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1999 Annual Report to Our Shareholders
CONSECO FUND GROUP
<PAGE>
Welcome
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Formed in 1996, Conseco Fund Group (CFG) is headquartered on the corporate
campus of Conseco, Inc. in Carmel, Ind., just a few miles north of Indianapolis.
We currently offer six actively managed mutual funds featuring investment
objectives ranging from aggressive growth to more conservative income funds.
Each fund offers four share classes to help you precisely tailor your mutual
fund portfolio.
Driven by rigorous investigation and bottom-up analysis, our funds embrace a
total-return investment philosophy designed to help financial professionals and
individual investors pursue growth and retain principal without undue risk.
Conseco Capital Management, Inc. (CCM) was formed in 1981, and serves as our
investment adviser, managing shareholder investments in CFG's fund portfolios.
With only a minimal initial fund investment of $250, our investors receive the
same top-notch asset management expertise and experience enjoyed by a long list
of institutional clients, including public and corporate pension plans,
insurance companies, college endowments, foundations, Taft-Hartley funds,
hospitals, religious organizations and wealthy individuals. Today, CCM has more
than $42 billion in taxable and tax-exempt assets under management.
CCM is a wholly owned subsidiary of, and the principal investment adviser for,
Conseco, Inc., which provides wealth management solutions to nearly 12.5 million
customers.
Conseco's success was recently confirmed when FORTUNE listed the company as one
of America's Most Admired Companies, the definitive report card on corporate
reputations. The winners were chosen from the 1,000 largest U.S. companies
(ranked by revenues) and the 25 largest U.S. subsidiaries of foreign-owned
companies. Conseco became a publicly owned company in 1985 and is traded on the
New York Stock Exchange (symbol: CNC).
Investment in our funds can be arranged through your registered broker/dealer or
registered investment advisor. For more information on how we can help you meet
your financial objectives, please ask your financial consultant, or call us
toll-free at 800-986-3384.
You also can visit us on the Internet at www.consecofunds.com.
<PAGE>
CONSECO FUND GROUP
Table of Contents 1999 Annual Report
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A Message from the President ............................................ ii
Statements of Assets and Liabilities .................................... 2
Statements of Operations ................................................ 4
Statements of Changes in Net Assets ..................................... 6
Conseco Fixed Income Fund
Portfolio Manager's Review............................................ 10
Schedule of Investments............................................... 12
Conseco High Yield Fund
Portfolio Manager's Review............................................ 18
Schedule of Investments............................................... 20
Conseco Convertible Securities Fund
Portfolio Manager's Review............................................ 24
Schedule of Investments............................................... 26
Conseco Balanced Fund
Portfolio Managers' Review............................................ 30
Schedule of Investments .............................................. 32
Conseco Equity Fund
Portfolio Manager's Review............................................ 38
Schedule of Investments............................................... 40
Conseco 20 Fund
Portfolio Manager's Review............................................ 44
Schedule of Investments............................................... 46
Notes to Financial Statements ........................................... 48
Financial Highlights .................................................... 52
Portfolio Managers ...................................................... 61
Report of the Independent Accountants.................................... 62
This report is for the information of Conseco Fund Group shareholders.
It is authorized for distribution to other persons only when preceded, or
accompanied by, a current prospectus that contains more complete information,
including charges and expenses.
i
<PAGE>
A Message from the President
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Dear Fellow Shareholder:
Midway through the year, I reported to you that the funds were:
* Meeting their investment objectives
* Performing above their benchmarks
* Competing within the top third, or better, in their asset categories(1)
* Attracting strong inflows of new assets
I'm exceptionally pleased to report that we picked up the mid-year
performance pace, closing out the year with a strong finishing kick.
We also swept through the Y2K scenario without issue. Common sense and cool
heads prevailed in the marketplace and our extensive preparations paid off,
enabling us to deliver and settle all transactions according to plan.
Highlights abound.
A great many highlights occurred this year. I'd like to focus you on some of
the brightest.
The fund family celebrated an important performance evaluation milestone:
the third anniversaries of the Conseco Equity, Conseco Balanced and Conseco
Fixed Income Funds. This event heralded the funds' initial eligibility to earn
a coveted Morningstar performance ranking. Coming out of the three-year chute,
the Conseco Equity and Conseco Balanced Funds garnered four stars and the
Conseco Fixed Income Fund earned three stars.(2)
Also, the Wall Street Journal, in conjunction with Lipper Analytical
Services, conferred "A" performance rankings upon the Conseco Fixed Income Fund,
Conseco High Yield Fund, Conseco Balanced and Conseco Equity Funds. The
Conseco 20 Fund earned a "B" rating.(3)
In addition, the fund family enjoyed increasing news coverage in U.S. News &
World Report, Bloomberg News, Smart Investing, Mutual Funds, High Yield Report
and Institutional Investor.
This coverage, coupled with performance and a growing faith in the
fundamental value of our proprietary, disciplined and rigorous investment style,
helped attract more than 9,000 new investors, increasing our total shareholder
base to more than 17,500.
All totaled, existing and new shareholders entrusted us with $555.9 million
in gross new assets during 1999. Coupled with existing assets, appreciation and
redemptions, the fund family completed the year with slightly more than $679
million under management. That's a 137.0% increase in total net assets under
management since year-end 1998.
Performance.
On the equity side, our focused, all-cap, concentrated aggressive growth
offering -- the Conseco 20 Fund -- was an excellent fund to invest in this year
because the quality of sector leadership became so narrowly defined. Exercising
its market-cap flexibility within high-demand sectors, the fund generated a
superb Class A share one-year, total return of 60.60%. The S&P 500 Index had a
one-year total return of 21.04%, and the S&P 400 Midcap Index had a one-year
total return of 14.72%.(4)
The Conseco Equity Fund sent a clear signal about the power of research and
asset allocation. Our diversified mid-cap growth offering began a steady climb
in April as investors cashed in their large-cap holdings to seek equally strong
- -- or stronger -- earnings from more reasonably priced mid-size companies. Well
positioned to capitalize on this investor flight, the fund produced a 47.23%
Class A share one-year total return, outperforming the S&P 500 and S&P 400
Midcap.(4)
As an asset class, fixed income languished in this "best of times, worst of
times" market environment as investors fretted over interest rates, rushed to
equities and pushed down bond prices.
The Conseco Fixed Income Fund fought its way through this tough environment
with carefully considered credit selections. It also delivered a competitive
income and performed in the top 25% of its category.(1) Fundamentally strong,
this fund has solid long-term, total-return potential for our investors.
Interestingly, in the midst of this bear bond market, the Conseco High Yield
Fund chugged along, generating solid income and total return performance
compared to its peers.(1) Class A shares reaped a 2.76% return for the one-year
period -- outpacing the Merrill Lynch High Yield Index, which had a one-year
return of 1.57%.(4)
Thanks to a skillful blend of mid-cap equity and high-yielding bond holdings,
the Conseco Balanced Fund enhanced income and produced a Class A share one-year
total return of 22.00%. The fund outperformed its benchmarks -- the S&P 400
Midcap and the Lehman Brothers Aggregate Bond Index.
Another head-turning performer and growing investor favorite was our hybrid
offering -- the Conseco Convertible Securities Fund. This risk-managed fund
showcases our quantitative and qualitative strengths, as well as our ability to
decrease risk exposure and add value to your asset allocation plan. Class A
shares enjoyed a return of 32.07%.(4)
Later in this report, each portfolio manager provides you with a more
in-depth snapshot of his fund's structure and performance.
"Investor first" services.
Operationally, 1999 was a year of constant investor services upgrades. We
implemented an "investor first" program designed to enhance the responsiveness,
quality and cost effectiveness of our fund reporting, accounting and
administrative services.
ii
<PAGE>
CONSECO FUND GROUP
1999 Annual Report
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These service upgrades became effective and available to you on a 24-hour
basis, beginning Aug. 9, when we successfully converted to our new service
provider, Firstar Mutual Fund Services, LLC.
Risk-averse asset allocation.
What's ahead? Evaluation, evaluation, evaluation.
Low, relatively flat inflation will continue. Even though 100 basis points of
tightening is already embedded in the bond market, you should expect more
incremental rate hikes by the Fed. To move forward, the bond market needs a
strong, clarifying statement from the Fed that will encourage investment in this
fundamental asset class.
Measured sentiment between equities and bonds has never been wider.
Consequently, plenty of asset allocation choices are on the horizon. Look behind
the dot-coms, techs and telecoms; you'll see a bear market. Within this scenario
reside a wide assortment of opportunities -- only once or twice in the market's
history have there been better times to invest.
These trends -- especially Internet expansion -- strongly suggest an
increasingly greater role for financial advice and a wholesale return to
actively managed, bottom-up investment. Consequently, I submit to you that
research, astute analysis, informed risk assessment and asset allocation will
play increasingly critical roles in the success of your investment portfolio.
In an environment such as this, our funds are managed to excel in the middle
of the risk curve and are designed to help you more confidently plan for your
financial future. Moreover, our intense integration of rigorous research,
analysis, trading and portfolio management is relatively unusual in the mutual
fund industry. The 30-plus analysts that carefully monitor the Conseco Fund
Group funds help us to create portfolios that are unmatched in the risk/reward
spectrum.
During 2000, you will encounter a wide array of investment opportunities and
asset allocation challenges. Our versatile funds are designed to play a core
role within your portfolio -- with well-positioned names exhibiting the
potential to deliver solid returns.
As you and your investment professional strive to improve your financial
foundation and achieve your investment objectives during 2000, we hope you'll
continue to keep us in your portfolio.
Sincerely,
Maxwell E. Bublitz, CFA
President
Conseco Fund Group
Director, President & CEO
Conseco Capital Management, Inc.
Senior Vice President of Investments
Conseco, Inc.
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(1) For the period ending 12/31/99 according to Lipper Analytical Services, Inc.
The Conseco Fixed Income Fund placed 28 out of 132 funds in the Corporate
Debt Funds BBB-rated category. The Conseco High Yield Fund placed 40 out
of 339 funds in the High Current Yield category. The Conseco Convertible
Securities Fund placed 18 out of 59 funds in the Convertible Securities
Funds category. The Conseco Balanced Fund placed 11 out of 223 funds in
the Flexible Portfolio category. The Conseco Equity Fund placed 24 out of
144 funds in the Mid-Cap Core category. The Conseco 20 Fund placed 78 out
of 342 funds in the Multi-Cap Growth category. Lipper Analytical Services
is an independent organization that compiles performance data on
investment companies.
(2) Morningstar proprietary ratings reflect historical risk-adjusted
performance. The ratings are subject to change every month. Morningstar
ratings are calculated from a fund's 3-, 5- and 10-year average annual
returns in excess of 90-day T-bill returns with appropriate fee
adjustments and a risk factor that reflects fund performance below 90-day
T-bill returns. The top 10% of the funds in a broad asset class receive 5
stars; the next 22.5% receive 4 stars; the next 35% receive 3 stars; the
next 22.5% receive 2 stars and the bottom 10% receive 1 star.
(3) Report date: Jan. 10, 2000. Survey source: Lipper Analytical Services. For
Class A and Y shares of the Conseco Fixed Income (Corporate Debt BBB-Rated
fund class), Conseco Convertible Securities (Convertible Securities fund
class), and Conseco Equity (Mid-Cap Core fund class) Funds. For Class A, B
and Y shares of the Conseco High Yield Fund (High Current Yield fund
class). For Class A shares of the Conseco Balanced Fund (Flexible
Portfolio fund class). For Class A, B, C and Y shares of the Conseco 20
Fund (Multi-Cap Growth fund class). The "A" rating identifies portfolios
in the top 20% of their respective fund classes. The "B" rating identifies
portfolios in the top 40% of their respective fund classes. Past
performance does not guarantee future results. Results include dividends,
but not transaction costs or tax considerations. Individual investor results
will vary and achieving similar performance figures is unlikely. The Wall
Street Journal does not sponsor, endorse or approve Conseco Fund Group's
investment programs.
(4) Total return is provided in accordance with SEC guidelines for comparative
purposes and reflects certain contractual fee waivers and/or expense
reimbursements through April 30, 2000. If the waivers were not in place, the
fund's return would have been lower. Total return is shown with the
applicable sales load or contingent-deferred sales charge. The S&P 500
Index is an unmanaged index generally representative of the U.S. stock
market. The S&P 400 Index is an unmanaged index generally representative
of the mid-cap stock arena. The Lehman Brothers Aggregate Bond Index is an
unmanaged index generally considered to be generally representative of the
bond market in general. The Merrill Lynch High-Yield Index is an unmanaged
index representative of the high-yield market in general.
iii
<PAGE>
Statements of Assets and Liabilities
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December 31, 1999
<TABLE>
<CAPTION>
Conseco
Conseco Conseco Convertible Conseco Conseco Conseco
Fixed Income High Yield Securities Balanced Equity 20
Fund Fund Fund Fund Fund Fund
------------ ------------ ----------- ----------- ------------ ------------
ASSETS:
<S> <C> <C> <C> <C> <C> <C>
Investments in securities at cost.................. $66,214,882 $124,252,536 $53,828,595 $39,074,239 $108,442,117 $168,517,110
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Investments in securities at value................. $63,932,965 $123,371,504 $70,047,719 $44,809,334 $140,102,458 $210,574,282
Interest and dividends receivable.................. 1,160,665 2,657,510 245,218 291,894 28,126 15,395
Receivable for securities sold..................... -- -- -- 1,027,330 6,158,914 919,731
Receivable for shares sold......................... 1,148,899 1,212,678 782,805 438,242 3,186,955 10,450,981
Receivable from Conseco, Inc. and subsidiaries..... 24,103 -- -- -- -- --
Cash............................................... -- 5,682,182 218,320 -- 214 4,812,594
Organization costs................................. 37,800 59,066 -- 37,800 37,800 59,066
Prepaid assets..................................... 1,455 29,597 6,561 56,224 43,647 58,084
Other assets....................................... -- 54,819 134 21,631 8,492 27,580
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Total assets.................................... 66,305,887 133,067,356 71,300,757 46,682,455 149,566,606 226,917,713
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LIABILITIES AND NET ASSETS:
Payable to Conseco, Inc. and subsidiaries.......... -- 202,657 111,317 71,959 151,683 144,227
Accrued expenses................................... 164,408 95,428 54,052 34,964 233,633 410,805
Distributions payable.............................. 144 4,018 2,225 829 50,065 80,731
Payable to custodian............................... 481,606 -- -- 24,048 -- --
Payable for shares redeemed........................ 49,757 177,734 52,540 7,838 1,075,531 266,091
Payable for securities purchased................... -- -- -- 306,965 2,106,003 8,421,103
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Total liabilities............................... 695,915 479,837 220,134 446,603 3,616,915 9,322,957
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Net assets...................................... $65,609,972 $132,587,519 $71,080,623 $46,235,852 $145,949,691 $217,594,756
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Net assets consist of:
Paid-in capital.................................... $69,581,484 $136,333,085 $54,760,494 $38,657,753 $102,449,332 $158,687,492
Accumulated undistributed net investment income
(loss).......................................... -- -- -- -- -- --
Accumulated undistributed net realized
gains (losses) on investments................... (1,689,595) (2,864,534) 101,005 1,843,004 11,840,018 16,850,092
Net unrealized appreciation (depreciation) on
investments..................................... (2,281,917) (881,032) 16,219,124 5,735,095 31,660,341 42,057,172
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Net assets...................................... $65,609,972 $132,587,519 $71,080,623 $46,235,852 $145,949,691 $217,594,756
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</TABLE>
The accompanying notes are an integral part of these financial statements.
2
<PAGE>
CONSECO FUND GROUP
1999 Annual Report
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December 31, 1999
<TABLE>
<CAPTION>
Conseco
Conseco Conseco Convertible Conseco Conseco Conseco
Fixed Income High Yield Securities Balanced Equity 20
Fund Fund Fund Fund Fund Fund
----------- ------------ ----------- ----------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, redemption price and offering price
per share:
Class A Shares:
Shares outstanding (unlimited shares authorized)... 3,194,335 4,259,549 1,535,384 2,364,156 1,811,935 2,585,082
Net assets......................................... $30,681,059 $42,591,382 $22,927,306 $31,932,247 $ 29,479,968 $53,463,037
Net asset value and redemption price per share..... $9.60 $10.00 $14.93 $13.51 $16.27 $20.68
Maximum sales charge per share (5.75 percent of
public offering price; 5.00 percent of public
offering price for the Conseco Fixed Income
Fund)........................................... 0.51 0.61 0.91 0.82 0.99 1.26
Maximum offering price per share................... $10.11 $10.61 $15.84 $14.33 $17.26 $21.94
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Class B Shares:
Shares outstanding (unlimited shares authorized)... 545,608 4,758,933 920,235 213,277 216,319 3,491,492
Net assets......................................... $5,230,309 $47,433,301 $13,689,655 $ 2,854,301 $ 3,489,366 $71,232,859
Net asset value and offering price per share
(Note 1)........................................ $9.59 $9.97 $14.88 $13.38 $16.13 $20.40
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Class C Shares:
Shares outstanding (unlimited shares authorized)... 275,762 1,863,892 275,367 168,160 184,437 1,813,089
Net assets......................................... $2,654,524 $18,541,497 $4,106,682 $ 2,263,580 $ 2,972,430 $37,092,941
Net asset value and offering price per share (Note 1) $9.63 $9.95 $14.91 $13.46 $16.12 $20.46
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Class Y Shares:
Shares outstanding (unlimited shares authorized)... 2,804,575 2,394,651 2,032,022 676,034 6,678,394 2,723,386
Net assets......................................... $27,044,080 $24,021,339 $30,356,980 $ 9,185,724 $110,007,927 $55,805,919
Net asset value, redemption price and offering
price per share................................. $9.64 $10.03 $14.94 $13.59 $16.47 $20.49
</TABLE>
The accompanying notes are an integral part of these financial statements.
3
<PAGE>
Statements of Operations
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Year Ended December 31, 1999
<TABLE>
<CAPTION>
Conseco
Conseco Conseco Convertible Conseco Conseco Conseco
Fixed Income High Yield Securities Balanced Equity 20
Fund Fund Fund Fund Fund Fund
----------- ------------ ----------- ----------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
INVESTMENT INCOME:
Interest........................................... $ 4,524,985 $10,418,718 $ 1,014,332 $ 1,126,565 $ 257,703 $ 328,904
Dividends.......................................... 120,385 65,035 471,932 148,271 416,741 243,406
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Total investment income......................... 4,645,370 10,483,753 1,486,264 1,274,836 674,444 572,310
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EXPENSES:
Investment advisory fees........................... 301,525 709,581 345,093 264,478 704,523 607,285
Distribution and service fees...................... 291,115 661,209 209,748 172,965 181,361 569,932
Administration fee................................. 133,934 202,699 81,105 75,566 201,251 173,510
Transfer agent fee................................. 83,626 94,389 77,216 85,450 97,897 110,736
Registration and filing fees....................... 56,039 74,629 52,509 48,166 48,606 64,004
Custody fees....................................... 24,810 20,532 8,026 35,164 39,067 21,285
Audit fees......................................... 15,970 24,684 10,372 8,587 23,222 21,783
Amortization of organization costs................. 19,029 21,960 -- 19,029 19,029 21,960
Legal fees......................................... 7,681 9,951 3,813 4,235 10,645 6,514
Reports - printing................................. 6,368 10,096 3,864 3,470 9,363 7,627
Director fees and expenses......................... 8,183 9,697 6,053 6,309 9,408 7,595
Insurance.......................................... 983 1,519 592 1,163 1,389 1,204
Other.............................................. 1,447 816 612 1,130 2,241 1,074
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Total expenses.................................. 950,710 1,841,762 799,003 725,712 1,348,002 1,614,509
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Less expense reductions - fees waived and/or charged to
subsidiaries of Conseco, Inc. (Note 3).......... (257,489) (265,495) (163,455) (174,411) (159,608) (19,896)
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Net expenses.................................... 693,221 1,576,267 635,548 551,301 1,188,394 1,594,613
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Net investment income (loss).................... 3,952,149 8,907,486 850,716 723,535 (513,950) (1,022,303)
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NET REALIZED AND UNREALIZED GAINS (LOSSES)
ON INVESTMENTS:
Net realized gains (losses) on sales of investments (1,545,396) (1,875,854) 709,998 6,886,972 37,999,342 30,983,607
Net change in unrealized appreciation or depreciation
on investments.................................. (2,546,409) 45,213 13,674,727 3,085,847 15,927,962 34,276,573
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Net realized and unrealized gains (losses)
on investments............................... (4,091,805) (1,830,641) 14,384,725 9,972,819 53,927,304 65,260,180
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Net increase (decrease) in net assets from operations $ (139,656) $ 7,076,845 $15,235,441 $10,696,354 $53,413,354 $64,237,877
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</TABLE>
The accompanying notes are an integral part of these financial statements.
4
<PAGE>
5
<PAGE>
Statements of Changes in Net Assets
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<TABLE>
<CAPTION>
Conseco Conseco Conseco
Fixed Income Fund High Yield Fund Convertible Securities Fund
-------------------------- ------------------------- ---------------------------
September 28(a)
Year Ended through
Year Ended December 31, Year Ended December 31, December 31, December 31,
1999 1998 1999 1998 1999 1998
------------ ------------ ------------ ----------- ----------- --------------
Operations:
<S> <C> <C> <C> <C> <C> <C>
Net investment income........................ $ 3,952,149 $ 1,855,455 $ 8,907,486 $ 1,594,127 $ 850,716 $ 248,342
Net realized gains (losses) on sales of
investments............................... (1,545,396) 457,334 (1,875,854) (988,680) 709,998 66,433
Net change in unrealized appreciation or
depreciation on investments............... (2,546,409) (31,519) 45,213 (926,245) 13,674,727 2,544,397
- -------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets
from operations..................... (139,656) 2,281,270 7,076,845 (320,798) 15,235,441 2,859,172
- -------------------------------------------------------------------------------------------------------------------------------
Dividends to shareholders from net investment
income:
Class A shares............................... (1,960,510) (984,919) (4,202,545) (1,211,452) (717,148) (246,886)
Class B shares............................... (231,198) (37,011) (2,690,656) (268,669) (52,733) (10)
Class C shares............................... (121,935) (7,683) (951,375) (76,775) (15,161) (10)
Class Y shares............................... (1,625,267) (797,817) (1,076,564) (25,855) (66,901) (12)
- -------------------------------------------------------------------------------------------------------------------------------
Total dividends to shareholders from net
investment income...................... (3,938,910) (1,827,430) (8,921,140) (1,582,751) (851,943) (246,918)
- -------------------------------------------------------------------------------------------------------------------------------
Distributions to shareholders of net capital
gains:
Class A shares............................... (94,314) (295,438) -- -- (258,716) (1,524)
Class B shares............................... (11,058) (25,160) -- -- (120,598) --
Class C shares............................... (6,488) (5,012) -- -- (34,914) --
Class Y shares............................... (71,443) (181,165) -- -- (259,871) --
- -------------------------------------------------------------------------------------------------------------------------------
Total distributions to shareholders of net
capital gains.......................... (183,303) (506,775) -- -- (674,099) (1,524)
- -------------------------------------------------------------------------------------------------------------------------------
Capital share transactions:
Net proceeds from sales of shares............ 60,359,426 44,590,036 158,370,742 48,519,084 57,943,854 25,003,691
Net asset value of shares issued from
reinvestment of dividends and distributions 1,693,516 819,112 998,499 174,888 321,652 33
Cost of shares redeemed...................... (40,426,510) (19,140,030) (69,329,562) (2,398,388) (28,508,736) --
- -------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets from capital
share transactions..................... 21,626,432 26,269,118 90,039,679 46,295,584 29,756,770 25,003,724
- -------------------------------------------------------------------------------------------------------------------------------
Total increase in net assets.............. 17,364,563 26,216,183 88,195,384 44,392,035 43,466,169 27,614,454
- -------------------------------------------------------------------------------------------------------------------------------
Net assets, beginning of period.............. 48,245,409 22,029,226 44,392,135 100 27,614,454 --
- -------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period.................... $65,609,972 $48,245,409 $132,587,519 $44,392,135 $71,080,623 $27,614,454
- -------------------------------------------------------------------------------------------------------------------------------
Including undistributed net investment income
of:....................................... $ -- $ 39,008 $ -- $ 11,376 $ -- $ 1,424
<FN>
(a) Commencement of operations.
</FN>
</TABLE>
The accompanying notes are an integral part of these financial statements.
