UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number 811-7839
CONSECO FUND GROUP
(Exact name of registrant as specified in charter)
11825 N. Pennsylvania Street
Carmel, IN 46032
(Address of principal executive offices) (Zip code)
William P. Kovacs, Esq.
11825 N. Pennsylvania Street
Carmel, IN 46032
(Name and address of agent for service)
Registrant's telephone number, including area code: 317-817-6422
Date of fiscal year end: December 31, 2003
Date of reporting period: December 31, 2003
Form N-CSR is to be used by management investment companies to file reports
with the Commission not later than 10 days after the transmission to
stockholders of any report that is required to be transmitted to stockholders
under Rule 30e-1 under the Investment Company Act of 1940 (17 CFR 270.30e-1).
The Commission may use the information provided on Form N-CSR in its regulatory,
disclosure review, inspection, and policymaking roles.
A registrant is required to disclose the information specified by Form
N-CSR, and the Commission will make this information public. A registrant is not
required to respond to the collection of information contained in Form N-CSR
unless the Form displays a currently valid Office of Management and Budget
("OMB") control number. Please direct comments concerning the accuracy of the
information collection burden estimate and any suggestions for reducing the
burden to Secretary, Securities and Exchange Commission, 450 Fifth Street, NW,
Washington, DC 20549-0609. The OMB has reviewed this collection of information
under the clearance requirements of 44 U.S.C. 3507.
ITEM 1. REPORTS TO STOCKHOLDERS.
CONSECO FUND GROUP.
2003 ANNUAL REPORT
December 31, 2003
Conseco Science & Technology Fund
Conseco 20 Fund
Conseco Equity Fund
Conseco Large-Cap Fund
Conseco Balanced Fund
Conseco Convertible Securities Fund
Conseco High Yield Fund
Conseco Fixed Income Fund
[LOGO]
Investing in step with your life.
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Table of Contents
Statements of Assets and Liabilities 2
Statements of Operations . . . . . . 4
Statements of Changes in Net Assets. 6
CONSECO SCIENCE & TECHNOLOGY FUND
Portfolio Manager's Review . . . . . 14
Schedule of Investments. . . . . . . 16
CONSECO 20 FUND
Portfolio Manager's Review . . . . . 17
Schedule of Investments. . . . . . . 19
CONSECO EQUITY FUND
Portfolio Manager's Review . . . . . 20
Schedule of Investments. . . . . . . 22
CONSECO LARGE-CAP FUND
Portfolio Manager's Review . . . . . 25
Schedule of Investments. . . . . . . 27
CONSECO BALANCED FUND
Portfolio Managers' Review . . . . . 29
Schedule of Investments. . . . . . . 31
CONSECO CONVERTIBLE SECURITIES FUND
Portfolio Managers' Review . . . . . 35
Schedule of Investments. . . . . . . 37
CONSECO HIGH YIELD FUND
Portfolio Managers' Review . . . . . 40
Schedule of Investments. . . . . . . 42
CONSECO FIXED INCOME FUND
Portfolio Managers' Review . . . . . 46
Schedule of Investments. . . . . . . 48
Notes to Financial Statements. . . . 53
Financial Highlights . . . . . . . . 58
Report of Independent Auditors . . . 67
Board of Trustees. . . . . . . . . . 68
THIS REPORT IS FOR THE INFORMATION OF CONSECO FUND GROUP SHAREHOLDERS.
IT IS AUTHORIZED FOR DISTRIBUTION TO OTHER PERSONS ONLY WHEN PRECEDED, OR
ACCOMPANIED BY, A CURRENT PROSPECTUS THAT CONTAINS MORE COMPLETE INFORMATION,
INCLUDING CHARGES AND EXPENSES.
i
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STATEMENTS OF ASSETS AND LIABILITIES
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December 31, 2003
CONSECO SCIENCE & CONSECO CONSECO CONSECO
TECHNOLOGY FUND 20 FUND EQUITY FUND LARGE-CAP FUND
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ASSETS:
Investments in securities at cost . . . . . . . . $ 2,795,612 $ 98,840,239 $ 92,765,157 $ 3,863,065
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Investments in securities at value (Note 2)
(Including repurchase agreements of $145,600,
534,402, $2,114,348, $9,900, respectively) . . . $ 3,738,896 $ 59,298,088 $113,605,072 $ 4,380,382
Interest and dividends receivable . . . . . . . . 89 21,033 127,660 4,208
Receivable for securities sold . . . . . . . . . - 555,714 101,736 148,003
Receivable for shares sold. . . . . . . . . . . . - 10,316 45,047 18,267
Receivable from Conseco, Inc. subsidiaries. . . . 2,295 - - -
Cash. . . . . . . . . . . . . . . . . . . . . . . 4,366 - - -
Prepaid assets. . . . . . . . . . . . . . . . . . 4,292 21,563 25,181 5,478
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Total assets. . . . . . . . . . . . . . . . . . . 3,749,938 59,906,714 113,904,696 4,556,338
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LIABILITIES AND NET ASSETS:
Payable to Conseco, Inc. and subsidiaries . . . . - 147,097 161,770 3,460
Accrued expenses. . . . . . . . . . . . . . . . . 17,028 55,507 68,200 18,132
Payable to custodian. . . . . . . . . . . . . . . - 119 1,626 760
Payable for shares redeemed . . . . . . . . . . . 22,886 238,726 379,629 35,730
Payable upon return of securities on loan . . . . 145,600 3,541,744 4,869,056 9,900
Payable for securities purchased. . . . . . . . . - - 830,008 -
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Total liabilities . . . . . . . . . . . . . . . . 185,514 3,983,193 6,310,289 67,982
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Net assets. . . . . . . . . . . . . . . . . . . . $ 3,564,424 $ 55,923,521 $107,594,407 $ 4,488,356
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NET ASSETS CONSIST OF:
Paid-in capital . . . . . . . . . . . . . . . . . $ 50,915,028 $ 295,759,500 $134,560,812 $ 20,662,385
Accumulated undistributed net investment
income (loss) . . . . . . . . . . . . . . . . . . - - - -
Accumulated undistributed net realized
losses on investments . . . . . . . . . . . . . . (48,293,888) (200,293,828) (47,806,320) (16,691,346)
Net unrealized appreciation (depreciation)
on investments. . . . . . . . . . . . . . . . . . 943,284 (39,542,151) 20,839,915 517,317
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Net assets. . . . . . . . . . . . . . . . . . . . $ 3,564,424 $ 55,923,521 $107,594,407 $ 4,488,356
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NET ASSET VALUE, OFFERING PRICE AND
REDEMPTION PRICE PER SHARE:
CLASS A SHARES:
Shares outstanding (unlimited shares
authorized) . . . . . . . . . . . . . . . . . . . 535,313 1,452,638 939,964 138,918
Net assets .. . . . . . . . . . . . . . . . . . . $ 1,136,160 $ 7,955,606 $ 9,741,276 $ 836,942
Net asset value and redemption price
per share (Note 1). . . . . . . . . . . . . . . . $ 2.12 $ 5.48 $ 10.36 $ 6.02
Maximum sales charge per share
(5.75 percent of public
offering price; 5.00 percent of public offering
price for the Conseco Fixed Income Fund). . . . . 0.13 0.33 0.63 0.37
Maximum offering price per share. . . . . . . . . $ 2.25 $ 5.81 $ 10.99 $ 6.39
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CLASS B SHARES:
Shares outstanding (unlimited shares
authorized) . . . . . . . . . . . . . . . . . . . 321,982 3,741,582 1,708,709 339,763
Net assets .. . . . . . . . . . . . . . . . . . . $ 674,184 $ 19,723,864 $ 17,051,587 $ 2,008,211
Net asset value, offering price and
redemption price per share (Note 1) . . . . . . . $ 2.09 $ 5.27 $ 9.98 $ 5.91
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CLASS C SHARES:
Shares outstanding (unlimited shares
authorized) . . . . . . . . . . . . . . . . . . . 707,787 3,407,533 1,659,826 209,814
Net assets .. . . . . . . . . . . . . . . . . . . $ 1,483,301 $ 18,037,669 $ 16,576,121 $ 1,241,311
Net asset value and redemption price
per share (Note 1) . . . . . . . . . . . . . . . $ 2.10 $ 5.29 $ 9.99 $ 5.92
Maximum sales charge per share
(1.00 percent of public offering price) . . . . . 0.02 0.05 0.10 0.06
Maximum offering price per share. . . . . . . . . $ 2.12 $ 5.34 $ 10.09 $ 5.98
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CLASS Y SHARES:
Shares outstanding (unlimited shares
authorized) . . . . . . . . . . . . . . . . . . . 124,847 1,842,949 5,935,949 65,748
Net assets .. . . . . . . . . . . . . . . . . . . $ 270,779 $ 10,206,382 $ 64,225,423 $ 401,892
Net asset value, offering price and
redemption price per share (Note 1) . . . . . . . $ 2.17 $ 5.54 $ 10.82 $ 6.11
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The accompanying notes are an integral part of these financial statements.
2
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CONSECO FUND GROUP
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2003 ANNUAL REPORT
CONSECO CONSECO CONVERTIBLE CONSECO HIGH CONSECO FIXED
BALANCED FUND SECURITIES FUND YIELD FUND INCOME FUND
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ASSETS:
Investments in securities at cost. . . . . . . . . . . . $ 28,715,014 $ 18,709,855 $ 104,711,515 $ 82,974,188
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Investments in securities at value (Note 2)
(Including repurchase agreements of $1,061,750,
2,802,925, $19,408,608, $6,629,037, respectively) . . . $ 32,676,049 $ 21,524,392 $ 112,247,457 $ 86,852,731
Interest and dividends receivable. . . . . . . . . . . . 176,901 90,649 1,600,580 961,953
Receivable for securities sold .. . . . . . . . . . . . 651,479 - - -
Receivable for shares sold . . . . . . . . . . . . . . . 39,054 - 458,927 643,763
Receivable from Conseco, Inc. subsidiaries . . . . . . . - - - -
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . - 1,498 171,302 -
Prepaid assets . . . . . . . . . . . . . . . . . . . . . 20,621 15,769 27,125 23,965
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Total assets . . . . . . . . . . . . . . . . . . . . . . 33,564,104 21,632,308 114,505,391 88,482,412
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LIABILITIES AND NET ASSETS:
Payable to Conseco, Inc. and subsidiaries. . . . . . . . 82,956 30,316 199,347 175,921
Accrued expenses . . . . . . . . . . . . . . . . . . . . 33,403 23,574 80,959 69,051
Payable to custodian . . . . . . . . . . . . . . . . . . 540 - - 1,059
Payable for shares redeemed. . . . . . . . . . . . . . . 60,234 63,846 2,433,139 738,533
Payable upon return of securities on loan. . . . . . . . 1,061,750 2,802,925 21,913,144 7,229,700
Payable for securities purchased . . . . . . . . . . . . 101,921 - 187,417 -
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Total liabilities. . . . . . . . . . . . . . . . . . . . 1,340,804 2,920,661 24,814,006 8,214,264
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Net assets . . . . . . . . . . . . . . . . . . . . . . . $ 32,223,300 $ 18,711,647 $ 89,691,385 $ 80,268,148
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NET ASSETS CONSIST OF:
Paid-in capital. . . . . . . . . . . . . . . . . . . . . $ 52,992,695 $ 29,724,685 $ 109,494,968 $ 81,429,671
Accumulated undistributed net investment
income (loss). . . . . . . . . . . . . . . . . . . . . . (3,229) 475,046 (121,145) 8,985
Accumulated undistributed net realized
losses on investments. . . . . . . . . . . . . . . . . . (24,727,201) (14,302,621) (27,218,380) (5,049,051)
Net unrealized appreciation (depreciation)
on investments . . . . . . . . . . . . . . . . . . . . . 3,961,035 2,814,537 7,535,942 3,878,543
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Net assets . . . . . . . . . . . . . . . . . . . . . . . $ 32,223,300 $ 18,711,647 $ 89,691,385 $ 80,268,148
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NET ASSET VALUE, OFFERING PRICE AND
REDEMPTION PRICE PER SHARE:
CLASS A SHARES:
Shares outstanding (unlimited shares authorized) . . . . 330,833 254,191 2,917,747 751,653
Net assets . . . . . . . . . . . . . . . . . . . . . . . $ 3,447,748 $ 2,699,997 $ 24,693,380 $ 7,936,113
Net asset value and redemption price per share
(Note 1) . . . . . . . . . . . . . . . . . . . . . . . . $ 10.42 $ 10.62 $ 8.46 $ 10.56
Maximum sales charge per share (5.75 percent of public
offering price; 5.00 percent of public offering
price for the Conseco Fixed Income Fund) . . . . . . . . 0.64 0.65 0.52 0.56
Maximum offering price per share . . . . . . . . . . . . $ 11.06 $ 11.27 $ 8.98 $ 11.12
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CLASS B SHARES:
Shares outstanding (unlimited shares authorized) . . . . 1,183,140 963,852 4,251,234 2,716,494
Net assets . . . . . . . . . . . . . . . . . . . . . . . $ 12,134,369 $ 10,173,316 $ 35,695,424 $ 28,560,031
Net asset value, offering price and redemption
price per share (Note 1) . . . . . . . . . . . . . . . . $ 10.26 $ 10.55 $ 8.40 $ 10.51
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CLASS C SHARES:
Shares outstanding (unlimited shares authorized) . . . . 824,933 338,245 1,649,563 1,891,799
Net assets . . . . . . . . . . . . . . . . . . . . . . . $ 8,536,965 $ 3,583,309 $ 13,833,457 $ 20,008,613
Net asset value and redemption price per share
(Note 1) . . . . . . . . . . . . . . . . . . . . . . . . $ 10.35 $ 10.59 $ 8.39 $ 10.58
Maximum sales charge per share (1.00 percent
of public offering price). . . . . . . . . . . . . . . . 0.10 0.11 0.08 0.11
Maximum offering price per share . . . . . . . . . . . . $ 10.45 $ 10.70 $ 8.47 $ 10.69
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CLASS Y SHARES:
Shares outstanding (unlimited shares authorized) . . . . 771,565 212,140 1,815,506 2,239,910
Net assets . . . . . . . . . . . . . . . . . . . . . . . $ 8,104,218 $ 2,255,025 $ 15,469,124 $ 23,763,391
Net asset value, offering price and redemption
price per share (Note 1) . . . . . . . . . . . . . . . . $ 10.50 $ 10.63 $ 8.52 $ 10.61
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The accompanying notes are an integral part of these financial statements.
3
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STATEMENTS OF OPERATIONS
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For the year ended December 31, 2003
CONSECO SCIENCE & CONSECO CONSECO CONSECO
TECHNOLOGY FUND 20 FUND EQUITY FUND LARGE-CAP FUND
- ---------------------------------------------------------------------------------------------------------------------------
INVESTMENT INCOME:
Interest . . . . . . . . . . . . . . . . . . . . . . . $ 1,659 $ 17,889 $ 15,794 $ 940
Dividends .. . . . . . . . . . . . . . . . . . . . . . 5,197 264,317 1,366,659 51,912
Other Income . . . . . . . . . . . . . . . . . . . . . 710 25,044 28,438 495
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Total investment income. . . . . . . . . . . . . . . . 7,566 307,250 1,410,891 53,347
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EXPENSES:
Investment advisory fees . . . . . . . . . . . . . . . 44,411 359,986 725,062 34,046
Distribution and service fees:
Class A .. . . . . . . . . . . . . . . . . . . . . . . 10,914 40,359 51,172 4,312
Class B .. . . . . . . . . . . . . . . . . . . . . . . 6,193 177,910 156,052 19,902
Class C .. . . . . . . . . . . . . . . . . . . . . . . 13,788 165,755 155,989 15,341
Administration fee . . . . . . . . . . . . . . . . . . 8,882 102,853 207,161 9,727
Transfer agent fees and expenses . . . . . . . . . . . 35,913 169,849 70,325 37,935
Registration and filing fees . . . . . . . . . . . . . 48,882 37,795 43,047 45,285
Custody fees . . . . . . . . . . . . . . . . . . . . . 2,333 3,265 17,859 3,658
Auditor fees . . . . . . . . . . . . . . . . . . . . . 1,901 19,054 45,629 2,642
Legal fees . . . . . . . . . . . . . . . . . . . . . . 444 4,994 11,503 444
Reports - printing . . . . . . . . . . . . . . . . . . 39 43,623 16,609 802
Trustee fees and expenses. . . . . . . . . . . . . . . 533 8,018 18,022 626
Insurance. . . . . . . . . . . . . . . . . . . . . . . 365 1,085 2,190 365
Other. . . . . . . . . . . . . . . . . . . . . . . . . 365 4,661 10,208 365
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Total expenses . . . . . . . . . . . . . . . . . . . . 174,963 1,139,207 1,530,828 175,450
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Less expense reductions and reimbursements
(Note 3) . . . . . . . . . . . . . . . . . . . . . . . (88,554) (112,621) (131,812) (87,258)
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Net expenses . . . . . . . . . . . . . . . . . . . . . 86,409 1,026,586 1,399,016 88,192
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Net investment income (loss) . . . . . . . . . . . . . (78,843) (719,336) 11,875 (34,845)
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NET REALIZED AND UNREALIZED
GAINS (LOSSES) ON INVESTMENTS:
Net realized gains (losses) on sales of investments. . (1,285,782) (21,960,523) 9,989,664 (300,477)
Net change in unrealized appreciation or depreciation
on investments . . . . . . . . . . . . . . . . . . . . 3,446,364 45,094,541 22,717,764 1,405,924
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Net realized and unrealized gains on investments . . . 2,160,582 23,134,018 32,707,428 1,105,447
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Net increase in net assets from operations . . . . . . $ 2,081,739 $ 22,414,682 $ 32,719,303 $ 1,070,602
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The accompanying notes are an integral part of these financial statements.
4
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CONSECO FUND GROUP
- --------------------------------------------------------------------------------
2003 ANNUAL REPORT
CONSECO CONSECO CONVERTIBLE CONSECO HIGH CONSECO FIXED
BALANCED FUND SECURITIES FUND YIELD FUND INCOME FUND
- -------------------------------------------------------------------------------------------------------------------------------
INVESTMENT INCOME:
Interest . . . . . . . . . . . . . . . . . . . . . . . $ 860,772 $ 739,451 $ 10,423,531 $ 5,842,395
Dividends .. . . . . . . . . . . . . . . . . . . . . . 371,386 213,002 435,071 32,578
Other Income . . . . . . . . . . . . . . . . . . . . . 3,900 22,087 74,714 24,508
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Total investment income. . . . . . . . . . . . . . . . 1,236,058 974,540 10,933,316 5,899,481
- -------------------------------------------------------------------------------------------------------------------------------
EXPENSES:
Investment advisory fees . . . . . . . . . . . . . . . 233,456 167,334 805,468 433,309
Distribution and service fees:
Class A .. . . . . . . . . . . . . . . . . . . . . . . 17,995 13,212 214,223 54,220
Class B .. . . . . . . . . . . . . . . . . . . . . . . 119,194 97,871 367,968 325,871
Class C .. . . . . . . . . . . . . . . . . . . . . . . 96,769 35,937 160,695 259,657
Administration fee . . . . . . . . . . . . . . . . . . 66,702 39,373 230,133 192,582
Transfer agent fees and expenses . . . . . . . . . . . 41,804 41,992 70,833 52,843
Registration and filing fees . . . . . . . . . . . . . 34,808 37,866 40,494 42,141
Custody fees . . . . . . . . . . . . . . . . . . . . . 6,640 2,316 12,393 10,005
Auditor fees . . . . . . . . . . . . . . . . . . . . . 11,386 10,259 69,281 38,347
Legal fees . . . . . . . . . . . . . . . . . . . . . . 3,040 2,368 16,417 8,972
Reports - printing . . . . . . . . . . . . . . . . . . 1,076 6,471 29,407 (66)
Trustee fees and expenses. . . . . . . . . . . . . . . 5,891 3,414 19,946 15,704
Insurance. . . . . . . . . . . . . . . . . . . . . . . 1,095 365 2,924 2,831
Other. . . . . . . . . . . . . . . . . . . . . . . . . 4,135 1,677 8,268 14,427
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Total expenses . . . . . . . . . . . . . . . . . . . . 643,991 460,455 2,048,450 1,450,843
- -------------------------------------------------------------------------------------------------------------------------------
Less expense reductions and reimbursements
(Note 3) . . . . . . . . . . . . . . . . . . . . . . . (76,524) (106,728) (270,233) (233,349)
- -------------------------------------------------------------------------------------------------------------------------------
Net expenses . . . . . . . . . . . . . . . . . . . . . 567,467 353,727 1,778,217 1,217,494
- -------------------------------------------------------------------------------------------------------------------------------
Net investment income (loss) . . . . . . . . . . . . . 668,591 620,813 9,155,099 4,681,987
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NET REALIZED AND UNREALIZED
GAINS (LOSSES) ON INVESTMENTS:
Net realized gains (losses) on sales of investments. . (86,727) 723,956 1,020,472 3,052,881
Net change in unrealized appreciation or depreciation
on investments . . . . . . . . . . . . . . . . . . . . 6,362,325 3,413,709 20,021,304 1,880,216
- -------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gains on investments . . . 6,275,598 4,137,665 21,041,776 4,933,097
- -------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets from operations . . . . . . $ 6,944,189 $ 4,758,478 $ 30,196,875 $ 9,615,084
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The accompanying notes are an integral part of these financial statements.
5
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STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
For the year ended December 31
CONSECO SCIENCE & TECHNOLOGY FUND CONSECO 20 FUND
- --------------------------------------------------------------------------------------------------------------------------------
2003 2002 2003 2002
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OPERATIONS:
Net investment income (loss). . . . . . . . . . . . . . . $ (78,843) $ (245,951) $ (719,336) $ (1,225,755)
Net realized gains (losses) on sale of investments. . . . (1,285,782) (27,962,051) (21,960,523) (101,214,858)
Net change in unrealized appreciation or depreciation
on investments. . . . . . . . . . . . . . . . . . . . . . 3,446,364 15,821,591 45,094,541 51,871,990
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Net increase (decrease) from operations . . . . . . . . . 2,081,739 (12,386,411) 22,414,682 (50,568,623)
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DIVIDENDS TO SHAREHOLDERS
FROM NET INVESTMENT INCOME:
Class A shares. . . . . . . . . . . . . . . . . . . . . . - - - -
Class B shares. . . . . . . . . . . . . . . . . . . . . . - - - -
Class C shares. . . . . . . . . . . . . . . . . . . . . . - - - -
Class Y shares. . . . . . . . . . . . . . . . . . . . . . - - - -
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Total dividends from net investment income. . . . . . . . - - - -
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DISTRIBUTIONS TO SHAREHOLDERS
OF NET REALIZED GAINS:
Class A shares. . . . . . . . . . . . . . . . . . . . . . - - - -
Class B shares. . . . . . . . . . . . . . . . . . . . . . - - - -
Class C shares. . . . . . . . . . . . . . . . . . . . . . - - - -
Class Y shares. . . . . . . . . . . . . . . . . . . . . . - - - -
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Total distributions of net realized gains . . . . . . . . - - - -
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CAPITAL SHARE TRANSACTIONS:
Shares sold . . . . . . . . . . . . . . . . . . . . . . . 360,705 2,342,871 7,410,429 32,918,743
Reinvested dividends and distributions. . . . . . . . . . - - - -
Shares redeemed . . . . . . . . . . . . . . . . . . . . . (4,748,786) (8,273,714) (22,222,726) (64,632,020)
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Net increase (decrease) from capital share transactions . (4,388,081) (5,930,843) (14,812,297) (31,713,277)
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Total increase (decrease) in net assets . . . . . . . . . (2,306,342) (18,317,254) 7,602,385 (82,281,900)
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NET ASSETS:
Beginning of period . . . . . . . . . . . . . . . . . . . 5,870,766 24,188,020 48,321,136 130,603,036
- --------------------------------------------------------------------------------------------------------------------------------
End of period . . . . . . . . . . . . . . . . . . . . . . $ 3,564,424 $ 5,870,766 $ 55,923,521 $ 48,321,136
- --------------------------------------------------------------------------------------------------------------------------------
Including undistributed net investment income (loss) of:. $ - $ - $ - $ -
- --------------------------------------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
6
- --------------------------------------------------------------------------------
CONSECO FUND GROUP
- --------------------------------------------------------------------------------
2003 ANNUAL REPORT
CONSECO SCIENCE & TECHNOLOGY FUND CONSECO 20 FUND
- -----------------------------------------------------------------------------------------------------------
2003 2002 2003 2002
- -----------------------------------------------------------------------------------------------------------
SHARE DATA:
CLASS A SHARES:
Sold . . . . . . . . . . . . . . . . . 161,535 437,575 670,219 4,694,554
Reinvested dividends and distributions - - - -
Redeemed . . . . . . . . . . . . . . . (2,501,410) (2,911,351) (1,721,103) (6,101,175)
- -----------------------------------------------------------------------------------------------------------
Net increase (decrease) .. . . . . . . (2,339,875) (2,473,776) (1,050,884) (1,406,621)
- -----------------------------------------------------------------------------------------------------------
Shares Outstanding:
Beginning of period. . . . . . . . . . 2,875,188 5,348,964 2,503,522 3,910,143
End of period. . . . . . . . . . . . . 535,313 2,875,188 1,452,638 2,503,522
- -----------------------------------------------------------------------------------------------------------
CLASS B SHARES:
Sold . . . . . . . . . . . . . . . . . 5,440 30,242 112,727 352,466
Reinvested dividends and distributions - - - -
Redeemed . . . . . . . . . . . . . . . (99,517) (401,208) (1,147,780) (3,326,053)
- -----------------------------------------------------------------------------------------------------------
Net increase (decrease) .. . . . . . . (94,077) (370,966) (1,035,053) (2,973,587)
- -----------------------------------------------------------------------------------------------------------
Shares Outstanding:
Beginning of period. . . . . . . . . . 416,059 787,025 4,776,635 7,750,222
End of period. . . . . . . . . . . . . 321,982 416,059 3,741,582 4,776,635
- -----------------------------------------------------------------------------------------------------------
CLASS C SHARES:
Sold . . . . . . . . . . . . . . . . . 50,673 413,662 366,127 739,531
Reinvested dividends and distributions - - - -
Redeemed . . . . . . . . . . . . . . . (297,791) (1,027,323) (1,469,379) (2,983,550)
- -----------------------------------------------------------------------------------------------------------
Net increase (decrease) .. . . . . . . (247,118) (613,661) (1,103,252) (2,244,019)
- -----------------------------------------------------------------------------------------------------------
Shares Outstanding:
Beginning of period. . . . . . . . . . 954,905 1,568,566 4,510,785 6,754,804
End of period. . . . . . . . . . . . . 707,787 954,905 3,407,533 4,510,785
- -----------------------------------------------------------------------------------------------------------
CLASS Y SHARES:
Sold . . . . . . . . . . . . . . . . . 7,837 78,864 607,573 1,284,834
Reinvested dividends and distributions - - - -
Redeemed . . . . . . . . . . . . . . . (118,025) (200,650) (1,030,627) (2,307,412)
- -----------------------------------------------------------------------------------------------------------
Net increase (decrease) .. . . . . . . (110,188) (121,786) (423,054) (1,022,578)
- -----------------------------------------------------------------------------------------------------------
Shares Outstanding:
Beginning of period. . . . . . . . . . 235,035 356,821 2,266,003 3,288,581
End of period. . . . . . . . . . . . . 124,847 235,035 1,842,949 2,266,003
- -----------------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
7
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
FOR THE YEAR ENDED DECEMBER 31
CONSECO EQUITY FUND CONSECO LARGE-CAP FUND
2003 2002 2003 2002
- ---------------------------------------------------------------------------------------------------------------
OPERATIONS:
Net investment income (loss) . . . . . . . . $ 11,875 $ 73,548 $ (34,845) $ (115,893)
Net realized gains (losses) on sale of
investments. . . . . . . . . . . . . . . . . 9,989,664 (8,343,507) (300,477) (6,139,136)
Net change in unrealized appreciation
or depreciation
on investments . . . . . . . . . . . . . . . 22,717,764 (11,917,452) 1,405,924 538,657
- ---------------------------------------------------------------------------------------------------------------
Net increase (decrease) from operations. . . 32,719,303 (20,187,411) 1,070,602 (5,716,372)
- ---------------------------------------------------------------------------------------------------------------
DIVIDENDS TO SHAREHOLDERS
FROM NET INVESTMENT INCOME:
Class A shares . . . . . . . . . . . . . . . - - - -
Class B shares . . . . . . . . . . . . . . . - - - -
Class C shares . . . . . . . . . . . . . . . - - - -
Class Y shares . . . . . . . . . . . . . . . (11,903) (64,207) - -
- ---------------------------------------------------------------------------------------------------------------
Total dividends from net investment income . (11,903) (64,207) - -
- ---------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS
OF NET REALIZED GAINS:
Class A shares . . . . . . . . . . . . . . . - - - -
Class B shares . . . . . . . . . . . . . . . - - - -
Class C shares . . . . . . . . . . . . . . . - - - -
Class Y shares . . . . . . . . . . . . . . . - - - -
- ---------------------------------------------------------------------------------------------------------------
Total distributions of net realized gains .. - - - -
- ---------------------------------------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS:
Shares sold. . . . . . . . . . . . . . . . . 36,784,920 103,005,268 135,566 1,491,343
Reinvested dividends and distributions . . . 11,035 57,620 - -
Shares redeemed. . . . . . . . . . . . . . . (64,027,170) (124,761,361) (2,229,322) (12,009,141)
- ---------------------------------------------------------------------------------------------------------------
Net increase (decrease) from capital
share transactions . . . . . . . . . . . . . (27,231,215) (21,698,473) (2,093,756) (10,517,798)
- ---------------------------------------------------------------------------------------------------------------
Total increase (decrease) in net assets. . . 5,476,185 (41,950,091) (1,023,154) (16,234,170)
- ---------------------------------------------------------------------------------------------------------------
NET ASSETS:
Beginning of period. . . . . . . . . . . . . 102,118,222 144,068,313 5,511,510 21,745,680
- ---------------------------------------------------------------------------------------------------------------
End of period. . . . . . . . . . . . . . . . $107,594,407 $ 102,118,222 $ 4,488,356 $ 5,511,510
- ---------------------------------------------------------------------------------------------------------------
Including undistributed net investment
income (loss) of:. . . . . . . . . . . . . . $ - $ 11,885 $ - $ -
- ---------------------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
8
- --------------------------------------------------------------------------------
CONSECO FUND GROUP
- --------------------------------------------------------------------------------
2003 ANNUAL REPORT
CONSECO EQUITY FUND CONSECO LARGE-CAP FUND
- ----------------------------------------------------------------------------------------------------------
2003 2002 2003 2002
- ----------------------------------------------------------------------------------------------------------
SHARE DATA:
CLASS A SHARES:
Sold . . . . . . . . . . . . . . . . . 1,694,026 4,743,790 14 38,879
Reinvested dividends and distributions - - - -
Redeemed . . . . . . . . . . . . . . . (1,716,029) (5,405,802) (58,609) (1,267,388)
- ----------------------------------------------------------------------------------------------------------
Net increase (decrease) .. . . . . . . (22,003) (662,012) (58,595) (1,228,509)
- ----------------------------------------------------------------------------------------------------------
Shares Outstanding:
Beginning of period. . . . . . . . . . 961,967 1,623,979 197,513 1,426,022
End of period. . . . . . . . . . . . . 939,964 961,967 138,918 197,513
- ----------------------------------------------------------------------------------------------------------
CLASS B SHARES:
Sold . . . . . . . . . . . . . . . . . 142,237 636,830 17,911 29,989
Reinvested dividends and distributions - - - -
Redeemed . . . . . . . . . . . . . . . (609,715) (1,045,068) (123,890) (414,097)
- ----------------------------------------------------------------------------------------------------------
Net increase (decrease) .. . . . . . . (467,478) (408,238) (105,979) (384,108)
- ----------------------------------------------------------------------------------------------------------
Shares Outstanding:
Beginning of period. . . . . . . . . . 2,176,187 2,584,425 445,742 829,850
End of period. . . . . . . . . . . . . 1,708,709 2,176,187 339,763 445,742
- ----------------------------------------------------------------------------------------------------------
CLASS C SHARES:
Sold . . . . . . . . . . . . . . . . . 189,402 1,388,450 7,161 52,780
Reinvested dividends and distributions - - - -
Redeemed . . . . . . . . . . . . . . . (754,860) (1,509,251) (191,098) (394,351)
- ----------------------------------------------------------------------------------------------------------
Net increase (decrease) .. . . . . . . (565,458) (120,801) (183,937) (341,571)
- ----------------------------------------------------------------------------------------------------------
Shares Outstanding:
Beginning of period. . . . . . . . . . 2,225,284 2,346,085 393,751 735,322
End of period. . . . . . . . . . . . . 1,659,826 2,225,284 209,814 393,751
- ----------------------------------------------------------------------------------------------------------
CLASS Y SHARES:
Sold . . . . . . . . . . . . . . . . . 2,482,591 5,230,242 597 114,802
Reinvested dividends and distributions 1,039 7,266 - -
Redeemed . . . . . . . . . . . . . . . (4,492,775) (6,939,037) (60,451) (299,566)
- ----------------------------------------------------------------------------------------------------------
Net increase (decrease) .. . . . . . . (2,009,145) (1,701,529) (59,854) (184,764)
- ----------------------------------------------------------------------------------------------------------
Shares Outstanding:
Beginning of period. . . . . . . . . . 7,945,094 9,646,623 125,602 310,366
End of period. . . . . . . . . . . . . 5,935,949 7,945,094 65,748 125,602
- ----------------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
9
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
FOR THE YEAR ENDED DECEMBER 31
CONSECO BALANCED FUND CONSECO CONVERTIBLE SECURITIES FUND
- --------------------------------------------------------------------------------------------------------------------------
2003 2002 2003 2002
- --------------------------------------------------------------------------------------------------------------------------
OPERATIONS:
Net investment income. . . . . . . . . . $ 668,591 $ 1,669,222 $ 620,813 $ 833,062
Net realized gains (losses) on sale of
investments. . . . . . . . . . . . . . . (86,727) (13,098,168) 723,956 (4,257,955)
Net change in unrealized appreciation
or depreciation
on investments . . . . . . . . . . . . . 6,362,325 171,830 3,413,709 837,350
- --------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) from operations. 6,944,189 (11,257,116) 4,758,478 (2,587,543)
- --------------------------------------------------------------------------------------------------------------------------
DIVIDENDS TO SHAREHOLDERS
FROM NET INVESTMENT INCOME:
Class A shares . . . . . . . . . . . . . (87,238) (345,541) (105,991) (109,454)
Class B shares . . . . . . . . . . . . . (233,339) (402,655) (349,797) (358,729)
Class C shares . . . . . . . . . . . . . (174,928) (504,566) (127,704) (151,068)
Class Y shares . . . . . . . . . . . . . (234,379) (423,123) (168,467) (157,551)
- --------------------------------------------------------------------------------------------------------------------------
Total dividends from net investment
income . . . . . . . . . . . . . . . . . (729,884) (1,675,885) (751,959) (776,802)
- --------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS
OF NET CAPITAL GAINS:
Class A shares . . . . . . . . . . . . . - - - -
Class B shares . . . . . . . . . . . . . - - - -
Class C shares . . . . . . . . . . . . . - - - -
Class Y shares . . . . . . . . . . . . . - - - -
- --------------------------------------------------------------------------------------------------------------------------
Total distributions of net capital gains - - - -
- --------------------------------------------------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS:
Shares sold. . . . . . . . . . . . . . . 3,691,486 17,524,985 7,791,989 1,946,254
Reinvested dividends and distributions . 328,372 555,518 197,677 194,852
Shares redeemed. . . . . . . . . . . . . (16,195,827) (55,901,069) (12,400,846) (14,938,667)
- --------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) from capital
share transactions . . . . . . . . . . . (12,175,969) (37,820,566) (4,411,180) (12,797,561)
- --------------------------------------------------------------------------------------------------------------------------
Total increase (decrease) in net assets. (5,961,664) (50,753,567) (404,661) (16,161,906)
- --------------------------------------------------------------------------------------------------------------------------
NET ASSETS:
Beginning of period. . . . . . . . . . . 38,184,964 88,938,531 19,116,308 35,278,214
- --------------------------------------------------------------------------------------------------------------------------
End of period. . . . . . . . . . . . . . $ 32,223,300 $ 38,184,964 $ 18,711,647 $ 19,116,308
- --------------------------------------------------------------------------------------------------------------------------
Including undistributed net investment
income (loss) of:. . . . . . . . . . . . $ (3,229) $ 46,520 $ 475,046 $ 134,636
- --------------------------------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
10
- --------------------------------------------------------------------------------
CONSECO FUND GROUP
- --------------------------------------------------------------------------------
2003 ANNUAL REPORT
CONSECO BALANCED FUND CONSECO CONVERTIBLE SECURITIES FUND
- --------------------------------------------------------------------------------------------------------------
2003 2002 2003 2002
- --------------------------------------------------------------------------------------------------------------
SHARE DATA:
CLASS A SHARES:
Sold . . . . . . . . . . . . . . . . . 136,352 268,086 137,726 27,717
Reinvested dividends and distributions 5,104 10,792 3,564 3,878
Redeemed . . . . . . . . . . . . . . . (298,456) (2,041,177) (192,796) (191,975)
- --------------------------------------------------------------------------------------------------------------
Net increase (decrease) .. . . . . . . (157,000) (1,762,299) (51,506) (160,380)
- --------------------------------------------------------------------------------------------------------------
Shares Outstanding:
Beginning of period. . . . . . . . . . 487,833 2,250,132 305,697 466,077
End of period. . . . . . . . . . . . . 330,833 487,833 254,191 305,697
- --------------------------------------------------------------------------------------------------------------
CLASS B SHARES:
Sold . . . . . . . . . . . . . . . . . 76,677 379,892 70,888 74,898
Reinvested dividends and distributions 4,923 9,300 8,390 9,506
Redeemed . . . . . . . . . . . . . . . (353,414) (965,668) (215,240) (856,498)
- --------------------------------------------------------------------------------------------------------------
Net increase (decrease) .. . . . . . . (271,814) (576,476) (135,962) (772,094)
- --------------------------------------------------------------------------------------------------------------
Shares Outstanding:
Beginning of period. . . . . . . . . . 1,454,954 2,031,430 1,099,814 1,871,908
End of period. . . . . . . . . . . . . 1,183,140 1,454,954 963,852 1,099,814
- --------------------------------------------------------------------------------------------------------------
CLASS C SHARES:
Sold . . . . . . . . . . . . . . . . . 46,059 518,722 13,195 39,747
Reinvested dividends and distributions 2,926 5,246 2,459 3,040
Redeemed . . . . . . . . . . . . . . . (746,625) (1,879,354) (107,177) (385,928)
- --------------------------------------------------------------------------------------------------------------
Net increase (decrease) .. . . . . . . (697,640) (1,355,386) (91,523) (343,141)
- --------------------------------------------------------------------------------------------------------------
Shares Outstanding:
Beginning of period. . . . . . . . . . 1,522,573 2,877,959 429,768 772,909
End of period. . . . . . . . . . . . . 824,933 1,522,573 338,245 429,768
- --------------------------------------------------------------------------------------------------------------
CLASS Y SHARES:
Sold . . . . . . . . . . . . . . . . . 134,418 635,419 586,416 75,324
Reinvested dividends and distributions 22,086 35,638 6,314 5,938
Redeemed . . . . . . . . . . . . . . . (376,292) (1,334,668) (766,943) (264,126)
- --------------------------------------------------------------------------------------------------------------
Net increase (decrease) .. . . . . . . (219,788) (663,611) (174,213) (182,864)
- --------------------------------------------------------------------------------------------------------------
Shares Outstanding:
Beginning of period. . . . . . . . . . 991,353 1,654,964 386,353 569,217
End of period. . . . . . . . . . . . . 771,565 991,353 212,140 386,353
- --------------------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
11
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
FOR THE YEAR ENDED DECEMBER 31
CONSECO HIGH YIELD FUND CONSECO FIXED INCOME FUND
- ----------------------------------------------------------------------------------------------------------------------------
2003 2002 2003 2002
- ----------------------------------------------------------------------------------------------------------------------------
OPERATIONS:
Net investment income. . . . . . . . . . $ 9,155,099 $ 11,057,003 $ 4,681,987 $ 9,739,640
Net realized gains (losses) on sale
of investments . . . . . . . . . . . . . 1,020,472 (6,793,750) 3,052,881 (5,321,221)
Net change in unrealized appreciation
or depreciation on investments 20,021,304 (2,528,943) 1,880,216 2,244,567
- ----------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) from operations. 30,196,875 1,734,310 9,615,084 6,662,986
- ----------------------------------------------------------------------------------------------------------------------------
DIVIDENDS TO SHAREHOLDERS
FROM NET INVESTMENT INCOME:
Class A shares . . . . . . . . . . . . . (3,441,977) (2,795,876) (551,346) (2,093,523)
Class B shares . . . . . . . . . . . . . (2,865,020) (4,519,251) (1,534,976) (2,113,239)
Class C shares . . . . . . . . . . . . . (1,239,756) (2,488,853) (1,197,732) (2,834,367)
Class Y shares . . . . . . . . . . . . . (1,688,171) (1,134,429) (1,512,794) (2,703,211)
- ----------------------------------------------------------------------------------------------------------------------------
Total dividends from net investment
income . . . . . . . . . . . . . . . . . (9,234,924) (10,938,409) (4,796,848) (9,744,340)
- ----------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS
OF NET CAPITAL GAINS:
Class A shares . . . . . . . . . . . . . - - - -
Class B shares . . . . . . . . . . . . . - - - -
Class C shares . . . . . . . . . . . . . - - - -
Class Y shares . . . . . . . . . . . . . - - - -
- ----------------------------------------------------------------------------------------------------------------------------
Total distributions of net capital gains - - - -
- ----------------------------------------------------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS:
Shares sold. . . . . . . . . . . . . . . 149,982,558 122,719,523 27,291,381 72,574,538
Reinvested dividends and distributions . 3,277,625 1,651,621 1,559,667 2,598,766
Shares redeemed. . . . . . . . . . . . . (190,429,528) (123,281,422) (70,372,516) (164,831,690)
- ----------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) from capital
share transactions . . . . . . . . . . . (37,169,345) 1,089,722 (41,521,468) (89,658,386)
- ----------------------------------------------------------------------------------------------------------------------------
Total increase (decrease) in net assets. (16,207,394) (8,114,377) (36,703,232) (92,739,740)
- ----------------------------------------------------------------------------------------------------------------------------
NET ASSETS:
Beginning of period. . . . . . . . . . . 105,898,779 114,013,156 116,971,380 209,711,120
- ----------------------------------------------------------------------------------------------------------------------------
End of period. . . . . . . . . . . . . . $ 89,691,385 $ 105,898,779 $ 80,268,148 $ 116,971,380
- ----------------------------------------------------------------------------------------------------------------------------
Including undistributed net investment
income of: . . . . . . . . . . . . . . . $ (121,145) $ (38,590) $ 8,985 $ 126,182
- ----------------------------------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
12
- --------------------------------------------------------------------------------
CONSECO FUND GROUP
- --------------------------------------------------------------------------------
2003 ANNUAL REPORT
CONSECO HIGH YIELD FUND CONSECO FIXED INCOME FUND
- -------------------------------------------------------------------------------------------------
2003 2002 2003 2002
- -------------------------------------------------------------------------------------------------
SHARE DATA:
CLASS A SHARES:
Sold . . . . . . . . . . . . . . . . . 11,027,197 13,682,306 1,437,724 2,683,842
Reinvested dividends and distributions 207,031 94,030 11,420 42,996
Redeemed . . . . . . . . . . . . . . . (14,536,640) (11,128,588) (2,234,687) (7,631,799)
- -------------------------------------------------------------------------------------------------
Net increase (decrease) .. . . . . . . (3,302,412) 2,647,748 (785,543) (4,904,961)
- -------------------------------------------------------------------------------------------------
Shares Outstanding:
Beginning of period. . . . . . . . . . 6,220,159 2,572,411 1,537,196 6,442,157
End of period. . . . . . . . . . . . . 2,917,747 6,220,159 751,653 1,537,196
- -------------------------------------------------------------------------------------------------
CLASS B SHARES:
Sold . . . . . . . . . . . . . . . . . 417,994 928,565 248,859 1,241,495
Reinvested dividends and distributions 45,530 66,789 24,832 31,968
Redeemed . . . . . . . . . . . . . . . (1,274,538) (2,270,491) (1,060,013) (1,611,513)
- -------------------------------------------------------------------------------------------------
Net increase (decrease) .. . . . . . . (811,014) (1,275,137) (786,322) (338,050)
- -------------------------------------------------------------------------------------------------
Shares Outstanding:
Beginning of period. . . . . . . . . . 5,062,248 6,337,385 3,502,816 3,840,866
End of period. . . . . . . . . . . . . 4,251,234 5,062,248 2,716,494 3,502,816
- -------------------------------------------------------------------------------------------------
CLASS C SHARES:
Sold . . . . . . . . . . . . . . . . . 494,067 1,028,640 221,076 1,642,526
Reinvested dividends and distributions 27,534 46,292 11,884 30,805
Redeemed . . . . . . . . . . . . . . . (1,222,910) (2,039,562) (1,887,607) (3,764,822)
- -------------------------------------------------------------------------------------------------
Net increase (decrease) .. . . . . . . (701,309) (964,630) (1,654,647) (2,091,491)
- -------------------------------------------------------------------------------------------------
Shares Outstanding:
Beginning of period. . . . . . . . . . 2,350,872 3,315,502 3,546,446 5,637,937
End of period. . . . . . . . . . . . . 1,649,563 2,350,872 1,891,799 3,546,446
- -------------------------------------------------------------------------------------------------
CLASS Y SHARES:
Sold . . . . . . . . . . . . . . . . . 7,497,362 1,825,959 707,541 1,645,361
Reinvested dividends and distributions 135,646 27,307 101,878 154,850
Redeemed . . . . . . . . . . . . . . . (7,170,779) (2,028,312) (1,610,215) (3,511,174)
- -------------------------------------------------------------------------------------------------
Net increase (decrease) .. . . . . . . 462,229 (175,046) (800,796) (1,710,963)
- -------------------------------------------------------------------------------------------------
Shares Outstanding:
Beginning of period. . . . . . . . . . 1,353,277 1,528,323 3,040,706 4,751,669
End of period. . . . . . . . . . . . . 1,815,506 1,353,277 2,239,910 3,040,706
- -------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
13
- --------------------------------------------------------------------------------
CONSECO SCIENCE & TECHNOLOGY FUND
- --------------------------------------------------------------------------------
PORTFOLIO MANAGER'S REVIEW
HOW DID THE FUND PERFORM RELATIVE TO ITS BENCHMARKS?
