As filed with the Securities and Exchange Commission on May 1, 2000
Registration Nos. 811-3641/2-80455
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [ ]
Pre-Effective Amendment No. [ ]
Post-Effective Amendment No. 28 [X]
and/or
REGISTRATION STATEMENT UNDER
THE INVESTMENT COMPANY ACT OF 1940
Amendment No. 30 [X]
(Check appropriate box or boxes)
CONSECO SERIES TRUST
(Exact Name of Registrant as Specified in Charter)
11815 N. Pennsylvania Street, Carmel, Indiana 46032
(Address of Principal Executive Office) (Zip Code)
Registrant's Telephone Number, including Area Code (317) 817-6300
William P. Kovacs, Esq.
Conseco Series Trust
11815 N. Pennsylvania Street
Carmel, Indiana 46032
(Name and Address of Agent for Service)
With a copy to:
Donald Smith, Esq.
Kirkpatrick & Lockhart
1800 Massachusetts Avenue, N.W.
Washington, D.C. 20036-1800
Approximate date of proposed public Offering: As soon as practicable following
the effective date of this Registration Statement.
It is proposed that this filing will become effective (check appropriate space):
X immediately upon filing pursuant to Rule 485 (b)
______ on December 31, 1999 pursuant to Rule 485 (b) 60 days
______ after filing pursuant to Rule 485 (a)(1)
______ on [DATE] pursuant to Rule 485 (a)(1)
------
______ 75 days after filing pursuant to Rule 485 (a) (2)
______ on [DATE] pursuant to Rule 485 (a)(2)
------
<PAGE>
CONSECO SERIES TRUST
Conseco 20 Focus Portfolio
Equity Portfolio
Balanced Portfolio
High Yield Portfolio
Fixed Income Portfolio
Government Securities Portfolio
Money Market Portfolio
Contents of Registration Statement
This Registration Statement consists of the following papers and documents:
o Cover Sheet
Contents of Registration Statement:
o Part A- Prospectus
o Part B- Statement of Additional Information
o Part C- Other Information
Signature Pages
Exhibits
<PAGE>
PART A
<PAGE>
[GRAPHIC OMITTED]
[LOGO OMITTED]
CONSECO
STEP UP.(SM)
MAY 1, 2000
---------------------
Prospectus
---------------------
As with any mutual fund, the
Securities and Exchange Commission (SEC)
has not approved or disapproved of these securities
or determined whether this prospectus is accurate or complete.
Any representation to the contrary is a criminal offense.
CONSECO SERIES TRUST
<PAGE>
- ------------------------------------------------
Table Of Contents
- ------------------------------------------------
THE PORTFOLIOS
General Information About the Portfolios .............................. 3
Conseco 20 Focus Portfolio ............................................ 4
Equity Portfolio ...................................................... 6
Balanced Portfolio .................................................... 8
High Yield Portfolio .................................................. 10
Fixed Income Portfolio ................................................ 12
Government Securities Portfolio ....................................... 14
Money Market Portfolio ................................................ 16
PRIMARY RISK CONSIDERATIONS ................................................ 18
MANAGEMENT ................................................................. 21
YOUR ACCOUNT
Purchase and Redemption of Share ...................................... 23
Dividends and Distributions ........................................... 24
APPENDIX A: PRIOR PERFORMANCE OF SIMILAR FUNDS ............................. 25
FINANCIAL HIGHLIGHTS ....................................................... 27
2
<PAGE>
- -----------------------------------------------
The Adviser's Integrated Approach
To Money Management
- -----------------------------------------------
We believe that combining the knowledge and experience of both fixed income and
equity analysts leads to better security selection over time.
Whether selecting fixed income or equity securities, our analysts look for
companies with:
o Proven management teams
o Leading edge products
o Dominant market share positions
They then conduct a rigorous financial analysis of these companies, focusing on
such indicators as:
o Cost of capital
o Financial strength
o Spending plans
This analysis is used to select those securities deemed by the Adviser to be
most appropriate for each Portfolio's investment objective.
Each of the Portfolios may invest in restricted securities, such as private
placements, which are not registered with the Securities Exchange Commission.
Restricted securities are generally illiquid; however, the Adviser focuses on
those that are liquid and may not invest in any restricted security that would
cause more than 15 percent of the Portfolio's total assets to be invested in
illiquid securities. The Portfolios also may invest in securities that qualify
to be sold directly to institutional investors pursuant to Rule 144A under the
Securities Act of 1933.
Because of the Adviser's active management style, our Portfolios generally have
a higher portfolio turnover rate than other portfolios and, therefore, may have
higher taxable distributions and increased trading costs which may impact
performance.
There is no assurance that the Portfolios will achieve their investment
objectives. The Portfolios have the ability to change their investment
objectives without shareholder approval, although they do not currently intend
to do so. In addition, the value of your investment in any Portfolio will
fluctuate, which means that you may lose money.
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
PLEASE NOTE: DEFINITIONS FOR BOLD-FACED WORDS WITHIN THE TEXT CAN BE FOUND
DIRECTLY FOLLOWING EACH PORTFOLIO'S PRIMARY RISK CONSIDERATIONS.
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
> A WORD ABOUT THE ADVISER
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Conseco Capital Management, Inc. (CCM), or the "Adviser," provides investment
advice and management to each Portfolio. CCM manages more than $42.2 billion in
assets for an array of foundations, endowments, corporations, government and
union clients (as of 12/31/99).
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
3
<PAGE>
- -------------------------------------------------------
CONSECO 20 FOCUS FUND
- -------------------------------------------------------
THE PORTFOLIOS
> INVESTMENT OBJECTIVE
The Portfolio seeks capital appreciation.
> Adviser's Strategy
Normally, the Portfolio will invest at least 65% of its assets in common stocks
of companies that the Adviser believes have above-average growth prospects.
The Portfolio is NON-DIVERSIFIED and will normally concentrate its investments
in a core position of approximately 20 to 30 common stocks. While the Portfolio
invests in securities issued by large-cap companies, a substantial portion of
these securities may be issued by SMALL- AND MID-CAP COMPANIES.
The Adviser looks for companies that demonstrate strong growth potential,
preferring:
o Companies whose earnings appear likely to continue in an upward direction
o Companies that demonstrate the ability to consistently grow their earnings
at a faster rate than their peer group
o Companies whose stocks appear to the Adviser to be undervalued in the
marketplace
In selecting equity securities, the Adviser considers the following factors:
o High return on invested capital
o Sound financial policies and a strong balance sheet
o Competitive advantages (including innovative products and services)
o Effective research, product development and marketing o Stable, capable
management
The Fund may also invest in any or all of the following:
o PREFERRED STOCK
o CONVERTIBLE SECURITIES
o WARRANTS
o Fixed Income Securities (when the Adviser believes they are more attractive
than stocks on a long-term basis)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
For defensive purposes, the Portfolio may temporarily depart from its
investment objective and invest all or part of the Portfolio's assets in money
market instruments. This could help the Fund avoid losses but may mean lost
opportunities.
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
4
<PAGE>
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
NON-DIVERSIFIED
A Portfolio is considered non-diversified if it is not limited by the percentage
of assets it may invest in any one issuer. The success or failure of one issuer
will cause the Portfolio to fluctuate more than it would in a diversified fund.
SMALL- AND MID-CAP COMPANIES
Generally refers to companies in the earlier period of their growth
expectations, from start-ups to better established firms. While these companies
have potential for attractive long-term returns, their securities may involve
greater risks, and more volatility, than investments in larger companies with a
stronger competitive advantage. The Adviser's extensive research efforts can
play a greater role in selecting securities form this sector then from larger
companies.
PREFERRED STOCK
Shares of a company that ordinarily do not have voting rights but do have a
stated dividend payment, as opposed to common stocks which ordinarily do have
voting rights but do not have a stated dividend payment.
CONVERTIBLE SECURITIES
Bonds, debentures, notes or preferred stock that are convertible into common
stock. Convertible securities have some unique return characteristics relative
to market fluctuations:
o When equity markets go up, they tend to rise in price
o When equity markets decline, they tend to decline relatively less in price
than stocks Convertible securities have both an equity and a fixed income
component. Therefore, while the equity component is subject to fluctuations
in value due to activities of the issuing companies, and general market and
economic conditions
o The fixed income component will be impacted by shifting interest rates and
changes in credit quality of the issuers.
WARRANTS
Contracts that allow the bearer to purchase shares for a specified price at a
future date.
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
> HOW HAS THE PORTFOLIO PERFORMED?
Because the Conseco 20 Focus Portfolio was new when this prospectus was
printed, it has no previous operating history.
- ---------------------------------
> Primary Risks
...........................
Concentration Risk
Market Risk
Small Company Risk
Liquidity and Valuation
Risk
Foreign Risk
See "Primary Risk
Considerations"
on page 18 for a
detailed discussion of
the Portfolio's risks.
5
<PAGE>
THE PORTFOLIOS
- -----------------------------------------------
EQUITY PORTFOLIO
- -----------------------------------------------
> INVESTMENT OBJECTIVE
The Portfolio seeks to provide a high total return consistent with preservation
of capital and a prudent level of risk.
> ADVISER'S STRATEGY
The Portfolio will invest primarily in selected equity securities, including
common stocks and other securities having the investment characteristics of
common stocks, such as CONVERTIBLE SECURITIES and WARRANTS.
Normally, the Portfolio will be widely diversified by industry and company, but
will focus on SMALL- AND MID-CAP COMPANIES.
The Adviser looks for securities that will provide the two elements of total
return:
o Price appreciation
o Income from dividends
In selecting equity securities, the Adviser considers the following factors:
o Growth trends of the stock's issuer and the industry it represents
o Significant purchases and sales of the stock by corporate insiders
o Recent changes in earnings per share and their deviations from analysts'
expectations
o Relative price-earnings ratios, as compared to industry peers and earnings
growth potential
o The stock's historical price movement
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
For defensive purposes, the Portfolio may temporarily depart from its investment
objective and invest all or part of the Portfolio's assets in money market
instruments. This could help the Fund avoid losses but may mean lost
opportunities.
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
6
<PAGE>
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
CONVERTIBLE SECURITIES
See Page 5.
WARRANTS
See Page 5.
SMALL- AND MID-CAP COMPANIES
See Page 5.
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
- --------------------------
> Primary Risks
Market Risk
Liquidity and Valuation
Risk
Small Company Risk
See "Primary Risk
Considerations"
on page 18 for a
detailed discussion of
the Portfolio's risks.
- --------------------------
> HOW HAS THE PORTFOLIO PERFORMED?
The chart and table below give an indication of the Portfolio's risks and
performance. The chart shows you how the Portfolio's performance has varied from
year to year. The table compares the Portfolio's performance over time to that
of a broad measure of market performance. WHEN YOU CONSIDER THIS INFORMATION,
PLEASE REMEMBER THAT THE PORTFOLIO'S PAST PERFORMANCE IS NOT NECESSARILY AN
INDICATION OF HOW IT WILL PERFORM IN THE FUTURE.
Total return does not reflect expenses that apply to the related insurance
policies, and inclusion of these charges would reduce the total return for the
periods shown.
Year-By-Year Total Return Best Quarter: 4Q99 31.57%
(as of 12/31 each year) Worst Quarter: 3Q98 -21.17%
[Figures below represents bar chart in its printed form]
1999 1998 1997 1996 1995 1994 1993 1992 1991 1990
- ------ ------ ------ ------ ------ ----- ----- ------ ------ ------
50.28% 15.62% 18.68% 44.99% 36.30% 1.92% 8.35% 18.34% 25.77% -8.68%
Average Annual Total Return
(as of 12/31/99)
- --------------------------------------------------------------------------
One Five Ten
Year Year Year
- --------------------------------------------------------------------------
Equity Portfolio 50.28% 35.08% 21.18%
..........................................................................
S&P 500 Index 21.04% 28.55% 18.21%
..........................................................................
TOTAL RETURN DOES NOT REFLECT EXPENSES THAT APPLY TO THE RELATED INSURANCE
POLICIES, AND INCLUSION OF THESE CHARGES WOULD REDUCE THE TOTAL RETURN FOR THE
PERIODS SHOWN.
7
<PAGE>
THE PORTFOLIOS
- ------------------------------------------------------------
BALANCED PORTFOLIO
- ------------------------------------------------------------
> INVESTMENT OBJECTIVE
The Portfolio seeks a high total investment return, consistent with the
preservation of capital and prudent investment risk.
> ADVISER'S STRATEGY
Normally, the Portfolio invests approximately 50-65% of its assets in equity
securities, and the remainder in a combination of fixed income securities, or
cash equivalents.
The balance may change:
o A much higher percentage of assets may be invested in equity securities if
the Adviser considers conditions in the stock market to be substantially more
favorable than in the bond market.
o Conversely, if the Adviser considers conditions in the bond market to be
substantially more favorable than in the equity market, a much higher
percentage of assets may be invested in fixed income securities.
THE EQUITY PORTION OF THE PORTFOLIO
The Fund may invest in equity securities of domestic and foreign issuers. These
may include common and PREFERRED STOCKS, CONVERTIBLE SECURITIES AND WARRANTS.
The Adviser intends for the equity portion of the Portfolio to be widely
diversified by size of company and industry.
The Adviser looks for securities that will provide the two elements of total
return:
o Price appreciation
o Income from dividends
In selecting equity securities, the Adviser considers the following factors:
o Growth trends of the stock -- and its industry
o Significant purchases or sales of the stock by corporate insiders
o Recent changes in earnings per share and their deviations from analysts'
expectations
o Relative price-earnings ratios, as compared to industry peers and earnings
growth potential
o The stock's price movement
THE FIXED INCOME PORTION OF THE PORTFOLIO
Normally, the Adviser will maintain at least 25% of the value of the portfolio's
assets in a wide range of domestic and foreign debt securities, including
non-U.S. dollar denominated securities. The majority of foreign investments will
be in YANKEE BONDS.
The Adviser anticipates that bonds will be invested primarily in intermediate
and/or long-term domestic debt securities.
The Portfolio may also invest in BELOW INVESTMENT GRADE SECURITIES that are not
believed to involve undue risk to income or principal. In general, however,
these types of securities are issued by companies without long track records of
sales and earnings, or by companies with questionable credit strength. The
lowest rating categories in which the Portfolio will invest are CCC/Caa.
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
For defensive purposes, the Portfolio may temporarily depart from its investment
objective and invest without limitation in money market instruments. This could
help the Portfolio avoid losses but may mean lost opportunities.
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
8
<PAGE>
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
PREFERRED STOCK
See Page 5.
CONVERTIBLE SECURITIES
See Page 5.
WARRANTS
See Page 5.
YANKEE BONDS
Dollar-denominated bonds issued in the U.S. by foreign banks and corporations.
BELOW INVESTMENT GRADE SECURITIES
These securities offer higher return potential in exchange for assuming greater
risk. Normally, they are rated BB+ or lower by Standard & Poor's Corporation or
Ba1 or lower by Moody's Investors Services, Inc., or, if unrated deemed by the
Adviser to be of comparable credit.
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
- ------------------------------
> Primary Risks
....................
Market Risk
Credit Risk
Interest Rate Risk
Foreign Risk
Leverage Risk
See "Primary Risk
Considerations" on page 18
for a detailed discussion
of the Portfolio's risks.
Interest Rates and Bond
Maturities Bonds with
longer maturities will be
more effected by interest
rate changes than
intermediate-term bonds.
For example, if interest
rates go down, the price
of long-term bonds will
increase more rapidly than
the price of
intermediate-term bonds.
- ------------------------------
Year-By-Year Total Return Best Quarter: 4Q99 21.00%
(as of 12/31 each year) Worst Quarter: 3Q98 -12.06%
[Figures below represents bar chart in its printed form]
1999 1998 1997 1996 1995 1994 1993 1992 1991 1990
- ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
30.83% 10.37% 17.85% 28.30% 31.49% -0.55% 10.38% 10.36% 21.57% -5.59%
Average Annual Total Return
(as of 12/31/99)
- --------------------------------------------------------------------------------
One Five Ten
Year Year Year
- --------------------------------------------------------------------------------
Balanced Portfolio 30.83% 24.85% 16.85%
................................................................................
S&P 500 Index 21.04% 28.55% 18.21%
................................................................................
Lehman Brothers Government/
Corporate Index -2.15% 7.61% 7.65%
................................................................................
TOTAL RETURN DOES NOT REFLECT EXPENSES THAT APPLY TO THE RELATED INSURANCE
POLICIES, AND INCLUSION OF THESE CHARGES WOULD REDUCE THE TOTAL RETURN FOR THE
PERIODS SHOWN.
9
<PAGE>
THE PORTFOLIOS
- ----------------------------------------------------
HIGH YIELD PORTFOLIO
- ----------------------------------------------------
> INVESTMENT OBJECTIVE
The Portfolio seeks to provide high level of current income with a secondary
objective of capital appreciation.
> ADVISER'S STRATEGY
Normally, the Adviser invests at least 65% of the Portfolio's assets in BELOW
INVESTMENT GRADE SECURITIES (those rated BB+/Ba1 or lower by independent rating
agencies).
Adhering to a strict buy/sell discipline, the Adviser seeks to enhance total
return by:
o Purchasing securities it believes are undervalued
o Selling securities it believes are overvalued or fully priced
To select securities, the Adviser utilizes:
o Independent FUNDAMENTAL ANALYSIS to evaluate the issuer of a security
o An analysis of the specific structure of the security
In an effort to achieve its investment objective, the Portfolio may invest in
any or all of the following:
o Corporate debt securities and PREFERRED STOCK
o ZERO COUPON BONDS and other deferred interest securities
o Mortgage-backed securities
o Asset-backed securities
o Convertible securities
o RESTRICTED SECURITIES
o Taxable MUNICIPAL SECURITIES issued by states and their political
subdivisions
The Portfolio may also invest in:
o Cash or cash equivalents
o Money market instruments
o Securities issued or guaranteed by the U.S. government, its agencies, and
instrumentalities
In addition, the Portfolio may invest in the following:
o Common stocks and other equity securities
o Equity and debt securities of foreign issuers, including issuers in emerging
markets
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
For defensive purposes, the Portfolio may temporarily depart from its
investment objective and invest all or part of the Portfolio's assets in money
market instruments. This could help the Fund avoid losses but may mean lost
opportunities.
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
10
<PAGE>
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
BELOW INVESTMENT GRADE SECURITIES
See Page 9.
FUNDAMENTAL ANALYSIS
A research technique that looks at a company's financial condition,
creditworthiness, management, and place in its industry to determine the
intrinsic value of the company's securities.
PREFERRED STOCK
See Page 5.
ZERO COUPON BONDS
Bonds that are sold at a deep discount and do not pay periodic interest to
investors; instead, investors receive, at maturity, the difference between the
discounted price and the maturity value of the bond.
RESTRICTED SECURITIES
Securities that are not registered with the Securities and Exchange Commission,
some of which may qualify to be sold directly to institutional investors
pursuant to Rule 144A under the Securities Act of 1933. Restricted securities
are generally illiquid; however, the Adviser focuses on those that are liquid,
i.e., easily convertible into cash.
MUNICIPAL SECURITIES
Debt obligations issued by states, territories and possessions of the United
States and the District of Columbia and their political subdivisions, agencies
and instrumentalities, or multistate agencies or authorities, including:
o Debt obligations issued to obtain funds for various public purposes or,
o Industrial development bonds issued by or on behalf of public authorities
The interest on the municipal securities in which the Portfolio invests
typically is not exempt from federal income tax.
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
> HOW HAS THE PORTFOLIO PERFORMED?
Because the High Yield Portfolio was new when this prospectus was printed, it
has no previous operating history.
- ---------------------------
> Primary Risks:
. . . . . . . . . . . . . .
Credit Risk
Interest Rate Risk
Market Risk
Restricted Securities
Risk
Prepayment Risk
Foreign Risk
See "Primary Risk
Considerations"
on page 18 for a
detailed discussion
of the Portfolio's
risks.
- ---------------------------
11
<PAGE>
THE PORTFOLIOS
- -----------------------------------------
FIXED INCOME PORTFOLIO
- -----------------------------------------
> INVESTMENT OBJECTIVE
The Portfolio seeks the highest level of income consistent with preservation of
capital.
> ADVISER'S STRATEGY
The Portfolio invests primarily in INVESTMENT GRADE DEBT SECURITIES.
The Adviser actively manages the portfolio to generate income, reduce risk, and
preserve or enhance total return in light of current market conditions and
trends.
Adhering to a strict buy/sell discipline, the Adviser seeks to enhance total
return by:
o Purchasing securities it believes are undervalued
o Selling securities it believes are overvalued or fully priced
To determine value, the Adviser utilizes:
o Independent FUNDAMENTAL ANALYSIS in evaluating the issuer, and
o An analysis of the specific structure of the security
In an effort to achieve the Portfolio's investment objective, the Fund may
invest in debt securities issued by:
o Publicly or privately held companies in the U.S.
o Publicly or privately held companies overseas (primarily in YANKEE BONDS)
o The U.S. government, its agencies and instrumentalities
o States and their political subdivisions issuing taxable MUNICIPAL SECURITIES
o Foreign governments, their agencies and instrumentalities
The Portfolio may also invest in:
o Mortgage-backed debt securities
o Asset-backed debt securities
o Restricted securities
While the Portfolio may purchase debt securities of any MATURITY, it is
anticipated that the AVERAGE LIFE of the portfolio will be in the intermediate
range -- between seven and 15 years -- but may be shorter or longer depending on
market conditions.
12
<PAGE>
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
INVESTMENT GRADE DEBT SECURITIES
Considered especially creditworthy, these debt securities are (i) normally rated
AAA to BBB- by Standard and Poor's Corporation or Aaa to Baa3 by Moody's
Investors Services, Inc., or (ii) if unrated, are deemed by the Adviser to be of
comparable credit quality.
FUNDAMENTAL ANALYSIS
See Page 11.
YANKEE BONDS
See Page 9
MUNICIPAL SECURITIES
See Page 11.
MATURITY
When the principal, or face value of a bond, must be repaid.
AVERAGE LIFE
The average number of years that each principal dollar will be outstanding,
before it is repaid.
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
- -----------------------
> Primary Risks
......................
Credit Risk
Interest Rate Risk
Market Risk
Prepayment Risk
Restricted Securities
Risk
Municipal Market
Risk
Foreign Risk
See "Primary Risk
Considerations" on
page 18 for a detailed
discussion of the
Portfolio's risks.
- -----------------------
> HOW HAS THE PORTFOLIO PERFORMED?
The chart and table below give an indication of the Portfolio's risks and
performance. The chart shows you how the Portfolio's performance has varied from
year to year. The table compares the Portfolio's performance over time to that
of a broad measure of market performance. WHEN YOU CONSIDER THIS INFORMATION,
PLEASE REMEMBER THAT THE PORTFOLIO'S PAST PERFORMANCE IS NOT NECESSARILY AN
INDICATION OF HOW IT WILL PERFORM IN THE FUTURE.
Year-By-Year Total Return Best Quarter: 2Q95 6.63%
(as of 12/31 each year) Worst Quarter: 1Q94 -2.67%
[Figures below represents bar chart in its printed form]
1999 1998 1997 1996 1995 1994 1993
------ ----- ----- ----- ------ ------ ------
-0.44% 6.17% 9.97% 4.97% 18.25% -2.65% 8.84%*
Average Annual Total Return
(as of 12/31/99)
- --------------------------------------------------------------------------------
One Five Since
Year Year Inception*
- --------------------------------------------------------------------------------
Fixed Income Portfolio -0.44% 7.92% 6.23%
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Lehman Brothers Government
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Corporate Index (Since May 1, 1993) -2.15% 7.61% 3.97%
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
*SINCE INCEPTION, MAY 1, 1993 (ANNUALIZED)
TOTAL RETURN DOES NOT REFLECT EXPENSES THAT APPLY TO THE RELATED INSURANCE
POLICIES, AND INCLUSION OF THESE CHARGES WOULD REDUCE THE TOTAL RETURN FOR THE
PERIODS SHOWN.
13
<PAGE>
THE PORTFOLIOS
- -----------------------------------------------
GOVERNMENT SECURITIES PORTFOLIO
- -----------------------------------------------
> INVESTMENT OBJECTIVE
The Portfolio seeks safety of capital, liquidity and current income.
> ADVISER'S STRATEGY
The Portfolio will invest primarily in securities issued by the U.S. government
or an agency or instrumentality of the U.S. government. The Adviser uses
proprietary research to uncover undervalued securities. These securities may be
undervalued on the basis of structure, optionality or issuer.
The Portfolio may invest in any or all of the following:
o Treasury bills
o Certificates of indebtedness
o Notes
o Bonds
o Insured Bank deposits
o INVESTMENT GRADE CORPORATE DEBT SECURITIES
o Mortgage-related securities
o MUNICIPAL SECURITIES issued by states and their political subdivisions
Mortgage-related securities may include:
o Mortgage-backed securities of the Government National Mortgage Association
(GNMA)
o Mortgage-backed securities of the Federal Home Loan Mortgage Corporation
(FHLMC)
o Mortgage-backed securities of the Federal National Mortgage Association
(FNMA)
o PASS-THROUGH SECURITIES AND PARTICIPATION CERTIFICATES
o COLLATERALIZED MORTGAGE OBLIGATIONS
The Adviser may also purchase mortgage-related securities not issued by the U.S.
government or any agency or instrumentality of the U.S. government.
While the Portfolio may purchase debt securities of any maturity, it is
anticipated that the average life of the portfolio will be in the intermediate
range -- between five and 15 years -- but may be shorter or longer depending on
market conditions.
14
<PAGE>
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
INVESTMENT GRADE DEBT SECURITIES
See Page 13.
PASS-THROUGH SECURITIES AND PARTICIPATION CERTIFICATES
Both represent pools of mortgages that are assembled, with interests sold in
each pool. Payments of principal (including prepayments) and interest by
mortgagors are "passed through" to the holders of the interests in each
portfolio.
COLLATERALIZED MORTGAGE OBLIGATIONS
These are similar to conventional bonds because they have fixed maturities and
interest rates but are secured by groups of individual mortgages.
MUNICIPAL SECURITIES
See Page 11.
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
- -----------------------------
> Primary Risks
. . . . . . . . . . . . . . .
Market Risk
Interest Rate Risk
Restricted Securities
Risk
Credit Risk
Prepayment Risk
See "Primary Risk
Considerations" on
page 18 for a detailed
discussion of the
Portfolio's risks.
- -----------------------------
> How Has The Portfolio Performed?
The chart and table below give an indication of the Portfolio's risks and
performance. The chart shows you how the Portfolio's performance has varied from
year to year. The table compares the Portfolio's performance over time to that
of a broad measure of market performance. WHEN YOU CONSIDER THIS INFORMATION,
PLEASE REMEMBER THAT THE PORTFOLIO'S PAST PERFORMANCE IS NOT NECESSARILY AN
INDICATION OF HOW IT WILL PERFORM IN THE FUTURE.
Year-By-Year Total Return Best Quarter: 2Q95 5.95%
(as of 12/31 each year) Worst Quarter: 1Q94 -2.98%
[Figures below represents bar chart in its printed form]
1999 1998 1997 1996 1995 1994 1993 1992 1991 1990
- ------ ---- ---- ---- ----- ------ ---- ---- ----- ----
- -2.48% 7.07% 8.26% 2.75% 17.35% -2.79% 8.91% 6.62% 15.01% 7.96%
Average Annual Total Return
(as of 12/31/99)
- --------------------------------------------------------------------------------
One Five Since
Year Year Inception*
- --------------------------------------------------------------------------------
Government Securities Portfolio -2.48% 6.61% 7.30%
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Lehman Brothers Government Index -2.23% 7.44% 7.48%
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Lehman Brothers MBS Index 1.86% 7.98% 7.78%
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
TOTAL RETURN DOES NOT REFLECT EXPENSES THAT APPLY TO THE RELATED INSURANCE
POLICIES, AND INCLUSION OF THESE CHARGES WOULD REDUCE THE TOTAL RETURN FOR THE
PERIODS SHOWN.
15
<PAGE>
THE PORTFOLIOS
- ---------------------------------------
MONEY MARKET PORTFOLIO
- ---------------------------------------
> INVESTMENT OBJECTIVE
The Portfolio seeks current income consistent with stability of capital and
liquidity.
> ADVISER'S STRATEGY
The Portfolio may invest in the following types of money market securities:
o U.S. government securities
o BANK OBLIGATIONS
o COMMERCIAL PAPER OBLIGATIONS
o SHORT-TERM CORPORATE DEBT SECURITIES
o MUNICIPAL SECURITIES ISSUED BY STATES AND THEIR POLITICAL SUBDIVISIONS
An investment in this
Portfolio is neither
insured nor guaranteed
by the Federal Deposit
Insurance Corporation
or any other
government agency.
Although the Adviser
seeks to preserve the
value of your
investment at $1.00
per share, there can
be no assurance that
it will be able to do
so. It is possible to
lose money by
investing in the
Portfolio.
- --------------------------
16
<PAGE>
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
BANK OBLIGATIONS
Time deposits, certificates of deposit, bankers' acceptances and other bank
obligations of Banks that have total assets in excess of $1 billion and are
subject to regulation by the U.S. government, including:
o U.S. subsidiaries of foreign banks
o London branches of domestic banks
o Foreign branches of domestic commercial banks and foreign banks, as long as
the securities are U.S. dollar-denominated
COMMERCIAL PAPER OBLIGATIONS
A short-term debt obligation, including variable and floating rate securities of
U.S. corporations, maturing within 270 days and rated:
o A-1 or A-2 by Standard & Poor's Corporation or
o Prime-1 or Prime-2 by Moody's Investor Services, Inc. or,
o If not rated, of a comparable quality as determined by the Adviser under
supervision of the Board of Trustees
SHORT-TERM CORPORATE DEBT SECURITIES
Corporate debt securities (other than commercial paper) maturing in 13 months or
less.
MUNICIPAL SECURITIES
See page 11.
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
- --------------------------
> Primary Risks:
. . . . . . . . . . . . . .
Market Risk
Credit Risk
Interest Rate Risk
MUNICIPAL MARKET RISK
See "Primary Risk
Considerations" on
page 18 for a detailed
discussion of the
Portfolio's risks.
> HOW HAS THE PORTFOLIO PERFORMED?
The chart and table below give an indication of the Portfolio's risks and
performance. The chart shows you how the Portfolio's performance has varied from
year to year. The table compares the Portfolio's performance over time to that
of a broad measure of market performance. WHEN YOU CONSIDER THIS INFORMATION,
PLEASE REMEMBER THAT THE PORTFOLIO'S PAST PERFORMANCE IS NOT NECESSARILY AN
INDICATION OF HOW IT WILL PERFORM IN THE FUTURE.
Year-By-Year Total Return Best Quarter: 2Q89 1.17%
(as of 12/31 each year) Worst Quarter: 4Q92 0.61%
[Figures below represents bar chart in its printed form]
1999 1998 1997 1996 1995 1994 1993 1992 1991 1990
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
4.87% 5.21% 5.25% 5.13% 5.46% 3.78% 2.83% 2.66% 5.06% 6.97%
Average Annual Total Return
(as of 12/31/99)
- --------------------------------------------------------------------------------
One Five Ten
Year Year Year
- --------------------------------------------------------------------------------
Money Market Portfolio 4.87% 5.18% 4.71%
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
65% Commercial Paper Index/
35% Payden & Regal T-Note 1 Yr. 4.88% 5.61% 5.41%
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
TOTAL RETURN DOES NOT REFLECT EXPENSES THAT APPLY TO THE RELATED INSURANCE
POLICIES, AND INCLUSION OF THESE CHARGES WOULD REDUCE THE TOTAL RETURN FOR THE
PERIODS SHOWN.
