[Logo Omitted]
CONSECO(R)
STEP UP(SM)
ISSUED BY
CONSECO VARIABLE
INSURANCE COMPANY
CONSECO ADVANTAGE
--------------------------
FIXED AND VARIABLE ANNUITY
MAY 1, 2000
PROSPECTUS
CONSECO VARIABLE INSURANCE COMPANY
CONSECO VARIABLE ANNUITY ACCOUNT F
This cover is not part of the prospectus.
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CONSECO(R)
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THE INDIVIDUAL FIXED AND VARIABLE ANNUITY
ISSUED BY
CONSECO VARIABLE ANNUITY ACCOUNT F
AND
CONSECO VARIABLE INSURANCE COMPANY
This prospectus describes the Individual Fixed and Variable Annuity
Contract (CONTRACT) offered by Conseco Variable Insurance Company (Conseco
Variable).
The annuity contract has 49 investment choices - a fixed account which
offers an interest rate which is guaranteed not to be less than 3% by Conseco
Variable, the interest adjustment account and 47 investment portfolios listed
below. Prior to May 1, 2000, the interest adjustment account was known as the
market value adjustment account option. The interest adjustment account may not
be available in your state. You can put your money in the fixed account, the
interest adjustment account and/or the investment portfolios. Your investments
in the investment portfolios are not guaranteed. You could lose your money.
Currently, you can invest in up to 15 investment portfolios at one time. Money
you direct to the fixed account and the interest adjustment account earns
interest at a rate guaranteed by us.
CONSECO SERIES TRUST
MANAGED BY CONSECO CAPITAL MANAGEMENT, INC.
o Conseco 20 Focus Portfolio
o Equity Portfolio
o Balanced Portfolio
o High Yield Portfolio
o Fixed Income Portfolio
o Government Securities Portfolio
o Money Market Portfolio
THE ALGER AMERICAN FUND
MANAGED BY FRED ALGER MANAGEMENT, INC.
o Alger American Growth Portfolio
o Alger American Leveraged AllCap Portfolio
o Alger American MidCap Growth Portfolio
o Alger American Small Capitalization Portfolio
AMERICAN CENTURY VARIABLE PORTFOLIOS, INC.
MANAGED BY AMERICAN CENTURY INVESTMENT
MANAGEMENT, INC.
o VP Income & Growth
o VP International
o VP Value
BERGER INSTITUTIONAL PRODUCTS TRUST
MANAGED BY BERGER LLC
o Berger IPT--Growth Fund (formerly, Berger IPT--100 Fund)
o Berger IPT--Growth and Income Fund
o Berger IPT--Small Company Growth Fund
o Berger IPT--New Generation Fund
MANAGED BY BBOI WORLDWIDE LLC
o Berger/BIAM IPT--International Fund
THE DREYFUS SOCIALLY RESPONSIBLE GROWTH FUND, INC.
MANAGED BY THE DREYFUS CORPORATION
DREYFUS STOCK INDEX FUND
MANAGED BY THE DREYFUS CORPORATION
DREYFUS VARIABLE INVESTMENT FUND ("DREYFUS VIF")
MANAGED BY THE DREYFUS CORPORATION
o Dreyfus VIF Disciplined Stock Portfolio
o Dreyfus VIF International Value Portfolio
FEDERATED INSURANCE SERIES
MANAGED BY FEDERATED INVESTMENT MANAGEMENT COMPANY
o Federated High Income Bond Fund II
o Federated Utility Fund II
MANAGED BY FEDERATED GLOBAL INVESTMENT MANAGEMENT CORP.
o Federated International Equity Fund II
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THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR DISAPPROVED
THESE SECURITIES OR DETERMINED IF THIS PROSPECTUS IS ACCURATE OR COMPLETE. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
1
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INVESCO VARIABLE INVESTMENT FUNDS, INC.
(NOT AVAILABLE FOR NEW SALES AS OF MAY 1, 2000)
MANAGED BY INVESCO FUNDS GROUP, INC.
o INVESCO VIF--High Yield Fund
o INVESCO VIF--Equity Income Fund
JANUS ASPEN SERIES
MANAGED BY JANUS CAPITAL CORPORATION
o Aggressive Growth Portfolio
o Growth Portfolio
o Worldwide Growth Portfolio
LAZARD RETIREMENT SERIES, INC.
MANAGED BY LAZARD ASSET MANAGEMENT
o Lazard Retirement Equity Portfolio
o Lazard Retirement Small Cap Portfolio
LORD ABBETT SERIES FUND, INC.
MANAGED BY LORD, ABBETT & CO.
o Growth & Income Portfolio
MITCHELL HUTCHINS SERIES TRUST
MANAGED BY MITCHELL HUTCHINS ASSET MANAGEMENT INC.
o Growth and Income Portfolio
NEUBERGER BERMAN ADVISERS MANAGEMENT TRUST
MANAGED BY NEUBERGER BERMAN MANAGEMENT INC.
o Limited Maturity Bond Portfolio
o Partners Portfolio
RYDEX VARIABLE TRUST
MANAGED BY PADCO ADVISORS II, INC.
o OTC Fund
o Nova Fund
SELIGMAN PORTFOLIOS, INC.
MANAGED BY J. & W. SELIGMAN & CO. INCORPORATED
o Seligman Communications and Information Portfolio
o Seligman Global Technology Portfolio
STRONG OPPORTUNITY FUND II, INC.
ADVISED BY STRONG CAPITAL MANAGEMENT, INC.
o Opportunity Fund II
STRONG VARIABLE INSURANCE FUNDS, INC.
ADVISED BY STRONG CAPITAL MANAGEMENT, INC.
o Strong Mid Cap Growth Fund II
VAN ECK WORLDWIDE INSURANCE TRUST
MANAGED BY VAN ECK ASSOCIATES CORPORATION
o Worldwide Bond Fund
o Worldwide Emerging Markets Fund
o Worldwide Hard Assets Fund
o Worldwide Real Estate Fund
Please read this prospectus before investing and keep it on file for
future reference. It contains important information about the Conseco Advantage
Fixed and Variable Annuity Contract.
To learn more about the Conseco Advantage Fixed and Variable Annuity
Contract, you can obtain a copy of the Statement of Additional Information (SAI)
dated May 1, 2000. The SAI has been filed with the Securities and Exchange
Commission (SEC) and is legally a part of this prospectus. The SEC has a Web
site (http://www.sec.gov) that contains the SAI, material incorporated by
reference, and other information regarding companies that file electronically
with the SEC. The Table of Contents of the SAI is on Page 32 of this prospectus.
For a free copy of the SAI, call us at (800) 824-2726 or write us at our
administrative office: 11815 N. Pennsylvania Street, Carmel, Indiana 46032.