6
<PAGE>
CONSECO FUND GROUP
1999 Annual Report
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Conseco Conseco Conseco
Fixed Income Fund High Yield Fund Convertible Securities Fund
-------------------------- ------------------------- ----------------------------
September 28(a)
Year Ended through
Year Ended December 31, Year Ended December 31, December 31, December 31,
1999 1998 1999 1998 1999 1998
------------ ------------ ------------ ----------- ------------ --------------
<S> <C> <C> <C> <C> <C> <C>
SHARE DATA:
Class A shares:
Sold........................................ 3,002,369 3,207,908 6,221,921 2,949,647 986,869 2,511,147
Issued in reinvestment of dividends
and distributions........................ 2,154 2,354 16,109 11,701 498 --
Redeemed.................................... (2,815,791) (219,807) (4,799,560) (140,279) (1,963,130) --
- ------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease).................. 188,732 2,990,455 1,438,470 2,821,069 (975,763) 2,511,147
- ------------------------------------------------------------------------------------------------------------------------------
Class B shares:
Sold........................................ 359,137 258,916 3,951,066 1,165,361 932,283 115
Issued in reinvestment of dividends
and distributions........................ 1,243 770 15,200 3,746 1,651 1
Redeemed.................................... (71,662) (2,796) (338,125) (38,315) (13,815) --
- ------------------------------------------------------------------------------------------------------------------------------
Net increase............................. 288,718 256,890 3,628,141 1,130,792 920,119 116
- ------------------------------------------------------------------------------------------------------------------------------
Class C shares:
Sold........................................ 307,198 69,325 1,908,621 370,869 281,486 115
Issued in reinvestment of dividends
and distributions........................ 775 202 9,577 1,497 606 1
Redeemed.................................... (84,911) (16,827) (424,668) (2,004) (6,841) --
- ------------------------------------------------------------------------------------------------------------------------------
Net increase............................. 223,062 52,700 1,493,530 370,362 275,251 116
- ------------------------------------------------------------------------------------------------------------------------------
Class Y shares:
Sold........................................ 2,436,511 801,557 3,545,296 180,732 2,024,253 115
Issued in reinvestment of dividends
and distributions........................ 78,083 76,368 18,471 91 18,704 1
Redeemed.................................... (1,115,550) (1,626,721) (1,292,582) (57,357) (11,051) --
- ------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease).................. 1,399,044 (748,796) 2,271,185 123,466 2,031,906 116
- ------------------------------------------------------------------------------------------------------------------------------
<FN>
(a) Commencement of operations.
</FN>
</TABLE>
The accompanying notes are an integral part of these financial statements.
7
<PAGE>
Statements of Changes in Net Assets
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Conseco Conseco Conseco
Balanced Fund Equity Fund 20 Fund
-------------------------- ------------------------- -------------------------
Year Ended December 31, Year Ended December 31, Year Ended December 31,
1999 1998 1999 1998 1999 1998
------------ ------------ ------------ ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Operations:
Net investment income (loss)................ $723,535 $627,608 $(513,950) $231,856 $(1,022,303) $(73,852)
Net realized gains (losses) on sales
of investments............................ 6,886,972 (744,651) 37,999,342 (204,222) 30,983,607 (1,508,345)
Net change in unrealized appreciation
or depreciation on investments............ 3,085,847 2,078,143 15,927,962 10,904,206 34,276,573 7,780,599
- ----------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets
from operations........................ 10,696,354 1,961,100 53,413,354 10,931,840 64,237,877 6,198,402
- ----------------------------------------------------------------------------------------------------------------------------
Dividends to shareholders from net
investment income:
Class A shares.............................. (510,331) (451,549) -- (17,399) -- --
Class B shares.............................. (87,593) (12,843) -- (518) -- --
Class C shares.............................. (25,562) (15,657) -- (138) -- --
Class Y shares.............................. (100,814) (155,142) -- (215,587) -- --
- ----------------------------------------------------------------------------------------------------------------------------
Total dividends to shareholders from net
investment income...................... (724,300) (635,191) -- (233,642) -- --
- ----------------------------------------------------------------------------------------------------------------------------
Distributions to shareholders of net
capital gains:
Class A shares.............................. (3,025,465) (12,693) (5,527,099) (139,921) (2,781,016) --
Class B Shares.............................. (266,632) (892) (602,715) (5,654) (3,782,583) --
Class C shares.............................. (205,809) (3,007) (513,936) (1,943) (1,921,015) --
Class Y shares.............................. (823,600) (134,519) (19,135,544) (1,619,165) (3,127,718) --
- ----------------------------------------------------------------------------------------------------------------------------
Total distributions to shareholders of
net capital gains...................... (4,321,506) (151,111) (25,779,294) (1,766,683) (11,612,332) --
- ----------------------------------------------------------------------------------------------------------------------------
Capital share transactions:
Net proceeds from sales of shares........... 8,327,184 33,119,398 71,111,944 39,144,673 199,779,377 39,115,808
Net asset value of shares issued from
reinvestment of dividends and
distributions............................ 3,110,149 374,761 23,540,151 1,456,528 3,961,545 --
Cost of shares redeemed..................... (3,551,802) (15,081,839) (65,606,063) (25,473,746) (83,040,841) (1,045,180)
- ----------------------------------------------------------------------------------------------------------------------------
Net increase in net assets from
capital share transaction.............. 7,885,531 18,412,320 29,046,032 15,127,455 120,700,081 38,070,628
- ----------------------------------------------------------------------------------------------------------------------------
Total increase in net assets............. 13,536,079 19,587,118 56,680,092 24,058,970 173,325,626 44,269,030
- ----------------------------------------------------------------------------------------------------------------------------
Net assets, beginning of period............. 32,699,773 13,112,655 89,269,599 65,210,629 44,269,130 100
- ----------------------------------------------------------------------------------------------------------------------------
Net assets, end of period................... $46,235,852 $32,699,773 $145,949,691 $89,269,599 $217,594,756 $44,269,130
- ----------------------------------------------------------------------------------------------------------------------------
Including undistributed net investment
income of:................................ $ -- $ -- $ -- $ 3,044 $ -- $ --
<FN>
(a) Commencement of operations.
</FN>
</TABLE>
The accompanying notes are an integral part of these financial statements.
8
<PAGE>
CONSECO FUND GROUP
1999 Annual Report
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Conseco Conseco Conseco
Balanced Fund Equity Fund 20 Fund
-------------------------- ------------------------- -------------------------
Year Ended December 31, Year Ended December 31, Year Ended December 31,
1999 1998 1999 1998 1999 1998
------------ ------------ ------------ ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
SHARE DATA:
Class A shares:
Sold........................................ 99,536 2,162,683 2,640,042 1,805,294 4,232,232 2,669,274
Issued in reinvestment of dividends and
distributions 131,606 22,097 91,028 8,911 34,269 --
Redeemed.................................... (96,395) (55,558) (3,006,790) (167,079) (4,325,212) (25,491)
- ----------------------------------------------------------------------------------------------------------------------------
Net increase (decrease).................. 134,747 2,129,222 (275,720) 1,647,126 (58,711) 2,643,783
- ----------------------------------------------------------------------------------------------------------------------------
Class B shares:
Sold........................................ 115,984 115,703 122,282 136,877 3,054,669 611,056
Issued in reinvestment of dividends and
distributions............................. 5,470 431 9,282 231 29,256 --
Redeemed.................................... (20,292) (4,019) (46,275) (6,078) (164,644) (38,845)
- ----------------------------------------------------------------------------------------------------------------------------
Net increase............................. 101,162 112,115 85,289 131,030 2,919,281 572,211
- ----------------------------------------------------------------------------------------------------------------------------
Class C shares:
Sold........................................ 130,938 122,271 143,420 55,670 1,752,294 247,100
Issued in reinvestment of dividends and
distributions............................. 1,509 819 856 4 19,979 --
Redeemed.................................... (66,879) (20,498) (8,979) (6,534) (193,027) (13,257)
- ----------------------------------------------------------------------------------------------------------------------------
Net increase............................ 65,568 102,592 135,297 49,140 1,579,246 233,843
- ----------------------------------------------------------------------------------------------------------------------------
Class Y shares:
Sold........................................ 369,267 433,884 2,084,675 1,233,846 2,746,992 31,701
Issued in reinvestment of dividends and
distributions............................. 65,854 9,493 1,055,856 103,755 113,354 --
Redeemed.................................... (111,244) (1,207,918) (1,263,226) (1,955,498) (150,556) (18,105)
- ----------------------------------------------------------------------------------------------------------------------------
Net increase (decrease).................. 323,877 (764,541) 1,877,305 (617,897) 2,709,790 13,596
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
9
<PAGE>
Conseco Fixed Income Fund Searching for capital growth and current income
- --------------------------------------------------------------------------------
Portfolio Manager's Review
Focused on long-term prospects.
In one of the worst-ever fixed-income markets, the Conseco Fixed Income
Fund's one-year total return of -5.26% (Class A shares with sales load) lagged
behind its Lehman Brothers Aggregate Bond Index benchmark of -0.82%.
The fund ranked in the top 25% of its Lipper Corporate Debt BBB peer
group.(1) Lipper rankings are based on performance without sales loads included.
In this meager market, we have worked to maintain a steady focus on long-term
goals. Our investment style emphasizes security selection combined with a
disciplined portfolio structure that controls risk. We don't attempt to time
changes in interest rates; our discipline is to remain fully invested. While
these markets challenge our investment style, they also present investors with
opportunities.
Looking inside the fund.
During the fourth quarter, Dime Bancorp, Inc. (Ba1/BBB-) was reviewed for
upgrade by Moody's based on its merger with Hudson United Bank.
In addition, Union Planters Bank bonds (Baa1/BBB) remained undervalued due to
a sluggish bank sector. These bonds lagged further behind as the Financial
Accounting Standards Board contemplated the accounting treatment for bonds
issued withmandatory put and call provisions.
Understanding the market environment.
Heavily affecting the fixed-income market was the Federal Reserve's monetary
policy. The ongoing tug-of-war between manageable economic growth and resurgence
in the rate of inflation continued to pull on the markets through the year. As
the Fed gradually increased short-term interest rates, inflation remained
largely in check. Even with
Growth of $10,000(3)
CONSECO FIXED LEHMAN BROTHERS
INCOME FUND AGGREGATE BOND
DATE (CLASS A SHARES) INDEX
01/02/1997 9,500.00 10,000.00
12/31/1997 10,323.63 10,967.34
12/31/1998 11,105.26 11,918.63
12/31/1999 11,075.11 11,819.66
The growth of $10,000 chart is a comparison of the change in value of a
$10,000 investment with dividends and capital gains reinvested for the period
from inception of the Class A shares through 12/31/99. Past performance is no
guarantee of future results.
disinflationary increases in productivity through new technology, a chronically
tight labor market and rising commodity prices (particularly oil) have put
upward pressure on inflation.
Another top story was Y2K. Its impact on the market started in the first
quarter of 1999 with a record number of corporate issues. Corporations continued
to access the fixed income markets at a record pace through the third quarter as
they sought to refinance debt and term out commercial paper.
With the general rise in interest rates and corporate issues, the markets
were far from orderly during 1999.
Entering the Year 2000.
Moving into the Year 2000, we expect the current portfolio structure, which
has served us well through the past year, to remain intact through
- --------------------------------------------------------------------------------
(1) According to Lipper Analytical Services, Inc. The ranking reflects
performance for the Conseco Fixed Income Fund Class A shares for the period
ending Dec. 31, 1999. The Conseco Fixed Income Fund was ranked 28 out of
132 funds. Lipper Analytical Services is an independent organization that
compiles performance data on investment companies.
10
<PAGE>
CONSECO FUND GROUP
Morningstar Ranking(2): * * * (of 1,661 funds) 1999 Annual Report
- --------------------------------------------------------------------------------
the first quarter.
This structure emphasizes a high level of coupon income, a duration within 2%
of the Lehman Brothers Aggregate Bond Index benchmark and a continued emphasis
on the spread sectors: corporates, mortgage- and asset-backed securities and
taxable municipal bonds.
Within the corporate sector, we remain constructive on the media, cable and
energy sectors. However, as the economy slows, we expect several sectors may
underperform including airlines, chemicals, and retail.
Gregory J. Hahn, CFA
Senior Vice President, Portfolio Manager
Conseco Capital Management, Inc.
Average Annual Total Return(3) (as of 12/31/99)
Inception One Since
Date Year Inception
--------- ----------- ----------
Class A Shares...................... 01/02/97 (5.26%) 3.46%
Class B Shares...................... 03/20/98 (5.46%) (0.42%)
Class C Shares...................... 03/05/98 (1.47%) 2.63%
Class Y Shares...................... 01/02/97 0.38% 5.89%
Lehman Brothers Aggregate
Bond Index........................ 01/02/97 (0.82%) 5.73%
- --------------------------------------------------------------------------------
30-day SEC Yield (as of 12/31/99)
Class A.......................................................... 6.24%
Class B.......................................................... 6.29%
Class C.......................................................... 6.18%
Class Y.......................................................... 7.26%
- --------------------------------------------------------------------------------
Top Five Sectors(4) (as of 12/31/99)
U.S. Government and Agency Obligations........................... 12.2%
Electric, Gas, Water, Cogeneration, Sanitary Services............ 10.8%
Depository Institutions.......................................... 8.9%
Municipal Bonds.................................................. 7.3%
Communications by Phone, Television, Radio, Cable................ 7.2%
- --------------------------------------------------------------------------------
Top Ten Holdings (as of 12/31/99)
U.S. Treasury Bond............................................... 4.7%
Mutual Life Insurance Co. of New York............................ 2.9%
AES Eastern Energy............................................... 2.2%
R.J. Reynolds Tobacco Holdings, Inc.............................. 2.2%
PNC Funding Corp................................................. 2.1%
Union Planters Bank, National Association........................ 1.7%
Dime Bancorp, Inc................................................ 1.7%
East Coast Power................................................. 1.6%
Fanniemae Grantor Trust.......................................... 1.5%
Kroger Co........................................................ 1.5%
* Current Net Assets: $65,609,972 * Effective Duration: 4.99 years
* Increase in Net Assets $17,364,563 * Average Maturity: 12.96 years
* Percentage Increase in Net Assets YTD: 36.0%
- --------------------------------------------------------------------------------
(2) Morningstar proprietary ratings reflect historical risk-adjusted
performance. The ratings are subject to change every month. Morningstar
ratings are calculated from a fund's 3-, 5- and 10-year average annual
returns in excess of 90-day T-bill returns with appropriate fee adjustments
and a risk factor that reflects fund performance below 90-day T-bill
returns. The top 10% of the funds in a broad asset class receive 5 stars;
the next 22.5% receive 4 stars; the next 35% receive 3 stars; the next 22.5%
receive 2 stars and the bottom 10% receive 1 star.
(3) Past performance is no guarantee of future results. Your investment return
and principal will fluctuate and your shares may be worth more or less than
their original cost. Total return is provided in accordance with SEC
guidelines for comparative purposes and reflects certain contractual fee
waivers and/or expense reimbursements through April 30, 2000. If the waivers
were not in place, the fund's return would have been lower. Total return is
shown with the applicable sales load or contingent-deferred sales charge.
The maximum sales load for the Conseco Fixed Income Fund is 5.00%. The
Lehman Brothers Aggregate Bond Index is an unmanaged index considered to be
representative of the bond market in general.
(4) Top sectors are based on general Standard Industrial Classifications and are
not intended to represent detailed classifications.
11
<PAGE>
CONSECO FIXED INCOME FUND
- --------------------------------------------------------------------------------
Schedule of Investments
December 31, 1999
PRINCIPAL
AMOUNT SECURITY VALUE
----------- ------------ ---------
CORPORATE BONDS (63.0%)
Air Transportation (1.4%)
978,481 Continental Airlines, Inc., Series 98-1A-ETC,
6.648%, due 09/15/2017............................. $ 885,687
----------
Apparel and Other Finished Products (0.4%)
250,000 Tommy Hilfiger Corp., 6.500%, due 06/01/2003.......... 238,570
----------
Auto Repair and Parking (2.5%)
200,000 Amerco-MTN, 7.440%, due 10/02/2006.................... 199,316
100,000 Amerco-MTN, 6.710%, due 10/15/2008.................... 99,209
575,000 Amerco-MTN, 7.470%, due 01/15/2027.................... 545,830
750,000 Avis Rent A Car, Inc., 11.000%, due 05/01/2009........ 791,250
----------
1,635,605
----------
Cable and Other Pay Television Stations (0.6%)
400,000 Northland Cable Television, Inc., 10.250%,
due 11/15/2007..................................... 403,000
----------
Chemicals and Allied Products (0.4%)
300,000 Smith International, Inc., 7.000%,
due 09/15/2007..................................... 284,680
----------
Communications by Phone, Television, Radio, Cable (7.2%)
750,000 British Sky Broadcasting Group, 8.200%,
due 07/15/2009..................................... 722,270
400,000 Charter Communications, Inc., 8.250%,
due 04/01/2007..................................... 371,000
750,000 Continental Cablevision, Inc., 9.500%,
due 08/01/2013..................................... 819,887
1,000,000 Level 3 Communications, Inc., 9.125%,
due 05/01/2008..................................... 947,500
750,000 Nextel Communications, Inc., 9.750%,
due 08/15/2004..................................... 776,250
PRINCIPAL
AMOUNT SECURITY VALUE
----------- ------------ ---------
Communications by Phone, Television, Radio, Cable (continued)
500,000 Sprint Capital Corp., 6.900%, due 05/01/2019.......... $ 457,123
300,000 Telecommunications, Inc., 9.800%,
due 02/01/2012..................................... 351,077
250,000 Telecommunications, Inc., 10.125%,
due 04/15/2022..................................... 306,691
----------
4,751,798
----------
Depository Institutions (8.9%)
500,000 Centura Bank, 6.500%, due 03/15/2009.................. 453,512
1,100,000 Dime Bancorp, Inc., 7.000%, due 07/25/2001............ 1,085,087
500,000 FMR Corp., 7.570%, due 06/15/2029,
(a) Cost - $495,780; Acquired - 7/22/1999.......... 482,111
300,000 Key Bank, National Association, 6.500%,
due 04/15/2008..................................... 279,276
1,400,000 PNC Funding Corp., 7.500%, due 11/01/2009............. 1,381,030
250,000 St. Paul Bancorp, Inc., 7.125%, due 02/15/2004........ 243,791
700,000 Sovereign Bancorp, Inc., 10.250%,
due 05/15/2004..................................... 710,500
1,250,000 Union Planters Bank, National Association,
6.500%, due 03/15/2008............................. 1,124,728
100,000 USX Corporation, 9.375%, due 02/15/2012............... 110,195
----------
5,870,230
----------
Eating and Drinking Places (0.3%)
200,000 Marriott International, Inc.,
6.625%, due 11/15/2003............................. 192,226
----------
Electric, Gas, Water, Cogeneration, Sanitary Services (10.8%)
1,500,000 AES Eastern Energy, 9.000%, due 01/02/2017,
(a) Cost - $1,455,573; Acquired - 05/11/1999....... 1,413,787
1,200,000 East Cost Power, 7.536%, due 06/30/2017,
(a) Cost - $1,205,982; Acquired - 05/11/1999....... 1,063,937
1,000,000 Edison Mission Energy, 7.730%, due 06/15/2009......... 993,894
1,000,000 El Paso Energy Corp., Series B,
6.625%, due 07/15/2001............................. 990,304
The accompanying notes are an integral part of these financial statements.
12
<PAGE>
CONSECO FUND GROUP
1999 Annual Report
- --------------------------------------------------------------------------------
Schedule of Investments
December 31, 1999
PRINCIPAL
AMOUNT SECURITY VALUE
----------- ------------ ---------
Electric, Gas, Water, Cogeneration, Sanitary Services (continued)
500,000 MCN Investment Corp., 6.350%, due 04/02/2002.......... $ 486,865
700,000 PSI Energy, Inc., 7.850%, due 10/15/2007.............. 690,128
250,000 Southwest Gas Co., 9.750%, due 06/15/2002............. 262,111
500,000 USA Waste Services, Inc., 6.125%, due 07/15/2001...... 476,666
200,000 USA Waste Services, Inc., 7.000%, due 07/15/2028...... 149,429
200,000 Waste Management, Inc., 6.625%, due 07/15/2002........ 187,585
400,000 Yorkshire Power Finance, Ltd., Series B,
6.496%, due 02/25/2008............................. 359,824
----------
7,074,530
----------
Food and Kindred Products (2.2%)
500,000 Nabisco, Inc., 6.000%, due 02/15/2001................. 493,843
1,000,000 PanAmerican Beverage, Inc., 8.125%,
due 04/01/2003..................................... 952,207
----------
1,446,050
----------
Food Stores (1.5%)
1,000,000 Kroger Co., 6.000%, due 07/01/2000.................... 996,774
----------
General Merchandise Stores (0.5%)
350,000 Shopko Stores, Inc., 6.500%, due 08/15/2003........... 332,523
----------
Insurance Carriers (3.6%)
300,000 Delphi Financial Group, Inc., 8.000%,
due 10/01/2003..................................... 291,081
200,000 Horace Mann Educators, 6.625%,
due 01/15/2006..................................... 187,038
1,450,000 Mutual Life Insurance Co. of New York,
STEP (c) 0.000%/11.250%,
due 08/15/2024, (a) Cost - $2,004,549;
Acquired - 04/20/1999 & 06/23/1999................. 1,870,826
----------
2,348,945
----------
PRINCIPAL
AMOUNT SECURITY VALUE
----------- ------------ ---------
Lumber and Wood Products, except Furniture (1.1%)
700,000 West Fraser Mill, 7.250%,
due 09/15/2002, (a) Cost - $697,907;
Acquired - 01/06/1997 & 04/30/1997................. $ 696,193
----------
Motion Pictures (0.6%)
400,000 Liberty Media Corp., 8.500%,
due 07/15/2029, (a) Cost - $388,920;
Acquired 8/11/1999................................. 406,158
----------
Non-Durable Goods - Wholesale (0.6%)
400,000 Safeway Inc., 5.750%, due 11/15/2000.................. 396,399
----------
Oil and Gas Extraction (3.4%)
500,000 ENSCO International, Inc., 7.200%,
due 11/15/2027..................................... 437,535
500,000 LASMO (USA), Inc., 8.375%, due 06/01/2023............. 506,265
335,000 LASMO (USA), Inc., 7.300%, due 11/15/2027............. 306,103
1,000,000 Yosemite Sec Trust I, 8.250%, due 11/15/2004,
(a) Cost - $999,732; Acquired - 11/04/1999......... 986,177
----------
2,236,080
----------
Paper and Allied Products (0.7%)
500,000 Potlatch Corp., 6.250%, due 03/15/2002................ 489,638
----------
Petroleum Refining and Related Industries (1.2%)
375,000 Lyondell Chemical Co., Series A, 9.625%,
due 05/01/2007..................................... 385,313
375,000 Lyondell Chemical Co., 10.875%,
due 05/01/2009..................................... 388,125
----------
773,438
----------
The accompanying notes are an integral part of these financial statements.
13
<PAGE>
CONSECO FIXED INCOME FUND
- --------------------------------------------------------------------------------
Schedule of Investments
December 31, 1999
PRINCIPAL
AMOUNT SECURITY VALUE
----------- ------------ ---------
Pipe Lines, except Natural Gas (2.5%)
1,000,000 Osprey Trust/Osprey I, 8.310%, due 01/15/2003,
(a) Cost - $1,000,000; Acquired - 9/16/1999........ $ 993,579
600,000 Pemex Finance, Ltd., 9.690%, due 08/15/2009........... 620,853
----------
1,614,432
----------
Primary Metal Industries (1.0%)
675,000 Easco Corp., Series B, 10.000%, due 03/15/2001........ 682,594
----------
Printing and Publishing (0.7%)
468,000 News American Holdings, 8.625%,
due 02/01/2003..................................... 484,003
----------
Real Estate (0.5%)
500,000 Pinnacle Holdings, Inc., STEP (c)
0.000%/10.000%, due 03/15/2008..................... 330,000
----------
Real Estate Investment Trusts (REITS) (6.5%)
500,000 CarrAmerica Realty Corp., 6.625%,
due 03/01/2005..................................... 454,624
900,000 Colonial Realty, L.P., 7.500%, due 07/15/2001......... 893,150
200,000 Corporate Property Investors, Inc., 9.000%,
due 03/15/2002, (a) Cost - $219,360;
Acquired - 03/17/1998.............................. 203,813
1,000,000 ERP Operating, L.P., 6.150%, due 09/15/2000........... 993,461
250,000 Regency Centers, L.P., 7.400%, due 04/01/2004......... 239,470
1,000,000 Spieker Properties, 6.800%, due 05/01/2004............ 960,430
500,000 United Dominion Realty Trust, Inc.,
MTN, 7.600%, due 01/25/2002........................ 491,792
----------
4,236,740
----------
Security and Commodity Brokers (1.7%)
300,000 Lehman Brothers Holdings, Inc.,
Series E, MTN, 6.625%, due 12/27/2002.............. 293,762
550,000 Lehman Brothers Holdings, Inc., 7.000%,
due 05/15/2003..................................... 542,636
PRINCIPAL
AMOUNT SECURITY VALUE
----------- ------------ ---------
Security and Commodity Brokers (continued)
200,000 Paine Webber Group, Inc., 9.250%,
due 12/15/2001.................................... $ 207,111
100,000 Salomon Smith Barney Holdings, Inc.,
Series C, MTN, 6.500%, due 08/15/2003............. 97,814
-----------
1,141,323
-----------
Tobacco Products (2.2%)
1,500,000 R.J. Reynolds Tobacco Holdings, Inc.,
7.375%, due 05/15/2003............................ 1,409,805
-----------
Total corporate bonds (cost $42,784,757)............. 41,357,421
-----------
MUNICIPAL BONDS (7.3%)
495,000 Alaska Individual Development & Authority
Lease, 6.375%, due 05/01/2003..................... 483,522
800,000 Azusa Pacific University California,
Revenue, 7.250%, due 04/01/2009................... 767,697
90,000 Doylestown Pennsylvania, Hospital Authority,
Revenue, 8.375%, due 07/01/2008................... 90,824
595,000 Duarte California Certificates of Participation,
Series B, 6.250%, due 04/01/2005.................. 554,826
248,500 Fort Worth Texas, Higher Education,
Finance Corp., Revenue, 7.500%,
due 10/01/2006.................................... 250,801
500,000 Long Beach California Individual Development
& Revenue, 6.750%, due 2/01/2010.................. 446,449
300,000 Mississippi Development Bank, Special
Obligation, Series 1998, 8.500%,
due 12/01/2018.................................... 270,219
155,000 Reeves County Texas Certificate of Participation,
6.700%, due 03/31/2005............................ 155,027
800,000 Reeves County Texas Certificate of Participation,
7.250%, due 06/01/2011............................ 759,554
1,000,000 Wickliffe Kentucky Solid Waste, Revenue,
7.670%, due 01/15/2027............................ 978,780
-----------
Total municipal bonds (cost $5,008,732).............. 4,757,699
-----------
The accompanying notes are an integral part of these financial statements.