17
<PAGE>
PRIMARY RISK CONSIDERATIONS
- ------------------------------------------------
PRIMARY RISK CONSIDERATIONS
- ------------------------------------------------
The value of your investment in any Portfolio will fluctuate, which means that
you may lose money. The primary risks of investing in the Portfolios are
described below. Each Portfolio's exposure to risk depends upon its specific
investment profile. The amount and types of risk vary depending on:
o The Portfolio's investment objective
o The Portfolio's ability to achieve its objective
o The markets in which the Portfolio invests
o The investments the Portfolio makes in those markets
o Prevailing economic conditions over the period of an investment
> CONCENTRATION RISK
The risk that if a Portfolio has most of its investments in a few securities or
a single sector, its portfolio will be more susceptible to factors adversely
affecting issuers within that sector than would a more diversified portfolio of
securities.
> CREDIT RISK
The risk that the issuer of a security, or the counterparty to a contract, will
default or otherwise be unable to honor a financial obligation. Below investment
grade securities are especially susceptible to this risk.
> FOREIGN RISK
The risk that foreign issuers may be subject to foreign political and economic
instability, the imposition or tightening of exchange controls or other
limitations on repatriation of foreign capital. In addition, there may be
changes in foreign governmental attitudes towards private investment, possibly
leading to nationalization, increased taxation or confiscation of investors'
assets. Investments in issuers located or doing business in emerging or
developing markets are especially susceptible to these risks.
> INTEREST RATE RISK
The risk that changing interest rates may adversely affect the value of an
investment. With fixed income securities, an increase in interest rates
typically causes the value of those securities to fall, while a decline in
interest rates may produce an increase in the market value of those securities.
Because of this risk, an investment in a Portfolio that invests in fixed income
securities is subject to risk even if all the fixed income securities in the
Portfolio's portfolio are paid in full at maturity. Changes in interest rates
will affect the value of longer-term fixed income securities more than
shorter-term securities.
> LEVERAGE RISK
The risk that borrowing, or some derivative instruments, such as forward
commitment transactions, may multiply smaller market movements into large
changes in value.
> LIQUIDITY AND VALUATION RISKS
The risk that securities that were liquid when purchased by a Portfolio may
become temporarily illiquid (i.e., not be sold readily) and hard to value,
especially in declining markets.
> MARKET RISK
The risk that the market value of a Portfolio's investments will fluctuate as
the stock and bond markets fluctuate. Market risk may affect a single issuer,
industry or section of the economy or may affect the market as a whole.
18
<PAGE>
> MUNICIPAL MARKET RISK
The risk that special factors may negatively affect the value of municipal
securities and, as a result, a Portfolio's share price. These factors include
political or legislative changes, uncertainties related to the tax status of the
securities or the rights of investors in the securities. A Portfolio may invest
in municipal obligations that are related in such a way that an economic,
business or political development or change affecting one of these obligations
would also affect the other obligations.
> PREPAYMENT RISK
The risk that an issuer will prepay fixed rate obligations when interest rates
fall, forcing the Portfolio to re-invest in obligations with lower interest
rates than the original obligations.
> RESTRICTED SECURITIES RISK
The risk that a buyer will be difficult to come by and the selling price will
need to be less than originally anticipated because these restricted securities
may only be sold in privately negotiated transactions.
> SMALL COMPANY RISK
The risk that investments in smaller companies may be more volatile than
investments in larger companies. Smaller companies generally experience higher
growth rates and higher failure rates than do larger companies. The trading
volume of the securities of smaller companies is normally lower than that of
larger companies. Short-term changes in the demand for the securities of smaller
companies generally has a disproportionate effect on their market price, tending
to make prices rise more in response to buying demand and fall more in response
to selling pressure.
> EURO CONVERSION
The Portfolios also could be adversely affected by the conversion of European
currencies into the Euro beginning January 1, 1999. This conversion will not be
complete until 2002, and its full implementation may be delayed. Difficulties
with the conversion and potential delays may significantly impact European
capital markets and could increase volatility in world capital markets.
It is impossible to know whether the problems associated with Euro conversion,
which could disrupt operations of investments if uncorrected, have been
adequately addressed until the dates in question arrive.
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
PLEASE NOTE THAT THERE ARE OTHER CIRCUMSTANCES NOT DESCRIBED HERE WHICH
COULD ADVERSELY AFFECT YOUR INVESTMENT AND POTENTIALLY PREVENT
A PORTFOLIO FROM ACHIEVING ITS OBJECTIVES.
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
19
<PAGE>
ADVISER
Conseco Capital Management, Inc. (CCM) is a wholly owned subsidiary of Conseco,
Inc., a publicly owned financial services company that provides specialized
annuity, life and health insurance products. CCM serves as the "Adviser" to each
of the Portfolios and as adviser to other registered investment companies. In
addition to managing the invested assets of Conseco, Inc., CCM manages
foundations, endowments, corporations, government and unions. As of December 31,
1999, CCM managed over $42.2 billion.
ADVISORY FEES
For the fiscal year ended 12/31/99, the advisory fee paid to the Adviser by each
Portfolio was as follows:
- -------------------------------------------------------------------
Advisory Fees Paid
(expressed as a percentage
Portfolio Name of average daily net assets)
- -------------------------------------------------------------------
Money Market Portfolio 0.25%
- -------------------------------------------------------------------
Government Securities Portfolio 0.50%
- -------------------------------------------------------------------
Fixed Income Portfolio 0.50%
- -------------------------------------------------------------------
Balanced Portfolio 0.55%
- -------------------------------------------------------------------
Equity Portfolio 0.60%
- -------------------------------------------------------------------
Since this is the first year of operations for the High Yield Portfolio and the
Conseco 20 Focus Portfolio, no advisory fees were paid in prior years. However,
the High Yield Portfolio and Conseco 20 Focus Portfolio have each executed an
Advisory Agreement with CCM in which each Portfolio will pay to CCM on an annual
basis 0.70% of the average daily value of the net assets.
-------------------------------------
> CONSECO CAPITAL
MANAGEMENT, INC.
11825 N. Pennsylvania Street
Carmel, Indiana 46032
-------------------------------------
20
<PAGE>
MANAGEMENT
- ------------------------------------------------------------------
PORTFOLIO MANAGERS OF CONSECO SERIES TRUST
- ------------------------------------------------------------------
> CONSECO 20 FOCUS PORTFOLIO:
ERIC J. VOSS, CFA, VICE PRESIDENT, SENIOR SECURITIES ANALYST
CONSECO CAPITAL MANAGEMENT, INC.
At CCM, Mr. Voss is also responsible for assisting in research and portfolio
management efforts for all of the Adviser's equity portfolios. Prior to joining
the Adviser in 1996, Mr. Voss worked as an equity analyst for Gardner Lewis
Asset Management for over three years.
THOMAS J. PENCE, CFA, CHIEF INVESTMENT OFFICER, EQUITY
CONSECO CAPITAL MANAGEMENT, INC.
Mr. Pence currently heads the Equity Investments Group at CCM, overseeing
portfolio managers for all of the firm's equity products. Mr. Pence is the
portfolio manager for the Portfolio. Since joining the Adviser in 1992, Mr.
Pence has been responsible for the management of the Adviser's equity portfolios
and for the oversight of the equity investment process. Additionally, he is
portfolio manager of other affiliated investment companies.
> EQUITY PORTFOLIO:
THOMAS J. PENCE, CFA, CHIEF INVESTMENT OFFICER, EQUITY
CONSECO CAPITAL MANAGEMENT, INC.
See Conseco 20 Focus Portfolio for Mr. Pence's complete biography.
JAMES M. LEACH, MBA, ASSISTANT VICE PRESIDENT, SENIOR SECURITIES ANALYST
CONSECO CAPITAL MANAGEMENT, INC.
At CCM, Mr. Leach is responsible for assisting in the research and portfolio
management efforts for all of the Adviser's equity portfolios. Prior to joining
the Adviser, Mr. Leach was a Vice President and Equity Analyst at Bankers Trust
in New York.
> BALANCED PORTFOLIO:
GREGORY J. HAHN, CFA, CHIEF INVESTMENT OFFICER, FIXED INCOME
CONSECO CAPITAL MANAGEMENT, INC.
Mr. Hahn is the portfolio manager for the fixed income portion of the Portfolio.
At CCM, Mr. Hahn is also responsible for the portfolio analysis and management
of the institutional client accounts and analytical support for taxable
portfolios. In addition, he is responsible for SEC registered investment
products, investments in the insurance industry and is portfolio manager of
other affiliated and unaffiliated investment companies. Mr. Hahn joined the
Adviser as a Vice President and portfolio manager in 1989.
THOMAS J. PENCE, CFA, CHIEF INVESTMENT OFFICER, EQUITY
CONSECO CAPITAL MANAGEMENT, INC.
Mr. Pence is the portfolio manager for the equity portion of the Portfolio. See
Conseco 20 Focus Portfolio for Mr. Pence's complete biography.
21
<PAGE>
> HIGH YIELD PORTFOLIO:
PETER C. ANDERSEN, CFA, VICE PRESIDENT, PORTFOLIO MANAGER
CONSECO CAPITAL MANAGEMENT, INC.
At CCM, Mr. Andersen is responsible for managing below investment grade fixed
income portfolios for institutional client accounts and is the portfolio manager
of other affiliated investment companies. Prior to joining the Adviser in 1997,
he was a portfolio manager for Colonial Management Associates, where he managed
over $650 million in high-yield, tax-free mutual funds.
> FIXED INCOME PORTFOLIO:
GREGORY J. HAHN, CFA, CHIEF INVESTMENT OFFICER, FIXED INCOME
CONSECO CAPITAL MANAGEMENT, INC.
See Balanced Portfolio for Mr. Hahn's complete biography.
TODD THOMPSON, CFA, SECOND VICE PRESIDENT, PORTFOLIO MANAGER
CONSECO CAPITAL MANAGEMENT, INC.
At CCM, Mr. Thompson is responsible for the day-to-day portfolio manager of the
four primary investment-grade composites and the tax-exempt client portfolios
that comprise them. Prior to joining the Adviser, Mr. Thompson was an Assistant
Investment Officer at the Public Employees Retirement System of Ohio,
responsible for management of pension's $20 billion fixed income portfolio.
> GOVERNMENT SECURITIES PORTFOLIO:
GREGORY J. HAHN, CFA, CHIEF INVESTMENT OFFICER, FIXED INCOME
CONSECO CAPITAL MANAGEMENT, INC.
See Balanced Portfolio for Mr. Hahn's complete biography.
> MONEY MARKET PORTFOLIO:
GREGORY J. HAHN, CFA, CHIEF INVESTMENT OFFICER, FIXED INCOME
CONSECO CAPITAL MANAGEMENT, INC.
See Balanced Portfolio for Mr. Hahn's complete biography.
22
<PAGE>
YOUR ACCOUNT
- --------------------------------------------------------
PURCHASE AND REDEMPTION OF SHARES
- --------------------------------------------------------
Portfolio shares are currently offered to separate accounts established by
insurance companies to fund variable annuity and variable life insurance
contracts. Individuals may not purchase Portfolio shares directly from the
Trust. Shares of each Portfolio are purchased or redeemed at their respective
net asset values next computed (without a sales charge) after receipt of an
appropriate order.
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
A Portfolio's net asset value (NAV) per share is the total market value of the
Portfolio's securities and other assets minus its liabilities divided by the
total number of shares outstanding. Because the value of each Portfolio's
securities changes every business day, the Portfolio's share price usually
changes as well.
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Each Portfolio calculates its NAV per share at the close of regular trading
(normally 4:00 p.m., Eastern Time) on the New York Stock Exchange (NYSE). The
NYSE is open every day for trading, except:
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Saturday Presidents' Day Labor Day
Sunday Good Friday Thanksgiving Day
New Year's Day Memorial Day Christmas Day
Martin Luther King, Jr. Day Independence Day
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
The NAV is generally based on the market price of the securities held in a
Portfolio. Securities held by all Portfolios other than the Money Market
Portfolio are valued based on readily available market quotations.
The NAV for the Money Market Portfolio is determined using the amortized cost
method. In this method, securities are valued at the time of purchase at cost
and thereafter assume a constant amortization to maturity of any discount or
premium. This method does not take into account unrealized gains and losses, nor
does it consider the impact of fluctuating interest rates on the market value of
the security. The Money Market Portfolio will attempt to maintain a constant net
asset value of $1.00 per share, however, there can be no assurance that it will
be able to do so.
Under the direction of the Board, the Portfolios may use a practice known as
fair value pricing under the following circumstances:
o Securities and assets for which market quotations are not readily available
o Events occur after an exchange closes that are likely to affect the value of
the security
o Trust's management strongly believes a market price is not reflective of a
security's appropriate price
When using fair value pricing, the next asset value of the Portfolio's can
change over periods during which shareholders cannot purchase or redeem shares.
23
<PAGE>
- -------------------------------------------------
DIVIDENDS AND DISTRIBUTIONS
- -------------------------------------------------
Each Portfolio distributes at least 90% of its net investment income to its
shareholders to meet requirements of the Internal Revenue Code applicable to
regulated investment companies. Investors should understand that, as Contract
Owners, they will not receive any dividends or other distributions directly from
the Trust or any of the Portfolios. All such dividends and other distributions
are payable to, and reinvested by, the separate accounts of the insurance
company in which contract premiums are invested. Dividends from net investment
income are declared and reinvested in additional full and fractional shares by
each Portfolio according to the schedule below. The Trustees may elect to change
dividend distribution intervals.
> SCHEDULE OF DIVIDEND REINVESTMENTS
-----------------------------------------------------------------------------
Portfolio Declared and Reinvested
-----------------------------------------------------------------------------
Conseco 20 Portfolio Annually
-----------------------------------------------------------------------------
Equity Portfolio Annually
-----------------------------------------------------------------------------
Balanced Portfolio Quarterly
-----------------------------------------------------------------------------
High Yield Portfolio Monthly
-----------------------------------------------------------------------------
Fixed Income Portfolio Monthly
-----------------------------------------------------------------------------
Government Securities Portfolio Monthly
-----------------------------------------------------------------------------
Money Market Portfolio Daily
-----------------------------------------------------------------------------
Capital gains -- i.e., the excess of net long-term capital gain over net
short-term capital loss -- are generally declared and distributed to
shareholders annually after the close of the Portfolio's fiscal year.
SEE THE APPLICABLE CONTRACT PROSPECTUS FOR INFORMATION REGARDING THE FEDERAL
INCOME TAX TREATMENT OF DISTRIBUTIONS TO THE INSURANCE COMPANY SEPARATE
ACCOUNTS.
24
<PAGE>
APPENDIX
- -----------------------------------------------------------------
CONSECO 20 FOCUS PORTFOLIO AND HIGH YIELD PORTFOLIO
- -----------------------------------------------------------------
PRIOR PERFORMANCE OF SIMILAR FUNDS
The High Yield Portfolio and the Conseco 20 Focus Portfolio are modeled after
the High Yield Fund and the Conseco 20 Fund ("CFG Funds") which are existing
funds of the Conseco Fund Group ("CFG") that are managed by the Adviser, Conseco
Capital Management, Inc., and have investment objectives and policies
substantially similar to the Portfolios. While the Portfolios are investment
choices for variable annuity and variable life contracts, shares of the CFG
Funds are distributed through multiple distribution channels to the retail
marketplace in four separate classes (Classes A, B, C and Y).
Below you will find information about the performance of Class A shares of the
CFG Funds, not the Portfolios. The performance data of the Class A CFG Funds is
provided in two ways: (1) net of all management fees, distribution fees, other
expenses, and the applicable sales charge, and (2) net of all management fees,
distribution fees and other expenses. Although the Portfolios have substantially
similar investment objectives and policies, the same investment adviser and the
same portfolio managers as the corresponding CFG Funds, you should not assume
that the Portfolios will have the same future performance of the corresponding
CFG Funds due to, among other things, differences in expenses and cash flows
between a Portfolio and the corresponding CFG Fund. Moreover, past performance
information is based on historical earnings and is not intended to indicate
future performance of either the CFG Funds or the Portfolios.
The investment characteristics of each of these Portfolios are intended to
closely resemble the investment characteristics of the corresponding CFG Fund.
Depending on the Portfolio involved, similarity of investment characteristics
may involve factors such as industry diversification, portfolio beta, portfolio
quality, average maturity of fixed-income assets, equity/non-equity mixes, and
individual holdings. The Adviser also may manage other similar funds and
accounts that may have better or worse performance than the CFG Funds,
performance information for which is not presented here due to differences in
factors such as investment policies and/or portfolio management strategies
and/or because these accounts are not mutual funds.
The table below sets forth each Portfolio, its corresponding CFG Fund -- Class
A, the date the Adviser began managing the CFG Fund (referred to as the
"inception date") and net asset size as of December 31, 1999.
Corresponding CFG Fund--Class A
PORTFOLIO (INCEPTION DATE AND NET ASSET SIZE)
- --------- -----------------------------------
High Yield Portfolio Conseco High Yield Fund (Jan. 1, 1998)
$132,587,519
Conseco 20 Focus Portfolio Conseco 20 Portfolio (Jan. 1, 1998)
$217,594,756
25
<PAGE>
The following table shows the average annualized total returns for the CFG
Funds-Class A for the one year and since inception periods ending December 31,
1999. These figures are based on the gross investment performance of CFG Class A
shares and calculated as described above. Note that the actual investment
performance experienced by the investors in variable annuity and variable life
insurance contracts issued by affiliated and unaffiliated insurance companies
would be lower than the gross investment performance of the CFGFunds due to
expenses at the separate account level; these expenses typically are higher than
those borne by investors in CFGor CST. The following CFGperformance does not
represent the historical performance of the Portfolios and should not be
interpreted as indicative of the future performance of the Portfolios.
PERFORMANCE HISTORY
THE CONSECO 20 FUND
CLASS A SHARES
ONE YEAR SINCE INCEPTION (1/1/98)
--------------------------------------
Average Total Return
(Net of all fees and expenses) 60.60% 43.38%
Average Total Return (without
deducting Class A Sales Charge**) 70.40% 47.69%
PERFORMANCE HISTORY
THE HIGH YIELD FUND
CLASS A SHARES
ONE YEAR SINCE INCEPTION (1/1/98)
--------------------------------------
Average Total Return
(Net of all fees and expenses) 2.76% 4.64%
Average Total Return (without
deducting Class A Sales Charge**) 9.03% 7.79%
**This performance is net of all fees and expenses except for applicable maximum
Sales Charge.
26
<PAGE>
FINANCIAL HIGHLIGHTS
- -------------------------------------------
FINANCIAL HIGHLIGHTS
- -------------------------------------------
The financial highlights table is intended to help you understand the Trust's
financial performance for the past five years (or, if shorter, the period of the
Trust's operations). Certain information reflects financial results for a single
Portfolio share. The total returns in the table represent the rate that an
investor would have earned (or lost) on an investment in each Portfolio
(assuming reinvestment of all dividends and distributions). This information has
been audited by PricewaterhouseCoopers whose report, along with the Trust's
financial statements, is included in the Trust's annual report, which is
available upon request.
Because the Conseco 20 Focus Portfolio and the High Yield Portfolio are new,
financial highlights are not available.
27
<PAGE>
CONSECO SERIES TRUST
FINANCIAL HIGHLIGHTS
FOR YEARS ENDED DECEMBER 31,
================================================================================
<TABLE>
<CAPTION>
EQUITY PORTFOLIO
===================================================================
1999 1998 1997 1996 1995
===================================================================================================================================
<S> <C> <C> <C> <C> <C>
Net asset value per share, beginning of period............. $ 21.59 $ 20.16 $ 21.85 $ 18.84 $ 16.54
Income from investment operations:
Net investment income.................................. -- 0.11 0.06 0.01 0.34
Net realized and unrealized gains (losses)
on investments....................................... 10.63 3.09 4.06 8.17 5.68
- ----------------------------------------------------------------------------------------------------------------------------------
Total income (loss) from investment operations..... 10.63 3.20 4.12 8.18 6.02
- ----------------------------------------------------------------------------------------------------------------------------------
Distributions:...........................................
Dividends from net investment income................... -- (0.27) (4.23) (4.21) (2.81)
Distribution of net capital gains...................... (9.04) (0.48) (1.58) (0.96) (0.91)
Return of capital...................................... -- (1.02) -- -- --
- ----------------------------------------------------------------------------------------------------------------------------------
Total distributions................................ (9.04) (1.77) (5.81) (5.17) (3.72)
- ----------------------------------------------------------------------------------------------------------------------------------
Net asset value per share, end of period.................... $ 23.18 $ 21.59 $ 20.16 $ 21.85 $ 18.84
===================================================================================================================================
Total return (a) (b)........................................ 50.28% 15.62% 18.68% 44.99% 36.30%
Ratios/supplemental data:
Net assets (dollars in thousands), end of period ........ $ 300,437 $ 235,001 $ 216,986 $ 171,332 $ 109,636
Ratio of expenses to average net assets.................. 0.77% 0.80% 0.80% 0.80% 0.80%
Ratio of total expenses to average net assets (b)........ 0.82% 0.80% 0.80% 0.81% 0.80%
Ratio of net investment income to average
net assets (b)......................................... -0.10% 0.55% 0.28% 0.06% 1.80%
Portfolio turnover rate.................................. 364.53% 317.91% 234.20% 177.03% 172.55%
</TABLE>
- --------------------------------------------------------------------------------
(a) Total return represents performance of the Trust only and does not include
mortality and expense deductions in separate accounts.
(b) The Adviser has contractually agreed to waive their fees and/or reimburse
the Portfolio through April 30, 2000 to the extent that the ratio of total
expenses to average net assets exceeds, on an annual basis, 0.80 percent.
28
<PAGE>
CONSECO SERIES TRUST
FINANCIAL HIGHLIGHTS
FOR YEARS ENDED DECEMBER 31,
================================================================================
<TABLE>
<CAPTION>
BALANCED PORTFOLIO
================================================================
1999 1998 1997 1996 1995
===================================================================================================================================
<S> <C> <C> <C> <C> <C>
Net asset value per share, beginning of period.............. $ 13.67 $ 13.32 $ 13.47 $ 12.39 $ 11.04
Income from investment operations:
Net investment income.................................. 0.42 0.43 0.44 0.42 0.51
Net realized and unrealized gains (losses)
on investments....................................... 3.72 0.96 2.12 2.77 2.97
- -----------------------------------------------------------------------------------------------------------------------------------
Total income (loss) from investment operations..... 4.14 1.39 2.56 3.19 3.48
- -----------------------------------------------------------------------------------------------------------------------------------
Distributions:...........................................
Dividends from net investment income................... (0.42) (0.43) (2.20) (2.07) (1.83)
Distribution of net capital gains...................... (2.74) -- (0.51) (0.04) (0.30)
Return of capital...................................... -- (0.61) -- -- --
- -----------------------------------------------------------------------------------------------------------------------------------
Total distributions................................ (3.16) (1.04) (2.71) (2.11) (2.13)
- -----------------------------------------------------------------------------------------------------------------------------------
Net asset value per share, end of period.................... $ 14.65 $ 13.67 $ 13.32 $ 13.47 $ 12.39
===================================================================================================================================
Total return (a) (b)........................................ 30.83% 10.37% 17.85% 28.30% 31.49%
Ratios/supplemental data:
Net assets (dollars in thousands), end of period ........ $ 51,941 $ 45,904 $ 27,922 $ 16,732 $ 9,583
Ratio of expenses to average net assets.................. 0.73% 0.75% 0.75% 0.75% 0.75%
Ratio of total expenses to average net assets (b)........ 0.83% 0.84% 0.84% 0.95% 0.87%
Ratio of net investment income to average
net assets (b)......................................... 2.89% 3.25% 3.14% 3.15% 4.11%
Portfolio turnover rate.................................. 343.43% 336.30% 369.39% 208.13% 194.16%
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) Total return represents performance of the Trust only and does not include
mortality and expense deductions in separate accounts.
(b) The Adviser has contractually agreed to waive their fees and/or reimburse
the Portfolio through April 30, 2000 to the extent that the ratio of total
expenses to average net assets exceeds, on an annual basis, 0.75 percent.
29
<PAGE>
CONSECO SERIES TRUST
FINANCIAL HIGHLIGHTS
FOR YEARS ENDED DECEMBER 31,
<TABLE>
<CAPTION>
================================================================================
FIXED INCOME PORTFOLIO
=================================================================
1999 1998 1997 1996 1995
===================================================================================================================================
<S> <C> <C> <C> <C> <C>
Net asset value per share, beginning of period.............. $ 10.05 $ 10.14 $ 9.97 $ 10.15 $ 9.45
Income from investment operations:
Net investment income.................................. 0.62 0.64 0.65 0.66 0.68
Net realized and unrealized gains (losses)
on investments....................................... (0.66) (0.03) 0.31 (0.18) 0.99
- -----------------------------------------------------------------------------------------------------------------------------------
Total income (loss) from investment operations....... (0.04) 0.61 0.96 0.48 1.67
- ----------------------------------------------------------------------------------------------------------------------------------
Distributions:...........................................
Dividends from net investment income................... (0.62) (0.64) (0.79) (0.66) (0.97)
Distribution of net capital gains...................... -- -- -- -- --
Return of capital...................................... -- (0.06) -- -- --
- -----------------------------------------------------------------------------------------------------------------------------------
Total distributions.................................. (0.62) (0.70) (0.79) (0.66) (0.97)
- -----------------------------------------------------------------------------------------------------------------------------------
Net asset value per share, end of period.................... $ 9.39 $ 10.05 $ 10.14 $ 9.97 $ 10.15
===================================================================================================================================
Total return (a) (b)........................................ -0.44% 6.17% 9.97% 4.97% 18.25%
Ratios/supplemental data:
Net assets (dollars in thousands), end of period ........ $ 28,899 $ 23,985 $ 21,277 $ 17,463 $ 16,046
Ratio of expenses to average net assets.................. 0.67% 0.70% 0.70% 0.70% 0.70%
Ratio of total expenses to average net assets (b)........ 0.67% 0.80% 0.77% 0.77% 0.74%
Ratio of net investment income to average
net assets (b)......................................... 6.46% 6.24% 6.50% 6.65% 6.78%
Portfolio turnover rate.................................. 337.26% 321.09% 276.46% 276.35% 225.41%
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) Total return represents performance of the Trust only and does not include
mortality and expense deductions in separate accounts.
(b) The Adviser has contractually agreed to waive their fees and/or reimburse
the Portfolio through April 30, 2000 to the extent that the ratio of total
expenses to average net assets exceeds, on an annual basis, 0.70 percent.
30
<PAGE>
CONSECO SERIE STRUST
Financial Highlights
FOR YEARS ENDED DECEMBER 31,
<TABLE>
<CAPTION>
================================================================================
GOVERNMENT SECURITIES PORTFOLIO
=================================================================
1999 1998 1997 1996 1995
===================================================================================================================================
<S> <C> <C> <C> <C> <C>
Net asset value per share, beginning of period.............. $ 12.15 $ 12.04 $ 11.94 $ 12.38 $ 11.09
Income from investment operations:
Net investment income.................................. 0.64 0.69 0.73 0.72 0.75
Net realized and unrealized gains (losses)
on investments....................................... (1.19) 0.14 0.23 (0.41) 1.12
- -----------------------------------------------------------------------------------------------------------------------------------
Total income (loss) from investment operations....... (0.55) 0.83 0.96 0.31 1.87
- -----------------------------------------------------------------------------------------------------------------------------------
Distributions:...........................................
Dividends from net investment income................... (0.64) (0.72) (0.86) (0.71) (0.58)
Distribution of net capital gains...................... -- -- -- (0.04) --
Return of capital...................................... -- -- -- -- --
- -----------------------------------------------------------------------------------------------------------------------------------
Total distributions.................................. (0.64) (0.72) (0.86) (0.75) (0.58)
- -----------------------------------------------------------------------------------------------------------------------------------
Net asset value per share, end of period.................... $ 10.96 $ 12.15 $ 12.04 $ 11.94 $ 12.38
===================================================================================================================================
Total return (a) (b)........................................ -2.48% 7.07% 8.26% 2.75% 17.35%
Ratios/supplemental data:
Net assets (dollars in thousands), end of period ........ $ 13,104 $ 7,907 $ 4,270 $ 4,024 $ 4,613
Ratio of expenses to average net assets.................. 0.66% 0.70% 0.70% 0.70% 0.70%
Ratio of total expenses to average net assets (b)........ 0.66% 0.96% 0.92% 0.91% 0.78%
Ratio of net investment income to average
net assets (b)......................................... 5.61% 5.63% 6.05% 6.02% 6.27%
Portfolio turnover rate.................................. 168.69% 67.49% 195.08% 157.62% 284.31%
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) Total return represents performance of the Trust only and does not include
mortality and expense deductions in separate accounts.
(b) The Adviser has contractually agreed to waive their fees and/or reimburse
the Portfolio through April 30, 2000 to the extent that the ratio of total
expenses to average net assets exceeds, on an annual basis, 0.70 percent.
31
<PAGE>
CONSECO SERIES TRUST
Financial Highlights
FOR YEARS ENDED DECEMBER 31,
<TABLE>
<CAPTION>
===================================================================================================================================
MONEY MARKET PORTFOLIO
=================================================================
1999 1998 1997 1996 1995
===================================================================================================================================
<S> <C> <C> <C> <C> <C>
Net asset value per share, beginning of period............. $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
Income from investment operations:
Net investment income................................. 0.05 0.05 0.05 0.05 0.06
Net realized and unrealized gains (losses)
on investments...................................... -- -- -- -- --
- -----------------------------------------------------------------------------------------------------------------------------------
Total income (loss) from investment operations...... 0.05 0.05 0.05 0.05 0.06
- ----------------------------------------------------------------------------------------------------------------------------------
Distributions:.............................................
Dividends from net investment income.................... (0.05) (0.05) (0.05) (0.05) (0.06)
Distribution of net capital gains....................... -- -- -- -- --
Return of capital....................................... -- -- -- -- --
- -----------------------------------------------------------------------------------------------------------------------------------
Total distributions................................. (0.05) (0.05) (0.05) (0.05) (0.06)
- -----------------------------------------------------------------------------------------------------------------------------------
Net asset value per share, end of period................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
===================================================================================================================================
Total return (a) (b)....................................... 4.87% 5.21% 5.25% 5.13% 5.46%
Ratios/supplemental data:
Net assets (dollars in thousands), end of period ....... $ 85,692 $ 21,218 $ 8,603 $ 6,985 $ 5,396
Ratio of expenses to average net assets................. 0.40% 0.45% 0.45% 0.45% 0.45%
Ratio of total expenses to average net assets (b)....... 0.65% 0.54% 0.53% 0.59% 0.52%
Ratio of net investment income to average
net assets (b)........................................ 4.93% 5.08% 5.14% 5.03% 5.46%
Portfolio turnover rate................................. N/A N/A N/A N/A N/A
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) Total return represents performance of the Trust only and does not include
mortality and expense deductions in separate accounts.
(b) The Adviser has contractually agreed to waive their fees and/or
reimburse the Portfolio through April 30, 2000 to the extent that the ratio
of total expenses to average net assets exceeds, on an annual basis,
0.45 percent.
32
<PAGE>
(Sidebar)FOR MORE INFORMATION
- -----------------------------------------------
FOR MORE INFORMATION
- -----------------------------------------------
More information on the Conseco Series Trust is available free upon request:
> SHAREHOLDER REPORTS
Additional information about the Portfolios' investments is available in the
Portfolios' annual and semi-annual reports to shareholders. In the Portfolios'
annual report, you will find a discussion of the market conditions and
investment strategies that significantly affected the Portfolio's performance
during their most recent fiscal year.