The Conseco Science & Technology Fund (Class A with load) returned 52.52%
for the year ended December 31, 2003.(1) This compares to 49.12% for the
benchmark NASDAQ 100 Index and 28.69% for the benchmark S&P 500 Index.
WHAT CAUSED THE VARIANCE IN PERFORMANCE BETWEEN THE FUND AND
ITS BENCHMARKS?
Our concentrated strategy will result in out-performing the benchmark
during up markets. All three sectors in which the Fund is currently invested
performed very well for the year. Technology, our largest weighting, drove the
Fund higher. Within tech, networking and semiconductors were strong, both
gaining more than 20%. Semiconductors benefited due to the cyclical nature of
the industry while raising expectations for cap- ital spending on technology
helped the networking sector.
Interest rate sensitive stocks also performed well. The prospects of
continued low rates helped the group. Market- sensitive financials lagged.
Debate continues over how long the Fed may be on hold, but for now, the low
inflation envi- ronment, healthy growth and mediocre labor markets suggest it
may be some time before the Fed acts to raise rates.
In general, healthcare stocks performed in-line with the broader market
during the quarter. The noticeable standout was the drug sector. The group
experienced a relief rally after pas- sage of the Medicare Drug Benefit that
lacked strong pricing control language. Until the fourth quarter, healthcare
stocks had suffered an overhang from concern over the government's involvement
in the sector.
WHICH PORTFOLIO HOLDINGS ENHANCED THE FUND'S PERFORMANCE?
The Fund's performance was aided on the by several of our investment
holdings including PMC Sierra, EMC, Intel Corp, Juniper Networks, Cisco Systems
and Veritas Software.
WHICH HOLDINGS DETRACTED FROM PERFORMANCE?
The largest detractors were Eli Lilly, Pfizer, Medtronic and Microsoft.
WHAT IS YOUR OUTLOOK FOR THE NEXT FISCAL YEAR?
We expect economic data that points to an improving economy will continue
to trickle in. We feel our companies are extremely well positioned to
capitalize on not only an improved economy domestically, but a global
synchronized economic recovery. For most of 2003, a financially healthy
consumer helped pull the economy out of the recession. For 2004, it is likely
corporations will take over, generating real earnings growth and higher
spending.
OAK ASSOCIATES, LTD.
Oak Associates, ltd. ("Oak") sub-advises the Fund. Founded in 1985, Oak - known
for exceptionally low-turnover, aggressive growth performance - has taxable and
tax-exempt assets under management for more than 100 institutional clients, as
well as, three no-load mutual funds.
(1) Past performance does not guarantee future results. Your investment return
and principal will fluctuate, and your shares may be worth more or less
than their original cost. Total return is provided in accordance with SEC
guidelines for comparative purposes and reflects certain contractual
expense reimbursements through April 30, 2004. If the expense
reimbursements were not in place, the Fund's return would have been lower.
The total returns shown do not reflect the deduction of taxes that a
shareholder would pay on fund distributions or the redemption of fund
shares. Total return is shown with the applicable sales load or
contingent-deferred sales charge. The maximum sales load for the Conseco
Science & Technology Fund is 5.75% for Class A and 1.00% for Class C. The
applicable contingent-deferred sales charge is 5.00% in year 1 and
eliminated after year 6 for Class B, and the applicable contingent-deferred
sales charge is 1.00% and eliminated after 12 months for Class C. The
NASDAQ 100 Index is an unmanaged index considered to be representative of
the technology arena in general. The S&P 500 Index is an unmanaged index
considered to be representative of the U.S. stock market in general.
Investors cannot actually invest in an index.
14
- --------------------------------------------------------------------------------
CONSECO FUND GROUP
- --------------------------------------------------------------------------------
2003 Annual Report
CONSECO SCIENCE & TECHNOLOGY FUND
(unaudited)
GROWTH OF $10,000(1)
SINCE INCEPTION: 7/1/2000
DATE S&T NASDAQ 100 S&P 500
- --------------------------------------------
7/1/2000 . 9,425.07 10,000.00 10,000.00
7/31/2000. 10,320.45 9,590.00 9,844.00
8/31/2000. 11,847.31 10,833.82 10,455.31
9/30/2000. 10,989.63 9,487.18 9,903.27
10/31/2000 9,830.35 8,721.56 9,861.68
11/30/2000 7,426.96 6,660.66 9,084.58
12/31/2000 6,541.00 6,222.39 9,129.09
1/31/2001. 7,115.93 6,890.05 9,453.18
2/28/2001. 4,307.26 5,071.08 8,591.05
3/31/2001. 3,364.75 4,180.59 8,046.37
4/30/2001. 4,297.83 4,929.76 8,671.58
5/31/2001. 3,967.95 4,782.85 8,729.68
6/30/2001. 3,713.48 4,863.20 8,517.54
7/31/2001. 3,364.75 4,473.66 8,434.07
8/31/2001. 2,714.42 3,905.06 7,906.10
9/30/2001. 1,837.89 3,104.52 7,268.08
10/31/2001 2,516.49 3,626.39 7,406.90
11/30/2001 3,016.02 4,241.06 7,975.01
12/31/2001 2,836.95 4,190.60 8,045.19
1/31/2002. 2,874.65 4,119.36 7,927.73
2/28/2002. 2,148.92 3,611.85 7,774.72
3/31/2002. 2,563.62 3,860.71 8,067.05
4/30/2002. 2,148.92 3,393.56 7,578.19
5/31/2002. 1,903.86 3,210.99 7,522.11
6/30/2002. 1,555.14 2,793.88 6,986.54
7/31/2002. 1,489.16 2,556.68 6,441.59
8/31/2002. 1,357.21 2,504.27 6,484.10
9/30/2002. 1,036.76 2,212.27 5,779.28
10/31/2002 1,225.26 2,629.51 6,287.86
11/30/2002 1,498.59 2,965.82 6,658.21
12/31/2002 1,234.68 2,615.85 6,266.71
1/31/2003. 1,319.51 2,612.45 6,102.52
2/28/2003. 1,328.93 2,683.51 6,010.98
3/31/2003. 1,310.08 2,707.13 6,069.29
4/30/2003. 1,404.34 2,939.40 6,569.40
5/31/2003. 1,649.39 3,183.37 6,915.60
6/30/2003. 1,658.81 3,193.55 7,004.12
7/31/2003. 1,687.09 3,393.53 7,127.61
8/31/2003. 1,828.46 3,564.23 7,266.60
9/30/2003. 1,753.06 3,464.43 7,189.58
10/31/2003 1,922.71 3,763.76 7,596.51
11/30/2003 1,998.11 3,784.46 7,663.36
12/31/2003 1,998.11 3,900.64 8,064.92
The growth of $10,000 chart is a comparison of the change in value of a $10,000
investment with dividends and capital gains reinvested for the period from
inception of the Class A shares through 12/31/03. Past performance does not
guarantee future results.
- -----------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURN(1) (as of 12/31/03)
INCEPTION SINCE
DATE 1 YEAR 5 YEARS INCEPTION
- ------------------------------------------------------------------------
Science & Technology A. . . .. 07/01/2000 52.52% n/a -36.84%
Science & Technology B. . . . 07/01/2000 55.77% n/a -36.58%
Science & Technology C. . . . 07/01/2000 59.31% n/a -36.12%
Science & Technology Y. . . . 07/01/2000 63.16% n/a -35.34%
NASDAQ 100 Index. . . . . . . 07/01/2000 49.12% n/a -23.58%
S&P 500 Index . . . . . . . . 07/01/2000 28.69% n/a -5.96%
15
- --------------------------------------------------------------------------------
CONSECO SCIENCE & TECHNOLOGY FUND
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS
December 31, 2003
SHARES OR
PRINCIPAL AMOUNT VALUE
- ----------------------------------------------------------------------
COMMON STOCKS (96.1%)
BUSINESS SERVICES (20.8%)
--------
4,100 Cognizant Tech Solutions (a) $187,124
2,900 Intuit, Inc. (a) 153,439
5,900 Microsoft Corp 162,486
1,200 Symantec Corp. (a) . 41,580
5,330 VERITAS Software Corp. (a) 198,063
--------
742,692
--------
COMPUTER PROGRAMMING AND DATA PROCESSING (8.0%)
8,700 Symbol Technologies, Inc 146,943
2,100 Zebra Technologies Corp. (a) 139,377
--------
286,320
--------
EDUCATION SERVICES (3.5%)
1,800 University of Phoenix Online (a) 124,074
--------
ELECTRONIC, OTHER ELECTRICAL EQUIPMENT, EXCEPT COMPUTERS (22.2%)
12,300 Flextronics International Ltd. (a) 182,532
1,200 Maxim Integrated Products, Inc 59,760
3,700 QLogic Corp. (a) 190,920
3,700 QUALCOMM, Inc . 199,541
4,300 UTStarcom, Inc. (a) . 159,401
--------
792,154
--------
ENGINEERING, ACCOUNTING, RESEARCH, MANAGEMENT SERVICES (3.2%)
4,600 Affymetrix, Inc. (a) . 113,206
--------
INDUSTRIAL, COMMERCIAL MACHINERY, COMPUTERS (20.1%)
10,250 Cisco Systems, Inc. (a) 248,972
8,200 EMC Corp. (a) 105,944
5,170 Emulex Corp. (a) 137,936
5,910 Juniper Networks, Inc. (a) 110,399
4,600 Netscreen Technologies, Inc. (a) 113,850
--------
717,100
--------
SHARES OR
PRINCIPAL AMOUNT VALUE
- ------------------------------------------------------------------------
MEASURING INSTRUMENTS, PHOTO GOODS, WATCHES (4.0%)
2,600 Garmin, Ltd. (c) $ 141,648
-----------
MISCELLANEOUS RETAIL (3.5%)
1,900 eBay, Inc. (a) 122,722
-----------
SEMICONDUCTORS, RELATED DEVICES (4.3%)
6,200 Intersil Corp. - Class A 154,070
-----------
SPECIAL INDUSTRY MACHINERY (5.1%)
4,000 Applied Materials, Inc. (a) 89,800
2,200 Novellus Systems, Inc. (a) 92,510
-----------
182,310
-----------
STONE, CLAY, GLASS, AND CONCRETE (1.4%)
1,000 Cabot Microelectronics, Inc. (a) 49,000
-----------
TOTAL COMMON STOCK
(cost $2,482,012) 3,425,296
-----------
SHORT-TERM INVESTMENTS (8.8%)
$145,600 DAI Securities, Repurchase Agreement,
1.020%, due 01/02/2004 (b) 145,600
7,000 AIM Liquid Asset Portfolio 7,000
161,000 Nations Cash Reserve 161,000
-----------
TOTAL SHORT-TERM INVESTMENTS
(cost $313,600) 313,600
-----------
TOTAL INVESTMENTS
(cost $2,795,612) (104.9%) 3,738,896
-----------
LIABILITIES, LESS OTHER ASSETS (-4.9%) (174,472)
-----------
TOTAL NET ASSETS (100.0%) $3,564,424
-----------
-----------
(a) Non-income producing security.
(b) Securities lending collateral (Note 2).
(c) Securities (partial/entire) out on loan (Note 2).
The accompanying notes are an integral part of these financial statements.
16
- --------------------------------------------------------------------------------
CONSECO FUND GROUP
2003 ANNUAL REPORT
CONSECO 20 FUND
- --------------------------------------------------------------------------------
PORTFOLIO MANAGER'S REVIEW
HOW DID THE FUND PERFORM RELATIVE TO ITS BENCHMARKS?
The Conseco 20 Fund (Class A with load) returned 47.31% for the year ended
December 31, 2003.(1) This compares to 28.69% for the benchmark S&P 500 Index
and 35.63% for the benchmark S&P MidCap 400 Index.
WHAT CAUSED THE VARIANCE IN PERFORMANCE BETWEEN THE FUND AND ITS BENCHMARKS?
Our concentrated strategy will result in out-performing the benchmark
during up markets. All three sectors in which the Fund is currently invested
performed very well for the year. Technology, our largest weighting, drove the
Fund higher. Within tech, networking and semiconductors were strong, both
gaining more than 20%. Semiconductors benefited due to the cyclical nature of
the industry while raising expectations for capital spending on technology
helped the networking sector.
Interest rate sensitive stocks also performed well. The prospects of
continued low rates helped the group. Market-sensitive financials lagged. Debate
continues over how long the Fed may be on hold, but for now, the low inflation
environment, healthy growth and mediocre labor markets suggest it may be some
time before the Fed acts to raise rates.
In general, healthcare stocks performed in-line with the broader market
during the quarter. The noticeable standout was the drug sector. The group
experienced a relief rally after passage of the Medicare Drug Benefit that
lacked strong pricing control language. Until the fourth quarter, healthcare
stocks had suffered an overhang from concern over the government's involvement
in the sector.
WHICH PORTFOLIO HOLDINGS ENHANCED THE FUND'S PERFORMANCE?
The Fund's performance was aided on the by several of our investment
holdings including PMC Sierra, EMC, Intel Corp, Juniper Networks, Cisco Systems
and Veritas Software.
WHICH HOLDINGS DETRACTED FROM PERFORMANCE?
The largest detractors were Eli Lilly, Pfizer, Medtronic and Microsoft.
WHAT IS YOUR OUTLOOK FOR THE NEXT FISCAL YEAR?
We expect economic data that points to an improving economy will continue
to trickle in. We feel our companies are extremely well positioned to capitalize
on not only an improved economy domestically, but a global synchronized economic
recovery. For most of 2003, a financially healthy consumer helped pull the
economy out of the recession. For 2004, it is likely corporations will take
over, generating real earnings growth and higher spending.
OAK ASSOCIATES, LTD.
Oak Associates, ltd. ("Oak") sub-advises the Fund. Founded in 1985, Oak - known
for exceptionally low-turnover, aggressive growth performance - has taxable and
tax-exempt assets under management for more than 100 institutional clients, as
well as, three no-load mutual funds.
(1) Past performance does not guarantee future results. Your investment return
and principal will fluctuate, and your shares may be worth more or less
than their original cost. Total return is provided in accordance with SEC
guidelines for comparative purposes and reflects certain contractual
expense reimbursements through April 30, 2004. If the expense
reimbursements were not in place, the Fund's return would have been lower.
The total returns shown do not reflect the deduction of taxes that a
shareholder would pay on fund distributions or the redemption of fund
shares. Total return is shown with the applicable sales load or
contingent-deferred sales charge. The maximum sales load for the Conseco 20
Fund is 5.75% for Class A and 1.00% for Class C. The applicable
contingent-deferred sales charge is 5.00% in year 1 and eliminated after
year 6 for Class B, and the applicable contingent-deferred sales charge is
1.00% and eliminated after 12 months for Class C. The S&P MidCap 400 Index
is an unmanaged index considered to be representative of the mid cap stock
arena in general. The S&P 500 Index is an unmanaged index considered to be
representative of the U.S. stock market in general. Investors cannot
actually invest in an index.
17
- --------------------------------------------------------------------------------
CONSECO 20 FUND
- --------------------------------------------------------------------------------
(unaudited)
Growth of $10,000(1)
SINCE INCEPTION: 01/01/1998
DATE 20 S&P 500 S&P 400
- -------------------------------------------
1/1/1998 . 9,425.07 10,000.00 10,000.00
1/30/1998. 9,905.75 10,111.00 9,810.00
2/28/1998. 10,763.43 10,840.00 10,622.27
3/31/1998. 11,658.81 11,395.01 11,101.33
4/30/1998. 11,470.31 11,510.10 11,304.49
5/31/1998. 10,725.73 11,312.13 10,795.78
6/30/1998. 11,225.26 11,771.40 10,863.80
7/31/1998. 10,622.05 11,646.62 10,442.28
8/31/1998. 8,803.02 9,962.52 8,498.97
9/30/1998. 9,302.54 10,601.12 9,292.78
10/31/1998 9,717.25 11,462.99 10,123.55
11/30/1998 10,556.08 12,157.65 10,628.72
12/31/1998 12,064.09 12,857.93 11,912.67
1/31/1999. 12,111.22 13,395.39 11,449.26
2/28/1999. 11,771.91 12,978.79 10,849.32
3/31/1999. 12,318.57 13,497.94 11,152.02
4/30/1999. 13,034.87 14,020.31 12,031.91
5/31/1999. 13,327.05 13,689.43 12,083.65
6/30/1999. 14,542.88 14,449.20 12,731.33
7/31/1999. 14,552.31 13,998.38 12,460.16
8/31/1999. 15,155.51 13,928.39 12,032.77
9/30/1999. 15,221.49 13,546.75 11,660.96
10/31/1999 15,947.22 14,404.26 12,255.67
11/30/1999 18,058.44 14,696.67 12,899.09
12/31/1999 20,587.75 15,562.30 13,665.30
1/31/2000. 21,334.04 14,781.08 13,279.94
2/29/2000. 27,413.85 14,501.71 14,209.53
3/31/2000. 25,145.12 15,919.98 15,398.87
4/30/2000. 22,627.62 15,440.79 14,859.91
5/31/2000. 20,846.46 15,124.25 14,674.16
6/30/2000. 23,742.08 15,497.82 14,889.87
7/31/2000. 23,324.16 15,256.06 15,125.13
8/31/2000. 27,622.81 16,203.46 16,813.10
9/30/2000. 26,866.57 15,347.91 16,697.09
10/31/2000 23,224.65 15,283.45 16,131.05
11/30/2000 17,592.63 14,079.12 14,913.16
12/31/2000 15,302.95 14,148.11 16,054.02
1/31/2001. 17,007.61 14,650.36 16,412.02
2/28/2001. 11,451.18 13,314.25 15,476.54
3/31/2001. 9,121.91 12,470.13 14,326.63
4/30/2001. 11,334.07 13,439.06 15,906.86
5/31/2001. 10,540.29 13,529.10 16,277.49
6/30/2001. 10,045.81 13,200.34 16,212.38
7/31/2001. 9,278.06 13,070.98 15,970.81
8/31/2001. 7,820.64 12,252.73 15,448.57
9/30/2001. 5,959.82 11,263.94 13,526.76
10/31/2001 7,143.98 11,479.08 14,126.00
11/30/2001 8,354.16 12,359.52 15,176.97
12/31/2001 7,963.78 12,468.29 15,961.62
1/31/2002. 8,093.91 12,286.25 15,878.62
2/28/2002. 6,766.61 12,049.13 15,897.68
3/31/2002. 7,703.52 12,502.17 17,034.36
4/30/2002. 6,766.61 11,744.54 16,954.30
5/31/2002. 6,389.24 11,657.63 16,667.77
6/30/2002. 5,439.31 10,827.61 15,447.69
7/31/2002. 4,996.88 9,983.06 13,950.81
8/31/2002. 4,775.66 10,048.94 14,020.56
9/30/2002. 3,942.85 8,956.62 12,890.51
10/31/2002 4,528.42 9,744.81 13,448.67
11/30/2002 5,374.25 10,318.78 14,227.34
12/31/2002 4,567.46 9,712.03 13,642.60
1/31/2003. 4,541.44 9,457.58 13,244.24
2/28/2003. 4,619.51 9,315.71 12,929.02
3/31/2003. 4,619.51 9,406.07 13,037.63
4/30/2003. 5,283.16 10,181.14 13,984.16
5/31/2003. 5,790.66 10,717.68 15,143.45
6/30/2003. 5,725.59 10,854.87 15,337.28
7/31/2003. 6,128.99 11,046.25 15,881.48
8/31/2003. 6,467.32 11,261.65 16,602.50
9/30/2003. 6,220.08 11,142.28 16,348.48
10/31/2003 6,896.74 11,772.93 17,584.43
11/30/2003 7,104.94 11,876.53 18,196.36
12/31/2003 7,130.96 12,498.86 18,503.88
The growth of $10,000 chart is a comparison of the change in value of a $10,000
investment with dividends and capital gains reinvested for the period from
inception of the Class A shares through 12/31/03. Past performance does not
guarantee future results.
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURN(1) (as of 12/31/03)
INCEPTION SINCE
DATE 1 YEAR 5 YEARS INCEPTION
- ---------------------------------------------------------------
20 A . . . . . . . . 01/01/1998 47.31% -11.04% -5.48%
20 B . . . . . . . . 02/18/1998 50.46% -10.69% -7.10%
20 C . . . . . . . . 03/10/1998 52.79% -10.61% -8.01%
20 Y . . . . . . . . 04/06/1998 56.94% -9.49% -7.89%
S&P 500 Index. . . . 01/01/1998 28.69% -0.57% 3.79%
S&P MidCap 400 Index 01/01/1998 35.63% 9.21% 10.80%
18
- --------------------------------------------------------------------------------
CONSECO FUND GROUP
2003 ANNUAL REPORT
CONSECO 20 FUND
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS
DECEMBER 31, 2003
SHARES OR
PRINCIPAL AMOUNT VALUE
- --------------------------------------------------------------------
COMMON STOCKS (95.6%)
BUSINESS SERVICES (8.7%)
60,000 Microsoft Corp $ 1,652,400
86,000 VERITAS Software Corp. (a) 3,195,760
-----------
4,848,160
-----------
CHEMICALS AND ALLIED PRODUCTS (4.6%)
1,200 Eli Lilly & Co 84,396
71,000 Pfizer, Inc 2,508,430
-----------
2,592,826
-----------
DEPOSITORY INSTITUTIONS (3.3%)
38,000 Citigroup, Inc 1,844,520
-----------
ELECTRONIC, OTHER ELECTRICAL EQUIPMENT, EXCEPT COMPUTERS (25.1%)
100,000 Intel Corp 3,220,000
45,000 Linear Technology Corp 1,893,150
67,000 Maxim Integrated Products, Inc 3,336,600
225,000 McData Corp. (a) (c) 2,144,250
90,000 Xilinx, Inc. (a) 3,486,600
-----------
14,080,600
-----------
INDUSTRIAL, COMMERCIAL MACHINERY, COMPUTERS (23.9%)
167,000 Cisco Systems, Inc. (a) 4,056,430
80,000 Dell Computer Corp. (a) 2,716,800
250,000 EMC Corp. (a) 3,230,000
180,000 Juniper Networks, Inc. (a) (c) 3,362,400
-----------
13,365,630
-----------
INSURANCE CARRIERS (6.3%)
53,100 American International Group, Inc 3,519,468
-----------
MEASURING INSTRUMENTS, PHOTO GOODS, WATCHES (5.1%)
59,000 Medtronic, Inc 2,867,990
-----------
NON-DEPOSITORY CREDIT INSTITUTION (4.9%)
110,000 MBNA Corp 2,733,500
-----------
SECURITY AND COMMODITY BROKERS (2.1%)
20,000 Morgan Stanley Dean Witter & Co 1,157,400
-----------
SHARES OR
PRINCIPAL AMOUNT VALUE
- -------------------------------------------------------------------------------
SEMICONDUCTORS, RELATED DEVICES (5.8%)
160,000 PMC-Sierra, Inc. (a) $ 3,224,000
-------------
SPECIAL INDUSTRY MACHINERY (5.8%)
145,000 Applied Materials, Inc. (a) 3,255,250
-------------
TOTAL COMMON STOCK
(cost $93,031,495) 53,489,344
-------------
VARIABLE RATE BONDS AND CDS (5.4%)
$2,000,000 Credit Suisse First Boston
(USA), Inc., 1.430%,
due 02/20/2004 (b) 2,005,822
1,000,000 Lehman Brothers Holdings,
1.450%, due 09/20/2004 (b) 1,001,520
-------------
TOTAL VARIABLE RATE BONDS AND CDS
(cost $3,007,342) 3,007,342
-------------
SHORT-TERM INVESTMENTS (5.0%)
534,402 DAI Securities, Repurchase Agreement,
1.030%, due 01/02/2004 (b) 534,402
2,267,000 Nations Cash Reserve 2,267,000
-------------
TOTAL SHORT-TERM INVESTMENTS
(cost $2,801,402) 2,801,402
-------------
TOTAL INVESTMENTS (cost $98,840,239) (106.0%) 59,298,088
-------------
LIABILITIES, LESS OTHER ASSETS (-6.0%) (3,374,567)
-------------
TOTAL NET ASSETS (100.0%) $55,923,521
-------------
-------------
(a) Non-income producing security.
(b) Securities lending collateral (Note 2).
(c) Securities (partial/entire) out on loan (Note 2).
The accompanying notes are an integral part of these financial statements.
19
- --------------------------------------------------------------------------------
CONSECO EQUITY FUND
- --------------------------------------------------------------------------------
PORTFOLIO MANAGER REVIEW
HOW DID THE FUND PERFORM RELATIVE TO ITS BENCHMARKS?
The Conseco Equity Fund (Class A with load) returned 28.86% for the year
ended December 31, 2003.(1) This compares to 35.63% for the benchmark S&P MidCap
400 Index and 28.69% for the benchmark S&P 500 Index.
WHAT CAUSED THE VARIANCE IN PERFORMANCE BETWEEN THE FUND AND ITS BENCHMARKS?
The year 2003 saw equity markets post gains not seen since the bubble years
of the late 1990's. The euphoria over the expectations of a stronger economy
carried over to the equity markets, especially the tech heavy NASDAQ. The two
themes that dominated equity markets in 2003 were a lowering of the equity risk
premium and better than expected rebound in corporate profits. The lower equity
risk premium helped the riskiest stocks with high growth potential, low market
capitalizations and expensive multiples. The rebound in the economy and
corporate profits greatly benefited economically sensitive (cyclical) stocks.
Valuation and quality of earnings factors were not rewarded during 2003.
WHICH PORTFOLIO HOLDINGS ENHANCED THE FUND'S PERFORMANCE?
In terms of performance during the year, stock selection in Industrial,
Healthcare, and Consumer Staples sectors were the largest contributors relative
to the benchmark. The largest contributors to performance were over-weight
positions (relative to benchmark weight) in D.R. Horton Inc., Cypress
Semiconductor Corp. and Countrywide Financial Corp.
WHICH HOLDINGS DETRACTED FROM PERFORMANCE?
Within the Fund, stock selection in the Technology, Consumer Discretionary,
and Materials sectors detracted the most in 2003 relative to the index. The
largest detractors were under-weight positions (relative to the benchmark
weight) in Corning Inc., Yahoo! Inc. and International Game Technology.
WHAT IS YOUR OUTLOOK FOR THE NEXT FISCAL YEAR?
The economic expansion finally accelerated around the middle of 2003, and
2004 could see a continuation of this momentum. For 2004, GDP growth should
accelerate, allowing the unemployment rate to fall for the year. First half
growth in GDP is predicted to accelerate between 4% and 6%. Consumption will
respond to prior tax cuts, tax refunds from retroactive cuts in 2003, and
improving job market, while business spending should rise in response to
successive quarters of profit expansion. It should be an excellent environment
for equities, with predicted GDP expansion, mild inflation, and profits
registering further solid gains. Interest rates could be on the rise, but should
not be enough to spoil this environment. Overall, our philosophy will not change
based on short-term trends or conditions in the market. Our goal is to add value
through security selection, while attempting to neutralize other risk factors,
such as sector rotation, for which there is not adequate compensation by the
market.
CHICAGO EQUITY PARTNERS, LLC
Chicago Equity Partners, LLC ("CEP") sub-advises the Fund. With a history dating
back to 1989, CEP - known for low-turnover growth performance - has taxable and
tax-exempt assets under management for more than 100 institutional clients.
(1) Past performance does not guarantee future results. Your investment return
and principal will fluctuate, and your shares may be worth more or less
than their original cost. Total return is provided in accordance with SEC
guidelines for comparative purposes and reflects certain contractual
expense reimbursements through April 30, 2004. If the expense
reimbursements were not in place, the fund's return would have been lower.
The total returns shown do not reflect the deduction of taxes that a
shareholder would pay on fund distributions or the redemption of fund
shares. Total return is shown with the applicable sales load or
contingent-deferred sales charge. The maximum sales load for the Conseco
Equity Fund is 5.75% for Class A and 1.00% for Class C. The applicable
contingent-deferred sales charge is 5.00% in year 1 and eliminated after
year 6 for Class B, and the applicable contingent-deferred sales charge is
1.00% and eliminated after 12 months for Class C. The S&P MidCap 400 Index
is an unmanaged index considered to be representative of the Mid Cap stock
arena in general. The S&P 500 Index is an unmanaged index considered to be
representative of the U.S. stock market in general. Investors cannot
actually invest in an index.
20
- --------------------------------------------------------------------------------
CONSECO FUND GROUP
2003 ANNUAL REPORT
CONSECO EQUITY FUND
- --------------------------------------------------------------------------------
(unaudited)
Growth of $10,000(1)
SINCE INCEPTION: 1/2/1997
DATE EQUITY S&P 400 S&P 500
- -------------------------------------------
1/2/1997 . 9,425.07 10,000.00 10,000.00
1/31/1997. 9,679.55 10,375.00 10,625.00
2/28/1997. 9,396.80 10,289.93 10,707.88
3/31/1997. 8,963.24 9,851.57 10,267.78
4/30/1997. 8,868.99 10,106.73 10,880.77
5/31/1997. 9,792.65 10,990.06 11,543.41
6/30/1997. 10,226.20 11,298.88 12,060.55
7/31/1997. 10,999.06 12,417.47 13,020.57
8/31/1997. 11,206.41 12,402.57 12,291.42
9/30/1997. 12,271.44 13,115.71 12,964.99
10/31/1997 11,677.66 12,545.18 12,531.96
11/30/1997 11,762.49 12,730.85 13,112.19
12/31/1997 11,583.41 13,224.81 13,337.72
1/31/1998. 11,740.37 12,973.54 13,485.77
2/28/1998. 12,807.67 14,047.74 14,458.09
3/31/1998. 13,778.71 14,681.30 15,198.34
4/30/1998. 13,768.00 14,949.96 15,351.85
5/31/1998. 12,835.85 14,277.22 15,087.80
6/30/1998. 13,210.85 14,367.16 15,700.36
7/31/1998. 12,289.41 13,809.72 15,533.94
8/31/1998. 9,975.10 11,239.73 13,287.73
9/30/1998. 10,500.11 12,289.52 14,139.47
10/31/1998 11,014.40 13,388.20 15,289.01
11/30/1998 11,978.70 14,056.27 16,215.53
12/31/1998 13,449.57 15,754.27 17,149.54
1/31/1999. 13,160.21 15,141.43 17,866.39
2/28/1999. 12,474.34 14,348.02 17,310.75
3/31/1999. 13,160.21 14,748.33 18,003.18
4/30/1999. 13,642.47 15,911.97 18,699.90
5/31/1999. 13,588.89 15,980.39 18,258.58
6/30/1999. 14,847.57 16,836.94 19,271.93
7/31/1999. 15,008.61 16,478.32 18,670.65
8/31/1999. 15,062.29 15,913.11 18,577.30
9/30/1999. 15,180.38 15,421.39 18,068.28
10/31/1999 16,211.02 16,207.89 19,212.00
11/30/1999 17,885.80 17,058.80 19,602.00
12/31/1999 21,058.03 18,072.09 20,756.56
1/31/2000. 21,303.95 17,562.46 19,714.58
2/29/2000. 27,464.75 18,791.83 19,341.98
3/31/2000. 26,739.95 20,364.71 21,233.62
4/30/2000. 23,866.63 19,651.94 20,594.49
5/31/2000. 22,028.75 19,406.29 20,172.30
6/30/2000. 25,316.23 19,691.57 20,670.56
7/31/2000. 24,474.95 20,002.69 20,348.10
8/31/2000. 28,396.63 22,234.99 21,611.71
9/30/2000. 27,529.46 22,081.57 20,470.62
10/31/2000 25,018.55 21,333.01 20,384.64
11/30/2000 20,164.98 19,722.36 18,778.33
12/31/2000 22,105.07 21,231.13 18,870.34
1/31/2001. 22,060.23 21,704.58 19,540.24
2/28/2001. 20,446.07 20,467.42 17,758.17
3/31/2001. 18,921.58 18,946.69 16,632.30
4/30/2001. 20,423.65 21,036.51 17,924.63
5/31/2001. 20,759.93 21,526.66 18,044.73
6/30/2001. 20,558.16 21,440.55 17,606.24
7/31/2001. 20,020.11 21,121.09 17,433.70
8/31/2001. 19,302.70 20,430.43 16,342.35
9/30/2001. 17,307.42 17,888.88 15,023.52
10/31/2001 17,800.63 18,681.36 15,310.47
11/30/2001 18,921.58 20,071.26 16,484.78
12/31/2001 19,688.16 21,108.94 16,629.85
1/31/2002. 19,800.28 20,999.17 16,387.05
2/28/2002. 19,777.86 21,024.37 16,070.78
3/31/2002. 20,786.93 22,527.61 16,675.05
4/30/2002. 20,697.24 22,421.73 15,664.54
5/31/2002. 20,473.00 22,042.81 15,548.62
6/30/2002. 19,441.50 20,429.27 14,441.56
7/31/2002. 17,782.13 18,449.68 13,315.12
8/31/2002. 17,804.56 18,541.93 13,403.00
9/30/2002. 16,391.85 17,047.45 11,946.09
10/31/2002 16,907.60 17,785.60 12,997.35
11/30/2002 17,535.47 18,815.39 13,762.89
12/31/2002 16,997.30 18,042.07 12,953.63
1/31/2003. 16,795.48 17,515.25 12,614.25
2/28/2003. 16,683.36 17,098.38 12,425.03
3/31/2003. 16,817.91 17,242.01 12,545.56
4/30/2003. 17,894.25 18,493.78 13,579.31
5/31/2003. 19,262.11 20,026.91 14,294.94
6/30/2003. 19,508.77 20,283.26 14,477.92
7/31/2003. 20,181.49 21,002.95 14,733.18
8/31/2003. 21,056.02 21,956.48 15,020.47
9/30/2003. 20,899.05 21,620.55 14,861.26
10/31/2003 22,334.18 23,255.06 15,702.40
11/30/2003 22,805.08 24,064.34 15,840.58
12/31/2003 23,231.13 24,471.03 16,670.63
The growth of $10,000 chart is a comparison of the change in value of a $10,000
investment with dividends and capital gains reinvested for the period from
inception of the Class A shares through 12/31/03. Past performance does not
guarantee future results.