14
<PAGE>
CONSECO FUND GROUP
1999 Annual Report
- --------------------------------------------------------------------------------
Schedule of Investments
December 31, 1999
PRINCIPAL
AMOUNT SECURITY VALUE
----------- ------------ ---------
ASSET BACKED SECURITIES (7.0%)
376,122 Bear Stearns Commercial Mortgage Securities, Inc.,
99-C1 A1, 5.910%, due 05/14/2008................... $ 356,865
150,000 COMED Transitional Funding Trust, 98-1 A7,
5.740%, due 12/25/2010............................. 135,343
500,000 Contimortgage Home Equity Loan Trust, 98-2 A7,
6.570%, due 03/15/2023............................. 472,957
114,236 Copelco Capital Funding Corp., 98-A A2,
5.780%, due 08/15/2000............................. 114,280
850,000 EQCC Home Equity Loan Trust, 96-4 A6,
6.880%, due 07/15/2014............................. 847,803
400,000 First Union Lehman Brothers Commercial Mortgage
Trust, 97-C2 A2, 6.600%, due 05/18/2007 ........... 383,598
755,021 GMAC Commercial Mortgage Securities, Inc.,
99-C1 A1, 5.830%, due 05/15/2033................... 712,879
500,000 Green Tree Recreational Equipment & Consumer
Trust, 98-C A5, 6.280%, due 02/15/2014,
(b) Cost - $499,997; Acquired - 09/04/1998......... 489,537
202,240 Green Tree Recreational Equipment & Consumer
Trust, 97-C B, 6.750%, due 02/15/2018,
(b) Cost - $202,193; Acquired - 09/08/1997......... 188,936
933,335 NationsLink Funding Corp., 98-2 A1, 6.001%,
due 11/20/2007..................................... 889,305
----------
Total asset backed securities (cost $4,801,476)....... 4,591,503
----------
PRINCIPAL
AMOUNT SECURITY VALUE
----------- ------------ ---------
COLLATERIZED MORTGAGE OBLIGATIONS (5.8%)
23,031 FHLMC Structured Pass Through Securities,
T-A1, 7.625%, due 08/25/2022....................... $ 22,984
1,000,000 FHLMC 2149 Trust, 6.500%, due 01/15/2022.............. 969,615
1,020,251 Fanniemae Grantor Trust, 99-T2 A1, 7.500%,
due 01/19/2039..................................... 998,972
100,000 Federal National Mortgage Assn., 94-63, 7.000%,
due 04/24/2024..................................... 95,474
154,679 Iroquois Trust, 97-1A, 7.000%, due 12/15/2006......... 153,833
92,392 Midland Realty Acceptance Corp., 96-C1 A1,
7.315%, due 08/25/2028............................. 92,300
905,368 Mortgage Capital Funding, Inc., 98-MC2 A1,
6.325%, due 10/18/2007............................. 873,811
500,000 Paine Webber Mortgage Acceptance Corp.,
96-M1 A2, 6.900%, due 01/02/2012................... 497,778
113,277 Rural Housing Trust, 87-1 3B, 7.330%,
due 04/01/2026..................................... 113,175
----------
Total collaterized mortgage obligations
(cost $3,936,356) ................................. 3,817,942
----------
The accompanying notes are an integral part of these financial statements.
15
<PAGE>
CONSECO FIXED INCOME FUND
- --------------------------------------------------------------------------------
Schedule of Investments
December 31, 1999
PRINCIPAL
AMOUNT SECURITY VALUE
----------- ------------ ---------
U.S. GOVERNMENT AND AGENCY OBLIGATIONS (12.2%)
878,182 Federal Home Loan Mortgage Corp.,
#E00570, 6.000%, due 09/01/2013................. $ 835,991
442,604 Federal Home Loan Mortgage Corp.,
#E73076, 6.000%, due 11/01/2013................. 421,339
352,056 Federal Home Loan Mortgage Corp.,
#G00479, 9.000%, due 04/01/2025................. 367,780
468,444 Federal Home Loan Mortgage Corp.,
# G00943, 6.000%, due 07/01/2028................ 429,721
998,887 Federal Home Loan Mortgage Corp.,
#C28063, 6.500%, due 07/01/2029................. 942,700
799,441 Federal Home Loan Mortgage Corp.,
#C32933, 7.500%, due 11/01/2029................. 792,363
88,497 Federal National Mortgage Assn.,
#250307, 7.500%, due 07/01/2025................. 87,667
54,622 Federal National Mortgage Assn.,
#250758, 7.000%, due 11/01/2026................. 52,975
3,750,000 U.S. Treasury Bond, 5.250%, due 02/15/2029......... 3,103,125
1,000,000 U.S. Treasury Bond, 6.000%, due 08/15/2009......... 969,063
----------
Total U.S. government and agency obligations
(cost $8,224,583) .............................. 8,002,724
----------
NUMBER
OF SHARES SECURITY VALUE
----------- ------------ ---------
PREFERRED STOCK (2.1%)
Insurance Carriers (0.7%)
20,000 Lincoln National Corp., TOPrS (c), 6.400%.......... $ 496,250
-----------
Measuring Instruments, Photo Goods, Watches (0.2%)
2,371 River Holding Corp., Series B, PIK (c), 11.500%.... 142,551
-----------
Non-Depository Credit Institutions (1.2%)
7,500 Centaur Funding Corp., 11.500%,
(a) Cost - $750,000; Acquired - 12/09/1998...... 766,875
-----------
Total preferred stock (cost $1,458,978)............ 1,405,676
-----------
Total investments (cost $66,214,882) (97.4%)..................... 63,932,965
-----------
Other assets, less liabilities (2.6%)............................ 1,677,007
-----------
Total Net Assets (100.0%)........................................ $65,609,972
===========
- ---------------------
(a) Restricted under Rule 144A of the Securities Act of 1933.
(b) Security issued by Conseco Finance Corp. (formerly Green Tree Financial
Corp.) ("Conseco Finance"), a wholly owned subsidiary of Conseco, Inc.
effective June 30, 1998. Conseco Finance originates, purchases, sells and
services consumer and commercial finance loans throughout the United States.
(c) PIK - Payment In Kind
STEP - Bonds where the coupon increases or steps up at a predetermined rate.
TOPrS - Trust Originated Preferred Securities.
The accompanying notes are an integral part of these financial statements.
16
<PAGE>
17
<PAGE>
Conseco High Yield Fund Searching for high income and capital appreciation
- --------------------------------------------------------------------------------
Portfolio Manager's Review
Above-average return outperforms the benchmark.
Amid a tough fixed-income market, we forged ahead to produce an
above-average, one-year total return of 2.76% (Class A shares with sales load).
Surpassing the Merrill Lynch High Yield Index return of 1.57%, we continued
our trend of benchmark-beating returns since the fund's Jan. 1, 1998 inception.
In addition, the fund outperformed more than 85% of all high-yield mutual
funds in a ranking based on performance without the sales load.(1)
As a result, investor confidence in the fund remained strong. Net asset
inflows to the fund increased $90 million during a year when high-yield mutual
funds generally suffered net redemptions.
Tough scenario.
The 1999 fixed-income market was one of the toughest in history. After easing
interest rates 100 basis points in 1998 -- a policy that tends to increase the
price of bonds -- the Fed reversed course during 1999 with a 75 basis-point
interest-rate hike. This contributed to a broad retreat from the bond-market and
a flight into equities.
Compounding the Fed tightening challenge, the global economy bounced back
from the financial crises in Asia, Russia and Brazil. This global upturn
encouraged investors seeking higher returns from overseas opportunities to pull
lower-earning assets out of the domestic financial markets.
Mitigating high yield risk.
Despite the decline in bond prices and choppy market conditions, the fund
made headway. We avoided risky opportunities by staying on our time-proven
course, emphasizing exhaustive, bottom-up, proprietary research and analysis of
the company, and the structure of the bond.
Growth of $10,000(2)
CONSECO HIGH
YIELD FUND MERRILL LYNCH HIGH
DATE (CLASS A SHARES) YIELD BOND INDEX
12/31/1997 9,425.00 10,000.00
12/31/1998 10,043.14 10,365.29
12/31/1999 10,950.00 10,529.15
The growth of $10,000 chart is a comparison of the change in value of a $10,000
investment with dividends and capital gains reinvested for the period from
inception of the Class A shares through 12/31/99. Past performance is no
guarantee of future results.
In the high-yield market, where below-prime borrowers raise money and good
information is in short supply, the prospect of defaults always looms on the
horizon. However, the Conseco High Yield Fund had only one default the entire
year.
This low default record illustrates our forte and the value of our investment
in proprietary research by more than 30 top-notch analysts. Consequently, the
analyst-to-portfolio holding ratio is one of the highest in the industry -- a
critical factor in our ability to stay very close to our holdings and mitigate
risk.
On the horizon.
Investing in high yield is like running in a marathon -- it requires dis
cipline, flexibility, consistency and patience. We're optimistic about improving
bond performance in 2000.
- --------------------------------------------------------------------------------
(1) Reflects performance for Class A shares versus the Lipper High Current Yield
Funds category for the period ending Dec. 31, 1999. According to Lipper
Analytical Services, Inc. Conseco High Yield was ranked 40 out of 339 funds.
Lipper Analytical Services is an independent organization that compiles
performance data on investment companies.
18
<PAGE>
CONSECO FUND GROUP
1999 Annual Report
- --------------------------------------------------------------------------------
One reason is statistically based: there have never been more than two
consecutive difficult years that weren't followed by a good one. We don't think
a precedent will be set in 2000.
Another reason: we sense that asset classes that compete for high-yield money
flows will return to more average profiles. Then, investors will begin paying
more attention to asset allocation, which will increase bond demand and raise
bond prices.
We're also confident the Fed will move to resolve interest-rate uncertainties
that dogged the market in 1999. Paradoxically, even if rates increase, a
negative factor in the short run, bonds could benefit over the year. Anxious
investors have already factored much of the hike's impact into bond prices. And,
even an unfavorable decision should bring clarity to a long-muddled environment.
Peter C. Andersen, CFA
Vice President, Portfolio Manager
Conseco Capital Management, Inc.
Average Annual Total Return(2) (as of 12/31/99)
Inception One Since
Date Year Inception
--------- ------ ---------
Class A............................... 01/01/98 2.76% 4.64%
Class B............................... 02/19/98 3.14% 2.22%
Class C............................... 02/19/98 7.51% 4.33%
Class Y............................... 03/02/98 9.64% 5.93%
ML High Yield Index................... 01/01/98 1.57% 2.61%
- --------------------------------------------------------------------------------
30-day SEC Yield (as of 12/31/99)
Class A.......................................................... 8.54%
Class B.......................................................... 8.67%
Class C.......................................................... 8.74%
Class Y.......................................................... 9.55%
- --------------------------------------------------------------------------------
Top Five Sectors(3) (as of 12/31/99)
Communications by Phone, Television, Radio, Cable................ 13.1%
Cable and Other Pay Television Stations.......................... 10.2%
Oil and Gas Extraction........................................... 9.7%
Radiotelephone Communications.................................... 8.3%
Business Services................................................ 7.6%
- --------------------------------------------------------------------------------
Top Ten Holdings (as of 12/31/99)
AIM Liquid Asset Portfolio....................................... 4.5%
NEXTLINK Communications, Inc..................................... 3.2%
Grey Wolf, Inc................................................... 2.9%
Nextel Communications, Inc....................................... 2.7%
Pinnacle Holdings, Inc........................................... 2.5%
Level 3 Communications, Inc...................................... 2.3%
Sovereign Bancorp................................................ 2.3%
PSInet, Inc...................................................... 2.3%
Amkor Technologies, Inc.......................................... 2.3%
Dictaphone Corp.................................................. 2.1%
* Current Net Assets: $132,587,519 * Effective Duration: 3.81 years
* Increase in Net Assets YTD: $88,195,384 * Average Maturity: 6.91 years
* Percentage Increase in Net Assets YTD: 198.7%
- -------------------------------------------------------------------------------
(2) Past performance is no guarantee of future results. Your investment return
and principal will fluctuate and your shares may be worth more or less than
their original cost. Total return is provided in accordance with SEC
guidelines for comparative purposes and reflects certain contractual fee
waivers and/or expense reimbursements through April 30, 2000. If the waivers
were not in place, the fund's return would have been lower. Total return is
shown with the applicable sales load or contingent-deferred sales charge.
The maximum sales load for the Conseco High Yield Fund is 5.75%. The Merrill
Lynch (ML) High Yield Index is representative of the high-yield arena with
the following restrictions: Issues must be in the form of publicly placed,
nonconvertible, coupon-bearing U.S. domestic debt, and must carry a term to
maturity of at least one year; par amounts outstanding must not be less than
$10 million at the start and the close of the performance measurement
period; and issues must be rated by Standard & Poor's or Moody's as less
than investment grade (i.e., BBB or Baa) but not in default (i.e., DDD1 or
less). The index excludes floating-rate debt, equipment trust certificates,
and Title 11 securities.
(3) Top corporate sectors are based on general Standard Industrial
Classifications and are not intended to represent detailed classifications.
19
<PAGE>
CONSECO HIGH YIELD FUND
- --------------------------------------------------------------------------------
Schedule of Investments
December 31, 1999
PRINCIPAL
AMOUNT SECURITY VALUE
----------- ------------ ---------
CORPORATE BONDS (83.4%)
Apparel and Other Finished Products (0.3%)
500,000 Kasper A.S.L., Ltd., 12.750%, due 03/31/2004.......... $ 467,500
-----------
Business Services (7.6%)
850,000 Advanstar Communications, Inc., 9.250%,
due 05/01/2008..................................... 804,312
1,400,000 Interpool, Inc., 7.200%, due 08/01/2007............... 1,142,949
4,950,000 Pinnacle Holdings, Inc., STEP (b)
0.000%/10.000%, due 03/15/2008..................... 3,267,000
3,000,000 PSINet, Inc., 10.500%, due 12/01/2006,
(a) Cost - $3,026,250; Acquired 11/24/1999......... 3,037,500
1,750,000 PSINet, Inc., 11.000%, due 08/01/2009................. 1,811,250
-----------
10,063,011
-----------
Cable and Other Pay Television Stations (10.2%)
800,000 Avalon Cable of Michigan, 9.375%,
due 12/01/2008, (a) Cost - $800,000;
Acquired - 12/03/1998.............................. 812,000
750,000 Cencall Communications, 10.125%,
due 01/15/2004..................................... 780,000
2,300,000 Charter Communications Holdings, LLC, 8.625%,
due 04/01/2009, (a) Cost - $2,180,264;
Acquired - 04/19/1999 & 06/03/1999................. 2,136,125
2,000,000 Classic Cable, Inc., Series B, 9.375%,
due 08/01/2009..................................... 1,975,000
1,900,000 Coaxial Communications of Central Ohio, Inc.,
10.000%, due 08/15/2006............................ 1,871,500
650,000 CSC Holdings, Inc., 7.250%, due 07/15/2008............ 619,125
1,300,000 CSC Holdings, Inc., 8.125%, due 07/15/2009............ 1,304,875
1,300,000 CSC Holdings, Inc., 9.875%, due 02/15/2013............ 1,368,250
185,000 Fox Liberty Networks, LLC, STEP (b)
0.000%/9.750%, due 08/15/2007...................... 149,850
2,000,000 Northland Cable Television, 10.250%,
due 11/15/2007..................................... 2,015,000
PRINCIPAL
AMOUNT SECURITY VALUE
----------- ------------ ---------
Cable and Other Pay Television Stations (continued)
500,000 Regional Independent Media, 10.500%,
due 07/01/2008, (a) Cost - $499,375;
Acquired - 11/06/1998............................. $ 509,375
-----------
13,541,100
-----------
Coal Mining (0.4%)
1,000,000 Lodestar Holdings, Inc., 11.500%,
due 05/15/2005.................................... 505,000
-----------
Communications by Phone, Television, Radio, Cable (11.3%)
1,500,000 Arch Escrow Corp., 13.750%, due 04/15/2008........... 1,224,375
750,000 Clearnet Communications, STEP (b)
0.000%/14.750%, due 12/15/2005.................... 739,688
3,000,000 Crown Castle International Corp., STEP (b)
0.000%/10.375%, due 05/15/2011.................... 1,890,000
750,000 EchoStar DBS Corp., 9.375%, due 02/01/2009........... 757,500
500,000 Globenet Communications Group Ltd., 13.000%,
due 7/15/2007, (a) Cost - $500,000;
Acquired - 7/09/1999.............................. 511,875
3,250,000 Level 3 Communications, Inc., 9.125%,
due 05/01/2008.................................... 3,079,375
1,000,000 Mediacom, LLC, 7.875%, due 02/15/2011,
(a) Cost - $985,920; Acquired - 02/19/1999........ 885,000
2,450,000 Park `N View, Inc., Series B, 13.000%,
due 05/15/2008.................................... 1,837,500
2,500,000 USA Mobile Communications, 9.500%,
due 02/01/2004.................................... 2,053,125
1,900,000 Williams Communications Group, Inc., 10.875%,
due 10/01/2009.................................... 1,995,000
-----------
14,973,438
-----------
The accompanying notes are an integral part of these financial statements.
20
<PAGE>
CONSECO FUND GROUP
1999 Annual Report
- --------------------------------------------------------------------------------
Schedule of Investments
December 31, 1999
PRINCIPAL
AMOUNT SECURITY VALUE
----------- ------------ ---------
Depository Institutions (4.1%)
1,000,000 ICG Holdings, Inc., STEP (b) 0.000%/12.500%
due 05/01/2006..................................... $ 752,500
3,000,000 ICG Services, Inc., STEP (b) 0.000%/10.000%,
due 02/15/2008..................................... 1,597,500
3,000,000 Sovereign Bancorp, 10.500%, due 11/15/2006............ 3,075,000
----------
5,425,000
----------
Durable Goods - Wholesale (0.7%)
1,000,000 United Industries Corp., Series B, 9.875%,
due 04/01/2009..................................... 917,500
----------
Eating and Drinking Places (0.3%)
500,000 Avado Brands, 9.750%, due 06/01/2006.................. 457,500
----------
Electric, Gas, Water, Cogeneration, Sanitary Services (0.1%)
250,000 GNI Group, Inc., Series B, 10.875%,
due 07/15/2005..................................... 101,250
----------
Electrical Work (1.6%)
2,000,000 Worldwide Fiber, Inc., 12.000%, due 08/01/2009,
(a) Cost - $2,015,000; Acquired 11/4/1999.......... 2,100,000
----------
Electrical, Other Electrical Equipment, except Computers (2.8%)
3,000,000 Amkor Technologies, Inc., 10.500%,
due 05/01/2009, (a) Cost - $2,977,500;
Acquired - 11/10/1999.............................. 3,000,000
1,000,000 IPC Information Systems, Inc., STEP (b)
0.000%/10.875%, due 05/01/2008..................... 765,000
----------
3,765,000
----------
Food and Kindred Products (2.0%)
750,000 Fresh Foods, Inc., 10.750%, due 06/01/2006............ 716,250
1,000,000 National Wine & Spirits, Inc., 10.125%,
due 01/15/2009..................................... 995,000
1,000,000 New World Pasta Co., 9.250%, due 02/15/2009........... 905,000
----------
2,616,250
----------
PRINCIPAL
AMOUNT SECURITY VALUE
----------- ------------ ---------
Furniture and Fixtures (0.5%)
750,000 Simmons Co., 10.250%, due 03/15/2009,
(a) Cost - $750,000; Acquired - 03/10/1999......... $ 713,438
----------
Health Services (1.3%)
750,000 Team Health, Inc., 12.000%, due 03/15/2009,
(a) Cost - $757,500; Acquired - 04/13/1999......... 742,500
500,000 Tenet Healthcare Corp., 8.625%, due 12/01/2003........ 493,928
500,000 Tenet Healthcare Corp., Series B, 7.625%,
due 06/01/2008..................................... 461,250
----------
1,697,678
----------
Holding, Other Investment Offices (0.5%)
750,000 CRIIMI Mae, Inc., 9.125%, due 12/01/2002.............. 648,750
----------
Hotels, Other Lodging Places (0.6%)
900,000 HMH Properties, Inc., 8.450%, due 12/01/2008.......... 837,000
----------
Metal Mining (1.0%)
1,200,000 Golden Northwest Aluminum, Inc., 12.000%,
due 12/15/2006..................................... 1,266,000
----------
Miscellaneous Manufacturing Industries (0.9%)
1,250,000 True Temper Sports, Inc., 10.875%,
due 12/01/2008.................................. 1,193,750
----------
Motion Pictures (1.0%)
1,500,000 Carmike Cinemas, Inc., 9.375%, due 02/01/2009,
(a) Cost - $1,531,875; Acquired - 02/11/1999.... 1,350,000
----------
Non-Depository Credit Institutions (1.2%)
1,712,000 Aames Financial Corp., 9.125%, due 11/01/2003...... 1,089,260
500,000 Metris Companies, Inc., 10.125%, due 07/15/2006.... 480,000
----------
1,569,260
----------
The accompanying notes are an integral part of these financial statements.
21
<PAGE>
CONSECO HIGH YIELD FUND
- --------------------------------------------------------------------------------
Schedule of Investments
December 31, 1999
PRINCIPAL
AMOUNT SECURITY VALUE
----------- ------------ ---------
Office Machines (2.1%)
3,502,000 Dictaphone Corp, 11.750%, due 08/01/2005.............. $ 2,731,560
-----------
Oil and Gas Extraction (9.7%)
50,000 Cliffs Drilling Co., Series D, 10.250%,
due 05/15/2003..................................... 50,750
4,200,000 Grey Wolf, Inc., 8.875%, due 07/01/2007............... 3,906,000
1,300,000 Parker Drilling Co., Series D, 9.750%,
due 11/15/2006..................................... 1,277,250
2,000,000 Perez Companc SA, 9.000%, due 05/01/2006,
(a) Cost - $1,863,970; Acquired - 04/30/1999....... 1,785,000
2,000,000 Pride Petroleum Services, Inc., 9.375%,
due 05/01/2007..................................... 2,000,000
500,000 R&B Falcon Corp., Series B, 6.750%,
due 04/15/2005..................................... 451,250
2,400,000 R&B Falcon Corp., 9.500%, due 12/15/2008.............. 2,418,000
540,000 RBF Finance Co., 11.375%, due 03/15/2009
(a) Cost - $585,900; Acquired - 05/20/1999......... 580,500
400,000 Triton Energy, Ltd., 9.250%, due 04/15/2005........... 407,000
-----------
12,875,750
-----------
Paper and Allied Products (2.8%)
1,750,000 Doman Industries, Ltd., 12.000%, due 07/01/2004....... 1,830,938
1,950,000 Gaylord Container Corp., Series B, 9.750%,
due 06/15/2007..................................... 1,847,625
-----------
3,678,563
-----------
Petroleum Refining and Related Industries (1.8%)
1,155,000 Lyondell Chemical Co., Series A, 9.625%,
due 05/01/2007..................................... 1,186,763
1,175,000 Lyondell Chemical Co., 10.875%, due 05/01/2009........ 1,216,125
-----------
2,402,888
-----------
PRINCIPAL
AMOUNT SECURITY VALUE
----------- ------------ ---------
Phone Communication, except Radiotelephone (5.5%)
500,000 Metromedia Fiber Network, Inc., Series B,
10.000%, due 11/15/2008............................ $ 513,750
7,250,000 NEXTLINK Communications, Inc., STEP (b)
0.000%/12.125%, due 12/01/2009,
(a) Cost - $4,065,549; Acquired - 11/12/1999....... 4,259,375
2,000,000 Qwest Communications International, Series B,
7.500%, due 11/01/2008............................. 1,970,000
500,000 Time Warner Telecommunications, LLC, 9.750%,
due 07/15/2008..................................... 517,500
-----------
7,260,625
-----------
Primary Metal Industries (4.8%)
2,250,000 Algoma Steel, Inc., 12.375%, due 07/15/2005........... 2,171,250
2,000,000 Easco Corp, Series B, 10.000%, due 03/15/2001......... 2,022,500
2,050,000 NS Group, Inc., 13.500%, due 07/15/2003............... 2,121,750
-----------
6,315,500
-----------
Radiotelephone Communication (6.6%)
2,000,000 Granite Broadcasting Corp., 10.375%,
due 05/15/2005..................................... 2,050,000
2,250,000 Microcell Telecommunications, Inc., Series B,
STEP (b) 0.000%/14.000%, due 06/01/2006............ 1,996,875
4,845,000 Nextel Communications, Inc., STEP (b)
0.000%/10.650%, due 09/15/2007..................... 3,633,750
750,000 Omnipoint Corp., Series A, 11.625%,
due 08/15/2006..................................... 798,750
870,000 Pagemart Wireless, Inc., STEP (b)
0.000%/11.250%, due 02/01/2008..................... 300,150
-----------
8,779,525
-----------
Real Estate Investment Trusts (REITS) (0.5%)
750,000 Felcor Suites, 7.625%, due 10/01/2007................. 652,822
-----------
The accompanying notes are an integral part of these financial statements.