STATEMENT OF ADDITIONAL INFORMATION (SAI)
The SAI provides more details about each Portfolio and its policies. The SAI is
on file with the Securities and Exchange Commission (SEC) and is incorporated by
reference into (is legally considered part of) this prospectus.
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
> TO OBTAIN A SHAREHOLDER REPORT, SAI, OR OTHER INFORMATION:
BY TELEPHONE
Call 800-557-7043
BY MAIL
Conseco Series Trust
Attn: Administrative Offices
11815 N. Pennsylvania Street
Carmel, IN 46032
BY EMAIL
[email protected]
ON THE INTERNET
Text-only versions of the prospectuses and other documents pertaining to the
Portfolios can be viewed online or downloaded from:
SEC
http://www.sec.gov
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Information about the Trust (including the SAI) can also be reviewed and copied
at the SEC's public reference room in Washington, DC (phone 800-SEC-0330). Or,
you can obtain copies of this information by sending a request, along with a
duplicating fee, to the SEC's Public Reference Section, Washington, DC
20549-6009.
Registration Number: 811-3641
<PAGE>
PART B
<PAGE>
CONSECO SERIES TRUST
Statement of Additional
Information
May 1, 2000
This Statement of Additional Information ("SAI") is not a prospectus. It
contains additional information about the Conseco Series Trust (the "Trust") and
should be read in conjunction with the Trust's Prospectus dated May 1, 2000. You
can obtain a copy by contacting the Trust's Administrative Office, 11815 N.
Pennsylvania Street, Carmel, Indiana 46032 or by phoning 800-557-7043.
TABLE OF CONTENTS
PAGE
Fund History................................................ 2
Investment Restrictions..................................... 2
Investment Strategies....................................... 3
Portfolio Turnover.......................................... 5
Description of Securities and Investment Techniques......... 6
Investment Performance...................................... 21
Securities Transactions..................................... 23
Management.................................................. 24
Other Service Providers..................................... 25
Net Asset Values of the Shares of the Portfolios............ 27
Dividends, Distributions and Taxes.......................... 28
General..................................................... 28
Independent Accountants..................................... 29
Financial Statements........................................ 30
CCM INVESTMENT AD
---
Conseco Capital Management, Inc.
<PAGE>
FUND HISTORY
The Conseco Series Trust (the "Trust") was organized as a Massachusetts
business trust on November 15, 1982. The Trust is a no-load, open-end management
investment company registered with the Securities and Exchange Commission
("SEC") under the Investment Company Act of 1940 (the "1940 Act"). The Trust is
a "series" type of mutual fund which issues separate series of shares, each of
which currently represents a separate diversified portfolio of investments. The
Trust's series of shares are issued and redeemed at net asset value without a
sales load. This SAI relates to the shares of seven portfolios ("Portfolios") of
the Trust, each with its own investment objective or objectives and investment
policies. There is no assurance that any of the Portfolios will achieve its
investment objective. The various Portfolios may be used independently or in
combination.
The shares of the Portfolios are offered to insurance companies in order to
fund certain of their separate accounts used to support variable annuity and
variable life insurance contracts (the "Contracts"). Although not currently
doing so, Conseco Series Trust may also serve as an investment medium for
qualified pension and retirement plans outside of the separate account context.
The rights of an insurance company holding Trust shares for a separate account
are different from the rights of the owner of a Contract. The terms
"shareholder" or "shareholders" in this SAI shall refer to the insurance
companies, and not to any Contract owner.
The Trust serves as the underlying investment medium for sums invested in
Contracts issued by affiliated insurance companies, such as, Bankers National
Life Insurance Company ("Bankers National"), Conseco Variable Insurance Company
("Conseco Variable"), and unaffiliated insurance companies. Trust shares are not
offered directly to and may not be purchased directly by members of the public.
INVESTMENT RESTRICTIONS
The Trust has adopted the following restrictions and policies relating to
the investment of assets of the Portfolios and their activities. These are
fundamental policies and may not be changed without the approval of the holders
of a "majority" of the outstanding shares of each Portfolio affected. Under the
1940 Act, the vote of such a "majority" means the vote of the holders of the
lesser of (i) 67 percent of the shares represented at a meeting at which more
than 50 percent of the outstanding shares are represented or (ii) more than 50
percent of the outstanding shares. A change in policy affecting only one
Portfolio may be effected with the approval of the holders of a "majority" of
the outstanding shares of such Portfolio.
CONSECO 20 FOCUS PORTFOLIO AND HIGH YIELD PORTFOLIO
The Conseco 20 Focus Portfolio and High Yield Portfolio may not (except as
noted):
1. Purchase or sell commodities or commodity contracts except that a Portfolio
may purchase or sell options, futures contracts, and options on futures
contracts and may engage in interest rate and foreign currency transactions;
2. Borrow money, except that a Portfolio may: (a) borrow from banks, and (b)
enter into reverse repurchase agreements, provided that (a) and (b) in
combination do not exceed 33-1/3% of the value of its total assets
(including the amount borrowed) less liabilities (other than borrowings);
and except that a Portfolio may borrow from any person up to 5% of its total
assets (not including the amount borrowed) for temporary purposes (but not
for leverage or the purchase of investments);
3. Underwrite securities of other issuers except to the extent that a Portfolio
may be deemed an underwriter under the Securities Act of 1933 (the "1933
Act") in connection with the purchase or sale of portfolio securities;
4. With respect to 75% of the High Yield Portfolio's total assets, purchase the
securities of any issuer if (a) more than 5% of the Portfolio's total assets
would be invested in the securities of that issuer or (b) the
<PAGE>
Portfolio would own more than 10% of the outstanding voting securities of
that issuer; this restriction does not apply to U.S. Government securities
(as defined in the Prospectus);
5. Purchase any security if thereafter 25% or more of the total assets of the
Portfolio would be invested in securities of issuers having their principal
business activities in the same industry; this restriction does not apply
to U.S. Government securities (as defined in the Prospectus);
6. Purchase or sell real estate, except that a Portfolio may purchase
securities which are issued by companies which invest in real estate or
which are secured by real estate or interests therein;
7. Make loans of its assets if, as a result, more than 33-1/3% of the
Portfolio's total assets would be lent to other parties except through (a)
entering into repurchase agreements and (b) purchasing debt instruments; or
8. Issue any senior security, except as permitted under the 1940 Act.
EQUITY PORTFOLIO, BALANCED PORTFOLIO, FIXED INCOME PORTFOLIO, GOVERNMENT
SECURITIES PORTFOLIO AND MONEY MARKET PORTFOLIO
The Equity Portfolio, Balanced Portfolio, Fixed Income Portfolio, Government
Securities Portfolio and Money Market Portfolio may not (except as noted):
1. Purchase securities on margin or sell securities short, except that
Portfolios engaged in transactions in options, futures, and options on
futures may make margin deposits in connection with those transactions, and
except that each Portfolio (except the Money Market Portfolio) may make
short sales against the box and that effecting short sales against the box
will not be deemed to constitute a purchase of securities on margin;
2. Purchase or sell commodities or commodity contracts (which, for the purpose
of this restriction, shall not include foreign currency futures or forward
currency contracts), except: (a) any Portfolio (except the Money Market
Portfolio) may engage in interest rate futures contracts, stock index
futures, futures contracts based on other financial instruments, and options
on such futures contracts; and (b) the Balanced Portfolio may engage in
futures contracts on gold;
3. Borrow money or pledge, mortgage, or assign assets, except that a Portfolio
may: (a) borrow from banks, but only if immediately after each borrowing and
continuing thereafter it will have an asset coverage of at least 300
percent; (b) enter into reverse repurchase agreements, options, futures,
options on futures contracts, foreign currency futures contracts and forward
currency contracts as described in the Prospectus and in this Statement of
Additional Information. (The deposit of assets in escrow in connection with
the writing of covered put and call options and the purchase of securities
on a when-issued or delayed delivery basis and collateral arrangements with
respect to initial or variation margin deposits for future contracts, and
options on futures contracts and foreign currency futures and forward
currency contracts will not be deemed to be pledges of a Portfolio's assets)
4. Underwrite securities of other issuers;
5. With respect to 75 percent of its total assets, invest more than 5 percent
of its assets in the securities of any one issuer if thereafter the
Portfolio in question would have more than 5 percent of its assets in the
securities of any issuer; this restriction does not apply to U.S. Government
securities (as defined in the Prospectus);
6. Invest in securities of a company for the purpose of exercising control or
management;
7. Write, purchase or sell puts, calls or any combination thereof, except that
the Government Securities Portfolio, the Fixed Income Portfolio, the
Balanced Portfolio and the Equity Portfolio may write listed covered or
secured calls and puts and enter into closing purchase transactions with
respect to such calls and puts if, after writing any such call or put, not
more than 25 percent of the assets of the Portfolio are subject to covered
or secured calls and puts, and except that the Government Securities
Portfolio, Fixed
<PAGE>
Income Portfolio, Balanced Portfolio and Equity Portfolio may purchase calls
and puts with a value of up to 5 percent of each such Portfolio's net
assets;
8. Participate on a joint or a joint and several basis in any trading account
in securities;
9. With respect to 75 percent of its total assets, invest in the securities of
issuers in any one industry if thereafter more than 25 percent of the assets
of the Portfolio in question would be invested in securities of issuers in
that industry; investing in cash items (including time and demand deposits
such as certificates of deposit of domestic banks), U.S. Government
securities, or repurchase agreements as to these securities, shall not be
considered investments in an industry;
10. Purchase or sell real estate, except that it may purchase marketable
securities which are issued by companies which invest in real estate
interests therein; or
11. Lend any of its assets except to purchase or hold money market instruments
permitted by its investment objective and policies.
In order to limit the risks associated with entry into repurchase
agreements, the Trustees have adopted certain criteria (which are not
fundamental policies) to be followed by the Portfolios. These criteria provide
for entering into repurchase agreement transactions (a) only with banks or
broker-dealers meeting certain guidelines for creditworthiness, (b) that are
fully collateralized as defined therein, (c) on an approved standard form of
agreement and (d) that meet limits on investments in the repurchase agreements
of any one bank, broker or dealer.
NON-FUNDAMENTAL INVESTMENT RESTRICTIONS
The following restrictions for the Conseco 20 Focus Portfolio and High Yield
Portfolio are designated as nonfundamental and may be changed by the Trust's
Board of Trustees ("Board") without shareholder approval.
1. Sell securities short in an amount exceeding 15% of its assets, except that
a Portfolio may, without limit, make short sales against the box.
Transactions in options, futures, options on futures and other derivative
instruments shall not constitute selling securities short;
2. Purchase securities on margin, except that a Portfolio may obtain such
short-term credits as are necessary for the clearance of securities
transactions and except that margin deposits in connection with
transactions in options, futures, options on futures and other derivative
instruments shall not constitute a purchase of securities on margin; or
3. Make loans of its assets, except that a Portfolio may enter into repurchase
agreements and purchase debt instruments as set forth in its fundamental
policy on lending and may lend portfolio securities in an amount not to
exceed 33-1/3% of the value of the Portfolio's total assets.
INVESTMENT STRATEGIES
In addition to the investment strategies described in the Prospectus, the
CONSECO 20 FOCUS PORTFOLIO may:
o Invest in preferred stocks, convertible securities, and warrants, and in
debt obligations when the Adviser believes that they are more attractive
than stocks on a long-term basis. The debt obligations in which it invests
will be primarily investment grade debt securities, U.S. Government
securities, or short-term debt securities. However, the Portfolio may
invest up to 5% of its total assets in below investment grade securities.
o Invest up to 25% of its total assets in equity and debt securities of
foreign issuers. The Portfolio presently intends to invest in foreign
securities only through depositary receipts. See "Foreign Securities" below
for more information.
<PAGE>
o Use a variety of investment techniques and strategies, including but not
limited to: writing listed "covered" call and "secured" put options,
including options on stock indices, and purchasing options; purchasing and
selling, for hedging purposes, stock index, interest rate, and other
futures contracts, and purchasing options on such futures contracts;
entering into foreign currency futures contracts, forward contracts and
options on foreign currencies; borrowing from banks to purchase securities;
purchasing securities of other investment companies; entering into
repurchase agreements and reverse repurchase agreements; investing in
when-issued or delayed delivery securities; and selling securities short.
See "Description of Securities and Investment Techniques" below for further
information.
In addition to the investment strategies described in the Prospectus, the EQUITY
PORTFOLIO may:
o Invest in below investment grade securities, commonly known as "junk bonds".
o Use various investment strategies and techniques when the Adviser determines
that such use is appropriate in an effort to meet the Portfolio's investment
objectives. Such strategies and techniques include, but not limited to:
writing listed "covered" call and "secured" put options, including options
on stock indices, and purchasing such options; purchasing and selling, for
hedging purposes, stock index, interest rate, and other futures contracts,
and purchasing options on such futures contracts; purchasing warrants and
preferred and convertible preferred stocks; borrowing from banks to purchase
securities; purchasing foreign securities in the form of American Depository
Receipts ("ADRs"); purchasing securities of other investment companies;
entering into repurchase agreements; purchasing restricted securities;
investing in when-issued or delayed delivery securities; and selling
securities short "against the box." See "Description of Securities and
Investment Techniques" below for further information.
In addition to the investment strategies described in the Prospectus, the
BALANCED PORTFOLIO may:
o If the Adviser believes that inflationary or monetary conditions warrant a
significant investment in companies involved in precious metals, invest up
to 10 percent of its total assets in the equity securities of companies
exploring, mining, developing, producing, or distributing gold or other
precious metals.
o Invest in below investment grade securities, commonly known as "junk bonds".
o Invest in zero coupon securities and payment-in-kind securities.
o Invest in equity and debt securities of foreign issuers, including non-U.S.
dollar-denominated securities, Eurodollar securities and securities issued,
assumed or guaranteed by foreign governments or political subdivisions or
instrumentalities thereof. As a non-fundamental operating policy, the
Balanced Portfolio will not invest more than 50 percent of its total assets
(measured at the time of investment) in foreign securities. See "Description
of Securities and Investment Techniques" below for further information.
o Use various investment strategies and techniques when the Adviser determines
that such use is appropriate in an effort to meet the Portfolio's investment
objective, including but not limited to: writing listed "covered" call and
"secured" put options, including options on stock indices, and purchasing
such options; purchasing and selling, for hedging purposes, stock index,
interest rate, gold, and other futures contracts, and purchasing options on
such futures contracts; purchasing warrants and preferred and convertible
preferred stocks; purchasing foreign securities; entering into foreign
currency transactions and options on foreign currencies; borrowing from
banks to purchase securities; purchasing securities of other investment
companies; entering into repurchase agreements; purchasing restricted
securities; investing in when-issued or delayed delivery securities; and
selling securities short "against the box." See "Description of Securities
and Investment Techniques" below for further information.
<PAGE>
In addition to the investment strategies described in the Prospectus, the HIGH
YIELD PORTFOLIO may:
o Invest in below investment grade securities which include corporate debt
securities and preferred stock, convertible securities, zero coupon
securities, other deferred interest securities, mortgage-backed securities
and asset-backed securities. The Portfolio may invest in securities rated as
low as C by Moody's Investors Service, Inc. ("Moody's") or D by Standard &
Poor's ("S&P"), securities comparably rated by another national statistical
rating organization ("NRSRO"), or unrated securities of equivalent quality.
Such obligations are highly speculative and may be in default or in danger
of default as to principal and interest.
o Invest in high yield municipal securities. The interest on the municipal
securities in which the Portfolio invests typically is not except from
federal income tax.
o Invest in zero coupon securities and payment-in-kind securities.
o Invest in equity and debt securities of foreign issuers, including issuers
based in emerging markets. As a non-fundamental policy, the Portfolio may
invest up to 50% of its total assets (measured at the time of investment) in
foreign securities; however, the Portfolio presently does not intend to
invest more than 25% of its total assets in such securities. In addition,
the Portfolio presently intends to invest in foreign securities only through
depositary receipts. See "Foreign Securities" below for further information.
o Invest in private placements, securities traded pursuant to Rule 144A under
the 1933 Act (Rule 144A permits qualified institutional buyers to trade
certain securities even though they are not registered under the 1933 Act),
or securities which, though not registered at the time of their initial
sale, are issued with registration rights. Some of these securities may be
deemed by the Adviser to be liquid under guidelines adopted by the Board. As
a matter of fundamental policy, the Portfolio will not (1) with respect to
75% of the total assets, invest more than 5% in any one issuer, except for
U.S. Government securities or (2) with respect to total assets, invest 25%
or more in securities of issuers having their principal business activities
in the same industry.
o The Portfolio's remaining assets may be held in cash, money market
instruments, or securities issued or guaranteed by the U.S. Government, its
agencies, authorities or instrumentalities, or may be invested in common
stocks and other equity securities when these types of investments are
consistent with the objectives of the Portfolio or are acquired as part of a
unit consisting of a combination of fixed income securities and equity
investments. Such remaining assets may also be invested in investment grade
debt securities, including municipal securities.
o Use various investment strategies and techniques when the Adviser determines
that such use is appropriate in an effort to meet the Portfolio's investment
objectives. Such strategies and techniques include, but are not limited to,
writing listed "covered" call and "secured" put options and purchasing
options; purchasing and selling, for hedging purposes, interest rate and
other futures contracts, and purchasing options on such futures contracts;
entering into foreign currency futures contracts, forward foreign currency
contracts ("forward contracts") and options on foreign currencies; borrowing
from banks to purchase securities; investing in securities of other
investment companies; entering into repurchase agreements, reverse
repurchase agreements and dollar rolls; investing in when-issued or delayed
delivery securities; selling securities short; and entering into swaps and
other interest rate transactions. See "Description of Securities and
Investment Techniques" below for further information.
In addition to the investment strategies described in the Prospectus, the FIXED
INCOME PORTFOLIO may:
o Invest up to 15 percent of the Portfolio's assets directly in equity
securities, including preferred and common stocks, convertible debt
securities and debt securities carrying warrants to purchase equity
securities.
<PAGE>
o Invest up to 10 percent of the Portfolio's assets in debt securities below
investment grade.
o Use various investment strategies and techniques when the Adviser determines
that such use is appropriate in an effort to meet the Portfolio's investment
objective. Such strategies and techniques include, but are not limited to,
writing listed "covered" call and "secured" put options and purchasing such
options; purchasing and selling, for hedging purposes, interest rate and
other futures contracts, and purchasing options on such futures contracts;
borrowing from banks to purchase securities; investing in securities of
other investment companies; entering into repurchase agreements; investing
in when-issued or delayed delivery securities; and selling securities short
"against the box." See "Description of Securities and Investment Techniques"
below for further information.
In addition to the investment strategies described in the Prospectus, the
GOVERNMENT SECURITIES PORTFOLIO may:
o Invest the portion of the investment Portfolio which is not invested in U.S.
Government securities, in high rated debt securities that the Adviser
believes will not expose the Portfolio to undue risk.
o Use various investment strategies and techniques when the Adviser determines
that such use is appropriate in an effort to meet the Portfolio's investment
objective. Such strategies and techniques include, but are not limited to,
writing listed "covered" call and "secured" put options and purchasing such
options; purchasing and selling, for hedging purposes, interest rate and
other futures contracts, and purchasing options on such futures contracts;
borrowing from banks to purchase securities; investing in securities of
other investment companies; entering into repurchase agreements; investing
in when-issued or delayed delivery securities; and selling securities short
"against the box." See "Description of Securities and Investment Techniques"
below for further information.
In addition to the investment strategies described in the Prospectus, the MONEY
MARKET PORTFOLIO may:
o Invest only in U.S. dollar-denominated money market instruments that present
"minimal credit risk." At least 95 percent of the Money Market Portfolio's
total assets, as measured at the time of investment, must be of the "highest
quality." A money market instrument will be considered in the highest
quality (1) if it is rated in the highest rating category by (i) any two
nationally recognized statistical rating organization ("NRSRO") or, (ii) by
the only NRSRO that rated the security; (2) if, in the case of an instrument
with a remaining maturity of 13 months or less that was long-term at the
time of issuance, the issuer thereof has short-term debt obligations
comparable in priority and securities to such security, and that are rate in
the highest rating category by (i) any two NRSROs or (ii) the only NRSRO
that has rated the security; or (3) in the case of an unrated security, such
security is of comparable quality to a security in the highest rating
category as determined by the Adviser.
o With respect to no more than 5 percent of its total assets, measured at the
time of investment, invest in money market instruments that are in the
second-highest rating category for short-term debt obligations.
o Not invest more than 5 percent of its total assets, measured at the time of
investment, in securities of any one issuer, except that this limitation
shall not apply to U.S. Government securities, and repurchase agreements
thereon and except that the Portfolio may invest more than 5 percent of its
total assets in securities of a single issuer that are of the highest
quality for a period of up to three business days.
o Not invest more than the greater of 1 percent of its total assets or
$1,000,000, measured at the time of investment, in securities of any one
issuer that are in the second-highest rating category, except that this
limitation shall not apply to U.S. Government securities.
<PAGE>
o From time to time, purchase securities on a when-issued or delayed delivery
basis.
o Also enter into repurchase agreements.
TEMPORARY DEFENSIVE POSITIONS
When unusual market or other conditions warrant, a Portfolio may temporarily
depart from its investment objective. In assuming a temporary defensive
position, each Portfolio may make investments as follows:
The Equity Portfolio, Balanced Portfolio and High Yield Portfolio may invest in
money market instruments without limit.
The Conseco 20 Focus Portfolio may invest without limit in short-term debt
securities and cash and money market instruments.
PORTFOLIO TURNOVER
A portfolio turnover rate is, in general, the percentage computed by taking
the lesser of purchases or sales of portfolio securities (excluding certain
short-term securities) for a year and dividing it by the monthly average of the
market value of such securities during the year. The Money Market Portfolio does
not have a stated portfolio turnover matrix as securities of the type in which
it invests are excluded in the usual calculation of that rate. The remaining
Portfolios do not have a predetermined rate of portfolio turnover since such
turnover will be incidental to transactions taken with a view to achieving their
respective objectives.
Because of the Adviser's active management style, our Portfolios generally
have a higher portfolio turnover than other portfolios and therefore, may have
higher taxable distribution and increased trading costs with may impact
performance. The following is a list of the Portfolios' portfolio turnover rates
for the fiscal year ended December 31, 1998 and 1999:
----------------------------------------------------------------
YEAR ENDED
----------------------------------------------------------------
PORTFOLIO NAME 1998 1999
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Government Securities Portfolio 67.49% 168.69%
----------------------------------------------------------------
Fixed Income Portfolio 321.09% 337.26%
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Balanced Portfolio 336.30% 343.43%
---------------------------------------------------------------
Equity Portfolio 317.91% 364.53%
----------------------------------------------------------------
Turnover rates in excess of 100% generally result in higher transaction
costs and a possible increase in realized short-term capital gains or losses.
Because the Conseco 20 Focus Portfolio and High Yield Portfolio are new,
there is no portfolio turnover rate to report.
<PAGE>
DESCRIPTION OF SECURITIES AND INVESTMENT TECHNIQUES
The different types of securities and investment techniques common to one or
more Portfolios all have attendant risks of varying degrees. For example, with
respect to equity securities, there can be no assurance of capital appreciation
and there is a substantial risk of decline. With respect to debt securities,
there can be no assurance that the issuer of such securities will be able to
meet its obligations on interest or principal payments in a timely manner. In
addition, the value of debt instruments generally rises and falls inversely with
interest rates. The investments and investment techniques common to one or more
Portfolios and their risks are described in greater detail below.
The investment objectives of the Portfolios are not fundamental. All
investment policies and practices described in this SAI are not fundamental,
meaning that the Trust's Board of Trustees ("Board") may change them without
shareholder approval.
The following discussion describes in greater detail different types of
securities and investment techniques used by the individual Portfolios, as well
as the risks associated with such securities and techniques.
U.S. GOVERNMENT SECURITIES AND SECURITIES OF INTERNATIONAL ORGANIZATIONS
All of the Portfolios may invest in U.S. government securities. U.S.
government securities are issued or guaranteed by the U.S. Government or its
agencies, authorities or instrumentalities.
All of the Portfolios may purchase obligations issued by international
organizations, such as Inter-American Development Bank, the Asian-American
Development Bank and the International Bank for Reconstruction and Development
(the "World Bank"), which are not U.S. Government securities. These
international organizations, while not U.S. Government agencies or
instrumentalities, have the ability to borrow from member countries, including
the United States.
MUNICIPAL OBLIGATIONS
The Portfolios may invest in Municipal Obligations. Municipal Obligations
generally includes debt obligations issued to obtain funds for various public
purposes, including the construction of a wide range of public facilities such
as airports, bridges, highways, housing, hospitals, mass transportation,
schools, streets and water and sewer works. Other public purposes for which
Municipal Obligations may be issued include refunding outstanding obligations,
obtaining funds for general operating expenses and lending such funds to other
public institutions and facilities. In addition, certain types of industrial
development bonds are issued by or on behalf of public authorities to obtain
funds to provide for the construction, equipment, repair or improvement of
privately operated housing facilities, sports facilities, convention or trade
show facilities, airport, mass transit, industrial, port or parking facilities,
air or water pollution control facilities and certain local facilities for water
supply, gas, electricity or sewage or solid waste disposal; the interest paid on
such obligations may be exempt from Federal income tax, although current tax
laws place substantial limitations on the size of such issues. Such obligations
are considered to be Municipal Obligations if the interest paid thereon
qualifies as exempt from Federal income tax in the opinion of bond counsel to
the issuer. There are, of course, variations in the security of Municipal
Obligations, both within a particular classification and between
classifications.
<PAGE>
SMALL AND MEDIUM CAPITALIZATION COMPANIES
The Conseco 20 Focus Portfolio and Equity Portfolio may invest a substantial
portion of its assets in securities issued by small- and mid-cap companies.
While these companies generally have potential for rapid growth, investments in
such companies often involve greater risks than investments in larger, more
established companies because small- and mid-cap companies may lack the
management experience, financial resources, product diversification, and
competitive strengths of companies with larger market capitalizations. In
addition, in many instances the securities of small- and mid-cap companies are
traded only over-the-counter or on a regional securities exchange, and the
frequency and volume of their trading is substantially less than is typical of
larger companies. Therefore, these securities may be subject to greater and more
abrupt price fluctuations. When making large sales, a Portfolio may have to sell
portfolio holdings at discounts from quoted prices or may have to make a series
of small sales over an extended period of time due to the trading volume of
small- and mid-cap company securities. As a result, an investment in any of
these Portfolios may be subject to greater price fluctuations than an investment
in a fund that invests primarily in larger, more established companies. The
Adviser's research efforts may also play a greater role in selecting securities
for these Portfolios than in a portfolio that invests in larger, more
established companies.
PREFERRED STOCK
Preferred stock pays dividends at a specified rate and generally has
preference over common stock in the payment of dividends and the liquidation of
the issuer's assets but is junior to the debt securities of the issuer in those
same respects. Unlike interest payments on debt securities, dividends on
preferred stock are generally payable at the discretion of the issuer's board of
directors, and shareholders may suffer a loss of value if dividends are not
paid. Preferred shareholders generally have no legal recourse against the issuer
if dividends are not paid. The market prices of preferred stocks are subject to
changes in interest rates and are more sensitive to changes in the issuer's
creditworthiness than are the prices of debt securities. Under ordinary
circumstances, preferred stock does not carry voting rights.
DEBT SECURITIES
All Portfolios may invest in U.S. dollar-denominated corporate debt
securities of domestic issuers, and the Conseco 20 Focus Portfolio, the Balanced
Portfolio, the High Yield Portfolio and the Fixed Income Portfolio may invest in
debt securities of foreign issuers that may or may not be U.S.
dollar-denominated.
The investment return on a corporate debt security reflects interest
earnings and changes in the market value of the security. The market value of
corporate debt obligations may be expected to rise and fall inversely with
interest rates generally. There also exists the risk that the issuers of the
securities may not be able to meet their obligations on interest or principal
payments at the time called for by an instrument. Debt securities rated BBB or
Baa, which are considered medium-grade category debt securities, do not have
economic characteristics that provide the high degree of security with respect
to payment of principal and interest associated with higher rated debt
securities, and generally have some speculative characteristics. A debt security
will be placed in this rating category where interest payments and principal
security appear adequate for the present, but economic characteristics that
provide longer term protection may be lacking. Any debt security, and
particularly those rated BBB or Baa (or below), may be susceptible to changing
conditions, particularly to economic downturns, which could lead to a weakened
capacity to pay interest and principal.
Corporate debt securities may pay fixed or variable rates of interest or
interest at a rate contingent upon some other factor, such as price of some
commodity. These securities may be convertible into preferred or common stock,
or may be bought as part of a unit containing common stock. A debt security may
be subject to redemption at the option of the issuer at a price set in the
security's governing instrument.
<PAGE>
In selecting corporate debt securities for the Conseco 20 Focus Portfolio
and High Yield Portfolio, the Adviser reviews and monitors the creditworthiness
of each issuer and issue. The Adviser also analyzes interest rate trends and
specific developments which it believes may affect individual issuers.
As discussed more fully earlier in the SAI, the Money Market Portfolio may
invest in rated debt securities only if they are rated in one of the two highest
short-term ratings categories. The Fixed Income Portfolio and Government
Securities Portfolio will invest in rated debt securities only if they are rated
"investment grade," except that the Fixed Income Portfolio may invest up to 10
percent of the Portfolio's assets in below investment grade debt securities. The
Equity Portfolio and the Balanced Portfolio will not invest in rated debt
securities which are rated below CCC/Caa. All Portfolios may invest in unrated
securities as long as the Adviser determines that such securities have
investment characteristics comparable to securities that would be eligible for
investment by a Portfolio by virtue of a rating. Many securities of foreign
issuers are not rated by Moody's or Standard & Poor's; therefore, the selection
of such issuers depends, to a large extent, on the credit analysis performed or
used by the Adviser.
BELOW INVESTMENT GRADE SECURITIES
IN GENERAL. The Conseco 20 Focus Portfolio, the Equity Portfolio, the
Balanced Portfolio, the High Yield Portfolio and the Fixed Income Portfolio may
invest in below investment grade securities. Below investment grade securities
(also referred to as "high yield securities are securities rated BB+ or lower by
S&P or Ba1 or lower by Moody's, securities comparably rated by another NRSRO, or
unrated securities of equivalent quality. Below investment grade securities are
deemed by the rating agencies to be predominantly speculative with respect to
the issuer's capacity to pay interest and repay principal. Below investment
grade securities, while generally offering higher yields than investment grade
securities with similar maturities, involve greater risks, including the
possibility of default or bankruptcy. As discussed below, these risks are
significantly greater in the case of below investment grade securities.
Below investment grade securities generally offer a higher yield than that
available from higher-rated issues with similar maturities, as compensation for
holding a security that is subject to greater risk. Below investment grade
securities are deemed by rating agencies to be predominately speculative with
respect to the issuer's capacity to pay interest and repay principal and may
involve major risk or exposure to adverse conditions. Below investment grade
securities involve higher risks in that they are especially subject to (1)
adverse changes in general economic conditions and in the industries in which
the issuers are engaged, (2) adverse changes in the financial condition of the
issuers, (3) price fluctuation in response to changes in interest rates and (4)
limited liquidity and secondary market support.
Subsequent to purchase by a Portfolio (except the High Yield Portfolio), an
issue of debt securities may cease to be rated or its rating may be reduced, so
that the securities would no longer be eligible for purchase by that Portfolio.
In such a case, the Portfolio will engage in an orderly disposition on the
downgraded securities to the extent necessary to ensure that its holdings do not
exceed the permissible amount as set forth in the Prospectus and this SAI.