THE CONTRACTS:
O ARE NOT BANK DEPOSITS
O ARE NOT FEDERALLY INSURED
O ARE NOT ENDORSED BY ANY BANK OR GOVERNMENT AGENCY
O ARE NOT GUARANTEED AND MAY BE SUBJECT TO LOSS OF PRINCIPAL
May 1, 2000
2
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CONSECO VARIABLE INSURANCE COMPANY
2000 ACCOUNT F
INDIVIDUAL ANNUITY
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TABLE OF CONTENTS
PAGE
INDEX OF SPECIAL TERMS..................................................... 5
HIGHLIGHTS................................................................. 6
FEE TABLE.................................................................. 7
THE CONSECO ADVANTAGE ANNUITY CONTRACT..................................... 18
ANNUITY PAYMENTS (THE INCOME PHASE)........................................ 18
PURCHASE .................................................................. 19
Purchase Payments........................................................ 19
Allocation of Purchase Payments.......................................... 19
Free Look................................................................ 20
Accumulation Units....................................................... 20
INVESTMENT OPTIONS......................................................... 20
Investment Portfolios.................................................... 20
Voting Rights............................................................ 23
Substitution............................................................. 23
The Fixed Account and the Interest Adjustment Account.................... 23
Transfers................................................................ 23
Dollar Cost Averaging Program............................................ 24
Rebalancing Program...................................................... 24
Asset Allocation Program................................................. 25
Sweep Program............................................................ 25
EXPENSES .................................................................. 25
Insurance Charges........................................................ 25
Contract Maintenance Charge.............................................. 25
Contingent Deferred Sales Charge......................................... 25
Reduction or Elimination of the Contingent Deferred Sales Charge......... 26
Transfer Fee............................................................. 26
Premium Taxes............................................................ 26
Income Taxes............................................................. 27
Investment Portfolio Expenses............................................ 27
TAXES .................................................................. 27
Annuity Contracts in General............................................. 27
Qualified and Non-Qualified Contracts.................................... 27
Withdrawals--Non-Qualified Contracts..................................... 27
Withdrawals--Qualified Contracts......................................... 28
Withdrawals--Tax-Sheltered Annuities..................................... 28
Diversification.......................................................... 28
Investor Control......................................................... 28
ACCESS TO YOUR MONEY....................................................... 29
Systematic Withdrawal Program............................................ 29
Suspension of Payments or Transfers...................................... 29
PERFORMANCE................................................................ 29
3
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TABLE OF CONTENTS CONT'D
PAGE
DEATH BENEFIT.............................................................. 30
Upon Your Death.......................................................... 30
Death of Annuitant....................................................... 30
OTHER INFORMATION.......................................................... 31
Conseco Variable......................................................... 31
The Separate Account..................................................... 31
Distributor.............................................................. 31
Ownership................................................................ 31
Beneficiary.............................................................. 31
Assignment............................................................... 31
Financial Statements..................................................... 32
TABLE OF CONTENTS OF THE STATEMENT OF ADDITIONAL INFORMATION............... 32
APPENDIX A--CONDENSED FINANCIAL INFORMATION................................ 33
APPENDIX B--PARTICIPATING INVESTMENT PORTFOLIOS............................ 36
4
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CONSECO VARIABLE INSURANCE COMPANY
2000 ACCOUNT F
INDIVIDUAL ANNUITY
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INDEX OF SPECIAL TERMS
Because of the complex nature of the contract, we have used certain words
or terms in this prospectus which may need an explanation. We have identified
the following as some of these words or terms. The page that is indicated here
is where we believe you will find the best explanation for the word or term.
These words and terms are in italics on the indicated page.
Page
Accumulation Phase......................................................... 18
Accumulation Unit.......................................................... 20
Annuitant.................................................................. 18
Annuity Date............................................................... 18
Annuity Options............................................................ 18
Annuity Payments........................................................... 18
Annuity Unit............................................................... 20
Beneficiary................................................................ 31
Contract .................................................................. 1
Income Phase............................................................... 18
Investment Portfolios...................................................... 20
Joint Owner................................................................ 31
Non-Qualified.............................................................. 27
Owner .................................................................. 31
Purchase Payment........................................................... 19
Qualified.................................................................. 27
Tax-Deferral............................................................... 27
5
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HIGHLIGHTS
The variable annuity contract that we are offering is a contract between
you, (the owner) and us (the insurance company). The contract provides a way for
you to invest on a tax-deferred basis in the subaccounts (also referred to as
investment portfolios) of Conseco Variable Annuity Account F (Separate Acount),
the fixed account and the interest adjustment account. The contract is intended
to be used to accumulate money for retirement or other long-term tax-deferred
investment purposes.
All deferred annuity contracts, like the contract, have two periods: the
accumulation period (accumulation phase) and the annuity period (income phase).
During the accumulation phase, any earnings accumulate on a tax-deferred basis
and are taxed as ordinary income when you make a withdrawal. If you make a
withdrawal during the accumulation phase, we may assess a charge of up to 7% of
each purchase payment withdrawn. The income phase occurs when you begin
receiving regular annuity payments from your contract.
You can choose to receive annuity payments on a variable basis, on a fixed
basis or a combination of both. If you choose variable payments, the amount of
the variable annuity payments will depend upon the investment performance of the
investment portfolios you select for the income phase. If you choose fixed
payments, the amount of the fixed annuity payments are constant for the entire
income phase.
FREE LOOK. If you cancel the contract within 10 days after receiving it (or
whatever longer time period is required in your state), we will cancel the
contract without assessing a contingent deferred sales charge. You will receive
whatever your contract is worth on the day we receive your request for
cancellation. This may be more or less than your original payment. We will
return your original payment if required by law.
TAX PENALTY. The earnings in your contract are not taxed until you take
money out of your contract. If you take money out during the accumulation phase,
earnings come out first and are taxed as ordinary income. If you are younger
than age 591/2 when you take money out, you may be charged a 10% federal tax
penalty on those earnings. Payments during the income phase are considered
partly a return of your original investment. The part of each payment that is a
return of your investment is not taxable as income.
INQUIRIES. If you need more information, please contact us at:
Conseco Variable Insurance Company
11815 N. Pennsylvania Street
Carmel, Indiana 46032
(800) 824-2726
6
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CONSECO VARIABLE INSURANCE COMPANY
2000 ACCOUNT F
INDIVIDUAL ANNUITY
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FEE TABLE
The purpose of the Fee Table is to show you the various contract expenses
you will pay directly or indirectly. The Fee Table reflects expenses of the
Separate Account as well as the investment portfolios.
OWNER TRANSACTION EXPENSES
CONTINGENT DEFERRED SALES CHARGE: (as a percentage of purchase payments) (See
Note 1 under "Explanation of Fee Table and Examples")
NO. OF YEARS FROM CONTINGENT DEFERRED
RECEIPT OF PAYMENT SALES CHARGE
----------------------------------------------------------------------
First Year.................................................... 7%
Second Year................................................... 7%
Third Year.................................................... 6%
Fourth Year................................................... 5%
Fifth Year.................................................... 4%
Sixth Year.................................................... 3%
Seventh Year.................................................. 2%
Eighth Year and more.......................................... 0%
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TRANSFER FEE:
(see Note 2 under "Explanation No charge for one transfer in each 30 day
of Fee Table and Examples") period during the accumulation phase.
Thereafter, we may charge a fee of $25 per
transfer. We will not charge for the two
transfers allowed each year during the income
phase.
CONTRACT MAINTENANCE CHARGE: $30 per contract per year (this charge can be
(see Note 3 under "Explanation increased up to a maximum of $60 per contract
of Fee Table and Examples") per year)
SEPARATE ACCOUNT ANNUAL EXPENSES
("Insurance Charges"):
(as a percentage of average
account value)
Mortality and Expense Risk Charge 1.25%
Administrative Charge (the administrative charge can
be increased to .25%) .15%
-----
TOTAL SEPARATE ACCOUNT ANNUAL EXPENSES 1.40%
7
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INVESTMENT PORTFOLIO EXPENSES:
(as a percentage of the average daily net assets of an investment portfolio)
<TABLE>
<CAPTION>
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OTHER EXPENSES TOTAL ANNUAL
(AFTER EXPENSE PORTFOLIO EXPENSES
REIMBURSEMENT, (AFTER EXPENSE
IF ANY, REIMBURSEMENT,
MANAGEMENT 12b-1 FOR CERTAIN IF ANY, FOR
FEES FEES PORTFOLIOS) CERTAIN PORTFOLIOS)
<S> <C> <C> <C> <C>
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CONSECO SERIES TRUST (a)
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Conseco 20 Focus Portfolio (b) ................................ 0.80% -- 0.10% 0.90%
Equity Portfolio .............................................. 0.75% -- 0.02% 0.77%
Balanced Portfolio ............................................ 0.75% -- 0.00% 0.75%
High Yield Portfolio (b) ...................................... 0.80% -- 0.10% 0.90%
Fixed Income Portfolio ........................................ 0.60% -- 0.07% 0.67%
Government Securities Portfolio. .............................. 0.60% -- 0.06% 0.66%
Money Market Portfolio (c) .................................... 0.35% -- 0.05% 0.40%
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THE ALGER AMERICAN FUND
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Alger American Growth Portfolio ............................... 0.75% -- 0.04% 0.79%
Alger American Leveraged AllCap Portfolio (d) ................. 0.85% -- 0.08% 0.93%
Alger American Mid Cap Growth Portfolio ....................... 0.80% -- 0.05% 0.85%
Alger American Small Capitalization Portfolio ................. 0.85% -- 0.05% 0.90%
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AMERICAN CENTURY VARIABLE PORTFOLIOS, INC.