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURN(1) (as of 12/31/03)
INCEPTION SINCE
DATE 1 YEAR 5 YEARS INCEPTION
- ---------------------------------------------------------------
Equity A . . . . . . 01/02/1997 28.86% 10.23% 12.80%
Equity B . . . . . . 01/28/1998 31.15% 10.84% 11.80%
Equity C . . . . . . 02/19/1998 33.83% 10.89% 10.49%
Equity Y . . . . . . 01/02/1997 37.51% 12.16% 14.36%
S&P MidCap 400 Index 01/02/1997 35.63% 9.21% 13.64%
S&P 500 Index. . . . 01/02/1997 28.69% -0.57% 7.57%
21
- --------------------------------------------------------------------------------
CONSECO EQUITY FUND
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS
DECEMBER 31, 2003
SHARES OR
PRINCIPAL AMOUNT VALUE
- ------------------------------------------------------------------------
COMMON STOCKS (98.4%)
APPAREL AND ACCESSORY STORES (1.0%)
46,100 Foot Locker, Inc $ 1,081,045
-----------
APPAREL AND OTHER FINISHED PRODUCTS (2.0%)
16,600 Chico's, Inc. (a) 613,370
50,200 Claire's Stores, Inc 945,768
13,200 VF Corp 570,768
-----------
2,129,906
-----------
AUTOMOTIVE REPAIR, SERVICES, PARKING (0.9%)
28,300 Ryder System, Inc 966,445
-----------
BUILDING CONSTRUCTION, GENERAL CONTRACTORS AND OPERATIVE BUILDERS (2.0%)
32,850 D.R. Horton, Inc 1,421,091
7,600 Pulte Homes, Inc 711,512
-----------
2,132,603
-----------
BUSINESS SERVICES (9.5%)
10,900 Affiliated Computer Services, Inc. (a) 593,614
31,500 Citrix Systems, Inc. (a) 668,115
27,100 Computer Sciences Corp. (a) 1,198,633
26,200 Convergys Corp. (a) 457,452
9,800 DST Systems, Inc. (a) (c) 409,248
9,400 Dun & Bradstreet (a) 476,674
34,900 Electronic Arts, Inc. (a) 1,667,522
11,700 Factset Research Systems, Inc 447,057
6,500 Fair, Isaac & Co., Inc 319,540
17,500 GTECH Holdings Corp 866,075
13,200 IMS Health, Inc 328,152
11,000 NCR Corp. (a) 426,800
3,800 Pixar, Inc. (a) 263,302
24,800 Rent-A-Center, Inc. (a) 741,024
6,514 Sotheby's Holdings, Inc. (a) 88,981
35,900 Symantec Corp. (a) . 1,243,935
-----------
10,196,124
-----------
CHEMICALS AND ALLIED PRODUCTS (5.0%)
13,875 Biogen, Inc. (a) 510,322
15,200 Chiron Corp. (a) 866,248
19,100 Cytec Industries, Inc. (a) 733,249
28,300 Endo Pharmaceuticals Corp. (a) 545,058
12,800 Invitrogen Corp. (a) (c) 896,000
18,000 Lubrizol Corp 585,360
24,500 Mylan Laboratories, Inc 618,870
15,800 Praxair, Inc 603,560
-----------
5,358,667
-----------
COMMUNICATIONS BY PHONE, TELEVISION, RADIO, CABLE (2.0%)
12,200 Adtran, Inc 378,200
34,000 Centurytel, Inc 1,109,080
13,600 Global Payments, Inc 640,832
-----------
2,128,112
-----------
DEPOSITORY INSTITUTIONS (7.9%)
27,500 Associated Banc Corp 1,172,875
16,500 City National Corp. 1,024,980
22,100 First Tennessee National Corp 974,610
50,900 Hibernia Corp. - Class A 1,196,659
52,600 Huntington Bancshares 1,183,500
22,600 Regions Financial Corp 840,720
11,300 Sovereign Bancorp, Inc 268,375
22,200 UnionBanCal Corp 1,277,388
13,400 Webster Financial Corp 614,524
-----------
8,553,631
-----------
EATING AND DRINKING PLACES (2.2%)
24,600 Applebee's International, Inc 966,042
29,100 Ruby Tuesday, Inc 829,059
17,000 Starbucks Corp. (a) . 562,020
-----------
2,357,121
-----------
ELECTRIC, GAS, WATER, COGENERATION, SANITARY SERVICES (7.3%)
37,100 Constellation Energy Group, Inc 1,452,836
56,700 Northeast Utilities 1,143,639
25,100 Nstar Corp 1,217,350
73,600 ONEOK, Inc 1,625,088
28,900 Questar Corp 1,015,835
185,700 Reliant Resources, Inc. (a) 1,366,752
-----------
7,821,500
-----------
ELECTRONIC, OTHER ELECTRICAL EQUIPMENT, EXCEPT COMPUTERS (5.9%)
13,800 Amkor Technology, Inc. (a) 251,298
20,700 Energizer Holdings, Inc. (a) 777,492
20,600 Fairchild Semiconductor
International, Inc. - Class A (a) 514,382
22,900 National Semiconductor Corp. (a) 902,489
10,500 QLogic Corp. (a) 541,800
30,700 Polycom, Inc. (a) 599,264
20,900 Rockwell Collins, Inc 627,627
30,300 Scientific-Atlanta, Inc 827,190
11,100 Silicon Laboratories, Inc. (a) 479,742
22,400 UTStarcom, Inc. (a) (c) 830,368
-----------
6,351,652
-----------
ENGINEERING, ACCOUNTING, RESEARCH, MANAGEMENT SERVICES (0.5%)
8,700 Moody's Corp 526,785
-----------
FABRICATED METAL PRODUCTS (0.8%)
11,900 Fortune Brands, Inc. 850,731
-----------
FOOD AND KINDRED PRODUCTS (2.0%)
6,300 Hershey Foods Corp 485,037
10,400 The J.M. Smucker Co 471,016
17,500 Pepsiamericas, Inc 299,600
67,600 Tyson Foods, Inc. - Class A 895,024
-----------
2,150,677
-----------
FURNITURE AND FIXTURES (0.7%)
12,500 Lear Corp 766,625
-----------
GENERAL MERCHANDISE STORES (1.8%)
27,200 Federated Department Stores, Inc 1,281,936
15,500 Sears Roebuck & Co. (c) 705,095
-----------
1,987,031
-----------
The accompanying notes are an integral part of these financial statements.
22
- --------------------------------------------------------------------------------
CONSECO FUND GROUP
2003 ANNUAL REPORT
CONSECO EQUITY FUND
SHARES OR
PRINCIPAL AMOUNT VALUE
- -----------------------------------------------------------------------------
HEALTH SERVICES (3.0%)
3,500 AdvancePCS (a) $ 184,310
12,000 Appria Healthcare Group (a) 341,640
15,700 Coventry Health Care, Inc. (a) 1,012,493
10,400 Renal Care Group, Inc. (a) 428,480
8,800 SICOR, Inc. (a) 239,360
22,600 Watson Pharmaceuticals, Inc. (a) 1,039,600
------------
3,245,883
------------
INDUSTRIAL, COMMERCIAL MACHINERY, COMPUTERS (6.1%)
14,100 Black & Decker, Inc. 695,412
32,000 Cypress Semiconductor Corp. (a) 683,520
14,400 Diebold Co 775,728
31,600 Foundry Networks, Inc. (a) 864,576
27,400 Lam Research Corp. (a) 885,020
6,800 Lexmark International, Inc. (a) 534,752
38,100 Maxtor Corp. (a) 422,910
14,800 Network Appliance, Inc. (a) 303,844
21,200 Pall Corp 568,796
1 Riverstone Networks, Inc. (a) 1
6,900 Sandisk Corp. (a) 421,866
6,500 Varian Medical Systems, Inc. (a) 449,150
------------
6,605,575
------------
INSURANCE CARRIERS (6.0%)
5,341 Anthem, Inc. (a) (c) . 400,575
14,175 Fidelity National Financial, Inc 549,707
14,300 MBIA, Inc 846,989
9,400 Mid-Atlantic Medical Services, Inc. (a) . 609,120
32,700 Old Republic International Corp 829,272
17,200 The PMI Group, Inc. 640,356
14,500 Protective Life Corp. 490,680
15,900 Reinsurance Group of America, Inc 614,535
22,100 Torchmark Corp 1,006,434
4,800 Wellpoint Health Networks, Inc. (a) 465,552
------------
6,453,220
------------
LEATHER AND LEATHER PRODUCTS (0.3%)
9,000 Coach, Inc. (a) 339,750
------------
MEASURING INSTRUMENTS, PHOTO GOODS, WATCHES (2.7%)
9,500 Beckman Coulter, Inc 482,885
21,400 Becton Dickinson & Co 880,396
16,600 Tektronix, Inc 524,560
14,100 Zimmer Holidngs, Inc. (a) 992,640
------------
2,880,481
------------
MISCELLANEOUS RETAIL (1.8%)
20,700 Blockbuster, Inc. (c) . 371,565
45,500 Borders Group, Inc 997,360
13,000 Michael's Stores, Inc. 574,600
------------
1,943,525
------------
NON-DEPOSITORY CREDIT INSTITUTIONS (1.5%)
21,200 Countrywide Financial Corp 1,608,020
------------
OIL AND GAS EXTRACTION (3.1%)
12,900 BJ Services Co. (a) 463,110
30,600 FMC Technologies, Inc. (a) 712,980
18,600 Marathon Oil Corp. 615,474
17,400 Newfield Exploration Co. (a) 774,996
16,300 Pogo Producing Co 787,290
------------
3,353,850
------------
PAPER AND ALLIED PRODUCTS (1.3%)
13,200 Boise Cascade (c) $ 433,752
39,100 Pactiv Corp. (a) 934,490
------------
1,368,242
------------
PETROLEUM REFINING AND RELATED PRODUCTS (0.5%)
11,100 Valero Energy Corp. 514,374
------------
PRIMARY METAL INDUSTRIES (0.7%)
25,200 Engelhard Corp 754,740
------------
PRINTING, PUBLISHING, AND ALLIED INDUSTRIES (2.0%)
17,900 Dow Jones & Co., Inc 892,315
27,400 Harte-Hanks, Inc 595,950
10,100 McClatchy Newspapers - Class A 694,880
------------
2,183,145
------------
REAL ESTATE INVESTMENT TRUST (REIT'S) (4.9%)
14,300 CBL & Associates Properties 807,950
40,700 CarrAmerica Realty Corp 1,212,046
52,100 General Growth Properties, Inc 1,445,775
21,100 Mack-Cali Realty Corp 878,182
16,600 Vornado Realty Trust 908,850
------------
5,252,803
------------
RUBBER AND MISCELLANEOUS PLASTIC PRODUCTS (0.8%)
15,600 Sealed Air Corp. (a) . 844,584
------------
SECURITY AND COMMODITY BROKERS (2.0%)
8,600 Bear Stearns Companies, Inc 687,570
52,700 E*Trade Financial Corp. (a) 666,655
16,000 Franklin Resources, Inc 832,960
------------
2,187,185
------------
TEXTILE MILL PRODUCTS (0.6%)
9,600 Mohawk Industries, Inc. (a) 677,184
------------
TOBACCO PRODUCTS (0.7%)
13,300 R.J. Reynolds Tobacco Holdings (c) 773,395
------------
TRANSPORTATION EQUIPMENT (4.6%)
23,300 Brunswick Corp 741,639
17,850 Paccar, Inc 1,519,392
9,500 Polaris Industries, Inc. (c) 841,510
31,900 Textron, Inc 1,820,214
------------
4,922,755
------------
TRANSPORTATION SERVICES (0.5%)
20,400 J. B. Hunt (a) 551,004
------------
WHOLESALE TRADE-DURABLE GOODS (2.3%)
41,700 Arrow Electronics, Inc. (a) 964,938
36,600 Avnet, Inc. (a) 792,756
8,500 BorgWarner, Inc 723,095
------------
2,480,789
------------
WHOLESALE TRADE-NON-DURABLE GOODS (1.5%)
6,500 Henry Schein, Inc. (a) 439,270
39,300 SUPERVALU, INC 1,123,587
------------
1,562,857
------------
TOTAL COMMON STOCK
(cost $85,022,101) 105,862,016
------------
------------
The accompanying notes are an integral part of these financial statements.
23
- --------------------------------------------------------------------------------
CONSECO EQUITY FUND
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS
December 31, 2003
SHARES OR
PRINCIPAL AMOUNT VALUE
- --------------------------------------------------------------------------
VARIABLE RATE BONDS AND CDS (2.6%)
$750,000 Credit Suisse First Boston (USA),
Inc., 1.420%, due 07/05/2005 (b) $ 752,498
1,000,000 Lehman Brothers Holdings,
1.450%, due 09/20/2004 (b) 1,001,520
1,000,000 Southtrust Bank, National Association,
1.250%, due 05/24/2004 (b) 1,000,690
--------------
TOTAL VARIABLE RATE BONDS AND CDS
(cost $2,754,708) 2,754,708
--------------
SHORT-TERM INVESTMENTS (4.6%)
2,114,348 DAI Securities, Repurchase Agreement,
1.030%, due 01/02/2004 (b) 2,114,348
2,874,000 Nations Cash Reserve 2,874,000
--------------
TOTAL SHORT-TERM INVESTMENTS
cost $4,988,348) 4,988,348
--------------
TOTAL INVESTMENTS
(cost $92,765,157) (105.6%) 113,605,072
--------------
LIABILITIES, LESS OTHER ASSETS
(-5.6%) (6,010,665)
--------------
TOTAL NET ASSETS (100.0%) $107,594,407
--------------
--------------
(a) Non-income producing security.
(b) Securities lending collateral (Note 2).
(c) Securities (partial/entire) out on loan (Note 2).
The accompanying notes are an integral part of these financial statements.
24
- --------------------------------------------------------------------------------
CONSECO FUND GROUP
2003 ANNUAL REPORT
CONSECO LARGE-CAP FUND
- --------------------------------------------------------------------------------
PORTFOLIO MANAGER'S REVIEW
HOW DID THE FUND PERFORM RELATIVE TO ITS BENCHMARKS?
The Conseco Large-Cap Fund (Class A with load) returned 18.74% for the year
ended December 31, 2003.(1) This compares to 28.69% for the benchmark S&P 500
Index and 29.89% for the benchmark Russell 1000 Index.
WHAT CAUSED THE VARIANCE IN PERFORMANCE BETWEEN THE FUND AND ITS BENCHMARKS?
The year 2003 saw equity markets post gains not seen since the bubble years
of the late 1990's. The euphoria over the expectations of a stronger economy
carried over to the equity markets, especially the tech heavy NASDAQ. The two
themes that dominated equity markets in 2003 were a lowering of the equity risk
premium and better than expected rebound in corporate profits. The lower equity
risk premium helped the riskiest stocks with high growth potential, low market
capitalizations and expensive multiples. The rebound in the economy and
corporate profits greatly benefited economically sensitive (cyclical) stocks.
Valuation and quality of earnings factors were not rewarded during 2003, which
led to the fund underperformance.
WHICH PORTFOLIO HOLDINGS ENHANCED THE FUND'S PERFORMANCE?
In terms of performance during the year, stock selection in Industrial,
Healthcare, and Financial sectors were the largest contributors relative to the
benchmark. The largest contributors to performance were over-weight positions
(relative to benchmark weight) in Capital One Financial Corp., Coventry Health
Care, Inc. and Countrywide Financial Corp.
WHICH HOLDINGS DETRACTED FROM PERFORMANCE?
Within the Fund, stock selection in the Technology, Consumer Discretionary,
and Materials sectors detracted the most in 2003 relative to the index. The
largest detractors were under-weight positions (relative to the benchmark
weight) in Texas Instruments, Applied Materials Inc. and QUALCOMM Inc.
WHAT IS YOUR OUTLOOK FOR THE NEXT FISCAL YEAR?
The economic expansion finally accelerated around the middle of 2003, and
2004 could see a continuation of this momentum. For 2004, GDP growth should
accelerate, allowing the unemployment rate to fall for the year. First half
growth in GDP is predicted to accelerate between 4% and 6%. Consumption will
respond to prior tax cuts, tax refunds from retroactive cuts in 2003, and
improving job market, while business spending should rise in response to
successive quarters of profit expansion. It should be an excellent environment
for equities, with predicted GDP expansion, mild inflation, and profits
registering further solid gains. Interest rates could be on the rise, but should
not be enough to spoil this environment. Overall, our philosophy will not change
based on short-term trends or conditions in the market. Our goal is to add value
through security selection, while attempting to neutralize other risk factors,
such as sector rotation, for which there is not adequate compensation by the
market.
CHICAGO EQUITY PARTNERS, LLC
Chicago Equity Partners, LLC ("CEP") sub-advises the Fund. With a history
dating back to 1989, CEP - known for low-turnover growth performance - has
taxable and tax-exempt assets under management for more than 100 institutional
clients.
(1) Past performance does not guarantee future results. Your investment return
and principal will fluctuate, and your shares may be worth more or less
than their original cost. Total return is provided in accordance with SEC
guidelines for comparative purposes and reflects certain contractual
expense reimbursements through April 30, 2004. If the expense
reimbursements were not in place, the Fund's return would have been lower.
The total returns shown do not reflect the deduction of taxes that a
shareholder would pay on fund distributions or the redemption of fund
shares. Total return is shown with the applicable sales load or
contingent-deferred sales charge. The maximum sales load for the Conseco
Large-Cap Fund is 5.75% for Class A and 1.00% for Class C. The applicable
contingent-deferred sales charge is 5.00% in year 1 and eliminated after
year 6 for Class B, and the applicable contingent-deferred sales charge is
1.00% and eliminated after 12 months for Class C. The S&P 500 Index is an
unmanaged index considered to be representative of the U.S. stock market in
general. The Russell 1000 Index is an unmanaged index considered to be
representative of the large-cap arena in general. Investors cannot actually
invest in an index.
25
- --------------------------------------------------------------------------------
CONSECO LARGE-CAP FUND
- --------------------------------------------------------------------------------
(unaudited)
Growth of $10,000(1)
SINCE INCEPTION: 7/1/2000
DATE LARGE-CAP S&P 500 RUSSELL 1000
- ----------------------------------------------
7/1/2000 . 9,425.07 10,000.00 10,000.00
7/31/2000. 9,330.82 9,844.00 9,834.00
8/31/2000. 10,593.78 10,455.31 10,561.72
9/30/2000. 10,216.78 9,903.27 10,071.65
10/31/2000 9,462.77 9,861.68 9,949.79
11/30/2000 8,086.71 9,084.58 9,039.38
12/31/2000 7,945.33 9,129.09 9,148.76
1/31/2001. 8,350.61 9,453.18 9,449.75
2/28/2001. 6,993.40 8,591.05 8,568.09
3/31/2001. 6,220.55 8,046.37 7,999.17
4/30/2001. 7,002.83 8,671.58 8,641.50
5/31/2001. 6,908.58 8,729.68 8,700.26
6/30/2001. 6,757.78 8,517.54 8,503.64
7/31/2001. 6,559.85 8,434.07 8,387.14
8/31/2001. 6,041.47 7,906.10 7,876.36
9/30/2001. 5,494.82 7,268.08 7,208.45
10/31/2001 5,739.87 7,406.90 7,358.38
11/30/2001 6,239.40 7,975.01 7,924.98
12/31/2001 6,220.55 8,045.19 8,009.77
1/31/2002. 6,145.15 7,927.73 7,908.05
2/28/2002. 5,909.52 7,774.72 7,750.68
3/31/2002. 6,079.17 8,067.05 8,069.23
4/30/2002. 5,626.77 7,578.19 7,606.87
5/31/2002. 5,504.24 7,522.11 7,539.92
6/30/2002. 5,032.99 6,986.54 6,983.48
7/31/2002. 4,740.81 6,441.59 6,466.70
8/31/2002. 4,806.79 6,484.10 6,500.33
9/30/2002. 4,344.96 5,779.28 5,802.19
10/31/2002 4,684.26 6,287.86 6,284.35
11/30/2002 4,816.21 6,658.21 6,651.99
12/31/2002 4,505.18 6,266.71 6,275.49
1/31/2003. 4,410.93 6,102.52 6,123.62
2/28/2003. 4,401.51 6,010.98 6,028.70
3/31/2003. 4,514.61 6,069.29 6,091.40
4/30/2003. 4,787.94 6,569.40 6,582.98
5/31/2003. 5,004.71 6,915.60 6,958.21
6/30/2003. 5,051.84 7,004.12 7,050.06
7/31/2003. 5,174.36 7,127.61 7,190.54
8/31/2003. 5,240.34 7,266.60 7,336.50
9/30/2003. 5,212.06 7,189.58 7,261.67
10/31/2003 5,485.39 7,596.51 7,687.21
11/30/2003 5,560.79 7,663.36 7,779.45
12/31/2003 5,673.89 8,064.92 8,152.09
The growth of $10,000 chart is a comparison of the change in value of a $10,000
investment with dividends and capital gains reinvested for the period from
inception of the Class A shares through 12/31/03. Past performance does not
guarantee future results.
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURN(1) (as of 12/31/03)
INCEPTION SINCE
DATE 1 YEAR 5 YEARS INCEPTION
- -----------------------------------------------------------
Large-Cap A. . . . 07/01/2000 18.74% n/a -14.93%
Large-Cap B. . . . 07/01/2000 20.21% n/a -14.68%
Large-Cap C. . . . 07/01/2000 23.12% n/a -14.14%
Large-Cap Y. . . . 07/01/2000 26.50% n/a -13.12%
S&P 500 Index. . . 07/01/2000 28.69% n/a -5.96%
Russell 1000 Index 07/01/2000 29.89% n/a -5.67%
26
- --------------------------------------------------------------------------------
CONSECO FUND GROUP
2003 ANNUAL REPORT
CONSECO LARGE-CAP FUND
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS
DECEMBER 31, 2003
SHARES OR
PRINCIPAL AMOUNT VALUE
- -----------------------------------------------------------------
COMMON STOCKS (97.4%)
APPAREL AND OTHER FINISHED PRODUCTS (0.8%)
600 Claire's Stores, Inc. . $ 11,304
1,000 Ross Stores, Inc 26,430
---------
37,734
---------
AUTOMOTIVE DEALERS AND GASOLINE SERVICE STATIONS (0.8%)
400 AutoZone, Inc. (a) 34,084
---------
AUTOMOTIVE REPAIR, SERVICES, PARKING (0.7%)
900 Ryder System, Inc 30,749
---------
BUILDING MATERIALS, HARDWARE, GARDEN-RETAIL (3.1%)
2,660 The Home Depot, Inc 94,431
800 Lowe's Companies, Inc 44,312
---------
138,743
---------
BUSINESS SERVICES (11.5%)
1,900 Cendant Corp. (a) 42,314
1,200 Citrix Systems, Inc. (a) 25,487
500 Computer Sciences Corp. (a) 22,115
700 Electronic Arts, Inc. (a) 33,502
600 GTECH Holdings Corp 29,694
500 InterActiveCorp (a) . 16,979
7,800 Microsoft Corp 214,857
5,100 Oracle Corp. (a) 67,332
1,300 Rent-A-Center, Inc. (a) 38,846
1,100 Sungard Data Systems, Inc. (a) 27,714
---------
518,840
---------
CHEMICALS AND ALLIED PRODUCTS (15.1%)
300 Abbott Laboratories, Inc 13,980
1,400 Amgen, Inc. (a) 86,507
100 Avon Products, Inc . 6,749
1,100 Bristol-Myers Squibb Co 31,458
600 Clorox Corp 29,136
500 Cytec Industries, Inc. (a) 19,195
300 Genetech, Inc. (a) 28,071
200 Invitrogen Corp. (a) . 14,000
800 Merck & Co., Inc 36,960
675 Mylan Laboratories, Inc 17,051
7,760 Pfizer, Inc 274,186
600 The Procter & Gamble Co 59,928
1,400 Wyeth 59,466
---------
676,687
---------
COMMUNICATIONS BY PHONE, TELEVISION, RADIO, CABLE (1.3%)
700 Comcast Corp. - Class A (a) 23,049
1,200 Nextel Communications, Inc. -
Class A (a) 33,693
---------
56,742
---------
DEPOSITORY INSTITUTIONS (2.0%)
500 Banc One Corp 22,795
700 Citigroup, Inc 34,003
700 Wachovia Corp 32,619
---------
89,417
---------
EATING AND DRINKING PLACES (0.7%)
800 Applebee's International, Inc 31,401
---------
EDUCATIONAL SERVICES (0.5%)
300 University of Phoenix Online (a) 20,679
---------
ELECTRONIC, OTHER ELECTRICAL EQUIPMENT, EXCEPT COMPUTERS (12.7%)
1,000 Fairchild Semiconductor
International, Inc. - Class A (a) 24,970
6,760 General Electric Co. 209,463
6,800 Intel Corp 218,990
500 National Semiconductor Corp. (a) 19,756
500 Rockwell Collins, Inc 15,015
300 Scientific-Atlanta , Inc 8,190
300 Silicon Laboratories, Inc. (a) 12,966
1,500 Texas Instruments, Inc 44,083
400 UTStarcom, Inc. (a) . 14,828
---------
568,261
---------
ENGINEERING, ACCOUNTING, RESEARCH, MANAGEMENT SERVICES (1.0%)
200 Cephalon, Inc. (a) (c) 9,682
600 Moody's Corp 36,330
---------
46,012
---------
FABRICATED METAL PRODUCTS (0.9%)
200 Fortune Brands, Inc. 14,298
700 Gillette Co 25,711
---------
40,009
---------
FOOD AND KINDRED PRODUCTS (5.1%)
800 Anheuser-Busch Companies, Inc 42,144
1,720 The Coca-Cola Co 87,314
400 Hershey Foods Corp. 30,796
1,080 PepsiCo, Inc 50,349
300 Wm. Wrigley Jr. Co. 16,863
---------
227,466
---------
GENERAL MERCHANDISE STORES (2.8%)
800 Federated Department Stores, Inc 37,704
300 Sears Roebuck & Co 13,647
1,390 Wal-Mart Stores, Inc 73,740
---------
125,091
---------
HEALTH SERVICES (2.2%)
700 Coventry Health Care, Inc. (a) 45,143
605 Medco Health Solutions, Inc. (a) 20,564
100 Pharmaceutical Resources, Inc. (a) 6,515
600 Watson Pharmaceuticals, Inc. (a) 27,600
---------
99,822
---------
HOME FURNITURE AND EQUIPMENT STORE (0.5%)
400 Best Buy Co., Inc 20,896
---------
INDUSTRIAL, COMMERCIAL MACHINERY, COMPUTERS (11.0%)
2,300 Applied Materials, Inc. (a) 51,654
7,000 Cisco Systems, Inc. (a) 170,085
2,600 Dell Computer Corp. (a) 88,286
1,700 EMC Corp. (a) 21,985
600 Foundry Networks, Inc. (a) 16,416
300 Illinois Tool Works . 25,173
200 International Business
Machines Corp 18,536
300 Lexmark International, Inc. (a) 23,592
500 Network Appliance, Inc. (a) 10,293
200 Sandisk Corp. (a) 12,228
700 Smith International, Inc. (a) 29,032
400 Varian Medical Systems, Inc. (a) 27,640
---------
494,920
---------
The accompanying notes are an integral part of these financial statements.
27
- --------------------------------------------------------------------------------
CONSECO LARGE-CAP FUND
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS
DECEMBER 31, 2003
SHARES OR
PRINCIPAL AMOUNT VALUE
- ------------------------------------------------------------------------
INSURANCE CARRIERS (4.3%)
900 The Allstate Corp $ 38,717
500 American International Group, Inc 33,140
1,700 Old Republic International Corp 43,120
700 UnitedHealth Group, Inc 40,715
400 Wellpoint Health Networks, Inc. (a) 38,796
----------
194,488
----------
LEATHER AND LEATHER PRODUCTS (0.2%)
200 Timberland Co. (a) . 10,414
----------
MEASURING INSTRUMENTS, PHOTO GOODS, WATCHES (4.9%)
300 Beckman Coulter, Inc 15,249
900 Becton Dickinson & Co 37,026
500 Boston Scientific Corp. (a) 18,402
300 C.R. Bard, Inc 24,375
1,200 Guidant Corp 72,240
600 Tektronix, Inc 18,960
500 Zimmer Holdings, Inc. (a) 35,200
----------
221,452
----------
MISCELLANEOUS RETAIL (0.6%)
800 CVS Corp 28,896
----------
MOTION PICTURES (1.1%)
2,100 Walt Disney Co 49,000
----------
NON-DEPOSITORY CREDIT INSTITUTIONS (2.6%)
700 Capital One Financial Corp 42,903
567 Countrywide Financial Corp 43,010
1,300 MBNA Corp 32,314
----------
118,227
----------
OIL AND GAS EXTRACTION (0.5%)
500 Newfield Exploration Co. (a) 22,270
----------
PAPER AND ALLIED PRODUCTS (2.3%)
1,200 3M Co 102,036
----------
PRINTING, PUBLISHING, AND ALLIED INDUSTRIES (1.3%)
800 Harte-Hanks, Inc 17,392
300 The McGraw-Hill Companies, Inc 20,976
500 Viacom, Inc. - Class B 22,190
----------
60,558
----------
RUBBER AND MISCELLANEOUS PLASTIC PRODUCTS (0.6%)
500 Sealed Air Corp. (a) . 27,070
----------
SECURITY & COMMODITY BROKERS (1.4%)
500 Merrill Lynch & Co., Inc 29,325
75 NVR, Inc. (a) 34,950
----------
64,275
----------
TOBACCO PRODUCTS (0.5%)
400 Altria Group, Inc 21,768
----------
TRANSPORTATION BY AIR (0.5%)
300 FedEx Corp 20,250
----------
TRANSPORTATION EQUIPMENT (1.4%)
500 Harley-Davidson, Inc 23,765
400 United Technologies Corp 37,908
----------
61,673
----------
WHOLESALE TRADE-DURABLE GOODS (2.5%)
2,140 Johnson & Johnson Co 110,552
----------
TOTAL COMMON STOCK (cost $3,853,165) 4,370,482
----------
SHORT-TERM INVESTMENTS (0.2%)
$9,900 DAI Securities, Repurchase Agreement,
1.030%, due 01/02/2004 (b) 9,900
----------
TOTAL SHORT-TERM INVESTMENTS
(cost $9,900) 9,900
----------
TOTAL INVESTMENTS
(cost $3,863,075) (97.6%) 4,380,382
----------
OTHER ASSETS, LESS LIABILITIES (2.4%) 107,974
----------
TOTAL NET ASSETS (100.0%) $4,488,356
----------
----------
(a) Non-income producing security.
(b) Securities lending collateral (Note 2).
(c) Securities (partial/entire) out on loan (Note 2).
The accompanying notes are an integral part of these financial statements.
28
- --------------------------------------------------------------------------------
CONSECO FUND GROUP
2003 ANNUAL REPORT
CONSECO BALANCED FUND
- --------------------------------------------------------------------------------
PORTFOLIO MANAGER'S REVIEW
HOW DID THE FUND PERFORM RELATIVE TO ITS BENCHMARK?
The Conseco Balanced Fund (Class A with load) returned 16.68% for the year
ended December 31, 2003.(1) This compares to 4.10% for the benchmark Lehman
Brothers Aggregate Bond Index and 35.63% for the benchmark S&P MidCap 400 Index.
WHAT CAUSED THE VARIANCE IN PERFORMANCE BETWEEN THE FUND AND ITS BENCHMARKS?
The year 2003 saw equity markets post gains not seen since the bubble years
of the late 1990's. The euphoria over the expectations of a stronger economy
carried over to the equity markets, especially the tech heavy NASDAQ. The two
themes that dominated equity markets in 2003 were a lowering of the equity risk
premium and better than expected rebound in corporate profits. The lower equity
risk premium helped the riskiest stocks with high growth potential, low market
capitalizations and expensive multiples. The rebound in the economy and
corporate profits greatly benefited economically sensitive (cyclical)
stocks.Valuation and quality of earnings factors were not rewarded during 2003.
The fixed income performance was a result to the portfolio structure and
its overweight to corporate bonds. The corporate bond sector experienced
significant spread contraction during the year as companies reduced leverage
through excess cash flow and sold off non-core businesses. The return of fiscal
discipline helped alleviate fears in the capital market which had forced credit
spreads to historic wide levels in the prior year. In addition, our increased
exposure to the high yield sector helped add incremental return through the
year.
WHICH PORTFOLIO HOLDINGS ENHANCED THE FUND'S PERFORMANCE?
In terms of performance during the year, for the equity portion stock
selection in Healthcare, Industrial and Materials sectors were the largest
contributors relative to the benchmark. The largest contributors to performance
were over-weight positions (relative to benchmark weight) in Centex Corp.,
Freeport-McMoRan Copper & Gold Inc., and Countrywide Financial Corp.
The Fund's performance was aided on the fixed income side by several of our
investment holdings including Kraft Foods, Sprint and Tyco. Kraft has been under
some scrutiny as its parent company, Phillip Morris, endures the tobacco
litigation pain. Kraft's underlying businesses are strong and performing well.
In order to preserve the enterprise value of Kraft, we believe that there is a
strong probability that Phillip Morris will spin-off Kraft. Sprint has done an
excellent job of focusing on its core business and cutting costs. In spite of
the highly publicized lawsuits surrounding Tyco's ex-chairman, the fundamentals
of Tyco's underlying businesses appear solid and the new management team has
done a good job of reducing debt and selling non-core businesses.
WHICH HOLDINGS DETRACTED FROM PERFORMANCE?
Within the equity portion of the Fund, stock selection in the Consumer
Discretionary, Technology and Financial sectors detracted the most in 2003
relative to the index. The largest detractors were under-weight positions
(relative to the benchmark weight) in Comcast Corp., FleetBoston Financial
Corp., and MBNA Corp.
While the credit markets improved through the year, our fixed income
holdings in tobacco settlement bonds lagged the recovery. The tobacco settlement
structures were created by certain states to prefund the long payouts associated
with the settlement of tobacco litigation. As tobacco companies make payments
into the Master Settlement Agreement, they are funneled to the states to pay
interest and principal on these bonds outstanding. With the overhang of the
tobacco litigation, these structured deals did not perform well last year.
WHAT IS YOUR OUTLOOK FOR THE NEXT FISCAL YEAR?
Going forward, the economic expansion finally accelerated around the middle
of 2003, and 2004 could see a continuation of this momentum. For 2004, GDP
growth is predicted to accelerate, allowing the unemployment rate to fall for
the year. First half growth in GDP is predicted to accelerate between 4% and 6%.
Consumption will respond to prior tax cuts, tax refunds from retroactive cuts in
2003, and improving job market, while business spending should rise in response
to successive quarters of profit expansion. It should be an excellent
environment for equities, with predicted GDP expansion, mild inflation, and
profits registering further solid gains. Interest rates could be on the rise,
but should not be enough to spoil this environment. Overall, our philosophy will
not change based on short-term trends or conditions in the market. Our goal is
to add value through security selection, while attempting to neutralize other
risk factors, such as market timing and sector rotation, for which there is not
adequate compensation by the market.
For fixed income, we believe we are in a period of relative low interest
rates, however, with the strength of the economic recovery, the risks of an
increase in interest rates from the current levels is pretty high. The credit
markets have improved significantly and we remain positive on the outlook for
credit. In addition, we expect the mortgage-backed securities sector to
underperform in a rising interest rate environment.
CHICAGO EQUITY PARTNERS, LLP GREGORY J. HAHN, CFA
Chief Investment Officer
40|86 Advisors, Inc.
Chicago Equity Partners, LLP ("CEP") and Gregory J. Hahn, CFA, chief investment
officer and senior vice president at 40|86 Advisors, Inc. ("40|86"), share
responsibility for managing this Fund.
In business since 1989, CEP - known for low-turnover growth performance - has
taxable and tax-exempt assets under management for more than 100 institutional
clients.
Hahn is the portfolio manager for the fixed-income portion of the Fund, as well
as institutional fixed-income accounts for 40|86.
29
- --------------------------------------------------------------------------------
CONSECO BALANCED FUND
- --------------------------------------------------------------------------------
(unaudited)
Growth of $10,000(1)
SINCE INCEPTION: 1/2/1997
DATE BALANCED LBA S&P 400
- -------------------------------------------
1/2/1997 . 9,425.07 10,000.00 10,000.00
1/31/1997. 9,557.02 10,031.00 10,625.00
2/28/1997. 9,434.50 10,056.08 10,707.88
3/31/1997. 9,123.47 9,944.46 10,267.78
4/30/1997. 9,123.47 10,093.62 10,880.77
5/31/1997. 9,720.33 10,189.51 11,543.41
6/30/1997. 10,051.92 10,310.77 12,060.55
7/31/1997. 10,623.59 10,589.16 13,020.57
8/31/1997. 10,709.35 10,499.15 12,291.42
9/30/1997. 11,447.76 10,653.49 12,964.99
10/31/1997 11,083.73 10,807.96 12,531.96
11/30/1997 11,112.47 10,857.68 13,112.19
12/31/1997 11,045.41 10,967.34 13,337.72
1/31/1998. 11,261.58 11,107.72 13,485.77
2/28/1998. 11,920.39 11,098.84 14,458.09
3/31/1998. 12,508.18 11,136.57 15,198.34
4/30/1998. 12,570.82 11,194.48 15,351.85
5/31/1998. 12,153.19 11,300.83 15,087.80
6/30/1998. 12,450.75 11,396.89 15,700.36
7/31/1998. 11,968.25 11,420.82 15,533.94
8/31/1998. 10,678.07 11,606.98 13,287.73
9/30/1998. 10,992.75 11,878.58 14,139.47
10/31/1998 11,172.26 11,815.63 15,289.01
11/30/1998 11,710.81 11,882.98 16,215.53
12/31/1998 12,420.43 11,918.63 17,149.54
1/31/1999. 12,335.43 12,003.25 17,866.39
2/28/1999. 11,952.94 11,793.19 17,310.75
3/31/1999. 12,360.93 11,858.05 18,003.18
4/30/1999. 12,670.76 11,896.00 18,699.90
5/31/1999. 12,553.24 11,791.31 18,258.58
6/30/1999. 13,321.92 11,753.58 19,271.93
7/31/1999. 13,343.37 11,704.22 18,670.65
8/31/1999. 13,364.83 11,698.37 18,577.30
9/30/1999. 13,443.66 11,834.07 18,068.28
10/31/1999 13,960.73 11,877.85 19,212.00
11/30/1999 14,714.78 11,876.66 19,602.00
12/31/1999 16,088.17 11,819.66 20,756.56
1/31/2000. 16,064.36 11,780.65 19,714.58
2/29/2000. 18,946.18 11,923.20 19,341.98
3/31/2000. 18,621.42 12,080.58 21,233.62
4/30/2000. 17,497.92 12,045.55 20,594.49
5/31/2000. 16,732.98 12,039.53 20,172.30
6/30/2000. 18,196.09 12,289.95 20,670.56
7/31/2000. 18,148.08 12,401.79 20,348.10
8/31/2000. 19,852.46 12,581.61 21,611.71
9/30/2000. 19,480.62 12,660.88 20,470.62
10/31/2000 18,673.44 12,744.44 20,384.64
11/30/2000 16,962.72 12,953.45 18,778.33
12/31/2000 17,260.89 13,194.38 18,870.34
1/31/2001. 17,556.89 13,409.45 19,540.24
2/28/2001. 16,933.75 13,526.11 17,758.17
3/31/2001. 16,263.89 13,593.74 16,632.30
4/30/2001. 17,016.70 13,536.65 17,924.63
5/31/2001. 17,079.43 13,617.87 18,044.73
6/30/2001. 16,821.67 13,669.62 17,606.24
7/31/2001. 16,821.67 13,975.82 17,433.70
8/31/2001. 16,317.18 14,136.54 16,342.35
9/30/2001. 15,522.94 14,300.52 15,023.52
10/31/2001 15,681.66 14,599.40 15,310.47
11/30/2001 16,157.82 14,397.93 16,484.78
12/31/2001 16,161.41 14,305.79 16,629.85
1/31/2002. 16,065.69 14,421.66 16,387.05
2/28/2002. 15,874.24 14,561.55 16,070.78
3/31/2002. 16,164.44 14,319.83 16,675.05
4/30/2002. 15,747.09 14,597.64 15,664.54
5/31/2002. 15,714.98 14,721.72 15,548.62
6/30/2002. 14,957.65 14,849.79 14,441.56
7/31/2002. 14,116.79 15,029.48 13,315.12
8/31/2002. 14,359.34 15,283.48 13,403.00
9/30/2002. 13,550.01 15,531.07 11,946.09
10/31/2002 13,990.26 15,459.62 12,997.35
11/30/2002 14,495.74 15,454.99 13,762.89
12/31/2002 14,146.60 15,774.91 12,953.63
1/31/2003. 14,097.37 15,789.10 12,614.25
2/28/2003. 14,080.96 16,006.99 12,425.03
3/31/2003. 14,262.55 15,994.19 12,545.56
4/30/2003. 15,041.11 16,126.94 13,579.31
5/31/2003. 15,604.32 16,426.90 14,294.94
6/30/2003. 15,803.76 16,394.05 14,477.92
7/31/2003. 15,853.72 15,842.88 14,733.18
8/31/2003. 16,053.55 15,947.44 15,020.47
9/30/2003. 16,131.09 16,370.05 14,861.26
10/31/2003 16,817.16 16,217.81 15,702.40
11/30/2003 17,034.70 16,256.73 15,840.58
12/31/2003 17,521.35 16,422.55 16,670.63
The growth of $10,000 chart is a comparison of the change in value of a $10,000
investment with dividends and capital gains reinvested for the period from
inception of the Class A shares through 12/31/03. Past performance does not
guarantee future results.
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURN(1) (as of 12/31/03)
INCEPTION SINCE
DATE 1 YEAR 5 YEARS INCEPTION
- ---------------------------------------------------------------
Balanced A . . . . . 01/02/1997 16.68% 5.87% 8.34%
Balanced B . . . . . 02/10/1998 18.42% 6.37% 6.68%
Balanced C . . . . . 02/13/1998 21.10% 6.41% 6.50%
Balanced Y . . . . . 01/02/1997 24.51% 7.67% 9.81%
LBA Index. . . . . . 01/02/1997 4.10% 6.62% 7.34%
S&P MidCap 400 Index 01/02/1997 35.63% 9.21% 13.64%
(1) Past performance does not guarantee future results. Your investment return
and principal will fluctuate, and your shares may be worth more or less
than their original cost. Total return is provided in accordance with SEC
guidelines for comparative purposes and reflects certain contractual
expense reimbursements through April 30, 2004. If the expense
reimbursements were not in place, the Fund's return would have been lower.
The total returns shown do not reflect the deduction of taxes that a
shareholder would pay on fund distributions or the redemption of fund
shares. Total return is shown with the applicable sales load or
contingent-deferred sales charge. The maximum sales load for the Conseco
Balanced Fund is 5.75% for Class A and 1.00% for Class C. The applicable
contingent-deferred sales charge is 5.00% in year 1 and eliminated after
year 6 for Class B, and the applicable contingent-deferred sales charge is
1.00% and eliminated after 12 months for Class C. The Lehman Brothers
Aggregate Bond ("LBA") Index is an unmanaged index considered to be
representative of the bond market in general. The S&P MidCap 400 Index is
an unmanaged index considered to be representative of the mid-cap stock
arena in general. Investors cannot actually invest in an index.