22
<PAGE>
CONSECO FUND GROUP
1999 Annual Report
- --------------------------------------------------------------------------------
Schedule of Investments
December 31, 1999
PRINCIPAL
AMOUNT SECURITY VALUE
----------- ------------ ---------
Television and Radio Broadcast Stations (0.8%)
700,000 Antenna TV SA, 9.000%, due 08/01/2007................ $ 633,500
660,000 Lin Holdings Corp., STEP (b) 0.000%/10.000%,
due 03/01/2008.................................... 447,975
------------
1,081,475
------------
Transportation Equipment (0.4%)
500,000 Aircraft Service International Group, 11.000%,
due 08/15/2005, (a) Cost - $500,000;
Acquired - 08/13/1998............................. 462,500
140,000 Tata Engineering & Locomotive Co., Ltd., 7.875%,
due 07/15/2007, (a) Cost - $128,338;
Acquired - 03/15/1998............................. 129,647
------------
592,147
------------
Total corporate bonds (cost $111,500,350)............ 110,579,280
------------
NUMBER OF
SHARES
-------------
PREFERRED STOCK (5.1%)
Communications by Phone, Television, Radio, Cable (1.8%)
21,128 CSC Holdings, Inc., Series M, PIK (b), 11.125%...... 2,355,757
------------
Non-Depository Credit Institutions (0.1%)
3,556 River Holding Corp., Series B, PIK (b), 11.500%...... 213,827
------------
Phone Communication, except Radiotelephone (0.0%)
1 NEXTLINK Communications, PIK (b), 14.000%,
due 02/01/2009.................................... 43
------------
Radiotelephone Communications (1.7%)
1,045 Nextel Communications, Inc., Series D, PIK (b),
13.000%........................................... 1,128,600
1,085 Nextel Communications, Inc., Series E, PIK (b),
11.125%........................................... 1,101,190
------------
2,229,790
------------
NUMBER OF
SHARES SECURITY VALUE
----------- ------------ ---------
Textile Mill Products (0.0%)
4,874 Anvil Holdings, Series B, 13.000%.................... $ 5,484
------------
Television and Radio Broadcast Stations (1.5%)
10,000 Adelphia Communications, Series B, 13.000%........... 1,151,250
1,000 Benedek Communications Corp., 11.500%................ 813,750
9 IXC Communications, Inc., Series B, PIK (b),
12.500%........................................... 10,073
------------
1,975,073
------------
Total preferred stock (cost $6,752,186) ............. 6,779,974
------------
WARRANTS (0.0%)
Communication by Phone, Television, Radio, Cable (0.0%)
2,450 Park `N View, Inc.................................... 12,250
------------
Total warrants (cost $0)............................. 12,250
------------
SHORT-TERM INVESTMENTS (4.5%)
6,000,000 AIM Liquid Asset Portfolio........................... 6,000,000
Total short-term investments (cost $6,000,000)....... 6,000,000
------------
Total investments (cost $124,252,536) (93.0%)..................... 123,371,504
------------
Other assets, less liabilities (7.0%)............................. 9,216,015
------------
Total Net Assets (100.0%)......................................... $132,587,519
============
- ---------------
(a) Restricted under Rule 144A of the Securities Act of 1933.
(b) PIK - Payment In Kind
STEP - Bonds where the coupon increases or steps up at a predetermined rate.
The accompanying notes are an integral part of these financial statements.
23
<PAGE>
Searching for current income
CONSECO CONVERTIBLE SECURITIES FUND and capital appreciation
- --------------------------------------------------------------------------------
Portfolio Manager's Review
Working the market.
The U.S. equity markets closed out the 20th century with a bang. Although
positive earnings were posted in almost all categories, Internet-specific
sectors achieved spectacular gains.
Convertible securities, representing a hybrid of the equity and bond markets,
were influenced by both sectors but ultimately overcame the drag of higher
interest rates and recorded significant gains. The Merrill Lynch Broad
Convertible Index (excluding mandatory convertible securities) -- which has a
larger-than-average allocation to the Internet sector -- returned more than 28%
in the 4th quarter and 44.32% for the year. These figures are the highest
returns for the index in 15 months.
In the last three months of the year, the fund also had its strongest quarter
on record, but our relatively lighter holdings of Internet issuers caused us to
lag the torrid pace set by the overall convertible securities market.
Nevertheless, the Conseco Convertible Securities Fund (Class A shares with sales
load) earned 32.07% for the year.
Managing risk through intense research.
Performance was paced by large gains in the underlying stocks of the fund's
holdings in Nextel Communications, Cisco Systems, Inc. and NEXTLINK
Communications, Inc. Consistent with our long-term investment philosophy, there
have been few changes in the composition of the fund's core holdings. One core
holding, Home Depot, Inc., was sold in order to avoid conversion into common
stock, thereby limiting the amount of direct equity in the fund.
With new net inflows of cash -- $29.8 million since Jan. 1, 1999 -- we added
to our holdings in Level 3 Communications, Inc. and NEXTLINK Communications,
Inc.
Looking forward, we hope to justify continued investor confidence. However,
the recent returns achieved by the U.S. stock market in general
Growth of $10,000(1)
CONSECO CONVERTIBLE
SECURITIES FUND MERRILL LYNCH
DATE (CLASS A SHARES) BROAD CONVERTIBLE INDEX
09/28/1998 9,425.00 10,000.00
12/31/1998 10,465.75 11,085.74
06/30/1999 12,212.07 12,554.52
12/31/1999 14,664.92 16,001.27
The growth of $10,000 chart is a comparison of the change in value of a $10,000
investment with dividends and capital gains reinvested for the period from
inception of the Class A shares through 12/31/99. Past performance is no
guarantee of future results.
and the fund in particular -- are impressive, but rather unrepresentative
of the historical returns.
Staying the course through peaks and valleys.
Historically, the average return on equities in the United States is about
10% per year. In the past 20 years, the S&P 500 Index has returned more than
17.5% per annum. However, investors should not expect repeats of these returns.
Moreover, you should view convertible securities as a hybrid asset, combining
the attributes of both bonds and stocks. As such, they have a more moderate risk
profile than stocks, but should not be counted on to outperform an all-stock
index/mutual fund during a sustained rally in the equity markets.
A little dose of reality would also be a good prescription for the Internet
equities. Our philosophy with regard to this sector remains unchanged. The
Internet will revolutionize society and change the way we live. It's the
fastest-growing sector of the convertible securities market.
24
<PAGE>
CONSECO FUND GROUP
1999 Annual Report
- --------------------------------------------------------------------------------
We intend to remain focused on companies that provide the facilitating
technology to Internet firms, rather than on the so-called pure Internet plays.
Such pure-play Internet companies face daunting competition and a fickle
investor base. What's more, they sport difficult-to-rationalize valuations.
Until more -- much more -- attractive valuations are available in the pure
Internet sector, we will continue on the path that has served the fund well.
Andrew S. Chow, CFA
Vice President, Portfolio Manager
Conseco Capital Management, Inc.
Average Total Return(1) (as of 12/31/99)
Inception One Since
Date Year Inception
--------- ------ ---------
Class A............................... 09/28/98 32.07% 33.26%
Class B............................... 09/28/98 32.43% 33.40%
Class C............................... 09/28/98 38.12% 37.68%
Class Y............................... 09/28/98 40.91% 40.02%
ML Broad Convertible Index............ 09/28/98 44.32% 42.28%
- --------------------------------------------------------------------------------
Top Five Sectors(2) (as of 12/31/99)
Communications by Phone, Television, Radio, Cable................ 25.6%
Electrical, Other Electrical Equipment, except Computers......... 23.5%
Business Services................................................ 8.4%
Industrial, Commercial Machinery, Computers...................... 8.2%
Motion Pictures.................................................. 5.2%
- --------------------------------------------------------------------------------
Top Ten Holdings (as of 12/31/99)
Level One Communications, Inc.................................... 6.1%
Nextel Communications, Inc....................................... 5.7%
NEXTLINK Communications, Inc..................................... 4.9%
AIM Liquid Asset Portfolio....................................... 4.6%
Level 3 Communications........................................... 4.0%
Antec Corp....................................................... 3.8%
Lattice Semiconductor Corp....................................... 3.7%
Liberty Media Group.............................................. 3.5%
IDEC Pharmaceuticals............................................. 3.5%
ASM Lithography.................................................. 3.3%
* Current Net Assets: $71,080,623
* Increase in Net Assets YTD: $43,466,169
* Percentage Increase in Net Assets YTD: 157.4%
* Beta: 0.57 (Class A shares)(3)
- --------------------------------------------------------------------------------
(1) Past performance is no guarantee of future results. Your investment return
and principal will fluctuate and your shares may be worth more or less than
their original cost. Total return is provided in accordance with SEC
guidelines for comparative purposes and reflects certain contractual fee
waivers and/or expense reimbursements through April 30, 2000. If the waivers
were not in place, the fund's return would have been lower. Total return is
shown with the applicable sales load or contingent-deferred sales charge.
The maximum sales load for the Conseco Convertible Securities Fund is 5.75%.
Our benchmark index, the Merrill Lynch (ML) Broad Convertible Index is an
unmanaged index considered to be representative of the convertible
securities market in general. The Merrill Lynch Bond Index and the Standard
& Poor's 500 Index are secondary indices used for additional comparisons
only. The Merrill Lynch Bond Index is an unmanaged index considered to be
representative of the fixed income market in general. The Standard & Poor's
500 Index is an unmanaged index considered to be representative of the stock
market in general.
(2) Top corporate sectors are based on general Standard Industrial
Classifications categorizations and are not intended to represent detailed
classifications.
(3) Beta measures the fund's volatility compared to the Merrill Lynch Broad
Convertible Index.
25
<PAGE>
CONSECO CONVERTIBLE SECURITIES FUND
- --------------------------------------------------------------------------------
Schedule of Investments
December 31, 1999
NUMBER OF
SHARES SECURITY VALUE
----------- ------------ ---------
COMMON STOCKS (10.7%)
Business Services (2.0%)
12,000 Microsoft Corp. (a)................................ $1,401,000
----------
Communications by Phone, Television, Radio, Cable (2.2%)
19,805 MediaOne Group, Inc. (a)........................... 1,521,272
----------
Electrical, Other Electrical Equipment, except Computers (3.8%)
75,000 Antec Corp. (a).................................... 2,737,500
----------
Industrial, Commercial Machinery, Computers ( 2.7%)
18,000 Cisco Systems, Inc. (a)............................ 1,928,250
----------
Total common stocks (cost $3,631,455) 7,588,022
----------
PREFERRED STOCKS (1.4%)
Insurance Carriers (1.4%)
13,500 Life Re Capital Trust II, 6.000%................... 1,017,562
----------
Total preferred stocks (cost $1,002,498) 1,017,562
----------
PREFERRED STOCKS - CONVERTIBLE (27.3%)
Business Services (4.1%)
20,000 Verio, Inc., 6.750%, conv into VRIO
common stock, (b) Cost - $1,000,000;
Acquired - 7/15/1999 (a)........................ 1,127,500
30,000 PSINet, Inc., Class C, 6.750%, conv into PSIX
common stock.................................... 1,751,250
----------
2,878,750
----------
NUMBER OF
SHARES SECURITY VALUE
----------- ------------ ---------
Communications by Phone, Television, Radio, Cable (15.9%)
5,000 Adelphia Communications Corp., Series D,
5.500%, conv into ADLAC common stock............ $ 941,250
20,000 MediaOne Group, Inc., 6.250%, PIES (c), conv into
VOD common stock................................ 2,160,000
15,000 Newfield Financial Trust I, 6.500%, conv into
NFX common stock................................ 701,250
4,000 Nextel Communications, Inc., 0.000%, conv into
NXTL common stock, (b) Cost - $1,014,700;
Acquired - 12/18/1998 (a)....................... 4,024,000
18,000 NEXTLINK Communications, Inc., 6.500%, conv
into NXLK common stock.......................... 3,465,000
-----------
11,291,500
-----------
Depository Institutions (1.7%)
25,000 Sovereign Capital Trust II, 7.500%, conv into
SVRN common stock .............................. 1,215,625
-----------
General Merchandise Stores (0.6%)
10,000 Kmart Financing, Inc., I, 7.750%, conv into
KM common stock................................. 437,500
-----------
Industrial, Commercial Machinery, Computers (1.4%)
6,000 Coltec Capital Trust, 5.250%, conv into GR
common stock (a)................................ 234,000
23,450 WBK STRYPES Trust, STRYPES (c) .................... 751,866
-----------
985,866
-----------
Miscellaneous Retail (1.0%)
10,000 CVS Corp., 6.000%, conv into CVS
common stock.................................... 712,500
-----------
The accompanying notes are an integral part of these financial statements.
26
<PAGE>
CONSECO FUND GROUP
1999 Annual Report
- --------------------------------------------------------------------------------
Schedule of Investments
December 31, 1999
NUMBER OF
SHARES SECURITY VALUE
----------- ----------- --------
Motion Pictures (1.7%)
4,000 TCI Pacific Communications, Inc., Series A,
5.000%, conv into T common stock............... $ 1,233,144
-----------
Railroad Transportation (0.9%)
15,000 Canadian National Railway Co., 5.500%, conv into
CNI common stock............................... 630,000
-----------
Total preferred stocks - convertible
(cost $14,061,175)............................. 19,384,885
-----------
PRINCIPAL
AMOUNT
-------------
CONVERTIBLE BONDS (51.5%)
Building Material, Hardware, Garden Rental (0.7%)
1,000,000 Elan International Financial, 0.000% (d),
due 12/14/2018, conv into ELN common stock,
(b) Cost - $542,840; Acquired - 12/09/1998..... 530,000
-----------
Business Services (2.3%)
750,000 Citrix Systems, Inc., 0.000% (d), due 3/22/2019,
conv into CTXS common stock,
(b) Cost - $284,914; Acquired - 03/17/1999..... 665,625
1,000,000 At Home Corp., 4.750%, due 12/15/2006,
conv into ATHM common stock,
(b) Cost - $1,000,000; Acquired - 12/08/1999... 952,500
-----------
1,618,125
-----------
Chemicals and Allied Products (4.2%)
500,000 Alza Corp., 5.000%, due 05/01/2006, conv into
AZA common stock............................... 526,250
2,000,000 IDEC Pharmaceuticals, 0.000% (d), due 02/16/2019,
conv into IDPH common stock,
(b) Cost - $1,569,459; Acquired - 10/26/1999... 2,497,500
-----------
3,023,750
-----------
PRINCIPAL
AMOUNT SECURITY VALUE
----------- ------------ ---------
Communications by Phone, Television, Radio, Cable (9.2%)
1,000,000 Echostar Communications, 4.875%,
due 01/01/2007, conv into DISH
common stock, (b) Cost - $1,000,000;
Acquired - 12/03/1999.......................... $ 1,225,000
1,000,000 Global Telesystems, Inc., 5.750%, due 07/01/2010,
conv into GTSG common stock.................... 1,312,500
1,000,000 ITC Deltacom, Inc., 4.500%, due 05/15/2006,
conv into ITCD common stock,
(b) Cost - $1,000,000; Acquired - 05/06/1999... 1,200,000
2,000,000 Level 3 Communications, 6.000%, due 09/15/2009,
conv into LVLT common stock.................... 2,810,000
-----------
6,547,500
-----------
Durable Goods - Wholesale (1.4%)
3,000,000 Ingram Micro, Inc., 0.000% (d), due 06/09/2018,
conv into IM common stock...................... 986,250
-----------
Electrical, Other Electrical Equipment, except Computers (18.0%)
2,000,000 ASM Lithography, 4.250%, due 11/30/2004,
conv into ASML common stock,
(b) Cost - $2,000,000; Acquired - 11/19/1999... 2,360,000
2,000,000 Lattice Semiconductor Corp, 4.750%, due
11/01/2006, conv into LSCC common stock,
(b) Cost - $2,028,750; Acquired - 10/29/1999... 2,622,500
1,600,000 Level One Communications, Inc., 4.000%, due
09/01/2004, conv into LEVL common stock........ 4,334,000
1,100,000 Micron Technology, Inc., 7.000%, due 07/01/2004,
conv into MU common stock...................... 1,420,375
1,500,000 Stmicroelectronics NV, 0.000% (d), due 09/22/2009,
conv into STM common stock..................... 2,058,750
-----------
12,795,625
-----------
The accompanying notes are an integral part of these financial statements.
27
<PAGE>
Conseco Convertible Securities Fund
Schedule of Investments
December 31, 1999
PRINCIPAL
AMOUNT SECURITY VALUE
----------- ----------- --------
General Merchandise Stores (2.3%)
1,500,000 Costco Companies, Inc., 0.000% (d), due
08/19/2017, conv into COST common stock........ $ 1,597,500
-----------
Health Services (1.8%)
2,000,000 Wellpoint Health Networks, Inc., 0.000% (d),
due 07/02/2019, conv into WLP
common stock................................... 1,285,000
-----------
Industrial, Commercial Machinery, Computers (4.1%)
2,000,000 Hewlett Packard Co., 0.000% (d), due 10/14/2007,
conv into HWP common stock..................... 1,377,500
2,000,000 Solectron Corp., 0.000% (d), due 01/27/2019,
conv into SLR common stock..................... 1,512,500
-----------
2,890,000
-----------
Motion Pictures (3.5%)
2,000,000 Liberty Media Group, 4.000%, due 11/15/2029,
conv into PCS common stock,
(b) Cost - $2,000,000; Acquired - 11/10/1999... 2,520,000
-----------
Paper and Allied Products (2.1%)
1,350,000 APP Global Finance V Ltd., 2.000%,
due 07/25/2000, conv into PAP common stock,
(b) Cost - $1,293,634;
Acquired - 11/25/1998, 4/29/1999, 6/04/1999.... 1,471,500
-----------
Oil and Gas Extraction (1.9%)
4,000,000 Pride International, Inc., 0.000% (d),
due 04/24/2018, conv into PDE common stock..... 1,345,000
-----------
Total convertible bonds (cost $29,746,467)........ 36,610,250
-----------
PRINCIPAL
AMOUNT SECURITY VALUE
----------- ----------- --------
CORPORATE BONDS (3.0%)
Paper and Allied Products (1.5%)
1,000,000 APP Global Finance V Ltd., 2.000%,
due 07/25/2000................................. $ 1,090,000
-----------
Textile Mill Products (1.5%)
1,000,000 Worldwide Fiber, Inc., 12.000%, due 08/01/2009,
(b) Cost - $1,000,000; Acquired - 7/23/1999.... 1,050,000
-----------
Total corporate bonds (cost $2,080,000).......... 2,140,000
-----------
NUMBER OF
SHARES
-------------
SHORT-TERM INVESTMENTS (4.6%)
3,307,000 AIM Liquid Asset Portfolio........................ 3,307,000
-----------
Total short-term investments (cost $3,307,000) ... 3,307,000
-----------
Total investments (cost $53,828,595) (98.5%) ................... 70,047,719
-----------
Other assets, less liabilities (1.5%) ......................... 1,032,904
-----------
Total Net Assets (100.0%) ...................................... $71,080,623
===========
- ---------------
(a) Non-income producing security.
(b) Restricted under Rule 144A of the Securities Act of 1933.
(c) PIES -Premium Income Exchangeable Securities.
STRYPES - Structured Yield Product Exchangeable for Stock.
(d) Zero Coupon - Bonds that make no interest payments.
The accompanying notes are an integral part of these financial statements.
28
<PAGE>
29
<PAGE>
Conseco Balanced Fund Searching for income consistent with capital appreciation
- --------------------------------------------------------------------------------
Portfolio Managers' Review
The Conseco Balanced Fund achieved a one-year total return of 22.00% (Class A
shares with sales load) versus the S&P 400 Midcap Index return of 14.72% and the
Lehman Brothers Aggregate Bond Index return of -0.82%.
This performance ranked the fund 11 out of 223 funds for one-year returns, as
tracked by Lipper Analytical Services.(1)
Its three-year performance also earned the fund a four-star ranking (of a
possible five stars) from Morningstar, which placed the fund in the top third of
its asset category.(2) This was the first year in which the fund was eligible
for a Morningstar ranking. Both Lipper and Morningstar rankings are based on
performance without the sales load.
A tale of two market environments.
During 1999, equity markets had a record year driven by an ever-increasing
amount of selectivity among sectors, while the fixed-income market experienced
one of its worst years ever. In this environment, growth-oriented investors
materially outperformed value investors.
The equity charge, which propelled the market to new highs, was focused on
technology, telecommunications and the Internet. Despite lofty valuations, these
high-growth market segments became "safe havens," as investors rode out concerns
over full employment, wage pressure and inflation.
The best of times.
On the equity side, our analysts worked hard to identify the fastest growing
market segments and select the best companies within each segment. As always, we
continued to employ a balanced security-selection approach, based on strong
bottom-up, fundamental research.
Voicestream Wireless Corp. was an exceptional communications-sector
performer. The company is in the midst of compiling a nationwide wireless
network based on the Global Systems for Mobile Communications (GSM) standard.
This network creates a valuable platform upon which the company can capitalize
on increasing use of mobile devices aimed at accessing the Internet.
Growth of $10,000(3)
CONSECO BALANCED FUND LEHMAN BROTHERS AGGREGATE S&P 400
DATE (CLASS A SHARES) BOND INDEX VALUE
01/02/1997 9,425.00 10,000.00 10,000.00
12/31/1997 11,045.33 10,967.34 13,224.81
12/31/1998 12,420.34 11,918.63 15,754.27
12/31/1999 16,076.69 11,819.66 18,072.09
The growth of $10,000 chart is a comparison of the change in value of a $10,000
investment with dividends and capital gains reinvested for the period from
inception of the Class A shares through 12/31/99. Past performance is no
guarantee of future results.
Biotechnology continued to be an emerging focus area for us, based on large
pharmaceutical companies' need to refill their product pipelines as patents for
key drugs continue to expire. Research spending is migrating toward drug
development and gene mapping. PE Corp. - PE Biosystems, a company that provides
equipment used in genomic research, is a major player in this trend.
- --------------------------------------------------------------------------------
(1) Reflects performance for the Class A shares versus the Lipper Flexible
Portfolio Funds category for the period ending Dec. 31, 1999. Lipper
Analytical Services is an independent organization that compiles performance
data on investment companies.
(2) Morningstar proprietary ratings reflect historical risk-adjusted
performance. The ratings are subject to change every month. Morningstar
ratings are calculated from a fund's 3-, 5- and 10-year average annual
returns in excess of 90-day T-bill returns with appropriate fee adjustments
and a risk factor that reflects fund performance below 90-day T-bill
returns. The top 10% of the funds in a broad asset class receive 5 stars;
the next 22.5% receive 4 stars; the next 35% receive 3 stars; the next 22.5%
receive 2 stars and the bottom 10% receive 1 star.
30
<PAGE>
CONSECO FUND GROUP
Morningstar Ranking(2): * * * * (of 3,533 funds) 1999 Annual Report
- --------------------------------------------------------------------------------
The worst of times.
In the fixed-income market, U.S. Treasury yields increased by more than 170
basis points in 1999 resulting from Federal rate hikes and continued
inflationary fears. Although the Treasury market suffered, the exceptional
strength of the U.S. economy boosted performance of the spread sectors. Excess
returns (measured by return over U.S. Treasuries) in the corporate and
asset-backed sectors were the highest since 1991 and 1992.
Looking back, moving forward.
1999 will be remembered as one of narrow focus and high valuations. The
fund's shareholders benefited from our disciplined investment process, which
covers all asset classes.
With valuations at record levels, it may be unrealistic to expect similar
returns in 2000. Going into the new year, we will be keeping a keen eye on
interest rates and market movements in Europe and Asia. As always, we will be
steadfast in our approach -- investing for total return in companies with
outstanding growth opportunities.
Gregory J. Hahn, CFA Thomas J. Pence, CFA
Senior Vice President, Senior Vice President,
Portfolio Manager Portfolio Manager
Conseco Capital Management, Inc. Conseco Capital Management, Inc.
Average Annual Total Return(3) (as of 12/31/99)
Inception One Since
Date Year Inception
--------- ------ ---------
Class A............................... 01/02/97 22.00% 17.15%
Class B............................... 02/10/98 22.35% 14.94%
Class C............................... 02/13/98 27.52% 17.08%
Class Y............................... 01/02/97 30.07% 20.07%
Lehman Brothers
Aggregate Bond Index................ 01/02/97 (0.82%) 5.73%
S&P 400 Midcap Index ................. 01/02/97 14.72% 21.80%
- --------------------------------------------------------------------------------
Top Five Sectors(4) (as of 12/31/99)
Communications by Phone, Television, Radio, Cable................ 14.5%
Business Services................................................ 13.2%
Electrical, Other Electrical Equipment, except Computers......... 8.9%
Electric, Gas, Water, Cogeneration, Sanitary Services............ 7.6%
Measuring Instruments, Photo Goods, Watches...................... 6.6%
- --------------------------------------------------------------------------------
Top Ten Holdings (as of 12/31/99)
Veritas Software Corp............................................ 2.6%
Symbol Technologies, Inc......................................... 2.6%
PSI Energy, Inc.................................................. 2.5%
Microsoft Corp................................................... 2.2%
Research in Motion, Ltd.......................................... 2.0%
Yorkshire Power Finance, Ltd..................................... 1.9%
NEXTLINK Communications, Inc..................................... 1.9%
Integrated Device Technology, Inc................................ 1.9%
U.S. Treasury Bond............................................... 1.8%
EchoStar Communications Corp..................................... 1.7%
* Current Net Assets: $46,235,852
* Increase in Net Assets YTD: $13,536,079
* Percentage Increase in Net Assets YTD: 41.4%
* Beta: 1.10 (A shares)(5)
- --------------------------------------------------------------------------------
(3) Past performance is no guarantee of future results. Your investment return
and principal will fluctuate and your shares may be worth more or less than
their original cost. Total return is provided in accordance with SEC
guidelines for comparative purposes and reflects certain contractual fee
waivers and/or expense reimbursements through April 30, 2000. If the waivers
were not in place, the fund's return would have been lower. Total return is
shown with the applicable sales load or contingent-deferred sales charge.