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VP Income & Growth (e) ........................................ 0.70% -- 0.00% 0.70%
VP International (e) .......................................... 1.34% -- 0.00% 1.34%
VP Value (e) .................................................. 1.00% -- 0.00% 1.00%
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BERGER INSTITUTIONAL PRODUCTS TRUST
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Berger IPT--Growth Fund (f) ................................... 0.75% -- 0.25% 1.00%
Berger IPT--Growth and Income Fund (f) ........................ 0.75% -- 0.25% 1.00%
Berger IPT--Small Company Growth Fund (f) ..................... 0.85% -- 0.30% 1.15%
Berger IPT--New Generation Fund (f) ........................... 0.85% -- 0.30% 1.15%
Berger/BIAM IPT--International Fund (f) ....................... 0.90% -- 0.30% 1.20%
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THE DREYFUS SOCIALLY RESPONSIBLE GROWTH FUND, INC.............. 0.75% -- 0.04% 0.79%
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DREYFUS STOCK INDEX FUND....................................... 0.25% -- 0.01% 0.26%
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DREYFUS VARIABLE INVESTMENT FUND
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Dreyfus VIF Disciplined Stock Portfolio ....................... 0.75% -- 0.06% 0.81%
Dreyfus VIF International Value Portfolio ..................... 1.00% -- 0.35% 1.35%
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FEDERATED INSURANCE SERIES
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Federated High Income Bond Fund II ............................ 0.60% -- 0.19% 0.79%
Federated International Equity Fund II (g) .................... 0.54% -- 0.71% 1.25%
Federated Utility Fund II ..................................... 0.75% -- 0.19% 0.94%
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INVESCO VARIABLE INVESTMENT FUNDS, INC.
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INVESCO VIF--High Yield Fund (h) .............................. 0.60% -- 0.47% 1.07%
INVESCO VIF--Equity Income Fund (h) ........................... 0.75% -- 0.42% 1.17%
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JANUS ASPEN SERIES, Institutional Shares
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Aggressive Growth Portfolio (i) ............................... 0.65% -- 0.02% 0.67%
Growth Portfolio (i) .......................................... 0.65% -- 0.02% 0.67%
Worldwide Growth Portfolio (i) ................................ 0.65% -- 0.05% 0.70%
</TABLE>
8
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CONSECO VARIABLE INSURANCE COMPANY
2000 ACCOUNT F
INDIVIDUAL ANNUITY
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
OTHER EXPENSES TOTAL ANNUAL
(AFTER EXPENSE PORTFOLIO EXPENSES
REIMBURSEMENT, (AFTER EXPENSE
IF ANY, REIMBURSEMENT,
MANAGEMENT 12b-1 FOR CERTAIN IF ANY, FOR
FEES FEES PORTFOLIOS) CERTAIN PORTFOLIOS)
<S> <C> <C> <C> <C>
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LAZARD RETIREMENT SERIES, INC.
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Lazard Retirement Equity Portfolio (j) ........................ 0.75% 0.25% 0.25% 1.25%
Lazard Retirement Small Cap Portfolio (j) ..................... 0.75% 0.25% 0.25% 1.25%
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LORD ABBETT SERIES FUND, INC.
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Growth & Income Portfolio ..................................... 0.50% -- 0.37% 0.87%
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MITCHELL HUTCHINS SERIES TRUST
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Growth and Income Portfolio ................................... 0.70% -- 0.53% 1.23%
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NEUBERGER BERMAN ADVISERS MANAGEMENT TRUST
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Limited Maturity Bond Portfolio ............................... 0.65% -- 0.11% 0.76%
Partners Portfolio ............................................ 0.80% -- 0.07% 0.87%
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RYDEX VARIABLE TRUST
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OTC Fund ...................................................... 0.75% -- 0.80% 1.55%
Nova Fund ..................................................... 0.75% -- 0.80% 1.55%
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SELIGMAN PORTFOLIOS, INC.
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Seligman Communications and Information Portfolio (k) ......... 0.75% 0.25% 0.11% 1.11%
Seligman Global Technology Portfolio (k) ...................... 1.00% 0.15% 0.40% 1.55%
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STRONG OPPORTUNITY FUND II, INC.
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Opportunity Fund II ........................................... 1.00% -- 0.14% 1.14%
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STRONG VARIABLE INSURANCE FUNDS, INC
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Strong Mid Cap Growth Fund II (l) ............................. 1.00% -- 0.15% 1.15%
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VAN ECK WORLDWIDE INSURANCE TRUST (m)
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Worldwide Bond Fund ........................................... 1.00% -- 0.22% 1.22%
Worldwide Emerging Markets Fund ............................... 1.00% -- 0.54% 1.54%
Worldwide Hard Assets Fund .................................... 1.00% -- 0.26% 1.26%
Worldwide Real Estate Fund .................................... 1.00% -- 2.23% 3.23%
</TABLE>
(a) The Adviser, Conseco Capital Management, Inc., and the Administrator,
Conseco Services, LLC, have contractually agreed to waive a portion of their
fees and/or pay a portion of the Portfolio's expenses through 4/30/01 to ensure
that total annual operating expenses do not exceed: 0.90% for Conseco 20 Focus
Portfolio; 0.85% for Equity Portfolio; 0.85% for Balanced Portfolio; 0.90% for
High Yield Portfolio; 0.70% for Fixed Income Portfolio; 0.70% for Government
Securities Portfolio and 0.45% for Money Market Portfolio. The Adviser and
Administrator may recover any money waived under the contract provisions, to the
extent that actual fees and expenses are less than the expense limitation, for a
period of 3 years, after the date of the waiver.
(b) Because these Portfolios have not completed a full fiscal year, other
expenses are estimated.
(c) Conseco Capital Management, Inc., since May 1, 1993, has waived its
management fees in excess of the annual rate set forth above. Absent such fee
waivers, the management fees for the Money Market Portfolio would be 0.60%.
(d) The Alger American Leveraged AllCap Portfolio's "Other Expenses"
includes .01% of interest expense.
(e)The fund has a stepped fee schedule. As a
9
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result, the fund's management fee rate generally decreases as the fund's assets
increase.
(f) The Funds' investment advisers have agreed to waive their advisory fees
and reimburse the Funds for additional expenses to the extent that normal
operating expenses in any fiscal year, including the investment advisory fee but
excluding brokerage commissions, interest, taxes and extraordinary expenses, of
each of the Berger IPT--Growth Fund and the Berger IPT--Growth and Income Fund
exceed 1.00%, the normal operating expenses in any fiscal year of each of the
Berger IPT--Small Company Growth Fund and the Berger IPT--New Generation Fund
exceed 1.15%, and the normal operating expenses of the Berger/BIAM
IPT--International Fund exceed 1.20% of the respective Fund's average daily net
assets. Absent the waiver and reimbursement, Other Expenses for the Berger
IPT--Growth Fund, the Berger IPT--New Generation Fund, the Berger IPT--Growth
and Income Fund, the Berger IPT--Small Company Growth Fund and the Berger/BIAM
IPT--International Fund would have been 1.43%, 0.43%, 0.64%, 2.10% and 1.55%,
respectively, and their Total Annual Portfolio Expenses would have been 2.18%,
1.18%, 1.49%, 2.95% and 2.45%, respectively. These waivers/reimbursements may
not be terminated or amended except by a vote of the Fund's Board of Trustees.