30
- --------------------------------------------------------------------------------
CONSECO FUND GROUP
2003 ANNUAL REPORT
CONSECO BALANCED FUND
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS
DECEMBER 31, 2003
SHARES OR
PRINCIPAL AMOUNT VALUE
- ------------------------------------------------------------------
COMMON STOCKS (72.0%)
APPAREL AND ACCESSORY STORES (0.2%)
2,700 Foot Locker, Inc $ 63,315
----------
APPAREL AND OTHER FINISHED PRODUCTS (0.2%)
2,800 Claire's Stores, Inc 52,752
----------
BUILDING CONSTRUCTION, GENERAL CONSTRUCTION (0.8%)
2,400 Centex Corp. (e) 258,360
----------
BUILDING MATERIALS, HARDWARE, GARDEN-RETAIL (1.3%)
8,070 The Home Depot, Inc 286,487
2,300 Lowe's Companies, Inc 127,418
----------
413,905
----------
BUSINESS SERVICES (5.0%)
8,000 Cendant Corp. (a) 178,165
5,700 Citrix Systems, Inc. (a) 120,897
900 Computer Sciences Corp. (a) 39,807
1,600 Electronic Arts, Inc. (a) 76,448
2,400 GTECH Holdings Corp 118,792
20,800 Microsoft Corp 572,968
1,600 NCR Corp. (a) 62,080
16,500 Oracle Corp. (a) 217,875
3,550 Rent-A-Center, Inc. (a) 106,074
1,238 Sotheby's Holdings, Inc. (a) 16,911
3,100 Sungard Data Systems, Inc. (a) 85,910
----------
1,595,927
----------
CHEMICALS AND ALLIED PRODUCTS (7.6%)
3,100 Amgen, Inc. (a) 191,567
1,300 Avon Products, Inc 87,727
4,500 Bristol-Meyers Squibb Co 128,700
900 Clorox Corp 43,704
3,300 Cytec Industries, Inc. (a) 126,678
1,100 Genetech, Inc. (a) 102,958
800 Invitrogen Corp. (a) (e) 56,000
3,970 Merck & Co., Inc 183,453
2,850 Mylan Laboratories, Inc 71,991
22,740 Pfizer, Inc 803,576
3,000 Praxair, Inc 114,600
2,700 The Procter & Gamble Co 269,704
1,600 Sigma-Aldrich Corp. (e) 91,488
3,900 Wyeth 165,555
----------
2,437,701
----------
COMMUNICATIONS BY PHONE, TELEVISION, RADIO, CABLE (2.8%)
17,400 BellSouth Corp 492,544
3,400 Comcast Corp. - Class A (a) 111,758
8,000 Nextell Communications, Inc. -
Class A (a) 224,542
4,800 Sprint Corp 78,816
----------
907,660
----------
DEPOSITORY INSTITUTIONS (8.5%)
4,500 Bank of America Corp 361,943
7,000 Banc One Corp 319,137
12,332 Citigroup, Inc 598,718
3,000 First Tennessee National Corp 132,300
900 Golden West Financial Corp 92,871
8,900 JP Morgan Chase & Co 326,932
3,000 UnionBanCal Corp 172,650
12,100 Wachovia Corp 563,762
1,600 Wells Fargo & Co 94,224
1,400 Zions Bancorporation 85,862
----------
2,748,399
----------
EATING AND DRINKING PLACES (0.5%)
4,400 Applebee's International, Inc 172,788
----------
EDUCATIONAL SERVICES (0.2%)
1,200 University of Phoenix Online (a) 82,633
----------
ELECTRIC, GAS, WATER, COGENERATION, SANITARY SERVICES (2.2%)
4,500 Entergy Corp 257,086
4,700 Exelon Corp 311,882
7,000 ONEOK, Inc 154,537
----------
723,505
----------
ELECTRONIC, OTHER ELECTRICAL EQUIPMENT, EXCEPT COMPUTERS (5.0%)
13,990 General Electric Co. 433,603
21,060 Intel Corp 678,369
3,000 National Semiconductor Corp. (a) 118,230
2,300 Polycom, Inc. (a) (e) 44,896
1,800 Rockwell Collins, Inc 54,054
2,600 Scientific-Atlanta, Inc 70,980
600 Silicon Laboratories, Inc. (a) 25,932
3,600 Texas Instruments, Inc 105,768
2,000 UTStarcom, Inc. (a) . 74,140
----------
1,605,972
----------
ENGINEERING, ACCOUNTING, RESEARCH, MANAGEMENT SERVICES (0.4%)
400 Cephalon, Inc. (a) (e) 19,364
1,600 Moody's Corp 96,878
----------
116,242
----------
FABRICATED METAL PRODUCTS (0.6%)
1,300 Fortune Brands, Inc. 92,937
3,200 Gillette Co 117,563
----------
210,500
----------
FOOD AND KINDRED PRODUCTS (2.5%)
2,000 Anheuser-Busch Companies, Inc 105,360
4,950 The Coca-Cola Co 251,260
1,600 Hershey Foods Corp. 123,184
2,730 PepsiCo, Inc 127,272
9,800 Tyson Foods, Inc. - Class A 129,752
1,200 Wm. Wrigley Jr. Co. 67,452
----------
804,280
----------
FOOD STORES (0.3%)
5,400 Kroger Co. (a) 99,954
----------
FURNITURE AND FIXTURES (0.3%)
1,500 Lear Corp 91,995
----------
GENERAL MERCHANDISE STORES (1.4%)
4,100 Federated Department Stores, Inc 193,231
1,600 Sears Roebuck & Co 72,797
3,240 Wal-Mart Stores, Inc 171,914
----------
437,942
----------
The accompanying notes are an integral part of these financial statements.
31
- --------------------------------------------------------------------------------
CONSECO BALANCED FUND
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS
DECEMBER 31, 2003
SHARES OR
PRINCIPAL AMOUNT VALUE
- --------------------------------------------------------------------------
HEALTH SERVICES (1.2%)
1,900 Coventry Health Care, Inc. (a) $ 122,445
2,997 Medco Health Solutions, Inc. (a) 101,868
600 Pharmaceutical Resources, Inc. (a) 39,090
2,700 Watson Pharmaceuticals. Inc. (a) 124,200
-----------
387,603
-----------
HOME FURNITURE AND EQUIPMENT STORES (0.6%)
3,500 Best Buy Co., Inc 182,856
-----------
INDUSTRIAL, COMMERCIAL MACHINERY, COMPUTERS (6.1%)
6,100 Applied Materials, Inc. (a) 136,984
16,940 Cisco Systems, Inc. (a) 411,638
7,900 Dell Computer Corp. (a) 268,253
6,900 EMC Corp. (a) 89,148
2,000 Foundry Networks, Inc. (a) 54,720
6,543 Hewlett-Packard Co. 150,340
2,000 Illinois Tool Works . 167,820
1,700 Ingersoll-Rand Co. - Class A 115,413
1,780 International Business
Machines Corp 164,987
1,000 Lexmark International, Inc. (a) 78,683
1 Riverstone Networks, Inc. (a) 1
3,000 Smith International, Inc. (a) 124,560
2,900 Storage Technology Corp. (a) 74,675
1,300 Varian Medical Systems, Inc. (a) 89,830
2,600 Western Digital Corp. (a) 30,654
-----------
1,957,706
-----------
INSURANCE CARRIERS (3.5%)
4,000 The Allstate Corp 172,080
3,015 American International Group, Inc 199,865
2,000 Hartford Financial Services Group, Inc. 118,060
2,300 Lincoln National Corp 92,851
3,300 Metlife, Inc 111,111
3,600 Old Republic International Corp 91,296
2,600 Torchmark Corp 118,412
2,400 UnitedHealth Group, Inc 139,621
900 WellPoint Health Networks, Inc. (a) 87,291
-----------
1,130,587
-----------
LEATHER AND LEATHER PRODUCTS (0.1%)
800 . . . . . . . . Timberland Co. (a) . 41,656
-----------
MEASURING INSTRUMENTS, PHOTO GOODS, WATCHES (2.3%)
4,200 Becton Dickinson & Co 172,788
2,000 Boston Scientific Corp. (a) 73,520
1,000 C.R. Bard, Inc 81,250
2,600 Guidant Corp 156,513
2,000 Tektronix, Inc 63,200
2,600 Zimmer Holdings, Inc. (a) 183,006
-----------
730,277
-----------
METAL MINING (0.7%)
5,400 Freeport-McMoRan Copper &
Gold, Inc. (e) 227,497
-----------
MISCELLANEOUS RETAIL (0.2%)
2,100 CVS Corp 75,852
-----------
MOTION PICTURES (1.4%)
9,460 Time Warner, Inc. (a) 170,243
12,400 Walt Disney Co 289,322
-----------
459,565
-----------
NON-DEPOSITORY CREDIT INSTITUTIONS (1.8%)
2,800 Capital One Financial Corp 171,642
2,967 Countrywide Financial Corp 225,051
2,500 Prudential Financial, Inc 104,425
2,050 Washington Mutual, Inc 82,246
-----------
583,364
-----------
OIL AND GAS EXTRACTION (1.5%)
2,400 Burlington Resources, Inc 132,831
2,300 Newfield Exploration Co. (a) 102,429
5,600 Occidental Petroleum Corp 236,497
-----------
471,757
-----------
PAPER AND ALLIED PRODUCTS (1.2%)
4,400 3M Co 374,198
-----------
PETROLEUM REFINING AND RELATED INDUSTRIES (2.2%)
3,810 ChevronTexaco Corp 329,119
9,620 Exxon Mobil Corp 394,467
-----------
723,586
-----------
PRINTING, PUBLISHING, AND ALLIED INDUSTRIES (1.6%)
2,150 Harte-Hanks, Inc 46,763
2,700 The McGraw-Hill Companies, Inc 188,783
6,200 Viacom, Inc. - Class B 275,279
-----------
510,825
-----------
REAL ESTATE INVESTMENT TRUSTS (REITS) (1.0%)
4,200 CarrAmerica Realty Corp 124,983
7,100 General Growth Properties, Inc 197,008
-----------
321,991
-----------
RUBBER AND MISCELLANEOUS PLASTIC PRODUCTS (0.4%)
2,200 Sealed Air Corp. (a) . 119,168
-----------
SECURITY AND COMMODITY BROKERS (1.3%)
2,800 Bear Stearns Companies, Inc 223,900
3,500 Merrill Lynch & Co., Inc 205,303
-----------
429,203
-----------
TOBACCO PRODUCTS (0.9%)
5,220 Altria Group, Inc 284,179
-----------
TRANSPORTATION BY AIR (0.5%)
2,500 FedEx Corp 168,717
-----------
TRANSPORTATION EQUIPMENT (2.4%)
1,800 General Motors Corp. (e) 96,147
1,800 Harley-Davidson, Inc 85,558
3,500 J.B. Hunt (a) 94,535
1,100 Northrop Grumman Corp 105,205
3,400 Textron, Inc 194,017
2,040 United Technologies Corp 193,338
-----------
768,800
-----------
WHOLESALE TRADE-DURABLE GOODS (1.1%)
3,600 Avnet, Inc. (a) 77,976
5,380 Johnson & Johnson Co 277,958
-----------
355,934
-----------
WHOLESALE TRADE-NON-DURABLE GOODS (0.2%)
1,800 SYSCO Corp 67,014
-----------
TOTAL COMMON STOCKS (cost $19,907,327) 23,196,165
-----------
The accompanying notes are an integral part of these financial statements.
32
- --------------------------------------------------------------------------------
CONSECO FUND GROUP
2003 ANNUAL REPORT
CONSECO BALANCED FUND
- --------------------------------------------------------------------------------
SHARES OR
PRINCIPAL AMOUNT VALUE
- --------------------------------------------------------------------------
PREFERRED STOCKS (0.5%)
NONDEPOSITORY CREDIT INSTITUTIONS 0.5%)
135 Centaur Funding Corp., (b)
Cost - $159,265;
Acquired - 07/22/2003 (a) $ 166,008
----------
TOTAL PREFERRED STOCKS (cost $159,265). 166,008
----------
CORPORATE BONDS (20.8%)
AMUSEMENT & RECREATIONAL SERVICES (0.3%)
$80,000 Six Flags, Inc., 8.875%, due
02/01/2010 (e) 82,500
----------
CHEMICALS AND ALLIED PRODUCTS (1.1%)
80,000 Lyondell Chemical Co., Series A,
11.125%, due 07/15/2012 89,200
40,000 Polyone Corp., 10.625%,
due 05/15/2010 . 40,200
190,000 Terra Capital, Inc., 12.875%,
due 10/15/2008 . 225,150
----------
354,550
----------
COMMUNICATIONS BY PHONE, TELEVISION, RADIO, CABLE (3.4%)
105,000 AT&T Wireless Services, Inc.,
8.750%, due 03/01/2031 130,010
110,000 DirecTV Holdings, 8.375%, due
03/15/2013 128,150
75,000 EchoStar Broadband Corp., 10.375%,
due 10/01/2007 . 82,594
300,000 Nextel Communications, Inc., 9.375%
due 11/15/2009 . 328,500
135,000 Sprint Capital Corp., 6.875%,
due 11/15/2028 . 132,200
190,000 TCI Communications, Inc., 6.875%,
due 02/15/2006 (e) 206,394
80,000 Triton PCS, Inc., 8.500%,
due 06/01/2013 . 86,400
----------
1,094,248
----------
DEPOSITORY INSTITUTIONS (0.1%)
30,000 Union Planters Bank, 6.500%,
due 03/15/2008 . 32,391
----------
ELECTRIC, GAS, WATER, COGENERATION, SANITARY SERVICES (0.8%)
120,000 Allied Waste North America, 8.875%,
due 04/01/2008 . 135,000
105,000 Southern Natural Gas Co., 8.875%,
due 03/15/2010 . 118,650
----------
253,650
----------
ELECTRONIC, OTHER ELECTRICAL EQUIPMENT, EXCEPT COMPUTERS (3.2%)
270,000 Celestica, Inc., 0.000% (c),
due 08/01/2020 . 144,113
195,000 Nortel Networks Ltd., 6.125%,
due 02/15/2006 . 198,413
----------
SHARES OR
PRINCIPAL AMOUNT VALUE
- ---------------------------------------------------------------------
ELECTRONIC, OTHER ELECTRICAL EQUIPMENT, EXCEPT COMPUTERS (cont.)
$145,000 Tyco International Group, 6.000%,
due 11/15/2013, (b) Cost - $144,375;
Acquired - 11/06/2003 $ 150,075
535,000 Tyco International Group, 6.875%,
due 01/15/2029 . 548,910
----------
1,041,511
----------
FOOD AND KINDRED PRODUCTS (0.7%)
195,000. . . . . . Kraft Foods, Inc., 6.250%,
due 06/01/2013 . 212,873
----------
FOOD STORES (0.5%)
140,000 Kroger Co., 7.000%,
due 05/01/2018 . 156,977
----------
GENERAL MERCHANDISE STORES (0.4%)
115,000 JC Penney Co., Inc., 8.000%,
due 03/01/2010 . 132,394
----------
HOTELS, OTHER LODGING PLACES (1.7%)
200,000 Hyatt Equities LLC, 6.875%,
due 06/15/2007, (b)
Cost - $199,506;
Acquired - 06/13/2002 215,025
175,000 Park Place Entertainment, 8.875%,
due 09/15/2008 . 198,625
135,000 Vail Resorts, Inc., 8.750%,
due 05/15/2009 . 143,100
----------
556,750
----------
INSURANCE CARRIERS (0.7%)
250,000 RenaissanceRe Holdings, Ltd.,
7.000%, due 07/15/2008 272,181
----------
LUMBER AND WOOD PRODUCTS, EXCEPT FURNITURE (0.6%)
165,000 Georgia-Pacific Corp., 7.700%,
due 06/15/2015 . 172,425
----------
MEASURING INSTRUMENTS, PHOTO GOODS. WATCHES (0.6%)
105,000 Guidant Corp., 6.150%,
due 02/15/2006 . 112,493
90,000 PLC Trust 2003-1, 2.709%, due
03/31/2006, (b) Cost - $90,000;
Acquired - 12/12/2003 90,000
----------
202,493
----------
PAPER AND ALLIED PRODUCTS (0.0%)
15,000 Boise Cascade Co., 6.500%,
due 11/01/2010 . 15,669
----------
PERSONAL SERVICES (0.5%)
145,00 Service Corp. International, 6.875%,
due 10/01/2007 . 150,800
----------
PIPE LINES, EXCEPT NATURAL GAS (0.7%)
230,000 Dynegy-Roseton Danskamme, 7.670%,
due 11/08/2016 . 219,794
----------
The accompanying notes are an integral part of these financial statements.
33
- --------------------------------------------------------------------------------
CONSECO BALANCED FUND
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS
DECEMBER 31, 2003
SHARES OR
PRINCIPAL AMOUNT VALUE
- -------------------------------------------------------------------------
PRINTING, PUBLISHING, AND ALLIED INDUSTRIES (1.3%)
$55,000 Moore North American Finance,
7.875%, due 01/15/2011, (b)
Cost - $54,614; Acquired -
03/11/2003 $ 62,563
75,000 News America, Inc., 7.625%, due
11/30/2028 83,857
135,000 Quebecor Media, Inc., 11.125%,
due 07/15/2011 . 156,938
30,000 R.H. Donnelley Financial Corp., 8.875%,
due 12/15/2010, (b) Cost - $30,000;
Acquired - 11/26/2002 33,900
75,000 R.H. Donnelley Financial Corp., 10.875%,
due 12/15/2012, (b) Cost - $75,000;
Acquired - 11/26/2002 89,344
----------
426,602
----------
REAL ESTATE INVESTMENT TRUSTS (REITS) (1.9%)
150,000 Health Care REIT, Inc., 7.500%,
due 08/15/2007 . 169,107
150,000 Hospitality Properties, 6.750%,
due 02/15/2013 . 157,430
130,000 ISTAR Financial, Inc., 8.750%,
due 08/15/2008 . 150,800
125,000 Senior Housing Trust, 8.625%,
due 01/15/2012 . 136,875
----------
614,212
----------
STONE, CLAY, GLASS, AND CONCRETE PRODUCTS (1.7%)
475,000 Owens-Brockway Glass, 8.875%,
due 02/15/2009 . 523,094
----------
TOBACCO PRODUCTS (0.5%)
175,000 Universal Corp., Series B, 7.500%,
due 01/26/2004 . 175,000
----------
WHOLESALE TRADE - NON DURABLE GOODS (0.1%)
30,000 Amerisourcebergen Corp., 7.250%,
due 11/15/2012 . 32,475
----------
TOTAL CORPORATE BONDS (cost $6,054,846) 6,722,589
----------
MUNICIPAL BONDS (3.2%)
300,000 California County, 7.500%,
due 06/01/2019 . 299,286
141,405 Educational Enhancement
Funding Corp., 6.720%,
due 06/01/2025 . 134,899
130,000 Indiana State Dev. Fin. Auth. Rev.,
5.500%,due 01/01/2033 132,987
270,000 Tobacco Settlement Fin. Corp., 5.920%,
due 06/01/2012 . 264,549
196,051 Tobacco Settlement Fin. Corp., 6.360%,
due 05/15/2025 . 191,852
----------
TOTAL MUNICIPAL BONDS
(cost $1,039,340) 1,023,573
----------
SHARES OR
PRINCIPAL AMOUNT VALUE
- -------------------------------------------------------------------------------
ASSET BACKED SECURITIES (0.8%)
$227,834 First Union National Bank
Commercial Mortgage, 99-C4 A1,
7.184%, due 12/15/2031 $ 243,417
------------
TOTAL ASSET BACKED SECURITIES
(cost $228,971) 243,417
------------
U.S. GOVERNMENT AND AGENCY OBLIGATIONS (0.7%)
85,000 U.S. Treasury Bond, 5.375%,
due 02/15/2031 . 88,664
150,000 U.S. Treasury Bond, 4.250%,
due 11/15/2013 149,883
------------
TOTAL U.S. GOVERNMENT AND AGENCY OBLIGATIONS
(cost $239,515) 238,547
------------
SHORT-TERM INVESTMENTS (3.4%)
1,061,750 DAI Securities, Repurchase Agreement,
1.030%, due 01/02/2004 (d) 1,061,750
24,000 Nations Cash Reserve 24,000
------------
TOTAL SHORT-TERM INVESTMENTS
(cost $1,085,750) 1,085,750
------------
TOTAL INVESTMENTS (cost $28,715,014) (101.4%) 32,676,049
------------
LIABILITIES, LESS OTHER ASSETS (-1.4%) (452,749)
------------
TOTAL NET ASSETS (100.0%) $32,223,300
------------
------------
(a) Non-income producing security.
(b) Restricted under Rule 144A of the Securities Act of 1933.
(c) Zero Coupon - Bonds that make no interest payments.
(d) Securities lending collateral (Note 2).
(e) Securities (partial/entire) out on loan (Note 2).
The accompanying notes are an integral part of these financial statements.
34
- --------------------------------------------------------------------------------
CONSECO FUND GROUP
2003 ANNUAL REPORT
CONSECO CONVERTIBLE SECURITIES FUND
- --------------------------------------------------------------------------------
PORTFOLIO MANAGERS' REVIEW
HOW DID THE FUND PERFORM RELATIVE TO ITS BENCHMARK?
The Conseco Convertible Securities Fund (Class A with load) returned 20.73%
for the year ended December 31, 2003.(1) This compares to 25.80% for the
benchmark Merrill Lynch Convertible Bond Index.
WHAT CAUSED THE VARIANCE IN PERFORMANCE BETWEEN THE FUND AND ITS BENCHMARK?
The negative performance variance was attributed to the inclusion of the
sales load in the return calculation. Fund performance is reduced by the
inclusion of shareholder expenses, including sales loads and fees. Excluding the
sales load, the Fund return would have returned 28.14% for the year ended
December 31, 2003, outperforming the Merrill Lynch Convertible Securities Index.
The S&P 500 returned 28.69% in 2003 and the Lehman Brothers Aggregate Bond
Index returned 4.10%. Convertibles are designed to perform somewhere between
bond markets and equity markets. In this spectrum, our Fund was leaning more
towards the equity markets during the second half of the year.
Actions taken around mid-year helped us close the gap for the year. We have
consistently remained in the top tier of our peer group since.
WHICH PORTFOLIO HOLDINGS ENHANCED THE FUND'S PERFORMANCE?
Tyco International Group, one of our top ten holdings, greatly enhanced the
Fund performance. Our Diversified Industrial's Analyst, Andrew Clouse evaluated
the underlying assets of Tyco and recognized that Tyco's corporate bonds and
convertibles were trading well below the actual value of the company. Other
performers not included in the top ten are Nextel, Nortel Networks, Countrywide
Financial, AES and Allied Waste Ind. Similar to Tyco, our research showed that
Nextel's cellular products were an important component of the day-to-day
operations of the business they serve. While the economic downturn hurt small
and midsize businesses, Nextel's products helped them maintain efficiency and
thus utilization did not decline as many other anticipated. The majority of the
positive performance came from the healthcare, biotech, communications, and
consumer sector names.
WHICH HOLDINGS DETRACTED FROM PERFORMANCE?
Some holdings in the energy sector were responsible for detracting
performance. Other sectors that detracted from performance were the financial,
biotech, and media sectors. Specific companies include Liberty Media, Nortel,
Amgen and United Parcel Post.
WHAT IS YOUR OUTLOOK FOR THE NEXT FISCAL YEAR?
Looking forward, our focus will continue to be value driven with selective
investments in the utility, health care, pharmaceutical, energy and retail
sectors. We intend to maintain our current beta in order to be correlated to the
index with respect to volatility, yet maintain a focus on pure yield
opportunities when presented. We believe geopolitical and terrorist concerns
have eased and our confidence has increased in the rebound in the overall
economy. Corporate earnings have begun to improve, as has our outlook for equity
returns. Finally, we will continue to selectively participate in new issues as
attractive opportunities arise through the year.
ROBERT L. COOK, CFA LEO DIERCKMAN
Senior Vice President Second Vice President
Director of Research. 40|86 Advisors, Inc.
40|86 Advisors, Inc.
Robert Cook, CFA, Senior Vice President at 40|86 Advisors, Inc. ("40|86"), and
Leo Dierckman, Second Vice President, co-manage the Fund.
Cook joined 40|86 in 1994 and has a bachelor's degree in finance from Indiana
University. He previously served as a financial analyst at PNC Securities Corp.
Dierckman is responsible for the analysis of the healthcare, tobacco,
homebuilding, building products and restaurant industries. Prior to joining
40|86, he was vice president of development for Congrecare Retirement Housing.
(1) Past performance does not guarantee future results. Your investment return
and principal will fluctuate, and your shares may be worth more or less
than their original cost. Total return is provided in accordance with SEC
guidelines for comparative purposes and reflects certain contractual
expense reimbursements through April 30, 2004. If the expense
reimbursements were not in place, the Fund's return would have been lower.
The total returns shown do not reflect the deduction of taxes that a
shareholder would pay on fund distributions or the redemption of fund
shares. Total return is shown with the applicable sales load or
contingent-deferred sales charge. The maximum sales load for the Conseco
Convertible Securities Fund is 5.75% for Class A and 1.00% for Class C. The
applicable contingent-deferred sales charge is 5.00% in year 1 and
eliminated after year 6 for Class B, and the applicable contingent-deferred
sales charge is 1.00% and eliminated after 12 months for Class C. Our
benchmark index, the Merrill Lynch Convertible Bond ("MLCB") Index is an
unmanaged index considered to be representative of the convertible
securities market in general. Investors cannot actually invest in an index.
35
- --------------------------------------------------------------------------------
CONSECO CONVERTIBLE SECURITIES FUND
- --------------------------------------------------------------------------------
(unaudited)
Growth of $10,000(1)
SINCE INCEPTION: 9/28/1998
DATE CONVERTIBLE ML CONVERTIBLE
- ---------------------------------------
9/28/1998. 9,425.07 10,000.00
9/30/1998. 9,321.39 9,791.00
10/31/1998 9,472.20 10,025.00
11/30/1998 9,885.78 10,469.11
12/31/1998 10,465.83 11,085.74
1/31/1999. 11,175.99 11,603.45
2/28/1999. 10,783.16 11,189.20
3/31/1999. 10,958.29 11,669.22
4/30/1999. 11,480.24 12,180.33
5/31/1999. 11,457.47 12,091.42
6/30/1999. 12,212.17 12,554.52
7/31/1999. 12,416.15 12,476.68
8/31/1999. 12,429.30 12,396.83
9/30/1999. 12,403.05 12,497.24
10/31/1999 12,901.31 12,950.89
11/30/1999 13,873.66 13,928.69
12/31/1999 14,665.40 16,001.27
1/31/2000. 15,533.75 15,868.46
2/29/2000. 17,419.22 17,479.11
3/31/2000. 17,157.87 17,099.82
4/30/2000. 16,110.69 16,020.82
5/31/2000. 15,284.74 15,213.37
6/30/2000. 16,549.54 16,120.09
7/31/2000. 16,020.65 15,623.59
8/31/2000. 16,888.52 16,956.28
9/30/2000. 16,127.21 16,498.46
10/31/2000 15,171.87 15,648.79
11/30/2000 12,959.17 13,695.82
12/31/2000 14,143.64 14,129.98
1/31/2001. 14,439.58 15,037.12
2/28/2001. 13,416.73 13,909.34
3/31/2001. 12,650.93 13,279.24
4/30/2001. 13,596.21 14,137.08
5/31/2001. 13,427.56 14,089.02
6/30/2001. 13,016.02 13,915.72
7/31/2001. 12,629.33 13,715.34
8/31/2001. 12,428.97 13,493.15
9/30/2001. 11,341.40 12,648.48
10/31/2001 11,904.88 12,967.22
11/30/2001 12,515.18 13,330.30
12/31/2001 12,550.46 13,574.25
1/31/2002. 12,492.22 13,475.15
2/28/2002. 11,920.69 13,138.27
3/31/2002. 12,506.16 13,606.00
4/30/2002. 12,187.55 13,430.48
5/31/2002. 12,013.97 13,367.36
6/30/2002. 11,526.07 12,735.08
7/31/2002. 10,844.16 12,052.48
8/31/2002. 11,033.71 12,168.18
9/30/2002. 10,785.67 11,906.57
10/31/2002 11,064.36 12,142.32
11/30/2002 11,615.11 12,953.42
12/31/2002 11,642.09 12,900.32
1/31/2003. 11,883.20 13,137.68
2/28/2003. 11,908.57 13,166.58
3/31/2003. 12,135.50 13,375.93
4/30/2003. 12,827.90 14,005.94
5/31/2003. 13,449.91 14,584.38
6/30/2003. 13,515.27 14,651.47
7/31/2003. 13,607.66 14,685.61
8/31/2003. 13,710.75 14,854.50
9/30/2003. 13,803.02 14,992.64
10/31/2003 14,335.45 15,547.37
11/30/2003 14,576.09 15,802.35
12/31/2003 14,917.50 16,229.01
The growth of $10,000 chart is a comparison of the change in value of a $10,000
investment with dividends and capital gains reinvested for the period from
inception of the Class A shares through 12/31/03. Past performance does not
guarantee future results.
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURN(1) (as of 12/31/03)
INCEPTION SINCE
DATE 1 YEAR 5 YEARS INCEPTION
- -------------------------------------------------------------------
Convertible Securities A 09/28/1998 20.73% 6.08% 7.91%
Convertible Securities B 09/28/1998 22.46% 6.51% 8.44%
Convertible Securities C 09/28/1998 25.16% 6.62% 8.39%
Convertible Securities Y 09/28/1998 28.73% 7.90% 9.69%
MLCB Index . . . . . . . 09/28/1998 25.80% 7.92% 9.51%
36
- --------------------------------------------------------------------------------
CONSECO FUND GROUP
2003 ANNUAL REPORT
CONSECO CONVERTIBLE SECURITIES FUND
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS
DECEMBER 31, 2003
CONSECO FUND GROUP
2003 ANNUAL REPORT
SHARES OR
PRINCIPAL AMOUNT VALUE
- ---------------------------------------------------------------------
COMMON STOCKS (15.9%)
BUSINESS SERVICES (3.0%)
1,300 First Data Corp $ 53,417
5,900 Microsoft Corp 162,486
8,800 NCR Corp. (c) 341,440
--------
557,343
--------
COMMUNICATIONS BY PHONE, TELEVISION, RADIO, CABLE (3.1%)
4,800 SBC Communications Inc 125,136
6,914 SpectraSite, Inc. (c) . 240,261
6,000 Verizon Communications Inc 210,480
--------
575,877
--------
DEPOSITORY INSTITUTIONS (3.4%)
26,677 Sovereign Bancorp, Inc 633,579
--------
HEALTH SERVICES (0.0%)
108 Medco Health Solutions, Inc. (c) 3,671
--------
PIPE LINES, EXCEPT NATURAL GAS (2.3%)
2,600 GulfTerra Energy Partners, L.P. (e) 110,448
6,600 Northern Border Partners, L.P 259,182
1,800 Plains All American Pipeline, L.P. (e) 58,428
--------
428,058
--------
REAL ESTATE INVESTMENT TRUSTS (REITS) (1.1%)
4,265 Simon Property Group, Inc 197,640
--------
TOBACCO PRODUCTS (1.0%)
3,300 Altria Group, Inc 179,586
--------
TRANSPORTATION EQUIPMENT (2.0%)
9,000 Boeing Co 379,260
--------
TOTAL COMMON STOCKS
(cost $2,082,517) 2,955,014
--------
PREFERRED STOCKS - CONVERTIBLE (15.9%)
BUSINESS SERVICES (2.0%)
6,000 Omnicare, Inc., 4.000%, conv into
OCR common stock (e) 382,500
--------
DEPOSITORY INSTITUTIONS (1.6%)
1,250 State Street Corp., 6.750%, conv into
STT common stock 303,725
--------
ELECTRIC, GAS, WATER, COGENERATION, SANITARY SERVICES (4.2%)
500 Allied Waste Industries, Inc., 6.250%,
conv into AW common stock 38,250
4,800 American Electric Power Co., 9.250%,
conv into AEP common stock (e) 218,688
2,000 Chesapeake Energy, 6.000%, conv into
CHK common stock, (a) Cost -
$100,000; Acquired - 02/28/2003 (c) 151,500
12,500 ONEOK, Inc., 8.500%, conv into OKE
common stock 384,625
--------
793,063
--------
INSURANCE CARRIERS (1.4%)
10,500 Travelers Property Casualty, 4.500%,
due 04/15/2032, conv into C
common stock 258,825
--------
SHARES OR
PRINCIPAL AMOUNT VALUE
- -------------------------------------------------------------------------
NON-DEPOSITORY CREDIT INSTITUTIONS (3.2%)
6,000 Capital One Financial Corp., 6.250%,
conv into COF common stock $288,750
5,500 Washington Mutual, Inc., 5.375%, conv
into WM common stock, (a)
Cost - $292,875; Acquired - 06/25/2001 306,130
-------
594,880
-------
REAL ESTATE INVESTMENT TRUSTS (REITS) (3.5%)
7,000 Equity Office Property Trust, 5.250%,
conv into EOP common stock 350,070
6,000 Host Marriott LP, 6.750%, conv into
HMT common stock 312,000
-------
662,070
-------
TOTAL PREFERRED STOCKS - CONVERTIBLE
(cost $2,571,307) 2,995,063
-------
CONVERTIBLE BONDS (67.1%)
BUILDING MATERIALS, HARDWARE, GARDEN - RETAIL (1.5%)
$300,000 Lowes Companies, 0.000% (b),
due 02/16/2021, conv into LOWO
common stock 276,000
-------
BUSINESS SERVICES (7.0%)
250,000 BEA Systems, Inc., 4.000%, due
12/15/2006, conv into BEAS
common stock 252,188
250,000 Cendant Corp., 3.875%, due 11/27/2011,
conv into CD common stock,
(a) Cost - $251,565; Acquired -
250,000 1/29/2002 271,250
Computer Associates International,
5.000%, due 03/15/2007, conv into
CA common stock, (a) Cost -
250,000; Acquired - 3/13/2002 323,750
250,000 Keane, Inc., 2.000%, due 06/15/2013,
conv into KEA common stock, (a)
Cost - $250,625; Acquired -
06/16/2003 262,813
250,000 Time Warner, Inc., 0.000% (b), due
12/06/2019, conv into TWX
common stock 157,813
50,000 Young & Rubicam, Inc., 3.000%, due
01/15/2005, conv. into WPPLN
common stock 50,375
-------
1,318,189
-------
CHEMICALS AND ALLIED PRODUCTS (6.8%)
400,000 Amgen, Inc., 0.000% (b), due 03/01/2032,
conv into AMGN common stock 303,500
250,000 Gilead Sciences, Inc., 2.000%, due
12/15/2007, conv into GILD common
stock, (a) Cost - $250,000; Acquired -
12/13/2002 (e) 342,500
250,000 Invitrogen, Inc., 2.000%, due 08/01/2023,
conv into IVGN common stock, (a)
Cost - $250,000; Acquired -
07/29/2003 311,875
50,000 IVAX Corp., 5.500%, due 05/15/2007,
conv into IVX common stock 52,063
The accompanying notes are an integral part of these financial statements.
37
- --------------------------------------------------------------------------------
CONSECO CONVERTIBLE SECURITIES FUND
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS
DECEMBER 31, 2003
SHARES OR
PRINCIPAL AMOUNT VALUE
- ---------------------------------------------------------------------------
CHEMICALS AND ALLIED PRODUCTS (cont.)
$125,000 King Pharmaceuticals, Inc., 2.750%, due
11/15/2021,conv into KG common
stock, (a) Cost - $365,625; Acquired -
02/12/2002 . $ 116,563
100,000 Serologicals Corp., 4.750%, due
08/15/2033, conv into SERO common
stock, (a) Cost - $100,000; Acquired -
08/15/2003 152,625
----------
1,279,126
----------
COMMUNICATIONS BY PHONE, TELEVISION, RADIO, CABLE (7.9%)
250,000 American Tower Corp., 5.000%, due
02/15/2010, conv into AMT common
stock (e) 239,375
250,000 Centurytel, Inc., 4.750%, due 08/01/2032,
conv into CTL common stock, (a)
Cost - $250,000; Acquired -
08/21/2002 285,625
250,000 Commonwealth Telephone Corp., 3.250%,
due 07/15/2023, conv into CTCO
common stock, (a) Cost - $250,000;
Acquired - 07/15/2003 252,812
200,000 Extreme Networks, Inc., 3.500%, due
12/01/2006, conv into EXTR common
stock, (a) Cost - $167,312;
Acquired - 12/04/2001 (e) 191,250
250,000 Nextel Communications, Inc., 5.250%,
due 01/15/2010, conv into NXTL
common stock 255,000
150,000 Nextel Communications, Inc., 6.000%,
due 06/01/2011, conv into NXTL
common stock, (a) Cost - $179,158;
Acquired - 10/04/2001 186,750
50,000 Primus Telecommunications Group Co.,
3.750%, due 09/15/2010, conv into
PRTL common stock, (a) Cost -
50,000; Acquired - 09/09/2003 70,250
----------
1,481,062
----------
EATING AND DRINKING PLACES (1.1%)
200,000 CKE Restaurants, Inc., 4.000%, due
10/01/2023, conv into CKR common
stock, (a) Cost - $200,000; Acquired -
09/24/2003 (e) 211,000
----------
ELECTRONIC, OTHER ELECTRICAL EQUIPMENT, EXCEPT COMPUTERS (11.9%)
$500,000 Celestica, Inc., 0.000% (b), due
08/01/2020, conv into CLS
common stock 266,875
250,000 Flextronics International Co. Ltd.,
1.000%, due 08/01/2010, conv into
FLEX common stock, (a) Cost -
244,115; Acquired - 07/31/2003 . 300,312
250,000 LSI Logic, 4.000%, due 11/01/2006,
conv into LSI common stock, (a) Cost -
248,438; Acquired - 03/06/2002 (e) 245,625
200,000 L-3 Communications Holdings, 5.250%,
due 06/01/2009, conv into LLL
common stock 253,500
SHARES OR
PRINCIPAL AMOUNT VALUE
- ------------------------------------------------------------------------
ELECTRONIC, OTHER ELECTRICAL EQUIPMENT, EXCEPT COMPUTERS (cont.)
$100,000 McData Corp., 2.250%, due 02/15/2010,
conv into MCDTA common stock,
(a) Cost - $100,000;
Acquired - 02/04/2003 122,250
250,000 Nortel Networks Ltd., 4.250%, due
09/01/2008, conv into NT common
stock (e) 237,812
250,000 Solectron Corp., 0.000% (b), due
11/20/2020, conv into SLR
common stock 143,125
200,000 Tyco International Group, 2.750%, due
01/15/2018, conv into TYC
common stock, (a) Cost - $200,000;
Acquired - 01/08/2003 256,250
300,000 Tyco International Ltd., 3.125%, due
01/15/2023, conv into TYC
common stock, (a) Cost - $289,349;
Acquired - 01/08/2003 411,750
----------
2,237,499
----------
GENERAL MERCHANDISE STORES (3.0%)
200,000 Barnes and Noble, Inc., 5.250%, due
03/15/2009, conv into BKS
common stock 217,250
400,000 TJX Companies, Inc., 0.000% (b), due
02/13/2031, conv into TJX
common stock (e) 337,000
----------
554,250
----------
HEALTH SERVICES (7.7%)
250,000 Axcan Pharmaceutical, Inc., 4.250%,
due 04/15/2008, conv into AXCA
common stock, (a) Cost - $265,000;
Acquired - 3/10/2003 329,375
250,000 Lifepoint Hospital, 4.500%, due
06/01/2009,conv into LPNT
common stock, (a) Cost - $250,000;
Acquired - 05/17/2002 252,188
250,000 Res-Care, Inc., 6.000%, due 12/01/2004,
conv into RSCR common
stock 256,250
400,000 Universal Health Services, Inc., 0.426%,
due 06/23/2020, conv into UHS
common stock 265,500
250,000 Watson Pharmaceuticals, Inc., 1.750%,
due 03/15/2023, conv into WPI
common stock, (a) Cost - $250,000;
Acquired - 03/05/2003 330,312
----------
1,433,625
----------
HOME FURNITURE AND EQUIPMENT STORE (1.8%)
300,000 Best Buy, 2.250%, due 01/15/2022, conv
into BBY common stock 327,750
----------
INDUSTRIAL, COMMERCIAL MACHINERY, COMPUTER EQUIPMENT (1.5%)
250,000 Agco Corp., 1.750%, due 12/31/2033,
conv into AG common stock (a)
Cost - $255,938; Acquired -
12/17/2003 279,687
----------
The accompanying notes are an integral part of these financial statements.
