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CONSECO
BANKERS NATIONAL LIFE INSURANCE COMPANY
SEMIANNUAL REPORT
TO CONTRACT OWNERS
June 30, 1998
Bankers National Variable Account B
Conseco Series Trust
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SEMIANNUAL REPORT TO CONTRACT OWNERS
TABLE OF CONTENTS
JUNE 30, 1998
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BANKERS NATIONAL VARIABLE ACCOUNT B PAGE
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Statement of Assets and Liabilities as of June 30, 1998................................................................... 1
Statements of Operations for the Six Months Ended June 30, 1998 and the Year Ended December 31, 1997...................... 2
Statements of Changes in Net Assets for the Six Months Ended June 30, 1998 and the Year Ended December 31, 1997........... 2
Notes to Financial Statements............................................................................................. 3
CONSECO CAPITAL MANAGEMENT, INC.
Report from the President................................................................................................. 4
Report from the Asset Allocation Portfolio Adviser........................................................................ 4
Report from the Common Stock Portfolio Adviser............................................................................ 5
Report from the Corporate Bond Portfolio Adviser.......................................................................... 5
Report from the Government Securities Portfolio Adviser................................................................... 6
Report from the Money Market Portfolio Adviser............................................................................ 6
CONSECO SERIES TRUST
Statement of Assets and Liabilities as of June 30, 1998................................................................... 7
Statement of Operations for the Six Months Ended June 30, 1998............................................................ 7
Statements of Changes in Net Assets for the Six Months Ended June 30, 1998 and the Year Ended December 31, 1997........... 8
Statements of Investments in Securities as of June 30, 1998:
Asset Allocation Portfolio.............................................................................................10
Common Stock Portfolio.................................................................................................13
Corporate Bond Portfolio...............................................................................................14
Government Securities Portfolio........................................................................................16
Money Market Portfolio.................................................................................................17
Notes to Financial Statements.............................................................................................18
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BANKERS NATIONAL VARIABLE ACCOUNT B
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 1998
(UNAUDITED)
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Assets:
Investments in portfolio shares, at net asset value (Note 2)
Asset Allocation Portfolio, 186,430 shares, (cost - $2,305,133)................................................ $ 2,622,254
Common Stock Portfolio, 350,177 shares, (cost - $6,792,177).................................................... 7,491,727
Corporate Bond Portfolio, 315 shares, (cost - $3,193).......................................................... 3,181
Government Securities Portfolio, 265,790 shares, (cost - $3,156,931)........................................... 3,205,752
Money Market Portfolio, 636,891 shares, (cost - $636,891)...................................................... 636,891
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Total investments in portfolio shares...................................................................... 13,959,805
Liabilities:
Amounts due to Bankers National Life Insurance Company......................................................... 41,695
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Net assets (Note 5)...................................................................................... $ 13,918,110
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UNITS UNIT VALUE REPORTED VALUE
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Net assets attributable to:
Contract owners' deferred annuity reserves:
Contracts issued prior to August 20, 1984:
Government Securities Portfolio................................................. 442.0 $ 30.148705 $ 13,326
Money Market Portfolio.......................................................... 87.7 19.551646 1,715
Contracts issued on or after August 20, 1984:
Asset Allocation Portfolio...................................................... 75,958.8 34.411504 2,613,858
Common Stock Portfolio.......................................................... 99,556.7 74.976138 7,464,374
Corporate Bond Portfolio........................................................ 232.0 13.669022 3,171
Government Securities Portfolio................................................. 113,750.9 27.149922 3,088,328
Money Market Portfolio.......................................................... 35,911.4 17.631518 633,173
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Net assets attributable to contract owners' deferred annuity reserves...................................... 13,817,945
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Contract owners' annuity payment reserves:
Common Stock Portfolio......................................................................................... 5,469
Government Securities Portfolio................................................................................ 94,696
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Net assets attributable to contract owners' annuity payment reserves......................................... 100,165
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Net assets................................................................................................. $ 13,918,110
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The accompanying notes are an integral part of these financial statements.
1
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BANKERS NATIONAL VARIABLE ACCOUNT B
STATEMENTS OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1998 AND THE YEAR ENDED DECEMBER 31, 1997
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SIX MONTHS ENDED DECEMBER 31,
JUNE 30, 1998 1997
(UNAUDITED) (AUDITED)
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Investment income:
Dividends from investments in portfolio shares................................................ $ 846,954 $ 2,308,498
Expenses:
Mortality and expense risk fees............................................................... 81,871 122,641
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Net investment income....................................................................... 765,083 2,185,857
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Net realized gains (losses) and unrealized appreciation (depreciation) of investments in portfolio shares:
Net realized gains on sale of investments in portfolio shares................................. 109,402 288,084
Net change in unrealized appreciation (depreciation) of investments in portfolio shares....... 430,292 (801,587)
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Net gain (loss) on investments in portfolio shares.......................................... 539,694 (513,503)
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Net increase in net assets from operations................................................ $ 1,304,777 $ 1,672,354
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STATEMENTS OF CHANGES IN NET ASSETS
FOR THE SIX MONTHS ENDED JUNE 30, 1998 AND THE YEAR ENDED DECEMBER 31, 1997
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SIX MONTHS ENDED DECEMBER 31,
JUNE 30, 1998 1997
(UNAUDITED) (AUDITED)
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Changes from operations:
Net investment income......................................................................... $ 765,083 $ 2,185,857
Net realized gains on sale of investments in portfolio shares................................. 109,402 288,084
Net change in unrealized appreciation (depreciation) of investments in portfolio shares....... 430,292 (801,587)
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Net increase in net assets from operations.................................................. 1,304,777 1,672,354
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Changes from principal transactions:
Net contract purchase payments................................................................ 7,096 47,005
Contract redemptions.......................................................................... (660,386) (1,851,716)
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Net decrease in net assets from principal transactions...................................... (653,290) (1,804,711)
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Net increase (decrease) in net assets.................................................... 651,487 (132,357)
Net assets, beginning of period.................................................................. 13,266,623 13,398,980
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Net assets, end of period (Note 5)...................................................... $ 13,918,110 $ 13,266,623
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The accompanying notes are an integral part of these financial statements.
2
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BANKERS NATIONAL VARIABLE ACCOUNT B
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1998
(UNAUDITED)
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(1) GENERAL
Bankers National Variable Account B (the "Account") is registered under the
Investment Company Act of 1940, as amended, as a unit investment trust. The
account was established on June 8, 1982, as a segregated investment account for
individual variable annuity contracts issued by Bankers National Life Insurance
Company (the "Company"). The operations of the Account are included in the
operations of the Company pursuant to the provisions of the Texas Insurance
Code. The Company is an indirect wholly owned subsidiary of Conseco, Inc., a
publicly-held specialized financial services holding company listed on the New
York Stock Exchange.
The Account invests solely in shares of the portfolios of Conseco Series
Trust (the "Trust"), a diversified, open-end management investment holding
company.
The financial statements have been prepared in accordance with generally
accepted accounting principles and, as such, includes amounts based on informed
estimates and judgments of management with consideration given to materiality.
Actual results could differ from those estimates.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
INVESTMENT VALUATION, TRANSACTIONS, AND INCOME
Investments in portfolio shares are valued using the net asset value of the
respective portfolios of the Trust at the end of each New York Stock Exchange
business day. Investment share transactions are accounted for on a trade date
basis (the date the order to purchase or redeem shares is executed) and dividend
income is recorded on the ex-dividend date. The cost of investments in portfolio
shares sold is determined on a first-in first-out basis. The Account does not
hold any investments which are restricted as to resale.
Net investment income and net realized gains (losses) and unrealized
appreciation (depreciation) on investments are allocated to the contracts on
each valuation date based on each contract's pro rata share of the assets of the
Account as of the beginning of the valuation date.
FEDERAL INCOME TAXES
No provision for federal income taxes has been made in the accompanying
financial statements because the operations of the Account are included in the
total operations of the Company, which is treated as a life insurance company
for federal income tax purposes under the Internal Revenue Code. Net investment
income and realized gains (losses) are retained in the Account and are not
taxable until received by the contract owner or beneficiary in the form of
annuity payments or other distributions.
ANNUITY RESERVES
Deferred annuity contract reserves are comprised of net contract purchase
payments less redemptions and benefits. These reserves are adjusted daily for
the net investment income and net realized gains (losses) and unrealized
appreciation (depreciation) on investments.
Annuity payment reserves for the contracts under which the contract owners
are receiving periodic retirement payments are computed according to the 1983
Group Annuity Mortality table. The assumed net investment rate is equal to the
assumed rate of accumulation. The annuity unit values for periodic retirement
payments were as shown below:
JUNE 30, DECEMBER 31,
1998 1997
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Common Stock Portfolio...................... $ 1.788 $ 1.603
Government Securities Portfolio............. $ 1.164 $ 1.152
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(3) PURCHASES AND SALES OF INVESTMENTS IN
PORTFOLIO SHARES
The aggregate costs of purchases of investments in portfolio shares for the
six months ended June 30, 1998 and for the year ended December 31, 1997 were
$996,042, and $2,686,967, respectively. The aggregate proceeds from sales of
investments in portfolio shares for the six months ended June 30, 1998 and for
the year ended December 31, 1997 were $748,168, and $2,446,423, respectively.
(4) DEDUCTIONS AND EXPENSES
Although periodic retirement payments to contract owners vary according to
the investment performance of the portfolios, such payments are not affected by
expense or mortality experience because the Company assumes the mortality risk
and the expense risk under the contracts.
The mortality risk assumed by the Company results from the life annuity
payment option in the contracts in which the Company agrees to make annuity
payments regardless of how long a particular annuitant or other payee lives. The
annuity payments are determined in accordance with annuity purchase rate
provisions established at the time the contracts are issued. Based on the
actuarial determination of expected mortality, the Company is required to fund
any deficiency in the annuity payment reserves from its general account assets.
The expense risk assumed by the Company is the risk that the deductions for
contract administrative charges and transfer processing fees may prove
insufficient to cover the actual administrative and transfer processing
expenses.
The Company deducts daily from the Account a fee, which is equal on an annual
basis to 1.25 percent (0.75 percent for those contracts issued prior to August
20, 1984) of the daily value of the total investments of the Account, for
assuming the mortality and expense risks. These fees were $81,871 and $122,641
for the six months ended June 30, 1998 and for the year ended December 31, 1997,
respectively.
The Company does not deduct a sales charge from purchase payments received on
contracts issued after August 20, 1984. However, upon surrender, the Company,
with certain exceptions, deducts from the contract value a contingent deferred
sales charge equal to the lesser of: (a) 5.0 percent of the total of all
purchase payments made within 72 months prior to the date of the request for
surrender; or (b) 5.0 percent of the amount surrendered. No charge is made for
such part of a surrender in a contract year that does not exceed 10.0 percent of
the net sum of purchase payments made more than one year prior to the date of
the surrender. A sales charge of 6.5 percent is deducted by the Company on
purchase payments received on contracts issued before August 20, 1984. There
were no sales charges for the six months ended June 30, 1998 and for the year
ended December 31, 1997.
An annual contract administrative charge of $30 ($12 on Individual Retirement
Accounts or "IRAs") on contracts issued after August 20, 1984 and $36 ($12 on
IRAs) on contracts issued prior to August 20, 1984 is deducted in units from
each contract owner's account. Such charges were $6,810 and $11,844 for the six
months ended June 30, 1998 and for the year ended December 31, 1997,
respectively.
A transfer processing fee (currently at $5 and guaranteed not to exceed $15)
for each transfer between portfolios is deducted from the amount transferred.
These fees were $15 for the six months ended June 30, 1998 and for the year
ended December 31, 1997.
(5) NET ASSETS
Net assets consisted of the following at June 30, 1998:
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Proceeds from sale of units since organization,
less proceeds of units redeemed................................ $(12,960,581)
Undistributed Net Investment Income............................... 24,137,839
Undistributed net realized gains on sales of investments.......... 1,675,371
Net unrealized appreciation of investments........................ 1,065,481
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Net assets..................................................... $13,918,110
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3
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CONSECO CAPITAL MANAGEMENT, INC.
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REPORT FROM THE PRESIDENT
Dear Contract Owner:
We are pleased to report the performance of the Conseco Series Trust for
Bankers National Variable Account B for the six months ended June 30, 1998:
MORNINGSTAR
SIX MONTHS SIX MONTHS
ENDED ENDED
PORTFOLIO JUNE 30, 1998 JUNE 30, 1998 (1)
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Asset Allocation ....................... 10.97% 9.51%
Common Stock ........................... 13.49% 11.36%
Corporate Bond ......................... 2.98% 3.41%
Government Securities .................. 2.80% 3.78%
Money Market ........................... 1.95% 1.92%
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Note: Past performance is not indicative of future results.
(1) Average Accumulation Unit Value Total Return for each respective peer group
from Morningstar Variable Annuity/Life Performance Report through 06/30/98.
In recent testimony before Congress, Federal Reserve Chairman Alan Greenspan
stated that the U.S. economy was performing better than at any time in the last
50 years. Strong stuff indeed, and largely the result of the prudent and
intelligent implementation of both monetary policy and-surprise-fiscal policy.
We can think of no time in the 20th century where monetary and fiscal policies
have been so "in sync". That the performance of U.S. financial assets has been
so incredible in the 1990s, surely reflects the power of enlightened policy.
Much ink has been spilled of late claiming that recent market turmoil harkens
the beginning of bad times for the U.S. economy and the market. We don't buy it.
Bull markets end with significant increases in inflation, rising interest rates,
tax hikes, or rampant protectionism. We just don't see any of these on the
horizon. As long as monetary and fiscal policies stay their current courses, we
should see nothing more than what used to be recognized as relatively normal
cyclical activity. As you can see, markets don't always move in one direction.
While markets have certainly been buffeted lately by a series of events that
have raised doubts about the ability of the economy and the market to sustain
their secular path, we are relatively nonplused by what we view as simply normal
cyclical volatility. In fact, as you read through the reports of the various
portfolio managers, it should be clear that we view the current period as a time
when our research intensive, bottom-up security selection process will shine, as
volatility unearths value. One theme rings constant throughout these reports, as
it does throughout all of Conseco Capital Management; we will continue to
populate your portfolio with rigorously researched, undervalued securities-one
security at a time. We are convinced that this philosophy offers the best upside
potential with the greatest downside protection.