Expenses shown for the Berger IPT--New Generation Fund are based on estimates
for the Fund's first full year of operations.
(g) Absent a voluntary waiver of the management fee and the voluntary
reimbursement of certain other operating expenses by Federated Global Investment
Management Corp., the Management Fee and Total Annual Portfolio Expenses for
International Equity Fund II would have been 0.75% and 1.46%, respectively.
(h) The fund's actual Total Annual Fund Expenses were lower than the
figures shown, because its custodian fees were reduced under an expense offset
arrangement. The expense information presented in the table has been restated
from the financials to reflect a change in the administrative services fee.
Certain expenses of the Fund were absorbed voluntarily by INVESCO in order to
ensure that expenses did not exceed 1.05% of the High Yield Fund's average net
assets and 1.15% of the Equity Income Fund's average net assets pursuant to a
commitment between the Fund and INVESCO. This commitment may be changed at any
time following consultation with the board of directors. Without such
absorption, but excluding any expense offset arrangements, Other Expenses and
Total Annual Operating Expenses for the fiscal year ended December 31, 1999 were
0.48% and 1.08% respectively of the High Yield Fund's average net assets, and
0.44% and 1.19% respectively of the Equity Income Fund's average net assets.
(i) Expenses are based upon expenses for the fiscal year ended December 31,
1999, restated to reflect a reduction in the management fee for Growth,
Aggressive Growth and Worldwide Growth Portfolios. All expenses are shown
without the effect of expense offset arrangements.
(j) Effective May 1, 1999, Lazard Asset Management, the Fund's investment
adviser, has voluntarily agreed to reimburse all expenses through December 31,
2000 to the extent total annual portfolio expenses exceed in any fiscal year
1.25% of the Portfolio's average daily net assets. Absent such an agreement with
the adviser, the total annual portfolio expenses for the year ended December 31,
1999 would have been 5.63% for the Lazard Retirement Equity Portfolio and 7.31%
for the Lazard Retirement Small Cap Portfolio.
(k) The amount of the Management Fee and Other Expenses are actual expenses
for the fiscal year ended December 31, 1999. Seligman Communications and
Information Fund and Seligman Global Technology Fund began offering shares
charging 12b-1 fees effective May 1, 2000. J. & W. Seligman & Co. Incorporated
("Seligman") voluntarily agreed to reimburse expenses of Seligman Global
Technology Portfolio, other than the management fee, which exceed .40%. Without
reimbursement, other expenses and total annual portfolio expenses would have
been .41% and 1.56% respectively, for Seligman Global Technology Portfolio.
There is no assurance that Seligman will continue this policy in the future.
(l) Strong Capital Management, Inc., the fund's advisor of the Strong Mid
Cap Growth Fund II is currently absorbing expenses of 0.02%. Without these
absorptions, the expenses would have been 1.17% for the year ended December 31,
1999. The Advisor has no current intention to, but may in the future,
discontinue or modify any waiver of fees or absorption of expenses at its
discretion with appropriate notification to its shareholders.
10
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CONSECO VARIABLE INSURANCE COMPANY
2000 ACCOUNT F
INDIVIDUAL ANNUITY
- --------------------------------------------------------------------------------
(m) Van Eck Associates Corporation (the "Adviser") agreed to assume
expenses (excluding interest, foreign taxes and brokerage commissions) exceeding
1.50% of the Worldwide Emerging Markets Fund's average daily net assets for the
period January 1, 1999 to May 12, 1999. For the period May 13, 1999 to December
31, 1999, the Adviser agreed to assume expenses (excluding interest, foreign
taxes and brokerage commissions) exceeding 1.30% of average daily net assets.
For the Worldwide Real Estate Fund, the Adviser agreed to assume expenses
(excluding interest, foreign taxes and brokerage commissions) for the period
January 2, 1999 to February 28, 1999. The Adviser also agreed to assume expenses
exceeding 1.50% of the Worldwide Real Estate Fund's average daily net assets for
the period March 3, 1999 to December 31, 1999. The Worldwide Real Estate Fund
expenses were also reduced by a fee arrangement based on cash balances left on
deposit with the custodian and a directed brokerage arrangement where the Fund
directs certain portfolio trades to a broker that, in turn, pays a portion of
the Fund's expenses.
EXPLANATION OF FEE TABLE AND EXAMPLES
1. Every year you can take money out of your contract, without the
contingent deferred sales charge, of an amount equal to the greater of: (i) 10%
of the value of your contract, or (ii) the IRS minimum distribution requirement
for your contract if issued as an Individual Retirement Annuity, or (iii) the
total of your purchase payments that have been in the contract more than 7
complete years.
2. Conseco Variable will not charge you the transfer fee even if there is
more than one transfer in a 30-day period during the Accumulation Phase if the
transfer is for the Dollar Cost Averaging, Sweep or Rebalancing Programs. We
will also not charge you a transfer fee on transfers made at the end of the free
look period. All reallocations made on the same day count as one transfer.
3. Conseco Variable will not charge the contract maintenance charge if the
value of your contract is $50,000 or more. However, if you make a complete
withdrawal, we will charge the contract maintenance charge.
4. Premium taxes are not reflected. Premium taxes may apply depending on
the state where you live.
5. The assumed average contract size is $30,000.
6. THE EXAMPLES SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
THERE IS CONDENSED FINANCIAL INFORMATION IN APPENDIX A TO THIS PROSPECTUS.
11
<PAGE>
EXAMPLES:
You would pay the following expenses assuming the current charges under
your contract were assessed on a $1,000 investment, assuming a hypothetical
5% annual return on assets, and assuming the entire $1,000 is invested in
the option listed:
(a) if you surrender your contract at the end of each time period; (b) if
you do not surrender your contract; (c) if you annuitize your contract
(except under certain circumstances).
