GREAT AMERICAN RESERVE INSURANCE COMPANY
A Conseco Company
GREAT AMERICAN RESERVE VARIABLE ANNUITY
ACCOUNT E
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CONSECO SERIES TRUST
December 31, 1996
ANNUAL REPORT TO CONTRACT OWNERS
<PAGE>
ANNUAL REPORT TO CONTRACT OWNERS
TABLE OF CONTENTS
December 31, 1996
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<TABLE>
<CAPTION>
GREAT AMERICAN RESERVE VARIABLE ANNUITY ACCOUNT E PAGE
<S> <C>
Statement of Assets and Liabilities as of December 31, 1996..................................... 1
Statements of Operations for the Years Ended December 31, 1996 and 1995......................... 3
Statements of Changes in Net Assets for the Years Ended December 31, 1996 and 1995.............. 3
Notes to Financial Statements................................................................... 4
Report of Independent Accountants............................................................... 6
CONSECO CAPITAL MANAGEMENT, INC.
Report from the President....................................................................... 7
Report from the Asset Allocation Portfolio Adviser.............................................. 7
Report from the Common Stock Portfolio Adviser.................................................. 8
Report from the Corporate Bond Portfolio Adviser................................................ 8
Report from the Government Securities Portfolio Adviser......................................... 9
Report from the Money Market Portfolio Adviser.................................................. 9
CONSECO SERIES TRUST
Statement of Assets and Liabilities as of December 31, 1996..................................... 10
Statement of Operations for the Year Ended December 31, 1996.................................... 11
Statements of Changes in Net Assets for the Years Ended December 31, 1996 and 1995.............. 12
Statements of Investments in Securities as of December 31, 1996:
Asset Allocation Portfolio................................................................... 14
Common Stock Portfolio....................................................................... 16
Corporate Bond Portfolio..................................................................... 18
Government Securities Portfolio.............................................................. 20
Money Market Portfolio....................................................................... 21
Notes to Financial Statements................................................................... 22
Report of Independent Accountants............................................................... 28
</TABLE>
<PAGE>
GREAT AMERICAN RESERVE VARIABLE ANNUITY ACCOUNT E
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1996
<TABLE>
<CAPTION>
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SHARES COST REPORTED VALUE
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<S> <C> <C> <C>
Assets:
Investments in portfolio shares, at net asset value (Note 2):
The Alger American Fund:
Growth Portfolio ............................................. 2,228.2 $ 75,938 $ 76,493
Leveraged AllCap Portfolio ................................... 66,983.2 1,253,918 1,296,794
MidCap Portfolio ............................................. 1,977.2 42,182 42,213
Small Capitalization Portfolio ............................... 59,660.5 2,426,458 2,440,712
Berger Institutional Products Trust:
100 Fund ..................................................... 6,895.0 69,671 71,639
Growth and Income Fund ....................................... 5,945.2 64,659 66,230
Small Company Growth Fund .................................... 4,263.0 44,658 42,374
Conseco Series Trust:
Asset Allocation Portfolio ................................... 312,532.4 4,145,115 4,209,385
Common Stock Portfolio ....................................... 320,252.1 6,708,965 6,996,839
Corporate Bond Portfolio ..................................... 186,680.3 1,856,056 1,861,142
Government Securities Portfolio .............................. 13,300.8 159,975 158,849
Money Market Portfolio ....................................... 1,254,757.8 1,254,758 1,254,758
Dreyfus Stock Index Fund ....................................... 128,076.3 2,438,791 2,597,387
The Dreyfus Socially Responsible Growth Fund, Inc. ............. 15,466.6 307,519 310,724
Federated Insurance Series:
High Income Bond Fund II ..................................... 59,732.4 589,035 611,660
International Equity Fund II ................................. 9,154.6 98,715 102,166
Utility Fund II .............................................. 30,856.6 339,890 364,416
The Janus Aspen Series:
Aggressive Growth Portfolio .................................. 77,020.9 1,411,595 1,404,861
Growth Portfolio ............................................. 129,029.6 1,924,726 2,001,249
Worldwide Growth Portfolio ................................... 172,509.0 3,145,653 3,353,574
The Van Eck Worldwide Insurance Trust:
Gold and Natural Resources Fund .............................. 48,926.6 781,504 818,053
Worldwide Bond Fund .......................................... 166,197.3 1,809,105 1,844,790
Worldwide Emerging Markets Fund .............................. 12,104.2 147,150 151,182
Worldwide Hard Assets Fund ................................... 130,278.7 1,540,251 1,929,428
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Total assets ............................................... 34,006,918
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Liabilities:
Amounts due to Great American Reserve Insurance Company .......... 39,723
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Net assets (Note 6) ........................................ 33,967,195
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</TABLE>
The accompanying notes are an integral part of these financial statements.
1
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GREAT AMERICAN RESERVE VARIABLE ANNUITY ACCOUNT E
STATEMENT OF ASSETS AND LIABILITIES -- CONTINUED
December 31, 1996
<TABLE>
<CAPTION>
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UNITS UNIT VALUE REPORTED VALUE
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Net assets attributable to:
Contract owners' deferred annuity reserves:
The Alger American Fund:
<S> <C> <C> <C>
Growth Portfolio ............................................. 73,226.5 $1.043521 $ 76,414
Leveraged AllCap Portfolio ................................... 832,794.1 1.555302 1,295,246
MidCap Portfolio ............................................. 42,736.2 0.986695 42,168
Small Capitalization Portfolio ............................... 1,946,992.8 1.252107 2,437,844
Berger Institutional Products Trust:
100 Fund ..................................................... 69,521.1 1.029280 71,557
Growth and Income Fund ....................................... 59,956.1 1.103582 66,166
Small Company Growth Fund .................................... 42,981.8 0.984692 42,324
Conseco Series Trust:
Asset Allocation Portfolio ................................... 2,475,992.2 1.698128 4,204,552
Common Stock Portfolio ....................................... 3,374,109.6 2.071274 6,988,704
Corporate Bond Portfolio ..................................... 1,540,494.1 1.206516 1,858,631
Government Securities Portfolio .............................. 135,679.6 1.169361 158,658
Money Market Portfolio ....................................... 1,144,950.6 1.094516 1,253,167
Dreyfus Stock Index Fund ....................................... 1,862,979.9 1.392679 2,594,533
The Dreyfus Socially Responsible Growth Fund, Inc............... 221,018.2 1.404343 310,386
Federated Insurance Series:
High Income Bond Fund II...................................... 508,205.1 1.202161 610,945
International Equity Fund II.................................. 93,215.1 1.094819 102,054
Utility Fund II .............................................. 294,881.5 1.234309 363,975
The Janus Aspen Series:
Aggressive Growth Portfolio .................................. 1,041,049.6 1.347927 1,403,258
Growth Portfolio ............................................. 1,466,042.4 1.363534 1,998,998
Worldwide Growth Portfolio ................................... 2,173,780.7 1.541029 3,349,859
The Van Eck Worldwide Insurance Trust:
Gold and Natural Resources Fund .............................. 651,603.1 1.253925 817,061
Worldwide Bond Fund .......................................... 1,790,258.5 1.029224 1,842,577
Worldwide Emerging Markets Fund............................... 132,952.7 1.135940 151,026
Worldwide Hard Assets Fund ................................... 1,257,325.2 1.532692 1,927,092
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Net assets............................................................................... $ 33,967,195
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</TABLE>
The accompanying notes are an integral part of these financial statements.
2
<PAGE>
GREAT AMERICAN RESERVE VARIABLE ANNUITY ACCOUNT E
STATEMENTS OF OPERATIONS
For the Years Ended December 31, 1996 and 1995
<TABLE>
<CAPTION>
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1996 1995
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Investment income:
<S> <C> <C>
Dividends from investments in portfolio shares........................................... $ 1,880,859 $ 268,996
Expenses:
Mortality and expense risk fees.......................................................... 211,735 17,815
Administrative fees...................................................................... 24,908 2,137
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Total expenses......................................................................... 236,643 19,952
Net investment income................................................................ 1,644,216 249,044
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Net realized gains (losses) and unrealized appreciation (depreciation) of
investments in portfolio shares:
Net realized gains on sales of investments in portfolio shares........................... 90,408 72,012
Net change in unrealized appreciation (depreciation) of investments in portfolio shares . 1,416,628 (46,944)
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Net gain on investments in portfolio shares ......................................... 1,507,036 25,068
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Net increase in net assets from operations ........................................ $ 3,151,252 $ 274,112
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</TABLE>
STATEMENTS OF CHANGES IN NET ASSETS
For the Years Ended December 31, 1996 and 1995
<TABLE>
<CAPTION>
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1996 1995
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Changes from operations:
<S> <C> <C>
Net investment income.................................................................... $ 1,644,216 $ 249,044
Net realized gains on sales of investments in portfolio shares .......................... 90,408 72,012
Net change in unrealized appreciation (depreciation) of investments in portfolio shares . 1,416,628 (46,944)
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Net increase in net assets from operations............................................. 3,151,252 274,112
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Changes from principal transactions:
Net contract purchase payments........................................................... 26,259,253 4,933,143
Contract redemptions..................................................................... (523,287) (9,667)
Net transfers (to) from fixed account.................................................... (239,681) 42,904
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Net increase in net assets from principal transactions................................. 25,496,285 4,966,380
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Net increase in net assets........................................................... 28,647,537 5,240,492
Net assets, beginning of year............................................................... 5,319,658 79,166
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Net assets, end of year (Note 6)..................................................... $33,967,195 $ 5,319,658
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</TABLE>
The accompanying notes are an integral part of these financial statements.
3
<PAGE>
GREAT AMERICAN RESERVE VARIABLE ANNUITY ACCOUNT E
NOTES TO FINANCIAL STATEMENTS
December 31, 1996
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(1) GENERAL
Great American Reserve Variable Annuity Account E ("Account E") is registered
under the Investment Company Act of 1940, as amended, as a unit investment
trust. Account E was established on November 12, 1993 and commenced operations
on July 25, 1994 as a segregated investment account for individual and group
variable annuity contracts issued by Great American Reserve Insurance Company
(the "Company") which are registered under the Securities Act of 1933. The
operations of Account E 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.
Prior to June 1, 1995, Account E invested solely in shares of the portfolios
of the Conseco Series Trust. Effective June 1, 1995 (or June 1, 1996) the
following investment options were available:
THE ALGER AMERICAN FUND
Growth Portfolio (June 1, 1996)
Leveraged AllCap Portfolio
MidCap Portfolio (June 1, 1996)
Small Capitalization Portfolio
BERGER INSTITUTIONAL PRODUCTS TRUST
100 Fund (June 1, 1996)
Growth and Income Fund (June 1, 1996)
Small Company Growth Fund (June 1, 1996)
THE CONSECO SERIES TRUST
Asset Allocation Portfolio
Common Stock Portfolio
Corporate Bond Portfolio
Government Securities Portfolio
Money Market Portfolio
THE DREYFUS SOCIALLY RESPONSIBLE GROWTH FUND, INC.
DREYFUS STOCK INDEX FUND
FEDERATED INSURANCE SERIES
High Income Bond Fund II
International Equity Fund II
Utility Fund II
THE JANUS ASPEN SERIES
Aggressive Growth Portfolio
Growth Portfolio
Worldwide Growth Portfolio
THE VAN ECK WORLDWIDE INSURANCE TRUST
Gold and Natural Resources Fund
Worldwide Bond Fund
Worldwide Emerging Markets Fund (June 1, 1996)
Worldwide Hard Assets Fund
(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 at the end of each New York Stock Exchange business day,
with the exception of regional business holidays. 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. Account E 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
Account E 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 Account E are included in the
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 Account E 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.
(3) PURCHASES AND SALES OF INVESTMENTS IN PORTFOLIO SHARES
The aggregate costs of purchases of investments in portfolio shares for the
years ended December 31, 1996 and 1995 were $29,565,192 and $6,575,469,
respectively. The aggregate proceeds from sales of investments in portfolio
shares for the years ended December 31, 1996 and 1995 were $2,741,697 and
$1,353,396, respectively.
4
<PAGE>
GREAT AMERICAN RESERVE VARIABLE ANNUITY ACCOUNT E
NOTES TO FINANCIAL STATEMENTS
December 31, 1996
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(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
mortality or expense experience because the Company assumes the mortality and
expense risks 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
sales and administrative expenses may prove insufficient to cover the actual
sales and administrative expenses.