So enjoy reading these reports, thank you for your trust, and good investing!
Sincerely,
/s/ Maxwell E. Bublitz
-----------------------------
Maxwell E. Bublitz, CFA
President & CEO
Conseco Capital Management
REPORT FROM THE ASSET ALLOCATION
PORTFOLIO ADVISER
The economic environment in the first half of 1998 has proven positive for
both the economy and the financial markets. During this time period we
experienced above-trend growth in the economy, slowing inflation, and lower
levels of interest rates. While the U.S. economy posted strong growth numbers
through the first half of 1998, we believe there is considerable evidence,
particularly from recent jobs growth, industrial production, and the trade data,
for a significant slowdown during the second half of the year. With the
unemployment rate bouncing off a 28 year low, there is little slack in our labor
markets. Historically, this would result in a pickup in the rate of inflation.
The improvement in productivity throughout the economy, however, has allowed for
a higher rate of economic growth without higher inflation.
At Conseco Capital Management, our investment philosophy is deeply rooted in
the belief that through investing in securities that we consider to be
undervalued, we will provide better portfolio returns without assuming
significant levels of risk. We implement our investment strategies utilizing
proprietary research gleaned from our team of securities analysts and strive to
achieve every advantage to earn incremental return for your portfolio. In
executing our investment strategies, we actively manage the portfolio across all
the major asset sectors including equities and corporate bonds.
Our strategy for the fixed income portion of the portfolio (which represents
roughly 38% of the portfolio's value) during the first half of 1998 was to
continue to emphasize the investment grade corporate sector while utilizing high
yield bonds to enhance the overall yield and return potential of the portfolio.
One of the cheapest sectors of the investment grade corporate bond market has
been Real Estate Investment Trusts. The income potential from bonds in this
sector remains very attractive. In this sector, we invested in EOP Operating and
Simon DeBartolo Group, Inc.
We believe the media and telecommunications sectors currently represents good
value within the high yield market. In the communications sector, we invested in
Pinnacle Holdings, a wireless telecommunications tower owner and operator. In
the media sector, we invested in Lenfest Communications, an owner and developer
of cable television systems.
The remaining 62% of the portfolio is comprised of equities and cash. In the
equity markets, the first half of 1998 ended with yet another healthy dose of
the volatility that has become commonplace in the latter stages of this bull
market. April began with a continuation of the upward bias we saw through much
of the first quarter, with most indices reaching new highs and sentiment
readings indicating that 65% of all investors were bullish. In fact, the outlook
was so positive that Federal Reserve Board Chairman Alan Greenspan felt
compelled once again to suggest that interest rates may need an upward
adjustment by mid-year to cool things down a bit. As the concern about such a
move began to work its way into stocks, selling pressure increased even further
as second quarter earnings suggested that growth was slowing in many industries
and that the problems in Asia were becoming a much bigger issue than many had
anticipated.
Looking forward, we expect to experience stability in interest rates as a
shrinking industrial sector, combined with trade imbalances, helps to slow U.S.
economic growth. We believe the Federal Reserve will remain on the sidelines and
not alter monetary policy until the financial crisis in Southeast Asia is
perceived to be under control. Until the Fed is clear on the direction of
monetary policy, the shape of the yield curve will remain flat and investors may
find better opportunities investing in securities with shorter maturities. While
we have experienced some easing in our labor markets recently, the low level of
unemployment during the first half of 1998 may cause some pres-
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CONSECO CAPITAL MANAGEMENT, INC.
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sure on wages. Still, we believe this is an excellent environment for bond
investors.
In the meantime, thank you for another quarter of your much-valued trust.
Please know that our investment strategy will continue to rely upon a bottom up
approach to stock selection that emphasizes extensive research of the companies
in which we invest. Our goal, as always, is to discover good growth stories in
stocks that still trade at reasonable valuations. We are committed to a long
term reliance on this strategy, and believe that it will continue to serve our
shareholders well through the balance of this year and beyond.
/s/ Thomas J. Pence
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Thomas J. Pence
Vice President
Portfolio Manager
REPORT FROM THE COMMON STOCK
PORTFOLIO ADVISER
As we began 1998, much of the prevailing market sentiment was driven by
concerns that weakness in foreign markets (Asia) would worsen global
deflationary pressures, depress the global economy and drag down the U.S. market
in the process. What transpired was something quite different. By cutting
incremental demand for oil and other resource inputs, weakness in Asian markets
actually stimulated the U.S. financial markets. Falling interest rates resulted
in increased refinancing activity, allowing U.S. consumers to bolster their
already high confidence levels by strengthening their balance sheets and
increasing their monthly disposable income. We saw the direct effect of this in
stronger than expected housing starts (the highest jump since 1987) and retail
sales through much of the first quarter.
Larger cap stocks continued to outpace small and mid-cap stocks in the first
quarter, much as they did in the latter half of 1997. In fact, the mania for
large caps is beginning to create market anomalies that resemble conditions of
some of the great market bubbles in history. Our concern here is that the
appetite for large cap stocks at virtually any price may simply reflect the
current demographic profile of U.S. investors. In an effort to save for their
retirement via 401K contributions into mutual funds, investors have poured huge
amounts of money into the market that must be put to work quickly, regardless of
the valuations being assigned to the businesses behind the stocks being
purchased. The parallels here to the conditions that existed in Japan in the
late '80's are somewhat disconcerting.
Our strong performance during the quarter was well ahead of most major
indices, including the seemingly unstoppable S&P 500. Encouragingly, many of the
stocks responsible for this solid quarter were in sectors that underperformed in
the overall market. In the healthcare sector, we enjoyed strong performance from
Quorum Health Group.
Amid all of the negative sentiment in the technology sector, we were able to
establish a position in Comverse Technology at a three year low point in its
price and price to earnings ratio multiple. Comverse, who recently merged with
one of its main competitors, Boston Technology, is involved in enhanced voice
messaging for wired and wireless networks.
Other strong names in the portfolio during the quarter were Affiliated
Computer Services, Transocean Offshore in the oil drilling sector and Department
56, who finally regained investor confidence after a two-year struggle with
excess inventories in its retail channel. Lastly, we realized some excellent
returns through our holding of several asset managers such as Franklin
Resources, Legg Mason and Kansas City Southern.
As we move toward the second half of 1998, all eyes will be on the lookout
for the much-feared slowdown in corporate profits, particularly once second
quarter earnings can be fully tallied. The fact that fourth quarter profits fell
2.3% in 1997 (the first drop since mid 1996) did not receive much attention when
it was reported on March 26th. Nor did the fact that this profit shortfall came
not only from slower revenue growth but also from a decrease in profit margins,
which have been the key driver of this profit cycle. A continuation of this
trend would suggest that in order for stocks to advance from here, they simply
have to get more expensive (i.e., multiples have to keep increasing).
Our investment strategy continues to rely on a bottom up approach to stock
selection. Through extensive research of the companies in which we invest, our
goal is to discover good growth stories in stocks that still trade at reasonable
valuations. We are committed to a long term reliance on this strategy, and we
remain hopeful that it will continue to serve our shareholders well through the
balance of the year and beyond.
/s/ Thomas J. Pence
-------------------------
Thomas J. Pence
Vice President
Portfolio Manager
REPORT FROM THE CORPORATE BOND
PORTFOLIO ADVISER
The first half of 1998 continues an environment that has been positive for
the economy as well as financial assets. We have experienced above-trend growth
in the economy, slowing inflation, and lower levels of interest rates. The U.S.
economy has shown strong growth through the first half of 1998 although there is
considerable evidence, particularly from recent jobs growth, industrial
production, and the trade data, for a significant slowing in the second half of
the year. With the unemployment rate bouncing off a 28 year low, there is little
slack in our labor markets. Historically, this has resulted in a pickup in the
rate of inflation; however, the improvement in productivity throughout the
economy has allowed for a higher rate of economic growth without the consequence
of higher inflation.
At Conseco Capital Management, our investment philosophy is deeply rooted in
the belief that through investing in securities that we consider to be
undervalued, we will provide better portfolio returns without assuming
significant levels of risk. We implement our investment strategies utilizing
proprietary research gleaned from our team of security analysts and strive to
achieve every advantage to earn incremental return for your portfolio.
Our strategy during the first half of 1998 was to emphasize the corporate
sector and utilize other asset sectors to enhance the overall yield and return
potential of the portfolio. To this end, we found value in two primary areas of
the corporate bond market: the industrial sector and the bank/finance sector.
Within the industrial sector, several securities offered excellent return
potential. We invested in Waste Management which we consider to be fundamentally
undervalued in the environmental sector. One of the cheapest sectors of the
corporate bond market has been Real Estate Investment Trusts (REITs). Because of
the large amount of issuance of REIT debt during the period, the opportunity to
earn incremental return was limited. However, the income potential remains
attractive and we have invested in several shorter maturity issues including
Chelsea GCA Realty and Simon DeBartolo.
Our economy is in the eighth year of an expansion and, combined with
deflationary price pressures from the Southeast Asian economies, we have
experienced a decline in several commodity prices. This lack of price pressure
has kept us out of several of the
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CONSECO CAPITAL MANAGEMENT, INC.
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cyclical sectors including paper and forest products, and chemicals. We
considers several securities to be undervalued in the cable and media sector,
which has been one of the best performing. We have maintained a position in
based on improving balance sheet fundamentals and profitability. The recently
announced merger with AT&T has helped to further tighten Telecommunications
Inc.'s yield spread over U. S. Treasury securities.
The strength and health of our financial markets can be attributed, in part,
to a very healthy bank system in the United States. Because of the strength in
the U.S. economy, one of our investment themes has been to invest in several of
the regional banks and underweight the money center banks. With the trend toward
consolidation, we also look for value in certain banks that we consider to be
underrated and have the potential for an upgrade either through a merger or
improved fundamentals. Consistent with this theme, we invested in the debt of
St. Paul Bancorp and U.S. Bancorp during the first half of the year.
We have utilized taxable municipal bonds, asset-backed securities and
commercial mortgage-backed securities (CMBS) within the portfolio in order to
capture value in the short and intermediate maturity portions of the portfolio.
Taxable municipal bonds have similar characteristics to their tax-exempt
counterparts; however, the interest earned is subject to Federal taxes. The CMBS
in which we invested offer excellent relative value with more predictable
cashflows than other types of mortgage-backed securities.
Looking forward, we expect to experience stability in interest rates as a
shrinking industrial sector combine with trade imbalances to help slow U.S.
economic growth. We believe the Federal Reserve will remain on the sidelines and
not alter monetary policy until the financial crisis in Southeast Asia is under
control. Until it is clear on the direction of monetary policy, the shape of the
yield curve will remain flat and investors may find better opportunities in
securities with shorter maturities. While we have experienced some easing in our
labor markets recently, the low levels of unemployment we have seen in the first
half of 1998 may cause some pressure on wages. Still, we believe this is an
excellent environment in which to invest.
/s/ Gregory J. Hahn
--------------------------
Gregory J. Hahn, CFA
Senior Vice President
Portfolio Manager
REPORT FROM THE GOVERNMENT SECURITIES
PORTFOLIO ADVISER
The key points in the behavior of the U.S. Government bond market in the 2nd
quarter were low domestic inflation, continuing Asian turmoil and a balanced
Federal budget. Without exception, these key factors led the market to new price
highs and historic lows in yields. The Portfolio capitalized on this encouraging
market environment by being fully invested in fixed income instruments in a wide
range of maturities. The sector allocation of the Portfolio at quarter end was
52% in U.S. Government and agency debt, 23% in corporate debt, 15% in asset
backed securities, and 10% in taxable municipal debt. The investment in taxable
municipal securities permits the fund to access a relatively new asset class
that offers value due to pricing disparity versus comparably rated credits.
It has been our strategy in the last few quarters to make a partial
allocation in highly rated corporate bonds in an effort to increase the income
component of the fund. This strategy has contributed to the Portfolio's total
return, not only through increased income but also by price performance. These
securities, which include Tommy Hilfiger and Tyson Foods, generally have short
maturities and are of high credit quality.
The outlook for the U.S. bond market is, in the near term, positive. The
Federal Reserve has maintained a stance of non-intervention due in large part to
the unwinding of the Asian economic miracle. The U.S. economy, however,
continues to show outstanding performance. If the growth continues at its
current pace, we would expect a preemptory move by the Federal Reserve, once
Asia stabilizes and the wealth effect becomes apparent in the economic data.
/s/ G. Nolan Smith
-------------------------
G. Nolan Smith
Vice President
Portfolio Manager
REPORT FROM THE MONEY MARKET
PORTFOLIO ADVISER
During the first half of 1998, the Federal Open Market Committee (FOMC) met
three times to discuss the economic outlook and the implementation of monetary
policy. The Federal Reserve Board (the "Fed") held the Federal Funds Target Rate
at a 5.50% yield throughout the first and second quarters. With Asia still
struggling to revive its economies and many American multinational companies
issuing earnings warnings, the Fed has hesitated to increase the Federal Funds
Target Rate. The Fed noted in the May meeting that weakening net exports were
exerting an unfavorable impact on U.S. economic growth. The Fed also expected
that this trend would expand into the last two quarters of 1998.
Low price inflation in combination with low unemployment was a major focus
for all the FOMC meetings. Consumer price inflation in the second quarter was
modest as weak energy prices offset most of the increases in other sectors. The
Consumer Price Index was anticipated to reach an increase of .2% but achieved a
level of .3%. Also, the unemployment level reached 4.3% which is placing
additional pressure on the Fed to tighten its credit policy in order to prevent
future inflation.
Quarter end pressures from brokers who needed to liquidate their inventory
lead to increased yields in short term securities. Top-tier Commercial Paper
traded over the quarter end at a 5.98% discount as compared to a Federal Fund
Target of 5.50%. This pressure is caused by brokers needing to liquidate
inventory from their balance sheets for the quarter end.