<TABLE>
<CAPTION>
TIME PERIODS
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
CONSECO SERIES TRUST
Conseco 20 Focus .................................................. (a) $ 87 (a) $127 (a) $162 (a) $270
(b) $ 24 (b) $ 74 (b) $126 (b) $270
(c) $ 87 (c) $127 (c) $126 (c) $270
Equity ............................................................ (a) $ 86 (a) $123 (a) $155 (a) $257
(b) $ 23 (b) $ 70 (b) $120 (b) $257
(c) $ 86 (c) $123 (c) $120 (c) $257
Balanced .......................................................... (a) $ 85 (a) $123 (a) $154 (a) $255
(b) $ 23 (b) $ 69 (b) $119 (b) $255
(c) $ 85 (c) $123 (c) $119 (c) $255
High Yield ........................................................ (a) $ 87 (a) $127 (a) $162 (a) $270
(b) $ 24 (b) $ 74 (b) $126 (b) $270
(c) $ 87 (c) $127 (c) $126 (c) $270
Fixed Income ...................................................... (a) $ 85 (a) $120 (a) $150 (a) $247
(b) $ 22 (b) $ 67 (b) $115 (b) $247
(c) $ 85 (c) $120 (c) $115 (c) $247
Government Securities ............................................. (a) $ 84 (a) $120 (a) $150 (a) $246
(b) $ 22 (b) $ 67 (b) $114 (b) $246
(c) $ 84 (c) $120 (c) $114 (c) $246
Money Market ...................................................... (a) $ 82 (a) $112 (a) $136 (a) $219
(b) $ 19 (b) $ 59 (b) $101 (b) $219
(c) $ 82 (c) $112 (c) $101 (c) $219
THE ALGER AMERICAN FUND
Alger American Growth ............................................. (a) $ 86 (a) $124 (a) $156 (a) $259
(b) $ 23 (b) $ 71 (b) $121 (b) $259
(c) $ 86 (c) $124 (c) $121 (c) $259
Alger American Leveraged AllCap ................................... (a) $ 87 (a) $128 (a) $163 (a) $273
(b) $ 24 (b) $ 75 (b) $128 (b) $273
(c) $ 87 (c) $128 (c) $128 (c) $273
Alger American MidCap Growth ...................................... (a) $ 86 (a) $126 (a) $159 (a) $265
(b) $ 24 (b) $ 72 (b) $124 (b) $265
(c) $ 86 (c) $126 (c) $124 (c) $265
Alger American Small Capitalization ............................... (a) $ 87 (a) $127 (a) $162 (a) $270
(b) $ 24 (b) $ 74 (b) $126 (b) $270
(c) $ 87 (c) $127 (c) $126 (c) $270
AMERICAN CENTURY VARIABLE PORTFOLIOS, INC
VP Income & Growth ................................................ (a) $ 85 (a) $121 (a) $152 (a) $250
(b) $ 22 (b) $ 68 (b) $116 (b) $250
(c) $ 85 (c) $121 (c) $116 (c) $250
VP International .................................................. (a) $ 91 (a) $141 (a) $184 (a) $313
(b) $ 28 (b) $ 87 (b) $148 (b) $313
(c) $ 91 (c) $141 (c) $148 (c) $313
VP Value .......................................................... (a) $ 88 (a) $130 (a) $167 (a) $280
(b) $ 25 (b) $ 77 (b) $131 (b) $280
(c) $ 88 (c) $130 (c) $131 (c) $280
BERGER INSTITUTIONAL PRODUCTS TRUST
Berger IPT--Growth ................................................ (a) $ 88 (a) $130 (a) $167 (a) $280
(b) $ 25 (b) $ 77 (b) $131 (b) $280
(c) $ 88 (c) $130 (c) $131 (c) $280
Berger IPT--Growth and Income ..................................... (a) $ 88 (a) $130 (a) $167 (a) $280
(b) $ 25 (b) $ 77 (b) $131 (b) $280
(c) $ 88 (c) $130 (c) $131 (c) $280
</TABLE>
12
<PAGE>
CONSECO VARIABLE INSURANCE COMPANY
2000 ACCOUNT F
INDIVIDUAL ANNUITY
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
TIME PERIODS
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Berger IPT--Small Company Growth .................................. (a) $ 89 (a) $135 (a) $174 (a) $295
(b) $ 27 (b) $ 81 (b) $139 (b) $295
(c) $ 89 (c) $135 (c) $139 (c) $295
Berger IPT--New Generation ........................................ (a) $ 89 (a) $135 (a) $174 (a) $295
(b) $ 27 (b) $ 81 (b) $139 (b) $295
(c) $ 89 (c) $135 (c) $139 (c) $295
Berger--BIAM IPT--International ................................... (a) $ 90 (a) $136 (a) $177 (a) $300
(b) $ 27 (b) $ 83 (b) $141 (b) $300
(c) $ 90 (c) $136 (c) $141 (c) $300
THE DREYFUS SOCIALLY RESPONSIBLE GROWTH FUND, INC ................. (a) $ 86 (a) $124 (a) $156 (a) $259
(b) $ 23 (b) $ 71 (b) $121 (b) $259
(c) $ 86 (c) $124 (c) $121 (c) $259
DREYFUS STOCK INDEX FUND .......................................... (a) $ 80 (a) $108 (a) $129 (a) $204
(b) $ 18 (b) $ 55 (b) $ 94 (b) $204
(c) $ 80 (c) $108 (c) $ 94 (c) $204
DREYFUS VARIABLE INVESTMENT FUND
Dreyfus VIF Disciplined Stock Portfolio ........................... (a) $ 86 (a) $125 (a) $157 (a) $261
(b) $ 23 (b) $ 71 (b) $122 (b) $261
(c) $ 86 (c) $125 (c) $122 (c) $261
Dreyfus VIF International Value Portfolio ......................... (a) $ 91 (a) $141 (a) $184 (a) $314
(b) $ 29 (b) $ 87 (b) $149 (b) $314
(c) $ 91 (c) $141 (c) $149 (c) $314
FEDERATED INSURANCE SERIES
Federated High Income Bond II ..................................... (a) $ 86 (a) $124 (a) $156 (a) $259
(b) $ 23 (b) $ 71 (b) $121 (b) $259
(c) $ 86 (c) $124 (c) $121 (c) $259
Federated International Equity II ................................. (a) $ 90 (a) $138 (a) $179 (a) $305
(b) $ 28 (b) $ 84 (b) $144 (b) $305
(c) $ 90 (c) $138 (c) $144 (c) $305
Federated Utility II .............................................. (a) $ 87 (a) $129 (a) $164 (a) $274
(b) $ 24 (b) $ 75 (b) $128 (b) $274
(c) $ 87 (c) $129 (c) $128 (c) $274
INVESCO VARIABLE INVESTMENT FUNDS, INC.
INVESCO VIF--High Yield ........................................... (a) $ 89 (a) $133 (a) $170 (a) $287
(b) $ 26 (b) $ 79 (b) $135 (b) $287
(c) $ 89 (c) $133 (c) $135 (c) $287
INVESCO VIF--Equity Income ........................................ (a) $ 90 (a) $136 (a) $175 (a) $297
(b) $ 27 (b) $ 82 (b) $140 (b) $297
(c) $ 90 (c) $136 (c) $140 (c) $297
JANUS ASPEN SERIES
Aggressive Growth ................................................. (a) $ 85 (a) $120 (a) $150 (a) $247
(b) $ 22 (b) $ 67 (b) $115 (b) $247
(c) $ 85 (c) $120 (c) $115 (c) $247
Growth ............................................................ (a) $ 85 (a) $120 (a) $150 (a) $247
(b) $ 22 (b) $ 67 (b) $115 (b) $247
(c) $ 85 (c) $120 (c) $115 (c) $247
Worldwide Growth .................................................. (a) $ 85 (a) $121 (a) $152 (a) $250
(b) $ 22 (b) $ 68 (b) $116 (b) $250
(c) $ 85 (c) $121 (c) $116 (c) $250
LAZARD RETIREMENT SERIES, INC.
Lazard Retirement Equity .......................................... (a) $ 90 (a) $138 (a) $179 (a) $305
(b) $ 28 (b) $ 84 (b) $144 (b) $305
(c) $ 90 (c) $138 (c) $144 (c) $305
Lazard Retirement Small Cap ....................................... (a) $ 90 (a) $138 (a) $179 (a) $305
(b) $ 28 (b) $ 84 (b) $144 (b) $305
(c) $ 90 (c) $138 (c) $144 (c) $305
</TABLE>
13
<PAGE>
<TABLE>
<CAPTION>
TIME PERIODS
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
LORD ABBETT SERIES FUND, INC.
Growth & Income ................................................... (a) $ 87 (a) $127 (a) $160 (a) $267
(b) $ 24 (b) $ 73 (b) $125 (b) $267
(c) $ 87 (c) $127 (c) $125 (c) $267
MITCHELL HUTCHINS SERIES TRUST
Growth and Income ................................................. (a) $ 90 (a) $137 (a) $178 (a) $303
(b) $ 27 (b) $ 84 (b) $143 (b) $303
(c) $ 90 (c) $137 (c) $143 (c) $303
NEUBERGER BERMAN ADVISERS MANAGEMENT TRUST
Limited Maturity Bond ............................................. (a) $ 85 (a) $123 (a) $155 (a) $256
(b) $ 23 (b) $ 70 (b) $119 (b) $256
(c) $ 85 (c) $123 (c) $119 (c) $256
Partners .......................................................... (a) $ 87 (a) $127 (a) $160 (a) $267
(b) $ 24 (b) $ 73 (b) $125 (b) $267
(c) $ 87 (c) $127 (c) $125 (c) $267
RYDEX VARIABLE TRUST
OTC ............................................................... (a) $ 93 (a) $147 (a) $194 (a) $333
(b) $ 31 (b) $ 93 (b) $159 (b) $333
(c) $ 93 (c) $147 (c) $159 (c) $333
Nova .............................................................. (a) $ 93 (a) $147 (a) $194 (a) $333
(b) $ 31 (b) $ 93 (b) $159 (b) $333
(c) $ 93 (c) $147 (c) $159 (c) $333
SELIGMAN PORTFOLIOS, INC.