38
- --------------------------------------------------------------------------------
CONSECO FUND GROUP
2003 ANNUAL REPORT
CONSECO CONVERTIBLE SECURITIES FUND
- --------------------------------------------------------------------------------
SHARES OR
PRINCIPAL AMOUNT VALUE
- -----------------------------------------------------------------------
INSURANCE AGENTS, BROKERS (0.7%)
$100,000 AON Corp, 3.500%, due 11/15/2012,
conv into AOC common stock, (a)
Cost - $100,000; Acquired -
11/05/2002 $124,000
--------
INSURANCE CARRIERS (5.1%)
200,000 First American Corp., 4.500%, due
04/15/2008, conv into FAF common
stock, (a) Cost - $202,500; Acquired -
04/19/2001 & 06/15/2001 224,500
250,000 The PMI Group, Inc., 2.500%, due
07/15/2021, conv into PMI common
stock, (a) Cost - $250,000; Acquired -
07/10/2001 274,062
250,000 Radian Grop, 2.250%, due 01/01/2022,
conv into RDN common stock
(a) Cost - $268,438;
Acquired - 12/04/2003 262,500
300,000 XL Capital Ltd., 0.000% (b), due
05/23/2021, conv into XL common
stock 193,125
--------
954,187
--------
MEASURING INSTRUMENTS, PHOTO GOODS, WATCHES (1.4%)
250,000 Medtronic, Inc., 1.250%, due 09/15/2021,
conv into MDT common stock, (a)
Cost - $262,700; Acquired -
01/15/2002 257,188
--------
MOTION PICTURES (1.3%)
125,000 Liberty Media Group, 3.250%, due
03/15/2031, conv into VIA/B common
stock, (a) Cost - $126,390; Acquired -
03/01/2001 (e) 130,625
100,000 Regal Entertainment Group, 3.750%,
due 05/15/2008, conv into RGC
common stock, (a) Cost - $100,000;
Acquired - 05/22/2003 113,000
--------
243,625
--------
NON-DEPOSITORY CREDIT INSTITUTIONS (3.1%)
250,000 Countrywide Financial Corp., 0.000%
(b), due 02/08/2031, conv into CCR
common stock (e) 302,188
150,000 Ford Motor Credit Corp., 7.600%, due
08/01/2005, conv into FRD
common stock 160,382
100,000 Providian Financial Corp., 4.000%, due
05/15/2008, conv into PVN
common stock 116,000
--------
578,570
--------
SHARES OR
PRINCIPAL AMOUNT VALUE
- -----------------------------------------------------------------------
PERSONAL SERVICES (1.7%)
$300,000 Service Corp. International, 6.750%, due
06/22/2008, conv into SRV
common stock . . $322,875
--------
PETROLEUM REFINING AND RELATED INDUSTRIES (1.1%)
200,000 Devon Energy Corp., 4.950%, due
08/15/2008, conv into CHV
common stock 205,250
--------
TRANSPORTATION BY AIR (1.2%)
200,000 Expressjet, Inc., 4.250%, due 08/01/2023,
conv into XJT common stock, (a) Cost -
200,000; Acquired - 07/31/2003 224,250
--------
WHOLESALE - DURABLE GOODS (1.3%)
250,000 Apogent Technologies, Inc., 0.000% (b),
due 12/15/2033, conv into AOT
common stock, (a) Cost - $250,000;
Acquired - 12/12/2003 251,257
--------
TOTAL CONVERTIBLE BONDS
(cost $11,041,106) 12,559,390
--------
SHORT-TERM INVESTMENTS (16.1%)
2,802,925 Bank of America, Repurchase Agreement,
1.250%, due 07/01/2004 (d) 2,802,925
212,000 Nations Cash Reserve 212,000
--------
TOTAL SHORT-TERM INVESTMENTS
(cost $3,014,925) 3,014,925
TOTAL INVESTMENTS
(cost $18,709,855) (115.0%) 21,524,392
----------
LIABILITIES, LESS OTHER ASSETS
(-15.0%) (2,812,745)
----------
TOTAL NET ASSETS (100.0%) 18,711,647
----------
----------
(a) Restricted under Rule 144A of the Securities Act of 1933.
(b) Zero Coupon - Bonds that make no interest payments.
(c) Non-income producing security.
(d) Securities lending collateral (Note 2).
(e) Securities (partial/entire) out on loan (Note 2).
The accompanying notes are an integral part of these financial statements.
39
- --------------------------------------------------------------------------------
CONSECO HIGH YIELD FUND
- --------------------------------------------------------------------------------
PORTFOLIO MANAGER REVIEW
HOW DID THE FUND PERFORM RELATIVE TO ITS BENCHMARK?
The Conseco High Yield Fund (Class A with load) returned 22.30% for the
year ended December 31, 2003.(1) This compares to 28.15% for the benchmark
Merrill Lynch High Yield Master II Index.
WHAT CAUSED THE VARIANCE IN PERFORMANCE BETWEEN THE FUND AND ITS BENCHMARK?
The negative performance variance was attributed to the inclusion of the
sales load in the return calculation. Fund performance is reduced by the
inclusion of shareholder expenses, including sales loads and fees. Excluding the
sales load, the Fund return would have been 29.73% for the year ended December
31, 2003.
WHICH PORTFOLIO HOLDINGS ENHANCED THE FUND'S PERFORMANCE?
During 2003, Fund performance was driven by our holdings in the Telecom,
Cable/Media and Utility sectors. This included many previously
distressed/dislocated names such as Airgate, Alamosa, Charter Communications,
Qwest Communications, and Dynegy. Many of these lower rated, higher yielding
names continued to rally throughout 2003 as the credit markets underwent a major
revaluation of risk. While many of these names underperformed during the market
turmoil of 2002, they contributed significantly to Fund performance in 2003.
WHICH HOLDINGS DETRACTED FROM PERFORMANCE?
During 2003, the Fund was most negatively impacted by its exposure to Levi
Strauss and Delta Airlines.
WHAT IS YOUR OUTLOOK FOR THE NEXT FISCAL YEAR?
During 2003, we continued to take advantage of the rally in the lower rated
sector and sold many of the credits that we believed had moved beyond
justifiable valuations. At the same time, we reduced many higher quality names
that were trading at levels that no longer offered compelling relative value.
The proceeds of these sales continue to be selectively reinvested in securities
representing better risk/return characteristics.
While the 2003 rally has pushed yields to record lows (7.46%) and spreads
(+418) to the tightest levels since 1998, there is still opportunity for further
spread compression. A strengthening economy, earnings momentum, and balance
sheet repair have contributed to an overall improvement in credit quality. As
evidence, the JP Morgan domestic default rate decreased to 2.9% for the 12
months ended December 2003 and is expected to reach 2% by the end of 2004. While
spreads have pushed through the 20-year average and may appear relatively tight
on an historical basis, it is necessary to compare spreads to similar periods in
the credit cycle. For example, the domestic default rate was below 2.5% for most
of the period between 1993 and 1997. During this period, the average spread to
worst was +372 basis points. Assuming that we are in the early stages of a
similar credit cycle, it is not unreasonable to expect spreads to continue to
grind tighter over the next 6-12 months.
While an expected 6-10% return for 2004 would pale in comparison to the
returns witnessed in 2003, it may prove attractive relative to cash, investment
grade bonds, and equities on a risk-adjusted basis. In addition to incremental
yield provided, the high yield market has a low correlation with other
investment alternatives. Additionally, the excess spread and short duration
characteristics should serve as a buffer should interest rates rise. For these
reasons, demand for the high yield asset class is expected to remain strong
through at least 2004.
Given the expectations for lower nominal returns, we expect a much tighter
dispersion of manager returns for 2004. After several years of significant
difference between top and bottom managers, we believe that the deviation should
moderate over the next couple years. With approximately 85% of the market
trading above par, credit selection will be increasingly important in this
asymmetric landscape. Given this environment, 2004 could well be about credit
problem avoidance, rather than significant price appreciation. As a result,
security selection will be back to the forefront in determining relative
performance. Our intensive credit process will continue to guide our investment
decisions, and, we believe, will continue to allow us to generate competitive,
risk-adjusted returns over time.
ROBERT L. COOK, CFA THOMAS G. HAUSER, CFA
Senior Vice President, Vice President
Director of Research . Portfolio Manager
40|86 Advisors, Inc. . 40|86 Advisors, Inc.
(1) Past performance does not guarantee future results. Your investment return
and principal will fluctuate, and your shares may be worth more or less
than their original cost. Total return is provided in accordance with SEC
guidelines for comparative purposes and reflects certain contractual
expense reimbursements through April 30, 2004. If the expense
reimbursements were not in place, the fund's return would have been lower.
The total returns shown do not reflect the deduction of taxes that a
shareholder would pay on fund distributions or the redemption of fund
shares. Total return is shown with the applicable sales load or
contingent-deferred sales charge. The maximum sales load for the Conseco
High Yield Fund is 5.75% for Class A and 1.00% for Class C. The applicable
contingent-deferred sales charge is 5.00% in year 1 and eliminated after
year 6 for Class B, and the applicable contingent-deferred sales charge is
1.00% and eliminated after 12 months for Class C. The Merrill Lynch High
Yield Master II Index is an unmanaged market capitalization weighted index
of all domestic and Yankee high yield bonds. Investors cannot actually
invest in an index.
40
- --------------------------------------------------------------------------------
CONSECO FUND GROUP
2003 ANNUAL REPORT
CONSECO HIGH YIELD FUND
- --------------------------------------------------------------------------------
(unaudited)
Growth of $10,000(1)
SINCE INCEPTION: 01/02/1998
DATE HIGH YIELD ML HY MASTER II
- ---------------------------------------
1/2/1998 . 9,425.07 10,000.00
1/31/1998. 9,686.62 10,159.00
2/28/1998. 9,918.38 10,200.65
3/31/1998. 10,194.84 10,297.56
4/30/1998. 10,309.39 10,341.84
5/31/1998. 10,338.13 10,403.89
6/30/1998. 10,458.23 10,457.99
7/31/1998. 10,559.72 10,524.92
8/31/1998. 9,845.04 9,993.41
9/30/1998. 9,876.88 10,019.39
10/31/1998 9,479.73 9,805.98
11/30/1998 9,971.60 10,314.91
12/31/1998 10,043.21 10,296.34
1/31/1999. 10,348.83 10,435.35
2/28/1999. 10,436.44 10,364.39
3/31/1999. 10,546.91 10,484.61
4/30/1999. 10,819.65 10,676.48
5/31/1999. 10,568.78 10,578.26
6/30/1999. 10,557.96 10,551.81
7/31/1999. 10,652.20 10,565.53
8/31/1999. 10,508.06 10,453.53
9/30/1999. 10,504.87 10,411.72
10/31/1999 10,587.73 10,355.50
11/30/1999 10,835.64 10,490.12
12/31/1999 10,950.08 10,553.06
1/31/2000. 10,894.52 10,516.12
2/29/2000. 11,062.21 10,538.21
3/31/2000. 10,893.88 10,383.30
4/30/2000. 10,607.82 10,383.30
5/31/2000. 10,220.95 10,252.47
6/30/2000. 10,619.07 10,450.34
7/31/2000. 10,666.97 10,506.77
8/31/2000. 10,580.05 10,609.74
9/30/2000. 10,522.37 10,518.49
10/31/2000 10,304.08 10,184.00
11/30/2000 9,583.45 9,793.96
12/31/2000 9,773.99 10,017.26
1/31/2001. 10,339.75 10,651.35
2/28/2001. 10,435.59 10,813.25
3/31/2001. 10,252.95 10,596.99
4/30/2001. 10,137.20 10,452.87
5/31/2001. 10,260.48 10,636.84
6/30/2001. 10,071.32 10,357.09
7/31/2001. 10,165.40 10,525.91
8/31/2001. 10,305.37 10,609.07
9/30/2001. 9,538.32 9,875.98
10/31/2001 9,839.52 10,192.01
11/30/2001 10,205.02 10,550.77
12/31/2001 10,241.35 10,467.42
1/31/2002. 10,234.37 10,524.99
2/28/2002. 10,060.07 10,386.06
3/31/2002. 10,404.07 10,647.79
4/30/2002. 10,479.77 10,818.15
5/31/2002. 10,484.67 10,735.93
6/30/2002. 9,702.57 9,904.97
7/31/2002. 9,455.53 9,520.66
8/31/2002. 9,576.92 9,758.68
9/30/2002. 9,273.59 9,606.44
10/31/2002 9,456.73 9,525.75
11/30/2002 10,261.21 10,121.11
12/31/2002 10,430.59 10,268.87
1/31/2003. 10,835.29 10,576.94
2/28/2003. 10,989.09 10,719.73
3/31/2003. 11,255.77 11,002.73
4/30/2003. 11,853.44 11,641.99
5/31/2003. 12,043.79 11,775.87
6/30/2003. 12,381.63 12,105.60
7/31/2003. 12,278.38 11,941.57
8/31/2003. 12,377.70 12,094.42
9/30/2003. 12,784.96 12,422.18
10/31/2003 13,045.39 12,679.31
11/30/2003 13,227.17 12,854.29
12/31/2003 13,532.24 13,158.94
The growth of $10,000 chart is a comparison of the change in value of a $10,000
investment with dividends and capital gains reinvested for the period from
inception of the Class A shares through 12/31/03. Past performance does not
guarantee future results.
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURN(1) (as of 12/31/03)
INCEPTION SINCE
DATE 1 YEAR 5 YEARS INCEPTION
- ---------------------------------------------------------------
High Yield A . . . . 01/02/1998 22.30% 4.89% 5.17%
High Yield B . . . . 02/19/1998 24.01% 5.33% 4.85%
High Yield C . . . . 02/19/1998 26.78% 5.43% 4.76%
High Yield Y . . . . 03/02/1998 30.30% 6.74% 5.99%
MLHY Master II Index 01/02/1998 28.15% 5.02% 4.68%
41
- --------------------------------------------------------------------------------
CONSECO HIGH YIELD FUND
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS
DECEMBER 31, 2003
SHARES OR
PRINCIPAL AMOUNT VALUE
- ----------------------------------------------------------------------------
PRIVATE PLACEMENT WARRANTS (0.0%)
INDUSTRIAL, COMMERCIAL MACHINERY, COMPUTER EQUIPMENT (0.0%)
48,724 Dictaphone Corp., expire 03/28/2006,
(Cost $0) $ 36,543
-----------
CORPORATE BONDS (94.0%)
AMUSEMENT AND RECREATION SERVICES (5.5%)
$1,000,000 Boca Resorts, Inc., 9.875%,
due 04/15/2009 . 1,070,000
555,000 Pinnacle Entertainment, 8.750%,
due 10/01/2013 . 567,487
255,000 Six Flags, Inc., 8.875%,
due 02/01/2010 (e) 262,969
1,400,000 Six Flags, Inc., 9.750%,
due 04/15/2013 (e) 1,480,500
365,000 Station Casinos, Inc., 9.875%,
due 07/01/2010 . 403,325
375,000 Vail Resorts, Inc., 8.750%,
due 05/15/2009 . 397,500
200,000 Vail Resorts, Inc., 8.750%,
due 05/15/2009 . 212,000
460,000 Venetian Casino, 11.000%,
due 06/15/2010 . 535,900
-----------
4,929,681
-----------
APPAREL AND OTHER FINISHED PRODUCTS (2.6%)
715,000 Levi Strauss & Co., 12.250%,
due 12/15/2012 (e) 468,325
530,000 Phillips Van Heusen Corp., 8.125%,
due 05/01/2013 . 565,775
535,000 Playtex Products, Inc., 9.375%,
due 06/01/2011 (e) 543,025
705,000 Russell Corp., 9.250%,
due 05/01/2010 . 734,081
-----------
2,311,206
-----------
BUILDING CONSTRUCTION, GENERAL CONTRACTORS AND OPERATIVE BUILDERS (0.5%)
405,000 D.R. Horton, Inc., 8.500%,
due 04/15/2012 . 459,675
-----------
BUSINESS SERVICES (1.2%)
290,000 H&E Equipment/Finance, 11.125%,
due 06/15/2012 . 292,900
710,000 Universal Hospital Services, Inc., 10.250%,
due 03/01/2008 . 749,050
-----------
1,041,950
-----------
CHEMICALS AND ALLIED PRODUCTS (6.7%)
644,000 HMP Equity Holdings Corp., 0.000% (c),
due 05/15/2008;
(a) Cost - $336,440; Acquired -
05/05/2003 396,060
365,000 Huntsman ICI Chemicals, 10.125%,
due 07/01/2009 (e) 377,775
475,000 Lyondell Chemical Co., 10.875%,
due 05/01/2009 (e) 489,250
480,000 Lyondell Chemical Co., 11.125%,
due 07/15/2012 (e) 535,200
355,000 Nalco Co., 8.875%, due 11/15/2013, (a)
Cost - $355,000;
Acquired - 10/29/2003 378,075
SHARES OR
PRINCIPAL AMOUNT VALUE
- ----------------------------------------------------------------------
CHEMICALS AND ALLIED PRODUCTS (cont.)
$175,000 Nalco Co., 7.750%, due 11/15/2011, (a)
Cost - $175,000;
Acquired - 10/29/2003 $ 188,125
780,000 Polyone Corp., 10.625%,
due 05/15/2010 (e) 783,900
600,000 Rockwood Specialties Corp., 10.625%,
due 05/15/2011, (a) Cost - $600,000;
Acquired - 07/09/2003 (e) 672,000
805,000 Terra Capital, Inc., 11.500%,
due 06/01/2010 (e) 845,250
570,000 Terra Capital, Inc., 12.875%,
due 10/15/2008 . 675,450
825,000 Witco Corp., 6.875%,
due 02/01/2026 . 711,562
----------
6,052,647
----------
COMMUNICATIONS BY PHONE, TELEVISION, RADIO, CABLE (23.2%)
1,360,000 AirGate PCS, Inc., STEP (b)
0.000%/13.500%,
due 10/01/2009 (e) 965,600
850,000 American Tower Corp., 5.000%,
due 02/15/2010 (e) 813,875
880,000 Charter Communications Holdings, LLC,
10.250%, due 09/15/2021, (a)
Cost - $891,000,
Acquired - 10/07/2003 (e) 928,400
710,000 Charter Communications Holdings, LLC,
11.125%, due 01/15/2011 (e) 654,975
505,000 Charter Communications Holdings, LLC,
STEP (b) 0.000% / 13.500%,
due 01/15/2011 (e) 378,750
400,000 Cincinnati Bell, Inc., 7.250%,
due 07/15/2013, (a) Cost - $403,500;
Acquired - 07/08/2003 422,000
390,000 Cincinnati Bell, Inc., 8.375%,
due 01/15/2014, (a) Cost - $410,168;
Acquired - 10/31/2003
& 12/09/2003 421,200
885,000 Crown Castle International Corp.,
7.5000%, due 12/01/2013, (a)
Cost - $855,102;
Acquired - 11/17/2003 893,850
330,000 Dex Media Finance/West, 8.500%,
due 08/15/2010, (a) Cost - $330,000;
Acquired - 08/15/2003 369,187
330,000 Dex Media East, LLC, 9.875%,
due 11/15/2009, (a) Cost - $330,000;
Acquired - 08/15/2003 385,275
805,000 Dex Media East, LLC, 12.125%,
due 11/15/2012 (e) 994,175
660,000 DirecTV Holdings, 8.375%,
due 03/15/2013 . 768,900
600,000 EchoStar Communications, 9.375%,
due 02/01/2009 . 630,750
105,000 EchoStar DBS Corp., 9.125%,
due 01/15/2009 . 117,994
880,000 Fairpoint Communications, 12.500%,
due 05/01/2010 . 963,600
The accompanying notes are an integral part of these financial statements.
42
- --------------------------------------------------------------------------------
CONSECO FUND GROUP
2003 ANNUAL REPORT
CONSECO HIGH YIELD FUND
- --------------------------------------------------------------------------------
SHARES OR
PRINCIPAL AMOUNT VALUE
- -------------------------------------------------------------------------
COMMUNICATIONS BY PHONE, TELEVISION, RADIO, CABLE (cont.)
$740,000 Innova S de R.L., 9.375%,
due 09/19/2013, (a) Cost - $740,000;
Acquired - 09/12/2003 (e) $ 763,125
1,000,000 Insight Communications, Inc., STEP (b)
0.000% / 12.250%,
due 02/15/2011 . 860,000
565,000 Madison River Capital, LLC, 13.250%,
due 03/01/2010 . 622,913
1,000,000 Nextel Communications, Inc., 7.375%,
due 08/01/2015 . 1,080,000
500,000 Nextel Communications, Inc., 6.875%,
due 10/31/2013 . 531,250
580,000 Quebecor Media, Inc., 11.125%,
due 07/15/2011 . 674,250
1,730,000 Qwest Capital Funding, Inc., 7.250%,
due 02/15/2011 (e) 1,712,700
500,000 Qwest Corp., 8.875%, due 03/15/2012, (a)
Cost - $541,381;
Acquired - 11/26/2002 576,250
520,000 Rogers Wireless, Inc., 9.625%,
due 05/01/2011 . 624,000
385,000 Sinclair Broadcast Group, 8.000%,
due 03/15/2012 . 417,725
530,000 SpectraSite, Inc., 8.250%,
due 05/15/2010 (e) 568,425
175,000 SpectraSite, Inc., 8.250%,
due 05/15/2010 . 187,688
500,000 Sprint Capital Corp., 8.375%,
due 03/15/2012 . 585,079
295,000 Triton PCS, Inc., 8.750%,
due 11/15/2011 (e) 292,050
505,000 Triton PCS, Inc., 8.500%,
due 06/01/2013 (e) 545,400
450,000 Vivendi Universal, 6.250%,
due 07/15/2008, (a) Cost - $450,000;
Acquired - 07/02/2003 (e) 478,688
715,000 Worldcom, Inc., 6.950%,
due 08/15/2006 (f) 579,150
-----------
20,807,224
-----------
ELECTRIC, GAS, WATER, COGENERATION, SANITARY SERVICES (3.7%)
670,000. . . . . . Allied Waste North America, 7.875%,
due 01/01/2009 . 701,825
480,000. . . . . . Allied Waste Industries, Inc., 7.400%,
due 09/15/2035 . 457,200
355,000. . . . . . Dynegy Holdings, Inc., 10.125%,
due 07/15/2013, (a) Cost - $352,220;
Acquired - 08/01/2003 410,025
260,000. . . . . . El Paso Production Holding, 7.750%,
due 06/01/2013, (a) Cost - $260,000;
Acquired - 05/20/2003 257,400
820,000. . . . . . Southern Natural Gas Co., 8.875%,
due 03/15/2010 . 926,600
500,000. . . . . . Transcontinental Gas Pipe Corp.,
7.000%, due 08/15/2011 535,000
-----------
3,288,050
-----------
SHARES OR
PRINCIPAL AMOUNT VALUE
- -------------------------------------------------------------------------
ELECTRONIC, OTHER ELECTRICAL EQUIPMENT, EXCEPT COMPUTERS (5.9%)
$940,000 Alamosa Delaware, Inc., STEP (b)
0.000%/12.000%,
due 07/31/2009 . $ 850,700
487,000 Alamosa Delaware, Inc., 13.625%,
due 08/15/2011 . 530,830
695,000 Flextronics International Ltd., 6.500%,
due 05/15/2013 (e) 722,800
1,225,000 IPC Acquisition Corp., 11.500%,
due 12/15/2009 . 1,341,375
885,000 Nortel Networks Ltd., 6.125%,
due 02/15/2006 . 900,488
355,000 Rayovac Corp., 8.500%,
due 10/01/2013 . 378,075
105,000 Soletron Corp., 0.000% (c),
due 11/20/2020 . 60,113
525,000 Tyco International Ltd., 6.375%,
due 10/15/2011, (a) Cost - $522,737;
Acquired - 11/06/2003 543,375
----------
5,327,756
----------
FABRICATED METAL PRODUCTS, EXCEPT MACHINERY AND TRANSPORTATION EQUIPMENT (0.9%)
700,000 Jacuzzi Brands, Inc., 9.625%,
due 07/01/2010, (a) Cost - $713,063;
Acquired - 06/30/2003
& 07/01/2003 773,500
----------
FOOD AND KINDRED PRODUCTS (2.0%)
715,000 Altria Group, Inc., 7.000%,
due 11/04/2013 . 764,123
250,000 Philip Morris Co., 7.650%,
due 07/01/2008 . 276,965
715,000 Reddy Ice Group, Inc., 8.875%,
due 08/01/2011, (a) Cost - $729,938;
Acquired - 07/17/2003 761,475
----------
1,802,563
----------
FOOD STORES (1.9%)
350,000 General Nutrition Center, 8.500%,
due 12/01/2010, (a) Cost - $350,000;
Acquired - 11/25/2003 360,500
605,000 Marsh Supermarket, Inc., 8.875%,
due 08/01/2007 (e) 574,750
700,000 Merisant Co., 9.500%, due 07/15/2013,
(a) Cost - $720,188;
Acquired - 06/27/2003 749,000
----------
1,684,250
----------
GENERAL MERCHANDISE STORES (0.7%)
550,000 JC Penney Co., Inc., 8.000%,
due 03/01/2010 . 633,188
----------
HEALTH SERVICES (4.7%)
720,000 HCA, Inc., 6.950%, due 05/01/2012 773,219
445,000 HCA, Inc., 6.750%, due 07/15/2013 472,755
555,000 HEALTHSOUTH Corp., 10.750%,
due 10/01/2008 (e) 527,250
310,000 HEALTHSOUTH Corp., 8.500%,
due 02/01/2008 . 299,150
The accompanying notes are an integral part of these financial statements.
43
- --------------------------------------------------------------------------------
CONSECO HIGH YIELD FUND
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS
DECEMBER 31, 2003
SHARES OR
PRINCIPAL AMOUNT VALUE
- ------------------------------------------------------------------------
HEALTH SERVICES (cont.)
$610,000 Matria Healthcare, 11.000%,
due 05/01/2008 . $ 655,750
355,000 Res-Care, Inc., 10.625%,
due 11/15/2008 . 369,200
835,000 Tenet Healthcare Corp., 6.500%,
due 06/01/2012 . 804,731
335,000 Tenet Healthcare Corp., 7.375%,
due 02/01/2013 (e) 338,350
----------
4,240,405
----------
HEAVY CONSTRUCTION OTHER THAN BUILDING CONSTRUCTION CONTRACTORS (0.3%)
265,000 Great Lakes Dedge & Dock Corp.,
7.750%, due 12/15/2013, (a)
Cost - $265,000;
Acquired - 12/12/2003 273,944
----------
HOTELS, OTHER LODGING PLACES (4.5%)
25,000 Host Marriott LP, 9.250%,
due 10/01/2007 . 28,062
790,000 Host Marriott LP, 9.500%,
due 01/15/2007 (e) 882,825
1,155,000 MGM Grand, Inc., 9.750%,
due 06/01/2007 . 1,322,475
820,000 Park Place Entertainment, 8.125%,
due 05/15/2011 (e) 923,525
845,000 Starwood Hotel & Resorts, 7.375%,
due 11/15/2015 . 908,375
----------
4,065,262
----------
INDUSTRIAL, COMMERCIAL MACHINERY, COMPUTER EQUIPMENT (2.7%)
870,000 Cummins Engine, Inc., 5.650%,
due 03/01/2098 . 580,725
600,000 Rexnord Corp., 10.125%,
due 12/15/2012 . 660,000
410,000 Terex Corp., 10.375%,
due 04/01/2011 (e) 461,250
750,000 Unova, Inc., 7.000%,
due 03/15/2008 . 731,250
----------
2,433,225
----------
LEATHER AND LEATHER PRODUCTS (1.0%)
895,000 Samsonite Corp., 10.750%,
due 06/15/2008 . 930,800
----------
LUMBER AND WOOD PRODUCTS, EXCEPT FURNITURE (2.1%)
1,765,000 Georgia-Pacific Corp., 7.750%,
due 11/15/2029 1,844,425
----------
MEASURING INSTRUMENTS, PHOTO GOODS, WATCHES (2.1%)
720,000 DRS Technologies, Inc., 6.875%,
due 11/01/2013, (a) Cost - $720,000;
Acquired - 10/16/2003 743,400
705,000 Eastman Kodak Co., 7.250%,
due 11/15/2013 . 741,018
490,000 Hudson Respiratory Care, Inc., 9.125%,
due 04/15/2008 . 433,650
----------
1,918,068
----------
SHARES OR
PRINCIPAL AMOUNT VALUE
- --------------------------------------------------------------------------
MISCELLANEOUS
RETAIL (0.4%)
$350,000 Suburban Propane Partners L.P., 6.875%,
due 12/15/2013, (a) Cost - $350,000;
Acquired - 12/18/2003 $ 355,250
----------
NON-DEPOSITORY CREDIT INSTITUTIONS (1.0%)
775,000 Ford Motor Credit Corp., 7.600%,
due 08/01/2005 . 852,088
----------
OIL AND GAS EXTRACTION (1.4%)
525,000 Citgo Petroleum Corp., 11.375%,
due 02/01/2011 . 611,625
600,000 Houston Exploration Co., 7.000%,
due 06/15/2013, (a) Cost - $598,500;
Acquired - 06/05/2003 622,500
----------
1,234,125
----------
PAPER AND ALLIED PRODUCTS (4.2%)
760,000 Abitibi-Consolidated, Inc., 8.850%,
due 08/01/2030 . 824,224
450,000 Boise Cascade Co., 6.500%,
due 11/01/2010 . 470,067
360,000 Boise Cascade Co., 7.000%,
due 11/01/2013 . 374,797
370,000 Buckeye Technologies, Inc., 8.500%,
due 10/01/2013 . 397,750
460,000 Graphic Packaging International,
9.500%, due 08/15/2013, (a)
Cost - $460,000;
Acquired - 08/01/2003 (e) 510,600
545,000 Mail-Well, Inc., 9.625%,
due 03/15/2012 (e) 607,675
505,000 Pliant Corp., 11.125%,
due 09/01/2009 . 547,925
----------
3,733,038
----------
PERSONAL SERVICES (0.8%)
720,000 Service Corp. International, 6.875%,
due 10/1/2007 748,800
----------
PRIMARY METAL INDUSTRIES (0.6%)
530,000 General Cable Corp., 9.500%,
due 11/15/2010, (a) Cost - $530,000;
Acquired - 11/18/2003 569,750
----------
PRINTING, PUBLISHING, AND ALLIED INDUSTRIES (2.8%)
560,000 Moore North American Finance, 7.875%,
due 01/15/2011, (a) Cost - $804,322;
Acquired - 03/11/2003 637,000
1,000,000 R.H. Donnelley Financial Corp., 10.875%,
due 12/15/2012, (a) Cost - $1,000,000;
Acquired - 11/26/2002 1,191,250
675,000 Sun Media Corp., 7.625%,
due 02/15/2013 . 725,625
----------
2,553,875
----------
RAILROAD TRANSPORTATION (0.6%)
545,000 TFM SA de CV, 11.750%,
due 06/15/2009 562,712
----------
The accompanying notes are an integral part of these financial statements.
44
- --------------------------------------------------------------------------------
CONSECO FUND GROUP
2003 ANNUAL REPORT
CONSECO HIGH YIELD FUND
- --------------------------------------------------------------------------------
SHARES OR
PRINCIPAL AMOUNT VALUE
- --------------------------------------------------------------------------------
REAL ESTATE INVESTMENT TRUSTS (REITS) (1.3%)
$400,000 ISTAR Financial, Inc., 8.750%,
due 08/15/2008 . $ 464,000
525,000 Senior Housing Trust, 8.625%,
01/15/2012 574,875
85,000 Senior Housing Trust, 7.875%,
due 04/15/2015 . 89,675
-----------
1,128,550
-----------
RUBBER AND MISCELLANEOUS PLASTIC PRODUCTS (0.8%)
705,000 Tekni-Plex, Inc., 8.750%,
due 11/15/2013 . 738,487
-----------
STONE, CLAY, GLASS, AND CONSTRUCTION (1.5%)
465,000 Hexcel Corp., 9.750%,
due 01/15/2009 (e) 489,413
815,000 Owens-Brockway Glass, 8.250%,
due 05/15/2013 (e) 879,181
-----------
1,368,594
-----------
TRANSPORTATION BY AIR (0.5%)
1,343,987 US Airways, Inc., 9.820%,
due 01/01/2013 . 455,229
-----------
TRANSPORTATION EQUIPMENT (2.5%)
730,000 Dana Corp., 9.000%,
due 08/15/2011 (e) 883,300
475,000 General Motors Corp., 8.375%,
due 07/15/2033 (e) 553,044
700,000 United Components, Inc., 9.375%,
due 06/15/2013 . 768,250
-----------
2,204,594
-----------
WATER TRANSPORTATION (0.7%)
540,000 Royal Caribbean Cruises, 8.000%,
due 05/15/2010 (e) 591,300
-----------
WHOLESALE TRADE - DURABLE GOODS (1.0%)
740,000 TRW Automotive, Inc., 9.375%,
due 02/15/2013 . 849,150
-----------
WHOLESALE TRADE - NONDURABLE GOODS (1.7%)
730,000 Amerisourcebergen Corp., 7.250%,
due 11/15/2012 . 790,225
700,000 DIMON, Inc., 7.750%, due 06/01/2013, (a)
Cost - $716,838; Acquired - 11/17/2003
& 12/09/2003 724,500
-----------
1,514,725
-----------
TOTAL CORPORATE BONDS
(cost $77,101,768) 84,278,086
-----------
INTERNATIONAL YANKEE (U.S. $DENOMINATED) (0.8%)
310,000 Alliance Atlantis Communications, Inc.,
13.000%, due 12/15/2009 354,950
350,000 Federative Republic of Brazil, 10.250%,
due 06/17/2013 . 378,000
-----------
TOTAL INTERNATIONAL/YANKEE
(cost $670,422) 732,950
-----------
PREFERRED STOCKS (2.6%)
APPAREL AND OTHER FINISHED PRODUCTS (0.8%)
27,875 Tommy Hilfiger USA, 9.000% 728,095
-----------
COMMUNICATIONS BY PHONE, TELEVISION, RADIO, CABLE (1.8%)
531 Alamosa Delaware, Inc. 7.500%,
Series B 188,505
13,578 CSC Holdings, Inc., 11.125%,
Series M 1,429,084
1 Intermedia Communications, Inc., Series B,
13.500% (f) 50
1,617,639
-----------
MEASURING INSTRUMENTS, PHOTO GOODS, WATCHES (0.0%)
0.41 River Holding Corp., Series B -
-----------
TOTAL PREFERRED STOCKS
(cost $2,085,181) 2,345,734
-----------
VARIABLE RATE BONDS AND CDS (2.8%)
$750,000 Credit Suisse First Boston (USA), Inc.,
1.420%, due 07/05/2005 (d) 752,498
1,000,000 Lehman Brothers Holdings, 1.450%,
due 09/20/2004 (d) 1,001,520
750,000 Southtrust Bank, National Association,
1.250%, due 05/24/2004 (d) 750,518
-----------
TOTAL VARIABLE RATE BONDS AND CDS
(cost $2,504,536) 2,504,536
-----------
SHORT-TERM INVESTMENTS (24.9%)
2,395,114 DAI Securities, Repurchase Agreement,
1.030%, due 01/02/2004 (d) 2,395,114
17,013,494 Deutsche GSI, Repurchase Agreement,
1.030%, due 01/02/2004 (d) 17,013,494
2,941,000 Nations Cash Reserve 2,941,000
-----------
TOTAL SHORT-TERM INVESTMENTS
(cost $22,349,608) 22,349,608
-----------
TOTAL INVESTMENTS
(cost $104,711,515) (125.1%) 112,247,457
------------
LIABILITIES, LESS OTHER ASSETS (-25.1%) (22,556,072)
------------
TOTAL NET ASSETS (100.0%) $ 89,691,385
------------
------------
(a) Restricted under Rule 144A of the Securities Act of 1933.
(b) STEP - Bonds where the coupon increases or steps up at a predetermined
rate.
(c) Zero Coupon Bonds that make no interest payments.
(d) Securities lending collateral (Note 2).
(e) Securities out on loan (Note 2).
(f) Security in default.
The accompanying notes are an integral part of these financial statements.
45
- --------------------------------------------------------------------------------
CONSECO FIXED INCOME FUND
- --------------------------------------------------------------------------------
PORTFOLIO MANAGER REVIEW
HOW DID THE FUND PERFORM RELATIVE TO ITS BENCHMARK?
The Conseco Fixed Income Fund (Class A with load) returned 5.12% for the
year ended December 31, 2003.(1) This compares to 4.10% for the benchmark Lehman
Brothers Aggregate Bond Index.
WHAT CAUSED THE VARIANCE IN PERFORMANCE BETWEEN THE FUND AND ITS BENCHMARK?
The Fund's out performance was a result to the portfolio structure and its
overweight to corporate bonds. The corporate bond sector experienced significant
spread contraction during the year as companies reduced leverage through excess
cash flow and sold off non-core businesses. The return of fiscal discipline
helped alleviate fears in the capital market which had forced credit spreads to
historic wide levels in the prior year. In addition, our increased exposure to
the high yield sector helped add incremental return through the year.
WHICH PORTFOLIO HOLDINGS ENHANCED THE FUND'S PERFORMANCE?
The Fund's performance was aided by several of our investment holdings
including Kraft Foods, Sprint and Tyco. Kraft has been under some scrutiny as
its parent company, Phillip Morris, endures the tobacco litigation pain. Kraft's
underlying businesses are strong and performing well. In order to preserve the
enterprise value of Kraft, we believe that there is a strong probability that
Phillip Morris will spin-off Kraft. Sprint has done an excellent job of focusing
on its core business and cutting costs. In spite of the highly publicized
lawsuits surrounding Tyco's ex-chairman, the fundamentals of Tyco's underlying
businesses appear solid and the new management team has done a good job of
reducing debt and selling non-core businesses.
WHICH HOLDINGS DETRACTED FROM PERFORMANCE?
While the credit markets improved through the year, our holdings in tobacco
settlement bonds lagged the recovery. The tobacco settlement structures were
created by certain states to prefund the long payouts associated with the
settlement of tobacco litigation. As tobacco companies make payments into the
Master Settlement Agreement, they are funneled to the states to pay interest and
principal on these bonds outstanding. With the overhang of the tobacco
litigation, these structured deals did not perform well last year.
WHAT IS YOUR OUTLOOK FOR THE NEXT FISCAL YEAR?
We believe we are in a period of relative low interest rates, however, with
the strength of the economic recovery, the risks of an increase in interest
rates from the current levels is pretty high. The credit markets have improved
significantly and we remain positive on the outlook for credit. In addition, we
expect the mortgage-backed securities sector to underperform in a rising
interest rate environment.
GREGORY J. HAHN, CFA MICHAEL D. RICHMAN, CFA
Chief Investment Officer Second Vice President
40|86 Advisors, Inc. . . Portfolio Manager
40|86 Advisors, Inc.
Gregory J. Hahn, CFA and Michael D. Richman, CFA share responsibility for
managing the Fund. Hahn is the Chief Investment Officer for 40|86 Advisors, Inc.
("40|86") and chairs the Portfolio Management Group. Richmond, a Second Vice
President at 40|86, co-manages the Fund and co-chairs 40|86's Portfolio
Management Group.
(1) Past performance does not guarantee future results. Your investment return
and principal will fluctuate, and your shares may be worth more or less
than their original cost. Total return is provided in accordance with SEC
guidelines for comparative purposes and reflects certain contractual
expense reimbursements through April 30, 2004. If the expense
reimbursements were not in place, the Fund's return would have been lower.
The total returns shown do not reflect the deduction of taxes that a
shareholder would pay on fund distributions or the redemption of fund
shares. Total return is shown with the applicable sales load or
contingent-deferred sales charge. The maximum sales load for the Conseco
Fixed Income Fund is 5.00% for Class A and 1.00% for Class C. The
applicable contingent-deferred sales charge is 5.00% in year 1 and
eliminated after year 6 for Class B, and the applicable contingent-deferred
sales charge is 1.00% and eliminated after 12 months for Class C. The
Lehman Brothers Aggregate Bond ("LBA") Index is an unmanaged index
considered to be representative of the bond market in general. Investors
cannot actually invest in an index.