EFFECT OF INTEREST RATES AND ECONOMIC CHANGES. All interest-bearing
securities typically experience appreciation when interest rates decline and
depreciation when interest rates rise. The market values of below investment
grade securities tend to reflect individual corporate developments to a greater
extent than do higher rated securities, which react primarily to fluctuations in
the general level of interest rates. Below investment grade securities also tend
to be more sensitive to economic conditions than are higher-rated securities. As
a result, they generally involve more credit risks than securities in the
higher-rated categories. During an economic downturn or a sustained period of
rising interest rates, highly leveraged issuers of below investment grade
securities may experience financial stress which may adversely affect their
ability to service their debt
<PAGE>
obligations, meet projected business goals, and obtain additional financing.
Periods of economic uncertainty and changes would also generally result in
increased volatility in the market prices of these securities and thus in a
Portfolio's net asset value.
PAYMENT EXPECTATIONS. Below investment grade securities may contain
redemption, call or prepayment provisions which permit the issuer of such
securities to, at its discretion, redeem the securities. During periods of
falling interest rates, issuers of these securities are likely to redeem or
prepay the securities and refinance them with debt securities with a lower
interest rate. To the extent an issuer is able to refinance the securities, or
otherwise redeem them, a Portfolio may have to replace the securities with a
lower yielding security, which would result in a lower return.
CREDIT RATINGS. Credit ratings issued by credit-rating agencies are
designed to evaluate the safety of principal and interest payments of rated
securities. They do not, however, evaluate the market value risk of
lower-quality securities and, therefore, may not fully reflect the risks of an
investment. In addition, credit rating agencies may or may not make timely
changes in a rating to reflect changes in the economy or in the condition of the
issuer that affect the market value of the security. With regard to an
investment in below investment grade securities, the achievement of a
Portfolio's investment objective may be more dependent on the Adviser's own
credit analysis than is the case for higher rated securities. Although the
Adviser considers security ratings when making investment decisions, it does not
rely solely on the ratings assigned by the rating services. Rather, the Adviser
performs research and independently assesses the value of particular securities
relative to the market. The Adviser's analysis may include consideration of the
issuer's experience and managerial strength, changing financial condition,
borrowing requirements or debt maturity schedules, and the issuer's
responsiveness to changes in business conditions and interest rates. It also
considers relative values based on anticipated cash flow, interest or dividend
coverage, asset coverage and earnings prospects.
The Adviser buys and sells debt securities principally in response to its
evaluation of an issuer's continuing ability to meet its obligations, the
availability of better investment opportunities, and its assessment of changes
in business conditions and interest rates.
LIQUIDITY AND VALUATION. Below investment grade securities may lack an
established retail secondary market, and to the extent a secondary trading
market does exist, it may be less liquid than the secondary market for higher
rated securities. The lack of a liquid secondary market may negatively impact a
Portfolio's ability to dispose of particular securities. The lack of a liquid
secondary market for certain securities may also make it more difficult for a
Portfolio to obtain accurate market quotations for purposes of valuing the
Portfolio's portfolio. In addition, adverse publicity and investor perceptions,
whether or not based on fundamental analysis, may decrease the values and
liquidity of below investment grade securities, especially in a thinly traded
market.
Because of the many risks involved in investing in below investment grade
securities, the success of such investments is dependent upon the credit
analysis of the Adviser. Although the market for below investment grade
securities is not new, and the market has previously weathered economic
downturns, the past performance of the market for such securities may not be an
accurate indication of its performance during future economic downturns or
periods of rising interest rates. Differing yields on debt securities of the
same maturity are a function of several factors, including the relative
financial strength of the issuers.
CONVERTIBLE SECURITIES
A convertible security is a bond, debenture, note, preferred stock or other
security that may be converted into or exchanged for a prescribed amount of
common stock of the same or a different issuer within a particular period of
time at a specified price or formula. A convertible security entitles the holder
to receive interest paid or accrued on debt or the dividend paid on preferred
stock until the convertible security matures or is redeemed, converted or
exchanged. Before conversion, convertible securities ordinarily provide a stable
stream of income with generally higher yields than those of common stocks of the
same or similar issuers, but lower than the yield on non-
<PAGE>
convertible debt. Convertible securities are usually subordinated to
comparable-tier non-convertible securities but rank senior to common stock in a
corporation's capital structure.
The value of a convertible security is a function of (1) its yield in
comparison with the yields of other securities of comparable maturity and
quality that do not have a conversion privilege and (2) its worth, at market
value, if converted into the underlying common stock. Convertible securities are
typically issued by smaller capitalized companies, whose stock prices may be
volatile. The price of a convertible security often reflects such variations in
the price of the underlying common stock in a way that non-convertible debt does
not. A convertible security may be subject to redemption at the option of the
issuer at a price established in the convertible security's governing
instrument, which could have an adverse effect on a Portfolio's ability to
achieve its investment objective.
MORTGAGE-BACKED SECURITIES
Each Portfolio other than the Money Market Portfolio may invest in
mortgage-backed securities. Mortgage-backed securities are interests in "pools"
of mortgage loans made to residential home buyers including mortgage loans made
by savings and loan institutions, mortgage bankers, commercial banks and others.
Pools of mortgage loans are assembled as securities for sale to investors by
various governmental, government-related and private organizations (see
"Mortgage Pass-Through Securities," below). These Portfolios may also invest in
debt securities which are secured with collateral consisting of mortgage-backed
securities (see "Collateralized Mortgage Obligations" below), and in other types
of mortgage-related securities. The Conseco 20 Focus Portfolio presently does
not intend to invest more than 5% of its assets in mortgage-backed securities.
MORTGAGE PASS-THROUGH SECURITIES. These are securities representing
interests in "pools" of mortgages in which periodic payments of both interest
and principal on the securities are made by "passing through" periodic payments
made by the individual borrowers on the residential mortgage loans underlying
such securities (net of fees paid to the issuer or guarantor of the securities
and possibly other costs). Early repayment of principal on mortgage pass-through
securities (arising from prepayments of principal due to sale of the underlying
property, refinancing, or foreclosure, net of fees and costs which may be
incurred) may expose a Portfolio to a lower rate of return upon reinvestment of
principal. Payment of principal and interest on some mortgage pass-through
securities may be guaranteed by the full faith and credit of the U.S. Government
(in the case of securities guaranteed by the Government National Mortgage
Association, "GNMA"), or guaranteed by agencies or instrumentalities of the U.S.
Government (in the case of securities guaranteed by the Federal National
Mortgage Association ("FNMA") or the Federal Home Loan Mortgage Corporation
("FHLMC")). Mortgage pass-through securities created by non-governmental issuers
(such as commercial banks, savings and loan institutions, private mortgage
insurance companies, mortgage bankers, and other secondary market issuers) may
be uninsured or may be supported by various forms of insurance or guarantees,
including individual loan, title, pool and hazard insurance, and letters of
credit, which may be issued by governmental entities, private insurers, or the
mortgage poolers.
GNMA CERTIFICATES. GNMA certificates are mortgage-backed securities
representing part ownership of a pool of mortgage loans on which timely payment
of interest and principal is guaranteed by the full faith and credit of the U.S.
Government. GNMA certificates differ from typical bonds because principal is
repaid monthly over the term of the loan rather than returned in a lump sum at
maturity. Although the mortgage loans in the pool will have maturities of up to
30 years, the actual average life of the GNMA certificates typically will be
substantially less because the mortgages may be purchased at any time prior to
maturity, will be subject to normal principal amortization, and may be prepaid
prior to maturity. Reinvestment of prepayments may occur at higher or lower
rates than the original yield on the certificates.
<PAGE>
FNMA AND FHLMC MORTGAGE-BACKED OBLIGATIONS. FNMA, a federally chartered and
privately owned corporation, issues pass-through securities representing
interests in a pool of conventional mortgage loans. FNMA guarantees the timely
payment of principal and interest, but this guarantee is not backed by the full
faith and credit of the U.S. Government. FNMA also issues REMIC certificates,
which represent interests in a trust funded with FNMA certificates. REMIC
certificates are guaranteed by FNMA and not by the full faith and credit of the
U.S. Government.
FHLMC, a corporate instrumentality of the U.S. Government, issues
participation certificates which represent an interest in a pool of conventional
mortgage loans. FHLMC guarantees the timely payment of interest and the ultimate
collection of principal, and maintains reserves to protect holders against
losses due to default, but these securities are not backed by the full faith and
credit of the U.S. Government.
As is the case with GNMA certificates, the actual maturity of and realized
yield on particular FNMA and FHLMC pass-through securities will vary based on
the prepayment experience of the underlying pool of mortgages.
COLLATERALIZED MORTGAGE OBLIGATIONS AND MORTGAGE-BACKED BONDS. All
Portfolios other than the Money Market Portfolio may purchase mortgage-backed
securities issued by financial institutions such as commercial banks, savings
and loan associations, mortgage banks, and securities broker-dealers (or
affiliates of such institutions established to issue these securities) in the
form of either collateralized mortgage obligations ("CMOs") or mortgage-backed
bonds. CMOs are obligations fully collateralized directly or indirectly by a
pool of mortgages on which payments of principal and interest are dedicated to
payment of principal and interest on the CMOs. Payments are passed through to
the holders on the same schedule as they are received. Mortgage-backed bonds are
general obligations of the issuer fully collateralized directly or indirectly by
a pool of mortgages. The mortgages serve as collateral for the issuer's payment
obligations on the bonds but interest and principal payments on the mortgages
are not passed through either directly (as with GNMA certificates and FNMA and
FHLMC pass-through securities) or on a modified basis (as with CMOs).
Accordingly, a change in the rate of prepayments on the pool of mortgages could
change the effective maturity of a CMO but not that of a mortgage-backed bond
(although, like many bonds, mortgage-backed bonds may be callable by the issuer
prior to maturity). Although the mortgage-related securities securing these
obligations may be subject to a government guarantee or third-party support, the
obligation itself is not so guaranteed. Therefore, if the collateral securing
the obligation is insufficient to make payment on the obligation, a holder could
sustain a loss. If new types of mortgage-related securities are developed and
offered to other types of investors, investments in such securities will be
considered.
STRIPPED MORTGAGE-BACKED SECURITIES. The High Yield Portfolio may invest in
stripped mortgage-backed securities, which are derivative securities usually
structured with two classes that receive different proportions of the interest
and principal distributions from an underlying pool of mortgage assets. The
Portfolio may purchase securities representing only the interest payment portion
of the underlying mortgage pools (commonly referred to as "IOs") or only the
principal portion of the underlying mortgage pools (commonly referred to as
"POs"). Stripped mortgage-backed securities are more sensitive to changes in
prepayment and interest rates and the market for such securities is less liquid
than is the case for traditional debt securities and mortgage-backed securities.
The yield on IOs is extremely sensitive to the rate of principal payments
(including prepayments) on the underlying mortgage assets, and a rapid rate of
repayment may have a material adverse effect on such securities' yield to
maturity. If the underlying mortgage assets experience greater than anticipated
prepayments of principal, the Portfolio will fail to recoup fully its initial
investment in these securities, even if they are rate high quality. Most IOs and
POs are regarded as illiquid and will be included in the Portfolio's limit on
illiquid securities.
RISKS OF MORTGAGE-BACKED SECURITIES. Mortgage pass-through securities, such
as GNMA certificates or FNMA and FHLMC mortgage-backed obligations, or modified
pass-through securities, such as CMOs issued
<PAGE>
by various financial institutions and IOs and Pos, are subject to, early
repayment of principal arising from prepayments of principal on the underlying
mortgage loans (due to the sale of the underlying property, the refinancing of
the loan, or foreclosure). Prepayment rates vary widely and may be affected by
changes in market interest rates and other economic trends and factors. In
periods of falling interest rates, the rate of prepayment tends to increase,
thereby shortening the actual average life of the mortgage-backed security.
Accordingly, it is not possible to accurately predict the average life of a
particular pool. Reinvestment of prepayments may occur at higher or lower rates
than the original yield on the securities. Therefore, the actual maturity and
realized yield on pass-through or modified pass-through mortgage-backed
securities will vary based upon the prepayment experience of the underlying pool
of mortgages.
ASSET-BACKED SECURITIES
Each Portfolio other than the Money Market Portfolio may purchase asset
backed securities. Asset-backed securities represent fractional interests in
pools of leases, retail installment loans and revolving credit receivables, both
secured and unsecured. These assets are generally held by a trust. Payments of
principal and interest or interest only are passed through to certificate
holders and may be guaranteed up to certain amounts by letters of credit issued
by a financial institution affiliated or unaffiliated with the trustee or
originator of the trust.
Underlying automobile sales contracts or credit card receivables are subject
to prepayment, which may reduce the overall return to certificate holders.
Nevertheless, principal repayment rates tend not to vary much with interest
rates and the short-term nature of the underlying car loans or other receivables
tends to dampen the impact of any change in the prepayment level. Certificate
holders may experience delays in payment on the certificates if the full amounts
due on underlying sales contracts or receivables are not realized by the trust
because of unanticipated legal or administrative costs of enforcing the
contracts or because of depreciation or damage to the collateral (usually
automobiles) securing certain contracts, or other factors. Other asset-backed
securities may be developed in the future.
ZERO COUPON BONDS
The Conseco 20 Focus Portfolio, Balanced Portfolio and High Yield Portfolio
may invest in zero coupon securities. Zero coupon bonds are debt obligations
which make no fixed interest payments but instead are issued at a significant
discount from face value. Like other debt securities, the market price can
reflect a premium or discount, in addition to the original issue discount,
reflecting the market's judgment as to the issuer's creditworthiness, the
interest rate or other similar factors. The original issue discount approximates
the total amount of interest the bonds will accrue and compound over the period
until maturity (or the first interest payment date) at a rate of interest
reflecting the market rate at the time of issuance. Because zero coupon bonds do
not make periodic interest payments, their prices can be very volatile when
market interest rates change.
The original issue discount on zero coupon bonds must be included in a
Portfolio's income ratably as it accrues. Accordingly, to qualify for tax
treatment as a regulated investment company and to avoid a certain excise tax, a
Portfolio may be required to distribute as a dividend an amount that is greater
than the total amount of cash it actually receives. These distributions must be
made from the Portfolio's cash assets or, if necessary, from the proceeds of
sales of portfolio securities. Such sales could occur at a time which would be
disadvantageous to a Portfolio and when the Portfolio would not otherwise choose
to dispose of the assets.
PAY-IN-KIND BONDS
The Balanced Portfolio and High Yield Portfolio may invest in pay-in-kind
bonds. These bonds pay "interest" through the issuance of additional bonds,
thereby adding debt to the issuer's balance sheet. The market prices of these
securities are likely to respond to changes in interest rates to a greater
degree than the prices of
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securities paying interest currently. Pay-in-kind bonds carry additional risk in
that, unlike bonds that pay interest throughout the period to maturity, a
Portfolio will realize no cash until the cash payment date and the Portfolio may
obtain no return at all on its investment if the issuer defaults.
The holder of a pay-in-kind bond must accrue income with respect to these
securities prior to the receipt of cash payments thereon. To avoid liability for
federal income and excise taxes, a Portfolio most likely will be required to
distribute income accrued with respect to these securities, even though the
Portfolio has not received that income in cash, and may be required to dispose
of portfolio securities under disadvantageous circumstances in order to generate
cash to satisfy these distribution requirements.
TRUST ORIGINATED PREFERRED SECURITIES
The High Yield Portfolio may invest in trust originated preferred
securities, a relatively new type of security issued by financial institutions
such as banks and insurance companies and other issuers. Trust originated
preferred securities represent interests in a trust formed by the issuer. The
trust sells preferred shares and invests the proceeds in notes issued by the
same entity. These notes may be subordinated and unsecured. Distributions on the
trust originated preferred securities match the interest payments on the notes;
if no interest is paid on the notes, the trust will not make current payments on
its preferred securities. Issuers of the notes currently enjoy favorable tax
treatment. If the tax characterization of these securities were to change
adversely, they could be redeemed by the issuers, which could result in a loss
to a Portfolio. In addition, some trust originated preferred securities are
available only to qualified institutional buyers under Rule 144A.
LOAN PARTICIPATIONS AND ASSIGNMENTS
The High Yield Portfolio may invest in loan participations or assignments.
In purchasing a loan participation or assignment, a Portfolio acquires some or
all of the interest of a bank or other lending institution in a loan to a
corporate borrower. Both the lending bank and the borrower may be deemed to be
"issuers" of a loan participation. Many such loans are secured and most impose
restrictive covenants which must be met by the borrower and which are generally
more stringent than the covenants available in publicly traded debt securities.
However, interests in some loans may not be secured, and a Portfolio will be
exposed to a risk of loss if the borrower defaults. There is no assurance that
the collateral can be liquidated in particular cases, or that its liquidation
value will be equal to the value of the debt. Loan participations may also be
purchased by a Portfolio when the borrowing company is already in default.
Borrowers that are in bankruptcy may pay only a small portion of the amount
owed, if they are able to pay at all. Where a Portfolio purchases a loan through
an assignment, there is a possibility that the Portfolio will, in the event the
borrower is unable to pay the loan, become the owner of the collateral. This
involves certain risks to the Portfolio as a property owner.
In purchasing a loan participation, a Portfolio may have less protection
under the federal securities laws than it has in purchasing traditional types of
securities. Loans are often administered by a lead bank, which acts as agent for
the lenders in dealing with the borrower. In asserting rights against the
borrower, a Portfolio may be dependent on the willingness of the lead bank to
assert these rights, or upon a vote of all the lenders to authorize the action.
Assets held by the lead bank for the benefit of the Portfolio may be subject to
claims of the lead bank's creditors. A Portfolio's ability to assert its rights
against the borrower will also depend on the particular terms of the loan
agreement among the parties. Many of the interests in loans purchased by a
Portfolio will be illiquid and therefore subject to the Portfolio's limit on
illiquid investments.
COLLATERALIZED BOND OBLIGATIONS
A collateralized bond obligation ("CBO") is a type of asset-backed security.
Specifically, a CBO is an investment grade bond which is backed by a diversified
pool of high risk, high yield fixed income securities. The pool of high yield
securities is separated into "tiers" representing different degrees of credit
quality. The top tier of CBOs is backed by the pooled securities with the
highest degree of credit quality and pays the lowest
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interest rate. Lower-tier CBOs represent lower degrees of credit quality and pay
higher interest rates to compensate for the attendant risk. The bottom tier
typically receives the residual interest payments (I.E. money that is left over
after the higher tiers have been paid) rather than a fixed interest rate. The
return on the bottom tier of CBOs is especially sensitive to the rate of
defaults in the collateral pool.
EURODOLLAR AND YANKEEDOLLAR OBLIGATIONS
Eurodollar obligations are U.S. dollar obligations issued outside the United
States by domestic or foreign entities, while Yankeedollar obligations are U.S.
dollar obligations issued inside the United States by foreign entities. There is
generally less publicly available information about foreign issuers and there
may be less governmental regulation and supervision of foreign stock exchanges,
brokers and listed companies. Foreign issuers may use different accounting and
financial standards, and the addition of foreign governmental restrictions may
affect adversely the payment of principal and interest on foreign investments.
In addition, not all foreign branches of United States banks are supervised or
examined by regulatory authorities as are United States banks, and such branches
may not be subject to reserve requirements.
FOREIGN SECURITIES
The Conseco 20 Focus Portfolio, the Balanced Portfolio and the High Yield
Portfolio may invest in equity securities of foreign issuers. The Balanced
Portfolio and High Yield Portfolio may invest up to 50 percent of its net assets
in such securities, while the Conseco 20 Focus may invest up to 25% of its net
assets in such securities. The Equity Portfolio and Balanced Portfolio may
invest in ADRs, which are described below. The Fixed Income Portfolio may invest
in debt obligations of foreign issuers, including foreign governments and their
agencies and instrumentalities.
Investments in foreign securities may offer unique potential benefits such
as substantial growth in industries not yet developed in the particular country.
Such investments also permit a Portfolio to invest in foreign countries with
economic policies or business cycles different from those of the United States,
or to reduce fluctuations in portfolio value by taking advantage of foreign
stock markets that may not move in a manner parallel to U.S. markets.
Investments in securities of foreign issuers involve certain risks not
ordinarily associated with investments in securities of domestic issuers. Such
risks include fluctuations in foreign exchange rates, U.S. also, and the
possible imposition of exchange controls or other foreign governmental laws or
restrictions on foreign investments or repatriation of capital. In addition,
with respect to certain countries, there is the possibility of nationalization
or expropriation of assets, confiscatory taxation, political or social
instability, or diplomatic developments that could adversely affect investments
in those countries. Since the Balanced Portfolio and the High Yield Portfolio
may invest in securities denominated or quoted in currencies other than the U.S.
dollar, changes in foreign currency exchange rates will affect the value of
securities in each Portfolio and the unrealized appreciation or depreciation of
investments so far as U.S. investors are concerned. Each Portfolio generally
will incur costs in connection with conversion between various currencies.
There may be less publicly available information about a foreign company
than about a U.S. company, and foreign companies may not be subject to
accounting, auditing, and financial reporting standards and requirements
comparable to or as uniform as those to which U.S. companies are subject.
Foreign securities markets, while growing in volume, have, for the most part,
substantially less volume than U.S. markets. Securities of many foreign
companies are less liquid and their prices more volatile than securities of
comparable U.S. companies. Transactional costs in non-U.S. securities markets
are generally higher than in U.S. securities markets. There is generally less
government supervision and regulation of exchanges, brokers, and issuers than
there is in the United States. A Portfolio might have greater difficulty taking
appropriate legal action with respect to foreign investments in non-U.S. courts
than with respect to domestic issuers in U.S. courts. In addition, transactions
in foreign securities may involve greater time from the trade date until
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settlement than domestic securities transactions and involve the risk of
possible losses through the holding of securities by custodians and securities
depositories in foreign countries.
All of the foregoing risks may be intensified in emerging markets.
Dividend and interest income from foreign securities may generally be
subject to withholding taxes by the country in which the issuer is located and
may not be recoverable by a Portfolio or its investors in all cases.
ADRs are certificates issued by a U.S. bank or trust company representing
the right to receive securities of a foreign issuer deposited in a foreign
subsidiary or branch or a correspondent of that bank. Generally, ADRs are
designed for use in U.S. securities markets and may offer U.S. investors more
liquidity than the underlying securities. The Portfolio may invest in
unsponsored ADRs. The issuers of unsponsored ADRs are not obligated to disclose
material information in the U.S. and, therefore, there may not be a correlation
between such information and the market value of such ADRs. European Depository
Receipts ("EDRs") are certificates issued by a European bank or trust company
evidencing its ownership of the underlying foreign securities. EDRs are designed
for use in European securities markets.
RESTRICTED SECURITIES, 144A SECURITIES AND ILLIQUID SECURITIES
The Conseco 20 Focus Portfolio, the Equity Portfolio, the Balanced
Portfolio, the High Yield Portfolio and the Fixed Income Portfolio may invest in
restricted securities such as private placements, and in 144A Securities. Once
acquired, restricted securities may be sold by a Portfolio only in privately
negotiated transactions or in a public offering with respect to which a
registration statement is in effect under the Securities Act of 1933. If sold in
a privately negotiated transaction, a Portfolio may have difficulty finding a
buyer and may be required to sell at a price that is less than the Adviser had
anticipated. Where registration is required, a Portfolio may be obligated to pay
all or part of the registration expenses and a considerable period may elapse
between the time of the decision to sell and the time the Portfolio may be
permitted to sell a security under an effective registration statement. If,
during such a period, adverse market conditions were to develop, the Portfolio
might obtain a less favorable price than prevailed when it decided to sell.
Restricted securities are generally considered illiquid.
Rule 144A securities, although not registered, may be resold to qualified
institutional buyers in accordance with Rule 144A under the 1933 Act. The
Adviser, acting pursuant to guidelines established by the Board, may determine
that some Rule 144A securities are liquid.
A Portfolio may not invest in any illiquid restricted security if, after
acquisition thereof, more than 15 percent of the Portfolio's assets would be
invested in illiquid securities, which are securities that cannot be expected to
be sold within seven days at approximately the price at which they are valued.
WHEN-ISSUED AND DELAYED DELIVERY SECURITIES
The Trust may, on behalf of each Portfolio, purchase securities on a
when-issued or delayed delivery basis. When-issued and delayed delivery
transactions arise when securities are bought with payment and delivery taking
place in the future. The settlement dates of these transactions, which may be a
month or more after entering into the transaction, are determined by mutual
agreement of the parties. The Trust bears the risk that, on the settlement date,
the market value of the securities may vary from the purchase price. At the time
the Trust makes a commitment to purchase securities on a when- issued or delayed
delivery basis, it will record the transaction and reflect the value each day of
such securities in determining the net asset value of the Portfolio in question.
There are no fees or other expenses associated with these types of transactions
other than normal transaction costs. To the extent the Trust engages in
when-issued and delayed delivery transactions, it will do so for the purpose of
acquiring portfolio instruments consistent with the investment
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objective and policies of the respective Portfolio and not for the purpose of
investment leverage or to speculate on interest rate changes. When effecting
when-issued and delayed delivery transactions, cash or liquid securities of a
Portfolio in an amount sufficient to make payment for the obligations to be
purchased will be segregated at the trade date and maintained until the
transaction has been settled. The Adviser will ensure that such assets are
segregated at all times and are sufficient to satisfy these obligations. The
Portfolio may dispose of these securities before the issuance thereof. However,
absent extraordinary circumstances not presently foreseen, it is the Trust's
policy not to divest itself of its right to acquire these securities prior to
the settlement date thereof.
VARIABLE AND FLOATING RATE SECURITIES
Each Portfolio may invest in variable and floating rate securities. Variable
rate securities provide for automatic establishment of a new interest rate at
fixed intervals (i.e., daily, monthly, semi-annually, etc.). Floating rate
securities provide for automatic adjustment of the interest rate whenever some
specified interest rate index changes. The interest rate on variable or floating
rate securities is ordinarily determined by reference to, or is a percentage of,
a bank's prime rate, the 90-day U.S. Treasury bill rate, the rate of return on
commercial paper or bank certificates of deposit, an index of short-term
interest rates, or some other objective measure.
Variable or floating rate securities frequently include a demand feature
entitling the holder to sell the securities to the issuer at par value. In many
cases, the demand feature can be exercised at any time on seven days' notice; in
other cases, the demand feature is exercisable at any time on 30 days' notice or
on similar notice at intervals of not more than one year.
BANKING INDUSTRY AND SAVINGS INDUSTRY OBLIGATIONS
Each Portfolio may invest in certificates of deposit, time deposits,
bankers' acceptances, and other short-term debt obligations issued by commercial
banks and in certificates of deposit, time deposits, and other short-term
obligations issued by savings and loan associations ("S&Ls"). Certificates of
deposit are receipts from a bank or an S&L for funds deposited for a specified
period of time at a specified rate of return. Time deposits in banks or S&Ls are
generally similar to certificates of deposit, but are uncertificated. Bankers'
acceptances are time drafts drawn on commercial banks by borrowers, usually in
connection with international commercial transactions. The Conseco 20 Focus
Portfolio, Equity Portfolio, High Yield Portfolio, Fixed Income Portfolio and
Money Market Portfolio may each invest in obligations of foreign branches of
domestic commercial banks and foreign banks so long as the securities are U.S.
dollar-denominated. The Balanced Portfolio may also invest in these types of
instruments but such instruments will not necessarily be U.S. dollar-
denominated. See "Foreign Securities" below for information regarding risks
associated with investments in foreign securities.
The Portfolios will not invest in obligations issued by a commercial bank or
S&L unless:
1. The bank or S&L has total assets of at least $1 billion, or the equivalent
in other currencies, and the institution has outstanding securities rated A
or better by Moody's or Standard & Poor's, or, if the institution has no
outstanding securities rated by Moody's or Standard & Poor's, it has, in
the determination of the Adviser, similar credit-worthiness to institutions
having outstanding securities so rated;
2. In the case of a U.S. bank or S&L, its deposits are federally insured; and
3. In the case of a foreign bank, the security is, in the determination of the
Adviser, of an investment quality comparable with other debt securities
which may be purchased by the Portfolio. These limitations do not prohibit
investments in securities issued by foreign branches of U.S. banks,
provided such U.S. banks meet the foregoing requirements.
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COMMERCIAL PAPER
Commercial paper refers to promissory notes representing an unsecured debt of a
corporation or finance company with a fixed maturity of no more than 270 days. A
variable amount master demand note (which is a type of commercial paper)
represents a direct borrowing arrangement involving periodically fluctuating
rates of interest under a letter agreement between a commercial paper issuer and
an institutional lender pursuant to which the lender may determine to invest
varying amounts.
STANDARD AND POOR'S DEPOSITORY RECEIPT (SPDRS)
The Portfolios may purchase securities that represent ownership in long-term
unit investment trust that holds a portfolio of common stocks designed to track
the performance of the S&P 500 Index. A SPDR entitles a holder to receive
proportionate quarterly cash distributions corresponding to the dividends that
accrue to the S&P 500 stocks in the underlying portfolio, less trust expenses.
REPURCHASE AGREEMENTS AND REVERSE REPURCHASE AGREEMENTS
Each Portfolio may enter into repurchase agreements and reverse repurchase
agreements. Repurchase agreements permit an investor to maintain liquidity and
earn income over periods of time as short as overnight. In these transactions, a
Portfolio purchases U.S. Treasury obligations or U.S. Government securities (the
"underlying securities") from a broker or bank, which agrees to repurchase the
underlying securities on a certain date or on demand and at a fixed price
calculated to produce a previously agreed upon return to the Portfolio. If the
broker or bank were to default on its repurchase obligation and the underlying
securities were sold for a lesser amount, the Portfolio would realize a loss. A
repurchase transaction will be subject to guidelines approved by the Board of
Trustees of the Trust, which include monitoring the credit-worthiness of the
parties with which the Portfolio engages in repurchase transactions, obtaining
collateral at least equal in value to the repurchase obligation, and marking the
collateral to market on a daily basis.
A reverse repurchase agreement involves the temporary sale of a security by
a Portfolio and its agreement to repurchase the instrument at a specified time
and price. Such agreements are short-term in nature. A Portfolio will segregate
cash or liquid securities whenever it enters into reverse repurchase agreements.
Such transactions may be considered to be borrowings.
Although not one of the Trust's fundamental policies, it is the Trust's
present policy not to enter into a repurchase transaction which will cause more
than 10 percent of the assets of the Money Market Portfolio, the Government
Securities Portfolio or the Fixed Income Portfolio to be subject to repurchase
agreements having a maturity of more than seven days. This 10 percent limit also
includes the aggregate of (i) fixed time deposits subject to withdrawal
penalties, other than overnight deposits; and (ii) any restricted securities
(i.e., securities which cannot freely be sold for legal reasons) and any
securities for which market quotations are not readily available; however, this
10 percent limit does not include any obligations payable at principal amount
plus accrued interest, on demand or within seven days after demand, and thus
does not include repurchase agreements having a maturity of seven days or less.
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MORTGAGE DOLLAR ROLLS
In a mortgage dollar roll, a Portfolio sells a fixed income security for
delivery in the current month and simultaneously contracts to repurchase a
substantially similar security (same type, coupon and maturity) on a specified
future date. During the roll period, the Portfolio would forego principal and
interest paid on such securities. The Portfolio would be compensated by the
difference between the current sales price and the forward price for the future
purchase, as well as by any interest earned on the proceeds of the initial sale.
In accordance with regulatory requirements, a Portfolio will segregate cash
or liquid securities whenever it enters into mortgage dollar rolls. Such
transactions may be considered to be borrowings for purposes of the Portfolios'
fundamental policies concerning borrowings.
WARRANTS
The Conseco 20 Focus Portfolio, Equity Portfolio and Balanced Portfolio may
invest in warrants. Each of these Portfolios may invest up to 5 percent of its
net assets in warrants (not including those that have been acquired in units or
attached to other securities), measured at the time of acquisition, and each
such Portfolio may acquire a warrant not listed on the New York or American
Stock Exchanges if, after such acquisition, no more than 2 percent of the
Portfolio's net assets would be invested in such warrants.