The portfolio achieved a 2.80% gross return versus the benchmark return of
2.72%. The benchmark used for the portfolio is weighted by a combination of 75%
of the commercial paper index and 25% of Payden & Rygel 1-Year Treasury Bill
Index.
Throughout the first half, Top-Tier 30 day commercial paper range went from
trading around a 5.36% discount on January 8, 1998 to a 5.98% discount on June
30,1998. The yield on the 3-month T-Bill varied between 4.97% and 5.345% and
ended on June 30, 1998 at a 5.078% yield. The 1-year T-Bill range went from
yielding 5.076% on January 09, 1998 to a high of 5.484% on April, 29, 1998.
The objectives of the Money Market Portfolio have not changed. We attempt to
balance safety, liquidity, and total return in managing a fully diversified
portfolio of money market securities. These objectives are met by investing in
United States Government and agency obligations, top-tier commercial paper, and
highly rated short corporate debt.
/s/ Darren B. Meyer
-------------------------
Darren B. Meyer
Portfolio Manager
6
<PAGE>
CONSECO SERIES TRUST
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
===================================================================================================================================
ASSET COMMON CORPORATE GOVERNMENT MONEY
ALLOCATION STOCK BOND SECURITIES MARKET
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
===================================================================================================================================
<S> <C> <C> <C> <C> <C>
Assets:
Investments in securities (cost or amortized cost
$39,602,821, $232,111,226, $20,084,922,
$4,430,741, and $11,465,900, respectively)........... $ 41,631,272 $250,658,792 $20,437,783 $ 4,481,706 $ 11,465,900
Cash................................................... 585,532 911,605 1,020,754 731,747 1,008,754
Accrued interest and dividends......................... 312,486 149,347 359,321 49,061 6,399
Receivable for securities sold........................ 2,946,529 29,269,517 777,017 253,875 380,000
Receivable for shares sold............................ 178,265 320,684 72,178 2,573 --
- -----------------------------------------------------------------------------------------------------------------------------------
Total assets........................................ 45,654,084 281,309,945 22,667,053 5,518,962 12,861,053
- -----------------------------------------------------------------------------------------------------------------------------------
Liabilities:
Accrued expenses....................................... 26,001 162,554 12,633 3,070 4,553
Payable for securities purchased....................... 4,503,093 41,544,083 1,703,200 99,821 --
Payable for shares redeemed............................ -- -- -- -- 129,112
- -----------------------------------------------------------------------------------------------------------------------------------
Total liabilities.................................. 4,529,094 41,706,637 1,715,833 102,891 133,665
- -----------------------------------------------------------------------------------------------------------------------------------
Net assets (Note 5).............................. $41,124,990 $239,603,308 $20,951,220 $ 5,416,071 $ 12,727,388
===================================================================================================================================
Shares outstanding (unlimited number of shares authorized) 2,923,795 11,199,493 2,071,873 449,049 12,727,388
Net asset value, offering and redemption price per share.. $ 14.07 $ 21.39 $ 10.11 $ 12.06 $ 1.00
===================================================================================================================================
</TABLE>
The accompanying notes are an integral part of these financial statements.
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
===================================================================================================================================
ASSET COMMON CORPORATE GOVERNMENT MONEY
ALLOCATION STOCK BOND SECURITIES MARKET
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
===================================================================================================================================
<S> <C> <C> <C> <C> <C>
Investment income:
Dividends and amortization............................. $ 135,753 $ 1,039,062 $ 4,259 $ -- $ --
Interest............................................... 513,185 390,310 736,556 156,264 254,875
- -----------------------------------------------------------------------------------------------------------------------------------
Total investment income.............................. 648,938 1,429,372 740,815 156,264 254,875
- -----------------------------------------------------------------------------------------------------------------------------------
Expenses:
Investment advisory fees............................... 93,433 694,314 52,757 11,761 11,351
Compensation expenses.................................. 16,590 104,620 9,410 2,284 4,664
Custodial fees......................................... 8,157 8,768 2,916 4,127 1,874
Printing fees.......................................... 3,742 23,597 2,122 515 1,052
Other.................................................. 16,243 96,084 9,832 3,358 5,195
- -----------------------------------------------------------------------------------------------------------------------------------
Total expenses....................................... 138,165 927,383 77,037 22,045 24,136
Less: Expenses charged to the Adviser (Note 3)......... 10,756 1,631 3,177 5,579 3,704
- -----------------------------------------------------------------------------------------------------------------------------------
Net expenses....................................... 127,409 925,752 73,860 16,466 20,432
- -----------------------------------------------------------------------------------------------------------------------------------
Net investment income............................ 521,529 503,620 666,955 139,798 234,443
- -----------------------------------------------------------------------------------------------------------------------------------
Net realized gains (losses) on sales of investments....... 2,062,191 27,471,663 136,521 10,201 (7)
- -----------------------------------------------------------------------------------------------------------------------------------
Unrealized appreciation (depreciation) of investments:
Beginning of period.................................... 1,297,079 16,547,476 401,835 38,425 --
End of period.......................................... 2,028,451 18,547,566 352,861 50,965 --
- -----------------------------------------------------------------------------------------------------------------------------------
Net change in unrealized appreciation (depreciation)
of investments .................................... 731,372 2,000,090 (48,974) 12,540 --
- -----------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gains (losses)
on investments ................................ 2,793,563 29,471,753 87,547 22,741 (7)
- -----------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets from operations..... $ 3,315,092 $ 29,975,373 $ 754,502 $ 162,539 $ 234,436
===================================================================================================================================
</TABLE>
The accompanying notes are an integral part of these financial statements.
7
<PAGE>
CONSECO SERIES TRUST
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE SIX MONTHS ENDED JUNE 30, 1998 AND THE YEAR ENDED DECEMBER 31, 1997
<TABLE>
<CAPTION>
===================================================================================================================================
ASSET ALLOCATION COMMON STOCK CORPORATE BOND
PORTFOLIO PORTFOLIO PORTFOLIO
------------------------ -------------------------- ---------------------------
SIX MONTHS YEAR ENDED SIX MONTHS YEAR ENDED SIX MONTHS YEAR ENDED
ENDED DECEMBER 31, ENDED DECEMBER 31, ENDED DECEMBER 31,
JUNE 30, 1998 1997 JUNE 30, 1998 1997 JUNE 30, 1998 1997
(UNAUDITED) (AUDITED) (UNAUDITED) (AUDITED) (UNAUDITED) (AUDITED)
===================================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Changes from operations:
Net investment income..................... $ 521,529 $ 686,159 $ 503,620 $ 544,203 $ 666,955 $ 1,241,256
Net realized gains on sales of investments 2,062,191 3,443,444 27,471,663 48,553,010 136,521 272,118
Net change in unrealized appreciation
(depreciation) of investments........... 731,372 (576,834) 2,000,090 (15,980,984) (48,974) 315,306
- -----------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets from
operations ......................... 3,315,092 3,552,769 29,975,373 33,116,229 754,502 1,828,680
- -----------------------------------------------------------------------------------------------------------------------------------
Net income equalization (Note 2)............. (33,373) (78,588) (1,123) (253,222) (3,318) (5,144)
- -----------------------------------------------------------------------------------------------------------------------------------
Dividends to shareholders (Note 2)........... (521,529) (3,333,678) (503,619) (35,669,657) (666,954) (1,500,199)
- -----------------------------------------------------------------------------------------------------------------------------------
Distribution to shareholders of net
realized long and short-term capital
gains (Note 2).............................. (1,386,070) (795,925) (17,107,901) (13,427,556) (128,334) --
- -----------------------------------------------------------------------------------------------------------------------------------
Capital share transactions:
Net proceeds from sale of shares.......... 10,608,678 9,907,488 8,711,312 21,244,308 3,289,769 4,517,431
Net asset value of shares issued from
reinvestment of dividends and
distributions........................... 1,940,971 4,208,191 17,612,644 49,350,435 798,607 1,505,343
Cost of shares redeemed................... (721,181) (2,270,061) (16,068,979) (8,707,426) (4,369,907) (2,532,596)
- -----------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net
assets from capital share
transactions........................ 11,828,468 11,845,618 10,254,977 61,887,317 (281,531) 3,490,178
- -----------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net
assets ......................... 13,202,588 11,190,196 22,617,707 45,653,111 (325,635) 3,813,515
Net assets, beginning of period............. 27,922,402 16,732,206 216,985,601 171,332,490 21,276,855 17,463,340
- -----------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(Note 5) ...................... $ 41,124,990 $ 27,922,402 $ 239,603,308 $ 216,985,601 $ 20,951,220 $ 21,276,855
===================================================================================================================================
Share data:
Shares sold.............................. 744,296 711,783 400,711 957,299 323,779 449,676
Shares issued from reinvestment of
dividends and distributions............ 135,654 309,812 787,764 2,357,384 78,858 149,867
Shares redeemed.......................... (52,328) (167,731) (750,464) (395,255) (430,007) (251,946)
- -----------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in number
of shares outstanding.............. 827,622 853,864 438,011 2,919,428 (27,370) 347,597
===================================================================================================================================
</TABLE>
The accompanying notes are an integral part of these financial statements.
8
<PAGE>
CONSECO SERIES TRUST
STATEMENTS OF CHANGES IN NET ASSETS - CONTINUED
FOR THE SIX MONTHS ENDED JUNE 30, 1998 AND THE YEAR ENDED DECEMBER 31, 1997
<TABLE>
<CAPTION>
===================================================================================================================================
GOVERNMENT SECURITIES MONEY MARKET
PORTFOLIO PORTFOLIO
--------------------------- ----------------------------
SIX MONTHS YEAR ENDED SIX MONTHS YEAR ENDED
ENDED DECEMBER 31, ENDED DECEMBER 31,
JUNE 30, 1998 1997 JUNE 30, 1998 1997
(UNAUDITED) (AUDITED) (UNAUDITED) (AUDITED)
===================================================================================================================================
<S> <C> <C> <C> <C>
Changes from operations:
Net investment income................................................ $ 139,798 $ 244,513 $ 234,443 $ 391,772
Net realized gains (losses) on sale of investments................... 10,201 29,743 (7) (65)
Net change in unrealized appreciation
of investments..................................................... 12,540 48,304 -- --
- ----------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets from operations....................... 162,539 322,560 234,436 391,707
- ----------------------------------------------------------------------------------------------------------------------------------
Net income equalization (Note 2)........................................ (2,743) 51 -- --
- ----------------------------------------------------------------------------------------------------------------------------------
Dividends to shareholders (Note 2)...................................... (139,799) (289,206) (234,436) (391,707)
- ----------------------------------------------------------------------------------------------------------------------------------
Distribution to shareholders of net realized long and
short-term capital gains (note 2).................................... (13,889) -- -- --
- ----------------------------------------------------------------------------------------------------------------------------------
Capital share transactions:
Net proceeds from sale of shares..................................... 1,896,769 640,218 9,565,514 10,118,046
Net asset value of shares issued from reinvestment
of dividends and distributions..................................... 156,431 289,155 234,436 391,707
Cost of shares redeemed.............................................. (913,512) (716,194) (5,675,298) (8,891,680)
- ----------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets from
capital share transactions..................................... 1,139,688 213,179 4,124,652 1,618,073
- ----------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets................................... 1,145,796 246,584 4,124,652 1,618,073
Net assets, beginning of period......................................... 4,270,275 4,023,691 8,602,736 6,984,663
- ----------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (Note 5)........................... $ 5,416,071 $ 4,270,275 $ 12,727,388 $ 8,602,736
==================================================================================================================================
Share data:
Shares sold.......................................................... 157,346 53,641 9,565,514 10,118,046
Shares issued from reinvestment of dividends
and distributions.................................................. 13,000 24,228 234,436 391,707
Shares redeemed...................................................... (75,968) (60,110) (5,675,298) (8,891,680)
- -----------------------------------------------------------------------------------------------------------------------------------
Net increase in number
of shares outstanding............................................ 94,378 17,759 4,124,652 1,618,073
===================================================================================================================================
</TABLE>
The accompanying notes are an integral part of these financial statements.