The Company deducts daily from Account E a fee, which is equal on an annual
basis to 1.25 percent of the daily value of the total investments of Account E,
for assuming the mortality and expense risks. These fees were $211,735 and
$17,815 for the years ended December 31, 1996 and 1995, respectively.
Pursuant to an agreement between Account E and the Company (which may be
terminated by the Company), the Company provides sales and administrative
services to Account E. The Company may deduct a percentage of amounts
surrendered to cover sales expenses. The percentage varies up to 9.00 percent
based upon the number of years the contract has been held. In addition, the
Company deducts units from individual contracts annually and upon full surrender
to cover an administrative fee of $30. These sales and administrative charges
were $21,774 for the year ended December 31, 1996. The Company also deducts
daily from Account E a fee, which is equal on an annual basis to 0.15 percent of
the daily value of the total investments of Account E, for administrative
expenses. These expenses were $24,908 and $2,137 for the years ended December
31, 1996 and 1995, respectively.
(5) OTHER TRANSACTIONS WITH AFFILIATES
Conseco Equity Sales, Inc., an affiliate of the Company, is the principal
underwriter and performs all variable annuity sales functions on behalf of the
Company.
(6) NET ASSETS
Net assets consisted of the following at December 31, 1996:
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Proceeds from the sales of units since organization,
less cost of units redeemed........................ $30,540,559
Undistributed net investment income................... 1,893,584
Undistributed net realized gains on sales of investments 162,421
Net unrealized appreciation of investments............ 1,370,631
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Total net assets................................. $33,967,195
5
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
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TO THE BOARD OF DIRECTORS OF GREAT
AMERICAN RESERVE INSURANCE COMPANY
AND CONTRACT OWNERS OF GREAT AMERICAN RESERVE VARIABLE ANNUITY ACCOUNT E
We have audited the accompanying statement of assets and liabilities of Great
American Reserve Variable Annuity Account E (the "Account") as of December 31,
1996, and the related statements of operations and changes in net assets for
each of the two years in the period then ended. These financial statements are
the responsibility of the Accounts' management. Our responsibility is to express
an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. Our procedures included
confirmation of portfolio shares owned at December 31, 1996 by correspondence
with custodians. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Great American Reserve Variable
Annuity Account E as of December 31, 1996, and the results of its operations and
changes in its net assets for each of the two years in the period then ended, in
conformity with generally accepted accounting principles.
/s/ Coopers & Lybrand L.L.P
- ---------------------------
Indianapolis, Indiana
February 21, 1997
6
<PAGE>
CONSECO CAPITAL MANAGEMENT, INC.
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REPORT FROM
THE PRESIDENT
Dear Contract Owner:
I am pleased to report on the performance of the Conseco Series Trust for
Great American Reserve Variable Annuity Account E for 1996.
MORNINGSTAR
YEARENDED YEAR ENDED
DECEMBER 31, DECEMBER 31,
PORTFOLIO 1996 1996 (1)
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Asset Allocation............................ 26.50% 12.33%
Common Stock................................ 42.96% 16.79%
Corporate Bond.............................. 3.50% 2.86%
Government Securities....................... 1.31% 1.50%
Money Market................................ 3.67% 3.79%
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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 12/31/96.
The consistency and discipline of our investment process have provided you,
the investor, with solid returns during another year of dynamic market activity.
Both our fixed income and equity styles of investment management-which emphasize
constructing a portfolio with securities that have been thoroughly researched by
our analytic staff, and which we consider to be undervalued-held up well under
the market's volatitility.
The equity market, measured by the Standard & Poor's 500, provided a return
in excess of 22% for 1996, while the Dow Jones Industrial Average continued to
flirt with a new record at year-end of 6600. Cash flows into equity mutual funds
set all time records during 1996. Even with the strength in the equity market,
Tom Pence and his staff continue to find individual securities across various
industries which we consider to be undervalued.
Strong demand for U.S. dollar-denominated fixed income securities, coupled
with a favorable inflation outlook, helped to lower interest rates during the
second half of the year. The best performing fixed-income sectors included
mortgage-backed securities, asset-backed securities and corporate bonds.
We believe that this environment of low inflation and moderate economic
growth bodes well for financial assets throughout the remainder of the decade.
Over the shorter-term, however, we are concerned that wage pressures and rising
energy prices could work their way into consumer prices and/or corporate
earnings. Whatever the outcome, our disciplined approach to rational
decision-making in a sometimes irrational world, ensures that we remain ready to
respond on behalf of our contract owners to the dynamics of an ever-changing
marketplace.
Sincerely,
/s/ Maxwell E. Bublitz
- ----------------------
Maxwell E. Bublitz
President
REPORT FROM THE
ASSET ALLOCATION PORTFOLIO ADVISERS
Our strategy in the Asset Allocation Portfolio has been to emphasize our
growth equity style of investing which has represented approximately 55% of the
total portfolio. Within the fixed-income portion of the portfolio, we have seen
very strong performance during the second half of the year from the high yield
sector, which includes our investments in UNYSIS, Peoples Telephone and
Phar-Mor. In addition, we are finding value in Yankee issues as well as domestic
bank/finance issues.
Concerning the equity portion of the portfolio, we feel it is important to
make several observations which have impacted our investment decisions. The
general market did not exit 1996 cheap by any calculation. Much has been said
about stock buybacks, lower dividend payouts and the attractiveness of U.S.
equities versus those abroad. We think much of this is just noise. The current
price/earnings ratio of around 22 times 1997 earnings is quite high, even after
giving consideration to such aforementioned factors. Much of this profit cycle
has been driven by the positive impact of lower interest rates and taxes on
corporate profit margins. These factors, along with restrictions and
technological advances, have expanded profit margins to levels which are going
to be hard to improve upon in 1997.
Despite the excess valuations in many segments of the market, we continue to
find opportunities in selected areas. Our bottom up, research intensive approach
during this period identified values in selected issues in energy,
telecommunications, and technology, as well as in the capital goods sector.
Tosco, Apache and Forest Oil were prominent in our portfolio and accounted for
much of our energy holdings. Network General, Brightpoint, Ultrak, and GenRad
all contributed as strong performers in telecommunications related holdings.
Also, Miller Industries was significant as an investment in the capital goods
sector and performed well during the period.
/s/ Greogry J. Hahn, CFA /s/ Thomas J. Pence
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Gregory J. Hahn, CFA Thomas J. Pence
Senior Vice President Second Vice President
Portfolio Manager Portfolio Manager
7
<PAGE>
CONSECO CAPITAL MANAGEMENT, INC.
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REPORT FROM THE
COMMON STOCK PORTFOLIO ADVISER
As we look back upon the second half of 1996, we have to keep things in
perspective by reminding ourselves how long we have been in the midst of
economic expansion relative to historical market cycles. This is already the
fourth longest expansion of the twentieth century. This is significant because
in the three longer cycles, corporate earnings peaked out well in advance of
each cycle's demise. Thus, if history offers any clues here, we are probably
pretty close to some degree of deceleration in corporate profits. Happily, we
can look back upon 1996 as another banner year of unabated growth in corporate
profits and equity returns.
As for returns during the second half of the year, the Standard & Poor's 500
(S & P 500) gained 11.68% and the Dow Jones Industrial Average gained 15.38%.
Market performance was mostly led by a strong showing in the semiconductor and
energy sectors with stocks such as Intel and Helmrich & Payne leading the way.
Some of the worst performers for the period included trucking, broadcasting and
manufactured housing.
During the period we continued to stay focused on our bottom up research
intensive approach. With this in mind, energy continued to play a prominent role
in our portfolio with names such as Tosco, Apache and Forest Oil. In the areas
of telecommunications and networking equipment, two of our more successful
positions were Network General and Brightpoint. Capital goods also put in strong
results in our portfolio with Miller Industries, which performed well throughout
the period. Finally, technology had its' role in the second half of the year
with names such as GenRad and Ultrak.
Looking into 1997, investor uncertainty on the overall market remains quite
high. Excessive valuations and sentiment readings as well as the ultimate
duration of this profit cycle all cause us to question whether we can continue
much longer without a significant correction. However, in spite of this
tentative outlook on the performance of the market averages such as the S&P 500
and the Dow Jones Industrial Average, we remain committed to finding great
businesses and great management teams that can grow their earnings significantly
in excess of the average company in the market. To this end, we will continue to
focus our research efforts in the months ahead on companies in the technology,
energy and business services sectors. Additionally, we are intrigued by the
opportunities for profit growth that exist in the textile, aerospace, healthcare
and gold producer industries where we still see attractive valuations and
developing insider buying patterns. We think that the possibility of a stronger
dollar in 1997 could result in a significant leadership change in this market as
domestically focused companies enjoy less pressure on unit volumes and profit
margins than their international counterparts. Finally, we expect to continue to
reduce our exposure to higher-end consumer products and services where we feel
the overabundance of capital investment in this cycle has created over-capacity
and excessive competition.
/s/ Thomas J. Pence
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Thomas J. Pence
Second Vice President
Portfolio Manager
REPORT FROM THE
CORPORATE BOND PORTFOLIO ADVISER
With interest rates declining over the last six months of the year, the fixed
income markets provided good performance and a plethora of investment
opportunities over the period. Returns in the second half of the year more than
erased the negative returns during the first half of the year. For the year of
1996, the general market, measured by the Lehman Brothers Aggregate Index,
returned 3.63% and was led by solid performance in the corporate mortgage-backed
and asset-backed securities sectors.
Even though spreads to treasuries remain tight, the bank and finance sector
provided some of the better relative value opportunities. Heavy issuance toward
year-end of Trust Preferred Securities provided investment opportunities in the
long part of the yield curve. We invested in the issues of Morgan Stanley
(A2/A-), Wells Fargo (A1/BBB), and First Chicago (A1/A-). Also, Standard Federal
Bancorp (Baa3/BBB-) was acquired by ABN AMRO (Aa2/AA-) and spreads narrowed by
over 40 basis points in anticipation of an upgrade to ABN AMRO's ratings.
In the industrial sector, we continued to add to our position in Safeway
(Ba2/BBB-) which we anticipate will be upgraded given the merger with Vons.
We have selectively increased our exposure to Yankee securities given the
improved liquidity and the relative value opportunities in the sector. During
the period we invested in Ras Laffan Gas (A3/BBB+) and Southern Investments UK
(Baa1/A) which both offer excellent relative value in the intermediate part of
the yield curve. We also invested in the bonds of the Republic of South Africa
(Baa3/BB-) which we believed were cheap at spreads of 195 basis points over U.S.
Treasuries.
The portfolio continues to emphasize a diverse group of corporate securities
which we consider to be undervalued currently in the market. Also, while we
consider the market for mortgage-backed securities fairly valued, we continue to
look for opportunities in asset-backed securities and commercial mortgage-backed
securities, particularly in the short end of the yield curve.
/s/ Gregory J. Hahn, CFA
- ------------------------
Gregory J. Hahn, CFA
Senior Vice President
Portfolio Manager
8
<PAGE>
CONSECO CAPITAL MANAGEMENT, INC.
- --------------------------------------------------------------------------------
REPORT FROM THE
GOVERNMENT SECURITIES PORTFOLIO ADVISER
The rising interest rate environment of the first half of 1996 changed
dramatically in the third quarter. The unemployment report in early July showed
signs of a weakening economy and interest rates reversed their course and began
trending lower. The 30 year U.S. Treasury bond peaked on July 5th at 7.19%. Some
market participants actually began looking toward an easing of monetary policy
by the Federal Reserve Board and short term interest rates also began falling.
The two year U.S. Treasury note peaked a few days later at 6.43%. Indications of
a sluggish economic environment continued into the fourth quarter. The 30 year
U.S. Treasury reached a low yield of 6.35% while the two year U.S. Treasury
bottomed at 5.58%. Perceptions changed in early December. Fueled by Fed Chairman
Alan Greenspan's now famous "irrational exuberance" comments, fears of a
tightening of monetary policy were reawakened and sent interest rates rising.
The year ended with long rates, as measured by the 30 year bond, at 6.64%. Short
rates, as measured by the two year note, closed at 5.87%.