Seligman Communications and Information ........................... (a) $ 89 (a) $134 (a) $172 (a) $291
(b) $ 26 (b) $ 80 (b) $137 (b) $291
(c) $ 89 (c) $134 (c) $137 (c) $291
Seligman Global Technology ........................................ (a) $ 93 (a) $147 (a) $194 (a) $333
(b) $ 31 (b) $ 93 (b) $159 (b) $333
(c) $ 93 (c) $147 (c) $159 (c) $333
STRONG OPPORTUNITY FUND II, INC.
Opportunity Fund II ............................................... (a) $ 89 (a) $135 (a) $174 (a) $294
(b) $ 26 (b) $ 81 (b) $138 (b) $294
(c) $ 89 (c) $135 (c) $138 (c) $294
STRONG VARIABLE INSURANCE FUNDS, INC.
Strong Mid Cap Growth II .......................................... (a) $ 89 (a) $135 (a) $174 (a) $295
(b) $ 27 (b) $ 81 (b) $139 (b) $295
(c) $ 89 (c) $135 (c) $139 (c) $295
VAN ECK WORLDWIDE INSURANCE TRUST
Worldwide Bond .................................................... (a) $ 90 (a) $137 (a) $178 (a) $302
(b) $ 27 (b) $ 83 (b) $142 (b) $302
(c) $ 90 (c) $137 (c) $142 (c) $302
Worldwide Emerging Markets ........................................ (a) $ 93 (a) $147 (a) $194 (a) $332
(b) $ 30 (b) $ 93 (b) $158 (b) $332
(c) $ 93 (c) $147 (c) $158 (c) $332
Worldwide Hard Assets ............................................. (a) $ 90 (a) $138 (a) $180 (a) $306
(b) $ 28 (b) $ 85 (b) $144 (b) $306
(c) $ 90 (c) $138 (c) $144 (c) $306
Worldwide Real Estate ............................................. (a) $110 (a) $196 (a) $274 (a) $479
(b) $ 47 (b) $142 (b) $238 (b) $479
(c) $110 (c) $196 (c) $238 (c) $479
</TABLE>
14
<PAGE>
CONSECO VARIABLE INSURANCE COMPANY
2000 ACCOUNT F
INDIVIDUAL ANNUITY
- --------------------------------------------------------------------------------
EXAMPLES:
You would pay the following expenses assuming the current charges, except
for the administrative charge and the contract maintenance charge, which are
assumed to be the maximum charges, were assessed on a $1,000 investment,
assuming a hypothetical 5% annual return on assets, and assuming the entire
$1,000 is invested in the option listed:
(a) if you surrender your contract at the end of each time period; (b) if
you do not surrender your contract; (c) if you annuitize your contract (except
under certain circumstances).
<TABLE>
<CAPTION>
TIME PERIODS
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
CONSECO SERIES TRUST
Conseco 20 Focus .................................................. (a) $ 89 (a) $133 (a) $172 (a) $290
(b) $ 26 (b) $ 80 (b) $136 (b) $290
(c) $ 89 (c) $133 (c) $136 (c) $290
Equity ............................................................ (a) $ 88 (a) $130 (a) $165 (a) $277
(b) $ 25 (b) $ 76 (b) $130 (b) $277
(c) $ 88 (c) $130 (c) $130 (c) $277
Balanced .......................................................... (a) $ 87 (a) $129 (a) $164 (a) $275
(b) $ 25 (b) $ 75 (b) $129 (b) $275
(c) $ 87 (c) $129 (c) $129 (c) $275
High Yield ........................................................ (a) $ 89 (a) $133 (a) $172 (a) $290
(b) $ 26 (b) $ 80 (b) $136 (b) $290
(c) $ 89 (c) $133 (c) $136 (c) $290
Fixed Income ...................................................... (a) $ 87 (a) $127 (a) $160 (a) $267
(b) $ 24 (b) $ 73 (b) $125 (b) $267
(c) $ 87 (c) $127 (c) $125 (c) $267
Government Securities ............................................. (a) $ 86 (a) $126 (a) $160 (a) $266
(b) $ 24 (b) $ 73 (b) $124 (b) $266
(c) $ 86 (c) $126 (c) $124 (c) $266
Money Market ...................................................... (a) $ 84 (a) $118 (a) $147 (a) $240
(b) $ 21 (b) $ 65 (b) $111 (b) $240
(c) $ 84 (c) $118 (c) $111 (c) $240
THE ALGER AMERICAN FUND
Alger American Growth ............................................. (a) $ 88 (a) $130 (a) $166 (a) $279
(b) $ 25 (b) $ 77 (b) $131 (b) $279
(c) $ 88 (c) $130 (c) $131 (c) $279
Alger American Leveraged AllCap ................................... (a) $ 89 (a) $134 (a) $173 (a) $293
(b) $ 26 (b) $ 81 (b) $138 (b) $293
(c) $ 89 (c) $134 (c) $138 (c) $293
Alger American MidCap Growth ...................................... (a) $ 88 (a) $132 (a) $169 (a) $285
(b) $ 26 (b) $ 78 (b) $134 (b) $285
(c) $ 88 (c) $132 (c) $134 (c) $285
Alger American Small Capitalization ............................... (a) $ 89 (a) $133 (a) $172 (a) $290
(b) $ 26 (b) $ 80 (b) $136 (b) $290
(c) $ 89 (c) $133 (c) $136 (c) $290
AMERICAN CENTURY VARIABLE PORTFOLIOS, INC
VP Income & Growth ................................................ (a) $ 87 (a) $127 (a) $162 (a) $270
(b) $ 24 (b) $ 74 (b) $126 (b) $270
(c) $ 87 (c) $127 (c) $126 (c) $270
VP International .................................................. (a) $ 93 (a) $147 (a) $194 (a) $332
(b) $ 30 (b) $ 93 (b) $158 (b) $332
(c) $ 93 (c) $147 (c) $158 (c) $332
VP Value .......................................................... (a) $ 90 (a) $136 (a) $177 (a) $300
(b) $ 27 (b) $ 83 (b) $141 (b) $300
(c) $ 90 (c) $136 (c) $141 (c) $300
BERGER INSTITUTIONAL PRODUCTS TRUST
Berger IPT--Growth ................................................ (a) $ 90 (a) $136 (a) $177 (a) $300
(b) $ 27 (b) $ 83 (b) $141 (b) $300
(c) $ 90 (c) $136 (c) $141 (c) $300
</TABLE>
15
<PAGE>
<TABLE>
<CAPTION>
TIME PERIODS
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Berger IPT--Growth and Income ..................................... (a) $ 90 (a) $136 (a) $177 (a) $300
(b) $ 27 (b) $ 83 (b) $141 (b) $300
(c) $ 90 (c) $136 (c) $141 (c) $300
Berger IPT--Small Company Growth .................................. (a) $ 91 (a) $141 (a) $184 (a) $314
(b) $ 29 (b) $ 87 (b) $149 (b) $314
(c) $ 91 (c) $141 (c) $149 (c) $314
Berger IPT--New Generation ........................................ (a) $ 91 (a) $141 (a) $184 (a) $314
(b) $ 29 (b) $ 87 (b) $149 (b) $314
(c) $ 91 (c) $141 (c) $149 (c) $314
Berger/BIAM IPT--International .................................... (a) $ 92 (a) $142 (a) $187 (a) $319
(b) $ 29 (b) $ 89 (b) $151 (b) $319
(c) $ 92 (c) $142 (c) $151 (c) $319
THE DREYFUS SOCIALLY RESPONSIBLE GROWTH FUND, INC. ................ (a) $ 88 (a) $130 (a) $166 (a) $279
(b) $ 25 (b) $ 77 (b) $131 (b) $279
(c) $ 88 (c) $130 (c) $131 (c) $279
DREYFUS STOCK INDEX FUND .......................................... (a) $ 82 (a) $114 (a) $139 (a) $225
(b) $ 20 (b) $ 61 (b) $104 (b) $225
(c) $ 82 (c) $114 (c) $104 (c) $225
DREYFUS VARIABLE INVESTMENT FUND
Dreyfus VIF Disciplined Stock Portfolio ........................... (a) $ 88 (a) $131 (a) $167 (a) $281
(b) $ 25 (b) $ 77 (b) $132 (b) $281
(c) $ 89 (c) $131 (c) $132 (c) $281
Dreyfus VIF International Value Portfolio ......................... (a) $ 93 (a) $147 (a) $194 (a) $333
(b) $ 31 (b) $ 93 (b) $159 (b) $333
(c) $ 93 (c) $147 (c) $159 (c) $333
FEDERATED INSURANCE SERIES
Federated High Income Bond II ..................................... (a) $ 88 (a) $130 (a) $166 (a) $279
(b) $ 25 (b) $ 77 (b) $131 (b) $279
(c) $ 88 (c) $130 (c) $131 (c) $279
Federated International Equity II ................................. (a) $ 92 (a) $144 (a) $189 (a) $324
(b) $ 30 (b) $ 90 (b) $154 (b) $324
(c) $ 92 (c) $144 (c) $154 (c) $324
Federated Utility II .............................................. (a) $ 89 (a) $135 (a) $174 (a) $294
(b) $ 26 (b) $ 81 (b) $138 (b) $294
(c) $ 89 (c) $135 (c) $138 (c) $294
INVESCO VARIABLE INVESTMENT FUNDS, INC.