The holder of a warrant has the right to purchase a given number of shares
of a security of a particular issuer at a specified price until expiration of
the warrant. Such investments provide greater potential for profit or loss than
a direct purchase of the same amount of the securities. Prices of warrants do
not necessarily move in tandem with the prices of the underlying securities, and
are considered speculative investments. They pay no dividends and confer no
rights other than a purchase option. If a warrant is not exercised by the date
of its expiration, a Portfolio would lose its entire investment in such warrant.
INTEREST RATE TRANSACTIONS
The Conseco 20 Focus Portfolio and the High Yield Portfolio may seek to
protect the value of its investments from interest rate fluctuations by entering
into various hedging transactions, such as interest rate swaps and the purchase
or sale of interest rate caps, floors and collars. A Portfolio expects to enter
into these transactions primarily to preserve a return or spread on a particular
investment or portion of its portfolio. A Portfolio may also enter into these
transactions to protect against an increase in the price of securities a
Portfolio anticipates purchasing at a later date. Each Portfolio intends to use
these transactions as a hedge and not as speculative investments.
Interest rate swaps involve the exchange by a Portfolio with another party
of their respective commitments to pay or receive interest, e.g., an exchange of
floating rate payments for fixed rate payments. The purchase of an interest rate
cap entitles the purchaser, to the extent that a specified index exceeds a
predetermined interest rate, to receive payments on a notional principal amount
from the party selling such interest rate cap. The purchase of an interest rate
floor entitles the purchaser, to the extent that a specified index falls below a
predetermined interest rate, to receive payments of interest on a notional
principal amount from the party selling such interest rate floor. An interest
rate collar combines elements of buying a cap and selling a floor.
A Portfolio may enter into interest rate swaps, caps, floors, and collars
on either an asset-based or liability-based basis depending on whether it is
hedging its assets or its liabilities, and will only enter into such
transactions on a net basis, i.e., the two payment streams are netted out, with
a Portfolio receiving or paying,
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as the case may be, only the net amount of the two payments. The amount of the
excess, if any, of a Portfolio's obligations over its entitlements with respect
to each interest rate swap, cap, floor, or collar will be accrued on a daily
basis and an amount of cash or liquid securities having an aggregate value at
least equal to the accrued excess will be maintained in a segregated account by
the custodian.
A Portfolio will not enter into any interest rate transaction unless the
unsecured senior debt or the claims-paying ability of the other party thereto is
rated in the highest rating category of at least one NRSRO at the time of
entering into such transaction. If there is a default by the other party to such
transaction, a Portfolio will have contractual remedies pursuant to the
agreements related to the transaction. The swap market has grown substantially
in recent years with a large number of banks and investment banking firms acting
both as principals and agents. As a result, the swap market has become well
established and provides a degree of liquidity. Caps, floors and collars are
more recent innovations which tend to be less liquid than swaps.
STEP DOWN PREFERRED SECURITIES
Step down perpetual preferred securities are issued by a real estate
investment trust ("REIT") making a mortgage loan to a single borrower. The
dividend rate paid by these securities is initially relatively high, but
declines yearly. The securities are subject to call if the REIT suffers an
unfavorable tax event, and to tender by the issuer's equity holder in the tenth
year; both events could be on terms unfavorable to the holder of the preferred
securities. The value of these securities will be affected by changes in the
value of the underlying mortgage loan. The REIT is not diversified, and the
value of the mortgaged property may not cover its obligations. Step down
perpetual preferred securities are considered restricted securities under the
1933 Act.
FUTURES CONTRACTS
The Conseco 20 Focus, Equity, Balanced, High Yield, Fixed Income and
Government Securities may engage in futures contracts and may purchase and sell
interest rate futures contracts. The Equity and Balanced Portfolios may purchase
and sell stock index futures contracts, interest rate futures contracts, and
futures contracts based upon other financial instruments and components. The
Balanced Portfolio may also engage in gold and other precious metals futures
contracts.
Such investments may be made by these Portfolios solely for the purpose of
hedging against the effect that changes in general market conditions, interest
rates, and conditions affecting particular industries may have on the values of
securities held in a Portfolio or in which a Portfolio intends to purchase, and
not for purposes of speculation.
GENERAL DESCRIPTION OF FUTURES CONTRACTS. A futures contract provides for
the future sale by one party and purchase by another party of a specified amount
of a particular financial instrument (debt security) or commodity for a
specified price at a designated date, time, and place. Although futures
contracts by their terms require actual future delivery of and payment for the
underlying financial instruments, such contracts are usually closed out before
the delivery date. Closing out an open futures contract position is effected by
entering into an offsetting sale or purchase, respectively, for the same
aggregate amount of the same financial instrument on the same delivery date.
Where a Portfolio has sold a futures contract, if the offsetting price is more
than the original futures contract purchase price, the Portfolio realizes a
gain; if it is less, the Portfolio realizes a loss.
At the time a Portfolio enters into a futures contract, an amount of cash,
or liquid securities equal to the fair market value less initial margin of the
futures contract, will be deposited in a segregated account with the Trust's
custodian to collateralize the position and thereby ensure that such futures
contract is covered. A Portfolio may be required to deposit additional assets in
the segregated account in order to continue covering the contract as market
conditions change. In addition, each Portfolio will comply with certain
regulations of the Commodity Futures Trading Commission to qualify for an
exclusion from being a "commodity pool operator".
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INTEREST RATE FUTURES CONTRACTS. The Conseco 20 Focus, Equity, Balanced,
High Yield, Fixed Income and Government Securities Portfolios may purchase and
sell interest rate futures contracts. An interest rate futures contract is an
obligation traded on an exchange or board of trade that requires the purchaser
to accept delivery, and the seller to make delivery, of a specified quantity of
the underlying financial instrument, such as U.S. Treasury bills and bonds, in a
stated delivery month, at a price fixed in the contract.
These Portfolios may purchase and sell interest rate futures as a hedge
against changes in interest rates that adversely impact the value of debt
instruments and other interest rate sensitive securities being held by a
Portfolio. A Portfolio might employ a hedging strategy whereby it would purchase
an interest rate futures contract when it is not fully invested in long-term
debt securities but wishes to defer their purchase until it can orderly invest
in such securities or because short-term yields are higher than long-term
yields. Such a purchase would enable the Portfolio to earn the income on a
short-term security while at the same time minimizing the effect of all or part
of an increase in the market price of the long-term debt security which the
Portfolio intends to purchase in the future. A rise in the price of the
long-term debt security prior to its purchase either would be offset by an
increase in the value of the futures contract purchased by the Portfolio or
avoided by taking delivery of the debt securities under the futures contract.
A Portfolio would sell an interest rate futures contract to continue to
receive the income from a long-term debt security, while endeavoring to avoid
part or all of the decline in market value of that security which would
accompany an increase in interest rates. If interest rates rise, a decline in
the value of the debt security held by the Portfolio would be substantially
offset by the ability of the Portfolio to repurchase at a lower price the
interest rate futures contract previously sold. While the Portfolio could sell
the long-term debt security and invest in a short-term security, this would
ordinarily cause the Portfolio to give up income on its investment since
long-term rates normally exceed short-term rates.
OPTIONS ON FUTURES CONTRACTS. The Conseco 20 Focus, Equity, Balanced, High
Yield, Fixed Income and Government Securities Portfolios may purchase options on
interest rate futures contracts, although these Portfolios will not write
options on any such contracts. A futures option gives a Portfolio the right, in
return for the premium paid, to assume a long position (in the case of a call)
or short position (in the case of a put) in a futures contract at a specified
exercise price prior to the expiration of the option. Upon exercise of a call
option, the purchaser acquires a long position in the futures contract and the
writer of the option is assigned the opposite short position. In the case of a
put option, the converse is true. In most cases, however, a Portfolio would
close out its position before expiration by an offsetting purchase or sale.
The Portfolios would enter into options on futures contracts only in
connection with hedging strategies. Generally, these strategies would be
employed under the same market conditions in which a Portfolio would use put and
call options on debt securities, as described in "Options on Securities" below.
STOCK INDEX FUTURES CONTRACTS. The Conseco 20 Focus, Equity and Balanced
Portfolios may purchase and sell stock index futures contracts. A "stock index"
assigns relative values to the common stocks included in an index (for example,
the Standard & Poor's 500 and Composite Stock Price Index or the New York Stock
Exchange Composite Index), and the index fluctuates with changes in the market
values of such stocks. A stock index futures contract is a bilateral agreement
to accept or make payment, depending on whether a contract is purchased or sold,
of an amount of cash equal to a specified dollar amount multiplied by the
difference between the stock index value at the close of the last trading day of
the contract and the price at which the futures contract is originally purchased
or sold.
To the extent that changes in the value of the Conseco 20 Focus Portfolio,
the Equity Portfolio or the Balanced Portfolio correspond to changes in a given
stock index, the sale of futures contracts on that index ("short hedge") would
substantially reduce the risk to the Portfolio of a market decline and, by so
doing, provide an alternative to a liquidation of securities position, which may
be difficult to accomplish in a rapid and orderly
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fashion. Stock index futures contracts might also be sold:
1. When a sale of portfolio securities at that time would appear to be
disadvantageous in the long-term because such liquidation would:
a. Forego possible appreciation,
b. Create a situation in which the securities would be difficult to
repurchase, or c. Create substantial brokerage commission;
2. When a liquidation of part of the investment portfolio has commenced or is
contemplated, but there is, in the Adviser's determination, a substantial
risk of a major price decline before liquidation can be completed; or
3. To close out stock index futures purchase transactions.
Where the Adviser anticipates a significant market or market sector advance,
the purchase of a stock index futures contract ("long hedge") affords a hedge
against the possibility of not participating in such advance at a time when a
Portfolio is not fully invested. Such purchases would serve as a temporary
substitute for the purchase of individual stocks, which may then be purchased in
an orderly fashion. As purchases of stock are made, an amount of index futures
contracts which is comparable to the amount of stock purchased would be
terminated by offsetting closing sales transactions. Stock index futures might
also be purchased:
1. If the Portfolio is attempting to purchase equity positions in issues which
it may have or is having difficulty purchasing at prices considered by the
Adviser to be fair value based upon the price of the stock at the time it
qualified for inclusion in the investment portfolio, or
2. To close out stock index futures sales transactions.
GOLD FUTURES CONTRACTS. The Balanced Portfolio may enter into futures
contracts on gold. A gold futures contract is a standardized contract which is
traded on a regulated commodity futures exchange, and which provides for the
future delivery of a specified amount of gold at a specified date, time, and
price. When the Portfolio purchases a gold futures contract, it becomes
obligated to take delivery and pay for the gold from the seller in accordance
with the terms of the contract. When the Portfolio sells a gold futures
contract, it becomes obligated to make delivery of the gold to the purchaser in
accordance with the terms of the contract. The Portfolio will enter into gold
futures contracts only for the purpose of hedging its holdings or intended
holdings of gold stocks. The Portfolio will not engage in these contracts for
speculation or for achieving leverage. The hedging activities may include
purchases of futures contracts as an offset against the effect of anticipated
increases in the price of gold or sales of futures contracts as an offset
against the effect of anticipated declines in the price of gold.
RISKS ASSOCIATED WITH FUTURES AND FUTURES OPTIONS. There are several risks
associated with the use of futures and futures options for hedging purposes.
While hedging transactions may protect a Portfolio against adverse movements in
the general level of interest rates and economic conditions, such transactions
could also preclude the Portfolio from the opportunity to benefit from favorable
movements in the underlying component. There can be no guarantee that the
anticipated correlation between price movements in the hedging vehicle and in
the portfolio securities being hedged will occur. An incorrect correlation could
result in a loss on both the hedged securities and the hedging vehicle so that
the Portfolio's return might have been better if hedging had not been attempted.
The degree of imperfection of correlation depends on circumstances such as
variations in speculative market demand for futures and futures options,
including technical influences in futures trading and futures options, and
differences between the financial instruments being hedged and the instruments
underlying the standard contracts available for trading in such respects as
interest rate levels, maturities, and credit-worthiness of issuers. A decision
as to whether, when, and how to hedge involves the exercise of skill and
judgment and even a well-conceived hedge may be unsuccessful to some degree
because
<PAGE>
of market behavior or unexpected interest rate trends.
There can be no assurance that a liquid market will exist at a time when a
Portfolio seeks to close out a futures contract or a futures option position.
Most futures exchanges and boards of trade limit the amount of fluctuation
permitted in futures contract prices during a single day. Once the daily limit
has been reached on a particular contract, no trades may be made that day at a
price beyond that limit. The daily limit governs only price movements during a
particular trading day and therefore does not limit potential losses because the
limit may work to prevent the liquidation of unfavorable positions. For example,
futures prices have occasionally moved to the daily limit for several
consecutive trading days with little or no trading, thereby preventing prompt
liquidation of positions and subjecting some holders of futures contracts to
substantial losses. In addition, certain of these instruments are relatively new
and without a significant trading history. Lack of a liquid market for any
reason may prevent a Portfolio from liquidating an unfavorable position and the
Portfolio would remain obligated to meet margin requirements and continue to
incur losses until the position is closed.
A Portfolio will only enter into futures contracts or futures options which
are standardized and traded on a U.S. exchange or board of trade. A Portfolio
will not enter into a futures contract or purchase a futures option if
immediately thereafter the initial margin deposits for futures contracts held by
the Portfolio plus premiums paid by it for open futures options positions,
excluding transactions entered into for bona fide hedging purposes and less the
amount by which any such positions are "in-the-money" (i.e., the amount by which
the value of the contract exceeds the exercise price), would exceed 5 percent of
the Portfolio's net assets.
OPTIONS ON SECURITIES AND SECURITIES INDICES
The Conseco 20 Focus, Equity, Balanced, Fixed Income and Government
Securities Portfolios may purchase put and call options on securities, and the
Conseco 20 Focus, Equity and Balanced Portfolios may purchase put and call
options on stock indices at such times as the Adviser deems appropriate and
consistent with a Portfolio's investment objective. Such Portfolios may also
write listed "covered" calls and "secured" put options. A Portfolio may write
covered and secured options with respect to not more than 25 percent of its net
assets. A Portfolio may purchase call and put options with a value of up to 5
percent of its net assets. Each of these Portfolios may enter into closing
transactions in order to terminate its obligations either as a writer or a
purchaser of an option prior to the expiration of the option.
PURCHASING OPTIONS ON SECURITIES. An option on a security is a contract that
gives the purchaser of the option, in return for the premium paid, the right to
buy a specified security (in the case of a call option) or to sell a specified
security (in the case of a put option) from or to the seller ("writer") of the
option at a designated price during the term of the option. A Portfolio may
purchase put options on securities to protect holdings in an underlying or
related security against a substantial decline in market value. Securities are
considered related if their price movements generally correlate to one another.
For example, the purchase of put options on debt securities held by a Portfolio
would enable a Portfolio to protect, at least partially, an unrealized gain in
an appreciated security without actually selling the security. In addition, the
Portfolio would continue to receive interest income on such security.
A Portfolio may purchase call options on securities to protect against
substantial increases in prices of securities which the Portfolio intends to
purchase pending its ability to invest in such securities in an orderly manner.
A Portfolio may sell put or call options it has previously purchased, which
could result in a net gain or loss depending on whether the amount realized on
the sale is more or less than the premium and other transactional costs paid on
the option which is sold.
<PAGE>
WRITING COVERED CALL AND SECURED PUT OPTIONS. In order to earn additional
income on its portfolio securities or to protect partially against declines in
the value of such securities, the Conseco 20 Focus, Equity, Balanced, High
Yield, Fixed Income and Government Securities Portfolios may each write
"covered" call and "secured" put options. The exercise price of a call option
may be below, equal to, or above the current market value of the underlying
security at the time the option is written. During the option period, a covered
call option writer may be assigned an exercise notice from OCC if exchanged
traded requiring the writer to deliver the underlying security against payment
of the exercise price. This obligation is terminated upon the expiration of the
option period or at such earlier time in which the writer effects a closing
purchase transaction. Closing purchase transactions will ordinarily be effected
to realize a profit on an outstanding call option, to prevent an underlying
security from being called, to permit the sale of the underlying security, or to
enable the Portfolio to write another call option on the underlying security
with either a different exercise price or expiration date or both.
In order to earn additional income or to protect partially against increases
in the value or securities to be purchased, the Conseco 20 Focus, Equity,
Balanced, High Yield, Fixed Income and Government Securities Portfolios may
write "secured" put options. During the option period, the writer of a put
option may be assigned an exercise notice requiring the writer to purchase the
underlying security at the exercise price.
A Portfolio may write a call or put option only if the call option is
"covered" or the put option is "secured" by the Portfolio. Under a covered call
option, the Portfolio is obligated, as the writer of the option, to own the
underlying securities subject to the option or hold a call at an equal or lower
exercise price, for the same exercise period, and on the same securities as the
written call. Under a secured put option, a Portfolio must maintain, in a
segregated account with the Trust's custodian, cash or liquid securities with a
value sufficient to meet its obligation as writer of the option. A put may also
be secured if the Portfolio holds a put on the same underlying security at an
equal or greater exercise price. Prior to exercise or expiration, an option may
be closed out by an offsetting purchase or sale of an option of the same
Portfolio.
OPTIONS ON SECURITIES INDICES. The Conseco 20 Focus, Equity and Balanced
Portfolios may purchase call and put options on securities indices. Call and put
options on securities indices also may be purchased or sold by a Portfolio for
the same purposes as the purchase or sale of options on securities. Options on
securities indices are similar to options on securities, except that the
exercise of securities index options requires cash payments and does not involve
the actual purchase or sale of securities. In addition, securities index options
are designed to reflect price fluctuations in a group of securities or segment
of the securities market rather than price fluctuations in a single security.
The Conseco 20 Focus, Equity and Balanced Portfolios may write put and call
options on securities indices. When such options are written, the Portfolio is
required to maintain a segregated account consisting of cash, or liquid
securities, or the Portfolio must purchase a like option of greater value that
will expire no earlier than the option written. The purchase of such options may
not enable a Portfolio to hedge effectively against stock market risk if they
are not highly correlated with the value of a Portfolio's securities. Moreover,
the ability to hedge effectively depends upon the ability to predict movements
in the stock market, which cannot be done accurately in all cases.
RISKS OF OPTIONS TRANSACTIONS. The purchase and writing of options involves
certain risks. During the option period, the covered call writer has, in return
for the premium on the option, given up the opportunity to profit from a price
increase in the underlying securities above the exercise price, and, as long as
its obligation as a writer continues, has retained the risk of loss should the
price of the underlying security decline. The writer of an option has no control
over the time when it may be required to fulfill its obligation as a writer of
the option. Once an option writer has received an exercise notice, it cannot
effect a closing purchase transaction in order to terminate its obligation under
the option and must deliver the underlying securities at the exercise price. If
a put or call option purchased by a Portfolio is not sold when it has remaining
value, and if the market price of the underlying security, in the case of a put,
remains equal to or greater than the exercise price or, in the case of a call,
remains less than or equal to the exercise price, the Portfolio will lose its
entire investment in the option.
<PAGE>
Also, where a put or call option on a particular security is purchased to hedge
against price movements in a related security, the price of the put or call
option may move more or less than the price of the related security.
There can be no assurance that a liquid market will exist when a Portfolio
seeks to close out an option position. Furthermore, if trading restrictions or
suspensions are imposed on the options markets, a Portfolio may be unable to
close out a position. If a Portfolio cannot effect a closing transaction, it
will not be able to sell the underlying security or securities in a segregated
account while the previously written option remains outstanding, even though it
might otherwise be advantageous to do so. Possible reasons for the absence of a
liquid secondary market on a national securities exchange could include:
insufficient trading interest, restrictions imposed by national securities
exchanges, trading halts or suspensions with respect to options or their
underlying securities, inadequacy of the facilities of national securities
exchanges or The Options Clearing Corporation due to a high trading volume or
other events, and a decision by one or more national securities exchanges to
discontinue the trading of call options or to impose restrictions on certain
types of orders.
There also can be no assurance that a Portfolio would be able to liquidate
an over-the-counter ("OTC") option at any time prior to expiration. In contrast
to exchange-traded options where the clearing organization affiliated with the
particular exchange on which the option is listed in effect guarantees the
completion of every exchange-traded option, OTC options are contracts between a
Portfolio and a counter-party, with no clearing organization guarantee. Thus,
when a Portfolio purchases an OTC option, it generally will be able to close out
the option prior to its expiration only by entering into a closing transaction
with the dealer from whom the Portfolio originally purchased the option.
Since option premiums paid or received by a Portfolio, as compared to
underlying investments, are small in relation to the market value of such
investments, buying and selling put and call options offer large amounts of
leverage. Thus, the leverage offered by trading in options could result in a
Portfolio's net asset value being more sensitive to changes in the value of the
underlying securities.
FOREIGN CURRENCY TRANSACTIONS
The Conseco 20 Focus Portfolio, Balanced Portfolio and High Yield Portfolio
may enter into foreign currency futures contracts and forward currency
contracts. A foreign currency futures contract is a standardized contract for
the future delivery of a specified amount of a foreign currency, at a future
date at a price set at the time of the contract. A forward currency contract is
an obligation to purchase or sell a currency against another currency at a
future date at a price agreed upon by the parties. The Portfolio may either
accept or make delivery of the currency at the maturity of the contract or,
prior to maturity, enter into a closing transaction involving the purchase or
sale of an offsetting contract. The Portfolio will engage in foreign currency
futures contracts and forward currency transactions in anticipation of or to
protect itself against fluctuations in currency exchange rates. The Portfolio
will not commit more than 15 percent of its total assets computed at market
value at the time of commitment to a foreign currency futures or forward
currency contracts. The Portfolio will purchase and sell such contracts for
hedging purposes and not as an investment. The Portfolio will not enter into a
foreign currency contract with a term of greater than one year.
Forward currency contracts are not traded on regulated commodities
exchanges. A Portfolio entering into a forward currency contract incurs the risk
of default by the counter party to the transaction.
There can be no assurance that a liquid market will exist when a Portfolio
seeks to close out a foreign currency futures or forward currency position, in
which case a Portfolio might not be able to effect a closing purchase
transaction at any particular time. While these contracts tend to minimize the
risk of loss due to a decline in the value of the hedged currency, at the same
time, they tend to limit any potential gain which might result should the value
of such currency increase.
Although the Conseco 20 Focus Portfolio, Balanced Portfolio and High Yield
Portfolio values assets daily in
<PAGE>
U.S. dollars, it does not intend to physically convert its holdings of foreign
currencies into U.S. dollars on a daily basis. The Portfolio will do so from
time to time and investors should be aware of the costs of currency conversion.
Although foreign exchange dealers do not charge a fee for conversion, they do
realize a profit based on the difference (the "spread") between the prices at
which they are buying and selling various currencies. Thus, a dealer may offer
to sell a foreign currency to the Portfolio at one rate, while offering a lesser
rate of exchange should the Portfolio desire to resell that currency to the
dealer.
OPTIONS ON FOREIGN CURRENCIES
The Conseco 20 Focus Portfolio, Balanced Portfolio and High Yield Portfolio
may invest up to 5 percent of its total assets, taken at market value at the
time of investment, in call and put options on domestic and foreign securities
and foreign currencies. The Portfolio may purchase call and put options on
foreign currencies as a hedge against changes in the value of the U.S. dollar
(or another currency) in relation to a foreign currency in which portfolio
securities of the Portfolio may be denominated. A call option on a foreign
currency gives the purchaser the right to buy, and a put option the right to
sell, a certain amount of foreign currency at a specified price during a fixed
period of time. The Portfolio may enter into closing sale transactions with
respect to such options, exercise them, or permit them to expire.
The Conseco 20 Focus Portfolio, Balanced Portfolio and High Yield Portfolio
may employ hedging strategies with options on currencies before the Portfolio
purchases a foreign security denominated in the hedged currency, during the
period the Portfolio holds the foreign security, or between the day the foreign
security is purchased or sold and the date on which payment therefor is made or
received. Hedging against a change in the value of a foreign currency in the
foregoing manner does not eliminate fluctuations in the prices of portfolio
securities or prevent losses if the prices of such securities decline.
Furthermore, such hedging transactions reduce or preclude the opportunity for
gain if the value of the hedged currency should increase relative to the U.S.
dollar. The Portfolio will purchase options on foreign currencies only for
hedging purposes and will not speculate in options on foreign currencies. The
Portfolio may invest in options on foreign currency which are either listed on a
domestic securities exchange or traded on a recognized foreign exchange.
An option position on a foreign currency may be closed out only on an
exchange which provides a secondary market for an option of the same series.
Although the Conseco 20 Focus Portfolio, Balanced Portfolio and High Yield
Portfolio will purchase only exchange-traded options, there is no assurance that
a liquid secondary market on an exchange will exist for any particular option,
or at any particular time. In the event no liquid secondary market exists, it
might not be possible to effect closing transactions in particular options. If
the Portfolio cannot close out an exchange-traded option which it holds, it
would have to exercise its option in order to realize any profit and would incur
transactional costs on the sale of the underlying assets.
SEGREGATION AND COVER FOR OPTIONS, FUTURES AND OTHER FINANCIAL INSTRUMENTS
The use of the financial instruments discussed above, I.E., interest rate
transactions (including swaps, caps, floors and collars), futures contracts,
options on future contacts, options on securities and securities indices, and
forward contracts (collectively, "Financial Instruments"), may be subject to
applicable regulations of the SEC, the several exchanges upon which they are
traded, and/or the Commodity Futures Trading Commission ("CFTC").
Each Portfolio is required to maintain assets as "cover," maintain
segregated accounts or make margin payments when it takes positions in Financial
Instruments involving obligations to third parties (I.E., Financial Instruments
other than purchased options). No Portfolio will enter into such transactions
unless it owns either (1) an offsetting ("covered") position in securities,
currencies or other options, futures contracts or forward contracts, or (2) cash
and liquid assets with a value, marked-to-market daily, sufficient to cover its
potential obligations to the extent not covered as provided in (1) above. Each
Portfolio will comply with SEC guidelines regarding cover for these instruments
and will, if the guidelines so require, set aside cash or liquid assets in a
<PAGE>
segregated account with its custodian in the prescribed amount as determined
daily.
SECURITIES LENDING
The Conseco 20 Focus and High Yield Portfolios may lend securities to
broker-dealers or other institutional investors pursuant to agreements requiring
that the loans be continuously secured by any combination of cash, U.S.
Government securities, and approved bank letters of credit that at all times
equal at least 100% of the market value of the loaned securities. The Conseco 20
Focus and High Yield Portfolios will not make such loans if, as a result, the
aggregate amount of all outstanding securities loans would exceed 33 1/3% of the
Portfolio's total assets. A Portfolio continues to receive interest on the
securities loaned and simultaneously earns either interest on the investment of
the cash collateral or fee income if the loan is otherwise collateralized.
Should the borrower of the securities fail financially, there is a risk of delay
in recovery of the securities loaned or loss of rights in the collateral.
However, the Portfolios seek to minimize this risk by making loans only to
borrowers which are deemed by the Adviser to be of good financial standing and
that have been approved by the Board.
BORROWING
For temporary purposes, such as to facilitate redemptions, a Portfolio may
borrow money from a bank, but only if immediately after each such borrowing and
continuing thereafter the Portfolio would have asset coverage of 300 percent.
Leveraging by means of borrowing will exaggerate the effect of any increase or
decrease in the value of portfolio securities on a Portfolio's net asset value;
money borrowed will be subject to interest and other costs which may or may not
exceed the income received from the securities purchased with borrowed funds.
The use of borrowing tends to result in a faster than average movement, up or
down, in the net asset value of a Portfolio's shares. A Portfolio also may be
required to maintain minimum average balances in connection with such borrowing
or to pay a commitment or other fee to maintain a line of credit; either of
these requirements would increase the cost of borrowing over the stated interest
rate.
The use of derivatives in connection with leverage may create the potential
for significant losses. The Conseco 20 Focus and High Yield Portfolios may
pledge assets in connection with permitted borrowings. As a manner of
fundamental policy, the Portfolios may (1) borrow money from banks, and (2)
enter into reverse repurchase agreements, provided that (1) and (2) in
combination do not exceed 33 1/3 of the value of the Portfolio's total assets
(including the amount borrowed) less liabilities (other than borrowings).
Additionally, the Portfolio's may borrow from any person up to 5% of its total
assets (not including the amount borrowed) for temporary purposes (but not for
leverage or the purchase of investments).
INVESTMENT IN SECURITIES OF OTHER INVESTMENT COMPANIES
Each Portfolio (except the Money Market Portfolio) may purchase securities
of other investment companies. Such securities have the potential to appreciate
as do any other securities, but tend to present less risk because their value is
based on a diversified portfolio of investments. The 1940 Act expressly permits
mutual funds such as the Trust to invest in other investment companies within
prescribed limitations. An investment company may invest in other investment
companies if at the time of such investment (1) it does not purchase more than 3
percent of the voting securities of any one investment company, (2) it does not
invest more than 5 percent of its assets in any single investment company, and
(3) the investment in all investment companies does not exceed 10 percent of
assets. Each Portfolio will comply with all of these limitations with respect to
the purchase of securities issued by other investment companies.
Investment companies in which the Portfolios may invest charge advisory and
administrative fees and may also assess a sales load and/or distribution fees.
Therefore, investors in a Portfolio that invested in other investment companies
would indirectly bear costs associated with those investments as well as the
costs associated with investing in the Portfolio. The percentage limitations
described above significantly limit the costs a
<PAGE>
Portfolio may incur in connection with such investments.
SHORT SALES
The Conseco 20 Focus Portfolio and High Yield Portfolio may effect short
sales. A short sale is a transaction in which a Portfolio sells a security in
anticipation that the market price of the security will decline. A Portfolio may
effect short sales (i) as a form of hedging to offset potential declines in long
positions in securities it owns or anticipates acquiring, or in similar
securities, and (ii) to maintain flexibility in its holdings. In a short sale
"against the box," at the time of sale the Portfolio owns the security it sold
short or has the immediate and unconditional right to acquire at no additional
cost the identical security. Under applicable guidelines of the SEC staff, if a
Portfolio engages in a short sale (other than an short sale against-the-box), it
must put an appropriate amount of cash or liquid securities in a segregated
account (not with the broker).
The effect of short selling on a Portfolio is similar to the effect of leverage.
Short selling may exaggerate changes in a Portfolio's NAV. Short selling may
also produce higher than normal portfolio turnover, which may result in
increased transaction costs to a Portfolio.
INVESTMENT PERFORMANCE
The methods by which the investment performance of the Money Market
Portfolio are calculated for a specified period of time are described below.
The first method, which results in an amount referred to as the "current
yield," assumes an account containing exactly one share at the beginning of the
period. (The net asset value of this share will be $1.00 except under
extraordinary circumstances.) The net change in the value of the account during
the period is then determined by subtracting this beginning value from the value
of the account at the end of the period; however, capital changes (i.e.,
realized gains and losses from the sale of securities and unrealized
appreciation and depreciation) are excluded from the calculation.
This net change in the account value is then divided by the value of the
account at the beginning of the period (i.e., normally $1.00 as discussed above)
and the resulting figure (referred to as the "base period return") is then
annualized by multiplying it by 365 and dividing by the number of days in the
period; the result is the "current yield." Normally a seven-day period will be
used in determining yields (both the current yield and the effective yield
discussed below) in published or mailed advertisements.
The second method results in an amount referred to as the "compounded
effective yield." This represents an annualization of the current yield with
dividends reinvested daily. This compounded effective yield is calculated for a
seven-day period by compounding the unannualized base period return by adding
one to the base period return, raising the sum to a power equal to 365 divided
by seven and subtracting one from the result.