Spread sectors were the best performers of 1996. Very strong demand for
investments that provided incremental yield over U.S. Treasuries led to higher
performance by the mortgage-backed securities (MBS), asset-backed securities
(ABS), and corporate bond markets. The Lehman Brothers Government Index returned
2.77% for 1996. In contrast, the Lehman Brothers Mortgage Index posted a return
of 5.35%, and the Lehman Brothers Asset-Backed Index returned 5.05%. Even
adjusting for the shorter duration of the Lehman mortgage and asset-backed
indices, both outpaced U.S. Treasury securities by between 70 and 80 basis
points. In addition to investors' appetite for extra yield, securities with
embedded options such as MBS and callable agencies benefitted from falling
volatility over the last half of 1996.
Looking toward 1997, the market seems to be at a crossroads. Demand for both
fixed income securities and equities is strong as money continues to pour in
from retail mutual funds and institutional investors. Additionally, demand for
U.S. Treasury securities from overseas continues to be strong. A risk here would
be if the dollar cannot sustain its continued strength in the foreign exchange
market. Other risks are lurking as well. Some investors are concerned that the
strong showing of the economy in the fourth quarter will continue and lead to
tighter monetary policy from the Federal Reserve. Expectations for Gross
Domestic Product (GDP) growth for the fourth quarter are around four percent.
With the current tightness in the labor markets, continued growth of this sort
in 1997 will most certainly lead to increased inflationary pressures on the wage
front. Energy prices also remain high furthering inflationary concerns. However,
many economists feel that GDP growth in the fourth quarter was an aberration and
look for sustainable growth in the range of 2.0% to 2.5%. Economic indicators in
the early part of 1997 will hopefully give investors a clearer picture of the
economic environment to be expected.
We expect demand for spread products such as MBS and ABS to continue to be
strong in 1997. The Government Securities Portfolio will continue to benefit
from diversification with selective investments in these sectors. As is our
strategy, we will invest in high-quality, liquid securities that provide
superior relative value.
/s/ Joseph F. DeMichele
- -------------------------
Joseph F. DeMichele
Vice President
Portfolio Manager
REPORT FROM THE
MONEY MARKET PORTFOLIO ADVISER
The Federal Open Market Committee (FOMC) met four times to discuss the
economic and financial outlook and implementation of monetary policy during the
second half of 1996. The main theme of the committee was the economy's inflation
outlook. In the first two meetings, the FOMC stressed that the economy would not
retain the strong growth seen in the first half of the year. The FOMC was
absolutely correct. Growth of economic activity slowed considerably which posted
a modest gain for the third and fourth quarter. This showing was attributed to
the weakening of housing demand, net exports, and federal purchases of goods and
services offsetting the increase in other sectors. Along with a slowing economy,
the FOMC felt the pressures of the White House in an election year to not raise
the Federal Funds target rate. The Federal Funds target rate remained at 5.25%
throughout the second half of the year with an average rate of 5.30%.
However, December's FOMC meeting captured investor's interest on what the
committee would implement. Federal Reserve Chairman Alan Greenspan's remarks
about the "irrational exuberance" in the stock market caught the market off
guard and encouraged investors to watch closely what the FOMC would do in its'
December 17th meeting. Greenspan commented that "because monetary policy works
with a lag, we need to be forward looking, taking actions to forestall
imbalances that may not be visible for many months." This brought attention to
the increasing wage inflation in a low price inflation environment. The FOMC
stated that this would be an issue that will be monitored closely as it left the
Federal Funds target rate at 5.25%.
Throughout the entire second half of the year, money market levels fluctuated
around the Federal Funds target rate. Top tier 30 day commercial paper traded on
average at 5.269% in the second half. The yield on the three month T-Bill went
from 5.36% on September 5th to 4.918% on December 13th, and the one year bill
fluctuated from a high of 5.947% to a low of 5.352%.
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 corporate debt.
/s/ William F. Ficca
- ----------------------
William F. Ficca
Portfolio Manager
9
<PAGE>
CONSECO SERIES TRUST
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1996
<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 $13,858,095,
$138,243,266, $17,130,181, $3,915,526, and
$6,690,002, respectively) .............................$15,732,008 $170,771,726 $ 17,216,710 $ 3,905,647 $ 6,690,002
Cash..................................................... 676,534 98,213 83,480 68,615 288,816
Accrued interest and dividends........................... 121,381 67,619 271,642 35,363 7,895
Receivable for securities sold........................... 820,000 11,200,000 971,531 200,000 --
Receivable for shares sold............................... 212,813 508,390 -- 16,456 612
- ------------------------------------------------------------------------------------------------------------------------------------
Total assets......................................... 17,562,736 182,645,948 18,543,363 4,226,081 6,987,325
- ------------------------------------------------------------------------------------------------------------------------------------
Liabilities:
Accrued expenses......................................... 10,838 117,619 10,629 2,465 2,662
Payable for securities purchased......................... 819,692 11,195,839 1,053,369 199,925 --
Payable for shares redeemed.............................. -- -- 16,025 -- --
- ------------------------------------------------------------------------------------------------------------------------------------
Total liabilities.................................... 830,530 11,313,458 1,080,023 202,390 2,662
Net assets (Note 5)................................$16,732,206 $171,332,490 $17,463,340 $4,023,691 $ 6,984,663
- ------------------------------------------------------------------------------------------------------------------------------------
Shares outstanding (unlimited number of shares authorized).. 1,242,309 7,842,054 1,751,646 336,912 6,984,663
Net asset value, offering and redemption price per share.... $ 13.47 $ 21.85 $ 9.97 $ 11.94 $ 1.00
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
10
<PAGE>
CONSECO SERIES TRUST
STATEMENT OF OPERATIONS
For the Year Ended December 31, 1996
<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:
Interest ..................................................... $ 455,682 $ 471,873 $ 1,224,128 $ 287,603 $314,969
Dividends .................................................... 34,361 703,155 -- -- --
- ------------------------------------------------------------------------------------------------------------------------------------
Total investment income .................................... 490,043 1,175,028 1,224,128 287,603 314,969
- ------------------------------------------------------------------------------------------------------------------------------------
Expenses:
Investment advisory fees ..................................... 69,483 819,083 83,915 21,586 14,490
Compensation expense ......................................... 13,885 150,011 18,411 4,738 6,343
Custodial fees ............................................... 25,873 24,022 12,017 9,067 8,657
- ------------------------------------------------------------------------------------------------------------------------------------
Other ........................................................ 9,893 107,236 13,287 3,442 4,067
Total expenses ............................................. 119,134 1,100,352 127,630 38,833 33,557
Less: Expenses charged to the Adviser (Note 3) .............. 24,384 8,242 10,149 8,612 7,474
- ------------------------------------------------------------------------------------------------------------------------------------
Net expenses ............................................... 94,750 1,092,110 117,481 30,221 26,083
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income .................................... 395,293 82,918 1,106,647 257,382 288,886
Net realized gains (losses) on sales of investments ............. 1,798,137 32,662,345 (5,075) 50,341 17
- ------------------------------------------------------------------------------------------------------------------------------------
Unrealized appreciation (depreciation) of investments:
Beginning of year ............................................ 796,338 13,279,475 363,685 197,393 --
End of year .................................................. 1,873,913 32,528,460 86,529 (9,879) --
- ------------------------------------------------------------------------------------------------------------------------------------
Net change in unrealized appreciation (depreciation)
of investments 1,077,575 19,248,985 (277,156) (207,272) --
- ------------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gains (losses) on investments 2,875,712 51,911,330 (282,231) (156,931). 17
Net increase in net assets from operations ............. $3,271,005 $51,994,248 $ 824,416 $ 100,451 $288,903
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
11
<PAGE>
CONSECO SERIES TRUST
STATEMENTS OF CHANGES IN NET ASSETS
For the Years Ended December 31, 1996 and 1995
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
ASSET ALLOCATION COMMON STOCK
PORTFOLIO PORTFOLIO
--------------------------- ------------------------------
1996 1995 1996 1995
- --------------------------------------------------------------------------------------------------------------------
Changes from operations:
<S> <C> <C> <C> <C>
Net investment income ........................ $ 395,293 $ 315,668 $ 82,918 $ 1,639,347
Net realized gains (losses) on sales
of investments ............................ 1,798,137 986,254 32,662,345 17,257,854
Net change in unrealized appreciation
(depreciation)of investments ............... 1,077,575 763,020 19,248,985 9,104,998
Net increase in net assets from operations 3,271,005 2,064,942 51,994,248 28,002,199
Net income equalization (Note 2) ................ (117,810) (45,637) (310,774) (304,482)
Dividends to shareholders from net investment
income and net realized short-term
capital gains ................................ (1,838,944) (1,088,856) (26,591,735) (13,216,278)
Distribution to shareholders of net realized
long-term capital gains ...................... (354,487) (190,541) (6,153,526) (4,375,576)
Capital share transactions:
Net proceeds from sales of shares ............ 5,671,987 2,337,932 15,914,256 10,907,804
Net asset value of shares issued from
reinvestment of dividends
and distributions .......................... 2,311,241 1,325,034 33,056,035 17,896,336
Cost of shares redeemed ...................... (1,794,161) (991,889) (6,211,539) (4,034,206)
Net increase in net assets from
capital share transactions ............. 6,189,067 2,671,077 42,758,752 24,769,934
Net increase in net assets ............. 7,148,831 3,410,985 61,696,965 34,875,797
Net assets, beginning of year ................... 9,583,375 6,172,390 109,635,525 74,759,728
Net assets, end of year (Note 5) ....... $ 16,732,206 $ 9,583,375 $ 171,332,490 $ 109,635,525
- ------------------------------------------------------------------------------------------------------------------------------------
Share data:
Shares sold .................................. 429,309 187,752 760,970 576,891
Shares issued from reinvestment
of dividends and distributions ............. 174,386 106,975 1,553,738 938,043
Shares redeemed .............................. (134,824) (80,133) (290,666) (215,685)
Net increase (decrease) in number
of shares outstanding .................. 468,871 214,594 2,024,042 1,299,249
====================================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------
CORPORATE BOND
PORTFOLIO
----------------------------
1996 1995
- ----------------------------------------------------------------------------------
Changes from operations:
<S> <C> <C>
Net investment income ........................ $ 1,106,647 $ 980,815
Net realized gains (losses) on sales
of investments ............................ (5,075) 330,899
------------
Net change in unrealized appreciation
(depreciation)of investments ............... (277,156) 1,075,255
------------
Net increase in net assets from operations 824,416 2,386,969
------------
Net income equalization (Note 2) ................ (8,548) (14,120)
------------
Dividends to shareholders from net investment
income and net realized short-term
capital gains ................................ (1,100,232) (1,385,323)
------------
Distribution to shareholders of net realized
long-term capital gains ...................... -- --
------------ ------------
Capital share transactions:
Net proceeds from sales of shares ............ 2,840,237 1,739,415
Net asset value of shares issued from
reinvestment of dividends
and distributions .......................... 1,108,780 1,399,443
Cost of shares redeemed ...................... (2,247,681) (983,079)
------------ ------------
Net increase in net assets from
capital share transactions ............. 1,701,336 2,155,779
------------ ------------
Net increase in net assets ............. 1,416,972 3,143,305
Net assets, beginning of year ................... 16,046,368 12,903,063
------------
Net assets, end of year (Note 5) ....... $ 17,463,340 $ 16,046,368
============ ============
Share data:
Shares sold .................................. 285,892 174,704
Shares issued from reinvestment
of dividends and distributions ............. 111,611 140,379
Shares redeemed .............................. (227,117) (99,878)
------------
Net increase (decrease) in number
of shares outstanding .................. 170,386 215,205
============
</TABLE>
The accompanying notes are an integral part of thesefinancial statements.