INVESCO VIF--High Yield ........................................... (a) $ 91 (a) $139 (a) $180 (a) $307
(b) $ 28 (b) $ 85 (b) $145 (b) $307
(c) $ 91 (c) $139 (c) $145 (c) $307
INVESCO VIF--Equity Income ........................................ (a) $ 92 (a) $142 (a) $185 (a) $316
(b) $ 29 (b) $ 88 (b) $150 (b) $316
(c) $ 92 (c) $142 (c) $150 (c) $316
JANUS ASPEN SERIES
Aggressive Growth ................................................. (a) $ 87 (a) $127 (a) $160 (a) $267
(b) $ 24 (b) $ 73 (b) $125 (b) $267
(c) $ 87 (c) $127 (c) $125 (c) $267
Growth ............................................................ (a) $ 87 (a) $127 (a) $160 (a) $267
(b) $ 24 (b) $ 73 (b) $125 (b) $267
(c) $ 87 (c) $127 (c) $125 (c) $267
Worldwide Growth .................................................. (a) $ 87 (a) $127 (a) $162 (a) $270
(b) $ 24 (b) $ 73 (b) $126 (b) $270
(c) $ 87 (c) $127 (c) $126 (c) $270
LAZARD RETIREMENT SERIES, INC.
Lazard Retirement Equity .......................................... (a) $ 92 (a) $144 (a) $189 (a) $324
(b) $ 30 (b) $ 90 (b) $154 (b) $324
(c) $ 92 (c) $144 (c) $154 (c) $324
Lazard Retirement Small Cap ....................................... (a) $ 92 (a) $144 (a) $189 (a) $324
(b) $ 30 (b) $ 90 (b) $154 (b) $324
(c) $ 92 (c) $144 (c) $154 (c) $324
</TABLE>
16
<PAGE>
CONSECO VARIABLE INSURANCE COMPANY
2000 ACCOUNT F
INDIVIDUAL ANNUITY
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
TIME PERIODS
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
LORD ABBETT SERIES FUND, INC.
Growth & Income ................................................... (a) $ 89 (a) $133 (a) $170 (a) $287
(b) $ 26 (b) $ 79 (b) $135 (b) $287
(c) $ 89 (c) $133 (c) $135 (c) $287
MITCHELL HUTCHINS SERIES TRUST
Growth and Income. ................................................ (a) $ 92 (a) $143 (a) $188 (a) $322
(b) $ 29 (b) $ 90 (b) $153 (b) $322
(c) $ 92 (c) $143 (c) $153 (c) $322
NEUBERGER BERMAN ADVISERS MANAGEMENT TRUST
Limited Maturity Bond ............................................. (a) $ 87 (a) $129 (a) $165 (a) $276
(b) $ 25 (b) $ 76 (b) $129 (b) $276
(c) $ 87 (c) $129 (c) $129 (c) $276
Partners .......................................................... (a) $ 89 (a) $133 (a) $170 (a) $287
(b) $ 26 (b) $ 79 (b) $135 (b) $287
(c) $ 89 (c) $133 (c) $135 (c) $287
RYDEX VARIABLE TRUST
OTC ............................................................... (a) $ 95 (a) $153 (a) $204 (a) $352
(b) $ 33 (b) $ 99 (b) $168 (b) $352
(c) $ 95 (c) $153 (c) $168 (c) $352
Nova .............................................................. (a) $ 95 (a) $153 (a) $204 (a) $352
(b) $ 33 (b) $ 99 (b) $168 (b) $352
(c) $ 95 (c) $153 (c) $168 (c) $352
SELIGMAN PORTFOLIOS, INC.
Seligman Communications and Information. .......................... (a) $ 91 (a) $140 (a) $182 (a) $310
(b) $ 28 (b) $ 86 (b) $147 (b) $310
(c) $ 91 (c) $140 (c) $147 (c) $310
Seligman Global Technology ........................................ (a) $ 95 (a) $153 (a) $204 (a) $352
(b) $ 33 (b) $ 99 (b) $168 (b) $352
(c) $ 95 (c) $153 (c) $168 (c) $352
STRONG OPPORTUNITY FUND II, INC.
Opportunity Fund II ............................................... (a) $ 91 (a) $141 (a) $184 (a) $313
(b) $ 28 (b) $ 87 (b) $148 (b) $313
(c) $ 91 (c) $141 (c) $148 (c) $313
STRONG VARIABLE INSURANCE FUNDS, INC.
Strong Mid Cap Growth II .......................................... (a) $ 91 (a) $141 (a) $184 (a) $314
(b) $ 29 (b) $ 87 (b) $149 (b) $314
(c) $ 91 (c) $141 (c) $149 (c) $314
VAN ECK WORLDWIDE INSURANCE TRUST
Worldwide Bond .................................................... (a) $ 92 (a) $143 (a) $188 (a) $321
(b) $ 29 (b) $ 89 (b) $152 (b) $321
(c) $ 92 (c) $143 (c) $152 (c) $321
Worldwide Emerging Markets ........................................ (a) $ 95 (a) $153 (a) $203 (a) $351
(b) $ 32 (b) $ 99 (b) $168 (b) $351
(c) $ 95 (c) $153 (c) $168 (c) $351
Worldwide Hard Assets ............................................. (a) $ 92 (a) $144 (a) $190 (a) $325
(b) $ 30 (b) $ 91 (b) $154 (b) $325
(c) $ 92 (c) $144 (c) $154 (c) $325
Worldwide Real Estate ............................................. (a) $112 (a) $202 (a) $283 (a) $495
(b) $ 49 (b) $148 (b) $247 (b) $495
(c) $112 (c) $202 (c) $247 (c) $495
</TABLE>
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THE CONSECO ADVANTAGE ANNUITY CONTRACT
This Prospectus describes the Conseco Advantage Fixed and Variable Annuity
contract offered by Conseco Variable.