46
- --------------------------------------------------------------------------------
CONSECO FUND GROUP
2003 ANNUAL REPORT
CONSECO FIXED INCOME FUND
- --------------------------------------------------------------------------------
(UNAUDITED)
Growth of $10,000(1)
SINCE INCEPTION: 1/2/1997
DATE FIXED INCOME LBA
- ---------------------------------------------------
1/2/1997 . . . . . . . . . 9,496.68 10,000.00
1/31/1997. . . . . . . . . 9,572.65 10,031.00
2/28/1997. . . . . . . . . 9,610.75 10,056.08
3/31/1997. . . . . . . . . 9,515.03 9,944.46
4/30/1997. . . . . . . . . 9,582.37 10,093.62
5/31/1997. . . . . . . . . 9,688.84 10,189.51
6/30/1997. . . . . . . . . 9,820.17 10,310.77
7/31/1997. . . . . . . . . 10,088.61 10,589.16
8/31/1997. . . . . . . . . 9,990.47 10,499.15
9/30/1997. . . . . . . . . 10,133.47 10,653.49
10/31/1997 . . . . . . . . 10,252.23 10,807.96
11/30/1997 . . . . . . . . 10,295.03 10,857.68
12/31/1997 . . . . . . . . 10,320.02 10,967.34
1/31/1998. . . . . . . . . 10,455.51 11,107.72
2/28/1998. . . . . . . . . 10,473.94 11,098.84
3/31/1998. . . . . . . . . 10,554.19 11,136.57
4/30/1998. . . . . . . . . 10,616.22 11,194.48
5/31/1998. . . . . . . . . 10,720.20 11,300.83
6/30/1998. . . . . . . . . 10,782.83 11,396.89
7/31/1998. . . . . . . . . 10,814.29 11,420.82
8/31/1998. . . . . . . . . 10,877.54 11,606.98
9/30/1998. . . . . . . . . 11,004.63 11,878.58
10/31/1998 . . . . . . . . 10,924.81 11,815.63
11/30/1998 . . . . . . . . 11,058.43 11,882.98
12/31/1998 . . . . . . . . 11,101.38 11,918.63
1/31/1999. . . . . . . . . 11,220.98 12,003.25
2/28/1999. . . . . . . . . 11,044.15 11,793.19
3/31/1999. . . . . . . . . 11,126.33 11,858.05
4/30/1999. . . . . . . . . 11,160.44 11,896.00
5/31/1999. . . . . . . . . 11,039.34 11,791.31
6/30/1999. . . . . . . . . 10,979.31 11,753.58
7/31/1999. . . . . . . . . 10,979.76 11,704.22
8/31/1999. . . . . . . . . 10,949.00 11,698.37
9/30/1999. . . . . . . . . 11,032.30 11,834.07
10/31/1999 . . . . . . . . 11,063.63 11,877.85
11/30/1999 . . . . . . . . 11,099.67 11,876.66
12/31/1999 . . . . . . . . 11,071.04 11,819.66
1/31/2000. . . . . . . . . 11,040.89 11,780.65
2/29/2000. . . . . . . . . 11,160.75 11,923.20
3/31/2000. . . . . . . . . 11,293.98 12,080.58
4/30/2000. . . . . . . . . 11,254.90 12,045.55
5/31/2000. . . . . . . . . 11,190.41 12,039.53
6/30/2000. . . . . . . . . 11,466.74 12,289.95
7/31/2000. . . . . . . . . 11,584.62 12,401.79
8/31/2000. . . . . . . . . 11,762.80 12,581.61
9/30/2000. . . . . . . . . 11,842.73 12,660.88
10/31/2000 . . . . . . . . 11,880.95 12,744.44
11/30/2000 . . . . . . . . 12,026.52 12,953.45
12/31/2000 . . . . . . . . 12,211.25 13,194.38
1/31/2001. . . . . . . . . 12,460.71 13,409.45
2/28/2001. . . . . . . . . 12,578.21 13,526.11
3/31/2001. . . . . . . . . 12,650.96 13,593.74
4/30/2001. . . . . . . . . 12,707.47 13,536.65
5/31/2001. . . . . . . . . 12,849.78 13,617.87
6/30/2001. . . . . . . . . 12,891.08 13,669.62
7/31/2001. . . . . . . . . 13,191.21 13,975.82
8/31/2001. . . . . . . . . 13,349.23 14,136.54
9/30/2001. . . . . . . . . 13,351.01 14,300.52
10/31/2001 . . . . . . . . 13,590.76 14,599.40
11/30/2001 . . . . . . . . 13,389.02 14,397.93
12/31/2001 . . . . . . . . 13,269.61 14,305.79
1/31/2002. . . . . . . . . 13,362.94 14,421.66
2/28/2002. . . . . . . . . 13,431.98 14,561.55
3/31/2002. . . . . . . . . 13,303.89 14,319.83
4/30/2002. . . . . . . . . 13,454.04 14,597.64
5/31/2002. . . . . . . . . 13,549.84 14,721.72
6/30/2002. . . . . . . . . 13,409.32 14,849.79
7/31/2002. . . . . . . . . 13,091.93 15,029.48
8/31/2002. . . . . . . . . 13,429.58 15,283.48
9/30/2002. . . . . . . . . 13,455.98 15,531.07
10/31/2002 . . . . . . . . 13,409.61 15,459.62
11/30/2002 . . . . . . . . 13,680.27 15,454.99
12/31/2002 . . . . . . . . 13,947.34 15,774.91
1/31/2003. . . . . . . . . 14,125.74 15,789.10
2/28/2003. . . . . . . . . 14,331.33 16,006.99
3/31/2003. . . . . . . . . 14,437.95 15,994.19
4/30/2003. . . . . . . . . 14,712.21 16,126.94
5/31/2003. . . . . . . . . 14,925.96 16,426.90
6/30/2003. . . . . . . . . 15,039.29 16,394.05
7/31/2003. . . . . . . . . 14,691.22 15,842.88
8/31/2003. . . . . . . . . 14,810.68 15,947.44
9/30/2003. . . . . . . . . 15,191.90 16,370.05
10/31/2003 . . . . . . . . 15,182.08 16,217.81
11/30/2003 . . . . . . . . 15,265.35 16,256.73
12/31/2003 . . . . . . . . 15,434.47 16,422.55
The growth of $10,000 chart is a comparison of the change in value of a $10,000
investment with dividends and capital gains reinvested for the period from
inception of the Class A shares through 12/31/03. Past performance does not
guarantee future results.
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURN(1) (as of 12/31/03)
INCEPTION SINCE
DATE 1 YEAR 5 YEARS INCEPTION
- ---------------------------------------------------------
Fixed Income A 01/02/1997 5.12% 5.72% 6.40%
Fixed Income B 03/20/1998 5.09% 6.04% 6.23%
Fixed Income C 03/05/1998 8.03% 6.17% 6.41%
Fixed Income Y 01/02/1997 11.17% 7.41% 7.80%
LBA Index. . . 01/02/1997 4.10% 6.62% 7.34%
47
- --------------------------------------------------------------------------------
CONSECO FIXED INCOME FUND
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS
DECEMBER 31, 2003
SHARES OR
PRINCIPAL AMOUNT VALUE
- -------------------------------------------------------------------------
PREFERRED STOCKS (1.0%)
APPAREL AND OTHER FINISHED PRODUCTS (0.3%)
11,000 Tommy Hilfiger USA $ 287,320
----------
NONDEPOSITORY CREDIT INSTITUTIONS (0.7%)
445 Centaur Funding Corp., (a)
Cost - $524,985;
Acquired - 07/25/2003 547,211
----------
TOTAL PREFERRED STOCK (cost $805,318) 834,531
----------
CORPORATE BONDS (58.6%)
AMUSEMENT AND RECREATIONAL SERVICES (0.3%)
$235,000 Six Flags, Inc., 8.875%,
due 02/01/2010 (d) 242,344
----------
BUILDING CONSTRUCTION, GENERAL CONTRACTORS AND OPERATIVE BUILDERS (0.6%)
440,000 Ryland Group, 5.375%,
due 06/01/2008 . 455,400
----------
BUSINESS SERVICES (2.0%)
565,000 Cendant Corp., 7.750%,
due 12/01/2003 . 648,970
180,000 NCR Corp., 7.125%,
due 06/15/2009 . 200,988
635,000 Time Warner, Inc., 7.700%,
due 05/01/2032 . 743,916
----------
1,593,874
----------
CHEMICALS AND ALLIED PRODUCTS (0.8%)
235,000 Lyondell Chemical Co., Series A,
9.625%, due 05/01/2007 262,025
120,000 Polyone Corp., 10.625%,
due 05/15/2010 (d) 120,600
215,000 Terra Capital, Inc., 12.875%,
due 10/15/2008 . 254,775
----------
637,400
----------
COMMUNICATIONS BY PHONE, TELEVISION, RADIO, CABLE (10.4%)
310,000 AT&T Wireless Services, Inc., 8.750%,
due 03/01/2031 . 383,840
414,000 Chancellor Media CCU, 8.000%,
due 11/01/2008 . 481,275
191,000 Clear Channel Communications, Inc.,
6.625%, due 06/15/2008 212,403
505,000 Comcast Corp., 7.050%,
due 03/15/2033 . 551,484
410,000 Cox Enterprises, 4.375%, due
05/01/2008, (a) Cost - $409,734;
Acquired - 04/14/2003 416,919
540,000 Deutsche Telcom International Finance,
Inc., 8.250%, due 06/15/2030 692,276
330,000 DirecTV Holdings, 8.375%,
due 03/15/2013 . 384,450
175,000 EchoStar Broadband Corp., 10.375%,
due 10/01/2007 . 192,719
200,000 Insight Midwest LLP, 10.500%,
due 11/01/2010 . 218,500
400,000 Nextel Communications, Inc., 9.375%,
due 11/15/2009 . 438,000
1,000,000 Qwest Capital Funding, Inc., 7.500%,
due 11/01/2008 . 1,032,500
SHARES OR
PRINCIPAL AMOUNT VALUE
- ----------------------------------------------------------------------------
COMMUNICATIONS BY PHONE, TELEVISION, RADIO, CABLE (cont.)
$990,000 Qwest Capital Funding, Inc., 7.250%,
due 02/15/2011 . $ 980,100
440,000 Sprint Capital Corp., 6.875%,
due 11/15/2028 . 430,875
350,000 Tele-Communications, Inc., 9.80%,
due 02/01/2012 . 457,233
1,065,000 Telus Corp, 8.000%, due
06/01/2011 1,247,431
235,000 Triton PCS, Inc., 8.500%,
due 06/01/2013 (d) 253,800
----------
8,373,805
----------
DEPOSITORY INSTITUTIONS (0.5%)
375,000 Union Planters Bank, 6.500%,
due 03/15/2008 . 404,889
----------
EATING AND DRINKING PLACES (0.5%)
315,000 Yum! Brands, Inc., 7.700%,
due 07/01/2012 . 364,219
----------
ELECTRIC, GAS, WATER, COGENERATION, SANITARY SERVICES (9.6%)
410,000 Allied Waste North America, 8.875%,
due 04/01/2008 . 461,250
800,000 AMERENENERGY Generating, Series C,
7.750%, due 11/01/2005 877,594
315,000 Cilcorp, Inc., 8.700%,
due 10/15/2009 . 380,593
355,000 Cinergy Corp., 6.250%,
due 09/01/2004 . 364,229
470,000 Constellation Energy Corp., 4.550%,
due 06/15/2015 . 433,003
500,000 Detroit Edison Co., 5.050%,
due 10/01/2005 . 523,236
450,000 Dominion Resources, Inc., 4.125%,
due 02/15/2008 . 459,020
510,000 Kansas City Power & Light, 7.125%,
due 12/15/2005 . 555,776
745,000 Niagara Mohawk Power Co., 5.375%,
due 10/01/2004 . 765,493
350,000 Nisource Finance, 7.875%,
due 11/15/2010 . 416,854
575,000 Pinnacle West Capital Corp., 6.400%,
due 04/01/2006 . 617,133
350,000 PSI Energy, Inc., 6.650%,
due 06/15/2006 . 381,682
320,000 Southern Natural Gas Co, 7.350%,
due 02/15/2031 . 361,600
770,000 Southwestern Public Service Co, Series B,
5.125%, due 11/01/2006 816,511
255,000 Texas Eastern Transmissions LP, 7.000%,
due 07/15/2032 . 283,051
----------
7,697,025
----------
ELECTRONIC, OTHER ELECTRICAL EQUIPMENT, EXCEPT COMPUTERS (3.7%)
825,000 Celestica, Inc. 0.000% (b),
due 08/01/2020 . 440,344
455,000 Nortel Networks Ltd., 6.125%,
due 02/15/2006 . 462,963
312,000 TeleCorp PCS, Inc., 10.625%,
due 07/15/2010 . 364,863
The accompanying notes are an integral part of these financial statements.
48
- --------------------------------------------------------------------------------
CONSECO FUND GROUP
2003 ANNUAL REPORT
CONSECO FIXED INCOME FUND
- --------------------------------------------------------------------------------
SHARES OR
PRINCIPAL AMOUNT VALUE
- -----------------------------------------------------------------------------
ELECTRONIC, OTHER ELECTRICAL EQUIPMENT, EXCEPT COMPUTERS (cont.)
$520,000 Tyco International Group, 6.000%,
due 11/15/2013, (a) Cost - $517,759;
Acquired - 11/06/2003 $ 538,200
1,165,000 Tyco International Group, 6.875%,
due 01/15/2029 . 1,195,290
----------
3,001,660
----------
FOOD AND KINDRED PRODUCTS (1.9%)
265,000 Coca-Cola HBC Finance, 5.125%,
due 09/17/2013, (a) Cost - $262,570;
Acquired - 09/10/2003 266,186
510,000 Kraft Foods, Inc., 6.250%,
due 06/01/2012 . 556,745
665,000 Kraft Foods, Inc., 5.250%,
due 106/01/2013 672,264
----------
1,495,195
----------
FOOD STORES (0.6%)
460,000 Kroger Co., 7.000%,
due 05/01/2018 . 515,780
----------
FURNITURE AND FIXTURES (0.6%)
250,000 Lear Corp., 8.110%, due 05/15/2009 295,312
152,000 Rubbermaid, Inc., 6.600%,
due 11/15/2006 . 167,688
----------
463,000
----------
GENERAL MERCHANDISE STORE (0.5%)
355,000 JC Penney Co., Inc., 8.000%,
due 03/01/2010 . 408,694
----------
HEALTH SERVICES (0.9%)
625,000 HCA, Inc., 8.750%, due 09/01/2010 745,175
----------
HOTELS, OTHER LODGING PLACES (1.3%)
495,000 Hyatt Equities LLC, 6.875%,
due 06/15/2007, (a) Cost -
493,827; Acquired - 06/12/2002 532,186
150,000 Park Place Entertainment, 8.875%,
due 09/15/2008 . 170,250
310,000 Vail Resorts, Inc., 8.750%,
due 05/15/2009 . 328,600
----------
1,031,036
----------
INSURANCE CARRIERS (2.7%)
500,000 John Hancock Financial Services,
5.625%, due 12/01/2008 540,686
375,000 Protective Life US Funding Trust,
5.875%, due 08/15/2006, (a)
Cost - $377,596;
Acquired - 08/28/2001 407,774
750,000 RenaissanceRe Holdings, Ltd.,
7.000%, due 07/15/2008 816,544
465,000 TGT Pipeline LLC, 5.200%,
due 06/01/2018 . 436,470
----------
2,201,474
----------
LUMBER AND WOOD PRODUCTS, EXCEPT FURNITURE (1.1%)
425,000 Georgia-Pacific Corp., 7.750%,
due 11/15/2029 . 444,125
400,000 Weyerhauser Co., 5.950%,
due 11/01/2008 . 430,405
----------
874,530
----------
SHARES OR
PRINCIPAL AMOUNT VALUE
- -----------------------------------------------------------------------------
MEASURING INSTRUMENTS, PHOTO GOODS, WATCHES (0.7%)
$305,000 Guidant Corp., 6.150%,
due 02/15/2006 . $ 326,766
220,000 PLC Trust 2003-1, 2.709%,
due 03/31/2006, (a) Cost - $220,000;
Acquired - 12/12/2003 220,000
----------
546,766
----------
MISCELLANEOUS MANUFACTURING INDUSTRIES (0.4%)
270,000 CIT Group Holdings, 7.750%,
due 04/02/2012 . 319,489
----------
MOTION PICTURE (0.2%)
190,000 Liberty Media Corp., 5.700%,
due 05/15/2013 (d) 192,556
----------
NON-DEPOSITORY CREDIT INSTITUTIONS (3.7%)
400,000 Aristar, Inc., 5.850%,
due 01/27/2004 . 401,267
380,000 Credit Suisse USA, Inc., 3.875%,
due 01/15/2009 (d) 379,976
485,000 Ford Motor Credit Corp., 7.600%,
due 08/01/2005 . 518,568
310,000 Ford Motor Credit Corp., 7.000%,
due 10/01/2013 . 327,530
695,000 Gemstone Investors Ltd., 7.710%,
due 10/31/2004, (a) Cost - $697,086;
Acquired - 10/25/2001 705,425
495,000 General Motors Acceptance Corp.,
8.375%, due 07/15/2033 513,051
15,000 Household Finance Corp., 6.375%,
due 11/27/2012 . 14,616
85,000 Transamerica Corp., 6.750%,
due 11/15/2006 . 94,213
----------
2,954,646
----------
OIL AND GAS EXTRACTION (1.1%)
290,000 Enterprise Products Operations,
8.250%, due 03/15/2005 309,923
540,000 Petroleos Mexicanos, 6.500%,
due 02/01/2005 . 566,325
----------
876,248
----------
PAPER AND ALLIED PRODUCTS (0.8%)
135,000 Boise Cascade Co., 6.500%,
due 11/01/2010 . 141,020
475,000 Meadwestvaco Corp., 2.750%,
due 12/01/2005 . 471,201
----------
612,221
----------
PERSONAL SERVICES (0.5%)
395,000 Service Corp. International, 7.700%,
due 04/15/2009 . 423,638
----------
PIPE LINES, EXCEPT NATURAL GAS (0.6%)
536,000 Dynegy-Roseton Danskamme, 7.670%,
due 11/08/2016 . 512,215
----------
PRINTING, PUBLISHING, AND ALLIED INDUSTRIES (2.2%)
160,000 Moore North American Finance,
7.875%, due 01/15/2011, (a)
Cost - $158,878;
Acquired - 03/11/2003 182,000
225,000 News America, Inc., 7.280%,
due 06/30/2028 . 251,572
The accompanying notes are an integral part of these financial statements.
49
- --------------------------------------------------------------------------------
CONSECO FIXED INCOME FUND
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS
DECEMBER 31, 2003
SHARES OR
PRINCIPAL AMOUNT VALUE
- ----------------------------------------------------------------------
PRINTING, PUBLISHING, AND ALLIED INDUSTRIES (cont.)
$460,000 News America, Inc., 7.625%,
due 11/30/2028 . $ 534,445
350,000 Quebecor Media, Inc., 11.125%,
due 07/15/2011 . 406,875
115,000 R.H. Donnelley Financial Corp.,
8.875%, due 12/15/2010, (a)
Cost - $115,000;
Acquired - 11/26/2002 129,950
210,000 R.H. Donnelley Financial Corp.,
10.875%, due 12/15/2012, (a)
Cost - $210,000;
Acquired - 11/26/2002 250,163
----------
1,755,005
----------
REAL ESTATE INVESTMENT TRUSTS (REITS) (7.6%)
185,000 Avalon Bay Communities, Inc.,
6.800%, due 07/15/2006 (d) 203,282
625,000 Duke Realty Corp., 7.375%,
due 09/22/2005 . 680,191
440,000 EOP Operating, LP, 8.375%,
due 03/15/2006 . 492,933
455,000 ERP Operating, LP, 7.100%,
due 06/23/2004 . 466,273
435,000 Healthcare Properties, Inc., 6.875%,
due 06/08/2005 . 455,669
230,000 Health Care REIT, Inc., 7.500%,
due 08/15/2007 . 259,297
465,000 Hospitality Properties, 6.750%,
due 02/15/2013 . 488,032
350,000 ISTAR Financial, Inc., 8.750%,
due 08/15/2008 . 406,000
590,000 JDN Realty Corp, 6.800%,
due 04/01/2004 . 604,195
555,000 New Plan Excel Realty, 5.875%,
due 06/15/2007 . 602,602
535,000 Post Apartment Homes, 6.850%,
due 03/16/2015 . 556,934
330,000 Prologis, 6.700%,
due 04/15/2004 . 335,183
330,000 Senior Housing Trust, 8.625%,
due 01/15/2012 . 361,350
145,000 Simon Property Group, 7.125%,
due 02/09/2009 . 164,691
----------
6,076,632
----------
REAL ESTATE OPERATORS, AGENTS, MANAGERS (0.1%)
100,000 Regency Centers, LP, 7.400%,
due 04/01/2004 . 101,472
----------
SECURITIES & COMMODITY BROKERS (0.5%)
365,000 Goldman Sachs Group, Inc.,
5.250%, due 10/15/2013 369,205
----------
TOBACCO PRODUCTS (1.0%)
350,000 Universal Corp., Series B, 7.500%,
due 01/26/2004 . 350,000
430,000 Universal Corp., 5.200%,
due 10/15/2013 . 429,442
----------
779,442
----------
WHOLESALE TRADE - NON-DURABLE GOODS (1.2%)
260,000 Amerisourcebergen Corp., 7.250%,
due 11/15/2012 . 281,450
SHARES OR
PRINCIPAL AMOUNT VALUE
- -------------------------------------------------------------------------
WHOLESALE TRADE - NON - DURABLEGOODS (cont.)
$320,000 Cardinal Health, Inc., 4.000%,
due 06/15/2015 . $ 292,758
350,000 DIMON, Inc., 9.625%,
due 10/15/2011 . 392,000
-----------
966,208
-----------
TOTAL CORPORATE BONDS
(cost $43,635,428) 46,991,243
-----------
MUNICIPAL BONDS (6.7%)
745,000 California County, 7.500%,
due 06/01/2019 . 743,227
260,000 Decatur Texas Hospital Authority,
Hospital Revenue 7.750%,
due 09/01/2009 . 278,684
595,000 Duarte California Certificate of
Participation, 6.250%,
due 04/01/2005 . 620,704
400,646 Educational Enhancement Funding Corp.,
6.720%, due 06/01/2025 382,213
580,000 Eufaula Ala, 4.000%,
due 08/15/2012 . 580,818
285,000 Indiana State Dev. Fin. Auth. Rev.,
5.500%, due 01/01/2033 291,549
265,000 Rothschild Wisconsin Ref., 2.125%,
due 03/01/2004 . 265,130
455,000 San Diego California Community
College, 1.340%, due 05/01/2004 455,068
495,000 Sisters of Providence Obligated Group,
Revenue, 7.470%, due 10/01/2007. 559,890
615,000 Tobacco Settlement Fin. Corp., 5.920%,
due 06/01/2012 . 602,583
603,234 Tobacco Settlement Fin Corp., 6.360%,
due 05/15/2025 . 590,312
-----------
TOTAL MUNICIPAL BONDS
(cost $5,314,932) 5,370,178
-----------
ASSET BACKED SECURITIES (10.1%)
800,000 Centex Home Equity, 2001-A A6,
6.250%, due 04/25/2031 838,679
600,000 Chase Funding Mortgage Loan,
2001-3 1A4, 5.602%,
due 05/25/2027 . 608,039
487,000 Chase Funding Mortgage Loan,
2002-19 2A3, 6.020%,
due 07/25/2032 . 489,664
200,000 Chase Funding Mortgage Loan,
2001-CKN5 A3, 5.107%,
due 09/15/2034 . 211,803
663,487 CMAT 1999-C1 A1, #1999CA, 6.250%,
due 01/17/2032 . 695,339
685,000 Deutsche Mortgage and Asset Receiving
Corp., 98-C1, A2, 6.538%,
due 06/15/2031 . 750,626
88,191 First Union Lehman Brothers
Commercial Mortgage Trust,
1997C2 A2, 6.600%,
due 05/18/2007 . 89,837
1,100,000 First Union National Bank Commercial
Mortgage, #2001-C3 A2, 6.180%,
due 08/15/2033 . 1,206,413
The accompanying notes are an integral part of these financial statements.
50
- --------------------------------------------------------------------------------
CONSECO FUND GROUP
2003 ANNUAL REPORT
CONSECO FIXED INCOME FUND
- --------------------------------------------------------------------------------
SHARES OR
PRINCIPAL AMOUNT VALUE
- -----------------------------------------------------------------------------
ASSET BACKED SECURITIES (cont.)
$223,515 GMAC Commercial Mortgage Services,
1999C2, 6.570%, due
9/15/2033 $ 239,768
220,288 GMAC Mortgage Corporation Loan
Trust, 2001-HE4 A5, 5.680%,
due 04/25/2027 . 222,912
165,000 Residential Asset Mortgage Products,
Inc., 2002-RZ3 A4, 4.730%,
due 11/25/2010 . 169,749
459,921 Residential Asset Mortgage Products,
Inc., 2001-RZ4 A4, 5.200%,
due 03/25/2030 . 462,960
51,154 Residential Asset Securities Corporation,
2001-KS3 AI3, 5.180%,
due 07/25/2027 . 51,286
1,031,261 Residential Asset Securities Corporation,
1999-KS4 AI4, 7.220%,
due 06/25/2028 . 1,084,013
925,000 Residential Asset Securities Corporation,
2001-KS2, 6.417%,
due 02/25/2029 . 949,097
----------
TOTAL ASSET BACKED SECURITIES
(cost $7,878,796) 8,070,185
----------
COLLATERIZED MORTGAGE OBLIGATIONS (8.3%)
1,485,000 Countrywide Home Loans, 2002-S1 A5,
5.960%, due 11/25/2016 1,519,142
870,000 Countrywide Home Loans, 2001-1 AF-6,
6.434%, due 07/25/2031 910,843
743,000 J.P. Morgan Mortgage Securities, #01CIB3,
6.044%, due 11/15/2035 809,187
320,000 LB-USB Commercial Mortgage Trust,
#2001C3, 6.365%,
due 12/15/2028 . 356,353
1,553,915 Morgan Stanley Dean Witter Capital, Inc.,
2001-PPM A2, 6.400%,
due 02/01/2031 . 1,694,682
225,000 Morgan Stanley Dean Witter Capital,
Inc., 2001-TOPS3 A3, 6.200%,
due 07/15/2033 . 247,737
196,596 Mortgage Capital Funding, Inc.,
1998 - MC2 A1, 6.325%,
due 10/18/2007 . 202,545
57,714 Paine Webber Mortgage Acceptance
Corp., 1999-04 2B1, 6.265%,
due 01/28/2009, (a) Cost - $56,193;
Acquired - 01/21/2000 57,714
178,584 Residential Asset Mortgage Products, Inc.,
2001-RZ3 A4, 6.130%,
due 03/25/2030 . 178,761
640,000 Salomon Brothers Mortgage Sec.,
6.168%, due 02/13/2010 702,054
----------
TOTAL COLLATERIZED MORTGAGE OBLIGATIONS
(cost $6,483,604) 6,679,018
----------
U.S. GOVERNMENT AND AGENCY OBLIGATIONS (10.6%)
$605,000 Federal Home Loan Mortgage Corp.,
#2614CH, 3.500%,
due 12/15/2010 . $ 619,092
83,210 Federal Home Loan Mortgage Corp.,
#G00479, 9.000%,
due 04/01/2025 . 93,015
279,670 Federal Home Loan Mortgage Corp.,
#2478EF, 6.000%,
due 03/15/2026 . 281,231
276,436 Federal Home Loan Mortgage Corp.,
#2435, 6.250%,
due 05/15/2027 . 277,533
16,352 Federal Home Loan Mortgage Corp.
PC Gold, #C28063, 6.500%,
due 07/01/2029 . 17,147
7 Federal Home Loan Mortgage Corp.,
#C35364, 7.500%,
due 01/01/2030 . 7
209,631 Federal Home Loan Mortgage Corp.,
#2422 CD, 6.000%,
due 02/01/2032 . 210,922
510,000 Federal National Mortgage Assn.,
#002638, 3.000%,
due 02/15/2015 . 515,961
100,000 Federal National Mortgage Assn.,
#199463, 7.000%,
due 04/25/2024 . 109,315
10,626 Federal National Mortgage Assn.,
#250307,7.500%,
due 07/01/2025 . 11,401
8,330 Federal National Mortgage Assn.,
#250758,7.000%,
due 11/01/2026 . 8,846
369,033 Federal National Mortgage Assn.,
#1999T2, 7.500%,
due 01/19/2031 . 403,169
605,000 U.S. Treasury, 3.375%,
due 11/15/2008 (d) 609,987
2,295,000 U.S. Treasury, 4.250%,
due 11/15/2013 (d) 2,293,208
2,920,000 U.S. Treasury, 5.375%,
due 02/15/2031 (d) 3,046,042
----------
TOTAL U.S. GOVERNMENT AND AGENCY OBLIGATIONS
(cost $8,445,410) 8,496,876
----------
VARIABLE RATE BONDS AND CD'S (0.7%)
300,000 Lehman Brothers Holdings, 1.450%,
due 09/20/2004 (c) 300,456
300,000 Southtrust Bank, National Association,
1.250%, due 05/24/2004 (c) 300,207
----------
TOTAL VARIABLE RATE BONDS AND CD'S
(cost $600,663) . 600,663
----------
The accompanying notes are an integral part of these financial statements.
51
- --------------------------------------------------------------------------------
CONSECO FIXED INCOME FUND
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS
DECEMBER 31, 2003
SHARES OR
PRINCIPAL AMOUNT VALUE
- -----------------------------------------------------------------
SHORT-TERM INVESTMENTS (12.2%)
$6,629,037 Deutsche GSI, Repurchase
Agreement, 1.030%,
due 01/02/2004 (c) $ 6,629,037
3,181,000 Nations Cash Reserve 3,181,000
------------
TOTAL SHORT-TERM INVESTMENTS
(cost $9,810,037) 9,810,037
------------
TOTAL INVESTMENTS
(cost $82,974,188) (108.2%) 86,852,731
LIABILITIES, LESS OTHER ASSETS
(-8.2%) (6,584,583)
------------
TOTAL NET ASSETS (100.0%) $80,268,148
------------
------------
(a) Restricted under Rule 144A of the Securities Act of 1933.
(b) Zero Coupon - Bonds that make no interest payments.
(c) Securities lending collateral (Note 2).
(d) Securities out on loan (Note 2).
52
- --------------------------------------------------------------------------------
CONSECO FUND GROUP
2003 ANNUAL REPORT
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
DECEMBER 31, 2003
1. ORGANIZATION
Conseco Fund Group (the "Trust") is an open-end management investment
company registered with the Securities and Exchange Commission under the
Investment Company Act of 1940 (the "1940 Act"). The Trust was organized as a
Massachusetts business trust on September 24, 1996. The Trust is a "series" type
of mutual fund which issues separate series of shares of beneficial interest,
each of which represents a separate portfolio of investments. Eight series
("Funds"), each with its own investment objective and investment policies are
included in this report. The Funds are the Conseco Science & Technology Fund,
Conseco 20 Fund, Conseco Equity Fund, Conseco Large-Cap Fund, Conseco Balanced
Fund, Conseco Convertible Securities Fund, Conseco High Yield Fund and Conseco
Fixed Income Fund. The Conseco Equity, Conseco Balanced, and Conseco Fixed
Income Funds became operational and available for sale on January 2, 1997. The
Conseco 20 and Conseco High Yield Funds commenced operations on January 1, 1998.
The Conseco Convertible Securities Fund became operational and available for
sale on September 28, 1998. The Conseco Science & Technology and Conseco
Large-Cap Funds commenced operations on July 1, 2000.
Each one of the Funds has a distinct investment strategy. The Conseco
Science & Technology Fund invests in companies the Advisor believes are
positioned to take advantage of scientific or technological advances to power
earnings growth. The Conseco 20 Fund concentrates its investments in a core
position of approximately 20 to 30 common stocks believed to have above-average
growth prospects. The Conseco Equity Fund invests in selected equity securities
and other securities having the investment characteristics of common stocks. The
Conseco Large-Cap Fund invests in larger, well-established companies. The
Conseco Balanced Fund invests in several asset classes including debt
securities, equity securities, and money-market instruments. The Conseco
Convertible Securities Fund invests primarily in below-investment-grade
securities that are convertible into common stock. The Conseco High Yield Fund
invests primarily in below-investment-grade securities, commonly known as "junk
bonds" or high-yield securities. The Conseco Fixed Income Fund invests primarily
in investment-grade debt securities.
The Funds offer four classes of shares: Class A, Class B, Class C and Class
Y. Sales of Class A and Class C shares may be subject to a front-end sales
charge. Redemptions of Class B and Class C shares may be subject to a
contingent-deferred sales charge (as a percentage of the offering price or net
asset value at the time of sale, whichever is less). Class Y shares are
available with no sales charge to certain institutional investors and qualifying
individual investors. The Funds are authorized to issue an unlimited number of
shares.
Class B shares have a contingent-deferred sales charge for redemptions
occurring within six years of their purchase. The contingent-deferred sales
charge is a percentage of the net asset value of the shares at the date of
purchase or the net asset value of the shares at the date of redemption,
whichever is less. These charges are 5% in year one, 4% in year two, 3% in year
three, 3% in year four, 2% in year five and 1% in year six. Class B shares will
automatically convert to a number of Class A shares of equal dollar value eight
years after purchase. This conversion feature benefits shareholders because
Class A shares have lower ongoing expenses than Class B shares. Class C shares
have a a maximum up-front sales charge of 1% of your investment. Class C shares
that are held for less than one year are subject to a contingent deferred sales
charge upon redemption in an amount equal to 1% of the lower of the net asset
value of the shares at the date of purchase or the net asset value of the shares
at the date of redemption. Class C shares held one year or longer are not
subject to this contingent-deferred sales charge. The contingent-deferred sales
charge will not apply to shares acquired due to reinvestment of dividends or
capital gains distributions.
2. SIGNIFICANT ACCOUNTING POLICIES
SECURITY VALUATION, TRANSACTIONS, AND RELATED INVESTMENT INCOME
The investments in each portfolio are valued at the close of regular
trading on the New York Stock Exchange on each business day. Investment
transactions are accounted for on the trade date (the date the order to buy or
sell is executed). Dividend income is recorded on the ex-dividend date and
interest income is accrued daily. The cost of investments sold is determined on
the specific identification basis. All Funds may invest in
U.S.-dollar-denominated, corporate-debt securities of domestic issuers, and all
Funds except the Conseco Equity Fund may invest in debt securities of foreign
issuers that may or may not be U.S.-dollar-denominated.
The following summarizes the investments, which carry certain restrictions as to
resale from the Trust to certain qualified buyers:
% OF
FUND COST VALUE NET ASSETS
- -------------------------------------------------------------------
CONSECO BALANCED - BONDS . . $ 752,780 $ 806,915 2.50%
CONSECO CONVERTIBLE
SECURITIES - BONDS . . . . . 7,070,028 7,825,824 41.82%
CONSECO HIGH YIELD - BONDS . 15,510,397 16,355,704 18.24%
CONSECO FIXED INCOME - BONDS 4,043,628 4,253,728 5.30%
These securities are eligible for resale to qualified institutional buyers
in transactions exempt from registration under Rule 144A of the Securities Act
of 1933. In addition, 40|86 Advisors, Inc., formerly Conseco Capital Management,
Inc. ("the Adviser"), a wholly-owned subsidiary of Conseco, Inc. ("Conseco"),
which serves as investment adviser to the Funds, has determined that the
securities are liquid securities through a procedure approved by the Board of
Trustees of the Trust ("Trustees").
In each Fund of the Trust, Fund securities which are traded on stock
exchanges excluding the NASDAQ national market system, are valued at the last
sale price as of the close of business on the day the securities are being
valued, or lacking any sales, at the mean between the closing bid and asked
prices. Securities that are principally traded on the NASDAQ national market
system are generally valued at the NASDAQ Official Closing Price ("NOCP").
Securities traded in the over-the-counter market are valued at the mean between
the bid and asked prices obtained from an independent pricing services or
brokers. Prices for fixed income securities may be obtained from an independent
pricing service which uses information provided by market makers or estimates of
market value obtained from yield data relating to investments or securities with
similar characteristics. Fund securities that are traded both in the
over-the-counter market and on a stock exchange are valued according to the
broadest and most representative market, and it is expected that for debt
securities this ordinarily will be the over-the-counter market. Securities for
which market quotations are not readily available are valued at fair value as
determined under policies approved by the Trustees. Debt securities with
maturities of sixty (60) days or less are valued at amortized cost which
approximates value. If an investment owned by a Fund experiences a default and
has accured interest from purchase or has recorded accrued interest during the
period it is owned, the Fund's policy is to cease interest accruals from the
time the investments are traded as "flat" in the market. The Fund evaluates the
collectibility of purchased accrued interest and previously recorded interest on
an investment-by-investment basis.
DIVIDENDS TO SHAREHOLDERS
Dividends from the Conseco Convertible Securities, Conseco High Yield and
Conseco Fixed Income Funds will be declared and distributed monthly. Dividends
from the Conseco Balanced Fund will be declared and distributed quarterly.
Dividends from the Conseco Science & Technology, Conseco 20, Conseco Equity, and
Conseco Large-Cap Funds will be declared and distributed annually. However, the
Trustees may decide to declare dividends at other intervals.
53
- --------------------------------------------------------------------------------
CONSECO FUND GROUP
2003 ANNUAL REPORT
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
DECEMBER 31, 2003
Dividends to shareholders from net investment income are determined in
accordance with income tax regulations that may differ from accounting
principles generally accepted in the United States of America. Permanent book
and tax differences relating to dividends to shareholders may result in
reclassifications to paid-in capital and may affect the per-share allocation
between net investment income, and realized and unrealized gain (losses). Any
taxable income or gain of the Trust remaining at fiscal year end will be
declared and distributed in the following year to the shareholders of the Fund
or Funds to which such gains are attributable.
FEDERAL INCOME TAXES
For federal income tax purposes, the Funds intend to qualify as regulated
investment companies under Subchapter M of the Internal Revenue Code by
distributing substantially all of their taxable income and net capital gains to
their shareholders annually and otherwise complying with the requirements for
regulated investment companies. Therefore, no provision has been made for
federal income taxes.
Net investment income and net realized gains (losses) may differ for
financial statement and tax purposes because of temporary or permanent book/tax
differences. To the extent these differences are permanent, reclassification are
made to the appropriate equity accounts in the period that the difference
arises. On the Statements of Assets and Liabilities the following
reclassifications were made:
ACCUMULATED
NET UNDISTRIBUTED
REALIZED NET PAID-
GAIN INVESTMENT IN
FUND (LOSS) INCOME CAPITAL
- -----------------------------------------------------------------------------
CONSECO SCIENCE & TECHNOLOGY . $ - $ 78,843 $ (78,843)
CONSECO 20 . . . . . . . . . . - 719,336 (719,336)
CONSECO EQUITY . . . . . . . . 28,632 (11,857) (16,775)
CONSECO LARGE-CAP. . . . . . . 460 34,845 (35,305)
CONSECO BALANCED . . . . . . . 3,363 11,544 (14,907)
CONSECO CONVERTIBLE SECURITIES (282,268) 471,556 (189,288)
CONSECO HIGH YIELD . . . . . . 2,730 (2,730) -
CONSECO FIXED INCOME . . . . . 2,336 (2,336) -
SECURITIES LENDING
The Funds have entered into a Securities Lending Agreement (the
"Agreement") with the Bank of New York. Under terms of the Agreement, the Funds
may lend portfolio securities to qualified institutional borrowers in order to
earn additional income. The Agreement requires that loans are collateralized at
all times by cash equal to at least 102% of the market value of any loaned
securities, plus accrued interest. Cash collateral is invested in short-term
securities, variable rate bonds and CDs which are included in the respective
Fund's Schedule of Investments.
At December 31, 2003, the Conseco Science & Technology Fund, Conseco 20
Fund, Conseco Equity Fund, Conseco Large-Cap Fund, Conseco Balanced Fund,
Conseco Convertible Securities Fund, Conseco High Yield Fund and the Conseco
Fixed Income Fund had securities with a market value of $141,648, $3,447,725,
$4,759,537, $9,682, $1,032,210, $2,742,510, $21,400,357 and $7,060,348,
respectively, on loan (included within Investments in securities in the
Statements of Assets and Liabilities) and had received $145,600, $3,541,744,
$4,869,056, $9,900, $1,061,750, $2,802,925, $21,913,144, $7,229,700,
respectively, in collateral. Amounts earned as interest on investments of cash
collateral, net of rebates and other securities lending expenses, are included
in Other income in the Statements of Operations. For the year ended December 31,
2003, this securities lending income totaled $710, $25,044, $28,438, $35,
$3,238, $11,463, $71,516, and $24,279, respectively.
The primary risk associated with securities lending is if the borrower
defaults on its obligation to return the securities loaned because of insolvency
or other reasons. The Funds could experience delays and costs in recovering
securities loaned or in gaining access to the collateral.
EXPENSES
Expenses shared by the Trust are allocated to each Fund based upon current
net assets. Expenses directly attributable to a Class of shares are charged to
that Class. The Fund pays the expenses of its Trustees who are not affiliated
persons of the Adviser or Trust.
USE OF ESTIMATES
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the reported assets and
liabilities and the disclosure of contingent assets and liabilities as of the
date of the financial statements and the reported amounts of increases and
decreases in net assets from operations during the reporting period. Actual
results may differ from these estimates.