12
<PAGE>
CONSECO SERIES TRUST
STATEMENTS OF CHANGES IN NET ASSETS - CONTINUED
For the Years Ended December 31,
1996 and 1995
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
GOVERNMENT SECURITIES MONEY MARKET
PORTFOLIO PORTFOLIO
------------------------- -----------------------
1996 1995 1996 1995
- ------------------------------------------------------------------------------------------------------------------------------------
Changes from operations:
<S> <C> <C> <C> <C>
Net investment income ..................................... $ 257,382 $ 293,496 $ 288,886 $ 270,384
Net realized gains (losses) on sales of investments ....... 50,341 205,153 17 --
Net change in unrealized appreciation
(depreciation) of investments ........................... (207,272) 249,884 -- --
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets from operations ............ 100,451 748,533 288,903 270,384
- ------------------------------------------------------------------------------------------------------------------------------------
Net income equalization (Note 2) ............................. 2,180 42,608 -- --
Dividends to shareholders from net investment income
and net realized short-term capital gains ................. (254,150) (269,374) (288,903) (270,384)
- ------------------------------------------------------------------------------------------------------------------------------------
Distribution to shareholders of net realized
long-term capital gains ................................... (16,363) -- -- --
- ------------------------------------------------------------------------------------------------------------------------------------
Capital share transactions:
Net proceeds from sales of shares ......................... 282,122 494,412 4,844,730 2,344,876
Net asset value of shares issued from reinvestment
of dividends and distributions .......................... 268,333 226,766 288,903 270,384
Cost of shares redeemed ................................... (971,489) (1,343,123) (3,544,847) (2,324,750)
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets from
capital share transactions .......................... (421,034) (621,945) 1,588,786 290,510
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets ................. (588,916) (100,178) 1,588,786 290,510
Net assets, beginning of year ................................ 4,612,607 4,712,785 5,395,877 5,105,367
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of year (Note 5) ...................... $ 4,023,691 $ 4,612,607 $ 6,984,663 $ 5,395,877
====================================================================================================================================
Share data:
Shares sold ............................................... 23,306 41,122 4,844,730 2,344,876
Shares issued from reinvestment
of dividends and distributions .......................... 22,360 18,550 288,903 270,384
Shares redeemed ........................................... (81,432) (112,066) (3,544,847) (2,324,750)
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in number of shares outstanding (35,766) (52,394) 1,588,786 290,510
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
13
<PAGE>
CONSECO SERIES TRUST
ASSET ALLOCATION PORTFOLIO
STATEMENT OF INVESTMENTS IN SECURITIES
December 31, 1996
NUMBER
OF SHARES SECURITY VALUE
- --------------------------------------------------------------------------------
COMMON STOCKS
(56.84% of total investments) (a)
APPAREL AND ACCESSORY STORES (3.35%)
12,300 Claire's Stores, Inc. ........................ $159,900
4,800 Finish Line Inc. Class A (b).................. 101,400
10,700 Footstar, Inc. (b)............................ 266,162
---------
527,462
---------
BUILDING CONSTRUCTION, GENERAL CONTRACTORS,
OPERATIVE BUILDERS (1.62%)
10,300 Fairfield Communities, Inc. (b)............... 254,925
---------
BUSINESS SERVICES (5.59%)
6,450 Comdisco, Inc. ............................... 204,787
13,750 IKOS Systems, Inc. (b)........................ 275,000
34,900 Ross Systems, Inc. (b)........................ 335,912
8,950 Software Artistry, Inc. (b)................... 63,768
---------
879,467
---------
COMMUNICATIONS BY PHONE,
TELEVISION, RADIO, CABLE (1.09%)
5,950 Billing Information Concepts Corporation (b).. 171,063
---------
DURABLE GOODS--WHOLESALE (1.29%)
6,300 Insight Enterprises, Inc. (b)................. 176,400
900 Watsco, Inc. (b)............................. 25,988
---------
202,388
---------
EATING AND DRINKING PLACES (1.33%)
2,200 Cooker Restaurant Corporation................. 25,575
10,100 Showbiz Pizza Time, Inc. (b).................. 183,063
---------
208,638
---------
ELECTRIC, GAS, WATER, COGENERATION,
SANITARY SERVICES (1.28%)
4,130 Coastal Corporation........................... 201,854
---------
ELECTRICAL EQUIPMENT, EXCEPT COMPUTERS (3.36%)
11,200 Semtech Corporation (b)....................... 191,800
11,050 Ultrak, Inc. (b).............................. 337,025
---------
528,825
---------
ENGINEERING SERVICES, ACCOUNTING,
MANAGEMENT (1.16%)
8,200 Correctional Services Corporation (b)......... 117,875
3,800 NCO Group, Inc. (b).......................... 64,125
---------
182,000
---------
FABRICATED METAL, EXCEPT MACHINERY,
TRANSPORTATION EQUIPMENT (3.19%)
25,125 Miller Industries, Inc. (b)................... 502,500
---------
FOOD AND KINDRED PRODUCTS (0.54%)
750 Philip Morris Companies Inc................... 84,469
---------
FURNITURE AND FIXTURES (1.31%)
3,650 Herman Miller, Inc. .......................... 206,681
---------
GENERAL MERCHANDISE STORES (0.58%)
2,475 Proffitt's Inc. (b)........................... 91,266
---------
HEALTH SERVICES (1.22%)
9,150 Medpartners, Inc. (b)......................... $192,150
---------
HOME FURNITURE AND EQUIPMENT STORES (1.77%)
13,900 Microage, Inc. (b)............................ 278,000
---------
HOTELS, OTHER LODGING PLACES (0.54%)
6,150 Chartwell Leisure, Inc. (b)................... 84,563
---------
INDUSTRIAL, COMMERCIAL MACHINERY,
COMPUTERS (4.28%)
9,900 Micros Systems Inc. (b)....................... 304,425
12,200 Network General Corporation (b)............... 369,050
---------
673,475
---------
INSURANCE COMPANIES (1.05%)
7,900 USF&G Corporation............................. 164,912
---------
LEATHER PRODUCTS (.60%)
10,200 Genesco Inc. (b).............................. 94,350
---------
MEASURING INSTRUMENTS,
PHOTO GOODS, WATCHES (6.61%)
10,100 GenRad, Inc. (b).............................. 234,825
3,900 Guidant Corporation (b)....................... 222,300
3,350 Honeywell, Inc. (b)........................... 220,264
900 Perclose, Inc. (b)............................ 18,225
9,300 SBS Technologies, Inc. (b).................... 344,100
---------
1,039,714
---------
MISCELLANEOUS RETAIL (0.84%)
18,000 Creative Computers, Inc. (b).................. 132,750
---------
NON-DEPOSITORY CREDIT INSTITUTIONS (2.23%)
13,650 Consumer Portfolio Services, Inc. (b)......... 153,563
5,350 Sirrom Capital Corporation.................... 196,613
---------
350,176
---------
OIL AND GAS EXTRACTION (4.54%)
5,870 Apache Corporation ........................... 207,651
7,250 Forest Oil Corporation (b).................... 127,781
2,300 Nuevo Energy Company (b)...................... 119,600
9,500 Oryx Energy Company (b)....................... 235,125
2,000 Titan Exploration, Inc. (b)................... 24,000
---------
714,157
---------
PAPER AND ALLIED PRODUCTS (1.14%)
5,700 Schweitzer-Mauduit International, Inc......... 180,262
---------
PETROLEUM - REFINING & RELATED PRODUCTS (2.70%)
2,550 Texaco, Inc. (b).............................. 250,219
2,200 Tosco Corporation............................. 174,075
---------
424,294
---------
PRINTING, PUBLISHING AND ALLIED (1.34%)
4,800 Central Newspapers, Inc. ..................... 211,200
---------
RUBBER AND MISCELLANEOUS
PLASTIC PRODUCTS (1.91%)
7,150 Reebok International Ltd. (b)................. 300,300
---------
TRANSPORTATION SERVICES (0.38%)
3,700 Team Rental Group, Inc. (b)................... 59,662
---------
TOTAL COMMON STOCKS (COST $7,144,283) ........ 8,941,503
---------
(Continued)
14
<PAGE>
CONSECO SERIES TRUST
ASSET ALLOCATION PORTFOLIO
STATEMENT OF INVESTMENTS IN SECURITIES - CONTINUED
December 31, 1996
NUMBER
OF SHARES SECURITY VALUE
- --------------------------------------------------------------------------------
PREFERRED STOCKS
(3.16% OF TOTAL INVESTMENTS) (A)
MINING - METALS AND ORES (0.72%)
6,500 Coeur D'Alene Mines Corporation, 7.00%........ $113,750
PRINTING, PUBLISHING AND ALLIED (2.44%)
366 Time Warner Inc., Series K, (144A), 10.25%.... 383,751
---------
TOTAL PREFERRED STOCKS (COST $460,578)........ 497,501
---------
PRINCIPAL
AMOUNT SECURITY VALUE
- --------------------------------------------------------------------------------
CORPORATE BONDS
(34.79% OF TOTAL INVESTMENTS) (A)
APPAREL AND OTHER FINISHED PRODUCTS (0.65%)
$100,000 Guess?, Inc., 9.500%, due 08/15/2003........ 102,500
---------
BUSINESS SERVICES (3.19%)
500,000 Valassis Inserts, 8.375%, due 03/15/1997...... 501,790
---------
CHEMICAL AND ALLIED PRODUCTS (2.53%)
200,000 Fisher Scientific International, Inc.,
7.125%, due 12/15/2005....................... 190,750
200,000 Freeport McMoran Resource Partners, L.P.,
8.750%, due 02/15/2004........................ 208,000
---------
398,750
---------
COMMUNICATIONS BY PHONE,
TELEVISION, RADIO, CABLE (3.38%)
190,000 Continental Cablevision, Inc., 9.000%,
due 09/01/2008 ............................. 215,412
100,000 Net Sat Servicos LTDA, 12.75%, due 08/05/2004. 104,625
200,000 Peoples Telephone Co., Inc., 12.25%,
due 07/15/2002.............................. 211,000
---------
531,037
---------
DEPOSITORY INSTITUTIONS (2.58%)
200,000 Anchor Bancorp, Inc., 8.9375%, due 07/09/2003. 207,250
200,000 Wells Fargo Capital, 7.96%, due 12/15/2026.... 199,354
---------
406,604
---------
DURABLE GOODS-WHOLESALE (1.30%)
200,000 Pioneer Standard Electronics, Inc., 8.500%,
due 08/01/2006................................ 204,000
---------
ELECTRIC, GAS, WATER, COGENERATION,
SANITARY SERVICES (0.04%)
7,000 System Energy Resources, Inc., 11.375%,
due 09/01/2016 ............................ 7,088
ELECTRICAL EQUIPMENT, EXCEPT COMPUTERS (1.25%)
200,000 USI American Holdings, Inc., (144A), 7.250%,
due 12/01/2006............................... 196,500
---------
FOOD AND KINDRED PRODUCTS (1.27%)
200,000 RJR Nabisco, Inc., 8.75%, due 08/15/2005...... 200,000
---------
FOOD STORES (2.14%)
300,000 Safeway, Inc., 10.000%, due 12/01/2001........ 336,750
---------
FOREIGN GOVERNMENT (1.91%)
300,000 Republic of South Africa, 8.375%,
due 10/17/2006 .............................. 300,375
INDUSTRIAL, COMMERCIAL MACHINERY,
COMPUTERS (1.36%)
$200,000 Unisys Corporation, (144A) 12.000%,
due 04/15/2003............................... $213,250
---------
INSURANCE COMPANIES (0.15%)
100,000 Home Holdings, Inc., 8.625%, due 12/15/2003... 23,000
---------
MISCELLANEOUS RETAIL (1.33%)
200,000 Phar-Mor, Inc., 11.72%, 09/11/2002............ 210,000
---------
MOTOR FREIGHT TRANSPORTATION,
WAREHOUSES (1.30%)
200,000 Amerco, 7.85%, 05/15/2003..................... 204,500
---------
NON-DEPOSITORY CREDIT INSTITUTIONS (4.48%)
200,000 Aames Financial Corporation, 9.125%,
due 11/01/2003 .............................. 204,500
500,000 Edison Mission Energy Funding, 7.330%,
due 09/15/2008.............................. 499,750
---------
704,250
---------
PAPER AND ALLIED PRODUCTS (0.68%)
100,000 Westvaco Corporation, 10.300%, due 01/15/2019. 106,750
---------
PERSONAL SERVICES (1.46%)
250,000 Uniforet, Inc., (144A) 11.125%, due 10/15/2006 229,375
---------
PRIMARY METAL INDUSTRIES (0.30%)
100,000 USX Corporation, 0.000%, due 08/09/2005....... 46,875
---------
SECURITY AND COMMODITY BROKERS (0.70%)
111,000 Lehman Brothers Holdings, Inc., 6.650%,
due 11/08/2000............................... 110,014
---------
TEXTILE MILL PRODUCTS (1.37%)
200,000 Polysindo International Finance Company,
11.375%, due 06/15/2006....................... 216,250
---------
TRANSPORTATION EQUIPMENT (1.42%)
200,000 Rohr Inc., 11.625%, due 05/15/2003............ 223,500
---------
TOTAL CORPORATE BONDS (COST $5,433,388)....... 5,473,158
---------
COMMERCIAL PAPER
(5.21% OF TOTAL INVESTMENTS) (A)
ELECTRICAL EQUIPMENT, EXCEPT COMPUTERS (5.21%)
820,000 Duracell Inc., 6.75%, due 01/02/1997.......... 819,846
---------
TOTAL COMMERCIAL PAPER (COST $819,846)........ 819,846
---------
TOTAL INVESTMENTS IN SECURITIES
(COST $13,858,095) (c)...................... $15,732,008
===========
- ------------------------------------
(a) Using Standard Industrial 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.