The maximum sales load for the Conseco Balanced Fund is 5.75%. The Lehman
Brothers Aggregate Bond Index is an unmanaged index considered to be
representative of the bond market in general. The Standard & Poor's 400
Midcap Index is an unmanaged index considered to be representative of the
mid-cap stock arena in general.
(4) Top sectors are based on Standard Industry Categorizations and are not
intended to represent detailed classifications.
(5) Beta measures the fund's volatility compared to a 50%/50% blend of the S&P
400 Midcap Index and the Lehman Brothers Aggregate Bond Index.
31
<PAGE>
Conseco Balanced Fund
- --------------------------------------------------------------------------------
Schedule of Investments
December 31, 1999
NUMBER OF
SHARES SECURITY VALUE
----------- ----------- --------
COMMON STOCKS (60.1%)
Apparel and Accessory Stores (0.5%)
12,770 Too, Inc. (a)...................................... $ 220,283
----------
Business Services (13.2%)
3,080 BMC Software, Inc. (a)............................. 246,207
830 BroadVision, Inc. (a).............................. 141,152
2,375 Citrix Systems, Inc. (a)........................... 292,125
8,230 Concord EFS, Inc. (a).............................. 211,923
1,560 Electronic Arts, Inc. (a).......................... 131,040
3,660 Fiserv, Inc. (a)................................... 140,224
7,470 go.com (a)......................................... 177,880
840 i2 Technologies, Inc. (a).......................... 163,800
8,160 Legato Systems, Inc. (a)........................... 561,510
8,910 Microsoft Corp. (a)................................ 1,040,242
1,950 Retek, Inc. (a).................................... 146,738
1,620 Sapient Corp. (a).................................. 228,319
2,160 Scient Corp. (a)................................... 186,705
2,840 Siebel Systems, Inc. (a)........................... 238,560
17,105 Sotheby's Holdings, Inc. - Class A................. 513,150
3,050 Symantec Corp. (a)................................. 178,806
9,570 Technology Solutions Co. (a)....................... 313,418
8,320 VERITAS Software Corp. (a)......................... 1,190,800
----------
6,102,599
----------
Chemicals and Allied Products (2.4%)
2,750 Enzon, Inc. (a).................................... 119,281
8,010 Gilead Sciences, Inc. (a).......................... 433,541
1,650 Medimmune, Inc. (a)................................ 273,694
1,980 Protein Design Labs, Inc. (a)...................... 94,500
3,960 Transkaryotic Therapies, Inc. (a).................. 176,715
----------
1,097,731
----------
NUMBER OF
SHARES SECURITY VALUE
----------- ----------- --------
Communications by Phone, Television, Radio, Cable (11.8%)
3,910 Adelphia Communications Corp. - Class A (a)........ $ 256,594
22,240 American Mobile Satellite Corp..................... 468,430
7,640 American Tower Corp. - Class A (a)................. 233,497
50 Broadwing, Inc..................................... 1,844
10,490 Charter Communications, Inc. - Class A (a)......... 229,469
5,588 Infinity Broadcasting Corp. (a).................... 202,216
7,200 MCI Worldcom, Inc. (a)............................. 382,050
8,880 McLeodUSA, Inc. - Class A (a)...................... 522,810
10,540 NEXTLINK Communications, Inc. (a).................. 875,479
1,940 Omnipoint Corp. (a)................................ 234,013
20,275 Research In Motion, Ltd. (a)....................... 936,452
1,900 Teligent, Inc. - Class A (a)....................... 117,325
4,880 VoiceStream Wireless Corp. (a)..................... 694,485
3,910 WinStar Communications, Inc. (a)................... 294,228
----------
5,448,892
----------
Depository Institutions (0.9%)
1,490 First Virginia Banks, Inc.......................... 64,070
5,650 National Commerce Bancorporation................... 128,184
12,850 North Fork Bancorporation, Inc..................... 224,875
----------
417,129
----------
Educational Services (0.2%)
5,850 DeVry, Inc. (a).................................... 108,956
----------
Electric, Gas, Water, Cogeneration, Sanitary Services (1.0%)
4,090 American Water Works Company, Inc.................. 86,912
5,190 Illinova Corp...................................... 180,352
5,960 The Montana Power Co............................... 214,932
----------
482,196
----------
The accompanying notes are an integral part of these financial statements.
32
<PAGE>
CONSECO FUND GROUP
1999 Annual Report
- --------------------------------------------------------------------------------
Schedule of Investments
December 31, 1999
NUMBER OF
SHARES SECURITY VALUE
----------- ----------- --------
Electrical, Other Electrical Equipment, except Computers (8.2%)
6,850 Advanced Micro Devices, Inc. (a)................... $ 198,222
4,330 CTS Corp........................................... 326,374
3,280 Conexant Systems, Inc. (a)......................... 217,710
7,610 Digital Microwave Corp. (a)........................ 178,359
8,290 EchoStar Communications Corp. - Class A (a)........ 808,275
29,530 Integrated Device Technology, Inc. (a)............. 856,370
1,880 PMC-Sierra, Inc. (a)............................... 301,388
7,080 TeleCorp PCS, Inc. (a)............................. 269,040
5,610 Tellabs, Inc. (a).................................. 360,092
1,380 The DII Group, Inc. (a)............................ 97,937
3,430 Vitesse Semiconductor Corp. (a).................... 179,861
----------
3,793,628
----------
Engineering, Accounting, Research, Management Services (0.9%)
760 Affymetrix, Inc. (a)............................... 128,963
1,620 Millenium Pharmaceuticals, Inc. (a)................ 197,640
1,350 Whittman-Hart, Inc. (a)............................ 72,394
----------
398,997
----------
Fabricators Metal, except Machinery and Transportation Equipment (0.9%)
8,510 Danaher Corp....................................... 410,607
----------
Food and Kindred Products (2.0%)
6,880 Adolph Coors Co.................................... 361,200
11,550 Ralston Purina Group............................... 321,956
6,870 Tootsie Roll Industries, Inc....................... 226,281
----------
909,437
----------
General Merchandise Stores (0.6%)
2,560 Cost Plus, Inc. (a)................................ 91,200
1,390 Costco Wholesale Corp. (a)......................... 126,837
5,020 Family Dollar Stores, Inc.......................... 81,889
----------
299,926
----------
NUMBER OF
SHARES SECURITY VALUE
----------- ----------- --------
Home Furniture and Equipment Stores (0.6%)
6,050 Circuit City Stores, Inc........................... $ 272,628
----------
Industrial, Commercial Machinery, Computers (4.7%)
13,420 Adaptec, Inc. (a).................................. 669,323
1,590 Extreme Networks, Inc. (a)......................... 132,765
18,650 Symbol Technologies, Inc........................... 1,185,441
4,790 Weatherford International, Inc. (a)................ 191,301
----------
2,178,830
----------
Measuring Instruments, Photo Goods, Watches (5.1%)
4,120 Agilent Technologies, Inc. (a)..................... 318,527
3,620 Credence Systems Corp. (a)......................... 313,130
5,390 Guidant Corp. (a).................................. 253,330
5,850 PE Corp. - PE Biosystems Group..................... 703,828
14,760 Waters Corp. (a)................................... 782,280
----------
2,371,095
----------
Non-Durable Goods Wholesale (1.7%)
47,270 U.S. Foodservice (a)............................... 791,773
----------
Oil and Gas Extraction (3.0%)
4,260 BJ Services Co. (a)................................ 178,121
5,220 Burlington Resources, Inc.......................... 172,586
13,710 Diamond Offshore Drilling, Inc..................... 419,012
10,980 ENSCO International, Inc........................... 251,167
5,580 Nabors Industries, Inc. (a)........................ 172,631
22,290 Ocean Energy, Inc. (a)............................. 172,747
----------
1,366,264
----------
The accompanying notes are an integral part of these financial statements.
33
<PAGE>
Conseco Balanced Fund
- --------------------------------------------------------------------------------
Schedule of Investments
December 31, 1999
NUMBER OF
SHARES SECURITY VALUE
----------- ----------- --------
Printing, Publishing and Allied Lines (1.5%)
12,432 A. H. Belo Corp. - Class A........................ $ 236,985
4,980 The E.W. Scripps Co. - Class A.................... 223,166
390 The Washington Post Co. - Class B................. 216,791
-----------
676,942
-----------
Water Transportation (0.9%)
8,650 Royal Caribbean Cruises, Ltd...................... 426,553
-----------
Total common stocks (cost $21,617,568)............ 27,774,466
-----------
PREFERRED STOCKS (1.6%)
Insurance Carriers (0.4%)
8,000 Lincoln National Capital, TOPrS (c), 6.400%....... 198,500
-----------
Measuring Instruments, Photo Goods, Watches (0.8%)
5,927 River Holding Corp., Series B, PIK (c), 11.500%... 356,378
-----------
Non-Depository Credit Institutions (0.4%)
2,000 Centaur Funding Corp., 9.080%,
(b) Cost - $226,056; Acquired - 01/14/1999..... 204,500
-----------
Total preferred stock (cost $948,481) ............ 759,378
-----------
PREFERRED STOCK - CONVERTIBLE (1.8%)
Communications by Phone, Television, Radio, Cable (0.9%)
12,000 Intermedia Communications, Inc., 7.000%,
(b) Cost - $300,000; Acquired - 10/24/1997..... 406,500
20 IXC Communications, Series B, PIK (c), 12.500%.... 22,252
-----------
428,752
-----------
NUMBER OF
SHARES SECURITY VALUE
----------- ----------- --------
Electric, Gas, Water, Cogeneration, Sanitary Services (0.9%)
6,000 The AES Trust II, 5.500%,
(b) Cost - $300,000; Acquired - 10/24/1997...... $ 411,750
-----------
Total preferred stocks - convertible
(cost $620,080) 840,502
-----------
WARRANTS (0.0%)
Communications by Phone, Television, Radio, Cable (0.0%)
100 Park `N View, Inc.................................. 500
-----------
Miscellaneous Manufacturing (0.0%)
200 V2 Music Holdings.................................. --
-----------
Total warrants (cost $0)........................... 500
-----------
PRINCIPAL
AMOUNT
-------------
CORPORATE BONDS (28.2%)
Apparel and Other Finished Products (0.2%)
100,000 Tommy Hilfiger Corp., 6.500%,
due 06/01/2003.................................. 95,428
-----------
Auto Repair and Parking (1.1%)
400,000 Amerco-MTN, 7.470%, due 01/15/2027................. 379,708
100,000 Avis Rent A Car, Inc., 11.000%,
due 05/01/2009.................................. 105,500
-----------
485,208
-----------
The accompanying notes are an integral part of these financial statements.
34
<PAGE>
CONSECO FUND GROUP
1999 Annual Report
- --------------------------------------------------------------------------------
Schedule of Investments
December 31, 1999
PRINCIPAL
AMOUNT SECURITY VALUE
----------- ----------- --------
Communications by Phone, Television, Radio, Cable (1.8%)
200,000 ALLTEL Corp., 6.800%, due 05/01/2029............... $ 174,427
350,000 British Sky Broadcasting, 8.200%,
due 07/15/2009.................................. 337,059
150,000 Cable and Wireless Communications PLC,
6.375%, due 03/06/2003.......................... 148,575
100,000 Nextel Communications, Inc., 9.750%,
due 08/15/2004.................................. 103,500
100,000 Park `N View, Inc., Series B, 13.000%,
due 5/15/2008................................... 75,000
----------
838,561
----------
Depository Institutions (5.4%)
300,000 Centura Bank, 6.500%, due 03/15/2009............... 272,107
500,000 Dime Bancorp, Inc., 7.000%, due 07/25/2001......... 493,221
100,000 FMR Corp., 7.570%, due 06/15/2029,
(b) Cost - $100,000; Acquired - 06/17/1999...... 96,422
150,000 Key Bank, National Association, 6.500%,
due 04/15/2008.................................. 139,638
600,000 PNC Funding Corp., 7.500%, due 11/01/2009.......... 591,870
335,000 Sovereign Bancorp, Inc., 10.250%,
due 05/15/2004.................................. 340,025
650,000 Union Planters Bank, National Association,
6.500%, due 03/15/2008.......................... 584,858
----------
2,518,141
----------
Electric, Gas, Water, Cogeneration, Sanitary Services (5.7%)
400,000 Commonwealth Edison, Series 88, 8.375%,
due 02/15/2023.................................. 389,319
1,175,000 PSI Energy, Inc., 7.850%, due 10/15/2007........... 1,158,429
100,000 Waste Management, Inc., 7.000%,
due 07/15/2028.................................. 74,715
100,000 Waste Management, Inc., 6.625%,
due 07/15/2002.................................. 93,792
1,000,000 Yorkshire Power Finance, Ltd., Series B,
6.496%, due 02/25/2008.......................... 899,559
----------
2,615,814
----------
PRINCIPAL
AMOUNT SECURITY VALUE
----------- ----------- --------
Electrical, Other Electrical Equipment, except Computers (0.7%)
400,000 Motorola, Inc., 6.500%, due 11/15/2028............. $ 344,664
----------
Food Stores (0.6%)
300,000 Kroger Co., 6.000%, due 07/01/2000................. 299,032
----------
General Merchandise Stores (0.3%)
150,000 Shopko Stores, Inc., 6.500%, due 08/15/2003........ 142,510
----------
Insurance Carriers (1.4%)
500,000 Mutual Life Insurance Co. of New York, STEP (c)
0.000%/11.250%, due 08/15/2024,
(b) Cost - $643,975; Acquired - 10/19/1999...... 645,113
----------
Lumber and Wood Products, except Furniture (1.1%)
500,000 West Fraser Mill, 7.250%, due 09/15/2002,
(b) Cost - $499,920; Acquired - 01/06/1997...... 497,281
----------
Measuring Instruments, Photo Goods, Watches (0.7%)
350,000 Bausch & Lomb, Inc., 6.150%,
due 08/01/2001.................................. 343,972
----------
Miscellaneous Manufacturing (0.2%)
200,000 V2 Music Holdings, STEP (c) 0.000%/14.000%,
due 04/15/2008, (b) Cost - $128,184;
Acquired - 05/07/1998........................... 69,000
----------
Motion Pictures (0.2%)
100,000 Liberty Media Corp., 8.500%, due 07/15/2029,
(b) Cost - $97,230; Acquired - 8/11/1999........ 101,539
----------
The accompanying notes are an integral part of these financial statements.
35
<PAGE>
Conseco Balanced Fund
- --------------------------------------------------------------------------------
Schedule of Investments
December 31, 1999
PRINCIPAL
AMOUNT SECURITY VALUE
----------- ----------- --------
Oil and Gas Extraction (1.6%)
270,000 LASMO (USA), Inc., 7.300%, due 11/15/2027.......... $ 246,710
500,000 R&B Falcon Corp, 9.500%, due 12/15/2008............ 503,750
----------
750,460
----------
Petroleum Refining and Related Industries (1.3%)
100,000 Lyondell Chemical Co., Series A, 9.625%,
due 05/01/2007.................................. 102,750
75,000 Lyondell Chemical Co., 10.875%,
due 05/01/2009.................................. 77,625
350,000 Pennzoil Co., 10.125%, due 11/15/2009.............. 397,362
----------
577,737
----------
Pipe Lines, except Natural Gas (0.7%)
300,000 Osprey Trust/Osprey I, 8.310%, due 01/15/2003,
(b) Cost - $300,000; Acquired 09/16/1999........ 298,074
----------
Primary Metal Industries (0.4%)
200,000 Easco Corp, Series B, 10.000%, due 03/15/2001...... 202,250
----------
Real Estate (0.4%)
250,000 Pinnacle Holdings, Inc., STEP (c)
0.000%/10.000%, due 03/15/2008.................. 165,000
----------
Real Estate Investment Trusts (REITS) (2.6%)
150,000 CarrAmerica Realty Corp., 6.625%,
due 03/01/2005.................................. 136,387
100,000 Corporate Property Investors, Inc., 9.000%,
due 03/15/2002, (b) Cost - $109,680;
Acquired - 3/17/1998............................ 101,907
500,000 Regency Centers, L.P., 7.400%, due 04/01/2004...... 478,940
500,000 United Dominion Realty Trust, Inc., 8.125%,
due 11/15/2000.................................. 502,721
----------
1,219,955
----------
PRINCIPAL
AMOUNT SECURITY VALUE
----------- ----------- --------
Security and Commodity Brokers (0.7%)
350,000 Lehman Brothers Holdings, Inc., 7.000%,
due 05/15/2003................................ $ 345,313
-----------
Tobacco Products (0.7%)
350,000 R.J. Reynolds Tobacco Holdings, Inc., 7.375%,
due 05/15/2003................................ 328,954
-----------
Transportation Equipment (0.4%)
180,000 Ford Motor Co., 7.450%, due 07/16/2031........... 173,558
-----------
Total corporate bonds (cost $13,432,224)......... 13,057,564
-----------
MUNICIPAL BONDS (1.2%)
250,000 Capital Projects Finance Authority,
Florida Revenue, 8.000%, due 12/01/2001....... 247,846
350,000 Mississippi Development Bank,
Special Obligation, Series 1998, 8.500%,
due 12/01/2018................................ 315,256
-----------
Total municipal bonds (cost $600,000)............ 563,102
-----------
COLLATERALIZED MORTGAGE OBLIGATIONS (0.6%)
270,000 First Union National Bank Commercial
Mortgage, 99-C4 A1, 7.184%, due 09/15/2008.... 268,622
-----------
Total collateralized mortgage obligations
(cost $271,347)............................... 268,622
-----------
U.S. GOVERNMENT AND AGENCY OBLIGATIONS (1.9%)
40,000 U.S. Treasury Bond, 5.250%, due 11/15/2028....... 32,975
990,000 U.S. Treasury Bond, 5.250%, due 02/15/2029....... 819,225
-----------
Total U.S. government and agency obligations
(cost $891,539)............................... 852,200
-----------
The accompanying notes are an integral part of these financial statements.
36
<PAGE>
CONSECO FUND GROUP
1999 Annual Report
- --------------------------------------------------------------------------------
Schedule of Investments
December 31, 1999
NUMBER OF
SHARES SECURITY VALUE
----------- ----------- --------
SHORT-TERM INVESTMENTS (1.5%)
693,000 AIM Liquid Asset Portfolio......................... $ 693,000
-----------
Total short-term investments (cost $693,000)....... 693,000
-----------
Total investments (cost $39,074,239) (96.9%).................... 44,809,334
-----------
Other assets, less liabilities (3.1%)........................... 1,426,518
-----------
Total Net Assets (100.0%) $46,235,852
===========
- ---------------
(a) Non-income producing security.
(b) Restricted under Rule 144A of the Securities Act of 1933.
(c) PIK - Payment In Kind
STEP - Bonds where the coupon increases or steps up at a predetermined rate.
TOPrS - Trust Originated Preferred Securities.
The accompanying notes are an integral part of these financial statements.
37
<PAGE>
Conseco Equity Fund Searching for high equity and total return
- --------------------------------------------------------------------------------
Portfolio Manager's Review
Mid caps for the new millennium.
As we expected, the last half of 1999 brought about a robust rally for
mid-cap growth stocks.
The Conseco Equity Fund reveled in this market turnaround with a one-year
total return of 47.23% (Class A shares with sales load), beating the S&P 400
Midcap Index of 14.72% and the S&P 500 Index of 21.04%.
This one-year performance boosted the fund to 24 out of 144 funds in the
Lipper Midcap Core Funds peer group.(1)
The fund also earned a four-star Morningstar rating (of a possible five
stars) for its three-year return.(2) This was the first time the fund was
eligible to be rated by Morningstar -- the recognized industry leader in mutual
fund performance, evaluation and ranking. Both Lipper and Morningstar rankings
are based on performance without the sales load.
As a result of the fund's success, investors entrusted an additional $29.0
million in new net assets to the fund this year, bringing total net assets under
management to more than $145 million.
Market environment demands intense research.
Strong returns in the technology, telecommunications and Internet market
sectors added tremendous value to growth investors' portfolios. Despite Fed
concerns over low employment, wage pressure and inflation, many of these
companies produced strong balance sheets and superior market positions with
exciting growth prospects. Consequently, investors began to view mid caps as the
best place to ride out a period of higher interest rates and increasing costs.
Once again, our bottom-up, research-intensive, total-return approach sought
to identify companies in those areas where high returns on capital could either
be sustained or increased with reduced risk.
Growth of $10,000(3)
Conseco Equity Fund
(Class A Shares) S&P 500 Index S&P 400 Midcap Index
DATE VALUE (6) VALUE VALUE
01/02/1997 9,425.00 10,000.00 10,000.00
12/31/1997 11,583.33 13,337.72 13,224.81
12/31/1998 13,449.47 17,147.81 15,754.27
12/31/1999 21,009.32 20,754.46 18,072.09
The growth of $10,000 chart is a comparison of the change in value of a $10,000
investment with dividends and capital gains reinvested for the period from
inception of the class A shares through 12/31/99. Past performance is no
guarantee of future results.
Bottom-up investigation uncovers winners.
The fund benefited from Integrated Device Technology (IDT), a company in the
Static Random Access Memory market for semiconductors. IDT translated excess
capacity, in a capacity-constrained market, into dramatic improvements in return
on invested capital.
Research in Motion, Ltd. (RIMM) continued to produce solid returns for the
fund in the telecom sector. The stock was up nearly 50% during the fourth
quarter thanks, in part, to a huge boost in credibility after Dell Computer
Corp. signed agreements to market RIMM's Blackberry pager under the Dell name.
- --------------------------------------------------------------------------------
(1) Reflects performance for Class A shares for the period ending Dec. 31, 1999.
Lipper Analytical Services is an independent organization that compiles
performance data on investment companies.
(2) Morningstar proprietary ratings reflect historical risk-adjusted
performance. The ratings are subject to change every month. Morningstar
ratings are calculated from a fund's 3-, 5- and 10-year average annual
returns in excess of 90-day T-bill returns with appropriate fee adjustments
and a risk factor that reflects fund performance below 90-day T-bill
returns. The top 10% of the funds in a broad asset class receive 5 stars;
the next 22.5% receive 4 stars; the next 35% receive 3 stars; the next 22.5%
receive 2 stars and the bottom 10% receive 1 star.
38
<PAGE>
Morningstar Ranking(2): * * * * (of 3,533 funds) CONSECO FUND GROUP
- --------------------------------------------------------------------------------
1999 Annual Report
We have increased our focus on the biotechnology sector because many large
pharmaceutical companies face the end of the patent protection periods.
Additionally, we're very excited about the prospects for new drug therapies.
These should be brought to market soon after a worldwide gene-mapping effort is
completed in 2000.
While it may be optimistic to expect Year 2000 returns to mimic our success
in 1999, we will steadfastly rely on our research team to provide guideposts and
spot the solid growth opportunities. Higher interest rates and already high
valuations will present a challenging environment.
However, we think investors will continue to gravitate toward the companies
and industries with the strongest earnings until we see an overall economic
slowdown. With capital spending increasing in Europe and Asia, the growth
outlook appears solid for the near term.
Thomas J. Pence, CFA
Senior Vice President, Portfolio Manager
Conseco Capital Management, Inc.
Average Annual Total Return(3) (as of 12/31/99)
Inception One Since
Date Year Inception
--------- ------- --------
Class A............................... 01/02/97 47.23% 28.08%
Class B............................... 01/28/98 47.85% 30.51%
Class C............................... 02/19/98 54.33% 29.88%
Class Y............................... 01/02/97 57.13% 31.33%
S&P 400 Midcap Index.................. 01/02/97 14.72% 21.80%
S&P 500 Index......................... 01/02/97 21.04% 27.55%
- --------------------------------------------------------------------------------
Top Five Sectors(4) (as of 12/31/99)
Communications by Phone, Television, Radio, Cable................ 17.0%
Business Services................................................ 16.9%
Electrical, Other Electrical Equipment, except Computers......... 14.6%
Measuring Instruments, Photo Goods and Watches................... 8.3%
Industrial, Commercial Machinery, Computers...................... 7.3%
- --------------------------------------------------------------------------------
Top Ten Holdings (as of 12/31/99)
Veritas Software Corp............................................ 4.1%
Symbol Technologies, Inc......................................... 4.0%
Research in Motion, Ltd.......................................... 3.2%
NEXTLINK Communications, Inc..................................... 3.0%
Integrated Device Technology, Inc................................ 2.9%
U.S. Foodservice................................................. 2.7%
EchoStar Communications Corp..................................... 2.7%
Waters Corp...................................................... 2.7%
PE Corp - PE Biosystems Group.................................... 2.6%
VoiceStream Wireless Corp........................................ 2.4%
* Current Net Assets: $145,949,691
* Increase in Net Assets YTD: $56,680,092
* Percentage Increase in Net Assets YTD: 63.5%
* Beta: 0.99 (Class A shares)(5)
- --------------------------------------------------------------------------------
(3) Past performance is no guarantee of future results. Your investment return
and principal will fluctuate and your shares may be worth more or less than
their original cost. Total return is provided in accordance with SEC
guidelines for comparative purposes and reflects certain contractual fee
waivers and/or expense reimbursements through April 30, 2000. If the waivers
were not in place, the fund's return would have been lower. Total return is
shown with the applicable sales load or contingent-deferred sales charge.
The maximum sales load for the Conseco Equity Fund is 5.75%. The Standard &
Poor's 400 Midcap Index is an unmanaged index considered to be
representative of the midcap stock arena in general. The Standard & Poor's
500 Index is an unmanaged index considered to be representative of the U.S.
stock market in general.