3. AGREEMENTS WITH SUBSIDIARIES OF CONSECO
INVESTMENT ADVISORY AGREEMENT
The Adviser supervises the Trust's management and investment program,
performs a variety of services in connection with the management and operation
of the Funds and pays all compensation of officers and Trustees of the Trust who
are affiliated persons of the Adviser or the Trust. The following summarizes the
total fees incurred for such services for the year ended December 31, 2003:
FUND GROSS AMOUNT WAIVER
- ---------------------------------------------------------
CONSECO SCIENCE & TECHNOLOGY . $ 44,411 $ (88,554)
CONSECO 20 . . . . . . . . . . 359,986 (112,621)
CONSECO EQUITY . . . . . . . . 725,062 (131,812)
CONSECO LARGE-CAP .. . . . . . 34,046 (87,258)
CONSECO BALANCED . . . . . . . 233,456 (76,524)
CONSECO CONVERTIBLE SECURITIES 167,334 (106,728)
CONSECO HIGH YIELD . . . . . . 805,468 (270,233)
CONSECO FIXED INCOME . . . . . 433,309 (233,349)
Under the investment advisory agreement, the Adviser receives an investment
advisory fee equal to an annual rate of 1.00% of the average daily net asset
value of the Conseco Science & Technology, 0.70% of the average daily net asset
value of the Conseco 20, Conseco Equity, Conseco Large-Cap, Conseco Balanced,
and Conseco High Yield Funds, 0.85% of the average daily net asset value of the
Conseco Convertible Securities Fund, and 0.45% of the average daily net asset
value of the Conseco Fixed Income Fund. The Adviser also manages other
registered investment companies and the invested assets of its parent company,
Conseco, which owns or manages several life insurance subsidiaries. The Adviser
has entered into Subadviser Agreements for the management of the investments in
the Conseco Science & Technology Fund, Conseco 20 Fund, Conseco Equity Fund,
Conseco Large-Cap Fund and the equity portion of the Conseco Balanced Fund. The
Adviser is solely responsible for the payment of all fees to the Subadviser. The
Subadvisor for the Conseco Science & Technology Fund and the Conseco 20 Fund is
Oak Associates, ltd. The Subadvisor for the Conseco Equity Fund, Conseco
Large-Cap Fund and the equity portion of the Conseco Balanced Fund is Chicago
Equity Partners, LLC. The Adviser has contractually agreed to reimburse the
Funds to the extent that the ratio of expenses to net assets exceeds the
following:
54
- --------------------------------------------------------------------------------
CONSECO FUND GROUP
- --------------------------------------------------------------------------------
2003 ANNUAL REPORT
FUND CLASS A CLASS B CLASS C CLASS Y
- ------------------------------------------------------------
CONSECO SCIENCE
& TECHNOLOGY . . . . 1.75% 2.25% 2.25% 1.25%
CONSECO 20 . . . . . 1.75% 2.25% 2.25% 1.25%
CONSECO EQUITY . . . 1.50% 2.00% 2.00% 1.00%
CONSECO LARGE-CAP. . 1.50% 2.00% 2.00% 1.00%
CONSECO BALANCED . . 1.50% 2.00% 2.00% 1.00%
CONSECO CONVERTIBLE
SECURITIES . . . . . 1.55% 2.05% 2.05% 1.05%
CONSECO HIGH YIELD . 1.40% 1.90% 1.90% .90%
CONSECO FIXED INCOME 1.10%(a) 1.60% 1.60% .60%
(a) Class A rate change effective May 1, 2001. Prior to this date the rate was
1.25%.
The Adviser may discontinue these contractual limits at any time after
April 30, 2004. After this date, the Adviser may elect to continue, modify or
terminate the limitation on Fund operating expenses. Further, under the terms of
this agreement any fund expenses including initial organizational costs, waived
or reimbursed after May 1, 2000, may be recouped by the Adviser from the Fund to
the extent actual operating expenses for a period are less than the expense
limitation caps, provided that the Adviser may only be entitled to recoup such
amounts for a period of three years from the fiscal year such amounts were
waived or reimbursed. Reimbursed/absorbed expenses subject to potential recovery
by year of expiration are as follows:
YEAR OF EXPIRATION
- -------------------------------------------------------
DECEMBER 31,
FUND 2004 2005 2006
- -------------------------------------------------------
CONSECO SCIENCE &
TECHNOLOGY . . . . . $ 95,616 $ 86,186 $ 88,554
CONSECO 20 . . . . . - 57,247 112,621
CONSECO EQUITY . . . 142,531 114,495 131,812
CONSECO LARGE-CAP. . 103,682 84,366 87,258
CONSECO BALANCED . . 147,436 123,484 76,524
CONSECO CONVERTIBLE
SECURITIES . . . . . 170,570 111,370 106,728
CONSECO HIGH YIELD . 213,373 218,449 270,233
CONSECO FIXED INCOME 282,001 385,555 233,349
ADMINISTRATION AGREEMENT
Conseco Services, LLC (the "Administrator"), a wholly-owned subsidiary of
Conseco, supervises the preparation and filing of all documents required for
compliance by the Funds with applicable laws and regulations, supervises the
maintenance of books and records of the Funds and provides other general and
administrative services. For providing these services, the Administrator
receives compensation at the annual rate of 0.20% of the average daily net
assets of each Fund. The Administrator has contractually agreed to reimburse the
Funds to the extent that the ratio of expenses to average net assets on an
annual basis exceeds the expense limitations as stated above for the investment
advisory agreement. The Administrator may discontinue these contractual limits
at any time after April 30, 2004. The following summarizes the total fees
incurred for such services for the year ended December 31, 2003:
FUND AMOUNT
- ----------------------------------------
CONSECO SCIENCE & TECHNOLOGY . $ 8,882
CONSECO 20 . . . . . . . . . . 102,853
CONSECO EQUITY . . . . . . . . 207,161
CONSECO LARGE-CAP. . . . . . . 9,727
CONSECO BALANCED . . . . . . . 66,702
CONSECO CONVERTIBLE SECURITIES 39,373
CONSECO HIGH YIELD . . . . . . 230,133
CONSECO FIXED INCOME . . . . . 192,582
DISTRIBUTION ARRANGEMENTS
Conseco Equity Sales, Inc. (the "Distributor"), a wholly-owned subsidiary
of Conseco, serves as the principal underwriter for each Fund pursuant to an
Underwriting Agreement, initially approved by the Trustees. The Distributor is a
registered broker-dealer and member of the National Association of Securities
Dealers, Inc. ("NASD"). Shares of each Fund will be continuously offered and are
sold by selected brokers, dealers and other financial intermediaries who have
executed selling agreements with the Distributor. The Distributor bears all the
expenses of providing services pursuant to the Principal Underwriting Agreement
including the payment of the expenses relating to the distribution of
prospectuses for sales purposes, as well as, any advertising or sales
literature.
The Trust has adopted Distribution and Service Plans (the "Plans"), dated
March 28, 1997 for Class A shares for the Conseco Equity, Conseco Balanced and
Conseco Fixed Income Funds and December 31, 1997 for Class B and Class C shares
for the Conseco Equity, Conseco Balanced and Conseco Fixed Income Funds and
Class A, Class B and Class C shares for the Conseco 20, Conseco Convertible
Securities and Conseco High Yield Funds; and July 1, 2000 for Class A, Class B
and Class C shares for the Conseco Science & Technology and Conseco Large-Cap
Funds in accordance with the requirements of Rule 12b-1 under the 1940 Act and
the requirements of the applicable rules of the NASD regarding asset based sales
charges. Pursuant to the Plans, a Fund may compensate the Distributor for its
expenditures in financing any activity primarily intended to result in the sale
of Class A, Class B and Class C shares of the Fund and for account maintenance
provided to existing Class A, Class B and Class C shareholders. The Conseco
Science & Technology, Conseco 20, Conseco Equity, Conseco Large-Cap, Conseco
Balanced, Conseco Convertible Securities and Conseco High Yield Funds' Plans
authorize payments to the Distributor up to 0.50%, and beginning May 1, 2001,
the Conseco Fixed Income Fund's Plans authorize payments to the Distributor up
to 0.50%, changed from 0.65%, annually of each Fund's average daily net assets
attributable to its Class A shares. Class B and Class C share's Plan authorizes
payments to the Distributor up to 1.00% annually for each Fund's average daily
net assets attributable to their respective class. The Plans provide for
periodic payments by the Distributor to brokers, dealers and financial
intermediaries for providing shareholder services to accounts that hold Class A,
Class B and Class C shares and for promotional and other sales related costs.
The following summarizes the total fees incurred for such services for
Class A, Class B, and Class C shares for the year ended December 31, 2003:
FUND AMOUNT
- ----------------------------------------
CONSECO SCIENCE & TECHNOLOGY $30,895
CONSECO 20 . . . . . . . . . . 384,024
CONSECO EQUITY . . . . . . . . 363,213
CONSECO LARGE-CAP. . . . . . . 39,555
CONSECO BALANCED . . . . . . . 233,958
CONSECO CONVERTIBLE SECURITIES 147,020
CONSECO HIGH YIELD . . . . . . 742,886
CONSECO FIXED INCOME . . . . . 639,748
55
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
DECEMBER 31, 2003
4. INVESTMENT TRANSACTIONS
The aggregate cost of purchases and the aggregate proceeds from sales of
long-term investments for the year ended December 31, 2003 are shown below:
PURCHASES: SALES:
------------------------------------------------------------
U.S. GOVERNMENT OTHER U.S. GOVERNMENT OTHER
------------------------------------------------------------
Conseco Science & Technology Fund . $ - 1,969,406 $ - 6,246,901
Conseco 20 Fund . . . . . . . . . . - 1,290,298 - 17,373,598
Conseco Equity Fund . . . . . . . . - 110,339,249 - 134,826,563
Conseco Large-Cap Fund. . . . . . . - 2,518,619 - 4,724,176
Conseco Balanced Fund . . . . . . . 5,162,485 24,649,886 6,081,319 35,758,855
Conseco Convertible Securities Fund - 27,851,490 - 32,402,414
Conseco High Yield Fund . . . . . . 3,302,461 140,325,047 3,358,711 168,357,827
Conseco Fixed Income Fund . . . . . 99,348,768 179,897,866 104,966,083 218,124,232
5. FEDERAL INCOME TAXES
The following information for the Conseco Fund Group is presented on an income
tax basis as of December 31, 2003:
NET UNREALIZED
GROSS GROSS APPRECIATION
COST OF UNREALIZED UNREALIZED (DEPRECIATION)
INVESTMENTS (A) APPRECIATION DEPRECIATION ON INVESTMENTS
-----------------------------------------------------------------
Conseco Science & Technology Fund $ 3,635,517 $ 972,042 $ (868,663) $ 103,379
Conseco 20 Fund . . . . . . . . . . 98,940,239 1,826,070 (41,368,221) (39,542,151)
Conseco Equity Fund . . . . . . . . 93,263,739 21,343,812 (1,002,479) 20,341,333
Conseco Large-Cap Fund. . . . . . . 4,234,025 640,877 (494,520) 146,357
Conseco Balanced Fund . . . . . . . 29,218,695 4,350,444 (893,090) 3,457,354
Conseco Convertible Securities Fund 19,105,589 2,873,921 (455,118) 2,418,803
Conseco High Yield Fund . . . . . . 105,286,850 8,209,414 (1,248,807) 6,960,607
Conseco Fixed Income Fund . . . . . 83,161,325 4,091,551 (400,145) 3,691,406
(a) Represents cost for federal income tax purposes and differs from the cost
for financial reporting purposes by the amount of losses recognized for the
financial reporting purposes in excess of federal income tax purposes.
As of December 31, 2003, the components of accumulated earnings (deficit) on a
tax basis were:
ACCUMULATED TOTAL
DISTRIBUTABLE DISTRIBUTABLE CAPITAL AND UNREALIZED ACCUMULATED
ORDINARY LONG-TERM ACCUMULATED POST-OCTOBER APPRECIATION EARNINGS
INCOME GAINS EARNINGS LOSSES (DEPRECIATION) (DEFICIT)
- -----------------------------------------------------------------------------------------------------------------------
Conseco Science &
Technology Fund . . . . . $ - $ - $ - $ (47,453,983) $ 103,379 $ (47,350,604)
Conseco 20 Fund . . . . . - - - (200,293,828) (39,542,151) (239,835,979)
Conseco Equity Fund . . . - - - (47,307,738) 20,341,333 (26,966,405)
Conseco Large-Cap Fund. . - - - (16,320,386) 146,357 (16,174,029)
Conseco Balanced Fund . . - - - (24,223,520) 3,457,354 (20,766,166)
Conseco Convertible
Securities Fund . . . . . 475,046 - 475,046 (13,906,887) 2,418,803 (11,013,038)
Conseco High Yield Fund . 17,126 - 17,126 (26,643,045) 6,960,607 (19,665,312)
Conseco Fixed Income Fund 19,768 - 19,768 (4,861,914) 3,691,406 (1,150,740)
56
- --------------------------------------------------------------------------------
CONSECO FUND GROUP
- --------------------------------------------------------------------------------
2003 ANNUAL REPORT
The tax components of dividends paid during the years ended December 31, 2003
and 2002 were as follows:
LONG-TERM
ORDINARY INCOME CAPITAL GAIN
DIVIDENDS DISTRIBUTIONS
DECEMBER 31, DECEMBER 31,
- --------------------------------------------------------------------------
2003 2002 2003 2002
- --------------------------------------------------------------------------
Conseco Science & Technology Fund . $ - $ - $ - $ -
Conseco 20 Fund . . . . . . . . . . - - - -
Conseco Equity Fund . . . . . . . . 11,903 64,207 - -
Conseco Large Cap Fund. . . . . . . - - - -
Conseco Balanced Fund . . . . . . . 729,884 1,675,885 - -
Conseco Convertible Securities Fund 751,959 776,802 - -
Conseco High Yield Fund . . . . . . 9,234,924 10,938,409 - -
Conseco Fixed Income Fund . . . . . 4,796,848 9,744,340 - -
The percentage of Ordinary Income Dividends that can be designated as Qualifying
Dividend Income for the year ended December 31, 2003, is as follows (unaudited):
Conseco Balanced Fund 48.6%, Conseco Convertible Securities 4.9% and Conseco
High Yield Fund 4.7%.
For corporate shareholders in the Funds, the percentage of dividend income
distributed for the year ended December 31, 2003, which is designated as
qualifying for the dividends-received deduction, is as follows (unaudited):
Conseco Equity Fund 100%, Conseco Balanced Fund 53.7%, Conseco Convertible
Securities Fund 18.8% and the Conseco High Yield Fund 4.7%.
As of December 31, 2003, the following Funds have capital loss carryforwards
available to offset capital gains in the future, if any:
FUND AMOUNT EXPIRES
- ----------------------------------------------------
Conseco Science & Technology . $ 1,075,374 2008
Conseco Science & Technology . 13,751,410 2009
Conseco Science & Technology . 26,449,050 2010
Conseco Science & Technology . 4,095,608 2011
Conseco 20 . . . . . . . . . . 77,079,380 2009
Conseco 20 . . . . . . . . . . 79,991,018 2010
Conseco 20 . . . . . . . . . . 40,035,261 2011
Conseco Equity . . . . . . . . 37,701,692 2009
Conseco Equity . . . . . . . . 9,606,046 2010
Conseco Large-Cap. . . . . . . 146,019 2008
Conseco Large-Cap. . . . . . . 8,645,848 2009
Conseco Large-Cap. . . . . . . 6,822,200 2010
Conseco Large-Cap. . . . . . . 706,319 2011
Conseco Balanced . . . . . . . $ 8,964,956 2009
Conseco Balanced . . . . . . . 13,683,503 2010
Conseco Balanced . . . . . . . 1,575,061 2011
Conseco Convertible Securities 7,384,078 2009
Conseco Convertible Securities 6,522,809 2010
Conseco High Yield . . . . . . 101,748 2006
Conseco High Yield . . . . . . 1,841,847 2007
Conseco High Yield . . . . . . 11,314,158 2008
Conseco High Yield . . . . . . 6,618,233 2009
Conseco High Yield . . . . . . 6,767,059 2010
Conseco Fixed Income . . . . . 4,861,914 2010
Net realized gains or losses may differ for Federal income tax purposes
primarily as a result of wash sales and post-October losses which may not be
recognized for tax purposes until the first of the following fiscal year. Such
amounts may be used to offset future capital gains. The following summarizes
the amount of post-October losses deferred, on a tax basis, for the year ended
December 31, 2003:
FUND AMOUNT
- ----------------------------------------
Conseco Science & Technology $2,082,541
Conseco 20 . . . . . . . . . 3,188,169
6. SUBSEQUENT EVENT
On 10/22/2003, the Funds' Trustees approved, subject to shareholder
approval, the merger of each of the Funds comprising Conseco Fund Group into new
funds managed by an advisor not related to Conseco.
57
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
For a share outstanding during each year or period ended December 31
CONSECO SCIENCE & TECHNOLOGY FUND CONSECO 20 FUND
- -----------------------------------------------------------------------------------------------------------------------------
2003 2002 2001 2000 (F) 2003 2002 2001 2000 1999
- -----------------------------------------------------------------------------------------------------------------------------
CLASS A SHARES
Net asset value per share,
beginning of period . . . . . $ 1.31 $ 3.01 $ 6.94 $ 10.00 $ 3.51 $ 6.12 $ 11.76 $ 20.68 $ 12.80
Income from investment
operations (a):
Net investment income (loss). (0.03) (0.05) (0.04) (0.05) (0.05) (0.07) (0.08) (0.28) (0.18)
Net realized gains (losses)
and change in unrealized
appreciation or depreciation
on investments. . . . . . . . 0.84 (1.65) (3.89) (3.01) 2.02 (2.54) (5.56) (5.22) 9.19
- -----------------------------------------------------------------------------------------------------------------------------
Total income (loss) from
investment operations . . . . 0.81 (1.70) (3.93) (3.06) 1.97 (2.61) (5.64) (5.50) 9.01
- -----------------------------------------------------------------------------------------------------------------------------
Distributions:
Dividends from net
investment income . . . . . . .- .- .- .- .- .- .- .- .-
Distributions of net
realized gains. . . . . . . . .- .- .- .- .- .- .- (3.42) (1.13)
- -----------------------------------------------------------------------------------------------------------------------------
Total distributions . . . . . .- .- .- .- .- .- .- (3.42) (1.13)
- -----------------------------------------------------------------------------------------------------------------------------
Net asset value per share,
end of period . . . . . . . . $ 2.12 $ 1.31 $ 3.01 $ 6.94 $ 5.48 $ 3.51 $ 6.12 $ 11.76 $ 20.68
- -----------------------------------------------------------------------------------------------------------------------------
Total return (b)(c)(d). . . . 61.83% (56.48%) (56.63%) (30.60%) 56.13% (42.65%) (47.96%) (25.67%) 70.40%
- -----------------------------------------------------------------------------------------------------------------------------
Ratios/supplemental data:
Net assets (dollars in
thousands), end of period . . $ 1,136 $ 3,778 $ 16,077 $ 19,850 $ 7,956 $ 8,778 $ 23,948 $ 33,439 $53,463
Ratio of expenses to
average net assets (b)(e)
Before expense reimbursement. 3.74% 2.38% 2.18% 2.17% 1.97% 1.82% 1.67% 1.51% 1.70%
After expense reimbursement . 1.75% 1.75% 1.75% 1.75% 1.75% 1.75% 1.67% 1.51% 1.68%
Ratio of net investment
Income (loss) to average
net assets (b)(e) . . . . . . (1.58%) (1.69%) (1.50%) (1.23%) (1.15%) (1.19%) (1.19%) (1.14%) (1.02%)
CONSECO EQUITY FUND CONSECO LARGE-CAP FUND
- -------------------------------------------------------------------------------------------------------------------------------
2003 2002 2001 2000 1999 2003 2002 2001 2000 (F)
- -------------------------------------------------------------------------------------------------------------------------------
CLASS A SHARES
Net asset value per share,
beginning of period . . . . . $ 7.58 $ 8.79 $ 9.86 $ 16.27 $ 12.55 $ 4.78 $ 6.60 $ 8.43 $ 10.00
Income from investment
operations (a):
Net investment income (loss). (0.01) (0.01) (0.01) (0.13) (0.14) (0.02) (0.07) (0.06) .-
Net realized gains (losses)
and change in unrealized
appreciation or depreciation
on investments. . . . . . . . 2.79 (1.20) (1.06) 0.40 7.18 1.26 (1.75) (1.77) (1.57)
- -------------------------------------------------------------------------------------------------------------------------------
Total income (loss) from
investment operations . . . . 2.78 (1.21) (1.07) 0.27 7.04 1.24 (1.82) (1.83) (1.57)
- -------------------------------------------------------------------------------------------------------------------------------
Distributions:
Dividends from net
investment income .- .- .- .- .- - .- .- .-
Distributions of net
realized gains .- .- (0.00) (g) (6.68) (3.32) - .- .- .-
- -------------------------------------------------------------------------------------------------------------------------------
Total distributions .- .- (0.00) (6.68) (3.32) - .- .- .-
- -------------------------------------------------------------------------------------------------------------------------------
Net asset value per share,
end of period . . . . . . . . $ 10.36 $ 7.58 $ 8.79 $ 9.86 $ 16.27 $ 6.02 $ 4.78 $ 6.60 $ 8.43
- -------------------------------------------------------------------------------------------------------------------------------
Total return (b)(c)(d). . . . 36.68% (13.77%) (10.93%) 4.97% 56.21% 25.94% (27.58%) (21.71%) (15.70%)
- -------------------------------------------------------------------------------------------------------------------------------
Ratios/supplemental data:
Net assets (dollars in
thousands), end of period . . $ 9,741 $ 7,290 $ 14,268 $15,210 $29,480 $837 $945 $ 9,417 $ 13,737
Ratio of expenses to
average net assets (b)(e)
Before expense reimbursement. 1.63% 1.59% 1.60% 1.47% 1.66% 3.29% 2.10% 1.96% 2.06%
After expense reimbursement . 1.50% 1.50% 1.50% 1.47% 1.50% 1.50% 1.50% 1.50% 1.50%
Ratio of net investment
Income (loss) to average
net assets (b)(e) . . . . . . (0.14%) (0.09%) (0.08%) (0.80%) (0.83%) (0.41%) (0.64%) (0.80%) (0.16%)
(a) Per share amounts presented are based on an average of monthly shares
outstanding for the periods ended December 31, 2000 and December 31, 2003.
Per share amounts for Conseco Convertible Securities Fund only are
presented based on an average of monthly shares outstanding for the year
ended December 31, 2001. Per share amounts for Conseco Large-Cap, Balanced
and Fixed Income Funds only are presented based on an average of monthly
shares outstanding for the year ended December 31, 2002.
(b) The Adviser and Administrator have contractually agreed to reimburse Fund
expenses to the extent that the ratio of expenses to average net assets
exceeds, on an annual basis, 1.75% for the Conseco Science & Technology and
Conseco 20, 1.50% for the Conseco Equity, Conseco Large-Cap and Conseco
Balanced 1.55% for the Conseco Convertible Securities, 1.40% for the
Conseco High Yield and 1.10% for the Conseco Fixed Income Funds. These
contractual limits may be discontinued at any time after April 30, 2004.
The accompanying notes are an integral part of these financial statements.
58
- --------------------------------------------------------------------------------
CONSECO FUND GROUP
- --------------------------------------------------------------------------------
2003 ANNUAL REPORT
CONSECO BALANCED FUND CONSECO CONVERTIBLE SECURITIES FUND
- ---------------------------------------------------------------------------------------------------------------------------------
2003 2002 2001 2000 1999 2003 2002 2001 2000 1999
- ---------------------------------------------------------------------------------------------------------------------------------
CLASS A SHARES
Net asset value per share,
beginning of period . . . . . $ 8.62 $ 10.13 $ 11.08 $ 13.51 $ 11.69 $ 8.63 $ 9.62 $ 11.80 $ 14.93 $ 11.00
Income from investment
operations (a):
Net investment income (loss). 0.22 0.24 0.25 0.28 0.22 0.34 0.32 0.30 0.43 0.46
Net realized gains (losses)
and change in unrealized
appreciation or depreciation
on investments. . . . . . . . 1.81 (1.49) (0.96) 0.64 3.18 2.04 (1.02) (1.63) (1.08) 3.89
- ---------------------------------------------------------------------------------------------------------------------------------
Total income (loss) from
investment operations . . . . 2.03 (1.25) (0.71) 0.92 3.40 2.38 (0.70) (1.33) (0.65) 4.35
- ---------------------------------------------------------------------------------------------------------------------------------
Distributions:
Dividends from net
investment income . . . . . . (0.23) (0.26) (0.24) (0.25) (0.23) (0.39) (0.29) (0.36) (0.36) (0.27)
Distributions of net
realized gains. . . . . . . . .- .- .- (3.10) (1.35) .- .- (0.49) (2.12) (0.15)
- ---------------------------------------------------------------------------------------------------------------------------------
Total distributions . . . . . (0.23) (0.26) (0.24) (3.35) (1.58) (0.39) (0.29) (0.85) (2.48) (0.42)
- ---------------------------------------------------------------------------------------------------------------------------------
Net asset value per share,
end of period . . . . . . . . $10.42 $ 8.62 $ 10.13 $ 11.08 $ 13.51 $10.62 $ 8.63 $ 9.62 $ 11.80 $ 14.93
- ---------------------------------------------------------------------------------------------------------------------------------
Total return (b)(c)(d). . . . 23.85% (12.47%) (6.37%) 7.29% 29.44% 28.14% (7.24%) (11.27%) (3.56%) 40.12%
- ---------------------------------------------------------------------------------------------------------------------------------
Ratios/supplemental data:
Net assets (dollars in
thousands), end of period . . $3,448 $ 4,205 $22,802 $24,311 $31,932 $2,700 $ 2,639 $ 4,482 $15,022 $22,927
Ratio of expenses to
average net assets (b)(e)
Before expense reimbursement. 1.73% 1.68% 1.68% 1.74% 1.96% 2.09% 1.98% 1.90% 1.70% 1.95%
After expense reimbursement . 1.50% 1.50% 1.50% 1.50% 1.50% 1.55% 1.55% 1.55% 1.55% 1.55%
Ratio of net investment
Income (loss) to average
net assets (b)(e) . . . . . . 2.21% 2.62% 2.43% 1.92% 1.87% 3.40% 3.50% 3.15% 2.49% 2.11%
CONSECO HIGH YIELD FUND CONSECO FIXED INCOME FUND
- ---------------------------------------------------------------------------------------------------------------------------------
2003 2002 2001 2000 1999 2003 2002 2001 2000 1999
- ---------------------------------------------------------------------------------------------------------------------------------
CLASS A SHARES
Net asset value per share,
beginning of period . . . . . $ 7.08 $ 7.76 $ 8.20 $ 10.00 $ 10.00 $10.05 $ 10.14 $ 9.94 $ 9.60 $ 10.21
Income from investment
operations (a):
Net investment income (loss). 0.64 0.80 0.79 0.81 1.00 0.52 0.56 0.55 0.62 0.63
Net realized gains (losses)
and change in unrealized
appreciation or depreciation
on investments. . . . . . . . 1.39 (0.70) (0.41) (1.83) (0.13) 0.53 (0.06) 0.30 0.33 (0.65)
- ---------------------------------------------------------------------------------------------------------------------------------
Total income (loss) from
investment operations . . . . 2.03 0.10 0.38 (1.02) 0.87 1.05 0.50 0.85 0.95 (0.02)
- ---------------------------------------------------------------------------------------------------------------------------------
Distributions:
Dividends from net
investment income . . . . . . (0.65) (0.78) (0.82) (0.78) (0.87) (0.54) (0.59) (0.55) (0.61) (0.56)
Distributions of net
realized gains. . . . . . . . .- .- .- .- .- .- .- (0.10) .- (0.03)
- ---------------------------------------------------------------------------------------------------------------------------------
Total distributions . . . . . (0.65) (0.78) (0.82) (0.78) (0.87) (0.54) (0.59) (0.65) (0.61) (0.59)
- ---------------------------------------------------------------------------------------------------------------------------------
Net asset value per share,
end of period . . . . . . . . $ 8.46 $ 7.08 $ 7.76 $ 8.20 $ 10.00 $10.56 $ 10.05 $ 10.14 $ 9.94 $ 9.60
- ---------------------------------------------------------------------------------------------------------------------------------
Total return (b)(c)(d). . . . 29.73% 1.85% 4.78% (10.74%) 9.03% 10.67% 5.11% 8.66% 10.30% (0.27%)
- ---------------------------------------------------------------------------------------------------------------------------------
Ratios/supplemental data:
Net assets (dollars in
thousands), end of period . . $24,693 $44,059 $27,712 $ 19,689 $42,591 $7,936 $15,455 $65,303 $32,693 $30,681
Ratio of expenses to
average net assets (b)(e)
Before expense reimbursement. 1.63% 1.61% 1.61% 1.58% 1.66% 1.33% 1.32% 1.33% 1.44% 1.64%
After expense reimbursement . 1.40% 1.40% 1.40% 1.40% 1.40% 1.10% 1.10% 1.13% 1.25% 1.25%
Ratio of net investment
Income (loss) to average
net assets (b)(e) . . . . . . 8.10% 10.86% 9.95% 8.43% 8.93% 5.02% 5.73% 5.44% 6.42% 5.69%
(c) Total return figures do not include sales loads; results would be lower if
sales charges were included.
(d) Not annualized for periods of less than one full year.
(e) Annualized for periods of less than one full year.
(f) Period from July 1, 2000 (commencement of operations) through December 31,
2000.
The accompanying notes are an integral part of these financial statements.
59
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
For a share outstanding during each year or period ended December 31
CONSECO SCIENCE & TECHNOLOGY FUND CONSECO 20 FUND
- -----------------------------------------------------------------------------------------------------------------------------
2003 2002 2001 2000 (F) 2003 2002 2001 2000 1999
- -----------------------------------------------------------------------------------------------------------------------------
CLASS B SHARES
Net asset value per share,
beginning of period . . . . . $ 1.30 $ 2.98 $ 6.93 $ 10.00 $ 3.39 $ 5.95 $ 11.48 $ 20.40 $ 12.71
Income from investment
operations (a):
Net investment income (loss). (0.04) (0.06) (0.07) (0.05) (0.07) (0.10) (0.13) (0.39) (0.10)
Net realized gains (losses)
and change in unrealized
appreciation or depreciation
on investments. . . . . . . . 0.83 (1.62) (3.88) (3.02) 1.95 (2.46) (5.40) (5.11) 8.94
- -----------------------------------------------------------------------------------------------------------------------------
Total income (loss) from
investment operations . . . . 0.79 (1.68) (3.95) (3.07) 1.88 (2.56) (5.53) (5.50) 8.84
- -----------------------------------------------------------------------------------------------------------------------------
Distributions:
Dividends from net
investment income . . . . . . .- .- .- .- - - - - -
Distributions of net
realized gains. . . . . . . . .- .- .- .- - - - (3.42) (1.15)
- -----------------------------------------------------------------------------------------------------------------------------
Total distributions . . . . . .- .- .- .- - - - (3.42) (1.15)
- -----------------------------------------------------------------------------------------------------------------------------
Net asset value per share,
end of period . . . . . . . . $ 2.09 $ 1.30 $ 2.98 $ 6.93 $ 5.27 $ 3.39 $ 5.95 $ 11.48 $ 20.40
- -----------------------------------------------------------------------------------------------------------------------------
Total return (b)(c)(d). . . . 60.77% (56.38%) (57.00%) (30.70%) 55.46% (43.03%) (48.17%) (25.99%) 69.56%
- -----------------------------------------------------------------------------------------------------------------------------
Ratios/supplemental data:
Net assets (dollars in
thousands), end of period . . $ 674 $ 540 $ 2,348 $ 4,699 $19,724 $ 16,197 $ 46,136 $ 89,044 $71,233
Ratio of expenses to
average net assets (b)(e)
Before expense reimbursement. 4.24% 2.88% 2.68% 2.67% 2.47% 2.32% 2.17% 2.01% 2.20%
After expense reimbursement . 2.25% 2.25% 2.25% 2.25% 2.25% 2.25% 2.17% 2.01% 2.18%
Ratio of net investment
Income (loss) to average
net assets (b)(e) . . . . . . (2.08%) (2.19%) (2.00%) (1.73%) (1.65%) (1.69%) (1.69%) (1.64%) (1.52%)
CONSECO EQUITY FUND CONSECO LARGE-CAP FUND
- ------------------------------------------------------------------------------------------------------------------------------
2003 2002 2001 2000 1999 2003 2002 2001 2000 (F)
- ------------------------------------------------------------------------------------------------------------------------------
CLASS B SHARES
Net asset value per share,
beginning of period . . . . . $ 7.33 $ 8.54 $ 9.63 $ 16.13 $ 12.47 $ 4.72 $ 6.55 $ 8.41 $ 10.00
Income from investment
operations (a):
Net investment income (loss). (0.05) (0.06) (0.05) (0.20) (0.14) (0.05) (0.10) (0.08) (0.01)
Net realized gains (losses)
and change in unrealized
appreciation or depreciation
on investments. . . . . . . . 2.70 (1.15) (1.04) 0.38 7.07 1.24 (1.73) (1.78) (1.58)
- ------------------------------------------------------------------------------------------------------------------------------
Total income (loss) from
investment operations . . . . 2.65 (1.21) (1.09) 0.18 6.93 1.19 (1.83) (1.86) (1.59)
- ------------------------------------------------------------------------------------------------------------------------------
Distributions:
Dividends from net
investment income . . . . . . .- .- .- .- .- .- .- .- .-
Distributions of net
realized gains. . . . . . . . .- .- (0.00) (g) (6.68) (3.27) - .- .- .-
- ------------------------------------------------------------------------------------------------------------------------------
Total distributions . . . . . .- .- (0.00) (6.68) (3.27) - .- .- .-
- ------------------------------------------------------------------------------------------------------------------------------
Net asset value per share,
end of period . . . . . . . . $ 9.98 $ 7.33 $ 8.54 $ 9.63 $ 16.13 $ 5.91 $ 4.72 $ 6.55 $ 8.41
- ------------------------------------------------------------------------------------------------------------------------------
Total return (b)(c)(d). . . . 36.15% (14.17%) (11.30%) 4.44% 55.63% 25.21% (27.94%) (22.12%) (15.90%)
- ------------------------------------------------------------------------------------------------------------------------------
Ratios/supplemental data:
Net assets (dollars in
thousands), end of period . . $17,052 $ 15,956 $ 22,075 $19,621 $ 3,489 $ 2,008 $ 2,102 $ 5,439 $ 8,096
Ratio of expenses to
average net assets (b)(e)
Before expense reimbursement. 2.13% 2.09% 2.10% 1.97% 2.16% 3.79% 2.60% 2.46% 2.56%
After expense reimbursement . 2.00% 2.00% 2.00% 1.97% 2.00% 2.00% 2.00% 2.00% 2.00%
Ratio of net investment
Income (loss) to average
net assets (b)(e) . . . . . . (0.64%) (0.59%) (0.58%) (1.30%) (1.33%) (0.91%) (1.14%) (1.30%) (0.66%)
(a) Per share amounts presented are based on an average of monthly shares
outstanding for the periods ended December 31, 2000 and December 31, 2003.
Per share amounts for Conseco Convertible Securities Fund only are
presented based on an average of monthly shares outstanding for the year
ended December 31,2001. Per share amounts for Conseco Large-Cap, Balanced
and Fixed Income Funds only are presented based on an average of monthly
shares outstanding for the year ended December 31, 2002.
(b) The Adviser and Administrator have contractually agreed to reimburse Fund
expenses to the extent that the ratio of expenses to average net assets
exceeds, on an annual basis, 2.25% for the Conseco Science & Technology and
Conseco 20, 2.00% for the Conseco Equity, Conseco Large-Cap and Conseco
Balanced, 2.05% for the Conseco Convertible Securities, 1.90% for the
Conseco High Yield and 1.60% for the Conseco Fixed Income Funds. These
contractual limits may be discontinued at any time after April 30, 2004.
The accompanying notes are an integral part of these financial statements.
60
- --------------------------------------------------------------------------------
CONSECO FUND GROUP
2003 ANNUAL REPORT
CONSECO BALANCED FUND CONSECO CONVERTIBLE SECURITIES FUND
- ----------------------------------------------------------------------------------------------------------------------------------
2003 2002 2001 2000 1999 2003 2002 2001 2000 1999
- ----------------------------------------------------------------------------------------------------------------------------------
CLASS B SHARES
Net asset value per share,
beginning of period . . . . . $ 8.49 $ 9.98 $ 10.92 $ 13.38 $11.61 $ 8.58 $ 9.56 $ 11.74 $ 14.88 $ 11.00
Income from investment
operations (a):
Net investment income (loss). 0.16 0.18 0.20 0.19 0.12 0.28 0.27 0.24 0.34 0.06
Net realized gains (losses)
and change in unrealized
appreciation or depreciation
on investments. . . . . . . . 1.79 (1.45) (0.94) 0.66 3.18 2.03 (1.00) (1.63) (1.07) 4.21
- ----------------------------------------------------------------------------------------------------------------------------------
Total income (loss) from
investment operations . . . . 1.95 (1.27) (0.74) 0.85 3.30 2.31 (0.73) (1.39) (0.73) 4.27
- ----------------------------------------------------------------------------------------------------------------------------------
Distributions:
Dividends from net
investment income . . . . . . (0.18) (0.22) (0.20) (0.21) (0.18) (0.34) (0.25) (0.30) (0.29) (0.24)
Distributions of net
realized gains. . . . . . . . .- .- .- (3.10) (1.35) .- .- (0.49) (2.12) (0.15)
- ----------------------------------------------------------------------------------------------------------------------------------
Total distributions . . . . . (0.18) (0.22) (0.20) (3.31) (1.53) (0.34) (0.25) (0.79) (2.41) (0.39)
- ----------------------------------------------------------------------------------------------------------------------------------
Net asset value per share,
end of period . . . . . . . . $ 10.26 $ 8.49 $ 9.98 $ 10.92 $13.38 $ 10.55 $ 8.58 $ 9.56 $ 11.74 $ 14.88
- ----------------------------------------------------------------------------------------------------------------------------------
Total return (b)(c)(d). . . . 23.42% (12.89%) (6.79%) 6.79% 28.79% 27.46% (7.61%) (11.77%) (4.07%) 39.40%
- ----------------------------------------------------------------------------------------------------------------------------------
Ratios/supplemental data:
Net assets (dollars in
thousands), end of period . . $12,134 $ 12,345 $20,279 $13,958 $2,854 $10,173 $ 9,438 $ 17,903 $30,872 $13,690
Ratio of expenses to
average net assets (b)(e)
Before expense reimbursement. 2.23% 2.18% 2.18% 2.24% 2.46% 2.59% 2.48% 2.40% 2.20% 2.45%
After expense reimbursement . 2.00% 2.00% 2.00% 2.00% 2.00% 2.05% 2.05% 2.05% 2.05% 2.05%
Ratio of net investment
Income (loss) to average
net assets (b)(e) . . . . . . 1.71% 2.12% 1.93% 1.42% 1.37% 2.90% 3.00% 2.65% 1.99% 1.61%
CONSECO HIGH YIELD FUND CONSECO FIXED INCOME FUND
- ---------------------------------------------------------------------------------------------------------------------------------
2003 2002 2001 2000 1999 2003 2002 2001 2000 1999
- ---------------------------------------------------------------------------------------------------------------------------------
CLASS B SHARES
Net asset value per share,
beginning of period . . . . . $ 7.04 $ 7.71 $ 8.16 $ 9.97 $ 9.97 $ 10.02 $ 10.10 $ 9.91 $ 9.59 $ 10.19
Income from investment
operations (a):
Net investment income (loss). 0.60 0.75 0.76 0.73 0.55 0.48 0.50 0.51 0.58 0.41
Net realized gains (losses)
and change in unrealized
appreciation or depreciation
on investments. . . . . . . . 1.38 (0.67) (0.43) (1.80) 0.28 0.50 (0.04) 0.29 0.32 (0.46)
- ---------------------------------------------------------------------------------------------------------------------------------
Total income (loss) from
investment operations . . . . 1.98 0.08 0.33 (1.07) 0.83 0.98 0.46 0.80 0.90 (0.05)
- ---------------------------------------------------------------------------------------------------------------------------------
Distributions:
Dividends from net
investment income . . . . . . (0.62) (0.75) (0.78) (0.74) (0.83) (0.49) (0.54) (0.51) (0.58) (0.52)
Distributions of net
realized gains. . . . . . . . .- .- .- .- .- .- .- (0.10) .- (0.03)
- ---------------------------------------------------------------------------------------------------------------------------------
Total distributions . . . . . (0.62) (0.75) (0.78) (0.74) (0.83) (0.49) (0.54) (0.61) (0.58) (0.55)
- ---------------------------------------------------------------------------------------------------------------------------------
Net asset value per share,
end of period . . . . . . . . $ 8.40 $ 7.04 $ 7.71 $ 8.16 $ 9.97 $ 10.51 $ 10.02 $ 10.10 $ 9.91 $ 9.59
- ---------------------------------------------------------------------------------------------------------------------------------
Total return (b)(c)(d). . . . 29.01% 1.49% 4.17% (11.31%) 8.57% 10.09% 4.64% 8.16% 9.74% (0.49%)
- ---------------------------------------------------------------------------------------------------------------------------------
Ratios/supplemental data:
Net assets (dollars in
thousands), end of period . . $35,695 $35,654 $48,857 $ 41,319 $47,433 $28,560 $35,087 $38,793 $9,340 $ 5,230
Ratio of expenses to
average net assets (b)(e)
Before expense reimbursement. 2.13% 2.11% 2.11% 2.08% 2.16% 1.84% 1.82% 1.80% 1.79% 1.99%
After expense reimbursement . 1.90% 1.90% 1.90% 1.90% 1.90% 1.60% 1.60% 1.60% 1.60% 1.60%
Ratio of net investment
Income (loss) to average
net assets (b)(e) . . . . . . 7.60% 10.36% 9.45% 7.93% 8.43% 4.52% 5.23% 4.98% 6.07% 5.34%
(c) Total return figures do not include sales loads; results would be lower if
sales charges were included.
(d) Not annualized for periods of less than one full year.
(e) Annualized for periods of less than one full year.
(f) Period from July 1, 2000 (commencement of operations) through December 31,
2000.
(g) Amount calculated is less than $0.005 per share.
The accompanying notes are an integral part of these financial statements.