9
<PAGE>
CONSECO SERIES TRUST
ASSET ALLOCATION PORTFOLIO
Statement of Investments in Securities
JUNE 30, 1998 (UNAUDITED)
================================================================================
NUMBER
OF SHARES SECURITY VALUE
- --------------------------------------------------------------------------------
COMMON STOCKS
(49.56% of total investments) (a)
APPAREL AND ACCESSORY STORES (0.55%)
8,150 The Finish Line, Inc. (b).............. $ 229,219
-----------
AUTO REPAIR, SERVICES, PARKING (1.19%)
15,550 Budget Group, Inc. (b) ................ 496,620
-----------
BUSINESS SERVICES (4.48%)
13,200 Affiliated Computer Services, Inc. (b). 508,200
7,750 Applied Graphics Technologies, Inc. (b) 354,563
10,200 Autodesk, Inc.......................... 393,975
7,950 Lamar Advertising Company (b).......... 285,206
16,050 Sykes Enterprises, Incorporated (b).... 321,995
-----------
1,863,939
-----------
COMMUNICATIONS BY PHONE, TELEVISION,
RADIO, CABLE (3.05%)
18,300 Emmis Broadcasting Corporation (b)..... 874,960
21,250 LCC International, Inc. (b)............ 393,125
-----------
1,268,085
-----------
DEPOSITORY INSTITUTIONS (3.04%)
16,550 Norwest Corporation.................... 618,556
15,050 U.S. Bancorp........................... 647,150
-----------
1,265,706
-----------
DURABLE GOODS--WHOLESALE (1.16%)
18,600 Pomeroy Computer Resources, Inc. (b)... 484,753
-----------
ELECTRIC, GAS, WATER, COGENERATION,
SANITARY SERVICES (3.90%)
10,450 Calenergy Company, Inc. (b)............ 314,148
23,600 Kinder Morgan Energy Partners, L.P..... 852,550
13,000 Waste Management, Inc.................. 455,000
-----------
1,621,698
-----------
ELECTRICAL EQUIPMENT, EXCEPT
COMPUTERS (2.20%)
6,300 CIENA Corporation (b).................. 438,638
6,550 Comverse Technology, Inc. (b).......... 339,781
3,050 RELTEC Corporation (b)................. 137,250
-----------
915,669
-----------
GENERAL MERCHANDISE STORES (2.20%)
16,100 The Elder-Beerman Stores Corporation (b) 429,661
26,300 Family Dollar Stores, Inc.............. 486,550
-----------
916,211
-----------
HOTELS OTHER LODGING PLACES (1.86%)
40,280 Fairfield Communities, Inc. (b)........ 772,852
-----------
INDUSTRIAL COMMERCIAL MACHINERY,
COMPUTERS (3.82%)
9,200 The Black & Decker Corporation......... 561,200
13,200 Ceridian Corporation................... 775,500
1,700 International Comfort Products
Corporation.......................... 20,612
11,550 Mettler-Toledo Holding, Inc. (b)....... 231,722
-----------
1,589,034
-----------
INSURANCE AGENTS, BROKERS (1.10%)
7,575 Marsh & McLennan Companies, Inc........ 457,810
-----------
MEASURING INSTRUMENTS, PHOTO GOODS,
WATCHES (3.95%)
6,700 Analogic Corporation................... 299,825
10,100 Mentor Corporation..................... 244,925
16,600 Sybron International Corporation (b)... 419,150
11,550 Waters Corporation (b)................. 680,722
-----------
1,644,622
-----------
MOTOR FREIGHT TRANSPORTATION,
WAREHOUSES (1.24%)
14,500 J.B. Hunt Transport Services, Inc...... 516,563
-----------
NON-DEPOSITORY CREDIT INSTITUTIONS (5.69%)
12,850 Banc One Corporation................... 717,184
5,100 Beneficial Corporation................. 781,254
7,000 Capital One Financial Corporation...... 869,309
-----------
2,367,747
-----------
NON-DURABLE GOODS WHOLESALE (2.51%)
28,350 Pharmerica, Inc. (b)................... 341,958
20,100 U.S. Foodservice (b)................... 704,746
-----------
1,046,704
-----------
OIL AND GAS EXTRACTION (1.82%)
19,000 Snyder Oil Corporation................. 378,803
8,500 Transocean Offshore, Inc............... 378,250
-----------
757,053
-----------
PAPER AND ALLIED PRODUCTS (0.11%)
1,700 St. Joe Corporation.................... 46,537
-----------
PRINTING, PUBLISHING AND ALLIED LINES (2.41%)
6,500 Central Newspapers, Inc................ 453,375
10,050 The E.W. Scripps Company............... 550,861
-----------
1,004,236
-----------
REAL ESTATE INVESTMENT
TRUSTS (REITS) (0.83%)
10,600 Simon Debartolo Group, Inc............. 344,500
-----------
REAL ESTATE OPERATORS, AGENTS,
MANAGERS (0.70%)
8,450 Boston Properties, Inc................. 291,525
-----------
STONE, CLAY, GLASS,
CONCRETE PRODUCTS (0.20%)
2,400 Department 56, Inc. (b)................ 85,200
-----------
TEXTILE MILL PRODUCTS (1.13%)
26,700 Shaw Industries, Inc. ................. 470,588
-----------
WATER TRANSPORTATION (0.42%)
7,000 Teekay Shipping Corporation............ 175,434
-----------
TOTAL COMMON STOCKS (COST $19,045,828). $20,632,305
-----------
- ------------------------
(a) Using Standard Industry Codes codes prepared by the Technical Committee on
Industrial Classifications.
(b) Non-dividend paying common stock.
(c) Cost also represents cost for federal income tax purposes.
(d) Restricted under Rule 144(A) of the Securities Act of 1933.
(Continued)
10
<PAGE>
CONSECO SERIES TRUST
ASSET ALLOCATION PORTFOLIO
Statement of Investments in Securities--Continued
JUNE 30, 1998 (UNAUDITED)
================================================================================
NUMBER
OF SHARES SECURITY VALUE
- --------------------------------------------------------------------------------
PREFERRED STOCKS
(6.14% of total investments) (a)
COMMUNICATIONS BY PHONE, TELEVISION,
RADIO, CABLE (3.04%)
195 IXC Communications, Inc., 12.5%,
Series B, PIK......................... $ 224,250
28,000 Intermedia Communications, Inc., 7% (d)
Cost - $700,000; Acquired - 10/24/1997. 1,043,000
-----------
1,267,250
-----------
ELECTRIC, GAS, WATER, COGENERATION,
SANITARY SERVICES (1.89%)
14,000 The AES Corporation Trust II, 5.5% CUM CVT (d)
Cost - $700,000; Acquired - 10/24/1997. 785,750
-----------
NON-DEPOSITORY CREDIT INSTITUTIONS (1.21%)
5,000 River Holding Corporation, 11.5%,
due 4/15/2010, PIK (d) Cost - $500,000;
Acquired - 04/02/1998................ 505,000
-----------
TOTAL PREFERRED STOCKS (COST $2,129,900) $ 2,558,000
-----------
PRINCIPAL
AMOUNT SECURITY VALUE
- --------------------------------------------------------------------------------
CORPORATE BONDS
(33.18% of total investments) (a)
AIR TRANSPORTATION (0.64%)
$ 250,000 CHC Helicopter Corporation, 11.500%,
due 07/15/2002......................... $ 266,250
-----------
AMUSEMENT AND RECREATION SERVICES (0.60%)
250,000 Park N View, Inc., 13.000%, due
05/15/2008 (d) Cost - $250,000;
Acquired - 05/20/1998. ................ 251,250
-----------
APPAREL AND OTHER FINISHED PRODUCTS (0.48%)
200,000 Tommy Hilfiger Corporation, 6.500%,
due 06/01/2003......................... 199,500
-----------
AUTO REPAIR, SERVICES, PARKING (0.54%)
200,000 Amerco -MTN, 7.470%, due 01/15/2027.... 225,500
-----------
BUILDING CONSTRUCTION, GENERAL
CONTRACTORS, OPERATIVE BUILDERS (1.08%)
250,000 D.R. Horton, Inc., 8.375%,
due 06/15/2004......................... 251,875
200,000 K. Hovnanian Enterprises, Inc., 9.750%,
due 06/01/2005......................... 198,500
-----------
450,375
-----------
BUSINESS SERVICES (0.79%)
500,000 Pinnacle Holdings, Inc., 0.000%,
due 03/15/2008 (d) Cost - $315,888;
Acquired - 03/17/1998. ................ 328,125
-----------
COAL MINING (0.61%)
250,000 Lodestar Holdings, Inc., 11.500%,
due 05/15/2005 (d)Cost - $250,000;
Acquired - 05/12/1998.................. 252,813
-----------
COMMUNICATIONS BY PHONE, TELEVISION,
RADIO, CABLE (4.18%)
200,000 Cable and Wireless Communications PLC,
6.375%, due 03/06/2003................. 200,500
300,000 Lenfest Communications, Inc., 8.375%,
due 11/01/2005......................... 319,500
250,000 MCI Communications Corporation, 6.125%,
due 04/15/2002......................... 249,688
150,000 SK Telecom Co., Ltd., 7.750%,
due 04/29/2004......................... 124,125
250,000 360 Communications Company, 7.500%,
due 03/01/2006......................... 266,563
300,000 Viatel, Inc., 11.250%, due 04/15/2008.. 315,000
250,000 Worldcom, Inc., 7.550%, due 04/01/2004. 265,000
-----------
1,740,376
-----------
DEPOSITORY INSTITUTIONS (1.92%)
200,000 Anchor Bancorp, Inc., 8.938%,
due 07/09/2003........................ 205,250
250,000 Centura Capital Trust I, 8.845%,
due 06/01/2027 (d)
Cost - $250,000; Acquired - 05/29/1997. 283,399
100,000 Hutchison Whampoa Finance, YANK Series B,
7.450%, due 08/01/2017 (d) Cost - $92,520;
Acquired - 10/23/1997.................. 80,938
250,000 Korea Development Bank, 6.250%,
due 05/01/2000......................... 228,437
-----------
798,024
-----------
DURABLE GOODS--WHOLESALE (1.32%)
500,000 Pioneer Standard Electronics Inc., 8.500%,
due 08/01/2006......................... 548,750
-----------
ELECTRIC, GAS, WATER, COGENERATION,
SANITARY SERVICES (3.53%)
150,000 The Cleveland Electric Illuminating
Company, 7.625%, due 08/01/2002........ 154,687
300,000 KN Energy, Inc., 6.800%, due 03/01/2008 306,000
300,000 MCN Investment Corporation, 6.350%,
due 04/02/2012......................... 301,500
4,000 System Energy Resources, Inc., 11.375%,
due 09/01/2016......................... 4,000
300,000 The United Illuminating Company, 6.250%,
due 12/15/2002......................... 299,625
400,000 Waste Management, Inc., 6.625%,
due 07/15/2002......................... 403,500
-----------
1,469,312
-----------
GENERAL MERCHANDISE STORES (0.73%)
300,000 Shopko Stores, Inc., 6.500%,
due 08/15/2003......................... 302,625
-----------
HOME FURNITURE AND EQUIPMENT
STORES (1.23%)
500,000 MacSaver Financial Services, 7.875%,
due 08/01/2003......................... 513,125
-----------
INDUSTRIAL, COMMERCIAL MACHINERY,
COMPUTERS (0.67%)
300,000 Morris Materials Handling, Inc., 9.500%,
due 04/01/2008 (d) Cost - $296,250;
Acquired - 05/06/1998.................. 279,000
-----------
- ------------------------
(a) Using Standard Industry Codes codes prepared by the Technical Committee on
Industrial Classifications.
(b) Non-dividend paying common stock.
(c) Cost also represents cost for federal income tax purposes.
(d) Restricted under Rule 144(A) of the Securities Act of 1933.
(Continued)
11
<PAGE>
CONSECO SERIES TRUST
ASSET ALLOCATION PORTFOLIO
Statement of Investments in Securities - Continued
JUNE 30, 1998 (UNAUDITED)
================================================================================
PRINCIPAL
AMOUNT SECURITY VALUE
- --------------------------------------------------------------------------------
CORPORATE BONDS (CONTINUED)
INSURANCE COMPANIES (1.23%)
$ 100,000 Delphi Financial, 8.000%,
due 10/01/2003......................... $ 104,750
200,000 Equitable Companies Incorporated, 7.000%,
due 04/01/2028......................... 206,000
200,000 Terra Nova Insurance (UK) Holdings PLC,
7.000%, due 05/18/2008 (d) Cost -
$199,798; Acquired - 05/12/1998........ 201,750
-----------
512,500
-----------
MISCELLANEOUS MANUFACTURING (0.51%)
400,000 V2 Music Holdings, 0.000%,
due 04/15/2008 (d) Cost - $208,980;
Acquired - 05/01/1998. ................ 210,000
-----------
MISCELLANEOUS RETAIL (1.05%)
200,000 Michael Stores, Inc., 10.875%,
due 06/15/2006......................... 222,000
200,000 Phar-Mor, Inc., 11.720%, 09/11/2002.... 214,500
-----------
436,500
-----------
NON-DEPOSITORY CREDIT INSTITUTIONS (0.97%)
200,000 Key Bank USA,
National Association, BKNT, 6.500%,
due 04/15/2008......................... 203,750
250,000 Tatneft Finance PLC, 9.000%,
due 10/29/2002 (d) Cost - $228,393;
Acquired 04/23/1998.................... 200,937
-----------
404,687
-----------
NON-DURABLE GOODS WHOLESALE (0.57%)
250,000 KCS Energy, Inc., 8.875%,
due 01/15/2008......................... 237,812
-----------
OIL AND GAS EXTRACTION (3.74%)
250,000 Cerro Negro Finance, Ltd., Series B,
7.900%, due 12/01/2020 (d)
Cost - $243,080; Acquired 06/16/1998... 244,375
350,000 Occidental Petroleum Corporation, 6.400%,
due 04/01/2003......................... 350,875
100,000 Parker Drilling Company, 9.750%,
due 11/15/2006 (d)
Cost - $103,833; Acquired - 03/04/1998. 102,500
600,000 Triton Energy Ltd., 9.250%,
due 04/15/2005......................... 659,250
200,000 Vastar Resources, Inc., 6.000%,
due 04/20/2000......................... 200,000
-----------
1,557,000
-----------
PAPER AND ALLIED PRODUCTS (0.26%)
100,000 Westvaco Corporation, 10.300%,
due 01/15/2019......................... 105,750
-----------
PERSONAL SERVICES (0.52%)
200,000 CPI Corp., 9.000%, due 03/15/2002 (d)
Cost - $219,360; Acquired - 03/17/1998. 218,250
-----------
REAL ESTATE INVESTMENT TRUSTS (REITS)(1.43%)
250,000 EOP Operating Limited Partnership,
6.500%, due 06/15/2004 (d) Cost -
$249,503; Acquired - 06/23/1998........ 247,187
100,000 EOP Operating Limited Partnership,
6.763%, due 06/15/2007 (d) Cost -
$100,000; Acquired - 06/10/1998........ 100,125
100,000 Simon Debartolo Group, L.P., 6.750%,
due 07/15/2004......................... 100,500
150,000 Simon Debartolo Group, L.P., 6.750%,
due 06/15/2005 (d) Cost - $149,108;
Acquired - 06/16/1998.................. 148,688
-----------
596,500
-----------
REAL ESTATE OPERATORS, AGENTS,
MANAGERS (0.50%)
200,000 Toll Corp., 8.750%, due 11/15/2006..... 207,000
-----------
SECURITY AND COMMODITY BROKERS (2.38%)
250,000 Lehman Brothers Holdings, Inc., 7.250%,
due 10/15/2003......................... 261,250
55,000 Lehman Brothers Inc., 7.375%,
due 01/15/2007......................... 58,300
550,000 Salomon, Inc., 7.300%, due 05/15/2002.. 572,688
100,000 Salomon, Inc., Series C - MTN, 6.500%,
due 08/15/2003........................ 100,000
-----------
992,238
-----------
STONE, CLAY, GLASS, CONCRETE PRODUCTS (1.01%)
200,000 Owens Corning, 7.500%, due 05/01/2005.. 203,910
200,000 USG Corporation, 9.250%, due 09/15/2001 217,250
-----------
421,160
-----------
TEXTILE MILL PRODUCTS (0.20%)
200,000 Polysindo International Finance Company,
13.000%, due 06/15/2001................. 85,000
-----------
TRANSPORTATION EQUIPMENT (0.49%)
200,000 Stena Line AB, 10.625%, due 06/01/2008. 203,250
-----------
TOTAL CORPORATE BONDS
(COST $13,814,621)..................... $13,812,672
-----------
MUNICIPAL BONDS
(1.45% of total investments) (a)
250,000 Capital Projects Finance Authority,
Florida Revenue, 8.000%, due 12/01/2001 250,625
350,000 Tallulah Louisiana, Revenue, Beneficial
Interest Certificates, 6.650%,
due 11/01/2008.......................... 353,938
-----------
TOTAL MUNICIPAL BONDS (COST $600,000).. $ 604,563
-----------
U. S. Government and Agency Obligations
(3.66% of total investments) (a)
75,000 U.S. Treasury Bond, 6.125%,
due 08/15/2007......................... 78,048
950,000 U.S. Treasury Note, 5.625%,
due 05/15/2008......................... 963,213
250,000 U.S. Treasury Note, 7.250%,
due 05/14/2004......................... 271,287
200,000 U.S. Treasury Note, 6.500%,
due 05/15/2005......................... 211,184
-----------
TOTAL U.S. GOVERNMENT AND AGENCY
OBLIGATIONS (COST $1,512,472).......... $ 1,523,732
-----------
COMMERCIAL PAPER
(6.01% of total investments) (a)
INDUSTRIAL COMMERCIAL MACHINERY,
COMPUTERS (2.40%)
1,000,000 Baker Hughes, Inc., 6.250%,
due 07/01/1998......................... 1,000,000
-----------
NON-DEPOSITORY CREDIT INSTITUTIONS (3.61%)
1,500,000 General Electric Capital Corporation,
6.100%, due 07/01/1998................. 1,500,000
-----------
TOTAL COMMERCIAL PAPER (COST $2,500,000) $ 2,500,000
-----------
TOTAL INVESTMENTS IN SECURITIES
(COST $39,602,821) (c)................. $41,631,272
-----------
- ------------------------
(a) Using Standard Industry Codes codes prepared by the Technical Committee on
Industrial Classifications.