The accompanying notes are an integral part of these financial statements.
15
<PAGE>
CONSECO SERIES TRUST
COMMON STOCK PORTFOLIO
STATEMENT OF INVESTMENTS IN SECURITIES
December 31, 1996
- --------------------------------------------------------------------------------
NUMBER
OF SHARES SECURITY VALUE
- --------------------------------------------------------------------------------
COMMON STOCKS
( 92.34% OF TOTAL INVESTMENTS) (A)
APPAREL AND ACCESSORY STORES (5.19%)
206,200 Claire's Stores, Inc. ........................ $2,680,600
80,800 Finish Line Inc. Class A (b).................. 1,706,900
179,700 Footstar, Inc. (b)............................ 4,470,037
---------
8,857,537
---------
BUILDING CONSTRUCTION, GENERAL CONTRACTORS,
OPERATIVE BUILDERS (2.52%)
173,600 Fairfield Communities, Inc. (b)............... 4,296,600
---------
BUSINESS SERVICES (8.91%)
111,400 Comdisco, Inc................................. 3,536,950
246,300 IKOS Systems, Inc. (b)........................ 4,926,000
581,800 Ross Systems, Inc. (b)........................ 5,599,825
161,100 Software Artistry, Inc. (b)................... 1,147,837
---------
15,210,612
---------
COMMUNICATIONS BY PHONE,
TELEVISION, RADIO, CABLE (1.68%)
100,150 Billing Information Concepts Corporation (b).. 2,879,312
---------
DURABLE GOODS - WHOLESALE (1.87%)
98,700 Insight Enterprises, Inc. (b)................. 2,763,600
15,200 Watsco, Inc. ................................. 438,900
---------
3,202,500
---------
EATING AND DRINKING PLACES (2.09%)
35,800 Cooker Restaurant Corporation................. 416,175
174,200 Showbiz Pizza Time, Inc. (b).................. 3,157,375
---------
3,573,550
---------
ELECTRIC, GAS, WATER, COGENERATION,
SANITARY SERVICES (1.99%)
69,400 Coastal Corporation........................... 3,391,925
---------
ELECTRICAL EQUIPMENT, EXCEPT COMPUTERS (5.22%)
187,100 Semtech Corporation (b) ...................... 3,204,088
187,100 Ultrak, Inc. (b) ............................. 5,706,550
---------
8,910,638
---------
ENGINEERING SERVICES, ACCOUNTING,
MANAGEMENT (2.02%)
160,500 Correctional Services Corporation (b) ........ 2,307,188
68,100 NCO Group, Inc. (b) .......................... 1,149,188
---------
3,456,376
---------
FABRICATED METAL, EXCEPT MACHINERY,
TRANSPORTATION EQUIPMENT (5.21%)
444,750 Miller Industries, Inc. (b)................... $8,895,000
---------
FOOD AND KINDRED PRODUCTS (0.91%)
13,775 Philip Morris Companies Inc................... 1,551,409
---------
FURNITURE AND FIXTURES (2.43%)
73,200 Herman Miller, Inc. .......................... 4,144,950
---------
GENERAL MERCHANDISE STORES (1.09%)
50,375 Proffitt's Inc. (b)........................... 1,857,578
---------
HEALTH SERVICES (1.97%)
160,100 Medpartners, Inc. (b)......................... 3,362,100
---------
HOME FURNITURE AND EQUIPMENT STORES (2.99%)
255,550 Microage, Inc. (b)............................ 5,111,000
---------
HOTELS, OTHER LODGING PLACES (0.95%)
117,700 Chartwell Leisure, Inc. (b)................... 1,618,375
---------
INDUSTRIAL, COMMERCIAL MACHINERY,
COMPUTERS (6.99%)
165,000 Micros Systems Inc. (b)....................... 5,073,750
226,900 Network General Corporation (b)............... 6,863,725
---------
11,937,475
---------
INSURANCE COMPANIES (1.84%)
150,300 USF&G Corporation............................. 3,137,513
---------
LEATHER PRODUCTS (0.96%)
177,900 Genesco Inc. (b).............................. 1,645,575
---------
MEASURING INSTRUMENTS,
PHOTO GOODS, WATCHES (10.52%)
182,700 GenRad, Inc. (b).............................. 4,247,775
65,800 Guidant Corporation .......................... 3,750,600
58,900 Honeywell, Inc. .............................. 3,872,675
15,600 Perclose, Inc................................. 315,900
156,200 SBS Technologies, Inc......................... 5,779,400
---------
17,966,350
---------
MISCELLANEOUS RETAIL (1.29%)
299,800 Creative Computers Inc. (b)................... 2,211,025
---------
NON-DEPOSITORY CREDIT INSTITUTIONS (3.52%)
241,000 Consumer Portfolio Services, Inc. (b)......... 2,711,250
90,000 Sirrom Capital Corporation ................... 3,307,500
---------
6,018,750
---------
(Continued)
16
<PAGE>
- --------------------------------------------------------------------------------
NUMBER
OF SHARES SECURITY VALUE
- --------------------------------------------------------------------------------
COMMON STOCKS (continued)
OIL AND GAS EXTRACTION (7.88%)
115,850 Apache Corporation............................ $4,098,194
142,500 Forest Oil Corporation (b).................... 2,511,563
39,900 Nuevo Energy Company (b)...................... 2,074,800
174,000 Oryx Energy Company (b)....................... 4,306,500
39,000 Titan Exploration, Inc. (b)................... 468,000
------------
13,459,057
------------
PAPER AND ALLIED PRODUCTS (2.07%)
111,600 Schweitzer-Mauduit International, Inc......... 3,529,350
------------
PETROLEUM - REFINING & RELATED INDUSTRIES (4.36%)
44,700 Texaco, Inc. ................................. 4,386,188
38,600 Tosco Corporation............................. 3,054,225
------------
7,440,413
------------
PRINTING, PUBLISHING & ALLIED (2.32%)
89,900 Central Newspapers, Inc. ..................... 3,955,600
------------
RUBBER AND MISCELLANEOUS
PLASTIC PRODUCTS (2.93%)
119,200 Reebok International Ltd...................... 5,006,400
------------
TRANSPORTATION SERVICES (0.62%)
66,300 Team Rental Group Inc. ....................... 1,069,087
------------
TOTAL COMMON STOCKS (COST $125,218,947)..... 157,696,057
------------
PREFERRED STOCKS
(1.10% OF TOTAL INVESTMENTS) (A)
MINING--METALS AND ORES (1.10%)
107,300 Coeur D'Alene Mines Corporation 7%............ 1,877,750
------------
TOTAL PREFERRED STOCKS (COST $1,826,400)...... 1,877,750
------------
PRINCIPAL
AMOUNT SECURITY VALUE
- --------------------------------------------------------------------------------
COMMERCIAL PAPER
( 6.56% of total investments) (a)
ELECTRICAL EQUIPMENT, EXCEPT COMPUTERS (4.92%)
$8,400,000 Duracell Inc., 6.75%, due 01/02/1997....... $8,398,425
------------
NON-DEPOSITORY CREDIT INSTITUTIONS (1.64%)
2,800,000 American General Capital Services, 6.50%,
due 01/02/1997............................ 2,799,494
------------
TOTAL COMMERCIAL PAPER (COST $11,197,919)..... 11,197,919
------------
TOTAL INVESTMENTS IN SECURITIES
(COST $138,243,266) (c).......................$170,771,726
------------
- -------------------------------------
(a) Using Standard Industrial 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.
17
<PAGE>
CONSECO SERIES TRUST
CORPORATE BOND PORTFOLIO
STATEMENT OF INVESTMENTS IN SECURITIES
December 31, 1996
- --------------------------------------------------------------------------------
PRINCIPAL
AMOUNT SECURITY VALUE
- --------------------------------------------------------------------------------
CORPORATE BONDS
(63.13% OF TOTAL INVESTMENTS) (A)
AIR TRANSPORTATION (1.94%)
$180,844 Delta Airlines 1992 ETC-C, 8.540%,
due 01/02/2007............................... $190,790
45,211 Delta Airlines 1992 ETC-D, 8.540%,
due 01/02/2007............................ 47,133
100,000 United Airlines 1996-A1 Pass Thru Certificate,
7.270%, due 01/30/2013........................ 95,625
------------
333,548
------------
AUTO REPAIR AND PARKING (2.96%)
400,000 Amerco, Inc. 7.850%, due 05/15/2003........... 409,000
100,000 Amerco MTN, 6.710%, due 10/15/2008............ 100,875
------------
509,875
------------
COMMUNICATIONS BY PHONE,
TELEVISION, RADIO, CABLE (1.88%)
285,000 Continental Cablevision, Inc., 9.000%,
due 09/01/2008.............................. 323,119
------------
DEPOSITORY INSTITUTIONS (7.56%)
100,000 First Chicago Corporation (144A), 7.950%,
due 12/01/2026 ............................. 98,299
300,000 Morgan Stanley Fin Plc, 8.030%,
due 02/28/2017.............................. 300,000
550,000 Southern Investments UK, 6.375%,
due 11/15/2001.............................. 543,813
250,000 Standard Federal Bancorp, 7.750%,
due 07/17/2006.............................. 260,625
100,000 Wells Fargo Capital I, 7.960%,
due 12/15/2026.............................. 99,677
------------
1,302,414
------------
DURABLE GOODS - WHOLESALE (2.37%)
400,000 Pioneer Standard Electronics, 8.500%,
due 08/01/2006 ............................. 408,000
------------
ELECTRIC, GAS, WATER, COGENERATION,
SANITARY SERVICES (6.41%)
300,000 Coastal Corporation, 10.000%, due 02/01/2001.. 333,375
400,000 System Energy Resources, 7.280%,
due 08/01/1999............................... 404,500
300,000 Tenneco, 10.200%, due 03/15/2008.............. 365,250
------------
1,103,125
------------
ELECTRICAL EQUIPMENT, EXCEPT COMPUTERS (0.57%)
100,000 USI American Holdings, Inc. (144A),
7.250%, due 12/01/2006....................... 98,250
------------
FOOD AND KINDRED PRODUCTS (4.65%)
500,000 Nabisco Inc., 7.550%, due 06/15/2015.......... 493,125
300,000 Pan-American Beverage Inc., 8.125%,
due 04/01/2003................................ 308,250
------------
801,375
------------
FOOD STORES (2.20%)
156,000 Safeway Inc., 9.650%, due 01/15/2004.......... 175,500
175,000 Safeway Inc., 9.875%, due 03/15/2007.......... 203,000
------------
378,500
------------
FOREIGN GOVERNMENTS (1.45%)
250,000 Republic of South Africa, 8.375%,
due 10/17/2006............................. 250,312
------------
HOLDING AND INVESTMENT COMPANIES (2.92%)
200,000 Guangdong International Trust &
Investments (144A),
8.750%, due 10/24/2016........................ 202,882
300,000 Duke Realty, 7.250%, due 09/22/2002........... 299,250
------------
502,132
------------
INSURANCE COMPANIES (7.64%)
$250,000 American Reinsurance, 10.875%,
due 09/15/2004............................... 272,500
100,000 Integon Corporation, 9.500%, due 10/15/2001... 107,375
400,000 Leucadia National Corporation, 7.875%,
due 10/15/2006.............................. 402,000
200,000 TIG Holdings, 8.125%, due 04/15/2005.......... 209,500
300,000 Torchmark Corporation, 8.250%, due 08/15/2009. 323,625
------------
1,315,000
------------
LUMBER AND WOOD PRODUCTS,
EXCEPT FURNITURE (1.73%)
300,000 West Fraser Mill (144A), 7.250%,
due 09/15/2002.............................. 298,875
------------
NON-DEPOSITORY CREDIT INSTITUTIONS (3.22%)
250,000 DSPL Finance (144A), 9.120%, due 12/30/2010... 257,000
300,000 Edison Mission Energy Funding (144A),
6.770%, due 09/15/2003....................... 297,750
------------
554,750
------------
OIL AND GAS EXTRACTION (4.58%)
400,000 BJ Services (144A), 7.000%, due 02/01/2006.... 386,836
150,000 Ras Laffan Gas (144A), 8.294%, due 03/15/2014. 151,024
250,000 Western Atlas Inc., 5.650%, due 07/13/1997.... 250,000
------------
787,860
------------
PAPER AND ALLIED PRODUCTS (1.24%)
200,000 Westvaco Corporation, 10.300%, due 01/15/2019. 213,500
------------
PETROLEUM - REFINING & RELATED INDUSTRIES (0.58%)
100,000 Lyondell Petrochemical Company, 8.250%,
due 03/15/1997............................... 100,383
------------
PRIMARY METAL INDUSTRIES (0.48%)
175,000 USX Corporation, 0.000%, due 08/09/2005....... 82,031