Yield information may be useful to investors in reviewing the performance of
the Money Market Portfolio. However, a number of factors should be taken into
account before using yield information as a basis for comparison with
alternative investments. An investment in the Money Market Portfolio is not
insured and its yields are not guaranteed. The yields normally will fluctuate on
a daily basis. The yields for any given past period are not an indication or
representation by the Trust of future yields or rates of return on the shares of
the Money Market Portfolio and, therefore, they cannot be compared to yields on
savings accounts or other investment alternatives which often provide a
guaranteed fixed yield for a stated period of time, and may be insured by a
government agency. In comparing the yields of one money market fund to another,
consideration should be given to each fund's investment policy, portfolio
quality, portfolio maturity, type of instruments held and operating expenses. In
addition, the yield of the Money Market Portfolio as well as the yield of the
Conseco 20 Focus, Equity, Balanced, High Yield, Fixed Income and Government
Securities Portfolios will each
<PAGE>
be affected by charges imposed by the separate accounts that invest in the
Portfolios. See the Prospectus of the applicable separate account for details.
The Conseco 20 Focus Portfolio, High Yield Portfolio, Fixed Income Portfolio
and Government Securities Portfolio may advertise investment performance
figures, including yield. Each Portfolio's yield will be based upon a stated
30-day period and will be computed by dividing the net investment income per
share earned during the period by the maximum offering price per share on the
last day of the period, according to the following formula:
6
YIELD = 2 ((A-B/CD)+1) -1
Where:
A = the dividends and interest earned during the period.
B = the expenses accrued for the period (net of reimbursements, if any).
C = the average daily number of shares outstanding during the period that were
entitled to receive dividends.
D = the maximum offering prices (which is the net asset value) per share on the
last day of the period.
STANDARDIZED AVERAGE ANNUAL TOTAL RETURN QUOTATIONS
Each of the Portfolios may advertise its total return and its cumulative
total return. The total return will be based upon a stated period and will be
computed by finding the average annual compounded rate of return over the stated
period that would equate an initial amount invested to the ending redeemable
value of the investment (assuming reinvestment of all distributions), according
to the following formula:
P (1+T)n=ERV
Where:
P = a hypothetical initial payment of $1,000.
T = the average annual total return.
n = the number of years.
ERV = the ending redeemable value at the end of the stated period of a
hypothetical $1,000 payment made at the beginning of the stated
period.
The cumulative total return will be based upon a stated period and will be
computed by dividing the ending redeemable value of a hypothetical investment by
the value of the initial investment (assuming reinvestment of all
distributions).
Each investment performance figure will be carried to the nearest hundredth
of one percent.
<PAGE>
AVERAGE ANNUAL TOTAL RETURNS
----------------------------
PERIODS ENDED DECEMBER 31, 1999
-------------------------------
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PORTFOLIO NAME ONE YEAR FIVE YEARS 10 YEARS
-------------- -------- ---------- --------
- ------------------------------------------------------------------------------
Equity Portfolio 50.28% 35.08% 21.18%
- ------------------------------------------------------------------------------
Balanced Portfolio 30.83% 24.85% 16.85%
- ------------------------------------------------------------------------------
Fixed Income Portfolio -0.44% 7.92% 6.23%
- ------------------------------------------------------------------------------
Government Securities Portfolio -2.48% 6.61% 7.30%
- ------------------------------------------------------------------------------
Money Market Portfolio 4.87% 5.18% 4.71%
- ------------------------------------------------------------------------------
*Since inception - May 1, 1993.
Because the Conseco 20 Focus and High Yield Portfolios are new, they have no
previous operating history.
NON-STANDARDIZED PERFORMANCE
In addition, in order to more completely represent a Portfolio's
performance or more accurately compare such performance to other measures of
investment return, a Portfolio also may include in advertisements, sales
literature and shareholder reports other total return performance data
("Non-Standardized Return"). Non-Standardized Return may be quoted for the same
or different periods as those for which Standardized Return is required to be
quoted; it may consist of an aggregate or average annual percentage rate of
return, actual year-by-year rates or any combination thereof. All
non-standardized performance will be advertised only if the standard performance
data for the same period, as well as for the required periods, is also
presented.
From time to time, the Conseco 20 Focus and High Yield Portfolios may
advertise their performance compared to similar funds or types of investments
using certain unmanaged indices, reporting services and publications.
Descriptions of some of the indices which may be used are listed below.
The Standard & Poor's 500 Composite Stock Price Index is a well diversifie
list of 500 companies representing the U.S. stock market.
The Standard & Poor's MidCap 400 Index consists of 400 domestic stocks of
companies whose market capitalizations range from $201 million to $14.4 billion,
with a median market capitalization of $2.1 billion.
The Lehman Government Bond Index is a measure of the market value of all
public obligations of the U.S. Treasury; all publicly issued debt of all
agencies of the U.S. Government and all quasi-federal corporations; and all
corporate debt guaranteed by the U.S. Government. Mortgage-backed securities and
foreign targeted issues are not included in the Lehman Government Bond Index.
The Lehman Government/Corporate Bond Index is a measure of the market value
of approximately 5,900 bonds with a face value currently in excess of $3.5
trillion. To be included in the Lehman Government/Corporate Index, an issue must
have amounts outstanding in excess of $100 million, have at least one year to
maturity and be rated "BBB/Baa" or higher ("investment grade") by an NRSRO.
The Lehman Brothers Aggregate Bond Index is an index consisting of the
securities listed in Lehman Brothers Government/Corporate Bond Index, the Lehman
Brothers Mortgage-Backed Securities Index, and the Lehman Brothers Asset-Backed
Securities Index. The Government/Corporate Bond Index is described above. The
Mortgage-Backed Securities Index consists of 15 and 30-year fixed rate
securities backed by mortgage pools of GNMA, FHLMC and FNMA (excluding buydowns,
manufactured homes and graduated equity
<PAGE>
mortgages). The Asset-Backed Securities Index consists of credit card, auto and
home equity loans (excluding subordinated tranches) with an average life of one
year.
The Merrill Lynch High Yield Master Index consists of publicly placed
nonconvertible, coupon-bearing US domestic debt and carries a term to maturity
of at least one year. Par amounts outstanding are not less than $10 million at
the start and at the close of the performance measurement period. Issues must be
rated by Standard & Poor's or by Moody's Investors Service as less than
investment grade (i.e., BBB or Baa) but not in default (i.e., DDD1 or less). The
index excludes floating rate debt, equipment trust certificates and Title 11
securities.
In addition, from time to time in reports and promotions (1) a Portfolio's
performance may be compared to other groups of mutual funds tracked by: (a)
Lipper Analytical Services and Morningstar, Inc., widely used independent
research firms which rank mutual funds by overall performance, investment
objectives, and assets; or (b) other financial or business publications, such as
Business Week, Money Magazine, Forbes and Barron's which provide similar
information; (2) the Consumer Price Index (measure for inflation) may be used to
assess the real rate of return from an investment in a Portfolio; (3) other
statistics such as GNP and net import and export figures derived from
governmental publications, e.g., The Survey of Current Business or statistics
derived by other independent parties, e.g., the Investment Company Institute,
may be used to illustrate investment attributes of a Portfolio or the general
economic, business, investment, or financial environment in which a Portfolio
operates; (4) various financial, economic and market statistics developed by
brokers, dealers and other persons may be used to illustrate aspects of a
Portfolio's performance; and (5) the sectors or industries in which a Portfolio
invests may be compared to relevant indices or surveys (e.g., S&P Industry
Surveys) in order to evaluate the Portfolio's historical performance or current
or potential value with respect to the particular industry or sector.
SECURITIES TRANSACTIONS
The Adviser is responsible for decisions to buy and sell securities for the
Trust, broker-dealer selection, and negotiation of brokerage commission rates.
The Adviser's primary consideration in effecting a securities transaction will
be execution at the most favorable price. A substantial portion of the Trust's
portfolio transactions in fixed income securities will be transacted with
primary market makers acting as principal on a net basis, with no brokerage
commissions being paid by the Trust. In certain instances, the Adviser may make
purchases of underwritten issues at prices which include underwriting fees.
In selecting a broker-dealer to execute each particular transaction, the
Adviser will take the following into consideration: the best net price
available; the reliability, integrity and financial condition of the
broker-dealer; and the size of contribution of the broker-dealer to the
investment performance of the Trust on a continuing basis. Broker-dealers may be
selected who provide brokerage and/or research services to the Trust and/or
other accounts over which the Adviser exercises investment discretion. Such
services may include advice concerning the value of securities (including
providing quotations as to securities); the advisability of investing in,
purchasing or selling securities; the availability of securities or the
purchasers or sellers of securities; furnishing analysis and reports concerning
issuers, industries, securities, economic factors and trends, portfolio strategy
and performance of accounts; and effecting securities transactions and
performing functions incidental thereto, such as clearance and settlement and
custody, or required in connection therewith.
Subject to the Conduct Rules of the NASD and to obtaining best prices and
executions, the Adviser may select brokers who provide research or other
services or who sell shares of the Funds to effect portfolio transactions. The
Adviser may also select an affiliated broker to execute transactions for the
Funds, provided that the commissions, fees or other remuneration paid to such
affiliated broker are reasonable and fair as compared to that paid to
non-affiliated brokers for comparable transactions.
The Adviser shall not be deemed to have acted unlawfully, or to have
breached any duty created by a
<PAGE>
Portfolio's Investment Advisory Agreement or otherwise, solely by reason of its
having caused the Portfolio to pay a broker-dealer that provides brokerage and
research services an amount of commission for effecting a portfolio investment
transaction in excess of the amount of commission another broker-dealer would
have charged for effecting that transaction, if the Adviser determines in good
faith that such amount of commission is reasonable in relation to the value of
the brokerage and research services provided by such broker-dealer, viewed in
terms of either that particular transaction or the Adviser's overall
responsibilities with respect to the Portfolio. The Adviser allocates orders
placed by it on behalf of these Portfolios in such amounts and proportions as
the Adviser shall determine and the Adviser will report on said allocations
regularly to a Portfolio indicating the broker-dealers to whom such allocations
have been made and the basis therefor.
The receipt of research from broker-dealers may be useful to the Adviser in
rendering investment management services to these Portfolios and/or the
Adviser's other clients; conversely, information provided by broker-dealers who
have executed transaction orders on behalf of other clients may be useful to the
Adviser in carrying out its obligations to these Portfolios. The receipt of such
research will not be substituted for the independent research of the Adviser. It
does enable the Adviser to reduce costs to less than those which would have been
required to develop comparable information through its own staff. The use of
broker-dealers who supply research may result in the payment of higher
commissions than those available from other broker-dealers who provide only the
execution of portfolio transactions.
During the fiscal years ended December 31, 1997, 1998 and 1999, no Portfolio
paid brokerage commissions to any affiliated brokers.
During the fiscal years ended December 31, 1997, 1998 and 1999, $1,075,944,
$1,911,370 and $1,787,853 respectively, were paid in brokerage commissions to
brokers.
The Board of Trustees periodically reviews the Adviser's performance of its
responsibilities in connection with the placement of portfolio transactions on
behalf of the Trust.
MANAGEMENT
THE ADVISER
Conseco Capital Management, Inc. (the "Adviser") provides investment advice
and, in general, supervises the Trust's management and investment program,
furnishes office space, prepares reports for the Trust, monitors compliance by
the Trust in its investment activities and pays all compensation of officers and
Trustees of the Trust who are affiliated persons of the Adviser. The Trust pays
all other expenses incurred in the operation of the Trust, including fees and
expenses of unaffiliated Trustees of the Trust.
The Adviser is a wholly-owned subsidiary of Conseco, Inc. ("Conseco"), a
publicly-owned financial services company, the principal operations of which are
in development, marketing and administration of specialized annuity, life and
health insurance products. Conseco's offices are located at 11825 N.
Pennsylvania Street, Carmel, Indiana 46032. The Adviser manages and serves as
adviser to other registered investment companies and manages the invested assets
of Conseco, which owns or manages several life insurance subsidiaries, and
provides investment and servicing functions to the Conseco companies and
affiliates. The Adviser also manages foundations, endowments, public and
corporate pension plans, and private client accounts. As of December 31, 1999,
the Adviser managed in excess of $42.2 billion in assets.
The Investment Advisory Agreements provide that the Adviser shall not be
liable for any error in judgment or mistake of law or for any loss suffered by
the Trust in connection with any investment policy or the purchase, sale or
redemption of any securities on the recommendations of the Adviser. The
Agreements provide that the Adviser is not protected against any liability to
the Trust or its security holders for which the Adviser shall otherwise be
subject by reason of willful misfeasance, bad faith, gross negligence, or
reckless disregard of the duties imposed upon it by the Agreements or the
violation of any applicable law.
<PAGE>
Because Conseco 20 Focus Portfolio and High Yield Portfolio are new
portfolios, no advisory fees were paid, reimbursed and/or waived in the prior
year. Under the terms of the Investment Advisory Agreements, the Adviser has
contracted to receive an investment advisory fee equal to an annual rate of
0.80% of the average daily net asset value of the High Yield Portfolio and the
Conseco 20 Focus Portfolio.
- --------------------------------------------------------------------------------
ADVISORY FEES ACCRUED
FISCAL YEAR ENDED DECEMBER 31
- --------------------------------------------------------------------------------
PORTFOLIO 1997 1998 1999
---- ---- ----
- --------------------------------------------------------------------------------
Equity Portfolio $1,145,633 $ 1,318,667 $1,527,354
- --------------------------------------------------------------------------------
Balanced Portfolio $ 119,987 $ 206,059 $ 290,656
- --------------------------------------------------------------------------------
Fixed Income Portfolio $ 95,504 $ 108,286 $ 135,467
- --------------------------------------------------------------------------------
Government Securities Portfolio $ 20,206 $ 28,774 $ 52,459
- --------------------------------------------------------------------------------
Money Market Portfolio $ 19,048 $ 34,393 $ 219,494
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
AMOUNT REIMBURSED/WAIVED
FISCAL YEAR ENDED DECEMBER 31
- --------------------------------------------------------------------------------
PORTFOLIO 1997 1998 1999
---- ---- ----
- --------------------------------------------------------------------------------
Equity Portfolio $ 511 $ 463 $ 117,489
- --------------------------------------------------------------------------------
Balanced Portfolio $ 20,538 $ 33,386 $ 44,716
- --------------------------------------------------------------------------------
Fixed Income Portfolio $ 13,678 $ 21,216 $ 0
- --------------------------------------------------------------------------------
Government Securities Portfolio $ 9,016 $ 15,354 $ 0
- --------------------------------------------------------------------------------
Money Market Portfolio $ 5,353 $ 11,851 $ 109,747
- --------------------------------------------------------------------------------
Pursuant to a contractual arrangement with the Trust, the Adviser has agreed
to waive fees and/or reimburse expenses through April 30, 2001, so that annual
operating expenses of each Portfolio are limited to the following net expenses:
0.90% for the Conseco 20 Focus Portfolio; 0.85% for the Equity Portfolio; 0.85%
for the Balanced Portfolio; 0.90% for the High Yield Portfolio; 0.70% for the
Fixed Income Portfolio; 0.70% for the Government Securities Portfolio; and 0.45%
for the Money Market Portfolio. This arrangement does not cover interest, taxes,
brokerage commissions, and extraordinary expenses.
Conseco Variable Insurance Company and Bankers National Life Insurance
Company, subsidiaries of Conseco, Inc., hold a majority of the outstanding
shares of Conseco Series Trust for the benefit of contract owners.
<PAGE>
OTHER SERVICE PROVIDERS
THE ADMINISTRATOR. Conseco Services, LLC, a wholly owned subsidiary of
Conseco acts as administrator to the Trust. Under the agreement, the
Administrator will supervise the overall administration of the Portfolios. These
administrative services may include supervising the preparation and filing of
all documents required for compliance by the Portfolios with applicable laws and
regulations, supervising the maintenance of books and records, and other general
administrative responsibilities. For providing these services, the Administrator
will receive a fee from each Portfolio as follows: 0.10% for the first $100
million; 0.08% for the second $100 million; and 0.06% in excess of $200 million.
The total fees under this agreement for the period from August 1, 1999 through
December 31, 1999 were $150,903.
From August 1, 1999 through December 31, 1999, the following administration fees
were accrued:
-------------------------------------------------------
FUND FEES PAID
-------------------------------------------------------
Equity Portfolio $ 88,225
-------------------------------------------------------
Balanced Portfolio $ 19,144
-------------------------------------------------------
Fixed Income Portfolio $ 12,100
-------------------------------------------------------
Government Securities Portfolio $ 5,209
-------------------------------------------------------
Money Market Portfolio $ 26,225
-------------------------------------------------------
CUSTODIAN. The Bank of New York , 90 Washington Street, 22nd Floor, New
York, New York 10826, serves as custodian of the assets of each Portfolio.
CODE OF ETHICS. The Fund, Adviser and Principal Underwriter have adopted a
Code of Ethics of (hereinafter "Code") pursuant to Rule 17j-1 promulgated by the
Securities and Exchange Commission pursuant to Section 17(j) of the Investment
Company Act of 1940 (the "Investment Company Act") and under the Insider Trading
and Securities Fraud Enforcement Act of 1988 (the "Insider Trading Act"). Under
the Code, neither director, officer nor advisory person of the Adviser shall
purchase or sell, directly or indirectly, any security in which he has, or by
reason of such transaction acquires, any direct or indirect beneficial ownership
and which security to his knowledge at the time of such purchase and sale (1) is
being considered for purchase or sale by the Adviser on behalf of any client, or
(2) is being purchased or sold by the Adviser on behalf of any client. The Code
also requires prior clearance, submission of duplicate confirmations on all
transactions, submission of duplicate monthly statements on all beneficially
owned accounts by access persons. The Code is on file with and is available from
the Securities and Exchange Commission.
INDEPENDENT ACCOUNTANTS/AUDITORS. PricewaterhouseCoopers LLP, 2900 One
American Square, Box 82002, Indianapolis, Indiana 46282-0002 serves as the
Trust's independent accountant.
TRUSTEES AND OFFICERS
The Trustees and officers of the Trust, their affiliations, if any, with the
Adviser and their principal
<PAGE>
occupations are set forth below. As of the date of this Prospectus, Messrs.
Parrish and LeCroy are Owners of contracts with Conseco Variable Insurance
Company; none of the other Trustees or officers own any of the shares of any of
the Portfolios, either directly or through ownership of the Contracts.
<TABLE>
<CAPTION>
NAME, ADDRESS POSITION HELD WITH PRINCIPAL OCCUPATION(S)
AND AGE TRUST OR ADVISER DURING PAST 5 YEARS
=====================================================================================================================
<S> <C> <C>
WILLIAM P. DAVES, JR. (74) Chairman of the Board, Consultant to insurance and healthcare
5723 Trail Meadow Trustee industries. Director, President and Chief
Dallas, TX 75230 Executive Officer, FFG Insurance Co. Chairman of
the Board and Trustee of other mutual funds
managed by the Adviser.
MAXWELL E. BUBLITZ* (44) President and Trustee Chartered Financial Analyst. President and
11825 N. Pennsylvania St. Director, Adviser. Previously, Senior Vice
Carmel, IN 46032 President, Adviser. President and Trustee of
other mutual funds managed by the Adviser.
HAROLD W. HARTLEY (76) Trustee Retired. Chartered Financial Analyst. Previously,
502 Canal Cove Court Executive Vice President, Tenneco Financial
Ft. Myers Beach, Fl 33931 Services, Inc. Trustee of other mutual funds
managed by the Adviser. Director Ennis Business
Forms, Inc.
DR. R. JAN LECROY (68) Trustee Retired. Previously, President, Dallas Citizens
841 Liberty Council. Trustee of other mutual funds managed
Dallas, TX 75204 by the Adviser. Director, Southwest Securities
Group, Inc.
DR. JESSE H. PARRISH (72) Trustee Former President, Midland College. Higher
2805 Sentinel Education Consultant. Trustee of other mutual
Midland, TX 79701 funds managed by the Adviser.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
NAME, ADDRESS POSITION HELD WITH PRINCIPAL OCCUPATION(S)
AND AGE TRUST OR ADVISER DURING PAST 5 YEARS
======================================================================================================================
<S> <C> <C>
DAVID N. WALTHALL (54) Trustee Principal, Walthall Asset Management. Former
1 Galleria Tower, Suite 1050 President, Chief Executive Officer and Director
13355 Noel Road of Lyrick Corporation. Formerly, President and
Dallas, TX 75240 CEO, Heritage Media Corporation. Formerly,
Director, Eagle National Bank. Trustee of other
mutual funds managed by the Adviser.
WILLIAM P. KOVACS (54) Vice President and Vice President, Senior Counsel, Secretary, Chief
11825 N. Pennsylvania St. Secretary Compliance Officer and Director of Adviser. Vice
Carmel, IN 46032 President, Senior Counsel, Secretary and
Director, Conseco Equity Sales, Inc. Vice
President and Secretary of other mutual funds
managed by the Adviser. Previously, Associate
Counsel, Vice President and Assistant Secretary,
Kemper Financial Services, Inc. (1989-1996);
previous to Of Counsel, Rudnick & Wolfe
(1997-1998); previous to Of Counsel, Shefsky &
Froelich (1998).
JAMES S. ADAMS (40) Treasurer Senior Vice President, Bankers National, Great
11815 N. Pennsylvania St. American Reserve. Senior Vice President, Treasurer,
Carmel, IN 46032 and Director, Conseco Equity Sales, Inc. Senior
Vice President and Treasurer, Conseco Services,
LLC. Treasurer of other mutual funds managed by the
Adviser.
WILLIAM T. DEVANNEY, JR. (44) Vice President, Senior Vice President, Corporate Taxes, Bankers
11815 N. Pennsylvania St. Corporate Taxes National and Great American Reserve. Senior Vice
Carmel, IN 46032 President, Corporate Taxes, Conseco Equity Sales,
Inc. and Conseco Services LLC. Vice President of
other mutual funds managed by the Adviser.
=======================================================================================================================
</TABLE>
* The Trustee so indicated is an "interested person," as defined in the
Investment Company Act of 1940, of the Trust due to the positions indicated with
the Adviser and its affiliates.
The following table shows the compensation of each disinterested Trustee for the
fiscal year ending December 31, 1999 for affiliated investment companies within
the Fund Complex. In addition to Conseco Series Trust, the Fund Complex as of
December 31, 1999 consists of: Conseco Fund Group and Conseco Strategic Income
Fund.
<PAGE>
COMPENSATION TABLE
<TABLE>
<CAPTION>
Aggregate Total Compensation From
Compensation Investment Companies in the Trust
Name of Person, Position From the Trust Complex Paid to Trustees
- ------------------------ -------------- -------------------------
<S> <C> <C>
William P. Daves, Jr. $9,000 $27,000
(14 other investment company)
Harold W. Hartley $9,000 $27,000
(14 other investment company)
Dr. R. Jan LeCroy $9,000 $27,000
(14 other investment company)
Dr. Jesse H. Parrish $8,000 $24,000
(14 other investment company)
David N. Walthall $9,000 $27,000
(14 other investment company)
</TABLE>
NET ASSET VALUES OF THE SHARES OF THE PORTFOLIOS
THE VALUE OF THE SECURITIES OF THE MONEY MARKET PORTFOLIO
The Money Market Portfolio's use of the amortized cost method is
conditioned on compliance with certain conditions contained in Rule 2a-7 (the
"Rule") under the 1940 Act. The Rule also obligates the Trustees, as part of
their responsibility within the overall duty of care owed to the shareholders,
to establish procedures reasonably designed, taking into account current market
conditions and the Portfolio's investment objectives, to stabilize the net asset
value per share as computed for the purpose of distribution and redemption at
$1.00 per share. The Trustees' procedures include periodically monitoring, as
they deem appropriate and at such intervals as are reasonable in light of
current market conditions, the relationship between the amortized cost value per
share and the net asset value per share based upon available indications of
market value. The Trustees will consider what steps should be taken, if any, in
the event of difference of more than one-half of one percent between the two. To
minimize any material dilution or other unfair results which might arise from
differences between the two, the Trustees will take such steps as they consider
appropriate (e.g., redemption in kind or shortening the average portfolio
maturity).
It is the normal practice of the Money Market Portfolio to hold portfolio
securities to maturity. Therefore, unless a sale or other disposition of a
security is mandated by redemption requirements or other extraordinary
circumstances, the Portfolio will realize the principal amount of the security.
Under the amortized cost method of valuation, neither the amount of daily income
nor the net asset value is affected by any unrealized appreciation or
depreciation of the Portfolio. In periods of declining interest rates, the yield
on shares of the Portfolio will tend to be higher than if the valuation were
based upon market prices and estimates. In periods of rising interest rates, the
yield on shares of the Portfolio will tend to be lower than if the valuation was
based upon market prices and estimates.
<PAGE>
THE VALUE OF THE SECURITIES OF THE OTHER PORTFOLIOS
Securities held by all Portfolios except the Money Market Portfolio will be
valued as follows: Portfolio securities which are traded on stock exchanges are
valued at the closing market prices on the day the securities are being valued,
or lacking any sales, at the mean between the closing bid and asked prices.
Securities traded in the over-the-counter market are valued at the mean between
the closing bid and asked prices as quoted by one or more dealers that make
markets in such securities. Portfolio securities which are traded both in the
over-the-counter market and on a stock exchange are valued according to the
broadest and most representative market, and it is expected that for debt
securities this ordinarily will be the over-the-counter market. Securities and
assets for which market quotations are not readily available are valued at fair
value as determined in good faith by or under the direction of the Board of
Trustees of the Trust. In valuing below investment grade securities, it should
be recognized that judgment plays a greater role than is the case with respect
to securities for which a broader range of dealer quotations and last sale
information is available. Debt securities with maturities of sixty (60) days or
less are valued at amortized cost.
DIVIDENDS, OTHER DISTRIBUTIONS AND TAXES
Investors should understand that, as Owners, they will not receive directly
any dividends or other distributions from the Trust or any of the Portfolios.
All such dividends and other distributions are payable to, and reinvested by,
the separate accounts of the insurance company in which contract premiums are
invested.
It is each Portfolio's intention to distribute sufficient net investment
income to avoid the imposition of federal income tax on the Portfolio. Each
portfolio also intends to distribute sufficient income to avoid the application
of any federal excise tax. For dividend purposes, the net investment income of
each Portfolio, other than the Money Market Portfolio, consists of all dividends
and/or interest received less its estimated expenses (including fees payable to
the Adviser). Net investment income of the Money Market Portfolio consists of
accrued interest (i) plus or minus amortized discounts or premiums, (ii) plus or
minus realized gains or losses on portfolio securities, (iii) less the estimated
expenses of that Portfolio applicable to that dividend period. The Balanced
Portfolio is also required to include in its taxable income each year a portion
of the original issue discount at which it acquires zero coupon securities, even
though the Portfolio receives no interest payment on the securities during the
year. Similarly, that Portfolio must include in its taxable income each year any
interest on payment-in-kind securities in the form of additional securities.
Accordingly, to continue to qualify for treatment as a regulated investment
company under the Code, that Portfolio may be required to distribute as a
dividend an amount that is greater than the total amount of cash the Portfolio
actually receives. Those distributions will be made from the Portfolio's cash
assets or the proceeds from sales of portfolio securities, if necessary.
Dividends from the Government Securities Portfolio and Fixed Income
Portfolio will be declared and reinvested monthly in additional full and
fractional shares of those respective Portfolios. Dividends from the Balanced
Portfolio and the Equity Portfolio will be declared and reinvested quarterly in
additional full and fractional shares of those respective Portfolios. Dividends
from the Money Market Portfolio will be declared and reinvested daily in
additional full and fractional shares of that Portfolio. However, the Trustees
may decide to declare dividends at other intervals.
Distributions of each Portfolio's net capital gains (the excess of net
long-term capital gain over net short-term capital loss), net short-term gains,
and net realized gains from foreign currency transactions, if any, is declared
and paid to its shareholders annually after the close of its fiscal year. See
the applicable Contract prospectus for information regarding the federal income
tax treatment of distributions to the insurance company separate accounts.
<PAGE>
Each Portfolio of the Trust is treated as a separate corporation for
federal income tax purposes and intends to qualify as a "regulated investment
company" under Subchapter M of the Internal Revenue Code of 1986 (the "Code").
As such, a portfolio will not be subject to federal income tax on the part of
its net investment income and net realized capital gains that it distributes to
shareholders. To qualify for treatment as a "regulated investment company," each
Portfolio must, among other things, derive at least 90 percent of its gross
income for each taxable year from dividends, interest and gains from the sale or
other disposition of securities.
GENERAL
The Trustees themselves have the power to alter the number and terms of
office of the Trustees, and they may at any time lengthen their own terms or
make their terms of unlimited duration (subject to certain removal procedures)
and appoint their own successors, provided that always at least a majority of
the Trustees have been elected by the shareholders of the Trust. The voting
rights of shareholders are not cumulative, so that holders of more than 50
percent of the shares voting can, if they choose, elect all Trustees being
selected, while the holders of the remaining shares would be unable to elect any
Trustees. The Trust is not required to hold Annual Meetings of Shareholders for
action by shareholders' vote except as may be required by the 1940 Act or the
Declaration of Trust. The Declaration of Trust provides that shareholders can
remove Trustees by a vote of two-thirds of the vote of the outstanding shares.
The Trustees will call a meeting of shareholders to vote on the removal of a
Trustee upon the written request of the holders of 10 percent of the Trust's
shares. In addition, 10 or more shareholders meeting certain conditions and
holding the lesser of $25,000 worth or 1 percent of the Trust's shares may
advise the Trustees in writing that they wish to communicate with other
shareholders for the purpose of requesting a meeting to remove a Trustee. The
Trustees will then either give those shareholders access to the shareholder list
or, if requested by those shareholders, mail at the shareholders' expense the
shareholders' communication to all other shareholders. See the Contract and
Policy Prospectuses for information as to the voting of shares by Owners.
Each issued and outstanding share of each Portfolio is entitled to
participate equally in dividends and distributions of the respective Portfolio
and in the net assets of such Portfolio upon liquidation or dissolution
remaining after satisfaction of outstanding liabilities. The shares of each
Portfolio have no preference, preemptive, conversion, exchange or similar
rights, and are freely transferable.
Under Rule 18f-2 under the 1940 Act, as to any investment company which has
two or more series (such as the Portfolios) outstanding and as to any matter
required to be submitted to shareholder vote, such matter is not deemed to have
been effectively acted upon unless approved by the holders of a "majority" (as
defined in that Rule) of the voting securities of each series affected by the
matter. Such separate voting requirements do not apply to the election of
Trustees or the ratification of the selection of accountants. The Rule contains
special provisions for cases on which an advisory contract is approved by one or
more, but not all, series. A change in investment policy may go into effect as
to one or more series whose holders so approve the change even though the
required vote is not obtained as to the holders of other affected series.
Under Massachusetts law, shareholders of a trust such as the Trust may,
under certain circumstances, be held personally liable as partners for the
obligations of the Trust. The Declaration of Trust, however, contains an express
disclaimer of shareholder liability for acts or obligations of the Trust and
requires that notice of such disclaimer be given in each agreement, obligation
or instrument entered into or executed by the Trust or its Trustees. The
Declaration of Trust provides for indemnification and reimbursement of expenses
out of Trust property for any shareholder held personally liable for its
obligations. The Declaration of Trust also provides that the Trust shall, upon
request, assume the defense of any claim made against any shareholder for any
act or obligation of the Trust and satisfy any judgment thereon. Thus, while
Massachusetts law permits a shareholder of a trust such as the Trust to be held
personally liable as a partner under certain circumstances, the risk of a
Contract Owner incurring financial loss on account of shareholder liability is
highly unlikely and
<PAGE>
is limited to the relatively remote circumstances in which the Trust would be
unable to meet its obligations.