(4) Top sectors are based on general Standard Industry categorizations and are
not intended to represent detailed classifications.
(5) Beta measures the fund's volatility compared to the S&P 400 Midcap Index.
39
<PAGE>
Conseco Equity Fund
- --------------------------------------------------------------------------------
Schedule of Investments December 31, 1999
NUMBER OF
SHARES SECURITY VALUE
----------- ----------- --------
COMMON STOCKS (95.1%)
Apparel and Accessory Stores (0.8%)
66,820 Too, Inc. (a)...................................... $ 1,152,645
-----------
Business Services (16.9%)
14,080 BMC Software, Inc. (a)............................. 1,125,520
3,780 BroadVision, Inc. (a).............................. 642,836
10,550 Citrix Systems, Inc. (a)........................... 1,297,650
33,980 Concord EFS, Inc. (a).............................. 874,985
7,660 Electronic Arts, Inc. (a).......................... 643,440
17,700 Fiserv, Inc. (a)................................... 678,131
39,490 go.com (a)......................................... 940,356
4,280 i2 Technologies, Inc. (a).......................... 834,600
43,000 Legato Systems, Inc. (a)........................... 2,958,937
10,180 Retek, Inc. (a).................................... 766,045
7,340 Sapient Corp. (a).................................. 1,034,481
10,360 Scient Corp. (a)................................... 895,492
13,020 Siebel Systems, Inc. (a)........................... 1,093,680
86,560 Sotheby's Holdings, Inc. - Class A................. 2,596,800
14,390 Symantec Corp. (a)................................. 843,614
47,650 Technology Solutions Co. (a)....................... 1,560,538
41,485 VERITAS Software Corp. (a)......................... 5,937,541
-----------
24,724,646
-----------
Chemicals and Allied Products (3.8%)
13,620 Enzon, Inc. (a).................................... 590,768
41,770 Gilead Sciences, Inc. (a).......................... 2,260,801
8,620 Medimmune, Inc. (a)................................ 1,429,843
7,150 Protein Design Labs, Inc. (a)...................... 500,500
18,400 Transkaryotic Therapies, Inc. (a).................. 708,400
-----------
5,490,312
-----------
NUMBER OF
SHARES SECURITY VALUE
----------- ----------- --------
Communications by Phone, Television, Radio, Cable (17.0%)
19,530 Adelphia Communications Corp. - Class A (a)........ $ 1,281,656
113,860 American Mobile Satellite Corp. (a)................ 2,398,176
31,330 American Tower Corp. - Class A (a)................. 957,523
240 Broadwing, Inc. ................................... 8,850
54,400 Charter Communications, Inc. - Class A (a)......... 1,190,000
27,295 Infinity Broadcasting Corp. (a).................... 987,738
43,260 McLeodUSA, Inc. - Class A (a)...................... 2,546,933
52,270 NEXTLINK Communications, Inc. (a).................. 4,341,677
9,370 Omnipoint Corp. (a)................................ 1,130,256
100,545 Research In Motion, Ltd. (a)....................... 4,643,922
8,560 Teligent, Inc. - Class A (a)....................... 528,580
24,330 VoiceStream Wireless Corp. (a)..................... 3,462,463
18,550 WinStar Communications, Inc. (a)................... 1,395,888
-----------
24,873,662
-----------
Depository Institutions (1.6%)
14,920 Compass Bancshares, Inc............................ 332,902
7,320 First Virginia Banks, Inc.......................... 314,760
28,170 National Commerce Bancorporation................... 639,107
64,070 North Fork Bancorporation, Inc..................... 1,121,225
-----------
2,407,994
-----------
Educational Services (0.4%)
28,770 DeVry, Inc. (a).................................... 535,841
-----------
Electric, Gas, Water, Cogeneration, Sanitary Services (1.7%)
20,110 American Water Works Company, Inc.................. 427,337
26,840 Illinova Corp...................................... 932,690
29,530 The Montana Power Co............................... 1,064,926
-----------
2,424,953
-----------
The accompanying notes are an integral part of these financial statements.
40
<PAGE>
CONSECO FUND GROUP
1999 Annual Report
- --------------------------------------------------------------------------------
Schedule of Investments
December 31, 1999
NUMBER OF
SHARES SECURITY VALUE
----------- ----------- --------
Electrical, Other Electrical Equipment, except Computers (14.6%)
33,580 Advanced Micro Devices, Inc. (a)................... $ 971,721
21,680 CTS Corp........................................... 1,634,130
37,980 Caliper Technologies Corp. (a)..................... 2,535,165
14,840 Conexant Systems, Inc. (a)......................... 985,005
53,510 Digital Microwave Corp. (a)........................ 1,254,141
39,860 EchoStar Communications Corp. - Class A (a)........ 3,886,350
147,850 Integrated Device Technology, Inc. (a)............. 4,287,650
8,870 PMC - Sierra, Inc. (a)............................. 1,421,972
34,870 TeleCorp PCS, Inc. (a)............................. 1,325,060
26,730 Tellabs, Inc. (a).................................. 1,715,732
6,570 The DII Group, Inc. (a)............................ 466,265
17,010 Vitesse Semiconductor Corp. (a).................... 891,962
-----------
21,375,153
-----------
Engineering, Accounting, Research, Management Services (3.5%)
4,060 Affymetrix, Inc. (a)............................... 688,931
42,870 Maxygen, Inc. (a).................................. 3,043,770
7,980 Millennium Pharmaceuticals, Inc. (a)............... 973,560
6,680 Whitman-Hart, Inc. (a)............................. 358,215
-----------
5,064,476
-----------
Fabricators Metal, except Machinery and Transportation Equipment (1.5%)
44,700 Danaher Corp....................................... 2,156,775
-----------
Food and Kindred Products (3.4%)
33,110 Adolph Coors Co. .................................. 1,738,275
58,400 Ralston Purina Group............................... 1,627,900
31,410 Tootsie Roll Industries, Inc....................... 1,034,567
32,930 Tyson Foods, Inc. - Class A........................ 535,113
-----------
4,935,855
-----------
NUMBER OF
SHARES SECURITY VALUE
----------- ----------- --------
General Merchandise Stores (1.0%)
12,510 Cost Plus, Inc. (a)................................ $ 445,669
6,850 Costco Wholesale Corp. (a)......................... 625,062
22,680 Family Dollar Stores, Inc.......................... 369,968
-----------
1,440,699
-----------
Home Furniture and Equipment Stores (0.8%)
27,580 Circuit City Stores, Inc........................... 1,242,824
-----------
Industrial, Commercial Machinery, Computers (7.3%)
66,030 Adaptec, Inc. (a).................................. 3,293,246
7,860 Extreme Networks, Inc. (a)......................... 656,310
91,840 Symbol Technologies, Inc........................... 5,837,580
23,710 Weatherford International, Inc. (a)................ 946,918
-----------
10,734,054
-----------
Insurance Carriers (1.6%)
14,700 Allmerica Financial Corp........................... 817,687
827 Berkshire Hathaway, Inc. - Class B (a)............. 1,513,410
-----------
2,331,097
-----------
Measuring Instruments, Photo Goods, Watches (8.3%)
21,780 Agilent Technologies, Inc. (a)..................... 1,683,866
16,460 Credence Systems Corp. (a)......................... 1,423,790
28,330 Guidant Corp. (a).................................. 1,331,510
31,060 PE Corp. - PE Biosystems Group..................... 3,736,906
73,170 Waters Corp. (a)................................... 3,878,010
-----------
12,054,082
-----------
The accompanying notes are an integral part of these financial statements.
41
<PAGE>
Conseco Equity Fund
- --------------------------------------------------------------------------------
Schedule of Investments
December 31, 1999
NUMBER OF
SHARES SECURITY VALUE
----------- ----------- --------
Non-Durable Goods Wholesale (2.7%)
233,860 U.S. Foodservice (a).............................. $ 3,917,155
------------
Oil and Gas Extraction (4.4%)
20,820 BJ Services Co. (a)............................... 870,536
25,830 Burlington Resources, Inc......................... 854,004
60,840 Diamond Offshore Drilling, Inc.................... 1,859,422
54,570 ENSCO International, Inc.......................... 1,248,289
27,460 Nabors Industries, Inc. (a)....................... 849,544
101,160 Ocean Energy, Inc. (a)............................ 783,990
------------
6,465,785
------------
Printing and Publishing (2.4%)
64,489 A. H. Belo Corp. - Class A........................ 1,229,321
25,900 The E. W. Scripps Co. - Class A................... 1,160,644
1,90 The Washington Post Co. - Class B................. 1,058,942
------------
3,448,907
------------
Water Transportation (1.4%)
42,410 Royal Caribbean Cruises, Ltd...................... 2,091,343
------------
Total common stock (cost $106,116,313)............ 138,868,258
------------
CONTRACTS
(100 SHARES
PER CONTRACT) SECURITY VALUE
------------- ----------- --------
PUT OPTIONS PURCHASED (0.1%)
68 NASDAQ - 100, Expiration January 2000,
Exercise Price $2,980.......................... $ 78,200
------------
Total put options purchased (cost $1,169,804)..... 78,200
------------
NUMBER OF
SHARES
- -------------
SHORT-TERM INVESTMENTS (0.8%)
1,156,000 AIM Liquid Asset Portfolio........................ 1,156,000
------------
Total short-term investments (cost $1,156,000).... 1,156,000
------------
Total investments (cost $108,442,117) (96.0%).................. 140,102,458
------------
Other assets, less liabilities (4.0%)........................... 5,847,233
------------
Total Net Assets (100.0%)....................................... $145,949,691
============
- ----------------
(a) Non-income producing security.
The accompanying notes are an integral part of these financial statements.
42
<PAGE>
43
<PAGE>
Conseco 20 Fund Searching for growth through a portfolio of "best ideas"
- --------------------------------------------------------------------------------
Portfolio Manager's Review
Focused on performance.
The Conseco 20 Fund's 1999 one-year total return of 60.60% (Class A shares
with sales load) outperformed the S&P 500 return of 21.04%.
The fund placed in the top 25% of mutual funds with similar investment
objectives for its one-year results.(1) Lipper rankings are based on performance
without the sales load.
As a result, investors seeking aggressive growth entrusted our portfolio
management team with more than $120 million in new net assets. This, combined
with asset appreciation, increased total net assets by 391% -- or more than $173
million in net assets since Jan. 1, 1999.
Process, Process, Process.
The fund was superbly positioned to benefit from favorable market conditions
that rewarded the 20 to 30 best companies our analysts identified. For starters,
it invested in "new-economy" leaders. Many of the fund's best stocks were in the
vanguard of industries revolutionizing America's way of living and doing
business.
For example: in the fourth quarter, VoiceStream Wireless Corp., one of two
independent nationwide wireless digital phone carriers, gained 130%. EchoStar
Communications Corp., the world's largest direct satellite broadcaster, also
boosted the fund's performance with a gain of 114%. And, Symbol Technologies,
Inc. rose 87%.
These impressive gains demonstrate the quality of the fund's investment
discipline -- choosing carefully selected companies that dominate their
industries. Each is a well-positioned leader with a stable management team. And,
together, they have an earnings growth record equaling that of the 50 largest
companies in the stock market.
Growth of $10,000(2)
Conseco 20 Fund
(Class A Shares) S&P 500 Index S&P 400 Midcap Index
DATE VALUE (6) VALUE VALUE
12/31/1997 9,425.00 10,000.00 10,000.00
12/31/1998 12,064.00 12,856.63 11,912.67
12/31/1999 20,566.58 15,560.73 13,665.30
The growth of $10,000 chart is a comparison of the change in value of a $10,000
investment with dividends and capital gains reinvested for the period from
inception of the Class A shares through 12/31/99. Past performance is no
guarantee of future results.
Symbol spotlights another aspect of the fund management team's successful
approach -- hands-on research. When we started buying the stock, Symbol was
known only as a bar-code company, a mature business with little growth prospect.
Instead of taking the Street's analysis at face value, our analysts visited
the company and talked to management.
Digging deeper, we talked to its customers and competitors, and learned that
Symbol is a leader in wireless technology, which delivers data to desktop
computers as well as Symbol-customized internet appliances. Because of Symbol's
specialties, we believe that the company is well positioned to continue an
impressive growth record.
- --------------------------------------------------------------------------------
(1) Reflects performance for the Class A shares versus the Lipper Multi-Cap
Growth category for the period ending Dec. 31, 1999. The Conseco 20 Fund was
ranked 78 out of 342 funds. Lipper Analytical Services is an independent
organization that compiles performance data on investment companies.
44
<PAGE>
CONSECO FUND GROUP
1999 Annual Report
- --------------------------------------------------------------------------------
A steady course.
Of course, the environment that favored new-economy stocks last year may not
persist. Indeed, increasing interest-rate uncertainty at year-end suggests
change lies ahead. Still, we feel the fund should confront this uncertainty from
a position of strength.
The holdings in the portfolio have strong financial positions. Consequently,
they are not as susceptible to federal interest rate hikes. They are positioned
to grow and expand while meeting their capital needs without feeling an
interest-rate pinch.
Since the portfolio has the flexibility to invest in the best ideas available
in large-, mid- and small-cap companies, your fund is well positioned to uncover
and grasp opportunity as it emerges during 2000.
Erik J. Voss, CFA
2nd Vice President, Portfolio Manager
Conseco Capital Management, Inc.
Average Annual Total Return(2) (as of 12/31/99)
Inception One Since
Date Year Inception
--------- -------- --------
Class A............................... 01/01/98 60.60% 43.38%
Class B............................... 02/18/98 61.08% 36.92%
Class C............................... 03/10/98 67.85% 38.24%
Class Y............................... 04/06/98 71.36% 38.17%
S&P 400 Midcap Index.................. 01/01/98 14.72% 16.89%
S&P 500 Index......................... 01/01/98 21.04% 24.74%
- --------------------------------------------------------------------------------
Top Five Sectors(3) (as of 12/31/99)
Radiotelephone Communication..................................... 17.0%
Business Services................................................ 15.0%
Electrical and Other Electrical Equipment, except Computers...... 11.2%
Industrial, Commercial Machinery, Computers...................... 10.8%
Measuring Instruments, Photo Goods, Watches...................... 10.0%
- --------------------------------------------------------------------------------
Top Ten Holdings (as of 12/31/99)
EchoStar Communications Corp..................................... 6.8%
Symbol Technologies, Inc......................................... 6.3%
Research in Motion, Ltd.......................................... 5.1%
U.S. Foodservice................................................. 5.0%
McLeodUSA, Inc................................................... 4.7%
VoiceStream Wireless Corp........................................ 4.7%
Waters Corp...................................................... 4.6%
AIM Liquid Asset Portfolio....................................... 4.6%
Nabors Industries, Inc........................................... 4.5%
Adaptec, Inc..................................................... 4.5%
* Current Net Assets: $217,594,756
* Increase in Net Assets YTD: $173,325,626
* Percentage Increase in Net Assets YTD: 391.5%
* Beta: 1.14 (Class A shares)(4)
- --------------------------------------------------------------------------------
(2) Past performance is no guarantee of future results. Your investment return
and principal will fluctuate and your shares may be worth more or less than
their original cost. Total return is provided in accordance with SEC
guidelines for comparative purposes and reflects certain contractual fee
waivers and/or expense reimbursements through April 30, 2000. If the waivers
were not in place, the fund's return would have been lower. Total return is
shown with the applicable sales load or contingent-deferred sales charge.
The maximum sales load for the Conseco 20 Fund is 5.75%. The Standard &
Poor's 400 Midcap Index is an unmanaged index considered to be
representative of the mid-cap stock arena in general. The Standard & Poor's
500 Index is an unmanaged index considered to be representative of the U.S.
stock market in general.
(3) Top sectors are based on general Standard Industry Categorizations and are
not intended to represent detailed classifications.
(4) Beta measures the fund's volatility compared against the S&P 500 Index.
45
<PAGE>
Conseco 20 Fund
- --------------------------------------------------------------------------------
Schedule of Investments
December 31, 1999
NUMBER OF
SHARES SECURITY VALUE
----------- ----------- --------
COMMON STOCKS (92.1%)
Business Services (15.0%)
98,420 Electronic Arts, Inc. (a).......................... $ 8,267,280
124,620 go.com (a)......................................... 2,967,515
105,790 Legato Systems, Inc. (a)........................... 7,279,674
86,110 Oracle Corp. (a)................................... 9,649,702
148,450 Sotheby's Holdings, Inc. - Class A................. 4,453,500
-----------
32,617,671
-----------
Communications by Phone, Television, Radio, Cable (3.7%)
29,700 Adelphia Communications Corp. - Class A (a)........ 1,949,063
158,710 American Mobile Satellite Corp. (a)................ 3,342,829
77,240 Infinity Broadcasting Corp. (a).................... 2,795,122
-----------
8,087,014
-----------
Electrical, Other Electrical Equipment, except Computers (11.2%)
150,820 EchoStar Communications Corp. - Class A (a)........ 14,704,950
330,660 Integrated Device Technology, Inc. (a)............. 9,589,140
-----------
24,294,090
-----------
Engineering, Accounting, Research, Management Services (1.9%)
34,870 Millennium Pharmaceuticals, Inc. (a)............... 4,254,140
-----------
General Merchandise Stores (1.1%)
27,320 Costco Wholesale Corp. (a)......................... 2,492,950
-----------
Industrial, Commercial Machinery, Computers (10.8%)
193,590 Adaptec, Inc. (a).................................. 9,655,301
216,510 Symbol Technologies, Inc........................... 13,761,917
-----------
23,417,218
-----------
Measuring Instruments, Photo Goods, Watches (10.0%)
29,240 JDS Uniphase Corp. (a)............................. 4,716,778
57,650 PE Corp. - PE Biosystems Group..................... 6,936,016
189,370 Waters Corp. (a)................................... 10,036,610
-----------
$21,689,404
-----------
NUMBER OF
SHARES SECURITY VALUE
----------- ----------- --------
Non-Durable Goods Wholesale (5.0%)
647,210 U.S. Foodservice (a)............................... $ 10,840,768
------------
Oil and Gas Extraction (4.5%)
314,560 Nabors Industries, Inc. (a)........................ 9,731,700
------------
Phone Communication, except Radiotelephone (7.6%)
149,430 MCI Worldcom, Inc. (a)............................. 7,929,129
104,630 NEXTLINK Communications, Inc. (a).................. 8,690,829
------------
16,619,958
------------
Radiotelephone Communication (17.0%)
174,620 McLeodUSA, Inc. - Class A (a)...................... 10,280,752
43,900 Omnipoint Corp. (a)................................ 5,295,438
242,610 Research In Motion, Ltd. (a)....................... 11,205,549
71,470 VoiceStream Wireless Corp. (a)..................... 10,171,074
------------
36,952,813
------------
Water Transportation (4.3%)
189,810 Royal Caribbean Cruises, Ltd....................... 9,360,006
------------
Total common stock (cost $155,570,694) 200,357,732
------------
CONTRACTS
(100 SHARES
PER CONTRACT)
- -----------------
PUT OPTIONS PURCHASED (0.1%)
25 NASDAQ - 100, Expiration January 2000,
Exercise Price $3,040........................... 47,500
147 NASDAQ - 100, Expiration January 2000,
Exercise Price $2,980........................... 169,050
------------
Total put options purchased (cost $2,946,416)...... 216,550
------------
The accompanying notes are an integral part of these financial statements.
46
<PAGE>
CONSECO FUND GROUP
1999 Annual Report
- --------------------------------------------------------------------------------
Schedule of Investments
December 31, 1999
NUMBER OF
SHARES SECURITY VALUE
----------- ----------- --------
SHORT-TERM INVESTMENTS (4.6%)
10,000,000 AIM Liquid Asset Portfolio..................... $ 10,000,000
------------
Total short-term investments
(cost $10,000,000).......................... 10,000,000
------------
Total investments (cost $168,517,110) (96.8%)................ 210,574,282
------------
Other assets, less liabilities (3.2%)........................ 7,020,474
------------
Total Net Assets (100.0%).................................... $217,594,756
============
- ----------------
(a) Non-income producing security.
The accompanying notes are an integral part of these financial statements.
47
<PAGE>
Notes to Financial Statements
- --------------------------------------------------------------------------------
December 31, 1999
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 portfolio of investments. The
Trust consists of six series ("Funds"), each with its own investment objective
and investment policies. The Funds are the Conseco Fixed Income Fund, Conseco
High Yield Fund, Conseco Convertible Securities Fund, Conseco Balanced Fund,
Conseco Equity Fund and Conseco 20 Fund. The Conseco Fixed Income, Conseco
Balanced and Conseco Equity Funds became operational and available for sale on
January 2, 1997. The Conseco High Yield and Conseco 20 Funds commenced
operations on January 1, 1998. The Conseco Convertible Securities Fund became
operational and available for sale on September 28, 1998.
Each one of the Funds has a distinct investment objective. The Conseco
Fixed Income Fund invests primarily in investment-grade debt securities. The
Conseco High Yield Fund invests primarily in below-investment-grade securities,
commonly known as junk bonds or high yield securities. The Conseco Convertible
Securities Fund invests primarily in below investment grade securities that are
convertible into common stock. The Conseco Balanced Fund invests in several
asset classes including debt securities, equity securities, and money market
instruments. The Conseco Equity Fund invests in selected equity securities and
other securities having the investment characteristics of common stocks. The
Conseco 20 Fund concentrates its investments in a core position of approximately
20 to 30 common stocks believed to have above average growth prospects.
The Funds offer four classes of shares: Class A, Class B, Class C and Class
Y. Sales of Class A shares may be subject to a front-end sales charge.
Redemptions of Class B and Class C shares may be subject to a
contingent-deferred sales charge (as a percentage of the offering price or net
asset value at the time of sale, whichever is less). Class Y shares are
available with no sales charge to certain institutional investors and qualifying
individual investors. The Funds are authorized to issue an unlimited number of
shares.
Class B shares have a contingent-deferred sales charge for redemptions
occurring within six years of their purchase. The contingent-deferred sales
charge is a percentage of the net asset value of the shares at the date of
purchase or the net asset value of the shares at the date of redemption,
whichever is less. These charges are 5% in year one, 4% in year two, 3% in year
three, 3% in year four, 2% in year five and 1% in year six. Class B Shares will
automatically convert to a number of Class A shares of equal dollar value eight
years after purchase. This conversion feature benefits shareholders because
Class A shares have lower ongoing expenses than Class B shares. Class C shares
which are held for less than one year are subject to a contingent-deferred sales
charge upon redemption in an amount equal to 1% of the lower of the net asset
value of the shares at the date of purchase or the net asset value of the shares
at the date of redemption. Class C shares held one year or longer are not
subject to this contingent-deferred sales charge. The contingent-deferred sales
charge will not apply to shares acquired due to reinvestment of dividends or
capital gains distributions.
2. Significant Accounting Policies
Security Valuation, Transactions, and Related Investment Income
The investments in each portfolio are valued at the close of regular
trading on the New York Stock Exchange on each 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. All Funds may invest in U.S. dollar
denominated corporate debt securities of domestic issuers, and all Funds except
the Conseco Equity Fund may invest in debt securities of foreign issuers that
may or may not be U.S. dollar denominated.
The following summarizes the investments, which carry certain restrictions
as to resale from the Trust to certain qualified buyers:
Market %of
Fund Cost Value Investments
---- ---------- ----------- -----------
Conseco Fixed Income - bonds................ $ 8,467,803 $ 8,116,581 12.70%
Conseco Fixed Income - preferred stock...... 750,000 766,875 1.20%
Conseco High Yield - bonds.................. 23,167,441 23,014,835 18.65%
Conseco Convertible Securities - bonds...... 13,719,597 17,094,625 24.40%
Conseco Convertible Securities - preferred
stocks 2,014,700 5,151,500 7.35%
Conseco Balanced - bonds.................... 1,878,989 1,809,336 4.04%
Conseco Balanced - preferred stocks......... 826,056 1,022,750 2.28%
These securities are eligible for resale to qualified institutional buyers
in transactions exempt from registration under Rule 144A of the Securities Act
of 1933. In addition, Conseco Capital Management, Inc., ("the Adviser"), a
wholly owned subsidiary of Conseco, which serves as investment adviser to the
funds pursuant to investment advisory agreements, has determined that these
securities are liquid securities through a procedure approved by the Board of
Trustees of the Trust ("Trustees").
48
<PAGE>
CONSECO FUND GROUP
1999 Annual Report
- --------------------------------------------------------------------------------
December 31, 1999
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 by third-party pricing services. 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 for which market quotations are not readily available are valued at
fair value as determined under policies approved by the Trustees. Debt
securities with maturities of sixty (60) days or less are valued at amortized
cost.
Dividends to Shareholders
Dividends from the Conseco Fixed Income, Conseco High Yield and Conseco
Convertible Securities Funds will be declared and distributed monthly. Dividends
from the Conseco Balanced, Conseco Equity and Conseco 20 Funds will be declared
and distributed quarterly. However, the Trustees may decide to declare dividends
at other intervals.
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 gains (losses). Any taxable income or gains 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. During
the year ended December 31, 1999, the following Funds paid capital gain
dividends (taxable as long-term capital gains):
Fund Amount
----- ----------
Conseco Convertible Securities Fund.............................. $ 334,118
Conseco Balanced Fund............................................ 148,467
Conseco Equity Fund.............................................. 3,137,539
Conseco 20 Fund.................................................. 28,900
Organization Costs
Costs incurred by all Funds, except the Conseco Convertible Securities
Fund, in connection with their organization and public offering of shares
totaling $461,794 have been deferred and will be amortized over a period of
approximately five years beginning with the initial date of sale of shares to
the public. Such costs were advanced by Conseco, Inc. ("Conseco") and were
reimbursed by the Funds. The proceeds of any redemption of the initial shares
(purchased by subsidiaries of Conseco) by any holder thereof will be reduced by
any unamortized organization 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 qualify as regulated
investment companies under Subchapter M of the Internal Revenue Code by
distributing substantially all of their taxable income and net capital gains to
their shareholders annually and otherwise complying with the requirements for
regulated investment companies. Therefore, no provision has been made for
federal income taxes.