------------
REAL ESTATE OPERATORS, AGENTS, MANAGERS (1.46%)
250,000 Trinet Corporation Realty Trust, 7.300%,
due 05/15/2001................................ 251,875
------------
RUBBER AND MISCELLANEOUS PLASTIC PRODUCTS (2.36%)
400,000 Tupperware Finance BV, 7.250%, due 10/01/2006. 406,000
------------
SECURITY AND COMMODITY BROKERS (3.15%)
280,000 Lehman Brothers Holdings, Inc. Ser E MTN,
6.650%, due 11/08/2000........................ 277,513
250,000 Lehman Brothers Holdings, Inc., 8.875%,
due 02/15/2000.............................. 264,688
------------
542,201
------------
NON-CLASSIFIED (1.78%)
300,000 Soc Quimica Y Minera De (144A), 7.700%,
due 09/15/2006.............................. 306,267
------------
TOTAL CORPORATE BONDS (COST $10,787,807).... 10,869,392
------------
(Continued)
18
<PAGE>
- --------------------------------------------------------------------------------
PRINCIPAL
AMOUNT SECURITY VALUE
- --------------------------------------------------------------------------------
MUNICIPAL BONDS
(5.37% of total investments) (a)
PUBLIC FINANCE, TAXATION (5.37%)
$210,000 Lake County Florida Resource Recovery Industrial
Development Revenue, 7.125%,
due 10/01/1999.............................. $209,213
300,000 Mississippi Hospital Equipment &
Facilities Authority Revenue,
9.100%, due 04/01/2006...................... 314,250
400,000 New York State Dorm Authority Revenues,
6.550%, due 04/01/2000...................... 400,500
------------
TOTAL MUNICIPAL BONDS (COST $922,630)......... 923,963
------------
COLLATERALIZED MORTGAGE
OBLIGATIONS
(5.24% of total investments)
193,466 FHLMC Structured Pass Through Securities T-4 A1,
7.625%, due 08/25/2022........................ 196,187
246,396 JP Morgan Commercial Mortgage Finance
Corporation 96 C2 A, 6.470%, due 11/25/2027. 240,236
474,703 Structured Asset Securities Corporation
96 CFL 1 A1B, 5.751%, due 02/25/2028........ 465,818
------------
TOTAL COLLATERALIZED MORTGAGE
OBLIGATIONS (COST $919,291)................... 902,241
------------
ASSET BACKED SECURITIES
(10.64% of total investments)
250,000 Contimortgage Home Equity Loan Trust 1996-3 A5,
7.520%, due 07/15/2011....................... 255,429
200,000 Green Tree Financial Corporation 1994-4 A5,
8.300%, due 07/15/2019........................ 212,125
204,831 Green Tree Recreational Equipment & Consumer
Trust 96 A A1, 5.550%, due 02/15/2018......... 201,912
500,000 Lehman FHA Title 1 Loan Trust 96-2 A2, 6.780%,
due 03/25/2008................................ 501,406
200,000 National Car Rental Financing Limited
Partnership 1996-1 A2, 6.800%, due 04/20/2000. 201,000
228,850 Newcourt Receivables Asset Trust 1996-2 A,
6.870%, due 06/20/2004......................... 229,825
229,121 New York City Tax Lien 1996-1 B, 6.910%,
due 05/25/2005................................. 230,410
------------
TOTAL ASSET BACKED SECURITIES
(COST $1,811,520)........................... 1,832,107
------------
U.S. GOVERNMENT AND
AGENCY OBLIGATIONS
(10.57% OF TOTAL INVESTMENTS)
$442,554 Federal Home Loan Mortgage Corp., #E20187,
7.000%, due 08/01/2010........................ $442,692
42,417 Federal National Mortgage Assn., #062289,
6.993%, due 03/01/2028........................ 42,921
251,384 Federal National Mortgage Assn., #183567,
7.500%, due 11/01/2022........................ 251,384
225,365 Federal National Mortgage Assn., #286122,
7.000%, due 06/01/2024........................ 220,576
455,181 Federal National Mortgage Assn., #325435,
7.000%, due 09/01/2010........................ 454,896
197,582 Federal National Mortgage Assn., #349410,
7.000%, due 08/01/2026........................ 193,384
3,173 Government National Mortgage Assn., #051699,
15.000%, due 07/15/2011....................... 3,780
2,955 Government National Mortgage Assn., #056522,
14.000%, due 08/15/2012....................... 3,473
100,121 Government National Mortgage Assn., #180604,
9.000%, due 11/15/2016........................ 105,502
100,000 U. S . Treasury Note, 6.500%, due 10/15/2006.. 100,562
------------
TOTAL U.S. GOVERNMENT AND
AGENCY OBLIGATIONS (COST $1,819,096)........ 1,819,170
------------
COMMERCIAL PAPER
(5.05% OF TOTAL INVESTMENTS) (A)
ELECTRICAL EQUIPMENT, EXCEPT COMPUTERS (5.05%)
870,000 Duracell Inc., 6.750%, due 01/02/1997......... 869,837
------------
TOTAL COMMERCIAL PAPER (COST $869,837)........ 869,837
------------
TOTAL INVESTMENTS IN SECURITIES
(COST $17,130,181) (b)...................... $17,216,710
------------
- ------------------------------------
(a) Using Standard Industrial Codes prepared by the Technical Committee on
Industry Classifications.
(b) Cost also represents cost for federal income tax purposes.
The accompanying notes are an integral part of these financial statements.
19
<PAGE>
CONSECO SERIES TRUST
GOVERNMENT SECURITIES PORTFOLIO
STATEMENT OF INVESTMENTS IN SECURITIES
December 31, 1996
- --------------------------------------------------------------------------------
PRINCIPAL
AMOUNT SECURITY VALUE
- --------------------------------------------------------------------------------
U.S. GOVERNMENT AND
AGENCY OBLIGATIONS
(91.17% OF TOTAL INVESTMENTS)
$250,000 Federal Home Loan Bank, 7.170%,
due 03/29/2000................................ $257,063
191,970 Federal Home Loan Mortgage Corp., D66012,
7.000%, due 11/01/2025........................ 188,431
239,951 Federal Home Loan Mortgage Corp., E00441,
7.500%, due 07/01/2011........................ 243,625
150,000 Federal Home Loan Mortgage Corp., Multi
Family Pool, 6.775%, due 11/15/2003........... 150,938
168,342 Federal National Mortgage Assn., # 174166,
8.000%, due 06/01/2002........................ 171,551
245,423 Federal National Mortgage Assn., # 250485,
6.500%, due 02/01/2026........................ 234,302
146,526 Federal National Mortgage Assn., # 303780,
7.000%, due 03/01/2026........................ 143,412
1,540 Government National Mortgage Assn., # 044522,
13.000%, due 03/15/2011....................... 1,792
5,389 Government National Mortgage Assn., # 068651,
12.000%, due 08/15/2013....................... 6,164
6,143 Government National Mortgage Assn., # 105200,
13.000%, due 10/15/2013....................... 7,149
7,130 Government National Mortgage Assn., # 119896,
13.000%, due 11/15/2014....................... 8,297
466,246 Government National Mortgage Assn., # 408675,
7.500%, due 01/15/2026........................ 466,683
246,838 Government National Mortgage Assn., # 417575,
8.000%, due 07/15/2026........................ 252,006
275,000 U.S. Treasury Bond, 8.125%, due 05/15/2021.... 319,503
475,000 U.S. Treasury Note, 5.875%, due 04/30/1998.... 475,941
125,000 U.S. Treasury Note, 7.750%, due 11/30/1999.... 130,651
50,000 U.S. Treasury Note, 6.750%, due 04/30/2000.... 50,974
50,000 U.S. Treasury Note, 5.625%, due 11/30/2000.... 49,131
50,000 U.S. Treasury Note, 5.500%, due 12/31/2000.... 48,880
200,000 U.S. Treasury Note, 6.625%, due 07/31/2001.... 203,250
150,000 U.S. Treasury Bond, 6.500%, due 10/15/2006.... 150,843
------------
TOTAL U.S. GOVERNMENT AND
AGENCY OBLIGATIONS (COST $3,571,030)........ 3,560,586
------------
ASSET BACKED SECURITIES
( 3.71% of total investments)
$150,000 Nationsbank Credit Card Master Trust,
Series 1993-2, Class A, 6.000%, due 12/15/2005 $ 145,098
------------
TOTAL ASSET BACKED SECURITIES (COST $144,533). 145,098
------------
COMMERCIAL PAPER
( 5.12% of total investments) (a)
ELECTRICAL EQUIPMENT, EXCEPT COMPUTERS (5.12%)
200,000 Duracell Inc., 6.750%, due 01/02/1997......... 199,963
------------
TOTAL COMMERCIAL PAPER(COST $199,963)......... 199,963
------------
TOTAL INVESTMENTS IN SECURITIES
(COST $3,915,526) (b)....................... $3,905,647
============
- ----------------------------------
(a) Using Standard Industrial 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.
20
<PAGE>
CONSECO SERIES TRUST
MONEY MARKET PORTFOLIO
STATEMENT OF INVESTMENTS IN SECURITIES
December 31, 1996
- --------------------------------------------------------------------------------
PRINCIPAL
AMOUNT SECURITY VALUE (b)
- --------------------------------------------------------------------------------
CORPORATE BONDS
(3.80% OF TOTAL INVESTMENTS) (A)
OIL AND GAS EXTRACTION (3.80%)
$255,000 Western Atlas, Inc. (Put), 5.650%,
due 07/13/1997................................ $254,201
---------
TOTAL CORPORATE BONDS......................... 254,201
---------
COMMERCIAL PAPER
(96.20% of total investments) (a)
COMMUNICATIONS BY PHONE,
TELEVISION, RADIO, CABLE (4.76%)
320,000 Lucent Technologies, Inc., 5.290%,
ue 01/28/1997................................ 318,730
---------
DEPOSITORY INSTITUTIONS (4.72%)
316,000 Bank Of New York, Inc., 5.320%,
due 01/09/1997................................. 315,627
---------
ELECTRIC, GAS, WATER, COGENERATION,
SANITARY SERVICES (19.40%)
322,000 Browning Ferris Industries, Inc., 5.350%,
due 01/15/1997 ............................... 321,330
320,000 Michigan Consolidated Gas Company, 5.410%, due
01/02/1997.................................... 319,952
340,000 Northern Indiana Public Service Company, Inc.,
5.350%, due 03/13/1997........................ 336,413
320,000 Northern States Power Company Minnesota, Inc.,
5.300%, due 01/07/1997........................ 319,717
---------
1,297,412
---------
ELECTRICAL EQUIPMENT, EXCEPT COMPUTERS (5.16%)
345,000 Duracell Inc., 6.000%, due 01/02/1997......... 344,943
---------
FOOD AND KINDRED PRODUCTS (9.78%)
340,000 Kellogg Corporation, 5.330%, due 01/13/1997... 339,396
316,000 Philip Morris Companies, Inc., 5.300%,
due 01/24/1997................................ 314,930
---------
654,326
MEASURING INSTRUMENTS,
PHOTO GOODS, WATCHES (9.32%)
$315,000 Xerox Corporation, 5.300%, due 01/14/1997...$ 314,397
310,000 Raytheon Company, Inc., 5.340%, due 01/16/1997 309,310
---------
623,707
---------
NON-DEPOSITORY CREDIT INSTITUTIONS (14.21%)
320,000 Associates Corp. of North America, Inc.,
5.340%, due 01/31/1997........................ 318,576
315,000 Ciesco L.P., 5.300%, due 01/14/1997........... 314,398
319,000 Household Finance Company, Inc., 5.310%,
due 01/31/1997 .............................. 317,588
---------
950,562
---------
PAPER AND ALLIED PRODUCTS (4.76%)
320,000 Weyerhauser Company, 5.300%, due 01/29/1997... 318,681
---------
RUBBER AND MISCELLANEOUS
PLASTICS PRODUCTS (4.78%)
320,000 Rubbermaid, Inc., 5.420%, due 01/03/1997...... 319,904
---------
SECURITY & COMMODITY BROKERS (19.31%)
320,000 CS First Boston, Inc., 5.340%, due 01/10/1997. 319,573
320,000 Goldman Sachs Group L.P., 5.350%,
due 02/04/1997................................ 318,383
318,000 Merrill Lynch Company, Inc., 5.330%,
due 01/06/1997................................ 317,764
340,000 JP Morgan & Co., Inc., 5.380%, due 03/17/1997. 336,189
---------
1,291,909
---------
TOTAL COMMERCIAL PAPER...................... 6,435,801
---------
TOTAL INVESTMENTS IN SECURITIES............ $6,690,002
---------
- ----------------------------------
(a) Using Standard Industrial 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.