61
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
For a share outstanding during each year or period ended December 31
CONSECO SCIENCE & TECHNOLOGY FUND CONSECO 20 FUND
- ----------------------------------------------------------------------------------------------------------------------------------
2003 2002 2001 2000 (F) 2003 2002 2001 2000 1999
- ----------------------------------------------------------------------------------------------------------------------------------
CLASS C SHARES
Net asset value per share,
beginning of period . . . . . $ 1.30 $ 2.99 $ 6.92 $ 10.00 $ 3.40 $ 5.98 $ 11.52 $ 20.46 $ 12.75
Income from investment
operations (a):
Net investment income (loss). (0.04) (0.06) (0.06) (0.05) (0.07) (0.10) (0.12) (0.39) (0.09)
Net realized gains (losses)
and change in unrealized
appreciation or depreciation
on investments. . . . . . . . 0.84 (1.63) (3.87) (3.03) 1.96 (2.48) (5.42) (5.13) 8.96
- ----------------------------------------------------------------------------------------------------------------------------------
Total income (loss) from
investment operations . . . . 0.80 (1.69) (3.93) (3.08) 1.89 (2.58) (5.54) (5.52) 8.87
- ----------------------------------------------------------------------------------------------------------------------------------
Distributions:
Dividends from net
investment income . . . . . . .- .- .- .- - - .- .- .-
Distributions of net
realized gains. . . . . . . . .- .- .- .- - - .- (3.42) (1.16)
- ----------------------------------------------------------------------------------------------------------------------------------
Total distributions . . . . . .- .- .- .- - - .- (3.42) (1.16)
- ----------------------------------------------------------------------------------------------------------------------------------
Net asset value per share,
end of period . . . . . . . . $ 2.10 $ 1.30 $ 2.99 $ 6.92 $ 5.29 $ 3.40 $ 5.98 $ 11.52 $ 20.46
- ----------------------------------------------------------------------------------------------------------------------------------
Total return (b)(c)(d). . . . 61.54% (56.52%) (56.79%) (30.80%) 55.13% (42.98%) (48.09%) (26.02%) 69.54%
- ----------------------------------------------------------------------------------------------------------------------------------
Ratios/supplemental data:
Net assets (dollars in
thousands), end of period . . $ 1,483 $ 1,240 $ 4,684 $ 5,122 $18,038 $ 15,359 $ 40,383 $ 64,272 $37,093
Ratio of expenses to
average net assets (b)(e)
Before expense reimbursement. 4.24% 2.88% 2.68% 2.67% 2.47% 2.32% 2.17% 2.01% 2.20%
After expense reimbursement . 2.25% 2.25% 2.25% 2.25% 2.25% 2.25% 2.17% 2.01% 2.18%
Ratio of net investment
Income (loss) to average
net assets (b)(e) . . . . . . (2.08%) (2.19%) (2.00%) (1.73%) (1.65%) (1.69%) (1.69%) (1.64%) (1.52%)
CONSECO EQUITY FUND CONSECO LARGE-CAP FUND
- -----------------------------------------------------------------------------------------------------------------------------
2003 2002 2001 2000 1999 2003 2002 2001 2000 (F)
- -----------------------------------------------------------------------------------------------------------------------------
CLASS C SHARES
Net asset value per share,
beginning of period . . . . . $ 7.34 $ 8.55 $ 9.63 $ 16.12 $ 12.54 $ 4.72 $ 6.56 $ 8.42 $ 10.00
Income from investment
operations (a):
Net investment income (loss). (0.05) (0.06) (0.04) (0.20) (0.07) (0.05) (0.10) (0.10) (0.01)
Net realized gains (losses)
and change in unrealized
appreciation or depreciation
on investments. . . . . . . . 2.70 (1.15) (1.04) 0.39 7.02 1.25 (1.74) (1.76) (1.57)
- -----------------------------------------------------------------------------------------------------------------------------
Total income (loss) from
investment operations . . . . 2.65 (1.21) (1.08) 0.19 6.95 1.20 (1.84) (1.86) (1.58)
- -----------------------------------------------------------------------------------------------------------------------------
Distributions:
Dividends from net
investment income . . . . . . - - - - - - - - -
Distributions of net
realized gains. . . . . . . . - - (0.00)(g) (6.68) (3.37) - - - -
- -----------------------------------------------------------------------------------------------------------------------------
Total distributions . . . . . - - (0.00) (6.68) (3.37) - - - -
- -----------------------------------------------------------------------------------------------------------------------------
Net asset value per share,
end of period . . . . . . . . $ 9.99 $ 7.34 $ 8.55 $ 9.63 $ 16.12 $ 5.92 $ 4.72 $ 6.56 $ 8.42
- -----------------------------------------------------------------------------------------------------------------------------
Total return (b)(c)(d). . . . 36.10% (14.15%) (11.19%) 4.51% 55.89% 25.42% (28.05%) (22.09%) (15.80%)
- -----------------------------------------------------------------------------------------------------------------------------
Ratios/supplemental data:
Net assets (dollars in
thousands), end of period . . $16,576 $ 16,329 $ 20,055 $13,793 $ 2,972 $ 1,241 $ 1,858 $ 4,825 $ 7,513
Ratio of expenses to
average net assets (b)(e)
Before expense reimbursement. 2.13% 2.09% 2.10% 1.97% 2.16% 3.79% 2.60% 2.46% 2.56%
After expense reimbursement . 2.00% 2.00% 2.00% 1.97% 2.00% 2.00% 2.00% 2.00% 2.00%
Ratio of net investment
Income (loss) to average
net assets (b)(e) . . . . . . (0.64%) (0.59%) (0.57%) (1.30%) (1.33%) (0.91%) (1.14%) (1.30%) (0.66%)
(a) Per share amounts presented are based on an average of monthly shares
outstanding for the periods ended December 31, 2000 and December 31, 2003.
Per share amount for Conseco Convertible Securities Fund only are presented
based on an average of monthly shares outstanding for the year ended
December 31,2001. Per share amounts for Conseco Large-Cap, Balanced and
Fixed Income Funds only are presented based on an average of monthly shares
outstanding for the year ended December 31, 2002.
(b) The Adviser and Administrator have contractually agreed to reimburse Fund
expenses to the extent that the ratio of expenses to average net assets
exceeds, on an annual basis, 2.25% for the Conseco Science & Technology and
Conseco 20, 2.00% for the Conseco Equity, Conseco Large-Cap and Conseco
Balanced, 2.05% for the Conseco Convertible Securities, 1.90% for the
Conseco High Yield and 1.60% for the Conseco Fixed Income Funds. These
contractual limits may be discontinued at any time after April 30, 2004.
The accompanying notes are an integral part of these financial statements.
62
- --------------------------------------------------------------------------------
CONSECO FUND GROUP
- --------------------------------------------------------------------------------
2003 ANNUAL REPORT
CONSECO BALANCED FUND CONSECO CONVERTIBLE SECURITIES FUND
- ------------------------------------------------------------------------------------------------------------------------------
2003 2002 2001 2000 1999 2003 2002 2001 2000 1999
- ------------------------------------------------------------------------------------------------------------------------------
CLASS C SHARES
Net asset value per share,
beginning of period . . . . . $ 8.56 $ 10.06 $ 11.01 $13.46 $11.66 $ 8.61 $ 9.60 $ 11.78 $ 14.91 $11.00
Income from investment
operations (a):
Net investment income (loss). 0.16 0.18 0.19 0.19 0.13 0.29 0.28 0.24 0.34 0.06
Net realized gains (losses)
and change in unrealized
appreciation or depreciation
on investments. . . . . . . . 1.81 (1.46) (0.94) 0.66 3.20 2.03 (1.02) (1.63) (1.06) 4.23
- ------------------------------------------------------------------------------------------------------------------------------
Total income (loss) from
investment operations . . . . 1.97 (1.28) (0.75) 0.85 3.33 2.32 (0.74) (1.39) (0.72) 4.29
- ------------------------------------------------------------------------------------------------------------------------------
Distributions:
Dividends from net
investment income . . . . . . (0.18) (0.22) (0.20) (0.20) (0.18) (0.34) (0.25) (0.30) (0.29) (0.23)
Distributions of net
realized gains. . . . . . . . .- .- .- (3.10) (1.35) - .- (0.49) (2.12) (0.15)
- ------------------------------------------------------------------------------------------------------------------------------
Total distributions . . . . . (0.18) (0.22) (0.20) (3.30) (1.53) (0.34) (0.25) (0.79) (2.41) (0.38)
- ------------------------------------------------------------------------------------------------------------------------------
Net asset value per share,
end of period . . . . . . . . $10.35 $ 8.56 $ 10.06 $11.01 $13.46 $10.59 $ 8.61 $ 9.60 $ 11.78 $14.91
- ------------------------------------------------------------------------------------------------------------------------------
Total return (b)(c)(d). . . . 23.38% (12.94%) (6.77%) 6.79% 28.81% 27.47% (7.68%) (11.72%) (3.99%) 39.52%
- ------------------------------------------------------------------------------------------------------------------------------
Ratios/supplemental data:
Net assets (dollars in
thousands), end of period . . $8,537 $ 13,026 $28,946 $8,487 $2,264 $3,583 $ 3,701 $ 7,417 $11,919 $4,107
Ratio of expenses to
average net assets (b)(e)
Before expense reimbursement. 2.23% 2.18% 2.18% 2.24% 2.46% 2.59% 2.48% 2.40% 2.20% 2.45%
After expense reimbursement . 2.00% 2.00% 2.00% 2.00% 2.00% 2.05% 2.05% 2.05% 2.05% 2.05%
Ratio of net investment
Income (loss) to average
net assets (b)(e) . . . . . . 1.71% 2.12% 1.93% 1.42% 1.37% 2.90% 3.00% 2.65% 1.99% 1.61%
CONSECO HIGH YIELD FUND CONSECO FIXED INCOME FUND
- ---------------------------------------------------------------------------------------------------------------------------------
2003 2002 2001 2000 1999 2003 2002 2001 2000 1999
- ---------------------------------------------------------------------------------------------------------------------------------
CLASS C SHARES
Net asset value per share,
beginning of period . . . . . $ 7.03 $ 7.70 $ 8.15 $ 9.95 $ 9.95 $ 10.07 $ 10.15 $ 9.95 $ 9.63 $ 10.23
Income from investment
operations (a):
Net investment income (loss). 0.60 0.75 0.75 0.73 0.50 0.47 0.50 0.51 0.58 0.41
Net realized gains (losses)
and change in unrealized
appreciation or depreciation
on investments. . . . . . . . 1.37 (0.67) (0.42) (1.79) 0.33 0.52 (0.04) 0.30 0.32 (0.45)
- ---------------------------------------------------------------------------------------------------------------------------------
Total income (loss) from
investment operations . . . . 1.97 0.08 0.33 (1.06) 0.83 0.99 0.46 0.81 0.90 (0.04)
- ---------------------------------------------------------------------------------------------------------------------------------
Distributions:
Dividends from net
investment income . . . . . . (0.61) (0.75) (0.78) (0.74) (0.83) (0.48) (0.54) (0.51) (0.58) (0.53)
Distributions of net
realized gains. . . . . . . . .- .- .- .- .- .- .- (0.10) .- (0.03)
- ---------------------------------------------------------------------------------------------------------------------------------
Total distributions . . . . . (0.61) (0.75) (0.78) (0.74) (0.83) (0.48) (0.54) (0.61) (0.58) (0.56)
- ---------------------------------------------------------------------------------------------------------------------------------
Net asset value per share,
end of period . . . . . . . . $ 8.39 $ 7.03 $ 7.70 $ 8.15 $ 9.95 $ 10.58 $ 10.07 $ 10.15 $ 9.95 $ 9.63
- ---------------------------------------------------------------------------------------------------------------------------------
Total return (b)(c)(d). . . . 29.04% 1.49% 4.18% (11.22%) 8.60% 10.11% 4.69% 8.26% 9.69% (0.47%)
- ---------------------------------------------------------------------------------------------------------------------------------
Ratios/supplemental data:
Net assets (dollars in
thousands), end of period . . $13,833 $16,538 $25,532 $ 18,645 $18,541 $20,009 $35,719 $57,239 $5,171 $ 2,655
Ratio of expenses to
average net assets (b)(e)
Before expense reimbursement. 2.13% 2.11% 2.11% 2.08% 2.16% 1.84% 1.82% 1.80% 1.79% 1.99%
After expense reimbursement . 1.90% 1.90% 1.90% 1.90% 1.90% 1.60% 1.60% 1.60% 1.60% 1.60%
Ratio of net investment
Income (loss) to average
net assets (b)(e) . . . . . . 7.60% 10.36% 9.45% 7.93% 8.43% 4.52% 5.23% 4.98% 6.07% 5.34%
(c) Total return figures do not include sales loads; results would be lower if
sales charges were included.
(d) Not annualized for periods of less than one full year.
(e) Annualized for periods of less than one full year.
(f) Period from July 1, 2000 (commencement of operations) through December 31,
2000.
(g) Amount calculated is less than $0.005 per share.
The accompanying notes are an integral part of these financial statements.
63
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
For a share outstanding during each year or period ended December 31
CONSECO SCIENCE & TECHNOLOGY FUND CONSECO 20 FUND
- -----------------------------------------------------------------------------------------------------------------------------
2003 2002 2001 2000 (F) 2003 2002 2001 2000 1999
- -----------------------------------------------------------------------------------------------------------------------------
CLASS Y SHARES
Net asset value per share,
beginning of period . . . . . $ 1.33 $ 3.03 $ 6.96 $ 10.00 $ 3.53 $ 6.13 $ 11.70 $ 20.49 $ 12.68
Income from investment
operations (a):
Net investment income (loss). (0.02) (0.03) (0.04) (0.02) (0.01) (0.04) (0.05) (0.16) (0.01)
Net realized gains (losses)
and change in unrealized
appreciation or depreciation
on investments. . . . . . . . 0.86 (1.67) (3.89) (3.02) 2.02 (2.56) (5.52) (5.21) 9.04
- -----------------------------------------------------------------------------------------------------------------------------
Total income (loss) from
investment operations . . . . 0.84 (1.70) (3.93) (3.04) 2.01 (2.60) (5.57) (5.37) 9.03
- -----------------------------------------------------------------------------------------------------------------------------
Distributions:
Dividends from net
investment income . . . . . . - - - - - - - - -
Distributions of net
realized gains. . . . . . . . - - - - - - - (3.42) (1.22)
- -----------------------------------------------------------------------------------------------------------------------------
Total distributions . . . . . - - - - - - - (3.42) (1.22)
- -----------------------------------------------------------------------------------------------------------------------------
Net asset value per share,
end of period . . . . . . . . $ 2.17 $ 1.33 $ 3.03 $ 6.96 $ 5.54 $ 3.53 $ 6.13 $ 11.70 $ 20.49
- -----------------------------------------------------------------------------------------------------------------------------
Total return (b)(c)(d). . . . 63.16% (56.11%) (56.47%) (30.40%) 56.94% (42.41%) (47.61%) (25.23%) 71.36%
- -----------------------------------------------------------------------------------------------------------------------------
Ratios/supplemental data:
Net assets (dollars in
thousands), end of period . . $ 271 $ 313 $ 1,080 $ 2,242 $10,206 $ 7,988 $ 20,149 $ 30,401 $55,806
Ratio of expenses to
average net assets (b)(e)
Before expense reimbursement. 3.24% 1.88% 1.68% 1.67% 1.47% 1.32% 1.17% 1.01% 1.20%
After expense reimbursement . 1.25% 1.25% 1.25% 1.25% 1.25% 1.25% 1.17% 1.01% 1.18%
Ratio of net investment
Income (loss) to average
net assets (b)(e) . . . . . . (1.08%) (1.19%) (1.00%) (0.73%) (0.65%) (0.69%) (0.69%) (0.64%) (0.52%)
CONSECO EQUITY FUND CONSECO LARGE-CAP FUND
- ------------------------------------------------------------------------------------------------------------------------------
2003 2002 2001 2000 1999 2003 2002 2001 2000 (F)
- ------------------------------------------------------------------------------------------------------------------------------
CLASS Y SHARES
Net asset value per share,
beginning of period . . . . . $ 7.87 $ 9.09 $ 10.16 $ 16.47 $ 12.67 $ 4.83 $ 6.65 $ 8.45 $ 10.00
Income from investment
operations (a):
Net investment income (loss). 0.03 0.04 0.03 (0.05) (0.03) 0.01 (0.04) (0.01) -
Net realized gains (losses)
and change in unrealized
appreciation or depreciation
on investments. . . . . . . . 2.92 (1.25) (1.09) 0.42 7.24 1.27 (1.78) (1.79) (1.55)
- ------------------------------------------------------------------------------------------------------------------------------
Total income (loss) from
investment operations . . . . 2.95 (1.21) (1.06) 0.37 7.21 1.28 (1.82) (1.80) (1.55)
- ------------------------------------------------------------------------------------------------------------------------------
Distributions:
Dividends from net
investment income . . . . . . - (0.01) (0.01) - - - - - -
Distributions of net
realized gains. . . . . . . . - - (0.00)(c) (6.68) (3.41) - - - -
- ------------------------------------------------------------------------------------------------------------------------------
Total distributions . . . . . - (0.01) (0.01) (6.68) (3.41) - - - -
- ------------------------------------------------------------------------------------------------------------------------------
Net asset value per share,
end of period . . . . . . . . $ 10.82 $ 7.87 $ 9.09 $ 10.16 $ 16.47 $ 6.11 $ 4.83 $ 6.65 $ 8.45
- ------------------------------------------------------------------------------------------------------------------------------
Total return (b)(c)(d). . . . 37.51% (13.33%) (10.38%) 5.51% 57.13% 26.50% (27.37%) (21.30%) (15.50%)
- ------------------------------------------------------------------------------------------------------------------------------
Ratios/supplemental data:
Net assets (dollars in
thousands), end of period . . $64,225 $ 62,544 $ 87,671 $106,512 $110,008 $ 402 $ 606 $ 2,064 $ 1,268
Ratio of expenses to
average net assets (b)(e)
Before expense reimbursement. 1.13% 1.09% 1.10% 0.97% 1.16% 2.79% 1.60% 1.46% 1.56%
After expense reimbursement . 1.00% 1.00% 1.00% 0.97% 1.00% 1.00% 1.00% 1.00% 1.00%
Ratio of net investment
Income (loss) to average
net assets (b)(e) . . . . . . 0.36% 0.41% 0.42% (0.30%) (0.33%) 0.09% (0.14%) (0.30%) 0.34%
(a) Per share amounts presented are based on an average of monthly shares
outstanding for the periods ended December 31, 2000 and December 31, 2003.
Per share amounts for Conseco Convertible Securities Fund only are
presented based on an average of monthly shares outstanding for the year
ended December 31,2001. Per share amounts for Conseco Large-Cap, Balanced
and Fixed Income Funds only are presented based on an average of monthly
shares outstanding for the year ended December 31, 2002.
(b) The Adviser and Administrator have contractually agreed to reimburse Fund
expenses to the extent that the ratio of expenses to average net assets
exceeds, on an annual basis, 1.25% for the Conseco Science & Technology and
Conseco 20, 1.00% for the Conseco Equity, Conseco Large-Cap and Conseco
Balanced, 1.05% for the Conseco Convertible Securities, 0.90% for the
Conseco High Yield and 0.60% for the Conseco Fixed Income Funds. These
contractual limits may be discontinued at any time after April 30, 2004.
The accompanying notes are an integral part of these financial statements.
64
- --------------------------------------------------------------------------------
CONSECO FUND GROUP
- --------------------------------------------------------------------------------
2003 ANNUAL REPORT
CONSECO BALANCED FUND CONSECO CONVERTIBLE SECURITIES FUND
- --------------------------------------------------------------------------------------------------------------------------------
2003 2002 2001 2000 1999 2003 2002 2001 2000 1999
- --------------------------------------------------------------------------------------------------------------------------------
CLASS Y SHARES
Net asset value per share,
beginning of period . . . . . $ 8.68 $ 10.22 $ 11.17 $ 13.59 $11.75 $ 8.64 $ 9.62 $ 11.81 $ 14.94 $ 11.00
Income from investment
operations (a):
Net investment income (loss). 0.27 0.28 0.31 0.34 0.24 0.37 0.36 0.35 0.51 0.04
Net realized gains (losses)
and change in unrealized
appreciation or depreciation
on investments. . . . . . . . 1.83 (1.50) (0.96) 0.66 3.24 2.05 (1.01) (1.64) (1.08) 4.38
- --------------------------------------------------------------------------------------------------------------------------------
Total income (loss) from
investment operations . . . . 2.10 (1.22) (0.65) 1.00 3.48 2.42 (0.65) (1.29) (0.57) 4.42
- --------------------------------------------------------------------------------------------------------------------------------
Distributions:
Dividends from net
investment income . . . . . . (0.28) (0.32) (0.30) (0.32) (0.29) (0.43) (0.33) (0.41) (0.44) (0.33)
Distributions of net
realized gains. . . . . . . . - - - (3.10) (1.35) - - (0.49) (2.12) (0.15)
- --------------------------------------------------------------------------------------------------------------------------------
Total distributions . . . . . (0.28) (0.32) (0.30) (3.42) (1.64) (0.43) (0.33) (0.90) (2.56) (0.48)
Net asset value per share,
end of period . . . . . . . . $10.50 $ 8.68 $ 10.22 $ 11.17 $13.59 $10.63 $ 8.64 $ 9.62 $ 11.81 $ 14.94
- --------------------------------------------------------------------------------------------------------------------------------
Total return (b)(c)(d). . . . 24.51% (12.06%) (5.83%) 7.82% 30.07% 28.73% (6.70%) (10.87%) (3.04%) 40.91%
- --------------------------------------------------------------------------------------------------------------------------------
Ratios/supplemental data:
Net assets (dollars in
thousands), end of period . . $8,104 $ 8,609 $16,912 $15,784 $9,186 $2,255 $ 3,338 $ 5,475 $ 9,787 $30,357
Ratio of expenses to
average net assets (b)(e)
Before expense reimbursement. 1.23% 1.18% 1.18% 1.24% 1.46% 1.59% 1.48% 1.40% 1.20% 1.45%
After expense reimbursement . 1.00% 1.00% 1.00% 1.00% 1.00% 1.05% 1.05% 1.05% 1.05% 1.05%
Ratio of net investment
Income (loss) to average
net assets (b)(e) . . . . . . 2.71% 3.12% 2.93% 2.42% 2.37% 3.90% 4.00% 3.65% 2.99% 2.61%
CONSECO HIGH YIELD FUND CONSECO FIXED INCOME FUND
- ---------------------------------------------------------------------------------------------------------------------------------
2003 2002 2001 2000 1999 2003 2002 2001 2000 1999
- ---------------------------------------------------------------------------------------------------------------------------------
CLASS Y SHARES
Net asset value per share,
beginning of period . . . . . $ 7.13 $ 7.79 $ 8.24 $ 10.03 $ 10.02 $ 10.10 $ 10.17 $ 9.98 $ 9.64 $ 10.25
Income from investment
operations (a):
Net investment income (loss). 0.68 0.84 0.82 0.90 0.45 0.58 0.61 0.61 0.69 0.58
Net realized gains (losses)
and change in unrealized
appreciation or depreciation
on investments. . . . . . . . 1.40 (0.68) (0.41) (1.86) 0.48 0.52 (0.04) 0.28 0.32 (0.54)
- ---------------------------------------------------------------------------------------------------------------------------------
Total income (loss) from
investment operations . . . . 2.08 0.16 0.41 (0.96) 0.93 1.10 0.57 0.89 1.01 0.04
- ---------------------------------------------------------------------------------------------------------------------------------
Distributions:
Dividends from net
investment income . . . . . . (0.69) (0.82) (0.86) (0.83) (0.92) (0.59) (0.64) (0.60) (0.67) (0.62)
Distributions of net
realized gains. . . . . . . . - - - - - - - (0.10) - (0.03)
- ---------------------------------------------------------------------------------------------------------------------------------
Total distributions . . . . . (0.69) (0.82) (0.86) (0.83) (0.92) (0.59) (0.64) (0.70) (0.67) (0.65)
- ---------------------------------------------------------------------------------------------------------------------------------
Net asset value per share,
end of period . . . . . . . . $ 8.52 $ 7.13 $ 7.79 $ 8.24 $ 10.03 $ 10.61 $ 10.10 $ 10.17 $ 9.98 $ 9.64
- ---------------------------------------------------------------------------------------------------------------------------------
Total return (b)(c)(d). . . . 30.30% 2.64% 5.15% (10.14%) 9.64% 11.17% 5.75% 9.20% 10.96% 0.38%
- ---------------------------------------------------------------------------------------------------------------------------------
Ratios/supplemental data:
Net assets (dollars in
thousands), end of period . . $15,469 $9,648 $11,913 $ 7,388 $24,021 $23,763 $30,711 $48,376 $27,189 $27,044
Ratio of expenses to
average net assets (b)(e)
Before expense reimbursement. 1.13% 1.11% 1.11% 1.08% 1.16% 0.84% 0.82% 0.80% 0.79% 0.99%
After expense reimbursement . 0.90% 0.90% 0.90% 0.90% 0.90% 0.60% 0.60% 0.60% 0.60% 0.60%
Ratio of net investment
Income (loss) to average
net assets (b)(e) . . . . . . 8.60% 11.36% 10.45% 8.93% 9.43% 5.52% 6.23% 5.98% 7.07% 6.34%
(c) Amount calculated is less than $0.005 per share.
(d) Not annualized for periods of less than one full year.
(e) Annualized for periods of less than one full year.
(f) Period from July 1, 2000 (commencement of operations) through December 31,
2000.
The accompanying notes are an integral part of these financial statements.
65
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
FOR A SHARE OUTSTANDING DURING EACH YEAR OR PERIOD ENDED DECEMBER 31
SUPPLEMENTAL DATA FOR ALL CLASSES:
CONSECO SCIENCE & CONSECO CONSECO
TECHNOLOGY FUND CONSECO 20 FUND EQUITY FUND LARGE-CAP FUND
- ----------------------------------------------------------------------------------------------------------------------
Net Assets (dollars in thousands):
2003. . . . . . . . . . . . . . . . $ 3,564 $ 55,924 $ 107,594 $ 4,488
2002. . . . . . . . . . . . . . . . 5,871 48,321 102,118 5,512
2001. . . . . . . . . . . . . . . . 24,188 130,603 144,068 21,746
2000. . . . . . . . . . . . . . . . 31,913 217,156 155,135 30,614
1999. . . . . . . . . . . . . . . . n/a 217,595 145,950 n/a
Portfolio turnover rate (b)
2003. . . . . . . . . . . . . . . . 46% 3% 109% 53%
2002. . . . . . . . . . . . . . . . 41% 9% 108% 78%
2001. . . . . . . . . . . . . . . . 39% 8% 120% 85%
2000. . . . . . . . . . . . . . . . 263% 449% 440% 190% (a)
1999. . . . . . . . . . . . . . . . n/a 280% 364% n/a
CONSECO CONSECO CONVERTIBLE CONSECO HIGH CONSECO FIXED
BALANCED FUND SECURITIES FUND YIELD FUND INCOME FUND
- ----------------------------------------------------------------------------------------------------------------------
Net Assets (dollars in thousands):
2003. . . . . . . . . . . . . . . . $ 32,223 $ 18,712 $ 89,691 $ 80,268
2002. . . . . . . . . . . . . . . . 38,185 19,116 105,899 116,971
2001. . . . . . . . . . . . . . . . 88,939 35,278 114,013 209,711
2000. . . . . . . . . . . . . . . . 62,539 67,601 87,040 74,393
1999. . . . . . . . . . . . . . . . 46,236 71,081 132,588 65,610
Portfolio turnover rate (b)
2003. . . . . . . . . . . . . . . . 91% 146% 138% 315%
2002. . . . . . . . . . . . . . . . 183% 185% 229% 438%
2001. . . . . . . . . . . . . . . . 226% 280% 197% 744%
2000. . . . . . . . . . . . . . . . 386% 187% 256% 342%
1999. . . . . . . . . . . . . . . . 321% 115% 312% 361%
(a) Period from July 1, 2000 (commencement of operations) through December 31,
2000 for the Conseco Science & Technology Fund and the Conseco Large Cap
Fund.
(b) Not annualized for periods of less than one full year.
66
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CONSECO FUND GROUP
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2003 ANNUAL REPORT
REPORT OF INDEPENDENT AUDITORS
To the Board of Trustees and Shareholders
of Conseco Fund Group:
In our opinion, the accompanying statements of assets and liabilities,
including the schedules of investments, and the related statements of operations
and of changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of the Conseco Science & Technology
Fund, Conseco 20 Fund, Conseco Equity Fund, Conseco Large-Cap Fund, Conseco
Balanced Fund, Conseco Convertible Securities Fund, Conseco High Yield Fund and
Conseco Fixed Income Fund (eight funds comprising Conseco Fund Group, hereafter
referred to as the "Funds") at December 31, 2003, the results of each of their
operations for the year then ended, the changes in their net assets for each of
the two years then ended and the financial highlights for each of the periods
presented, in conformity with accounting principles generally accepted in the
United States of America. These financial statements and financial highlights
(hereafter referred to as "financial statements") are the responsibility of the
Funds' management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
financial statements in accordance with auditing standards generally accepted in
the United States of America, which require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits, which included confirmation of securities at December 31, 2003 by
correspondence with the custodian and brokers, provide a reasonable basis for
our opinion.
PricewaterhouseCooper LLP
Indianapolis, Indiana
February 13, 2004
67
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BOARD OF TRUSTEES (UNAUDITED)
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NAME, (AGE) POSITION HELD PRINCIPAL OCCUPATION(S)
ADDRESS WITH TRUST DURING PAST 5 YEARS
- -----------------------------------------------------------------------------------------------------
WILLIAM P. DAVES, JR. (78) Chairman of the Board, Trustee Consultant to insurance and healthcare
11825 N. Pennsylvania St.. Since December 1996 industries. Director,Chairman and Chief
Carmel, IN 46032 Executive Officer, FFG Insurance Co.
Chairman of the Board and Trustee of
other mutual funds managed by the Adviser.
GREGORY J. HAHN* (43). . . President Chartered Financial Analyst. Senior Vice
11825 N. Pennsylvania St.. and Trustee President, Adviser. Portfolio Manager
Carmel, IN 46032 . . . . . Since December 1996 of the fixed income portion of Balanced and
Fixed Income Funds. President, Trustee and
portfolio manager of other mutual funds
managed by the Adviser.
HAROLD W. HARTLEY (80) . . Trustee Chartered Financial Analyst. Director,
11825 N. Pennsylvania St.. Since December 1996 Ennis Business Forms, Inc. Retired,
Carmel, IN 46032 Executive Vice President, Tenneco
Financial Services, Inc. Trustee of other
mutual funds managed by the Adviser.
DR. R. JAN LECROY (72) . . Trustee Director, Southwest Securities Group, Inc.
11825 N. Pennsylvania St.. Since December 1996 Retired, President, Dallas Citizens Council.
Carmel, IN 46032 Trustee of other mutual funds managed by
the Adviser.
DR. JESS H. PARRISH (76) . Trustee Higher Education Consultant. Former
11825 N. Pennsylvania St.. Since December 1996 President, Midland College, Trustee of
Carmel, IN 46032 other mutual funds managed by the Adviser.
DAVID N. WALTHALL (58) . . Trustee Principal, Walthall Asset Management.
11825 N. Pennsylvania St.. Since October 1998 Former President, Chief Executive Officer
Carmel, IN 46032 and Director of Lyrick Corporation. Formerly,
President and CEO, Heritage Media Corporation.
Formerly, Director, Eagle National Bank.
Trustee of other mutual funds managed by
the Adviser.
* The Trustee so indicated is an "interested person," as defined in the 1940
Act, of the Trust due to the positions indicated with the Adviser and its
affiliates. All Trustees will serve until their successors are duly elected
and qualified.
All Trustees oversee the 17 portfolios that make up the Conseco fund
complex including Conseco Fund Group, 40|86 Series Trust, 40|86 Strategic
Income Fund and Conseco StockCar Stocks Mutual Fund, Inc.
68
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FOR MORE INFORMATION
- --------------------------------------------------------------------------------
INVESTMENT ADVISER DISTRIBUTOR
40|86 Advisers, Inc. Conseco Equity Sales, Inc.
Carmel, IN Carmel, IN
TRANSFER AGENT CUSTODIAN
US Bancorp Fund Services, LLC The Bank of New York
Milwaukee, WI New York, NY
INDEPENDENT AUDITORS LEGAL COUNSEL
PricewaterhouseCoopers LLP Kirkpatrick & Lockhart LLP
Indianapolis, IN Washington, DC
INVESTMENT SUB-ADVISERS
Oak Associates, ltd.
Akron, OH
Chicago Equity Partners, LLC
Chicago, IL
69
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CONSECO FUND GROUP
distributed by
CONSECO EQUITY SALES, INC.
11815 N. Pennsylvania Street, Carmel, IN 46032
- --------------------------------------------------------------------------------
ITEM 2. CODE OF ETHICS.
The registrant has adopted a code of ethics that applies to the
registrant's principal executive officer and principal financial officer. The
registrant has not made any amendments to its code of ethics during the covered
period. The registrant has not granted any waivers from any provisions of the
code of ethics during the covered period. The registrant undertakes to provide
to any person without charge, upon request, a copy of its code of ethics by mail
when they call the registrant at 1-800-986-3384.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
The registrant's board of directors has determined that there is at least
one audit committee financial expert serving on its audit committee. Harold W.
Hartley is the audit committee financial expert and is considered to be
independent.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
The registrant has engaged its principal accountant to perform audit
services, audit-related services, tax services and other services during the
past two fiscal years. Audit services include performing an audit of the
registrant's annual financial statements or services that are normally provided
by the accountant in connection with statutory and regulatory filings or
engagements for those fiscal years. There were no audit-related services
provided by the principal accountant that are reasonably related to the
performance of the audit of the registrant. Tax services refer to professional
services rendered by the principal accountant for tax compliance, tax advice,
and tax planning. There were no other services provided by the principal
accountant to the registrant. The following table details the aggregate fees
billed for each of the last two fiscal years for audit fees, audit-related fees,
tax fees and other fees by the principal accountant.
FYE 12/31/2003 FYE 12/31/2002
--------------- ---------------
Audit Fees . . . . $ 118,000.00 $ 67,000.00
Audit-Related Fees $ - $ -
Tax Fees . . . . . $ 22,640.00 $ 21,825.00
All Other Fees . . $ - $ -
The audit committee has adopted pre-approval policies and procedures as
follows: Before the accountant is engaged by the registrant to render audit or
non-audit services, the engagement is approved by the registrant's audit
committee. The Chairman of the audit committee is authorized to pre-approve
engagement of the accountant to perform other non-audit services for the
registrant and to report such pre-approvals to the audit committee at their next
meeting. All services disclosed above were approved by the audit committee.
The following table indicates the non-audit fees billed by the registrant's
accountant for services to the registrant and to the registrant's investment
adviser (and any entity controlling, controlled by, or under common control with
the investment adviser that provides ongoing services to the registrant-not
sub-adviser) for the last two years.
NON-AUDIT RELATED FEES FYE 12/31/2003 FYE 12/31/2002
- ------------------------------- --------------- ---------------
Registrant. . . . . . . . . . . $ - $ -
Registrant's Investment Adviser $ 10,435.90 $ 193,639.49
The audit committee of the board of trustees has considered whether the
provision of non-audit services that were rendered to the registrant's
investment adviser and any entity controlling, controlled by, or under common
control with the investment adviser that provides ongoing services to the
registrant is compatible with maintaining the principal accountant's
independence and has concluded that the provision of such non-audit services by
the accountant has not compromised the accountant's independence.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
Not applicable to open-end investment companies.
ITEM 6. [RESERVED]
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES.
Not applicable to open-end investment companies.
ITEM 8. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT
COMPANY AND AFFILIATE PURCHASES.
Not applicable to open-end investment companies.
ITEM 9. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
Applicable for periods ending after January 1, 2004.
ITEM 10. CONTROLS AND PROCEDURES.
(a) The registrant's principal executive and principal financial officers, or
persons performing similar functions, have concluded that the registrant's
disclosure controls and procedures (as defined in Rule 30a-3(c) under the
Investment Company Act of 1940, as amended (the "1940 Act") (17 CFR
270.30a-3(c))) are effective, as of a date within 90 days of the filing
date of the report that includes the disclosure required by this paragraph,
based on their evaluation of these controls and procedures required by Rule
30a-3(b) under the 1940 Act (17 CFR 270.30a-3(b)) and Rules 13a-15(b) or
15d-15(b) under the Exchange Act (17 CFR 240.13a-15(b) or 240.15d-15(b)).
(b) There were no changes in the registrant's internal control over financial
reporting (as defined in Rule 30a-3(d) under the 1940 Act (17 CFR
270.30a-3(d)) that occurred during the registrant's last fiscal half-year
(the registrant's second fiscal half-year in the case of an annual report)
that has materially affected, or is reasonably likely to materially affect,
the registrant's internal control over financial reporting.
ITEM 11. EXHIBITS.
(a)(1) Any code of ethics or amendment thereto. Incorporated by reference to the
Registrant's Form N-1A filed May 12, 2000.
(a)(2) Certifications pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
are attached hereto.
(b) Certifications pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
are attached hereto.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
(registrant) CONSECO FUND GROUP
By (Signature and Title) /s/ Gregory J. Hahn
Gregory J. Hahn, President
(principal executive officer)
Date February 25, 2004
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
By (Signature and Title) /s/ Gregory J. Hahn
Gregory J. Hahn, President
(principal executive officer)
Date February 25, 2004
By (Signature and Title) /s/ Audrey L. Kurzawa
Audrey L. Kurzawa, Treasurer
(principal financial officer)
Date February 25, 2004
CERTIFICATION PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT
I, Gregory J. Hahn, certify that:
1. I have reviewed this report on Form N-CSR of Conseco Fund Group;
2. Based on my knowledge, this report does not contain any untrue statement of
a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material
respects the financial condition, results of operations, changes in net
assets, and cash flows (if the financial statements are required to include
a statement of cash flows) of the registrant as of, and for, the periods
presented in this report;
4. The registrant's other certifying officer(s) and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Rule 30a-3(c) under the Investment Company Act of 1940) for the
registrant and have:
(a) Designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the
registrant, including its consolidated subsidiaries, is made known to
us by others within those entities, particularly during the period in
which this report is being prepared;
(b) [Omitted]
(c) Evaluated the effectiveness of the registrant's disclosure controls
and procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of a date
within 90 days prior to the filing date of this report based on such
evaluation; and
(d) Disclosed in this report any change in the registrant's internal
control over financial reporting that occurred during the registrant's
most recent fiscal half-year (the registrant's second fiscal half-year
in the case of an annual report) that has materially affected, or is
reasonably likely to materially affect, the registrant's internal
control over financial reporting; and
5. The registrant's other certifying officer(s) and I have disclosed to the
registrant's auditors and the audit committee of the registrant's board of
directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or
operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrant's ability to
record, process, summarize, and report financial information; and
(b) Any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
control over financial reporting.
Date: February 25, 2004
/s/ Gregory J. Hahn
Gregory J. Hahn, President
(principal executive officer)
CERTIFICATION PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT
I, Audrey L. Kurzawa, certify that:
1. I have reviewed this report on Form N-CSR of Conseco Fund Group;
2. Based on my knowledge, this report does not contain any untrue statement of
a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material
respects the financial condition, results of operations, changes in net
assets, and cash flows (if the financial statements are required to include
a statement of cash flows) of the registrant as of, and for, the periods
presented in this report;
4. The registrant's other certifying officer(s) and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Rule 30a-3(c) under the Investment Company Act of 1940) for the
registrant and have:
(a) Designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the
registrant, including its consolidated subsidiaries, is made known to
us by others within those entities, particularly during the period in
which this report is being prepared;
(b) [Omitted]
(c) Evaluated the effectiveness of the registrant's disclosure controls
and procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of a date
within 90 days prior to the filing date of this report based on such
evaluation; and
(d) Disclosed in this report any change in the registrant's internal
control over financial reporting that occurred during the registrant's
most recent fiscal half-year (the registrant's second fiscal half-year
in the case of an annual report) that has materially affected, or is
reasonably likely to materially affect, the registrant's internal
control over financial reporting; and
5. The registrant's other certifying officer(s) and I have disclosed to the
registrant's auditors and the audit committee of the registrant's board of
directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or
operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrant's ability to
record, process, summarize, and report financial information; and
(b) Any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
control over financial reporting.
Date: February 25, 2004
/s/ Audrey L. Kurzawa
Audrey L. Kurzawa, Treasurer
(principal financial officer)
CERTIFICATION PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT
I, Gregory J. Hahn, President of Conseco Fund Group (the "Registrant"),
certify that:
1. The Form N-CSR of the Registrant (the "Report") fully complies with the
requirements of Section 13(a) or 15(d) of the Securities Exchange Act of
1934, as amended; and
2. The information contained in the Report fairly presents, in all material
respects, the financial condition and results of operations of the
Registrant.
Date: February 25, 2004
/s/ Gregory J. Hahn
Gregory J. Hahn, President
(principal executive officer)
I, Audrey L. Kurzawa, Treasurer of Conseco Fund Group (the "Registrant"),
certify that:
1. The Form N-CSR of the Registrant (the "Report") fully complies with the
requirements of Section 13(a) or 15(d) of the Securities Exchange Act of
1934, as amended; and
2. The information contained in the Report fairly presents, in all material
respects, the financial condition and results of operations of the
Registrant.
Date: February 25, 2004
/s/ Audrey L. Kurzawa
Audrey L. Kurzawa, Treasurer
(principal financial officer)