Expenses
Expenses directly attributable to a Fund are charged to operations.
Expenses directly attributable to a Class of shares are charged to that Class.
The Fund pays the expenses of its Trustees who are not affiliated persons of the
Adviser or Trust.
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 assets and liabilities and the disclosure
of contingent assets and liabilities as of the date of the financial statements
and the reported amounts of increases and decreases in net assets from
operations during the reporting period. Actual results may differ from these
estimates.
3. Agreements with Subsidiaries of Conseco
Investment Advisory Agreement
The Adviser supervises the Trust's management and investment program,
performs a variety of services in connection with the management and operation
of the Funds and pays all compensation of officers and Trustees who are
affiliated persons of the Adviser or the Trust. The following summarizes the
total fees incurred for such services for the year ended December 31, 1999:
Fund Amount
----- ---------
Conseco Fixed Income............................................. $301,525
Conseco High Yield............................................... 709,581
Conseco Convertible Securities................................... 345,093
Conseco Balanced................................................. 264,478
Conseco Equity................................................... 704,523
Conseco 20....................................................... 607,285
49
<PAGE>
Notes to Financial Statements
- --------------------------------------------------------------------------------
December 31, 1999
Under the investment advisory agreement, the Adviser receives an investment
advisory fee equal to an annual rate of 0.45% of the average daily net asset
value of the Conseco Fixed Income Fund, 0.85% of the average daily net asset
value of the Conseco Convertible Securities Fund and 0.70% of the average daily
net asset value of the Conseco High Yield, Conseco Balanced, Conseco Equity, and
Conseco 20 Funds. The Adviser also manages other registered investment companies
and the invested assets of its parent company, Conseco, which owns or manages
several life insurance subsidiaries, and provides investment and servicing
functions to Conseco and affiliates. The Adviser has contractually 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 exceeds the following:
Fund Class A Class B Class C Class Y
----- ------- ------- ------- -------
Conseco Fixed Income............... 1.25% 1.60% 1.60% 0.60%
Conseco High Yield................. 1.40% 1.90% 1.90% 0.90%
Conseco Convertible Securities..... 1.55% 2.05% 2.05% 1.05%
Conseco Balanced................... 1.50% 2.00% 2.00% 1.00%
Conseco Equity..................... 1.50% 2.00% 2.00% 1.00%
Conseco 20......................... 1.75% 2.25% 2.25% 1.25%
The Adviser may discontinue these contractual limits at any time after
April 30, 2000.
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 of each Fund. The Administrator has contractually agreed to waive its
fees and/or reimburse the Funds to the extent that the ratio of expenses to net
assets on an annual basis exceeds the expense limitations as stated above for
the investment advisory agreement. The Administrator may discontinue these
contractual limits at any time after April 30, 2000. The following summarizes
the total fees incurred for such services for the year ended December 31, 1999:
Fund Amount
----- ---------
Conseco Fixed Income............................................. $ 133,934
Conseco High Yield............................................... 202,699
Conseco Convertible Securities................................... 81,105
Conseco Balanced................................................. 75,566
Conseco Equity................................................... 201,251
Conseco 20....................................................... 173,510
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, initially approved by the 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 are
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 for the Conseco Fixed Income, Conseco Balanced
and Conseco Equity Funds and December 31, 1997 for Class B and Class C shares
for the Conseco Fixed Income, Conseco Balanced and Conseco Equity Funds and
Class A, Class B and Class C shares for the Conseco High Yield, Conseco
Convertible Securities and Conseco 20 Funds 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, Class B and Class C shares
of the Fund and for account maintenance provided to existing Class A, Class B
and Class C shareholders. The Conseco Fixed Income Fund's Plan authorizes
payments to the Distributor up to 0.65%, and the Conseco High Yield, Conseco
Convertible Securities, Conseco Balanced, Conseco Equity, and Conseco 20 Fund's
Plans up to 0.50%, annually of each Fund's average daily net assets attributable
to its Class A shares. Class B and Class C share's Plan authorizes payments to
the Distributor up to 1.00% annually for each Fund's average daily net assets
attributable to their respective class. 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, Class B and Class
C shares and for promotional and other sales related costs. The Distributor has
contractually agreed to waive its fees and/or reimburse the Funds to the extent
that the ratio of expenses to net assets on an annual basis exceeds the expense
limitations as stated above for the investment advisory agreement. The
Distributor may discontinue these contractual limits at any time after April 30,
2000. The following summarizes the total fees incurred for such services for
Class A, Class B, and Class C shares for the year ended December 31, 1999:
50
<PAGE>
CONSECO FUND GROUP
1999 Annual Report
- --------------------------------------------------------------------------------
December 31, 1999
Fund Amount
----- ---------
Conseco Fixed Income............................................. $291,115
Conseco High Yield............................................... 661,209
Conseco Convertible Securities................................... 209,748
Fund Amount
----- ---------
Conseco Balanced................................................. $172,965
Conseco Equity................................................... 181,361
Conseco 20....................................................... 569,932
4. Investment Transactions
The cost of investments and the composition of gross unrealized
appreciation and depreciation of investments at December 31, 1999, for federal
income tax purposes are shown below:
<TABLE>
<CAPTION>
Conseco Conseco Conseco Conseco Conseco Conseco
Fixed Income High Yield Convertible Balanced Equity 20
Fund Fund Securities Fund Fund Fund Fund
------------ ------------ --------------- ----------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Gross unrealized appreciation.......... $ 126,376 $ 2,860,217 $17,513,980 $ 7,050,621 $ 36,120,187 $ 47,410,628
Gross unrealized depreciation.......... (2,408,293) (3,741,249) (1,294,856) (1,385,679) (3,644,170) (6,062,928)
- -------------------------------------------------------------------------------------------------------------------------------
Net unrealized appreciation
(depreciation)....................... $(2,281,917) $ (881,032) $16,219,124 $ 5,664,942 $ 32,476,017 $ 41,347,700
- -------------------------------------------------------------------------------------------------------------------------------
Cost of investments.................... $66,214,882 $124,252,536 $53,828,595 $39,144,392 $107,626,441 $169,226,582
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
The aggregate cost of purchases and the aggregate proceeds from sales of
investments for the year ended December 31, 1999 are shown below:
<TABLE>
<CAPTION>
Conseco Conseco Conseco Conseco Conseco Conseco
Fixed Income High Yield Convertible Balanced Equity 20
Fund Fund Securities Fund Fund Fund Fund
------------ ------------ --------------- ----------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Purchases:
U.S. Government...................... $103,892,989 $ -- $ -- $ 15,754,001 $ -- $ --
Other................................ 159,309,253 392,963,363 70,082,892 110,066,810 367,277,898 334,804,337
Sales:
U.S. Government...................... $104,271,475 $ -- $ -- $ 17,822,876 $ -- $ --
Other................................ 137,631,829 316,892,310 46,620,355 103,734,606 367,261,658 243,644,941
</TABLE>
5. Federal Income Taxes
As of December 31, 1999, the following Funds have capital loss
carryforwards available to offset capital gains in the future, if any:
Amount Expires
---------- -------
Conseco Fixed Income................... $1,667,267 2007
Conseco High Yield..................... 2,529,608 2006
Net realized gains or losses may differ for Federal income tax purposes
primarily as a result of wash sales and post-October losses which may not be
recognized for tax purposes until the first of the following fiscal year. Such
amounts may be used to offset future capital gains. The following summarizes the
amount of post-October losses deferred, on a tax basis, for the year ended
December 31, 1999:
<TABLE>
<CAPTION>
Fund Amount
---- -------
<S> <C>
Conseco Fixed Income................................ $22,327
Conseco High Yield.................................. 334,926
Conseco Convertible Securities...................... 209,545
Conseco Balanced.................................... 26,327
Conseco Equity...................................... 448,872
Conseco 20.......................................... 1,600,343
</TABLE>
51
<PAGE>
Financial Highlights
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Conseco Conseco Conseco
Fixed Income Fund High Yield Fund Convertible Securities Fund
----------------------- ----------------------- ---------------------------
Period from
September 28,
1998(f)
Year Ended through
Year Ended December 31, Year Ended December 31, December 31, December 31,
Class A Shares 1999 1998 1997 1999 1998 1999 1998
----------------------- ----------------------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value per share, beginning of period........... $10.21 $10.13 $10.00 $10.00 $10.00 $11.00 $10.00
Income from investment operations (a):
Net investment income (loss)........................... 0.63 0.55 0.66 1.00 0.76 0.46 0.10
Net realized gains (losses) and change in unrealized
appreciation (depreciation) on investments............ (0.65) 0.20 0.18 (0.13) (0.10) 3.89 1.00
- -----------------------------------------------------------------------------------------------------------------------------------
Total income (loss) from investment operations........ (0.02) 0.75 0.84 0.87 0.66 4.35 1.10
- -----------------------------------------------------------------------------------------------------------------------------------
Distributions:
Dividends from net investment income................... (0.56) (0.55) (0.58) (0.87) (0.66) (0.27) (0.10)
Distribution of net capital gains...................... (0.03) (0.12) (0.13) -- -- (0.15) --
- -----------------------------------------------------------------------------------------------------------------------------------
Total distributions................................... (0.59) (0.67) (0.71) (0.87) (0.66) (0.42) (0.10)
- -----------------------------------------------------------------------------------------------------------------------------------
Net asset value per share, end of period.............. $ 9.60 $10.21 $10.13 $10.00 $10.00 $14.93 $11.00
- -----------------------------------------------------------------------------------------------------------------------------------
Total return (b)(c)(d)................................. (0.27%) 7.57% 8.66% 9.03% 6.56% 40.12% 11.04%
- -----------------------------------------------------------------------------------------------------------------------------------
Ratios/supplemental data:
Net assets (dollars in thousands), end of period....... $30,681 $30,684 $ 153 $42,591 $28,199 $22,927 $27,611
Ratio of expenses to average net assets (b)(e):
Before fee waiver and/or expense reimbursement...... 1.64% 1.94% 13.67% 1.66% 2.12% 1.95% 2.12%
After fee waiver and/or expense reimbursement....... 1.25% 1.25% 1.25% 1.40% 1.40% 1.55% 1.55%
Ratio of net investment income (loss) to average
net assets (b)(e):
Before fee waiver and/or expense reimbursement......... 5.30% 4.59% (6.91%) 8.67% 7.04% 1.71% 3.23%
After fee waiver and/or expense reimbursement.......... 5.69% 5.28% 5.51% 8.93% 7.76% 2.11% 3.80%
<FN>
(a) Per share amounts presented are based on an average of monthly shares
outstanding for the period ended December 31, 1998 and 1997.
(b) The Adviser, Administrator and Distributor have contractually agreed to
waive their fees and/or reimburse Fund expenses to the extent that the ratio
of expenses to average net assets exceeds on an annual basis 1.25% for the
Conseco Fixed Income, 1.40% for the Conseco High Yield, 1.55% for the
Conseco Convertible Securities, 1.50% for the Conseco Balanced and Conseco
Equity and 1.75% for the Conseco 20 Funds. These contractual limits may be
discontinued by the Adviser, Administrator and Distributor at any time after
April 30, 2000.
(c) Total return figures do not include sales loads; results would be lower if
sales charges were included.
(d) Not annualized.
(e) Annualized.
(f) Commencement of operations.
</FN>
</TABLE>
52
<PAGE>
CONSECO FUND GROUP
1999 Annual Report
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Conseco Conseco Conseco
Balanced Fund Equity Fund 20 Fund
------------------------ ------------------------- ------------------------
Year Ended December 31, Year Ended December 31, Year Ended December 31,
Class A Shares 1999 1998 1997 1999 1998 1997 1999 1998
--------- -------- ------- --------- -------- -------- -------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value per share, beginning of period........ $11.69 $10.73 $10.00 $12.55 $11.07 $10.00 $12.80 $10.00
Income from investment operations (a):
Net investment income (loss)........................ 0.22 0.30 0.28 (0.14) -- (0.04) (0.18) (0.02)
Net realized gains (losses) and change in
unrealized appreciation (depreciation)
on investments.................................... 3.18 1.03 1.43 7.18 1.79 2.33 9.19 2.82
- ------------------------------------------------------------------------- ----------------------------------------------------------
Total income (loss) from investment operations..... 3.40 1.33 1.71 7.04 1.79 2.29 9.01 2.80
- ------------------------------------------------------------------------------------------------------------------------------------
Distributions:
Dividends from net investment income................ (0.23) (0.24) (0.27) -- (0.01) -- -- --
Distribution of net capital gains................... (1.35) (0.13) (0.71) (3.32) (0.30) (1.22) (1.13) --
- ------------------------------------------------------------------------- ----------------------------------------------------------
Total distributions................................ (1.58) (0.37) (0.98) (3.32) (0.31) (1.22) (1.13) --
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value per share, end of period........... $13.51 $11.69 $10.73 $16.27 $12.55 $11.07 $20.68 $12.80
- ------------------------------------------------------------------------------------------------------------------------------------
Total return (b)(c)(d).............................. 29.44% 12.45% 17.19% 56.21% 16.11% 22.90% 70.40% 28.00%
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios/supplemental data:
Net assets (dollars in thousands), end of period.... $31,932 $26,064 $ 1,076 $29,480 $26,203 $ 4,877 $53,463 $33,845
Ratio of expenses to average net assets (b)(e):
Before fee waiver and/or expense reimbursement... 1.96% 2.26% 12.44% 1.66% 2.10% 4.85% 1.70% 2.15%
After fee waiver and/or expense reimbursement.... 1.50% 1.50% 1.50% 1.50% 1.50% 1.50% 1.68% 1.75%
Ratio of net investment income (loss) to average
net assets (b)(e):
Before fee waiver and/or expense reimbursement... 1.41% 1.90% (8.44%) (0.99%) (0.60%) (3.70%) (1.04%) (0.62%)
After fee waiver and/or expense reimbursement.... 1.87% 2.66% 2.50% (0.83%) --% (0.35%) (1.02%) (0.22%)
<FN>
(a) Per share amounts presented are based on an average of monthly shares
outstanding for the period ended December 31, 1998 and 1997.
(b) The Adviser, Administrator and Distributor have contractually agreed to
waive their fees and/or reimburse Fund expenses to the extent that the ratio
of expenses to average net assets exceeds on an annual basis 1.25% for the
Conseco Fixed Income, 1.40% for the Conseco High Yield, 1.55% for the
Conseco Convertible Securities, 1.50% for the Conseco Balanced and Conseco
Equity and 1.75% for the Conseco 20 Funds. These contractual limits may be
discontinued by the Adviser, Administrator and Distributor at any time after
April 30, 2000.
(c) Total return figures do not include sales loads; results would be lower if
sales charges were included.
(d) Not annualized.
(e) Annualized.
(f) Commencement of operations.
</FN>
</TABLE>
53
<PAGE>
Financial Highlights
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Conseco Conseco
Fixed Income Fund High Yield Fund
-------------------------------- ----------------------------------
Period from Period from
Year Ended March 20, 1998(f) Year Ended February 19, 1998(f)
December 31, through December 31, through
Class B Shares 1999 December 31, 1998 1999 December 31, 1998
-------------------------------- ----------------------------------
<S> <C> <C> <C> <C>
Net asset value per share, beginning of period............. $10.19 $10.24 $9.97 $10.44
Income from investment operations (a):
Net investment income (loss)............................. 0.41 0.36 0.55 0.60
Net realized gains (losses) and change in unrealized
appreciation (depreciation) on investments.............. (0.46) 0.14 0.28 (0.48)
- ---------------------------------------------------------------------------------------------------------------------------------
Total income (loss) from investment operations.......... (0.05) 0.50 0.83 0.12
- ---------------------------------------------------------------------------------------------------------------------------------
Distributions:
Dividends from net investment income..................... (0.52) (0.45) (0.83) (0.59)
Distribution of net capital gains........................ (0.03) (0.10) -- --
- ---------------------------------------------------------------------------------------------------------------------------------
Total distributions..................................... (0.55) (0.55) (0.83) (0.59)
- ---------------------------------------------------------------------------------------------------------------------------------
Net asset value per share, end of period................ $ 9.59 $10.19 $9.97 $ 9.97
- ---------------------------------------------------------------------------------------------------------------------------------
Total return (b)(c)(d)................................... (0.49%) 4.97% 8.57% 1.12%
- ---------------------------------------------------------------------------------------------------------------------------------
Ratios/supplemental data:
Net assets (dollars in thousands), end of period......... $ 5,230 $ 2,619 $47,433 $11,271
Ratio of expenses to average net assets (b)(e):
Before fee waiver and/or expense reimbursement........ 1.99% 2.77% 2.16% 2.75%
After fee waiver and/or expense reimbursement......... 1.60% 1.60% 1.90% 1.90%
Ratio of net investment income (loss) to average net
assets (b)(e):
Before fee waiver and/or expense reimbursement........ 4.95% 3.66% 8.17% 6.42%
After fee waiver and/or expense reimbursement......... 5.34% 4.83% 8.43% 7.27%
</TABLE>
<TABLE>
<CAPTION>
Conseco
Convertible Securities Fund
-------------------------------------
Period from
Year Ended September 28, 1998(f)
December 31, through
Class B Shares 1999 December 31, 1998
------------- ----------------------
<S> <C> <C>
Net asset value per share, beginning of period............. $11.00 $10.00
Income from investment operations (a):
Net investment income (loss)............................. 0.06 0.08
Net realized gains (losses) and change in unrealized
appreciation (depreciation) on investments.............. 4.21 1.00
- ---------------------------------------------------------------------------------------------------
Total income (loss) from investment operations.......... 4.27 1.08
- ---------------------------------------------------------------------------------------------------
Distributions:
Dividends from net investment income..................... (0.24) (0.08)
Distribution of net capital gains........................ (0.15) --
- --------------------------------------------------------------------------------------------------
Total distributions..................................... (0.39) (0.08)
- ---------------------------------------------------------------------------------------------------
Net asset value per share, end of period................ $14.88 $11.00
- ---------------------------------------------------------------------------------------------------
Total return (b)(c)(d)................................... 39.40% 10.89%
- ---------------------------------------------------------------------------------------------------
Ratios/supplemental data:
Net assets (dollars in thousands), end of period......... $13,690 $ 1
Ratio of expenses to average net assets (b)(e):
Before fee waiver and/or expense reimbursement........ 2.45% 154.76%
After fee waiver and/or expense reimbursement......... 2.05% 2.05%
Ratio of net investment income (loss) to average net
assets (b)(e):
Before fee waiver and/or expense reimbursement........ 1.21% (149.69%)
After fee waiver and/or expense reimbursement......... 1.61% 3.02%
<FN>
(a) Per share amounts presented are based on an average of monthly shares
outstanding for the period ended December 31, 1998 and 1997.
(b) The Adviser, Administrator and Distributor have contractually agreed to
waive their fees and/or reimburse Fund expenses to the extent that the ratio
of expenses to average net assets exceeds on an annual basis 1.60% for the
Conseco Fixed Income, 1.90% for the Conseco High Yield, 2.05% for the
Conseco Convertible Securities, 2.00% for the Conseco Balanced and Conseco
Equity and 2.25% for the Conseco 20 Funds. These contractual limits may be
discontinued by the Adviser, Administrator and Distributor at any time after
April 30, 2000.
(c) Total return figures do not include sales loads; results would be lower if
sales charges were included.
(d) Not annualized.
(e) Annualized.
(f) Commencement of operations.
</FN>
</TABLE>
54
<PAGE>
CONSECO FUND GROUP
1999 Annual Report
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Conseco Conseco
Balanced Fund Equity Fund
--------------------------------- ----------------------------------
Period from Period from
Year Ended February 10, 1998(f ) Year Ended January 28, 1998(f)
December 31, through December 31, through
Class B Shares 1999 December 31, 1998 1999 December 31, 1998
------------ ------------------- ------------ ----------------------
<S> <C> <C> <C> <C>
Net asset value per share, beginning of period............. $11.61 $11.20 $12.47 $11.09
Income from investment operations (a):
Net investment income (loss)............................. 0.12 0.19 (0.14) (0.06)
Net realized gains (losses) and change in unrealized
appreciation (depreciation) on investments.............. 3.18 0.57 7.07 1.75
- -----------------------------------------------------------------------------------------------------------------------------------
Total income (loss) from investment operations.......... 3.30 0.76 6.93 1.69
- -----------------------------------------------------------------------------------------------------------------------------------
Distributions:
Dividends from net investment income..................... (0.18) (0.22) -- (0.01)
Distribution of net capital gains........................ (1.35) (0.13) (3.27) (0.30)
- -----------------------------------------------------------------------------------------------------------------------------------
Total distributions..................................... (1.53) (0.35) (3.27) (0.31)
- -----------------------------------------------------------------------------------------------------------------------------------
Net asset value per share, end of period................ $13.38 $11.61 $16.13 $12.47
- -----------------------------------------------------------------------------------------------------------------------------------
Total return (b)(c)(d)................................... 28.79% 6.83% 55.63% 15.20%
- -----------------------------------------------------------------------------------------------------------------------------------
Ratios/supplemental data:
Net assets (dollars in thousands), end of period......... $ 2,854 $ 1,301 $ 3,489 $ 1,634
Ratio of expenses to average net assets (b)(e):
Before fee waiver and/or expense reimbursement........ 2.46% 3.93% 2.16% 4.85%
After fee waiver and/or expense reimbursement......... 2.00% 2.00% 2.00% 2.00%
Ratio of net investment income (loss) to average net
assets (b)(e):
Before fee waiver and/or expense reimbursement........ 0.91% 0.16% (1.49%) (3.45%)
After fee waiver and/or expense reimbursement......... 1.37% 2.09% (1.33%) (0.60%)
</TABLE>
<TABLE>
<CAPTION>
Conseco
20 Fund
-------------------------------------
Period from
Year Ended February 18, 1998(f)
December 31, through
Class B Shares 1999 December 31, 1998
-------------------------------------
<S> <C> <C>
Net asset value per share, beginning of period............. $12.71 $11.21
Income from investment operations (a):
Net investment income (loss)............................. (0.10) (0.07)
Net realized gains (losses) and change in unrealized
appreciation (depreciation) on investments.............. 8.94 1.57
- --------------------------------------------------------------------------------------------------
Total income (loss) from investment operations.......... 8.84 1.50
- --------------------------------------------------------------------------------------------------
Distributions:
Dividends from net investment income..................... -- --
Distribution of net capital gains........................ (1.15) --
- --------------------------------------------------------------------------------------------------
Total distributions..................................... (1.15) --
- --------------------------------------------------------------------------------------------------
Net asset value per share, end of period................ $20.40 $12.71
- --------------------------------------------------------------------------------------------------
Total return (b)(c)(d)................................... 69.56% 13.38%
- --------------------------------------------------------------------------------------------------
Ratios/supplemental data:
Net assets (dollars in thousands), end of period......... $71,233 $ 7,270
Ratio of expenses to average net assets (b)(e):
Before fee waiver and/or expense reimbursement........ 2.20% 2.73%
After fee waiver and/or expense reimbursement......... 2.18% 2.25%
Ratio of net investment income (loss) to average net
assets (b)(e):
Before fee waiver and/or expense reimbursement........ (1.54%) (1.26%)
After fee waiver and/or expense reimbursement......... (1.52%) (0.78%)
<FN>
(a) Per share amounts presented are based on an average of monthly shares
outstanding for the period ended December 31, 1998 and 1997.
(b) The Adviser, Administrator and Distributor have contractually agreed to
waive their fees and/or reimburse Fund expenses to the extent that the ratio
of expenses to average net assets exceeds on an annual basis 1.60% for the
Conseco Fixed Income, 1.90% for the Conseco High Yield, 2.05% for the
Conseco Convertible Securities, 2.00% for the Conseco Balanced and Conseco
Equity and 2.25% for the Conseco 20 Funds. These contractual limits may be
discontinued by the Adviser, Administrator and Distributor at any time after
April 30, 2000.
(c) Total return figures do not include sales loads; results would be lower if
sales charges were included.
(d) Not annualized.
(e) Annualized.
(f) Commencement of operations.