21
<PAGE>
CONSECO SERIES TRUST
NOTES TO FINANCIAL STATEMENTS
December 31, 1996
- --------------------------------------------------------------------------------
(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.
On July 25, 1994, Great American Reserve Variable Annuity Account E ("Account
E") commenced operations and began investing in the shares of the Trust's
portfolios.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
SECURITY VALUATION, TRANSACTIONS, AND RELATED INVESTMENT INCOME
The investments in each portfolio are valued at the end of each New York
Stock Exchange business day, with the exception of regional business holidays.
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 the BJ Services, DSPL Finance, Edison
Mission Energy Funding, First Chicago Corporation, Guangdong International Trust
& Investments, Ras Laffan Gas, Soc Quimica Y Minera De, USI American Holdings,
Inc. and West Fraser Mill bonds held in the Corporate Bond Portfolio and the USI
American Holdings, Inc., Uniforet, Inc., and Unisys Corporation bonds and the
Time Warner Inc. preferred stock held in the Asset Allocation Portfolio, 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 to 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 mid-day 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 the sum of net investment income
and net realized short-term capital gains or losses 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 long-term capital gains on an annual basis. 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 is equivalent, on a per share basis, to
the amount of distributable investment income on the date the transaction is
credited or charged to undistributed income. As a result, undistributed
investment income per share is not materially affected by sales or redemptions
of the portfolio shares.
(3) TRANSACTIONS WITH AFFILIATES
As investment adviser to 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 for the years ended December 31,
1996 and 1995, were $1,008,557 and $695,347, respectively. 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 and
Government Securities Portfolios, and 0.45 percent for the Money Market
Portfolio.
(4) INVESTMENT TRANSACTIONS
The aggregate cost of purchases of investments (excluding U.S. government
securities and short-term investments) for the years ended December 31, 1996 and
1995 were $310,865,829 and $214,317,334, respectively. The aggregate proceeds
from sales of investments (excluding U.S. government securities and short-term
investments) for the years ended December 31, 1996 and 1995 were $303,932,165
and $204,792,532, respectively.
The aggregate cost of purchases of U.S. government securities (excluding
short-term investments) for the years ended December 31, 1996 and 1995 were
$21,225,121 and $15,926,727, respectively. The aggregate proceeds from sales of
U.S. government securities (excluding short-term investments) for the years
ended December 31, 1996 and 1995 were $16,767,507 and $13,354,470, respectively.
Gross unrealized appreciation and depreciation of investments at December 31,
1996 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............. $ 2,175,754 $ 36,195,163 $ 182,899 $ 29,085 $ --
Gross unrealized depreciation ............ (301,841) (3,666,703) (96,370) (38,964) --
- -----------------------------------------------------------------------------------------------------------------
Net unrealized appreciation (depreciation) $ 1,873,913 $ 32,528,460 $ 86,529 $ (9,879) $ --
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
22
<PAGE>
CONSECO SERIES TRUST
NOTES TO FINANCIAL STATEMENTS --CONTINUED
December 31, 1996
- --------------------------------------------------------------------------------
(5) NET ASSETS
Total net assets consisted of the following at December 31, 1996:
<TABLE>
<CAPTION>
ASSET COMMON CORPORATE
ALLOCATION STOCK BOND
PORTFOLIO PORTFOLIO PORTFOLIO
- -------------------------------------------------------------------------------------------------------------
Proceeds from the sales of shares since organization,
<S> <C> <C> <C>
less cost of shares redeemed and net equalization ............ $14,858,293 $138,804,030 $ 17,528,336
Undistributed net realized gains (losses) on sales of investments -- -- (151,525)
Net unrealized appreciation (depreciation) of investments ....... 1,873,913 32,528,460 86,529
Total net assets ........................................... $16,732,206 $171,332,490 $ 17,463,340
=============================================================================================================
</TABLE>
<TABLE>
<CAPTION>
GOVERNMENT MONEY
SECURITIES MARKET
PORTFOLIO PORTFOLIO
- ---------------------------------------------------------------------------------------------
Proceeds from the sales of shares since organization,
<S> <C> <C>
less cost of shares redeemed and net equalization ............ $ 4,033,570 $6,984,663
Undistributed net realized gains (losses) on sales of investments -- --
Net unrealized appreciation (depreciation) of investments ....... (9,879) --
----------- ----------
Total net assets ........................................... $ 4,023,691 $6,984,663
=============================================================================================
</TABLE>
(6) FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
ASSET ALLOCATION PORTFOLIO
- --------------------------------------------------------------------------------------------------------------------
YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31,
1996 1995 1994
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net asset value per share, beginning of year .............. $ 12.390 $ 11.040 $ 11.400
Income from investment operations (a):
Net investment income ................................ 0.419 0.508 0.463
Net realized gains (losses) and change in unrealized
appreciation (depreciation) on investments ......... 2.774 2.976 (0.526)
----------- ----------- -----------
Total income (loss) from investment operations ... 3.193 3.484 (0.063)
----------- ----------- -----------
Distributions (a):
Dividends from net investment income and net realized
short-term capital gains ........................... (2.075) (1.827) (0.266)
Distribution of net realized long-term capital gains . (0.038) (0.307) (0.031)
----------- ----------- -----------
Total distributions .............................. (2.113) (2.134) (0.297)
----------- ----------- -----------
Net asset value per share, end of year .................... $ 13.470 $ 12.390 $ 11.040
=========== =========== ===========
Total return (b) (d) ...................................... 28.30% 31.49% (0.55%)
Ratios/supplemental data
Net assets, end of year (c) ............................ $16,732,206 $ 9,583,375 $ 6,172,390
Ratio of expenses to average net assets (d) ............ 0.75% 0.75% 0.75%
Ratio of net investment income to average net assets (d) 3.15% 4.11% 4.20%
Portfolio turnover rate ................................ 208.13% 194.16% 223.92%
Average commission paid (f) ............................ $ 0.0600 N/A N/A
</TABLE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------
YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31,
1993 1992 (e)
- ---------------------------------------------------------------------------------------------------
<S> <C> <C>
Net asset value per share, beginning of year .............. $ 11.630 $ 11.740
Income from investment operations (a):
Net investment income ................................ 0.410 0.633
Net realized gains (losses) and change in unrealized
appreciation (depreciation) on investments ......... 0.218 0.867
------------ -----------
Total income (loss) from investment operations ... 0.628 1.500
------------ -----------
Distributions (a):
Dividends from net investment income and net realized
short-term capital gains ........................... (0.570) (1.463)
Distribution of net realized long-term capital gains . (0.288) (0.147)
------------ -----------
Total distributions .............................. (0.858) (1.610)
------------ -----------
Net asset value per share, end of year .................... $ 11.400 $ 11.630
============ ===========
Total return (b) (d) ...................................... 10.38% 10.36%
Ratios/supplemental data
Net assets, end of year (c) ............................ $ 6,161,924 $ 4,308,251
Ratio of expenses to average net assets (d) ............ 0.75% 1.25%
Ratio of net investment income to average net assets (d) 3.55% 5.46%
Portfolio turnover rate ................................ 539.90% 690.17%
Average commission paid (f) ............................ N/A N/A
</TABLE>
- ----------------------------
(a) Per share amounts presented are based on an average of monthly shares
outstanding throughout the periods indicated.
(b) Total return represents performance of the Trust only and does not include
mortality and expense deductions in separate accounts.
(c) Accounts C and E became shareholders in the Trust effective May 1, 1993 and
July 25, 1994, respectively.
(d) These ratios have been favorably affected by a guarantee from the Adviser
that the ratio of expenses to average net assets would not exceed 0.75
percent for the Asset Allocation Portfolio, 0.70 percent for the Corporate
Bond and Government Securities Portfolios, 0.80 percent for the Common
Stock Portfolio and 0.45 percent for the Money Market Portfolio for the
years ended December 31, 1996, 1995, 1994 and 1993 and 1.25 percent for
each portfolio for the year ended December 31, 1992.
(e) The BNL High Yield and BNL Convertible Portfolios were merged into the
Asset Allocation Portfolio (formerly the BNL Multiple Strategies Portfolio)
effective March 11, 1992.
(f) 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.
23
<PAGE>
CONSECO SERIES TRUST
NOTES TO FINANCIAL STATEMENTS -- CONTINUED
December 31, 1996
- --------------------------------------------------------------------------------
(6) FINANCIAL HIGHLIGHTS (CONTINUED)
<TABLE>
<CAPTION>
COMMON STOCK PORTFOLIO
- ------------------------------------------------------------------------------------------------------------
YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31,
1996 1995 1994
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net asset value per share, beginning of year .................. $ 18.840 $ 16.540 $ 16.690
Income from investment operations (a):
Net investment income.................................... 0.013 0.340 0.240
Net realized gains (losses) and change in unrealized appreciation
(depreciation) on investments.......................... 8.169 5.675 0.072
- ------------------------------------------------------------------------------------------------------------
Total income from investment operations............... 8.182 6.015 0.312
- ------------------------------------------------------------------------------------------------------------
Distributions (a):
Dividends from net investment income and net realized
short-term capital gains................................ (4.209) (2.807) (0.327)
Distribution of net realized long-term capital gains...... (0.963) (0.908) (0.135)
- ------------------------------------------------------------------------------------------------------------
Total distributions................................... (5.172) (3.715) (0.462)
- ------------------------------------------------------------------------------------------------------------
NET ASSET VALUE PER SHARE, END OF YEAR ........................ $ 21.850 $ 18.840 $ 16.540
============================================================================================================
Total return (b) (d)........................................... 44.99% 36.30% 1.92%
Ratios/supplemental data
Net assets, end of year (c)................................. $171,332,490 $109,635,525 $74,759,728
Ratio of expenses to average net assets (d)................. 0.80% 0.80% 0.80%
Ratio of net investment income to average net assets (d).... 0.06% 1.80% 1.47%
Portfolio turnover rate..................................... 177.03% 172.55% 213.67%
Average commission paid (e) ................................ $ 0.0600 N/A N/A
</TABLE>
<TABLE>
<CAPTION>
COMMON STOCK PORTFOLIO
YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31,
1993 1992
- ---------------------------------------------------------------------------------------------
<S> <C> <C>
Net asset value per share, beginning of year .................. $ 16.880 $ 16.290
Income from investment operations (a):
Net investment income..................................... 0.232 0.292
Net realized gains (losses) and change in unrealized
appreciation (depreciation) on investments.............. 0.920 2.787
- ---------------------------------------------------------------------------------------------
Total income from investment operations............... 1.152 3.079
- ---------------------------------------------------------------------------------------------
Distributions (a):
Dividends from net investment income and net realized
short-term capital gains................................ (1.181) (1.101)
Distribution of net realized long-term capital gains...... (0.161) (1.388)
- ---------------------------------------------------------------------------------------------
Total distributions................................... (1.342) (2.489)
- ---------------------------------------------------------------------------------------------
NET ASSET VALUE PER SHARE, END OF YEAR ........................ $ 16.690 $ 16.880
=============================================================================================
Total return (b) (d)........................................... 8.35% 18.34%
Ratios/supplemental data
Net assets, end of year (c)................................. $66,799,824 $ 8,307,023
Ratio of expenses to average net assets (d)................. 0.80% 1.25%
Ratio of net investment income to average net assets (d).... 1.40% 1.73%
Portfolio turnover rate..................................... 205.81% 461.05%
Average commission paid (e) ................................ N/A N/A
</TABLE>
- ----------
(a) Per share amounts presented are based on an average of monthly shares
outstanding throughout the periods indicated.