(b) Non-dividend paying common stock.
(c) Cost also represents cost for federal income tax purposes.
(d) Restricted under Rule 144(A) of the Securities Act of 1933.
The accompanying notes are an integral part of these financial statements.
12
<PAGE>
CONSECO SERIES TRUST
COMMON STOCK PORTFOLIO
Statement of Investments in Securities
JUNE 30, 1998 (UNAUDITED)
================================================================================
NUMBER
OF SHARES SECURITY VALUE
- --------------------------------------------------------------------------------
COMMON STOCKS
(88.87% of total investments) (a)
APPAREL AND ACCESSORY STORES (1.09%)
96,950 The Finish Line, Inc. (b).............. $ 2,726,719
-----------
AUTO REPAIR, SERVICES, PARKING (2.12%)
166,250 Budget Group, Inc. (b)................. 5,309,526
-----------
BUSINESS SERVICES (8.33%)
141,200 Affiliated Computer Services, Inc. (b). 5,436,200
85,550 Applied Graphics Technologies, Inc. (b) 3,913,912
132,000 Autodesk, Inc.......................... 5,098,500
84,250 Lamar Advertising Company (b).......... 3,022,469
169,700 Sykes Enterprises, Incorporated (b).... 3,404,521
-----------
20,875,602
-----------
COMMUNICATIONS BY PHONE, TELEVISION,
RADIO, CABLE (5.51%)
194,650 Emmis Broadcasting Corporation (b)..... 9,306,606
243,250 LCC International, Inc. (b)............ 4,500,125
-----------
13,806,731
-----------
DEPOSITORY INSTITUTIONS (5.38%)
177,050 Norwest Corporation.................... 6,617,244
160,100 U.S. Bancorp........................... 6,884,300
-----------
13,501,544
-----------
DURABLE GOODS-- WHOLESALE (2.05%)
197,300 Pomeroy Computer Resources, Inc. (b)... 5,142,033
-----------
ELECTRIC, GAS, WATER, COGENERATION,
SANITARY SERVICES (7.28%)
110,750 Calenergy Company, Inc. (b)............ 3,329,366
266,450 Kinder Morgan Energy Partners, L.P..... 9,625,506
151,300 Waste Management, Inc.................. 5,295,500
-----------
18,250,372
-----------
ELECTRICAL EQUIPMENT,
EXCEPT COMPUTERS (3.92%)
67,300 CIENA Corporation (b).................. 4,685,763
70,000 Comverse Technology, Inc. (b).......... 3,631,250
33,400 RELTEC Corporation (b)................. 1,503,000
-----------
9,820,013
-----------
GENERAL MERCHANDISE STORES (3.90%)
169,300 The Elder-Beerman Stores Corporation (b) 4,518,109
284,600 Family Dollar Stores, Inc.............. 5,265,100
-----------
9,783,209
-----------
HOTELS, OTHER LODGING PLACES (3.28%)
428,126 Fairfield Communities, Inc. (b)........ 8,214,454
-----------
INDUSTRIAL, COMMERCIAL MACHINERY,
COMPUTERS (6.76%)
98,150 The Black & Decker Corporation......... 5,987,150
140,950 Ceridian Corporation................... 8,280,812
19,100 International Comfort Products
Corporation............................ 231,588
122,200 Mettler-Toledo Holding, Inc. (b)....... 2,451,638
-----------
16,951,188
-----------
INSURANCE AGENTS, BROKERS (1.94%)
80,400 Marsh & McLennan Companies, Inc........ 4,859,135
-----------
MEASURING INSTRUMENTS, PHOTO GOODS,
WATCHES (7.04%)
71,450 Analogic Corporation................... 3,197,387
107,300 Mentor Corporation..................... 2,602,025
174,300 Sybron International Corporation (b)... 4,401,075
126,200 Waters Corporation (b)................. 7,437,849
-----------
17,638,336
-----------
MOTOR FREIGHT TRANSPORTATION,
WAREHOUSES (2.21%)
155,500 J.B. Hunt Transport Services, Inc...... 5,539,688
-----------
NON-DEPOSITORY CREDIT INSTITUTIONS (10.06%)
137,300 Banc One Corporation................... 7,662,988
54,500 Beneficial Corporation................. 8,348,691
74,100 Capital One Financial Corporation...... 9,202,257
------------
25,213,936
------------
NON-DURABLE GOODS WHOLESALE (4.47%)
309,100 Pharmerica, Inc. (b)................... 3,728,364
213,250 U.S. Foodservice (b)................... 7,476,972
------------
11,205,336
------------
OIL & GAS EXTRACTION (3.22%)
201,850 Snyder Oil Corporation................. 4,024,283
90,850 Transocean Offshore Inc................ 4,042,825
------------
8,067,108
------------
PAPER AND ALLIED PRODUCTS (0.20%)
18,250 St. Joe Corporation.................... 499,594
------------
PRINTING, PUBLISHING AND ALLIED LINES (4.27%)
70,050 Central Newspapers, Inc................ 4,885,987
106,250 The E.W. Scripps Company............... 5,823,775
------------
10,709,762
------------
REAL ESTATE INVESTMENT TRUSTS (REITS) (1.46%)
112,650 Simon Debartolo Group, Inc............. 3,661,125
------------
REAL ESTATE OPERATORS, AGENTS,
MANAGERS (1.24%)
90,150 Boston Properties, Inc................. 3,110,175
------------
STONE, CLAY, GLASS, CONCRETE PRODUCTS (0.41%)
28,900 Department 56, Inc. (b)................ 1,025,950
------------
TEXTILE MILL PRODUCTS (1.98%)
281,850 Shaw Industries, Inc................... 4,967,606
------------
WATER TRANSPORTATION (0.75%)
75,000 Teekay Shipping Corporation............ 1,879,650
------------
TOTAL COMMON STOCKS
(COST $204,211,2260 ................... $222,758,792
------------
PRINCIPAL
AMOUNT SECURITY VALUE
================================================================================
COMMERCIAL PAPER
(11.13% of total investments) (a)
INDUSTRIAL COMMERCIAL MACHINERY
COMPUTERS (3.99%)
$10,000,000 Baker Hughes, Inc., 6.250%,
due 07/01/1998......................... $ 10,000,000
------------
NON-DEPOSITORY CREDIT INSTITUTIONS (4.59%)
11,500,000 General Electric Capital Corporation,
6.100%, due 07/01/1998................. 11,500,000
------------
SECURITY AND COMMODITY BROKERS (2.55%)
6,400,000 Goldman Sachs Group, L.P., 6.250%,
due 07/01/1998......................... 6,400,000
------------
TOTAL COMMERCIAL PAPER
(COST $27,900,000)..................... $ 27,900,000
------------
TOTAL INVESTMENTS IN SECURITIES
(COST $232,111,226) (c)................ $250,658,792
------------
- ------------------------
(a) Using Standard Industry Codes prepared by the Technical Committee on
Industry Classifications.
(b) Non-dividend paying common stock.
(c) Cost also represents cost for federal income tax purposes.
The accompanying notes are an integral part of these financial statements.
13
<PAGE>
CONSECO SERIES TRUST
CORPORATE BOND PORTFOLIO
Statement of Investments in Securities
JUNE 30, 1998 (UNAUDITED)
================================================================================
PRINCIPAL
AMOUNT SECURITY VALUE
- --------------------------------------------------------------------------------
CORPORATE BONDS
(64.90% of total investments) (a)
AIR TRANSPORTATION (1.37%)
$ 165,173 Delta Airlines 1992 ETC-C, 8.540%,
due 01/02/2007......................... $ 180,865
96,782 United Airlines 1996-A1 Pass Thru
Certificate, 7.270%, due 01/30/2013.... 99,686
-----------
280,551
-----------
APPAREL AND OTHER FINISHED PRODUCTS (1.22%)
250,000 Tommy Hilfiger Corporation, 6.500%,
due 06/01/2003......................... 249,375
-----------
AUTO REPAIR AND PARKING (3.37%)
250,000 Apcoa, Inc., 9.250%, due 03/15/2008 (d)
Cost - $250,000; Acquired - 03/25/1998. 250,000
100,000 Amerco -MTN, 6.710%, due 10/15/2008.... 100,145
300,000 Amerco -MTN, 7.470%, due 01/15/2027.... 338,250
-----------
688,395
-----------
BUSINESS SERVICES (0.80%)
250,000 Pinnacle Holdings, Inc., 0.000%,
due 03/15/2008 (d) Cost - $157,944;
Acquired - 03/17/1998.................. 164,062
-----------
CHEMICALS AND ALLIED PRODUCTS (1.02%)
200,000 Smith International, Inc., 7.000%,
due 09/15/2007......................... 208,750
-----------
COMMUNICATIONS BY PHONE, TELEVISION,
RADIO, CABLE (6.37%)
500,000 Cable and Wireless Communications PLC,
6.625%, due 03/06/2005.................. 505,625
200,000 MCI Communications Corporation, 6.125%,
due 04/15/2002......................... 199,750
300,000 SK Telecom Co., Ltd., 7.750%,
due 04/29/2004......................... 248,250
250,000 Telecommunications, Inc., 10.125%,
due 04/15/2022......................... 348,965
-----------
1,302,590
-----------
DEPOSITORY INSTITUTIONS (8.16%)
300,000 Dao Heng Bank Ltd., 7.750%, due
01/24/2007 (d) Cost - $247,563;
Acquired - 02/11/1998.................. 243,375
100,000 Hutchison Whampoa Finance, YANK,
Series B, 7.450%, due 08/01/2017 (d)
Cost - $92,520; Acquired - 10/23/1997.. 80,938
250,000 Lehman Brothers Holdings, Inc., 8.875%,
due 02/15/2000......................... 260,937
750,000 St. Paul Bancorp, 7.125%,
due 02/15/2004......................... 776,250
300,000 U.S. Bancorp, 6.500%, due 02/01/2008... 305,250
-----------
1,666,750
-----------
DURABLE GOODS--WHOLESALE (2.15%)
400,000 Pioneer Standard Electronics Inc.,
8.500%, due 08/01/2006................. 439,000
-----------
ELECTRIC, GAS, WATER, COGENERATION,
SANITARY SERVICES (11.87%)
200,000 The Cleveland Electric Illuminating
Company, 7.625%, due 08/01/2002........ 206,250
500,000 Coastal Corporation, 6.700%,
due 02/15/2027......................... 521,250
150,000 MCN Investment Corporation, 6.350%,
due 04/02/2012......................... 150,750
250,000 Southern Investments Capital, 8.230%,
due 02/01/2027......................... 263,550
300,000 Tenneco, Inc., 10.200%, due 03/15/2008. 381,750
500,000 The United Illuminating Company, 6.250%,
due 12/15/2002......................... 499,375
400,000 Waste Management, Inc., 6.625%,
due 07/15/2002......................... 403,500
-----------
2,426,425
-----------
FOOD AND KINDRED PRODUCTS (1.46%)
300,000 Nabisco, Inc., 6.000%, due 02/15/2011.. 298,500
-----------
FOOD STORES (1.22%)
250,000 Kroger Co. , 6.000%, due 07/01/2000.... 250,000
-----------
GENERAL MERCHANDISE STORES (1.73%)
350,000 Shopko Stores, Inc., 6.500%,
due 08/15/2003......................... 353,063
-----------
HOME FURNITURE AND EQUIPMENT STORES (2.76%)
550,000 MacSaver Financial Services, 7.875%,
due 08/01/2003......................... 564,437
-----------
INSURANCE COMPANIES (4.26%)
150,000 Delphi Financial, 8.000%,
due 10/01/2003......................... 157,125
400,000 Delphi Funding LLC, 9.310%,
due 03/25/2027......................... 461,500
250,000 Terra Nova Insurance (UK) Holdings PLC,
7.000%, due 05/18/2008 (d) Cost -
$249,748; Acquired - 05/12/1998........ 252,188
-----------
870,813
-----------
LUMBER AND WOOD PRODUCTS,
EXCEPT FURNITURE (1.51%)
300,000 West Fraser Mill, 7.250%,
due 09/15/2002 (d) Cost - $297,753;
Acquired - 09/26/1995. ................ 307,500
-----------
MISCELLANEOUS RETAIL (0.54%)
100,000 Michael Stores, Inc., 10.875%,
due 06/15/2006......................... 111,000
-----------
NON-DEPOSITORY CREDIT INSTITUTIONS (2.08%)
250,000 DSPL Finance Company, 9.120%,
due 12/30/2010 (d) Cost - $250,000;
Acquired - 08/15/1996................... 100,000
300,000 Safeco Capital Trust I, 8.072%,
due 07/15/2037.......................... 324,750
-----------
424,750
-----------
OIL AND GAS EXTRACTION (4.11%)
500,000 Cerro Negro Finance, Ltd., Series B,
7.900%, due 12/01/2020 (d)
Cost - $486,160; Acquired - 06/16/1998.. 488,750
200,000 Occidental Petroleum Corporation,
6.400%, due 04/01/2003.................. 200,500
150,000 Vastar Resources, Inc., 6.000%,
due 04/20/2000......................... 150,000
-----------
839,250
-----------
PAPER AND ALLIED PRODUCTS (1.03%)
200,000 Westvaco Corporation, 10.300%,
due 01/15/2019......................... 211,500
-----------
PERSONAL SERVICES (1.07%)
200,000 CPI Corp., 9.000%, due 03/15/2002 (d)
Cost - $219,360; Acquired - 03/17/1998. 218,250
-----------
REAL ESTATE INVESTMENT TRUSTS (REITS) (3.96%)
400,000 Chelsea GCA Realty Partnership, L.P.,
7.250%, due 10/21/2007.................. 412,000
200,000 EOP Operating Limited Partnership,
6.375%, due 02/15/2003 (d) Cost -
$199,648; Acquired - 06/02/1998......... 199,250
200,000 Simon Debartolo Group, L.P., 6.750%,
due 06/15/2005 (d) Cost - $198,810;
Acquired - 06/16/1998.................. 198,250
----------
809,500
----------
SECURITY AND COMMODITY BROKERS (2.34%)
300,000 Morgan Stanley Finance Plc, 8.030%,
due 02/28/2017......................... 328,500
150,000 Salomon, Inc., Series C - MTN, 6.500%,
due 08/15/2003......................... 150,000
----------
478,500
----------
- ------------------------
(a) Using Standard Industry Codes codes prepared by the Technical Committee on
Industrial Classifications.