</FN>
</TABLE>
55
<PAGE>
Financial Highlights
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Conseco Conseco
Fixed Income Fund High Yield Fund
-------------------------------- ----------------------------------
Period from Period from
Year Ended March 5, 1998(f) Year Ended February 19, 1998(f)
December 31, through December 31, through
Class C Shares 1999 December 31, 1998 1999 December 31, 1998
-------------------------------- ----------------------------------
<S> <C> <C> <C> <C>
Net asset value per share, beginning of period............. $10.23 $10.13 $9.95 $10.44
Income from investment operations (a):
Net investment income (loss)............................. 0.41 0.38 0.50 0.59
Net realized gains (losses) and change in unrealized
appreciation (depreciation) on investments.............. (0.45) 0.26 0.33 (0.50)
- -----------------------------------------------------------------------------------------------------------------------------------
Total income (loss) from investment operations.......... (0.04) 0.64 0.83 0.09
- -----------------------------------------------------------------------------------------------------------------------------------
Distributions:
Dividends from net investment income..................... (0.53) (0.44) (0.83) (0.58)
Distribution of net capital gains........................ (0.03) (0.10) -- --
- -----------------------------------------------------------------------------------------------------------------------------------
Total distributions..................................... (0.56) (0.54) (0.83) (0.58)
- -----------------------------------------------------------------------------------------------------------------------------------
Net asset value per share, end of period................ $ 9.63 $10.23 $9.95 $ 9.95
- -----------------------------------------------------------------------------------------------------------------------------------
Total return (b)(c)(d)................................... (0.47%) 6.44% 8.60% 0.88%
- -----------------------------------------------------------------------------------------------------------------------------------
Ratios/supplemental data:
Net assets (dollars in thousands), end of period......... $2,655 $ 539 $18,541 $3,685
Ratio of expenses to average net assets (b)(e):
Before fee waiver and/or expense reimbursement........ 1.99% 5.91% 2.16% 3.03%
After fee waiver and/or expense reimbursement......... 1.60% 1.60% 1.90% 1.90%
Ratio of net investment income (loss) to average net
assets (b)(e):
Before fee waiver and/or expense reimbursement........ 4.95% 0.67% 8.17% 6.09%
After fee waiver and/or expense reimbursement......... 5.34% 4.98% 8.43% 7.22%
</TABLE>
<TABLE>
<CAPTION>
Conseco
Convertible Securities Fund
---------------------------------------
Period from
Year Ended September 28, 1998(f)
December 31, through
Class C Shares 1999 December 31, 1998
---------------------------------------
<S> <C> <C>
Net asset value per share, beginning of period............. $11.00 $10.00
Income from investment operations (a):
Net investment income (loss)............................. 0.06 0.08
Net realized gains (losses) and change in unrealized
appreciation (depreciation) on investments.............. 4.23 1.00
- ---------------------------------------------------------------------------------------------------
Total income (loss) from investment operations.......... 4.29 1.08
- ---------------------------------------------------------------------------------------------------
Distributions:
Dividends from net investment income..................... (0.23) (0.08)
Distribution of net capital gains........................ (0.15) --
- ---------------------------------------------------------------------------------------------------
Total distributions..................................... (0.38) (0.08)
- ---------------------------------------------------------------------------------------------------
Net asset value per share, end of period................ $14.91 $11.00
- ---------------------------------------------------------------------------------------------------
Total return (b)(c)(d)................................... 39.52% 10.89%
- ---------------------------------------------------------------------------------------------------
Ratios/supplemental data:
Net assets (dollars in thousands), end of period......... $4,107 $ 1
Ratio of expenses to average net assets (b)(e):
Before fee waiver and/or expense reimbursement........ 2.45% 154.76%
After fee waiver and/or expense reimbursement......... 2.05% 2.05%
Ratio of net investment income (loss) to average net
assets (b)(e):
Before fee waiver and/or expense reimbursement........ 1.21% (149.69%)
After fee waiver and/or expense reimbursement......... 1.61% 3.02%
<FN>
(a) Per share amounts presented are based on an average of monthly shares
outstanding for the period ended December 31, 1998 and 1997.
(b) The Adviser, Administrator and Distributor have contractually agreed to
waive their fees and/or reimburse Fund expenses to the extent that the ratio
of expenses to average net assets exceeds on an annual basis 1.60% for the
Conseco Fixed Income, 1.90% for the Conseco High Yield, 2.05% for the
Conseco Convertible Securities, 2.00% for the Conseco Balanced and Conseco
Equity and 2.25% for the Conseco 20 Funds. These contractual limits may be
discontinued by the Adviser, Administrator and Distributor at any time after
April 30, 2000.
(c) Total return figures do not include sales loads; results would be lower if
sales charges were included.
(d) Not annualized.
(e) Annualized.
(f) Commencement of operations.
</FN>
</TABLE>
56
<PAGE>
CONSECO FUND GROUP
1999 Annual Report
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Conseco Conseco
Balanced Fund Equity Fund
-------------------------------- ----------------------------------
Period from Period from
Year Ended February 13, 1998(f) Year Ended March 10, 1998(f)
December 31, through December 31, through
Class C Shares 1999 December 31, 1998 1999 December 31, 1998
------------- ------------------- -------------- --------------------
<S> <C> <C> <C> <C>
Net asset value per share, beginning of period......... $11.66 $11.31 $12.54 $11.98
Income from investment operations (a):
Net investment income (loss)......................... 0.13 0.20 (0.07) (0.06)
Net realized gains and change in unrealized
appreciation on investments......................... 3.20 0.48 7.02 0.93
- --------------------------------------------------------------------------------------------------------------------------------
Total income from investment operations............. 3.33 0.68 6.95 0.87
- --------------------------------------------------------------------------------------------------------------------------------
Distributions:
Dividends from net investment income................. (0.18) (0.20) -- (0.01)
Distribution of net capital gains.................... (1.35) (0.13) (3.37) (0.30)
- --------------------------------------------------------------------------------------------------------------------------------
Total distributions................................. (1.53) (0.33) (3.37) (0.31)
- --------------------------------------------------------------------------------------------------------------------------------
Net asset value per share, end of period............ $13.46 $11.66 $16.12 $12.54
- --------------------------------------------------------------------------------------------------------------------------------
Total return (b)(c)(d)............................... 28.81% 6.10% 55.89% 7.21%
- --------------------------------------------------------------------------------------------------------------------------------
Ratios/supplemental data:
Net assets (dollars in thousands), end of period..... $ 2,264 $ 1,197 $ 2,972 $ 616
Ratio of expenses to average net assets (b)(e):
Before fee waiver and/or expense reimbursement.... 2.46% 3.40% 2.16% 8.51%
After fee waiver and/or expense reimbursement..... 2.00% 2.00% 2.00% 2.00%
Ratio of net investment income (loss) to average net
assets (b)(e):
Before fee waiver and/or expense reimbursement.... 0.91% 0.68% (1.49%) (7.19%)
After fee waiver and/or expense reimbursement..... 1.37% 2.08% (1.33%) (0.68%)
</TABLE>
<TABLE>
<CAPTION>
Conseco
20 Fund
---------------------------------------
Period from
Year Ended September 28, 1998(f)
December 31, through
Class C Shares 1999 December 31, 1998
---------------------------------------
<S> <C> <C>
Net asset value per share, beginning of period............. $12.75 $11.82
Income from investment operations (a):
Net investment income (loss)............................. (0.09) (0.07)
Net realized gains and change in unrealized
appreciation on investments............................. 8.96 1.00
- ---------------------------------------------------------------------------------------------------
Total income from investment operations................. 8.87 0.93
- ---------------------------------------------------------------------------------------------------
Distributions:
Dividends from net investment income..................... -- --
Distribution of net capital gains........................ (1.16) --
- ---------------------------------------------------------------------------------------------------
Total distributions..................................... (1.16) --
- ---------------------------------------------------------------------------------------------------
Net asset value per share, end of period................ $20.46 $12.75
- ---------------------------------------------------------------------------------------------------
Total return (b)(c)(d)................................... 69.54% 7.87%
- ---------------------------------------------------------------------------------------------------
Ratios/supplemental data:
Net assets (dollars in thousands), end of period......... $37,093 $ 2,982
Ratio of expenses to average net assets (b)(e):
Before fee waiver and/or expense reimbursement........ 2.20% 2.72%
After fee waiver and/or expense reimbursement......... 2.18% 2.25%
Ratio of net investment income (loss) to average net
assets (b)(e):
Before fee waiver and/or expense reimbursement........ (1.54%) (1.28%)
After fee waiver and/or expense reimbursement......... (1.52%) (0.81%)
<FN>
(a) Per share amounts presented are based on an average of monthly shares
outstanding for the period ended December 31, 1998 and 1997.
(b) The Adviser, Administrator and Distributor have contractually agreed to
waive their fees and/or reimburse Fund expenses to the extent that the ratio
of expenses to average net assets exceeds on an annual basis 1.60% for the
Conseco Fixed Income, 1.90% for the Conseco High Yield, 2.05% for the
Conseco Convertible Securities, 2.00% for the Conseco Balanced and Conseco
Equity and 2.25% for the Conseco 20 Funds. These contractual limits may be
discontinued by the Adviser, Administrator and Distributor at any time after
April 30, 2000.
(c) Total return figures do not include sales loads; results would be lower if
sales charges were included.
(d) Not annualized.
(e) Annualized.
(f) Commencement of operations.
</FN>
</TABLE>
57
<PAGE>
Financial Highlights
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Conseco Conseco
Fixed Income Fund High Yield Fund
---------------------------- -------------------------------------
Period from
March 2, 1998(f)
Year Ended through
Year Ended December 31, December 31, December 31,
Class Y Shares 1999 1998 1997 1999 1998
---------------------------- ------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value per share, beginning of period............. $10.25 $10.15 $10.00 $10.02 $10.49
Income from investment operations (a):
Net investment income (loss)............................. 0.58 0.65 0.68 0.45 0.62
Net realized gains (losses) and change in unrealized
appreciation (depreciation) on investments.............. (0.54) 0.17 0.21 0.48 (0.48)
- ----------------------------------------------------------------------------------------------------------------------------------
Total income (loss) from investment operations.......... 0.04 0.82 0.89 0.93 0.14
- ----------------------------------------------------------------------------------------------------------------------------------
Distributions:
Dividends from net investment income..................... (0.62) (0.60) (0.61) (0.92) (0.61)
Distribution of net capital gains........................ (0.03) (0.12) (0.13) -- --
- ----------------------------------------------------------------------------------------------------------------------------------
Total distributions..................................... (0.65) (0.72) (0.74) (0.92) (0.61)
- ----------------------------------------------------------------------------------------------------------------------------------
Net asset value per share, end of period................ $ 9.64 $10.25 $10.15 $10.03 $10.02
- ----------------------------------------------------------------------------------------------------------------------------------
Total return (b)(c)(d).................................. 0.38% 8.32% 9.18% 9.64% 1.36%
- ----------------------------------------------------------------------------------------------------------------------------------
Ratios/supplemental data:
Net assets (dollars in thousands), end of period......... $27,044 $14,403 $21,876 $24,021 $ 1,237
Ratio of expenses to average net assets (b)(e):
Before fee waiver and/or expense reimbursement........ 0.99% 1.46% 1.44% 1.16% 3.24%
After fee waiver and/or expense reimbursement......... 0.60% 0.60% 0.60% 0.90% 0.90%
Ratio of net investment income to average net
assets (b)(e):
Before fee waiver and/or expense reimbursement........ 5.95% 5.40% 5.44% 9.17% 5.32%
After fee waiver and/or expense reimbursement......... 6.34% 6.26% 6.28% 9.43% 7.66%
</TABLE>
<TABLE>
<CAPTION>
Conseco
Convertible Securities Fund
------------------------------------
Period from
September 28, 1998(f)
Year Ended through
December 31, December 31,
Class Y Shares 1999 1998
------------------------------------
<S> <C> <C>
Net asset value per share, beginning of period............... $11.00 $10.00
Income from investment operations (a):
Net investment income (loss)............................... 0.04 0.11
Net realized gains (losses) and change in unrealized
appreciation (depreciation) on investments................ 4.38 1.00
- -------------------------------------------------------------------------------------------------
Total income (loss) from investment operations............ 4.42 1.11
- -------------------------------------------------------------------------------------------------
Distributions:
Dividends from net investment income....................... (0.33) (0.11)
Distribution of net capital gains.......................... (0.15) --
- -------------------------------------------------------------------------------------------------
Total distributions....................................... (0.48) (0.11)
- -------------------------------------------------------------------------------------------------
Net asset value per share, end of period.................. $14.94 $11.00
- -------------------------------------------------------------------------------------------------
Total return (b)(c)(d).................................... 40.91% 11.17%
- -------------------------------------------------------------------------------------------------
Ratios/supplemental data:
Net assets (dollars in thousands), end of period........... $30,357 $ 1
Ratio of expenses to average net assets (b)(e):
Before fee waiver and/or expense reimbursement.......... 1.45% 149.31%
After fee waiver and/or expense reimbursement........... 1.05% 1.05%
Ratio of net investment income to average net assets (b)(e):
Before fee waiver and/or expense reimbursement.......... 2.21% (144.39%)
After fee waiver and/or expense reimbursement........... 2.61% 3.87%
<FN>
(a) Per share amounts presented are based on an average of monthly shares
outstanding for the period December 31, 1998 and 1997.
(b) The Adviser and Administrator have contractually agreed to waive their fees
and/or reimburse Fund expenses to the extent that the ratio of expenses to
average net assets exceeds on an annual basis 0.60% for the Conseco Fixed
Income, 0.90% for the Conseco High Yield, 1.05% for the Conseco Convertible
Securities, 1.00% for the Conseco Balanced and Conseco Equity and 1.25% for
the Conseco 20 Funds. These contractual limits may be discontinued by the
Adviser and Administrator at any time after April 30, 2000.
(c) Total return figures do not include sales load; results would be lower if
sales charges were included.
(d) Not annualized.
(e) Annualized.
(f) Commencement of operations.
</FN>
</TABLE>
58
<PAGE>
CONSECO FUND GROUP
1999 Annual Report
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Conseco Conseco
Balanced Fund Equity Fund
-------------------------------- -------------------------------
Year Ended December 31, Year Ended December 31,
Class Y Shares 1999 1998 1997 1999 1998 1997
-------------------------------- -------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value per share, beginning of period............. $11.75 $10.78 $10.00 $12.67 $11.13 $10.00
Income from investment operations (a):
Net investment income (loss)............................. 0.24 0.32 0.19 (0.03) 0.05 --
Net realized gains (losses) and change in unrealized
appreciation (depreciation) on investments.............. 3.24 1.06 1.58 7.24 1.83 2.35
- -----------------------------------------------------------------------------------------------------------------------------------
Total income (loss) from investment operations.......... 3.48 1.38 1.77 7.21 1.88 2.35
- -----------------------------------------------------------------------------------------------------------------------------------
Distributions:
Dividends from net investment income..................... (0.29) (0.28) (0.28) -- (0.04) --
Distribution of net capital gains........................ (1.35) (0.13) (0.71) (3.41) (0.30) (1.22)
- -----------------------------------------------------------------------------------------------------------------------------------
Total distributions..................................... (1.64) (0.41) (0.99) (3.41) (0.34) (1.22)
- -----------------------------------------------------------------------------------------------------------------------------------
Net asset value per share, end of period................ $13.59 $11.75 $10.78 $16.47 $12.67 $11.13
- -----------------------------------------------------------------------------------------------------------------------------------
Total return (b)(c)(d)................................... 30.07% 12.90% 17.87% 57.13% 16.82% 23.50%
- -----------------------------------------------------------------------------------------------------------------------------------
Ratios/supplemental data:
Net assets (dollars in thousands), end of period......... $ 9,186 $ 4,138 $12,037 $110,008 $60,816 $60,334
Ratio of expenses to average net assets (b)(e):
Before fee waiver and/or expense reimbursement........ 1.46% 2.19% 2.14% 1.16% 1.42% 1.24%
After fee waiver and/or expense reimbursement......... 1.00% 1.00% 1.00% 1.00% 1.00% 1.00%
Ratio of net investment income (loss) to average net
assets (b)(e):
Before fee waiver and/or expense reimbursement........ 1.91% 1.48% 1.62% (0.49%) (0.02%) (0.21%)
After fee waiver and/or expense reimbursement......... 2.37% 2.67% 2.76% (0.33%) 0.40% 0.03%
</TABLE>
<TABLE>
<CAPTION>
Conseco
20 Fund
-------------------------------------
Period from
April 6, 1998(f)
Year Ended through
December 31, December 31,
Class Y Shares 1999 1998
-------------------------------------
<S> <C> <C>
Net asset value per share, beginning of period............. $12.68 $12.33
Income from investment operations (a):
Net investment income (loss)............................. (0.01) 0.04
Net realized gains (losses) and change in unrealized
appreciation (depreciation) on investments.............. 9.04 0.31
- --------------------------------------------------------------------------------------------------
Total income (loss) from investment operations.......... 9.03 0.35
- --------------------------------------------------------------------------------------------------
Distributions:
Dividends from net investment income..................... -- --
Distribution of net capital gains........................ (1.22) --
- --------------------------------------------------------------------------------------------------
Total distributions..................................... (1.22) --
- --------------------------------------------------------------------------------------------------
Net asset value per share, end of period................ $20.49 $12.68
- --------------------------------------------------------------------------------------------------
Total return (b)(c)(d)................................... 71.36% 2.84%
- --------------------------------------------------------------------------------------------------
Ratios/supplemental data:
Net assets (dollars in thousands), end of period......... $55,806 $ 172
Ratio of expenses to average net assets (b)(e):
Before fee waiver and/or expense reimbursement........ 1.20% 3.77%
After fee waiver and/or expense reimbursement......... 1.18% 1.25%
Ratio of net investment income (loss) to average net
assets (b)(e):
Before fee waiver and/or expense reimbursement........ (0.54%) (1.90%)
After fee waiver and/or expense reimbursement......... (0.52%) 0.62%
<FN>
(a) Per share amounts presented are based on an average of monthly shares
outstanding for the period December 31, 1998 and 1997 .
(b) The Adviser and Administrator have contractually agreed to waive their fees
and/or reimburse Fund expenses to the extent that the ratio of expenses to
average net assets exceeds on an annual basis 0.60% for the Conseco Fixed
Income, 0.90% for the Conseco High Yield, 1.05% for the Conseco Convertible
Securities, 1.00% for the Conseco Balanced and Conseco Equity and 1.25% for
the Conseco 20 Funds. These contractual limits may be discontinued by the
Adviser and Administrator at any time after April 30, 2000.
(c) Total return figures do not include sales load; results would be lower if
sales charges were included.
(d) Not annualized.
(e) Annualized.
(f) Commencement of operations.
</FN>
</TABLE>
59
<PAGE>
Financial Highlights
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Conseco Conseco
Fixed Income Fund High Yield Fund
---------------------------- -----------------------------
Year Ended December 31, Year Ended December 31,
Supplemental data for all classes: 1999 1998 1997 1999 1998
---------------------------- -----------------------------
<S> <C> <C> <C> <C> <C>
Net assets (dollars in thousands), end of period........... $65,610 $48,245 $22,029 $132,588 $44,392
Portfolio turnover rate.................................... 361% 421% 368% 312% 432%
</TABLE>
<TABLE>
<CAPTION>
Conseco
Convertible Securities Fund
-------------------------------------
Period from
Year Ended September 28, 1998(a)
Supplemental data for all classes: December 31, through
1999 December 31, 1998
-------------------------------------
<S> <C> <C>
Net assets (dollars in thousands), end of period...... $71,081 $27,614
Portfolio turnover rate............................... 115% 13%
</TABLE>
<TABLE>
<CAPTION>
Conseco Conseco
Balanced Fund Equity Fund
---------------------------------- -----------------------------
Year Ended December 31, Year Ended December 31,
1999 1998 1997 1999 1998 1997
---------------------------------- -----------------------------
<S> <C> <C> <C> <C> <C> <C>
Net assets (dollars in thousands), end of period...... $46,236 $32,700 $13,113 $145,950 $89,270 $65,211
Portfolio turnover rate............................... 321% 341% 507% 364% 350% 199%
</TABLE>
<TABLE>
<CAPTION>
Conseco
20 Fund
-------------------------------
Year Ended December 31,
1999 1998
-------------------------------
<S> <C> <C>
Net assets (dollars in thousands), end of period...... $217,595 $44,269
Portfolio turnover rate............................... 280% 412%
</TABLE>
(a) Commencement of operations.
60
<PAGE>
CONSECO FUND GROUP
Portfolio Managers 1999 Annual Report
- --------------------------------------------------------------------------------
Gregory J. Hahn, CFA
Senior Vice President
Conseco Capital Management, Inc.
Portfolio Manager, Conseco Fixed Income Fund
Co-Portfolio Manager, Conseco Balanced Fund
Hahn manages the Conseco Fixed Income Fund, co-manages the Conseco Balanced
Fund and oversees $2 billion in fixed income for institutional accounts. Prior
to joining Conseco Capital Management, Inc. (CCM) in 1989, he was a portfolio
manager for Unified Management, where he was responsible for money market,
municipal and corporate bond mutual funds. Hahn earned a bachelor's degree in
business administration from the University of Wisconsin, Madison, and a master
of business administration degree from Indiana University, Bloomington.
Peter C. Andersen, CFA
Vice President
Conseco Capital Management, Inc.
Portfolio Manager, Conseco High Yield Fund
Andersen has managed the Conseco High Yield Fund since joining the firm in
1997 along with $3.6 billion of institutional funds in the high-yield market.
Andersen earned a bachelor's degree in physics from Northeastern University,
Boston, a master's degree in physics from Yale and a master's degree in
administration from Harvard.
Andrew S. Chow, CFA
Vice President
Conseco Capital Management, Inc.
Portfolio Manager, Conseco Convertible Securities Fund
Chow manages the Conseco Convertible Securities Fund and more than $3 billion
in institutional assets. Prior to joining CCM in 1991, Chow was manager of
quantitative analysis at Washington Square Capital, where he was responsible for
mortgage-backed securities, non-dollar bonds and derivatives. He earned a
bachelor's degree in economics from the University of California, Berkeley, and
a master of business administration degree from Carnegie Mellon University,
Pittsburgh.
Thomas J. Pence, CFA
Senior Vice President
Conseco Capital Management, Inc.
Portfolio Manager, Conseco Equity Fund
Co-Portfolio Manager, Conseco Balanced Fund
Pence manages the Conseco Equity Fund, co-manages the Conseco Balanced Fund
and oversees more than $600 million in institutional equity. Prior to joining
CCM in 1991, Pence worked for the Forum Group, where he specialized in project
finance. He earned a bachelor of science degree in business from Indiana
University, Bloomington, and a master of business administration degree from the
University of Notre Dame, South Bend, Ind.
Erik J. Voss, CFA
2nd Vice President
Conseco Capital Management, Inc.
Portfolio Manager, Conseco 20 Fund
Voss manages the Conseco 20 Fund, more than $500 million in institutional
assets, and is responsible for assisting in the research and portfolio
management of the company's institutional equity portfolios. Prior to joining
CCM in 1997, Voss was an equity analyst for Gardner Lewis Asset Management for
three years. He earned a bachelor's degree in mathematics and a master's degree
in finance from the University of Wisconsin, Madison.
61
<PAGE>
Report of Independent Accountants
- --------------------------------------------------------------------------------
To The Board of Trustees and Shareholders of the Conseco Fund Group:
In our opinion, the accompanying statements of assets and liabilities,
including the schedules of investments, and the related statements of operations
and of changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of Conseco Fixed Income Fund, Conseco
High Yield Fund, Conseco Convertible Securities Fund, Conseco Balanced Fund,
Conseco Equity Fund, and Conseco 20 Fund (six of the portfolios constituting the
Conseco Fund Group, hereafter referred to as the "Fund") at December 31, 1999,
the results of each of their operations, the changes in each of their net assets
and the financial highlights for the periods indicated, in conformity with
accounting principles generally accepted in the United States. These financial
statements and financial highlights (hereafter referred to as "financial
statements") are the responsibility of the Fund's management; our responsibility
is to express an opinion on these financial statements based on our audits. We
conducted our audits of these financial statements in accordance with auditing
standards generally accepted in the United States which require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits, which included confirmation of securities owned at
December 31, 1999 by correspondence with the custodian, provide a reasonable
basis for the opinion expressed above.
/s/ PriceWaterhouseCoopers LLP
Indianapolis, Indiana
February 23, 2000
<PAGE>
- --------------------------------------------------------------------------------
BOARD OF TRUSTEES
<TABLE>
<S> <C>
William P. Daves, Jr. Maxwell E. Bublitz, CFA
Chairman of the Board President, Conseco Fund Group
Insurance and healthcare industries consultant Director, President and CEO, Conseco Capital Management, Inc.
Chairman and CEO, FFG Insurance Co. Senior VP of Investments, Conseco, Inc.
Gregory J. Hahn, CFA Harold W. Hartley, CFA
Senior VP, Portfolio Analytics Director, Ennis Business Forms, Inc.
Conseco Capital Management, Inc. Former Executive VP, Tenneco Financial Services, Inc.
Dr. R. Jan LeCroy Dr. Jess H. Parrish
Director, Southwest Securities Group, Inc. Higher education consultant
Former President, Dallas Citizens Council Former President, Midland College
David N. Walthall
Prinicpal, Walthall Asset Management
INVESTMENT ADVISER DISTRIBUTOR
Conseco Capital Management, Inc. Conseco Equity Sales, Inc.
Carmel, IN Carmel, IN
TRANSFER AGENT CUSTODIAN
Firstar Mutual Fund Services, LLC The Bank of New York
Milwaukee, WI New York, NY
INDEPENDENT PUBLIC ACCOUNTANT LEGAL COUNSEL
PricewaterhouseCoopers LLP Kirkpatrick & Lockhart LLP
Indianapolis, IN Washington, DC
</TABLE>
<PAGE>
Conseco Fixed Income Fund COFAX
Searching for capital growth and current income
Conseco High Yield Fund
Searching for high income and capital appreciation CHYAX
Conseco Convertible Securities Fund
Searching for current income and capital appreciation CCSAX
Conseco Balanced Fund
Searching for income consistent with capital preservation COAAX
Conseco Equity Fund
Searching for high equity and total return CEYAX
Conseco 20 Fund
Searching for growth through a portfolio of "best ideas" CTWAX
(The NASDAQ symbols noted are for Class A shares.)
CONSECO FUND GROUP
11825 North Pennsylvania Street Carmel, IN 46032
Shareholder Services: 800.986-3384
CONSECO EQUITY SALES, INC.
11815 Pennsylvania Street Carmel, IN 46032
Broker/Dealer & RIA Services: 800.825.1530
www.consecofunds.com