(b) Total return represents performance of the Trust only and does not include
mortality and expense deductions in separate accounts.
(c) Accounts C and E became shareholders in the Trust effective May 1, 1993 and
July 25, 1994, respectively.
(d) These ratios have been favorably affected by a guarantee from the Adviser
that the ratio of expenses to average net assets would not exceed 0.75
percent for the Asset Allocation Portfolio, 0.70 percent for the Corporate
Bond and Government Securities Portfolios, 0.80 percent for the Common
Stock Portfolio and 0.45 percent for the Money Market Portfolio for the
years ended December 31, 1996, 1995, 1994 and 1993 and 1.25 percent for
each portfolio for the year ended December 31, 1992.
(e) 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.
24
<PAGE>
CONSECO SERIES TRUST
NOTES TO FINANCIAL STATEMENTS -- CONTINUED
December 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
(6) FINANCIAL HIGHLIGHTS (CONTINUED)
CORPORATE BOND PORTFOLIO (e)
- ------------------------------------------------------------------------------------------------------------------------------------
PERIOD FROM
YEAR ENDED YEAR ENDED YEAR ENDED MAY 1, 1993 TO
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1996 1995 1994 1993
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net asset value per share, beginning of period................. $ 10.150 $ 9.450 $ 9.980 $ 10.000
Income from investment operations (a):
Net investment income..................................... 0.662 0.680 0.649 0.417
Net realized gains (losses) and change in unrealized
appreciation (depreciation) on investments............. (0.179) 0.990 (0.912) 0.173
- ------------------------------------------------------------------------------------------------------------------------------------
Total income (loss) from investment operations........ 0.483 1.670 (0.263) 0.590
- ------------------------------------------------------------------------------------------------------------------------------------
Distributions (a):
Dividends from net investment income and net realized
short-term capital gains................................. (0.663) (0.970) (0.267) (0.610)
- ------------------------------------------------------------------------------------------------------------------------------------
Total distributions.................................... (0.663) (0.970) (0.267) (0.610)
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value per share, end of period....................... $ 9.970 $ 10.150 $ 9.450 $ 9.980
====================================================================================================================================
Total return (b) (d)............................................ 4.97% 18.25% (2.65%) 8.84%(f)
Ratios/supplemental data
Net assets, end of period (c)............................... $17,463,340 $16,046,368 $12,903,063 $13,577,440
Ratio of expenses to average net assets (d).................. 0.70% 0.70% 0.70% 0.70%(f)
Ratio of net investment income to average net assets (d)..... 6.65% 6.78% 6.78% 6.22%(f)
Portfolio turnover rate...................................... 276.35% 225.41% 198.48% 406.24%(f)
</TABLE>
- ----------
(a) Per share amounts presented are based on an average of monthly shares
outstanding throughout the periods indicated.
(b) Total return represents performance of the Trust only and does not include
mortality and expense deductions in separate accounts.
(c) Accounts C and E became shareholders in the Trust effective May 1, 1993 and
July 25, 1994, respectively.
(d) These ratios have been favorably affected by a guarantee from the Adviser
that the ratio of expenses to average net assets would not exceed 0.75
percent for the Asset Allocation Portfolio, 0.70 percent for the Corporate
Bond and Government Securities Portfolios, 0.80 percent for the Common
Stock Portfolio and 0.45 percent for the Money Market Portfolio for the
years ended December 31, 1996, 1995, 1994 and 1993 and 1.25 percent for
each portfolio for the year ended December 31, 1992.
(e) The Corporate Bond Portfolio became an available investment option
effective May 1, 1993, with an initial offering price of $10.00. (f)
Annualized.
25
<PAGE>
CONSECO SERIES TRUST
NOTES TO FINANCIAL STATEMENTS -- CONTINUED
December 31, 1996
- --------------------------------------------------------------------------------
(6) FINANCIAL HIGHLIGHTS (CONTINUED)
<TABLE>
<CAPTION>
GOVERNMENT SECURITIES PORTFOLIO
- ------------------------------------------------------------------------------------------------------------------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1996 1995 1994 1993 1992 (E)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value per share, beginning of year ..............$ 12.380 $ 11.090 $ 11.450 $ 11.610 $ 12.000
Income from investment operations (a):
Net investment income................................. 0.722 0.754 0.720 0.738 0.679
Net realized gains (losses) and change in unrealized
appreciation (depreciation) on investments.......... (0.409) 1.119 (1.031) 0.281 0.219
- ------------------------------------------------------------------------------------------------------------------------------------
Total income (loss) from investment operations.... 0.313 1.873 (0.311) 1.019 0.898
- ------------------------------------------------------------------------------------------------------------------------------------
Distributions (a):
- ------------------------------------------------------------------------------------------------------------------------------------
Dividends from net investment income and net realized
short-term capital gains............................ (0.707) (0.583) (0.049) (1.179) (1.094)
Distribution of net realized long-term capital gains.. (0.046) -- -- -- (0.194)
- ------------------------------------------------------------------------------------------------------------------------------------
Total distributions............................... (0.753) (0.583) (0.049) (1.179) (1.288)
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value per share, end of year ....................$ 11.940 $ 12.380 $ 11.090 $ 11.450 $ 11.610
- ------------------------------------------------------------------------------------------------------------------------------------
Total return (b) (d)....................................... 2.75% 17.35% (2.79%) 8.91% 6.62%
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios/supplemental data
Net assets, end of year (c).............................$ 4,023,691 $ 4,612,607 $ 4,712,785 $ 7,579,366 $ 10,220,193
Ratio of expenses to average net assets (d)............. 0.70% 0.70% 0.70% 0.70% 1.25%
Ratio of net investment income to average net assets (d) 6.02% 6.27% 6.45% 6.30% 5.77%
Portfolio turnover rate................................. 157.62% 284.31% 421.05% 397.42% 742.09%
</TABLE>
- ----------
(a) Per share amounts presented are based on an average of monthly shares
outstanding throughout the periods indicated.
(b) Total return represents performance of the Trust only and does not include
mortality and expense deductions in separate accounts.
(c) Accounts C and E became shareholders in the Trust effective May 1, 1993 and
July 25, 1994, respectively.
(d) These ratios have been favorably affected by a guarantee from the Adviser
that the ratio of expenses to average net assets would not exceed 0.75
percent for the Asset Allocation Portfolio, 0.70 percent for the Corporate
Bond and Government Securities Portfolios, 0.80 percent for the Common
Stock Portfolio and 0.45 percent for the Money Market Portfolio for the
years ended December 31, 1996, 1995, 1994 and 1993 and 1.25 percent for
each portfolio for the year ended December 31, 1992.
(e) The BNL Mortgage-Backed Securities Portfolio was merged into the Government
Securities Portfolio (formerly the BNL Government Securities Portfolio)
effective March 11, 1992.
26
<PAGE>
CONSECO SERIES TRUST
NOTES TO FINANCIAL STATEMENTS -- CONTINUED
December 31, 1996
- --------------------------------------------------------------------------------
(6) FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
MONEY MARKET PORTFOLIO
- -----------------------------------------------------------------------------------------------------------------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1996 1995 1994 1993 1992
- -----------------------------------------------------------------------------------------------------------------------------------
<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 (a):
Net investment income............................... 0.050 0.055 0.038 0.029 0.026
Net realized gains (losses) and change in unrealized
appreciation (depreciation) on investments........ -- -- -- -- 0.001
- -----------------------------------------------------------------------------------------------------------------------------------
Total income from investment operations......... 0.050 0.055 0.038 0.029 0.027
- -----------------------------------------------------------------------------------------------------------------------------------
Distributions (a):
Dividends from net investment income and net realize
short-term capital gains.......................... (0.050) (0.055) (0.038) (0.029) (0.027)
- -----------------------------------------------------------------------------------------------------------------------------------
Total distributions............................. (0.050) (0.055) (0.038) (0.029) (0.027)
- -----------------------------------------------------------------------------------------------------------------------------------
Net asset value per share, end of year .................. $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
====================================================================================================================================
Total return (b) (d)..................................... 5.13% 5.46% 3.78% 2.86% 2.66%
Ratios/supplemental data
Net assets, end of year (c)........................... $ 6,984,663 $ 5,395,877 $ 5,105,367 $ 5,229,641 $ 3,111,264
Ratio of expenses to average net assets (d)........... 0.45% 0.45% 0.45% 0.45% 1.25%
Ratio of net investment income to average net assets (d) 5.03% 5.46% 3.78% 2.86% 2.66%
Portfolio turnover rate............................... N/A N/A N/A N/A N/A
</TABLE>
- ----------
(a) Per share amounts presented are based on an average of monthly shares
outstanding throughout the periods indicated.
(b) Total return represents performance of the Trust only and does not include
mortality and expense deductions in separate accounts.
(c) Accounts C and E became shareholders in the Trust effective May 1, 1993 and
July 25, 1994, respectively.
(d) These ratios have been favorably affected by a guarantee from the Adviser
that the ratio of expenses to average net assets would not exceed 0.75
percent for the Asset Allocation Portfolio, 0.70 percent for the Corporate
Bond and Government Securities Portfolios, 0.80 percent for the Common
Stock Portfolio and 0.45 percent for the Money Market Portfolio for the
years ended December 31, 1996, 1995, 1994 and 1993 and 1.25 percent for
each portfolio for the year ended December 31, 1992.
27
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
================================================================================
TO THE BOARD OF TRUSTEES AND SHAREHOLDERS
CONSECO SERIES TRUST
We have audited the accompanying statement of assets and liabilities,
including the statement of investments in securities, of Conseco Series Trust
(comprising respectively, the Asset Allocation, Common Stock, Corporate Bond,
Government Securities, and Money Market Portfolios), as of December 31, 1996,
and the related statement of operations for the year then ended, the statements
of changes in net assets for each of the two years in the period then ended, and
the financial highlights for each of the five years in the period then ended for
each of the Portfolios named above except for the Corporate Bond Portfolio for
which the period is May 1, 1993 (inception) to December 31, 1996. These
financial statements and financial highlights are the responsibility of the
Trust's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of cash and securities owned as
of December 31, 1996, by correspondence with the custodian and brokers or other
auditing procedures where confirmations from brokers were not received. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of each
of the respective portfolios constituting the Conseco Series Trust as of
December 31, 1996, the results of their operations for the year ended, the
changes in their net assets for each of the two years in the period then ended,
and the financial highlights for each of the five years in the period then ended
for each of the Portfolios named above except for the Corporate Bond Portfolio
for which the period is May 1, 1993 (inception) to December 31, 1996, in
conformity with generally accepted accounting principles.
/s/ Coopers & Lybrand L.L.P
- ------------------------------
Indianapolis, Indiana
February 21, 1997
28
<PAGE>
================================================================================
GREAT AMERICAN RESERVE
VARIABLE ANNUITY ACCOUNT E
SPONSOR
Great American Reserve Insurance Company -
Carmel, Indiana.
DISTRIBUTOR
Conseco Equity Sales, Inc. - Carmel, Indiana.
INDEPENDENT PUBLIC ACCOUNTANTS
Coopers & Lybrand L.L.P. - 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
Coopers & Lybrand L.L.P. - Indianapolis, Indiana.
CUSTODIAN
Bankers Trust Company - New York, New York.
29
<PAGE>
Great American Reserve Insurance Company
11815 North Pennsylvania Street
Carmel, Indiana 46032
FIRST CLASS MAIL
U.S. POSTAGE PAID
CARMEL, IN
PERMIT 369
================================================================================
05-7993 (2/97)
================================================================================
GREAT AMERICAN RESERVE
INSURANCE COMPANY
A Conseco Company
Great American Reserve
Variable Annuity Account E
================================================================================
Conseco Series Trust
December 31, 1996
ANNUAL REPORT
TO CONTRACT OWNERS
This report is for the information of contract owners and
participants of the Great American Reserve Variable Annuity Account E
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.
================================================================================