(b) Non-dividend paying common stock.
(c) Cost also represents cost for federal income tax purposes.
(d) Restricted under Rule 144(A) of the Securities Act of 1933.
(Continued)
14
<PAGE>
CONSECO SERIES TRUST
CORPORATE BOND PORTFOLIO
Statement of Investments in Securities - Continued
JUNE 30, 1998 (UNAUDITED)
================================================================================
PRINCIPAL
AMOUNT SECURITY VALUE
- --------------------------------------------------------------------------------
CORPORATE BONDS (CONTINUED)
TRANSPORTATION EQUIPMENT (0.50%)
$ 100,000 Stena Line AB, 10.625%, due 06/01/2008. $ 101,625
-----------
TOTAL CORPORATE BONDS (COST $13,032,589) $13,264,586
-----------
Municipal Bonds
(6.69% of total investments) (a)
375,000 Doylestown Pennsylvania, Hospital Authority,
Revenue, 8.375%, due 07/01/2008........ 417,188
100,000 Fort Worth Texas, Higher Education,
Finance Corporation, Revenue, 7.500% ,
due 10/01/2006......................... 103,375
160,000 Lake County Florida, Resource Recovery,
Industrial Development, Revenue, 7.125%,
due 10/01/1999......................... 160,800
371,717 Philadelphia Pennsylvania,
Authority for Industrial Development,
Revenue, 6.488%, due 06/15/2004........ 381,475
200,000 Reeves County Texas Certificates of
Participation, 6.700%, due 03/31/2005.. 204,000
100,000 Tallulah Louisiana, Revenue,
Beneficial Interest Certificates, 6.650%,
due 11/01/2008......................... 101,125
-----------
Total municipal bonds (cost $1,318,741) $ 1,367,963
-----------
Asset Backed Securities
(9.55% of total investments) (a)
200,000 EQCC Home Equity Loan Trust 97-1 A7,
7.120%, due 05/15/2028................. 208,359
250,000 EQCC Home Equity Loan Trust 98-1 A6F,
6.252%, due 12/15/2007................. 250,820
200,000 Green Tree Financial Corp. 1994-4 A5,
8.300%, due 07/15/2019................. 224,748
90,899 Green Tree Recreational Equipment &
Consumer Trust, 96-A A1, 5.550%,
due 02/15/2018. ....................... 90,499
394,249 Green Tree Recreational Equipment &
Consumer Trust, 97-C B, 6.750%,
due 02/15/2018 ........................ 390,922
120,701 Lehman FHA Title 1 Loan Trust 96-2 A2,
6.780%, due 03/25/2008................. 121,338
200,000 National Car Rental Financing Limited
Partnership 1996-1 A2, 6.800%,
due 04/20/2000......................... 200,438
250,000 Newcourt Receivables Asset Trust 1997-1 A3,
6.110%, due 05/21/2001................. 250,508
212,544 New York City Tax Lien 1996-1 B, 6.910%,
due 05/25/2005......................... 213,083
-----------
TOTAL ASSET BACKED SECURITIES
(COST $1,920,394)...................... $ 1,950,715
-----------
Collateralized Mortgage Obligations
(4.85% of total investments) (a)
105,647 FHLMC Structured Pass Through Securities
T-4 A1, 7.625%, due 08/25/2022......... 108,618
500,000 Iroquois Trust 97-1 A, 7.000%,
due 12/15/2006......................... 504,258
167,685 JP Morgan Commercial Mortgage Finance
Corporation 97-C4 A1, 6.939%,
due 12/26/2028......................... 170,429
201,919 Rural Housing Trust 1987-1 3B, 7.330%,
due 04/01/2026......................... 207,282
-----------
TOTAL COLLATERALIZED MORTGAGE OBLIGATIONS
(COST $978,306)........................ $ 990,587
-----------
U. S. GOVERNMENT AND AGENCY OBLIGATIONS
(8.38% of total investments) (a)
301,739 Federal Home Loan Mortgage Corp.,
# G00479, 9.000%, due 04/01/2025....... 319,466
32,832 Federal National Mortgage Assn.,
# 062289, 6.710%, due 03/01/2028....... 33,632
193,590 Federal National Mortgage Assn.,
# 183567, 7.500%, due 11/01/2022....... 198,793
198,493 Federal National Mortgage Assn.,
# 286122, 7.000%, due 06/01/2024....... 201,408
176,264 Federal National Mortgage Assn.,
#349410, 7.000%, due 08/01/2026........ 178,853
72,539 Government National Mortgage Assn.,
# 354859, 9.000%, due 07/15/2024....... 77,684
1,380 Government National Mortgage Assn.,
# 051699, 15.000%, due 07/15/2011...... 1,647
2,449 Government National Mortgage Assn.,
# 056522, 14.000%, due 08/15/2012...... 2,909
400,000 U.S. Treasury Note, 7.250%,
due 05/14/2004......................... 434,060
250,000 U.S. Treasury Note, 6.500%,
due 05/15/2005......................... 263,980
-----------
TOTAL U.S. GOVERNMENT AND AGENCY OBLIGATIONS
(COST $ 1,684,892)..................... $ 1,712,432
-----------
NUMBER
OF SHARES SECURITY VALUE
- --------------------------------------------------------------------------------
PREFERRED STOCKS
(0.74% of total investments) (a)
NON-DEPOSITORY CREDIT INSTITUTIONS (0.74%)
1,500 River Holding Corp., 11.5%, due 4/15/2010,
PIK (d) Cost - $150,000;
Acquired - 04/02/1998.................. $ 151,500
-----------
TOTAL PREFERRED STOCKS (COST $150,000). $ 151,500
-----------
PRINCIPAL
AMOUNT SECURITY VALUE
- --------------------------------------------------------------------------------
COMMERCIAL PAPER
(4.89% of total investments) (a)
NON-DEPOSITORY CREDIT INSTITUTIONS (4.89%)
$1,000,000 General Electric Capital Corporation,
6.100%, due 07/01/1998................. $ 1,000,000
-----------
TOTAL COMMERCIAL PAPER (COST $1,000,000) $ 1,000,000
-----------
TOTAL INVESTMENTS IN SECURITIES
(COST $20,084,922) (c)................. $20,437,783
-----------
- ------------------------
(a) Using Standard Industry Codes codes prepared by the Technical Committee on
Industrial Classifications.
(b) Non-dividend paying common stock.
(c) Cost also represents cost for federal income tax purposes.
(d) Restricted under Rule 144(A) of the Securities Act of 1933.
The accompanying notes are an integral part of these financial statements.
15
<PAGE>
CONSECO SERIES TRUST
GOVERNMENT SECURITIES PORTFOLIO
Statement of Investments in Securities
JUNE 30, 1998 (UNAUDITED)
================================================================================
PRINCIPAL
AMOUNT SECURITY VALUE
- --------------------------------------------------------------------------------
CORPORATE BONDS
(23.12% of total investments) (a)
AIR TRANSPORTATION (3.68%)
$ 150,000 Airborne Freight Corporation, 8.875%,
due 12/15/2002......................... $ 165,188
-----------
APPAREL AND OTHER
FINISHED PRODUCTS (2.23%)
100,000 Tommy Hilfiger Corporation, 6.500%,
due 06/01/2003......................... 99,750
-----------
COMMUNICATIONS BY PHONE, TELEVISION,
RADIO, CABLE (5.95%)
250,000 360 Communications Company, 7.500%,
due 03/01/2006......................... 266,563
-----------
DEPOSITORY INSTITUTIONS (2.23%)
100,000 BB & T Corporation, 6.375%,
due 06/30/2005......................... 99,875
-----------
FOOD AND KINDRED PRODUCTS (4.45%)
100,000 Nabisco, Inc., 6.000%, due 02/15/2011.. 99,500
100,000 Tyson Foods, Inc., 6.080%,
due 02/01/2010......................... 99,875
-----------
199,375
-----------
SECURITY AND COMMODITY BROKERS (4.58%)
100,000 Lehman Brothers Holdings, Inc., 7.250%,
due 10/15/2003......................... 104,500
100,000 Lehman Brothers Holdings, Inc.,
Series E, MTN, 6.710%, due 10/12/1999.. 100,853
-----------
205,353
-----------
TOTAL CORPORATE BONDS (COST $1,036,567) $ 1,036,104
-----------
MUNICIPAL BONDS
(9.00% of total investments) (a)
PUBLIC FINANCE, TAXATION (9.00%)
150,000 Halifax Florida Hospital, Revenue,
Series B, 6.375%, due 04/01/2001....... 150,562
250,000 Tallulah Louisiana, Revenue,
Beneficial Interest Certificates, 6.650%,
due 11/01/2008......................... 252,812
-----------
TOTAL MUNICIPAL BONDS (COST $400,000).. $ 403,374
-----------
ASSET BACKED SECURITIES
(15.81% of total investments) (a)
200,000 EQCC Home Equity Loan Trust
97-1 A7, 7.120%, due 05/15/2028........ 208,359
197,124 Green Tree Recreational Equipment &
Consumer Trust, 97-C B, 6.750%,
due 02/15/2018......................... 195,461
100,000 Metris Master Trust 97-1 B, 7.110%,
due 10/20/2005......................... 104,063
200,000 Tiers Asset-Backed Securities,
Series CHAMT Trust 1997-7, 6.688%,
due 11/15/2003......................... 200,570
-----------
TOTAL ASSET BACKED SECURITIES
(COST $703,563)........................ $ 708,453
-----------
U. S. GOVERNMENT AND AGENCY OBLIGATIONS
(52.07% of total investments) (a)
100,000 Federal Home Loan Bank, 6.400%,
due 12/04/2003......................... 100,141
200,000 Federal Home Loan Bank,
Series ZR02, 6.540%, due 10/16/2002.... 200,198
158,449 Federal Home Loan Mortgage Corp.,
# D66012, 7.000%, due 11/01/2025....... 160,925
150,000 Federal Home Loan Mortgage Corp.,
Multi Family Pool, 6.775%,
due 11/01/2003......................... 154,471
86,214 Federal Home Loan Mortgage Corp.,
# E00441, 7.500%, due 07/01/2011....... 88,720
107,137 Federal National Mortgage Assn.,
# 174166, 8.000%, due 06/01/2002....... 108,644
121,488 Federal National Mortgage Assn.,
# 303780, 7.000%, due 03/01/2026....... 123,272
397,443 Government National Mortgage Assn.,
# 408675, 7.500%, due 01/15/2026....... 408,621
1,477 Government National Mortgage Assn.,
# 044522, 13.000%, due 03/15/2011...... 1,731
6,971 Government National Mortgage Assn.,
# 119896, 13.000%, due 11/15/2014...... 8,167
100,000 Salliemae, MTN, 6.000%, due 12/16/1999. 100,109
100,000 Tennessee Valley Authority, 6.250%,
due 12/15/2017......................... 103,500
200,000 U.S. Treasury Bond, 8.000%,
due 11/15/2021......................... 257,744
100,000 U.S. Treasury Bond, 6.375%,
due 08/15/2027......................... 109,985
100,000 U.S. Treasury Bond, 6.125%,
due 11/15/2027......................... 107,213
150,000 U.S. Treasury Note, 5.500%,
due 02/15/2008......................... 149,878
100,000 U.S. Treasury Note, 5.500%,
due 02/28/2003......................... 99,910
50,000 U.S. Treasury Note, 5.750%,
due 08/15/2003......................... 50,546
-----------
TOTAL U.S. GOVERNMENT AND AGENCY OBLIGATIONS
(COST $2,290,611)...................... $ 2,333,775
-----------
TOTAL INVESTMENTS IN SECURITIES
(COST $4,430,741) (B).................. $ 4,481,706
-----------
- ------------------------
(a) Using Standard Industry Codes prepared by the Technical Committee on
Industrial Classifications.