The Declaration of Trust further provides that the Trustees will not be
liable for errors of judgment or mistakes of fact or law, but nothing in the
Declaration of Trust protects a Trustee against any liability to which he would
otherwise be subject by reason of willful misfeasance, bad faith, gross
negligence, or reckless disregard of the duties involved in the conduct of his
office.
INDEPENDENT ACCOUNTANTS
The financial statements of the Trust included in the Prospectus and the
Statement of Additional Information have been examined by PricewaterhouseCoopers
L.L.P., Indianapolis, Indiana, independent accountants, for the periods
indicated in their reports as stated in their opinion and have been so included
in reliance upon such opinion given upon the authority of the firm as experts in
accounting and auditing.
<PAGE>
FINANCIAL STATEMENTS
Audited Financial Statements for the Conseco Series Trust Equity Portfolio,
Balanced Portfolio, Fixed Income Portfolio, Government Securities Portfolio and
Money Market Portfolio, and for the fiscal year ended December 31, 1999 are
incorporated by reference from the Trust's annual report to shareholders.
Because the Conseco 20 Focus Portfolio and the High Yield Portfolio are new,
financial statements are not available.
<PAGE>
CONSECO SERIES TRUST
ADMINISTRATIVE OFFICE
11815 N. PENNSYLVANIA STREET
CARMEL, INDIANA 46032
SAI-100 (5/99) May 1, 2000
<PAGE>
PART C
<PAGE>
CONSECO SERIES TRUST
Conseco 20 Focus Portfolio
Equity Portfolio
Balanced Portfolio
High Yield Portfolio
Fixed Income Portfolio
Government Securities Portfolio
Money Market Portfolio
REGISTRATION STATEMENT ON FORM N-1A
PART C
OTHER INFORMATION
ITEM 23. EXHIBITS.
(a) Articles of Incorporation:
-- Amended Declaration of Trust, incorporated herein by reference to
Exhibit 1 (i) to Pre-Effective Amendment No. 1 to the
Registration Statement on Form N-1 (File No. 2-80455) filed on
June 28, 1983; Amendment to Amended Declaration of Trust,
incorporated by reference to Exhibit No. 1 (ii) to Post-Effective
Amendment No. 1 to the Registration Statement of Form N-1A (File
No. 2-80455) April 20, 1984; Amendment to Amended Declaration of
Trust incorporated by reference to Exhibit No. 1 (iii) to
Post-Effective Amendment No. 17 to the Registration Statement on
Form N-1A (File No. 2-80455) April 28, 1993. All exhibits
incorporated by reference to Post-Effective Amendment No. 24 to
the Registration Statement (SEC File No. 2-80455), were filed
November 5, 1998.
(b) Bylaws
-- By-Laws, incorporated by reference to Exhibit No. 2 to the
Registration Statement on Form N-1 (File No. 2-80455). All
exhibits incorporated by reference to Post-Effective Amendment
No. 24 to the Registration Statement (SEC File No. 2-80455), were
filed November 5, 1998.
(c) Instruments Defining Rights of Security Holders
-- Not Applicable.
(d) Investment Advisory Contracts
-- Investment Advisory Agreements, incorporated by reference to
Exhibit No. 5 to the Post-Effective Amendment No. 8 to the
Registration Statement on Form N-1A (File No. 2-80455) March 3,
1988; and an Investment Advisory Agreement dated January 1, 1993
between the Registrant and Conseco Capital Management, Inc.
<PAGE>
incorporated by reference to Exhibit No. 5 (ii) to Post-Effective
Amendment No. 17 to the Registration Statement on Form N-1A (File
No. 2-80455) April 28, 1993. All exhibits incorporated by
reference to Post-Effective Amendment No. 24 to the Registration
Statement (SEC File No. 2-80455), were filed November 5, 1998.
-- Investment Advisory Agreements for the High Yield Portfolio and
the Conseco 20 Focus Portfolio. Filed herewith.
(e) Underwriting Contracts
-- Not Applicable.
(f) Bonus or Profit Sharing Contracts
-- Not Applicable.
(g) Custodian Agreements
-- Custodian Agreement incorporated by reference to Exhibit No. 8 to
the Post-Effective Amendment No. 17 to the Registration Statement
on Form N-1A (File No. 2-80455) April 28, 1993; and Custodian
Agreement incorporated by reference to Exhibit No. (g) to the
Post-Effective Amendment No. 25 to the Registration Statement on
Form N-1A (File No. 2-80455) May 3, 1999.
(h) Other Material Contracts
-- Administration Agreement incorporated by reference to Exhibit No.
(h) to the Post-Effective Amendment No. 25 to the Registration
Statement on Form N-1A (File No. 2-80455) May 3, 1999;
-- Amended Schedule A to the Administration Agreement. Filed
herewith.
(i) Legal Opinion
-- Consent and Opinion of Counsel: Filed herewith.
(j) Consent of Independent Accountants
-- Filed herewith.
(k) Omitted Financial Statements
-- Not Applicable.
(i) Letter of Intent
-- Not Applicable.
(m) Rule 12b-1 Plan
-- Not Applicable.
(n) Financial Data Schedule.
-- Filed herewith.
(o) Rule 18f-3 Plan
<PAGE>
-- Not Applicable.
(p) Code of Ethics. Filed herewith.
ITEM 24. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT
The following information concerns the principal companies that may be
deemed to be controlled by or under common control with Registrant (all 100%
owned unless indicated otherwise):
CONSECO, INC. (Indiana) - (publicly traded)
Conseco Capital Management, Inc. (Delaware)
Marketing Distribution Systems Consulting Group, Inc. (Delaware)
MDS of New Jersey, Inc. (New Jersey)
Conseco Equity Sales, Inc. (Texas)
Conseco Risk Management, Inc. (Indiana)
Conseco Mortgage Capital, Inc. (Delaware)
Conseco Group Risk Management Company (Mississippi)
Conseco Finance Corp. (Delaware)
CIHC, Incorporated (Delaware)
Conseco Services, LLC (Indiana)
Conseco Marketing, LLC (Indiana)
Conseco Securities, Inc. (Delaware)
Bankers National Life Insurance Company (Texas)
National Fidelity Life Insurance Company (Missouri)
Bankers Life Insurance Company of Illinois (Illinois)
Bankers Life & Casualty Company (Illinois)
Certified Life Insurance Company (Illinois)
Jefferson National Life Insurance Company of Texas (Texas)
Conseco Direct Life Insurance Company (Pennsylvania)
Conseco Annuity Assurance Company (Illinois)
Vulcan Life Insurance Company (Indiana)
Conseco Senior Health Insurance Company (Pennsylvania)
Continental Life Insurance Company (Texas)
United General Life Insurance Company (Texas)
Conseco Life Insurance Company of New York (New York)
<PAGE>
Conseco Variable Insurance Company (Texas)
Providential Life Insurance Company (Arkansas)
Washington National Corporation (Delaware)
Washington National Insurance Company (Illinois)
United Presidential Corporation (Indiana)
United Presidential Life Insurance Company (Indiana)
Wabash Life Insurance Company (Kentucky)
Conseco Life Insurance Company (Indiana)
Lincoln American Life Insurance Company (Tennessee)
Pioneer Financial Services, Inc. (Delaware)
Geneva International Insurance Company, Inc.
(Turks and Caicos Islands)
Pioneer Life Insurance Company (Illinois)
Health and Life Insurance Company of America (Illinois)
Manhattan National Life Insurance Company (Illinois)
Conseco Medical Insurance Company (Illinois)
Capital American Financial Corporation (Ohio)
Conseco Health Insurance Company (Arizona)
Frontier National Life Insurance Company (Ohio)
Consumer Acceptance Corporation (Indiana)
General Acceptance Corporation (Indiana)
NAL Financial Group, Inc. (Delaware)
Conseco Series Trust (Massachusetts)*
Conseco Fund Group (Massachusetts) (publicly held)**
Conseco Strategic Income Fund (Massachusetts) (publicly held) ***
* The shares of Conseco Series Trust currently are sold to insurance separate
accounts, both affiliated and unaffiliated.
** The shares of the Conseco Fund Group are sold to the public; Conseco
affiliates currently hold in excess of 16.4% of its shares.
*** The shares of the Conseco Strategic Income Fund, a closed-end management
investment company, are traded on the New York Stock Exchange.
ITEM 25. INDEMNIFICATION
Reference is made to Articles II and V of the Declaration of Trust filed as
Exhibit (1) to Post-Effective Amendment No. 2 to the Registration Statement on
Form N-1A (File No. 2-80455) June 19, 1984. Reference is also made to Article
VII of the Investment
<PAGE>
Advisory Agreements filed as Exhibit (5) to Post-Effective Amendment No. 8 and
Post-Effective Amendment No. 17 to the Registration Statement on Form N-1A (File
No. 2-80455) March 3, 1988 and April 28, 1993, respectively.
ITEM 26. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER.
Conseco Capital Management, Inc. (the "Adviser") is an Indiana corporation
which offers investment advisory services. The Adviser is a wholly-owned
subsidiary of Conseco, Inc., also an Indiana corporation, a publicly owned
financial services company. Both the Adviser's and Conseco, Inc.'s offices are
located at 11825 N. Pennsylvania Street, Carmel, Indiana 46032.
The principal officers and directors of Conseco Capital Management, Inc.
are as follows:
Rollin M. Dick, Director, Executive Vice President and Chief Financial
Officer of Conseco, Inc., Carmel, Indiana. Mr. Dick is an officer and/or
director of various affiliates of the Adviser. He is a director of Brightpoint,
Inc., Indianapolis, Indiana and Consumer Acceptance Corporation, Bloomington,
Indiana. Additionally, Mr. Dick is a director of approximately ten non-public
companies, which are believed to be not affiliated with Conseco, Inc.
Maxwell E. Bublitz, CEO, President and Director; Senior Vice President of
Conseco, Inc.; President and Trustee of Conseco Fund Group; President and
Trustee of Conseco Strategic Income Fund; President and Trustee of Conseco
Series Trust.
Gregory J. Hahn, Chief Investment Officer, Fixed Income; Trustee of Conseco
Fund Group; Trustee of Conseco Strategic Income Fund.
Thomas A. Meyers, Senior Vice President, Director of Marketing
Thomas J. Pence, Chief Investment Officer, Equity.
William P. Kovacs, Senior Counsel and Secretary; Chief Compliance Officer
and Director; Vice President and Secretary of Conseco Fund Group; Vice President
and Secretary of Conseco Strategic Income Fund; Vice President and Secretary
Conseco Series Trust; Vice President and Secretary Conseco Equity Sales, Inc.;
Vice President and Secretary of Conseco Securities, Inc.
Information as to the officers and directors of the Adviser is included in
its current Form ADV filed with the SEC and is incorporated by reference herein.
ITEM 27. PRINCIPAL UNDERWRITER
Not Applicable.
ITEM 28. LOCATION OF ACCOUNTS AND RECORDS
The accounts, books, or other documents required to be maintained by the
Registrant pursuant to Section 31(a) of the Investment Company Act of 1940 and
the rules promulgated thereunder are in the possession of the Adviser, Conseco
Capital Management, Inc., or the Custodian, The Bank of New York, 90 Washington
Street, 22nd Floor, New York, New York 10826.
<PAGE>
ITEM 29. MANAGEMENT SERVICES
Not Applicable.
ITEM 30. UNDERTAKINGS
None.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant, Conseco Series Trust, certifies
that it meets all of the requirements for effectiveness of this Post-Effective
Amendment No. 28 to the Registration Statement pursuant to Rule 485(b) under the
Securities Act of 1933 and has duly caused this Post-Effective Amendment No. 28
to be signed on its behalf by the undersigned, thereto duly authorized, in the
city of Carmel, of the State of Indiana, on the 1st day of May, 2000.
CONSECO SERIES TRUST
By: /S/ MAXWELL E. BUBLITZ
----------------------
Maxwell E. Bublitz
President
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, this Registration Statement has been signed
below by the following persons in the capacities and on the dates indicated.
SIGNATURE TITLE DATE
- --------- ----- ----
/S/ MAXWELL E. BUBLITZ* President May 1, 2000
- ----------------------------- (Principal Executive Officer)
Maxwell E. Bublitz and Trustee
/S/ WILLIAM P. DAVES, JR.* Chairman of the Board and May 1, 2000
- ----------------------------- Trustee
William P. Daves, Jr.
/S/ HAROLD W. HARTLEY* Trustee May 1, 2000
- -----------------------------
Harold W. Hartley
/S/ DR. R. JAN LECROY* Trustee May 1, 2000
- -----------------------------
Dr. R. Jan LeCroy
/S/ DR. JESS H. PARRISH* Trustee May 1, 2000
- -----------------------------
Dr. Jess H. Parrish
/S/ JAMES S. ADAMS Treasurer May 1, 2000
- -----------------------------
James S. Adams
<PAGE>
/S/ DAVID N. WALTHALL* Trustee May 1, 2000
- -----------------------------
David N. Walthall
* /S/ WILLIAM P. KOVACS
------------------------
William P. Kovacs
Attorney-in-fact
<PAGE>
EXHIBIT
NUMBER EXHIBIT
- ------ -------
(d) Advisory Agreement - Filed herewith.
(h) Amended Schedule A of the Administration Agreement- Filed herewith.
(i) Consent and Opinion of Counsel - Filed herewith.
(j) Consent of Independent Accountants - Filed herewith.
(n) Financial Data Schedule - Filed herewith.
(p) Code of Ethics - Filed herewith.
EXHIBIT (d)
INVESTMENT ADVISORY AGREEMENTS
<PAGE>
INVESTMENT ADVISORY AGREEMENT
Between CONSECO SERIES TRUST
and
CONSECO CAPITAL MANAGEMENT, INC.
It is hereby agreed by and between CONSECO SERIES TRUST (the "Trust") and
CONSECO CAPITAL MANAGEMENT, INC. (the "Adviser") as follows:
The Trust hereby appoints the Adviser to act as the investment adviser to
the Trust in relation to its class of shares entitled the Conseo 20 Focus
Portfolio (the "Portfolio") and to manage the investment and reinvestment of the
assets of the Portfolio and to provide certain administrative services to the
Trust in connection with the Portfolio, subject at all times to the direction
and control of the Trustees of the Trust. The Adviser accepts such appointment
subject to the terms and conditions as hereunder provided.
II
The Adviser agrees to provide continuous professional investment management
of the investments of the Portfolio. The Adviser shall provide the Trust with an
investment program complying with the investment objectives, policies and
restrictions of the Portfolio as more fully set forth in the Registration
Statement of the Trust as filed with the Securities and Exchange Commission and
as further amended from time to time. In carrying out the investment program of
the Portfolio, the Adviser shall:
1. Provide investment advice and, in general, supervise the management
and investment program of the Portfolio;
2. Furnish office space for the Trust;
3. Provide the Trust with such accounting data concerning the investment
activities of the Portfolio as shall be required to prepare and file
all periodic financial reports and returns required to be filed with
the Securities and Exchange Commission and any other regulatory
agency, provided that such data may be provided by the Trust's
custodian bank at the expense of the Trust pursuant to an agreement
between the Trust and said bank;
4. Continuously monitor compliance by the Trust as to the Portfolio in
its investment activities with the requirements of the Investment
Company Act and the rules promulgated thereunder pursuant thereto; and
5. Render to the Trust such periodic and special reports as to the
Portfolio as may be reasonably requested with respect to matters
relating to the duties of the Adviser.
<PAGE>
III
To the extent that the Trust or the Adviser is a party to any sub-advisory
agreements with persons other than the Adviser concerning any of the foregoing,
the Adviser shall be responsible for overseeing the performance of each such
sub-adviser.
IV
The Trust will pay an investment advisory fee to the Adviser for
compensation for investment advisory services rendered in connection with the
management of the Portfolio. Such fee shall be equal, on an annual basis, to
0.80% of the average daily value of the net assets of the Portfolio.
The amounts payable to the Adviser shall be determined at of the close of
business each day, and shall, except as set forth below, be based upon the value
of net assets of the Portfolio computed in accordance with the Declaration of
Trust of the Trust; and shall be paid in arrears whenever requested by the
Adviser.
V
It is understood and agreed that the Adviser and/or its affiliated
companies and persons may act and may continue to act as investment adviser to
other clients, accounts, and funds, and that the services to be provided
hereunder are not deemed to be exclusive. In addition, it is understood that the
individuals who participate on behalf of the Adviser in the performance of its
duties under this Agreement will not necessarily devote their full time thereto,
and nothing contained herein shall be deemed to limit or restrict their right to
engage in and devote time and attention to other businesses or to render other
services of whatever kind or nature.
VI
The Adviser agrees that all records which it maintains for the Trust shall
be the property of the Trust and that it will surrender promptly to the
designated officers of the Trust any of such records upon its request. The
Adviser further agrees to preserve for the period prescribed by the rules and
regulations of the Securities and Exchange Commission all such records as are
required to be maintained pursuant to said rules. The Adviser agrees that it
will maintain all records and accounts regarding the investment activities of
the Portfolio in a confidential manner. All such accounts or records shall be
made available within five (5) business days of request to the accountants or
auditors of the Trust during regular business hours at the Adviser's offices
upon reasonable prior written notice. In addition, the Adviser will provide any
materials reasonably related to the investment advisory services provided
hereunder as may be reasonably requested in writing by the designated officers
of the Trust or as may be required by any governmental agency having
jurisdiction.
VII
The Adviser shall give to the Trust the benefit of its best judgment,
efforts and facilities in rendering services hereunder.
The Adviser shall at all times be guided by and be subject to the Trust's
investment policies, the provisions of its Declaration of Trust and By-Laws as
each shall from time to time be amended, and by the decision and determination
of the Trustees.
This Agreement shall be performed in accordance with the requirements of
the Investment Company Act of 1940 (the "1940 Act"), the Investment Advisers Act
<PAGE>
of 1940, the Securities Act of 1933, and the Securities Exchange Act of 1934, to
the extent that the subject matter of this Agreement is within the purview of
such Acts. Insofar as applicable to the Adviser as an investment adviser and
affiliated person of the Trust, the Adviser shall comply with the provisions of
the 1940 Act, the Investment Advisers Act of 1940, and the respective Rules and
Regulations of the Securities and Exchange Commission thereunder.
In the absence of willful misfeasance, bad faith, gross negligence or
reckless disregard of obligations or duties hereunder on the part of the Adviser
(and its officers, directors, agents, employees, controlling persons,
shareholders and any other person or entity affiliated with the Adviser or
retained by it to perform or assist in the performance of its obligations under
this Agreement) the Adviser shall not be subject to liability to the Trust or to
any Shareholder of the Trust for any act or omission in the course of, or
connect with, rendering services hereunder, including without limitation, any
error of judgment or mistake of law or for any loss suffered by any of them in
connection with the matters to which Agreement relates, except to the extent
specified in Section 36(b) of the 1940 Act concerning loss resulting from a
breach of fiduciary duty with respect to the receipt of compensation for
services.
VIII
The Adviser understands that the obligations of this Agreement are not
binding upon any shareholder of the Trust personally, but bind only the Trust's
property; the Adviser represents that it has notice of the provisions of the
Trust's Declaration of Trust disclaiming shareholder liability for acts or
obligations of the Trust.
IX
This Agreement, unless sooner terminated, shall go into effect on the date
on which it is approved by a vote of the holders of a majority (as defined in
the 1940 Act) of the outstanding voting securities of the Portfolio and shall
continue for two years and thereafter from year to year so long as such
continuance is specifically approved at least annually (a) by the Trustees of
the Trust, and (b) by the vote of a majority of those Trustees of the Trust who
are not parties to this Agreement or interested persons (as defined in the 1940
Act) of any such party, cast in person at a meeting called for the purpose of
voting on such approval, provided, this Agreement may be terminated by the Trust
at any time, without the payment of any penalty, by vote of a majority of the
Trustees of the Trust, or by a vote of the holders of a majority (as defined in
the 1940 Act) of the outstanding voting securities of the Trust on sixty (60)
days written notice to the Adviser, or by the Adviser at any time, without
payment of any penalty, on sixty (60) days written notice to the Trust. This
Agreement shall terminate automatically upon its assignment (as defined in the
1940 Act).
This Agreement may be amended only in writing by the parties hereto. Any
amendment to this Agreement requires approval, prior to the effectiveness of
such amendment, (a) by vote of a majority of those Trustees of the Trust who are
not parties to this Agreement or interested persons of any such party, case in
person called for the purpose of voting on such amendment, and (b) by vote of
the holders of a majority (as defined in the 1940 Act) of the outstanding voting
securities of the Portfolio.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
signed on their behalf by their respective officers "hereunto duly authorized.
<PAGE>
CONSECO SERIES TRUST
By:
--------------------------------------
Maxwell E. Bublitz, President
CONSECO CAPITAL MANAGEMENT, INC.
By:
--------------------------------------
Gregory J. Hahn, Senior Vice President
December , 1999
--
<PAGE>
INVESTMENT ADVISORY AGREEMENT
-----------------------------
Between CONSECO SERIES TRUST
and
CONSECO CAPITAL MANAGEMENT, INC.
It is hereby agreed by and between CONSECO SERIES TRUST (the "Trust") and
CONSECO CAPITAL MANAGEMENT, INC. (the "Adviser") as follows:
The Trust hereby appoints the Adviser to act as the investment adviser to
the Trust in relation to its class of shares entitled the High Yield Portfolio
(the "Portfolio") and to manage the investment and reinvestment of the assets of
the Portfolio and to provide certain administrative services to the Trust in
connection with the Portfolio, subject at all times to the direction and control
of the Trustees of the Trust. The Adviser accepts such appointment subject to
the terms and conditions as hereunder provided.
II
The Adviser agrees to provide continuous professional investment management
of the investments of the Portfolio. The Adviser shall provide the Trust with an
investment program complying with the investment objectives, policies and
restrictions of the Portfolio as more fully set forth in the Registration
Statement of the Trust as filed with the Securities and Exchange Commission and
as further amended from time to time. In carrying out the investment program of
the Portfolio, the Adviser shall:
2. Provide investment advice and, in general, supervise the management
and investment program of the Portfolio;
2. Furnish office space for the Trust;
3. Provide the Trust with such accounting data concerning the investment
activities of the Portfolio as shall be required to prepare and file
all periodic financial reports and returns required to be filed with
the Securities and Exchange Commission and any other regulatory
agency, provided that such data may be provided by the Trust's
custodian bank at the expense of the Trust pursuant to an agreement
between the Trust and said bank;
4. Continuously monitor compliance by the Trust as to the Portfolio in
its investment activities with the requirements of the Investment
Company Act and the rules promulgated thereunder pursuant thereto; and
5. Render to the Trust such periodic and special reports as to the
Portfolio as may be reasonably requested with respect to matters
relating to the duties of the Adviser.
<PAGE>
III
To the extent that the Trust or the Adviser is a party to any sub-advisory
agreements with persons other than the Adviser concerning any of the foregoing,
the Adviser shall be responsible for overseeing the performance of each such
sub-adviser.
IV
The Trust will pay an investment advisory fee to the Adviser for
compensation for investment advisory services rendered in connection with the
management of the Portfolio. Such fee shall be equal, on an annual basis, to
0.80% of the average daily value of the net assets of the Portfolio.
The amounts payable to the Adviser shall be determined at of the close of
business each day, and shall, except as set forth below, be based upon the value
of net assets of the Portfolio computed in accordance with the Declaration of
Trust of the Trust; and shall be paid in arrears whenever requested by the
Adviser.
V
It is understood and agreed that the Adviser and/or its affiliated
companies and persons may act and may continue to act as investment adviser to
other clients, accounts, and funds, and that the services to be provided
hereunder are not deemed to be exclusive. In addition, it is understood that the
individuals who participate on behalf of the Adviser in the performance of its
duties under this Agreement will not necessarily devote their full time thereto,
and nothing contained herein shall be deemed to limit or restrict their right to
engage in and devote time and attention to other businesses or to render other
services of whatever kind or nature.
VI
The Adviser agrees that all records which it maintains for the Trust shall
be the property of the Trust and that it will surrender promptly to the
designated officers of the Trust any of such records upon its request. The
Adviser further agrees to preserve for the period prescribed by the rules and
regulations of the Securities and Exchange Commission all such records as are
required to be maintained pursuant to said rules. The Adviser agrees that it
will maintain all records and accounts regarding the investment activities of
the Portfolio in a confidential manner. All such accounts or records shall be
made available within five (5) business days of request to the accountants or
auditors of the Trust during regular business hours at the Adviser's offices
upon reasonable prior written notice. In addition, the Adviser will provide any
materials reasonably related to the investment advisory services provided
hereunder as may be reasonably requested in writing by the designated officers
of the Trust or as may be required by any governmental agency having
jurisdiction.
VII
The Adviser shall give to the Trust the benefit of its best judgment,
efforts and facilities in rendering services hereunder.
The Adviser shall at all times be guided by and be subject to the Trust's
investment policies, the provisions of its Declaration of Trust and By-Laws as
each shall from time to time be amended, and by the decision and determination
of the Trustees.
This Agreement shall be performed in accordance with the requirements of
the Investment Company Act of 1940 (the "1940 Act"), the Investment Advisers Act
of 1940, the Securities Act of
<PAGE>
1933, and the Securities Exchange Act of 1934, to the extent that the subject
matter of this Agreement is within the purview of such Acts. Insofar as
applicable to the Adviser as an investment adviser and affiliated person of the
Trust, the Adviser shall comply with the provisions of the 1940 Act, the
Investment Advisers Act of 1940, and the respective Rules and Regulations of the
Securities and Exchange Commission thereunder.
In the absence of willful misfeasance, bad faith, gross negligence or
reckless disregard of obligations or duties hereunder on the part of the Adviser
(and its officers, directors, agents, employees, controlling persons,
shareholders and any other person or entity affiliated with the Adviser or
retained by it to perform or assist in the performance of its obligations under
this Agreement) the Adviser shall not be subject to liability to the Trust or to
any Shareholder of the Trust for any act or omission in the course of, or
connect with, rendering services hereunder, including without limitation, any
error of judgment or mistake of law or for any loss suffered by any of them in
connection with the matters to which Agreement relates, except to the extent
specified in Section 36(b) of the 1940 Act concerning loss resulting from a
breach of fiduciary duty with respect to the receipt of compensation for
services.
VIII
The Adviser understands that the obligations of this Agreement are not
binding upon any shareholder of the Trust personally, but bind only the Trust's
property; the Adviser represents that it has notice of the provisions of the
Trust's Declaration of Trust disclaiming shareholder liability for acts or
obligations of the Trust.
IX
This Agreement, unless sooner terminated, shall go into effect on the date
on which it is approved by a vote of the holders of a majority (as defined in
the 1940 Act) of the outstanding voting securities of the Portfolio and shall
continue for two years and thereafter from year to year so long as such
continuance is specifically approved at least annually (a) by the Trustees of
the Trust, and (b) by the vote of a majority of those Trustees of the Trust who
are not parties to this Agreement or interested persons (as defined in the 1940
Act) of any such party, cast in person at a meeting called for the purpose of
voting on such approval, provided, this Agreement may be terminated by the Trust
at any time, without the payment of any penalty, by vote of a majority of the
Trustees of the Trust, or by a vote of the holders of a majority (as defined in
the 1940 Act) of the outstanding voting securities of the Trust on sixty (60)
days written notice to the Adviser, or by the Adviser at any time, without
payment of any penalty, on sixty (60) days written notice to the Trust. This
Agreement shall terminate automatically upon its assignment (as defined in the
1940 Act).
This Agreement may be amended only in writing by the parties hereto. Any
amendment to this Agreement requires approval, prior to the effectiveness of
such amendment, (a) by vote of a majority of those Trustees of the Trust who are
not parties to this Agreement or interested persons of any such party, case in
person called for the purpose of voting on such amendment, and (b) by vote of
the holders of a majority (as defined in the 1940 Act) of the outstanding voting
securities of the Portfolio.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
signed on their behalf by their respective officers "hereunto duly authorized.
<PAGE>
CONSECO SERIES TRUST
By:
--------------------------------------
Maxwell E. Bublitz, President
CONSECO CAPITAL MANAGEMENT, INC.
By:
--------------------------------------
Gregory J. Hahn, Senior Vice President
December , 1999
--
EXHIBIT (h)
AMENDED SCHEDULE TO THE ADMINISTRATION AGREEMENT
<PAGE>
CONSECO SERIES TRUST
ADMINISTRATION AGREEMENT
BALANCED PORTFOLIO
CONSECO 20 FOCUS PORTFOLIO
EQUITY PORTFOLIO
FIXED INCOME PORTFOLIO
GOVERNMENT PORTFOLIO
HIGH YIELD PORTFOLIO
MONEY MARKET PORTFOLIO
AMENDED
SCHEDULE A
Each Portfolio shall pay to the Administrator a fee computed at the annual
rate as set forth below:
ANNUAL FEE
----------
First $100,000,000 0.10%
Next $100,000,000 0.08%
In excess of $200,000,000 0.06%
EXHIBIT (i)
CONSENT AND OPINION OF COUNSEL
<PAGE>
April 28, 2000
Board of Trustees
Conseco Series Trust
RE: Conseco Series Trust
Registration Statement on Form N-1A
Gentlemen and Madam:
I am Executive Vice President, Secretary and General Counsel of Conseco,
Inc., the direct owner of the investment adviser of Conseco Series Trust (the
"Registrant"). At your request, I have examined or caused to be examined
Post-Effective Amendment Number 28 to the Registration Statement on Form N-1A,
(the "Registration Statement") of the Registrant with respect to the securities
issued in connection with the Registrant offering shares to insurance company
separate accounts. The Registrant's Form N-1A Registration Statement is filed
pursuant to the Securities Act of 1933 (the "Act") and the Investment Company
Act of 1940 ("1940 Act"). This opinion is being furnished pursuant to the Act in
connection with the Registrant's Form N-1A Registration Statement and
Post-Effective Amendment Number 28 thereto.
In rendering this opinion, I, or attorneys under my supervision (together
referred to herein as "we"), have examined and relied upon a copy of the
Registration Statement. We have also examined originals, or copies of originals
certified to our satisfaction, of such agreements, documents, certificates and
statements of government officials and other instruments, and have examined such
questions of law and have satisfied ourselves as to such matters of fact, as we
have considered relevant and necessary as a basis for this opinion. We have
assumed the authenticity of all documents submitted to us as originals, the
genuineness of all signatures, the legal capacity of all natural persons and the
conformity with the original documents of any copies thereof submitted to us for
examination.
Based on the foregoing, and subject to the qualifications and limitations
hereinafter set forth, I am of the opinion that:
1. The Registrant has been duly organized and is an existing
business trust pursuant to the applicable laws of the State of
Massachusetts;
2. The Account is a open ended management investment company
registered under the 1940 Act; and
<PAGE>
3. The securities issued by the Registrant, when issued as described
in the Registration Statement, will be duly authorized and upon
issuance will be validly issued, fully paid and non-assessable.
I do not find it necessary for the purposes of this opinion to cover, and
accordingly I express no opinion as to, the application of the securities or
blue sky laws of the various states to the sale of the securities to be
registered pursuant to the Registration Statement. Without limiting the
generality of the foregoing, I express no opinion in connection with the matters
contemplated by the Registration Statement, and no opinion may be implied or
inferred, except as expressly set forth herein.
This opinion is limited to the laws of the State of Indiana and of the
United States of America to the extent applicable. If any of the securities
included in the Registration Statement are governed by the laws of a state other
than Indiana, I have assumed for the purposes of this opinion that the laws of
such other state are the same as those of the State of Indiana.