(b) Cost also represents cost for federal income tax purposes.
The accompanying notes are an integral part of these financial statements.
16
<PAGE>
CONSECO SERIES TRUST
MONEY MARKET PORTFOLIO
Statement of Investments in Securities
JUNE 30, 1998 (UNAUDITED)
================================================================================
PRINCIPAL
AMOUNT SECURITY VALUE (b)
- --------------------------------------------------------------------------------
CORPORATE BONDS
(1.36% of total investments) (a)
FOOD AND KINDRED PRODUCTS (0.66%)
$ 75,000 Pepsico, Inc., 7.750%, due 10/01/1998.. $ 75,304
-----------
SECURITY AND COMMODITY BROKERS (0.70%)
80,000 Salomon, Inc., 6.220%, due 11/19/1998.. 80,052
-----------
TOTAL CORPORATE BONDS.................. $ 155,356
-----------
COMMERCIAL PAPER
(98.64% of total investments) (a)
BUSINESS SERVICES (3.46%)
400,000 First Data Corporation, 5.500%,
due 08/18/1998......................... 397,067
-----------
DEPOSITORY INSTITUTIONS (8.03%)
380,000 Societe Generale North America, Inc.,
5.480%, due 07/17/1998................. 379,074
550,000 Bankers Trust Company, 5.530%,
due 10/02/1998......................... 542,143
-----------
921,217
-----------
CHEMICALS AND ALLIED PRODUCTS (12.82%)
400,000 American Home Products Corporation,
5.490%, due 08/21/1998................. 396,889
600,000 American Home Products Corporation,
5.490%, due 10/15/1998................. 590,301
490,000 Monsanto Company, 5.490%,
due 10/08/1998......................... 482,602
-----------
1,469,792
-----------
ELECTRIC, GAS, WATER, COGENERATION,
SANITARY SERVICES (3.48%)
400,000 New York State Power Authority, 5.540%,
due 07/14/1998......................... 399,200
-----------
FOOD AND KINDRED PRODUCTS (7.36%)
400,000 Coca-Cola Company, 5.520%,
due 08/10/1998......................... 397,546
450,000 Hershey Foods Corporation, 5.490%,
due 08/26/1998......................... 446,157
-----------
843,703
-----------
FOOD STORES (3.47%)
400,000 Southland Corporation, 5.540%,
due 08/12/1998......................... 397,415
-----------
INDUSTRIAL COMMERCIAL MACHINERY,
COMPUTERS (6.86%)
390,000 Baker Hughes, Inc., 5.510%,
due 07/13/1998......................... 389,284
400,000 Caterpillar Financial Services
Corporation, 5.480%, due 08/06/1998.... 397,808
-----------
787,092
-----------
INSURANCE COMPANIES (8.14%)
450,000 Allstate Corporation, 5.510%,
due 07/20/1998......................... 448,691
490,000 Great Western Life, 5.530%,
due 09/03/1998......................... 485,183
-----------
933,874
-----------
NON-DEPOSITORY CREDIT INSTITUTIONS (17.56%)
275,000 American Express Company, 5.520%,
due 08/10/1998......................... 273,313
450,000 American General Finance Corporation,
5.510%, due 09/04/1998................. 445,523
400,000 Associates Corporation of North America,
5.480%, due 07/22/1998................. 398,721
400,000 General Electric Capital Corporation,
5.490%, due 07/20/1998................. 398,841
500,000 National Rural Utilities Corporation,
5.500%, due 08/07/1998................. 497,174
-----------
2,013,572
-----------
RUBBER AND MISCELLANEOUS
PLASTICS PRODUCTS (3.92%)
450,000 Rubbermaid, Inc., 5.520%,
due 07/14/1998......................... 449,103
-----------
SECURITY AND COMMODITY BROKERS (20.11%)
440,000 CS First Boston, Inc., 5.510%,
due 08/28/1998......................... 436,094
400,000 Goldman Sachs Group, L.P., 5.470%,
due 09/02/1998......................... 396,171
490,000 J.P. Morgan & Company, Inc., 5.480%,
due 09/17/1998......................... 484,182
600,000 Merrill Lynch & Company, Inc., 5.520%,
due 10/15/1998......................... 590,248
400,000 Morgan Stanley, Dean Witter,
Discover & Company, 5.490%,
due 07/24/1998......................... 398,597
-----------
2,305,292
-----------
MUNICIPAL BONDS -- REVENUE (3.43%)
400,000 Province of Quebec, 5.500%,
due 10/20/1998......................... 393,217
-----------
TOTAL COMMERCIAL PAPER................. $11,310,544
-----------
TOTAL INVESTMENTS IN SECURITIES........ $11,465,900
-----------
- ------------------------
(a) Using Standard Industry Codes prepared by the Technical Committee on
Industrial Classifications.
(b) Value also represents cost for federal income tax purposes.
The accompanying notes are an integral part of these financial statements.
17
<PAGE>
CONSECO SERIES TRUST
NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 1998
================================================================================
(1) GENERAL
Conseco Series Trust (the "Trust") is a diversified, open-end management
investment company registered under the Investment Company Act of 1940, as
amended (the "Act"), and was organized as a Massachusetts Trust effective
November 15, 1982. The Trust offers shares only to affiliated life insurance
company separate accounts (registered as unit investment trusts under the Act)
to fund the benefits under variable annuity contracts.
Effective May 1, 1993, Great American Reserve Variable Annuity Account C
("Account C") transferred its assets to the Trust in exchange for shares of the
Common Stock, Corporate Bond (newly created effective May 1, 1993) and Money
Market Portfolios. Since May 1, 1993, the Trust continues to offer shares of
each of its portfolios to Account C.
Great American Reserve Insurance Company has added three more accounts which
invest in the shares of the Trust: Account E (Educator and Achievement Series),
Account F (Conseco Advantage) and Account G (Monument Series), which commenced
operations on July 25, 1994, February 12, 1998, and April 29, 1998,
respectively.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES
SECURITY TRANSACTIONS, AND RELATED INVESTMENT INCOME
The investments in each portfolio are valued at the end of each New York
Stock Exchange business day. Investment transactions are accounted for on the
valuation date following the trade date (the date the order to buy or sell is
executed). Dividend income is recorded on the ex-dividend date. The cost of
investments sold is determined on the specific identification basis. The Trust
does not hold any investments which are restricted as to resale, except certain
bonds (designated as footnote (d) in the applicable Statement of Investments)
held in the Asset Allocation and the Corporate Bond Portfolios, all of which are
eligible for resale under Rule 144A of the Securities Act of 1933.
The Board of Trustees (the "Trustees") determined that it will value the
Money Market Portfolio investments at amortized cost, which is conditioned on
the Trust's compliance with certain conditions contained in Rule 2a-7 of the
Act. The investment adviser of the Trust continuously reviews this method of
valuation and recommends changes to the Trustees, if necessary, to ensure that
the Money Market Portfolio investments are valued at fair value (as determined
by the Trustees in good faith).
In all portfolios of the Trust, except for the Money Market Portfolio,
securities traded on a national securities exchange are valued at closing market
prices. Listed securities for which no sale was reported on the valuation date
are valued at the mean of the closing bid and asked prices. Short term notes,
U.S. government obligations maturing within one year or less from the date
purchased and bank certificates of deposit are valued at amortized cost, which
approximates fair value.
Fixed income securities for which representative market quotes are not
readily available are valued at the mean between the closing bid and asked
prices as quoted by one or more dealers who make a market in such securities.
FEDERAL INCOME TAXES
Each portfolio is treated as a separate taxable entity for federal income tax
purposes and qualifies as a regulated investment company under the Internal
Revenue Code. The Trust intends to continue to distribute all taxable income to
shareholders, and therefore, no provision has been made for federal income
taxes.
DIVIDENDS TO SHAREHOLDERS
Dividends are declared and reinvested from net investment income on a daily
basis in the Money Market Portfolio, on a monthly basis in the Corporate Bond
and Government Securities Portfolios and on a quarterly basis in the Asset
Allocation and Common Stock Portfolios. Distributions are declared and
reinvested from net realized capital gains on an annual basis. Prior to 1998,
net short-term capital gains and losses were included in net investment income.
INCOME EQUALIZATION
All portfolios, except the Money Market Portfolio, follow the accounting
practice known as income equalization by which a portion of the proceeds from
sales and costs of redemptions of shares which is equivalent, on a per share
basis, to the amount of distributable investment income on the date the
transaction is credited or charged to net undistributed income. As a result,
undistributed net investment income per share is not materially affected by
sales or redemptions of the portfolio shares. 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 amount of assets and liabilities and disclosure of
contingent assets and liabilities as of the date of the financial statements and
the reported amounts of income and expenses during the reporting period. Actual
results may differ from these estimates.
(3) TRANSACTIONS WITH AFFILIATES
As investment adviser of the Trust, Conseco Capital Management, Inc. (the
"Adviser"), a wholly-owned subsidiary of Conseco, Inc., a publicly-held
specialized financial services holding company listed on the New York Stock
Exchange, charges an investment advisory fee based on the daily net asset value
at an annual rate of 0.55 percent for the Asset Allocation Portfolio, 0.60
percent for the Common Stock Portfolio, 0.50 percent for the Corporate Bond and
Government Securities Portfolios and 0.25 percent for the Money Market
Portfolio. The total fees paid to the Adviser were $863,616 for the six months
ended June 30, 1998. The Adviser has agreed to limit the operating expenses of
each portfolio so that the ratio of expenses, including investment advisory
fees, to average net assets on an annual basis shall not exceed 0.75 percent for
the Asset Allocation Portfolio, 0.80 percent for the Common Stock Portfolio,
0.70 percent for the Corporate Bond Portfolio and the Government Securities
Portfolio, and 0.45 percent for the Money Market Portfolio.
16
<PAGE>
CONSECO SERIES TRUST
NOTES TO FINANCIAL STATEMENTS - CONTINUED
JUNE 30, 1998
================================================================================
(4) INVESTMENT TRANSACTIONS
For the six months ended June 30, 1998, purchases and sales of investment
securities other than long term U.S. Government securities and short-term
investments were:
<TABLE>
<CAPTION>
ASSET COMMON CORPORATE GOVERNMENT
ALLOCATION STOCK BOND SECURITIES
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
==================================================================================================================================
<S> <C> <C> <C> <C>
Purchases............................................................... $ 64,090,817 $318,749,151 $ 24,910,403 $ 1,039,026
Sales................................................................... 56,269,255 331,460,796 24,213,628 596,456
==================================================================================================================================
</TABLE>
Purchases and sales of long term U.S. Government securities during the six
months ended June 30, 1998 were:
<TABLE>
<CAPTION>
ASSET CORPORATE GOVERNMENT
ALLOCATION BOND SECURITIES
PORTFOLIO PORTFOLIO PORTFOLIO
===================================================================================================================================
<S> <C> <C> <C>
Purchases.............................................................................. $14,722,409 $ 9,669,925 $ 1,911,553
Sales.................................................................................. 12,487,094 10,208,097 1,733,050
===================================================================================================================================
</TABLE>
Gross unrealized appreciation and depreciation of investments at June 30,
1998 are shown below:
<TABLE>
<CAPTION>
ASSET COMMON CORPORATE GOVERNMENT MONEY
ALLOCATION STOCK BOND SECURITIES MARKET
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
==================================================================================================================================
<S> <C> <C> <C> <C> <C>
GROSS UNREALIZED APPRECIATION............................. $ 2,539,057 $ 21,386,999 $ 559,666 $ 56,170 $ --
Gross unrealized depreciation............................. (510,606) (2,839,433) (206,805) (5,205) --
- ----------------------------------------------------------------------------------------------------------------------------------
Net unrealized appreciation (depreciation)................ $ 2,028,451 $ 18,547,566 $ 352,861 $ 50,965 $ --
==================================================================================================================================
</TABLE>
(5) NET ASSETS
Net assets at June 30, 1998 are shown below:
<TABLE>
<CAPTION>
ASSET COMMON CORPORATE GOVERNMENT MONEY
ALLOCATION STOCK BOND SECURITIES MARKET
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
==================================================================================================================================
<S> <C> <C> <C> <C> <C>
Proceeds from the sales of shares since organization,
less cost of shares redeemed and net equalization...... $ 38,420,418 $ 210,691,979 $20,728,521 $ 5,383,745 $ 12,727,388
Undistributed net realized gains (losses) on sales
of investments ........................................ 676,121 10,363,763 (130,162) (18,639) --
Net unrealized appreciation of investments................ 2,028,451 18,547,566 352,861 50,965 --
- -----------------------------------------------------------------------------------------------------------------------------------
Total net assets..................................... $ 41,124,990 $ 239,603,308 $20,951,220 $ 5,416,071 $ 12,727,388
===================================================================================================================================
</TABLE>
19
<PAGE>
CONSECO SERIES TRUST
NOTES TO FINANCIAL STATEMENTS - CONTINUED
JUNE 30, 1998
================================================================================
(6) FINANCIAL HIGHLIGHTS
Following are the financial highlights for each portfolio for the years ended
December 31, 1994 through the six months ended June 30, 1998:
<TABLE>
<CAPTION>
ASSET ALLOCATION PORTFOLIO
-----------------------------------------------------------------------
SIX MONTHS YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
ENDED DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
JUNE 30, 1998 1997 1996 1995 1994
(UNAUDITED) (AUDITED) (AUDITED) (AUDITED) (AUDITED)
===================================================================================================================================
<S> <C> <C> <C> <C> <C>
Net asset value per share, beginning of year.............. $ 13.320 $ 13.470 $ 12.390 $ 11.040 $ 11.400
Income from investment operations:
Net investment income................................ 0.213 0.441 0.419 0.508 0.463
Net realized gains (losses) and change in unrealized
appreciation (depreciation) on investments......... 1.355 2.116 2.774 2.976 (0.526)
- -----------------------------------------------------------------------------------------------------------------------------------
Total income (loss) from investment operations... 1.568 2.557 3.193 3.484 (0.063)
- -----------------------------------------------------------------------------------------------------------------------------------
Distributions:
Dividends from net investment income................. (0.213) (2.195) (2.075) (1.827) (0.266)
Distribution of net realized gains (Note 2).......... (0.605) (0.512) (0.038) (0.307) (0.031)
- -----------------------------------------------------------------------------------------------------------------------------------
Total distributions.............................. (0.818) (2.707) (2.113) (2.134) (0.297)
- -----------------------------------------------------------------------------------------------------------------------------------
Net asset value per share, end of period.................. $ 14.070 $ 13.320 $ 13.470 $ 12.390 $ 11.040
===================================================================================================================================
Total return (a).......................................... 24.69%(c) 17.85% 28.30% 31.49% (0.55%)
Ratios/supplemental data
Net assets (dollars in thousands), end of period....... $ 41,125 $ 27,922 $ 16,732 $ 9,583 $ 6,172
Ratio of net expenses to average net assets............ 0.75%(c) 0.75% 0.75% 0.75% 0.75%
Ratio of total expenses to average net assets.......... 0.81%(c) 0.84% 0.95% 0.87% 1.00%
Ratio of net investment income to average net assets... 3.04%(c) 3.14% 3.15% 4.11% 4.20%
Portfolio turnover rate................................ 400.78%(c) 369.39% 208.13% 194.16% 223.92%
Average commission paid (b)............................ $ 0.0600 $ 0.0600 $ 0.0600 N/A N/A
</TABLE>
- ------------------------
(a)Total return represents performance of the Trust only and does not include
mortality and expense deductions in separate accounts.
(b)Computed by dividing the total amount of commissions paid by the total number
of shares purchased and sold during the period for which there was a
commission. This disclosure is required by the Securities and Exchange
Commission beginning in 1996.
(c)Annualized.
20
<PAGE>
CONSECO SERIES TRUST
NOTES TO FINANCIAL STATEMENTS - CONTINUED
JUNE 30, 1998
================================================================================
(6) FINANCIAL HIGHLIGHTS (Continued)
<TABLE>
<CAPTION>
COMMON STOCK PORTFOLIO
-----------------------------------------------------------------------
SIX MONTHS YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
ENDED DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
JUNE 30, 1998 1997 1996 1995 1994
(UNAUDITED) (AUDITED) (AUDITED) (AUDITED) (AUDITED)
===================================================================================================================================
<S> <C> <C> <C> <C> <C>
Net asset value per share, beginning of year.............. $ 20.160 $ 21.850 $ 18.840 $ 16.540 $ 16.690
Income from investment operations:
Net investment income................................ 0.047 0.064 0.013 0.340 0.240
Net realized gains and change in unrealized
appreciation on investments........................ 2.886 4.060 8.169 5.675 0.072
- -----------------------------------------------------------------------------------------------------------------------------------
Total income from investment operations.......... 2.933 4.124 8.182 6.015 0.312
- -----------------------------------------------------------------------------------------------------------------------------------
Distributions:
Dividends from net investment income................. (0.047) (4.232) (4.209) (2.807) (0.327)
Distribution of net realized gains (Note 2).......... (1.656) (1.582) (0.963) (0.908) (0.135)
- -----------------------------------------------------------------------------------------------------------------------------------
Total distributions.............................. (1.703) (5.814) (5.172) (3.715) (0.462)
- -----------------------------------------------------------------------------------------------------------------------------------
Net asset value per share, end of period.................. $ 21.390 $ 20.160 $ 21.850 $ 18.840 $ 16.540
===================================================================================================================================
Total return (a).......................................... 30.40%(c) 18.68% 44.99% 36.30% 1.92%
Ratios/supplemental data
Net assets (dollars in thousands), end of period....... $ 239,603 $ 216,986 $ 171,332 $ 109,636 $ 74,760
Ratio of net expenses to average net assets............ 0.80% (c) 0.80% 0.80% 0.80% 0.80%
Ratio of total expenses to average net assets.......... 0.79% (c) 0.80% 0.81% 0.80% 0.83%
Ratio of net investment income to average net assets... 0.43% (c) 0.28% 0.06% 1.80% 1.47%
Portfolio turnover rate................................ 272.91% (c) 234.20% 177.03% 172.55% 213.67%
Average commission paid (b)............................ $ 0.0600 $ 0.0600 $ 0.0600 N/A N/A
</TABLE>
- ---------------------------
(a)Total return represents performance of the Trust only and does not include
mortality and expense deductions in separate accounts.
(b)Computed by dividing the total amount of commissions paid by the total number
of shares purchased and sold during the period for which there was a
commission. This disclosure is required by the Securities and Exchange
Commission beginning in 1996.
(c)Annualized.
21
<PAGE>
CONSECO SERIES TRUST
NOTES TO FINANCIAL STATEMENTS - CONTINUED
JUNE 30, 1998
================================================================================
(6) FINANCIAL HIGHLIGHTS (Continued)
<TABLE>
<CAPTION>
CORPORATE BOND PORTFOLIO
-----------------------------------------------------------------------
SIX MONTHS YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
ENDED DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
JUNE 30, 1998 1997 1996 1995 1994
(UNAUDITED) (AUDITED) (AUDITED) (AUDITED) (AUDITED)
===================================================================================================================================
<S> <C> <C> <C> <C> <C>
Net asset value per share, beginning of year.............. $ 10.140 $ 9.970 $ 10.150 $ 9.450 $ 9.980
Income from investment operations:
Net investment income................................ 0.324 0.654 0.662 0.680 0.649
Net realized gains (losses) and change in unrealized
appreciation (depreciation) on investments......... 0.031 0.309 (0.179) 0.990 (0.912)
- -----------------------------------------------------------------------------------------------------------------------------------
Total income (loss) from investment operations... 0.355 0.963 0.483 1.670 (0.263)
- -----------------------------------------------------------------------------------------------------------------------------------
Distributions:
Dividends from net investment income................. (0.324) (0.793) (0.663) (0.970) (0.267)
Distribution of net realized gains (Note 2).......... (0.061) -- -- -- --
- -----------------------------------------------------------------------------------------------------------------------------------
Total distributions.............................. (0.385) (0.793) (0.663) (0.970) (0.267)
- -----------------------------------------------------------------------------------------------------------------------------------
Net asset value per share, end of period.................. $ 10.110 $ 10.140 $ 9.970 $ 10.150 $ 9.450
===================================================================================================================================
Total return (a).......................................... 7.37%(b) 9.97% 4.97% 18.25% (2.65%)
Ratios/supplemental data
Net assets (dollars in thousands), end of period....... $ 20,951 $ 21,277 $ 17,463 $ 16,046 $ 12,903
Ratio of net expenses to average net assets............ 0.70%(b) 0.70% 0.70% 0.70% 0.70%
Ration of total expenses to average net assets......... 0.72%(b) 0.77% 0.77% 0.74% 0.80%
Ratio of net investment income to average net assets... 6.27%(b) 6.50% 6.65% 6.78% 6.78%
Portfolio turnover rate................................ 323.47%(b) 276.46% 276.35% 225.41% 198.48%
</TABLE>
- ---------------------------
(a)Total return represents performance of the Trust only and does not include
mortality and expense deductions in separate accounts.
(b)Annualized.
22
<PAGE>
CONSECO SERIES TRUST
NOTES TO FINANCIAL STATEMENTS - CONTINUED
JUNE 30, 1998
================================================================================
(6) FINANCIAL HIGHLIGHTS (Continued)
<TABLE>
<CAPTION>
GOVERNMENT SECURITIES PORTFOLIO
----------------------------------------------------------------------
SIX MONTHS YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
ENDED DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
JUNE 30, 1998 1997 1996 1995 1994
(UNAUDITED) (AUDITED) (AUDITED) (AUDITED) (AUDITED)
===================================================================================================================================
<S> <C> <C> <C> <C> <C>
Net asset value per share, beginning of year.............. $ 12.040 $ 11.940 $ 12.380 $ 11.090 $ 11.450
Income from investment operations:
Net investment income................................ 0.351 0.724 0.722 0.754 0.720
Net realized gains (losses) and change in unrealized
appreciation (depreciation) on investments......... 0.056 0.232 (0.409) 1.119 (1.031)
- -----------------------------------------------------------------------------------------------------------------------------------
Total income (loss) from investment operations... 0.407 0.956 0.313 1.873 (0.311)
- -----------------------------------------------------------------------------------------------------------------------------------
Distributions:
Dividends from net investment income................. (0.351) (0.856) (0.707) (0.583) (0.049)
Distribution of net realized gains (Note 2).......... (0.036) -- (0.046) -- --
- -----------------------------------------------------------------------------------------------------------------------------------
Total distributions.............................. (0.387) (0.856) (0.753) (0.583) (0.049)
- -----------------------------------------------------------------------------------------------------------------------------------
Net asset value per share, end of period.................. $ 12.060 $ 12.040 $ 11.940 $ 12.380 $ 11.090
===================================================================================================================================
Total return (a).......................................... 7.00%(b) 8.26% 2.75% 17.35% (2.79%)
Ratios/supplemental data
Net assets (dollars in thousands), end of period....... $ 5,416 $ 4,270 $ 4,024 $ 4,613 $ 4,713
Ratio of net expenses to average net assets............ 0.70%(b) 0.70% 0.70% 0.70% 0.70%
Ratio of total expenses to average net assets.......... 0.92%(b) 0.92% 0.91% 0.78% 0.81%
Ratio of net investment income to average net assets... 5.82%(b) 6.05% 6.02% 6.27% 6.45%
Portfolio turnover rate................................ 96.91%(b) 195.08% 157.62% 284.31% 421.05%
</TABLE>
- -------------------------------
(a)Total return represents performance of the Trust only and does not include
mortality and expense deductions in separate accounts.
(b)Annualized.
23
<PAGE>
CONSECO SERIES TRUST
NOTES TO FINANCIAL STATEMENTS - CONTINUED
JUNE 30, 1998
================================================================================
(6) FINANCIAL HIGHLIGHTS (Continued)
<TABLE>
<CAPTION>
MONEY MARKET PORTFOLIO
-------------------------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
ENDED DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
JUNE 30, 1998 1997 1996 1995 1994
(UNAUDITED) (AUDITED) (AUDITED) (AUDITED) (AUDITED)
===================================================================================================================================
<S> <C> <C> <C> <C> <C>
Net asset value per share, beginning of year.............. $ 1.000 $ 1.000 $ 1.000 $1.000 $1.000
Income from investment operations:
Net investment income................................ 0.026 0.051 0.050 0.055 0.038
- -----------------------------------------------------------------------------------------------------------------------------------
Total income (loss) from investment operations... 0.026 0.051 0.050 0.055 0.038
- -----------------------------------------------------------------------------------------------------------------------------------
Distributions:
Dividends from net investment income ................ (0.026) (0.051) (0.050) (0.055) (0.038)
- -----------------------------------------------------------------------------------------------------------------------------------
Total distributions.............................. (0.026) (0.051) (0.050) (0.055) (0.038)
- -----------------------------------------------------------------------------------------------------------------------------------
Net asset value per share, end of period.................. $ 1.000 $ 1.000 $ 1.000 $1.000 $1.000
===================================================================================================================================
Total return (a).......................................... 5.22%(b) 5.25% 5.13% 5.46% 3.78%
Ratios/supplemental data
Net assets (dollars in thousands), end of period....... $ 12,727 $ 8,603 $ 6,985 $ 5,396 $ 5,105
Ratio of net expenses to average net assets............ 0.45%(b) 0.45% 0.45% 0.45% 0.45%
Ratio of total expenses to average net assets.......... 0.53%(b) 0.52% 0.59% 0.52% 0.58%
Ratio of net investment income to average net assets... 5.11%(b) 5.14% 5.03% 5.46% 3.78%
Portfolio turnover rate................................ N/A N/A N/A N/A N/A
</TABLE>
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(a)Total return represents performance of the Trust only and does not include
mortality and expense deductions in separate accounts.
(b)Annualized.
24
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BANKERS NATIONAL VARIABLE ACCOUNT B
SPONSOR
Bankers National Life Insurance Company - Carmel, Indiana.
INDEPENDENT PUBLIC ACCOUNTANTS
PricewaterhouseCoopers LLP - Indianapolis, Indiana.
CONSECO SERIES TRUST
BOARD OF TRUSTEES
William P. Daves, Jr., Chairman
Consultant to the insurance and health care industries.
Director, President and Chief Executive Officer,
FFG Insurance Co.,
Dallas, Texas.
Harold W. Hartley, Trustee
Retired. Chartered Financial Analyst.
Formerly Executive Vice President,
Tenneco Financial Services Inc.,
Fort Myers Beach, Florida.
Maxwell E. Bublitz, Trustee and President
President, Conseco Capital Management, Inc.,
Carmel, Indiana.
Dr. R. Jan LeCroy, Trustee
President, Dallas Citizens Council,
Dallas, Texas.
Dr. Jesse H. Parrish, Trustee
Higher education consultant.
Formerly President, Midland College,
Midland, Texas.
INVESTMENT ADVISER
Conseco Capital Management, Inc. - Carmel, Indiana.
INDEPENDENT PUBLIC ACCOUNTANTS
PricewaterhouseCoopers LLP - Indianapolis, Indiana.
CUSTODIAN
Bankers Trust Company - New York, New York.
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FIRST CLASS MAIL
U.S. POSTAGE PAID
HACKENSACK, NJ
PERMIT NO. 9
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BANKERS NATIONAL LIFE INSURANCE COMPANY
11815 North Pennsylvania Street
Carmel, Indiana 46032
VA-1001 (8/98)
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BANKERS NATIONAL LIFE INSURANCE COMPANY
SEMIANNUAL REPORT
TO CONTRACT OWNERS
JUNE 30, 1998
This report is for the information of contract owners and participants of the
Bankers National Variable Account B and Conseco Series Trust. It is authorized
for distribution to other persons only when preceded or accompanied by a current
prospectus which contains more complete information, including charges and
expenses.
Bankers National Variable Account B
Conseco Series Trust
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