I hereby consent to the inclusion of the opinion as Exhibit (i) to the
Registration Statement and to all references to me in the Registration Statement
or the Prospectus included therein.
Very truly yours,
/s/ John J. Sabl
John J. Sabl
Executive Vice President, Secretary,
and General Counsel
EXHIBIT (j)
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the inclusion in Post-Effective Amendment No. 28 to the
Registration Statement of Conseco Series Trust (the "Trust") on Form N-1A (File
No. 811-3641) of our report dated February 15, 2000, on our audit of the
financial statements and financial highlights of the Fund, which report is
included in the Annual Report to Shareholders for the year ended December 31,
1999, which is incorporated by reference in the Post-Effective Amendment to the
Registration Statement. We also consent to the reference to our Firm under the
caption "Independent Accountants".
/s/ PricewaterhouseCoopers L.L.P.
Indianapolis, Indiana
April 28, 2000
EXHIBIT (p)
CODE OF ETHICS
<PAGE>
CODE OF ETHICS
FOR
CONSECO SERIES TRUST
I. STATEMENT OF POLICY:
This Code of Ethics (hereinafter "Code") is adopted under rule 17j-1
promulgated by the Securities and Exchange Commission pursuant to Section
17(j) of the Investment Company Act of 1940 (the "Investment Company Act")
and under the Insider Trading and Securities Fraud Enforcement Act of 1988
(the "Insider Trading Act"). In general, the Investment Company Act and
Rule 17j-1 impose an obligation on registered investment companies and on
certain registered investment advisers and registered broker-dealers to
adopt written compliance procedures and a Code of Ethics covering
securities activities of their directors, officers and certain employees.
This Code is designed to ensure that those individuals who have access, due
to their duties and responsibilities with Conseco Series Trust (hereinafter
the "Trust") to material, non-public information regarding the activities
of the Trust, or to information about the portfolio securities and the
activities of the Trust and the Adviser (as herinafter defined), do not
intentionally use such information for their personal benefit.
The Code is intended to cover all Access Persons (as hereinafter
defined) of the Trust. All Access Persons are subject to and bound by the
terms of this Code. It is not the intention of this Code to prohibit
personal securities transactions by Access Persons, but rather to prescribe
rules designed to prevent actual and apparent conflicts of interest. While
it is not possible to specifically define and prescribe rules addressing
all possible situations in which conflicts may arise, this Code sets forth
the Trust's policy regarding conduct in those situations in which conflicts
are most likely to develop.
Every Access Person should keep the following general principles in
mind in discharging his or her obligations under the Code:
(A) No Access Person should knowingly place his or her own interests ahead
of the Trust; and
(B) No Access Person should use knowledge of the activities of the Trust
to his or her profit or advantage.
II. DEFINITIONS:
(A) "Access Person" means any director, officer or Advisory Person of the
Trust.
(B) "Adviser" means the investment adviser, Conseco Capital Management,
Inc.
(C) "Advisory Person" means any employee of the Trust, or any company or
natural person in a control relationship to the Trust, who, in
connection with his regular functions or duties, makes, participates
in, or obtains information regarding the purchase or sale of a
security by the Trust, or whose functions relate to the making of any
recommendations with respect to such purchases or sales.
(D) "Beneficial Ownership" shall be interpreted in the same manner as it
would be in determining whether a person is subject to the provisions
of Section 16 of the Securities Exchange Act of 1934 and the rules and
regulations thereunder, except that it applies to all securities which
an Access Person has or acquires. Beneficial ownership includes direct
or indirect pecuniary interest in securities, such as securities held
by members of a person's immediate family sharing the same household.
(E) "Board" means the Board of Trustees of the Trust.
(F) "Client" means any corporation, insurance company, individual, pension
plan, endowment, institution, investment company, separate account,
trust, business trust, or subsidiary of Conseco, Inc. or its
subsidiaries, who, for a fee, has selected the Adviser to act on its
behalf in the offering of portfolio management, investment consulting,
or other advisory services.
(G) "Conseco" means Conseco, Inc.
(H) "Control" means the power to exercise a controlling influence over the
management of policies of a
<PAGE>
company (Section 2(a)(9) of the Investment Company Act).
(I) "Designated Officer" means the Chief Compliance Officer or, in his
absence, the President of the Trust.
(J) "Director" means a member of the Board of Trustees of the Trust.
(K) "He" or "his" includes feminine gender.
(L) "Investment Company" means a company registered as such under the
Investment Company Act and for which the Adviser is the investment
adviser.
(M) "Purchase or sale of a security" includes, inter alia, the writing of
an option to purchase or sell a security and the exercise of a stock
option.
(N) "Security" includes any note, stock, treasury stock, bond, debenture,
evidence of indebtedness, certificate of interest or participation in
any profit-sharing agreement, collateral-trust certificate, investment
contract, limited partnership shares, etc. (as defined in Section
2(a)(36) of the Investment Company Act). "Security" shall not include
shares of registered open-end investment companies, securities issued
by the United States Government, short-term debt securities which are
"government securities" (meaning any security issued or guaranteed as
to principal or interest by the United States, or by any person acting
as an instrumentality of the United States government, per Section
2(a)(16) of the Investment Company Act), bankers acceptances, bank
certificates of deposit, commercial paper, and any other money market
instrument as designated by the Board.
(O) A security is "being considered for purchase or sale" when a
recommendation has been made and communicated, or when a person who
participates in making recommendations performs investigative or
analytical work for the purpose of making a recommendation or when
there is an outstanding order to purchase or sell that security for
the Trust.
III. EXEMPTED TRANSACTIONS:
The prohibitions of Section IV of this Code shall not apply to the
following transactions:
(A) Purchases or sales effected in any account over which the Access
Person has no direct or indirect influence or control;
(B) Purchases or sales which are non-volitional on the part of either the
Access Person or the Adviser;
(C) Purchases which are part of an automatic dividend reinvestment plan;
(D) Purchases effected upon the exercise of rights issued by an issuer pro
rata to all holders of a class of its securities, to the extent such
rights were acquired from the issuer;
(E) Purchases or sales of securities which are not eligible for purchase
or sale by the Trust (any Access Person desiring to engage in such a
transaction should obtain the prior written approval of the Designated
Officer);
(F) Purchases or sales which receive prior written approval from the
Designated Officer because they are only remotely potentially harmful
to the Trust because they are unlikely to affect a highly
institutional market, or because they are clearly not related
economically to the securities to be purchased, sold or held by the
Trust;
(G) Purchases or sales of securities which are not then being purchased or
sold by the Adviser on behalf of any Trust or considered for purchase
or sale by the Trust, provided that the Access Person has first
obtained the prior written approval of the Designated Officer;
(H) Purchases of securities which are then being sold or considered for
sale by the Adviser on behalf of the Trust and sales of securities
which are then being purchased or considered for purchase by the
Adviser on behalf of the Trust. The Designated Officer must give prior
written permission and will require written
<PAGE>
explanations for all such trades by an Access Person; and
(I) Purchases or sales of other securities of the same issuer whose
securities are being purchased or sold or considered for purchase or
sale by the Adviser on behalf of the Trust. However all equity
securities of an issuer shall be deemed the same security and all debt
securities of an issuer shall be deemed the same security.
The reporting requirements of Section V of the Code shall remain
applicable to all of the above transactions, except that no person
shall be required to make a report with respect to the transactions
listed in paragraphs (A), (B) and (C) above.
IV. PROHIBITED TRANSACTIONS:
The following prohibitions shall apply to this Code:
A. PURCHASES AND SALES OF SECURITIES.
No Access Person shall purchase or sell, directly or indirectly, any
security in which he has, or by reason of such transaction acquires,
any direct or indirect beneficial ownership and which security to his
knowledge at the time of such purchase and sale:
(1) is being considered for purchase or sale by the Adviser on behalf
of the Trust, or
(2) is being purchased or sold by the Adviser on behalf of the Trust.
It is the responsibility of every Access Person, prior to effecting a
purchase or sale of any security in which he has, or acquires, any
direct or indirect beneficial ownership, to ascertain whether such
security is being purchased or sold, or is being considered for
purchase or sale, by the Adviser for the Trust. In order to confirm
that such security is not then being purchased or sold or being
considered for purchase or sale on behalf of the Trust, the Access
Person must seek and receive prior written clearance for the proposed
trade from the Designated Officer. The Designated Officer will first
review the Restricted Securities List. Subject to the following
paragraphs, if the security which the Access Person wishes to trade is
not on this List at the time in question, the Designated Officer may
clear the Access Person to trade the security on that same day.
The Restricted Securities List is the list of those securities which
are either being considered for purchase or sale by the Adviser on
behalf of the Trust (including securities which are being held for
trading and may be expected to be sold at any time) and those
securities being purchased or sold by the Adviser on behalf of the
Trust. This List will be prepared and updated each business day by the
Adviser. The Restricted Securities List shall contain all securities
which the Adviser on behalf of the Trust is purchasing or selling or
considering for purchase or sale. It will be the duty of the Adviser
to place on the Restricted Securities List all such securities as
promptly as possible. If there is any type or class of securities as
to which the Adviser cannot readily determine which securities it is
trading or considering for trade, such type or class of securities
will be so identified by the Adviser whether on the Restricted
Securities List or otherwise; any Access Person wishing to trade in
any such security must first seek and receive prior written clearance
for his trade from the Designated Officer. The Access Person must
submit a copy of any such clearance prior to or with his report on
such trade pursuant to Section V below.
Reliance on the above-mentioned prior written clearance by an Access
Person shall be conclusive evidence that such Person was not aware
that such security was being purchased or sold, or considered for
purchase or sale, as the case may be, except in the case of an Access
Person who because of his or her position as trader, portfolio manager
or securities analyst or because of special access to knowledge
concerning that security had, or should have had, knowledge concerning
such purchase or sale of such consideration for purchase or sale.
In any event, no Access Person, who because of his or her position has
actual knowledge about the impending or actual purchase or sale or
consideration of a purchase or sale of a security by the Adviser on
behalf of the Trust prior to the publication of such security on the
Restricted Securities List, may purchase
<PAGE>
or sell such security until such security is thereafter removed from
the Restricted Securities List.
B. PURCHASES AND SALES OF RECOMMENDED SECURITIES BY ANALYSTS OR PORTFOLIO
MANAGERS.
No Access Person shall purchase or sell a security, in which he has or
acquires any direct or indirect beneficial interest, following the
preparation of a written recommendation by such Access Person that
such security be purchased or sold until such time as it is determined
that such recommendation will not be acted upon or until such time as
it is removed from the Restricted Securities List, if longer.
Any Access Person who manages the Trust's portfolio shall not purchase
or sell a security eligible for purchase by that portfolio within
seven calendar days before or after that portfolio trades in that
security; this prohibition does not apply to a sale of such a security
by such portfolio manager within seven calendar days after a sale of
such security by that portfolio or to his purchase of such security
within seven calendar days after a purchase of such security by that
portfolio. Any profits realized on trades within the periods
proscribed in Sections IV.A. and IV.B. above must be disgorged to the
Adviser for the benefit of the affected Clients.
C. RECEIPT OF GIFTS, ETC.
No Access Person or a member of his or her family shall seek or accept
gifts, favors, compensation or deals in securities more favorable than
those offered to the public from any broker, dealer, investment
adviser, financial institution or other supplier of goods and services
to the Trust or from any company whose securities have been purchased
or sold or considered for purchase or sale by the Trust. The foregoing
provision shall not prohibit any benefit, direct or indirect, in the
form of compensation to the Access Person from any entity under common
control with the Adviser for bona fide services rendered as an
officer, member of the Board or employee of such entity. This
prohibition shall not apply to:
(1) lunches or dinners conducted for business purposes;
(2) cocktail parties or similar social gatherings conducted for
business purposes; or
(3) gifts of small value, usually in the nature of reminder
advertising, such as pens, calendars, etc.
D. MATERIAL, NON-PUBLIC INFORMATION AND INSIDER TRADING.
(1) GENERAL. No Access Person may buy or sell securities on the basis
of non-public "material information" known by the Access Person
or "tip" other persons about such information. Any violation of
these restrictions may subject the Trust and the Access Person to
serious criminal and civil liabilities and sanctions, including
up to $1 million in criminal fines, up to 10 years in jail and
civil penalties up to three times the illegal profit gained or
loss avoided. In addition to governmental fines and other
sanctions, private actions brought by "professional plaintiffs"
against public companies and their insiders have become quite
common and can involve substantial costs, both monetary and in
terms of time, even if the claim ultimately is dismissed. Equally
important, any appearance of impropriety on the part of the Trust
or its insiders could impair investor confidence in the Trust and
severely damage its reputation and business relationships.
Accordingly, considerable care should be taken to avoid even
inadvertent violations. In light of these restrictions, the Trust
has adopted a general policy that the Trust's personnel may not
trade in securities of Conseco, Inc. or its publicly-held
affiliates ("Conseco") or any other company while in possession
of non-public, material information. Each Access Person should
obtain approval from Conseco's legal department prior to trading
in Conseco securities.
Each Access Person is also prohibited from directly or indirectly
disclosing material, non-public information about any issuer to
any other person, including family members and relatives, except
for persons who have a legitimate need to know.
(2) TRADING IN CONSECO OR CLIENT SECURITIES. Each Access Person and
his family members who share his household should not, under any
circumstances, trade options for, or sell "short," any securities
of Conseco.
<PAGE>
(3) MATERIAL INFORMATION. The term "material information," as used in
this Statement of Policy, means information relating to a
company, its business operations or securities, the public
dissemination of which would likely affect the market price of
any of its securities, or which would likely be considered
important by a reasonable investor in determining whether to buy,
sell or hold such securities. While it is impossible to list all
types of information that might be deemed material under
particular circumstances, information dealing with the following
subjects is often found material: internal forecasts or budgets;
dividends; major new discoveries or advances in research;
acquisitions, including mergers and tender offers; sales of
substantial assets; changes in debt ratings; significant
writedowns of assets or additions to reserves for bad debts or
contingent liabilities; liquidity problems; extraordinary
management developments; public offerings; major price or
marketing changes; labor negotiations; and significant litigation
or investigations by governmental bodies. Information about a
company generally is not material if its public dissemination
would not have an impact on the price of the company's publicly
traded securities. It should be noted that either positive or
adverse information may be material.
(4) NO USE OR SOLICITATION OF INSIDE INFORMATION. No Access Person
shall utilize material, non-public information about any issuer
of securities in the course of rendering investment advice or
making investment decisions on behalf of the Trust. No Access
Person should solicit from any issuer of securities any such
material, non-public information. Any Access Person inadvertently
receiving non-public information regarding securities held by the
Trust should notify the Designated Officer or any Vice President
of the Trust immediately.
E. CONFIDENTIALITY.
Serious problems could arise for the Trust and any Access Person by
any unauthorized disclosure of internal information about Conseco,
Inc. or its affiliated companies including the Adviser (the "Conseco
Companies"), or the Trust whether or not for the purpose of
facilitating improper trading in the securities of a Conseco Company
or the Trust. It is the Trust's policy that no Access Person should
discuss internal Conseco Company or Trust matters or developments with
anyone outside of the Conseco Companies (including family members,
relatives and friends), except as required in the performance of his
regular employment duties. Similarly, no Access Person should discuss
Conseco Company or Trust affairs in public or quasi-public areas where
your conversation may be overheard (e.g., restaurants, restrooms,
elevators, etc.). This prohibition also applies to inquiries about
Conseco Companies or the Trust which may be made by the financial
press, investment analysts or others in the financial community. It is
important that all such communications on behalf of the Conseco
Companies or the Trust be made only through authorized individuals. If
you receive any inquiries of this nature, you should decline comment
and refer the inquirer directly to the Conseco Companies' investor
relations spokesman, James Rosensteele, at (317) 573-2893.
F. INITIAL PUBLIC OFFERINGS.
No Access Person shall purchase a security, in which he by reason of
such transaction acquires any direct or indirect beneficial interest,
in an initial public offering.
G. PRIVATE PLACEMENTS.
No Access Person shall purchase a security, in which he by reason of
such transaction acquires any direct or indirect beneficial interest,
in a private placement, without obtaining the prior written approval
of the Designated Officer. In giving his approval, the Designated
Officer must consider, among other factors, whether the investment
opportunity should be reserved for the Trust and whether the
opportunity is being offered to the individual by virtue of his
position as an Access Person. Any Access Person who has been
authorized to so acquire securities must disclose that investment when
he plays a part in any subsequent consideration of an investment in
the issuer by the Trust. In such circumstances, such decision for the
Trust to purchase securities of that issuer must be reviewed
independently by other investment personnel of the Adviser who have no
personal interest in the issuer.
H. DIRECTORSHIPS OR PUBLICLY TRADED COMPANIES.
<PAGE>
No Access Person (except the disinterested Trustees of the Trust) may
serve on the boards of directors (or equivalent governing bodies) of
publicly traded companies, except the Board of Directors of the
Adviser's parent company, unless that Access Person first obtains in
writing the prior approval of the Designated Officer if the latter is
satisfied that the Access Person will normally be isolated from the
investment making decisions of the Adviser for the Trust.
V. REPORTING REQUIREMENTS:
A. IN GENERAL.
1. Every Access Person shall direct his broker to supply to the
Designated Officer, on a timely basis, duplicate copies of
confirmations of all security transactions in which such Access
Person has, or by reason of such transaction acquires, any direct
or indirect beneficial ownership in the security and copies of
periodic statements for all securities accounts.
2. Every Access Person shall report to the Designated Officer the
information with respect to the transactions in any security in
which such Access Person has, or by reason of such transaction
acquires, any direct or indirect beneficial ownership in the
security; provided, however, that an Access Person shall not be
required to make a report with respect to transactions effected
for any account over which such Access Person does not have any
direct or indirect influence or control.
3. Notwithstanding the above, an Access Person need not duplicate
information recorded pursuant to (i) Rule 204-2(a)(12) of the
Investment Advisers Act of 1940, or (ii) the confirmations and
statements supplied under paragraph V.A.1. above. The reporting
under this Code will satisfy that Rule.
4. A Director of the Trust who is not otherwise an Access Person
need only report a transaction in a security if such member, at
the time of that transaction, knew or, in the ordinary course of
fulfilling his official duties as a Director, should have known
that, during the 15-day period immediately preceding or after the
date of the transaction by the Director, such security was
purchased or sold by the Trust or was being considered for
purchase or sale by the Trust. Any Director, who pursuant to the
preceding sentence is not required to report any transaction in a
security during the period in question, need not make any other
report or disclosure of personal securities holdings during such
period under this Section V.
B. REPORT CONTENTS.
Every report under Paragraph V.A.2. shall be made not later than ten
(10) days after the end of the calendar quarter in which the
transaction to which the report relates was effected, and unless such
information has been supplied under paragraph V.A.1. above, shall
contain the following information:
(1) The date of the transaction, the title and the number of shares
or the principal amount of each security involved;
(2) The nature of the transaction (i.e., purchase, sale or any other
type of acquisition or disposition);
(3) The price at which the transaction was effected; and
(4) The name of the broker, dealer or bank with or through whom the
transaction was effected.
Any such report may contain a statement that the report shall not be
construed as an admission of direct or indirect beneficial ownership
in said security.
C. REVIEW.
<PAGE>
The Chief Compliance Officer shall review or supervise the review of
the personal securities transactions reported pursuant to Section V.
As part of the review, each such reported securities transaction may
be compared against the portfolio transactions of the Trust to
determine whether a violation of this Code may have occurred. If the
Chief Compliance Officer believes that a violation may have occurred,
he may submit the pertinent information regarding the transaction to,
and consult with the General Counsel of Conseco. The Chief Compliance
Officer shall evaluate whether a material violation of this Code has
occurred, taking into account all the exemptions provided under
Section III. Before making any determination that a violation has
occurred, the Chief Compliance Officer shall give the person involved
an opportunity to supply additional information regarding the
transaction in question and shall consult with counsel, if any, for
the Access Person whose transaction is in question.
D. ANNUAL DISCLOSURE AND CERTIFICATION.
Every Access Person shall disclose all securities in which he has any
direct or indirect beneficial ownership in the securities upon the
commencement of his employment and thereafter on an annual basis.
Every Access Person shall certify annually that he has read and
understands this Code of Ethics and is subject thereto and that he has
reported or disclosed all personal securities trades required to be
reported or disclosed thereunder.
VI. SANCTIONS.
If the Chief Compliance Officer determines that a material violation of the
Code or of the Insider Trading Act has occurred, he shall provide a written
report of his determination to the Board, as is appropriate under the
circumstances, for such further action and sanctions as such Board deems
appropriate, which may include, but shall not be limited to, a letter of
censure, suspension with pay, termination of employment or disgorgement of
any profits realized on transactions in violation of this Code. If a
securities transaction of a Designated Officer is under consideration, the
General Counsel of Conseco shall act in all respects in the manner
prescribed herein for the Designated Officer.
VII. MISCELLANEOUS PROVISIONS.
A. RECORDS.
The Chief Compliance Officer shall maintain records in the manner and
to the extent set forth below, which records may be maintained on film
or computer storage medium under conditions described in Rule
31a-2(f)(1) under the 1940 Act and shall be available for examination
by representatives of the Securities and Exchange Commission:
(1) A copy of this Code and any other code which is, or at any time
within the past five (5) years has been in effect, shall be
preserved in an easily accessible place;
(2) A record of any violation of this Code and of any action taken as
a result of such violation shall be preserved in an easily
accessible place for a period of not less than five (5) years
following the end of the fiscal year in which the violation
occurs;
(3) A copy of each report made by the Access Person pursuant to this
Code shall be preserved for a period of not less than five (5)
years from the end of the fiscal year in which it is made, the
first two (2) years in an easily accessible place; and
(4) A list of all persons who are, or within the past five (5) years
have been, required to make reports pursuant to this Code shall
be maintained in an easily accessible place.
B. CONFIDENTIALITY OF REPORTS.
All reports of securities transactions and any other information filed
with the Designated Officer or furnished to any person pursuant to
this Code shall be treated as confidential, but are subject to review
as
<PAGE>
provided herein and by representatives of the Securities and Exchange
Commission or of the Trust.
C. INTERPRETATION OF PROVISIONS.
The Board may from time to time adopt such interpretation of this Code
as they deem appropriate.
D. EFFECT OF VIOLATION OF THIS CODE.
In adopting Rule 17j-1, the Commission specifically noted in
Investment Company Act Release No. IC-11421 (Oct. 31, 1980) that a
violation of any provision of a particular code of ethics, such as
this Code, would not be considered a per se unlawful act prohibited by
the general anti-fraud provisions of that Rule. In adopting this Code
of Ethics, it is not intended that a violation of this Code is or
should be considered to be a violation of Rule 17j-1.
ATTACHMENTS:
Certification of Compliance (To be signed by all Access Persons of the
Trust) Annual Certification of Compliance (To be signed annually) Report of
Personal Securities Transactions (To report quarterly or for single
transactions) Prior Clearance Form (To be completed prior to each
transaction)
<PAGE>
CERTIFICATION OF COMPLIANCE
CONSECO SERIES TRUST
To: Chief Compliance Officer
I have read in detail and understand the Conseco Series Trust Code of
Ethics, dated January, 1995, and will comply in all respects with the
policies and procedures contained therein.
Signature:
-------------------------------------------
Print Name:
-------------------------------------------
Date:
-------------------------------------------
<PAGE>
ANNUAL CERTIFICATION OF COMPLIANCE
CONSECO SERIES TRUST
To: Chief Compliance Officer
I have read and understand the Conseco Series Trust Code of Ethics,
dated January, 1995, to which I am subject. During the period from to the
date of this annual certification, I have complied in all respects with the
policy and procedures contained in the Code of Ethics, including the annual
disclosure to Conseco Series Trust of all personal securities holdings in
which I have any direct or indirect beneficial ownership.*
Signature:
-------------------------------------------
Print Name:
-------------------------------------------
Date:
-------------------------------------------
- ----------
* In addition to the securities holdings reported on my broker-dealer
statement(s) for the preceding calendar year end, I directly or indirectly
beneficially own the following securities at such date. (If none, please so
state):
Complete Security Description: Number of Shares (Stock)
(Name) or Par (Bonds)
(Coupon)
(Maturity Date)
--------------------------------- ------------------
<PAGE>
CONSECO SERIES TRUST, INC.
PRIOR CLEARANCE FORM
FOR PERSONAL SECURITIES TRANSACTIONS
- --------------------------------------------------------------------------------
-----------------------------------------------------
(Printed Name of Access Person) Phone Ext.
The undersigned seeks clearance for the following trade(s) to be effected today,
- -------------------------------.
<TABLE>
<CAPTION>
SECURITY DESCRIPTION ORDER SIZE TYPE OF TRANSACTION BROKER-DEALER APPROXIMATE PRICE
(Issuer, (No. of Shares, (Buy, Sell, OR BANK INVOLVED OF SECURITY PER SHARE
Coupon, Par Value, etc.) Short, Gift, etc.) (rounded to nearest
Maturity Date, etc.) whole dollar)
======================================================================================================================
<S> <C> <C> <C> <C>
</TABLE>
* If research or equity analyst, written recommendation must be attached to or
written on this form.
---------------------------------
(Signature of Access Person)
The foregoing transaction(s) has (have) been cleared for trading on this date.
---------------------------------
(Signature of Designated Officer)
<PAGE>
Conseco Series Trust
REPORT OF PERSONAL SECURITIES TRANSACTIONS
------------------------------------------
In compliance with the Investment Advisers Act of 1940, Regulation 204-2(a) (12)
and the Company's Code of Ethics, the following securities transactions(s) are
listed. Include any transactions in warrants, convertible issues, puts, calls,
straddles, short sales, or other direct or indirect transactions in securities.
List your personal transactions, transactions made on your behalf in the name of
another person, transactions made by an immediate member of your family--parent,
spouse, children, or other person living in your household, or transactions on
behalf of any other person, and others in which you have beneficial ownership.
"Security" is defined in Section II.(N) of the Code of Ethics.
Please Check [_] only if this is a Single Transaction Report:
Consolidated Quarterly Report for calendar quarter ending _____________________.
Must be filed not later than 10 days after end of quarter. If you had no
securities transactions during the quarter, please so indicate. If all your
securities transactions during this period were already reported to the Trust by
your broker-dealer and will not be reported below, please so indicate.
<TABLE>
<CAPTION>
===================================================================================================================================
Complete Security Description: No. of Shs. Trade Date Transaction * Price Broker-dealer or Bank Involved
(Name) (Stock) or
(Coupon) Par (Bonds)
(Maturity Date)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
===================================================================================================================================
</TABLE>
* buy, sell, short, gift, etc.
I hereby certify that the above securities transactions represent all
transactions for the period indicated in which I had a direct or indirect
interest, except for transactions exempted by Section III(A), (B) and (C) of the
Code of Ethics and that I received clearance from the Designated Officer
immediately prior to my effecting the transactions(s) set forth above. I further
certify that during such period I did not communicate nor use any material,
non-public information in violation of Section IV.D. of the Code of Ethics.
(Signature)
-----------------------------------------
(Date)
Reviewed by:
-----------------------------
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NAME> EQUITY
<NUMBER> 3
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<INVESTMENTS-AT-COST> 236,922,275
<INVESTMENTS-AT-VALUE> 293,689,068
<RECEIVABLES> 10,551,267
<ASSETS-OTHER> 408
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 304,240,743
<PAYABLE-FOR-SECURITIES> 3,569,478
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 233,775
<TOTAL-LIABILITIES> 3,803,253
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 0
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 300,437,490
<DIVIDEND-INCOME> 1,118,561
<INTEREST-INCOME> 445,507
<OTHER-INCOME> 0
<EXPENSES-NET> 1,790,367
<NET-INVESTMENT-INCOME> (226,299)
<REALIZED-GAINS-CURRENT> 86,990,337
<APPREC-INCREASE-CURRENT> 14,254,138
<NET-CHANGE-FROM-OPS> 101,018,176
<EQUALIZATION> (4)
<DISTRIBUTIONS-OF-INCOME> (118,185)
<DISTRIBUTIONS-OF-GAINS> (84,221,849)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 265,451
<NUMBER-OF-SHARES-REDEEMED> (1,828,311)
<SHARES-REINVESTED> 3,638,854
<NET-CHANGE-IN-ASSETS> 2,075,994
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1,527,354
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 380,502
<AVERAGE-NET-ASSETS> 231,335,179
<PER-SHARE-NAV-BEGIN> 21.59
<PER-SHARE-NII> 0.00
<PER-SHARE-GAIN-APPREC> 10.63
<PER-SHARE-DIVIDEND> 0.00
<PER-SHARE-DISTRIBUTIONS> (9.04)
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 23.18
<EXPENSE-RATIO> 0.77
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 4
<NAME> BALANCED
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<INVESTMENTS-AT-COST> 44,486,113
<INVESTMENTS-AT-VALUE> 50,869,113
<RECEIVABLES> 1,448,496
<ASSETS-OTHER> 24,344
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 52,341,953
<PAYABLE-FOR-SECURITIES> 372,706
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 28,139
<TOTAL-LIABILITIES> 400,845
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 0
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 51,941,108
<DIVIDEND-INCOME> 256,439
<INTEREST-INCOME> 1,343,669
<OTHER-INCOME> 0
<EXPENSES-NET> 321,972
<NET-INVESTMENT-INCOME> 1,278,136
<REALIZED-GAINS-CURRENT> 8,598,436
<APPREC-INCREASE-CURRENT> 2,658,246
<NET-CHANGE-FROM-OPS> 12,534,818
<EQUALIZATION> (2,235)
<DISTRIBUTIONS-OF-INCOME> (1,278,138)
<DISTRIBUTIONS-OF-GAINS> (8,129,505)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 330,450
<NUMBER-OF-SHARES-REDEEMED> (788,443)
<SHARES-REINVESTED> 645,150
<NET-CHANGE-IN-ASSETS> 187,157
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 290,656
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 76,032
<AVERAGE-NET-ASSETS> 44,290,157
<PER-SHARE-NAV-BEGIN> 13.67
<PER-SHARE-NII> 0.42
<PER-SHARE-GAIN-APPREC> 3.72
<PER-SHARE-DIVIDEND> (0.42)
<PER-SHARE-DISTRIBUTIONS> (2.74)
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 14.65
<EXPENSE-RATIO> 0.73
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 5
<NAME> FIXED INCOME
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<INVESTMENTS-AT-COST> 29,381,277
<INVESTMENTS-AT-VALUE> 28,346,918
<RECEIVABLES> 481,016
<ASSETS-OTHER> 86,574
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 28,914,508
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 15,536
<TOTAL-LIABILITIES> 15,536
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 0
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 28,898,972
<DIVIDEND-INCOME> 63,030
<INTEREST-INCOME> 1,865,505
<OTHER-INCOME> 0
<EXPENSES-NET> 181,183
<NET-INVESTMENT-INCOME> 1,747,352
<REALIZED-GAINS-CURRENT> (594,992)
<APPREC-INCREASE-CURRENT> (1,231,899)
<NET-CHANGE-FROM-OPS> (79,539)
<EQUALIZATION> (10,808)
<DISTRIBUTIONS-OF-INCOME> (1,747,352)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 975,387
<NUMBER-OF-SHARES-REDEEMED> (467,148)
<SHARES-REINVESTED> 183,074
<NET-CHANGE-IN-ASSETS> 691,313
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 135,467
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 45,716
<AVERAGE-NET-ASSETS> 27,067,099
<PER-SHARE-NAV-BEGIN> 10.05
<PER-SHARE-NII> 0.62
<PER-SHARE-GAIN-APPREC> (0.66)
<PER-SHARE-DIVIDEND> (0.62)
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 9.39
<EXPENSE-RATIO> 0.67
</TABLE>