An annuity is a contract between you, the owner, and an insurance company
(in this case Conseco Variable), where the insurance company promises to pay you
an income, in the form of annuity payments. Until you decide to begin receiving
annuity payments, your annuity is in the ACCUMULATION PHASE. Once you begin
receiving annuity payments, your contract switches to the INCOME PHASE.
The contract benefits from tax-deferral. Tax-deferral means that you are
not taxed on earnings or appreciation on the assets in your contract until you
take money out of your contract.
The contract is a variable annuity. You can choose among 47 investment
portfolios and, depending upon market conditions, you can make or lose money in
any of these portfolios. If you select the variable annuity portion of the
contract, the amount of money you are able to accumulate in your contract during
the accumulation phase depends upon the investment performance of the investment
portfolio(s) you select. The amount of the annuity payments you receive during
the income phase from the variable annuity portion of the contract also depends
upon the investment performance of the investment portfolios you select for the
income phase.
The contract contains a fixed account. The fixed account offers an interest
rate that is guaranteed to be no less than 3% by Conseco Variable. If you select
the fixed account, the amount of money you are able to accumulate in your
contract during the accumulation phase depends upon the total interest credited
to your contract. The amount of the annuity payments you receive during the
income phase from the fixed account portion of the contract will remain level
for the entire income phase.
The contract also offers an interest adjustment account. Prior to May 1,
2000, the interest adjustment account was known as the market value adjustment
account.
As owner of the contract , you exercise all rights under the contract. You
can change the owner at any time by notifying Conseco Variable in writing. You
and another person can be named joint own ers. We have described more
information on this under "Other Information."
ANNUITY PAYMENTS
(THE INCOME PHASE)
Under the contract you can receive regular income payments. We call these
payments ANNUITY PAYMENTS. You can choose the month and year in which those
payments begin. We call that date the ANNUITY DATE. Your annuity date can be any
date selected by you. Your annuity date cannot be any earlier than 90 days after
we issue the contract. Annuity payments must begin by the earlier of the
annuitant's 90th birthday or the maximum date allowed by law. You can also
choose among income plans. We call those ANNUITY OPTIONS.
We ask you to choose your annuity date when you purchase the contract. With
30 days notice to us, you can change the annuity date or annuity option at any
time before the annuity date. The ANNUITANT is the person whose life we look to
when we determine annuity payments.
You can select an annuity option any time 30 days before the annuity date.
If you do not choose an annuity option, we will assume that you selected Option
2 which provides a life annuity with 10 years of guaranteed payments.
On the annuity date the value of your contract, less any premium tax, less
any contingent deferred sales charge, and less any contract maintenance charge
will be applied under the annuity option you selected. If you select an annuity
date that is at least 4 years after your contract was issued and you choose an
annuity option that has a life contingency or is for a minimum of 5 years, the
value of your contract, less any premium tax and less any contract maintenance
charge will be applied under the annuity option you selected. A contingent
deferred sales charge will not be deducted under these circumstances.
During the income phase, you can choose to have payments come from the
investment portfolios, the fixed account or both. Payments cannot come from the
interest adjustment account during the income phase. If you don't tell us
otherwise, your annuity payments will be based on the investment allocations in
the investment portfolios and fixed account that were in place on the annuity
date.
If you choose to have any portion of your annuity payments come from the
investment
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portfolio(s), the dollar amount of your payment will depend upon 3 things:
1) the value of your contract in the investment portfolio on the annuity
date;
2) the 3% or 5% (as you selected) assumed investment rate used in the
annuity table for the contract; and
3) the performance of the investment portfolio(s) you selected.
You can choose either a 5% or a 3% assumed investment rate. If the actual
performance exceeds the 3% or 5% (as you selected) assumed investment rate, your
annuity payments will increase. Similarly, if the actual investment rate is less
than 3% or 5% (as you selected), your annuity payments will decrease.
Unless you notify us otherwise, we will pay the annuity payments to you.
You can change the payee at any time prior to the annuity date. Income from any
distribution will be reported to you for tax purposes.
You can choose one of the following annuity options or any other annuity
option which is acceptable to Conseco Variable. After annuity payments begin,
you cannot change the annuity option.
OPTION 1. INCOME FOR A SPECIFIED PERIOD. We will pay an income for a
specific number of years in equal installments. However, you may elect to
receive a single lump sum payment which will be equal to the present value of
the remaining payments (as of the date of proof of death) discounted at the
assumed investment rate for a variable annuity payout option.
OPTION 2. LIFE ANNUITY WITH 5, 10, 15 OR 20 YEARS GUARANTEED. We will make
monthly annuity payments so long as the annuitant is alive. However, when the
annuitant dies, if we have made annuity payments for less than the selected
guaranteed period, we will then continue to make annuity payments for the rest
of the guaranteed period to the beneficiary. If, after the annuitant dies, you
do not want to receive payments, you can request a single lump sum payment which
will be equal to the present value of the remaining payments (as of the date of
proof of death) discounted at the assumed investment rate for a variable annuity
payout option.
OPTION 3. INCOME OF SPECIFIED AMOUNT. We will pay income of a specified
amount until the principal and interest are exhausted. However, you may elect to
receive a single lump sum payment which will be equal to the present value of
the remaining payments (as of the date of proof of death) discounted at the
assumed investment rate for a variable annuity payout option.
OPTION 4. JOINT AND SURVIVOR ANNUITY. We will make monthly annuity payments
so long as the annuitant and a joint annuitant are both alive. When either of
these people die, the amount of the annuity payments we will make to the
survivor can be equal to 100%, 662/3% or 50% of the amount that we would have
paid if both were alive.
Annuity payments are made monthly unless you have less than $5,000 to apply
toward a payment. In that case, Conseco Variable may make a single lump sum
payment to you. Likewise, if your annuity payments would be less than $50 a
month, Conseco Variable has the right to change the frequency of payments so
that your annuity payments are at least $50.
PURCHASE
PURCHASE PAYMENTS
A PURCHASE PAYMENT is the money you give us to buy the contract. The
minimum we will accept is $5,000 when the contract is bought as a non-qualified
contract. If you are buying the contract as part of an Individual Retirement
Annuity (IRA), the minimum we will accept is $2,000. For the interest adjustment
account, a minimum of $2,000 is required. The maximum we accept is $2,000,000
without our prior approval.
You can make additional purchase payments of $500 or more to a
non-qualified contract and $50 to an IRA contract. However, if you select the
automatic premium check option, you can make additional payments of $200 each
month for non-quali- fied contracts and $50 each month for IRA contracts.
ALLOCATION OF PURCHASE PAYMENTS
When you purchase a contract , we will allocate your purchase payment to
the fixed account, a guarantee period of the interest adjustment account and/or
one or more of the investment portfolios you have selected. Currently, you can
allocate money in up to 15 investment portfolios at any one time. If you make
additional purchase payments, we will allocate them in the same way as your
first purchase payment unless you tell us otherwise. Currently, the minimum
amount which can be allocated to the
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interest adjustment account is $2,000. We reserve the right to change this
amount in the future.
Once we receive your purchase payment and the necessary information, we
will issue your contract and allocate your first purchase payment within 2
business days. If you do not provide us all of the information needed, we will
contact you. If for some reason we are unable to complete this process within 5
business days, we will either send back your money or get your permission to
keep it until we get all of the necessary information. If you add more money to
your contract by making additional purchase payments, we will credit these
amounts to your contract as of the business day they are received. Our business
day closes when the New York Stock Exchange closes, usually 4:00 P.M. Eastern
time.
FREE LOOK
If you change your mind about owning the contract, you can cancel it within
10 days after receiving it (or whatever period is required in your state). When
you cancel the contract within this time period, Conseco Variable will not
assess a contingent deferred sales charge. On the day we receive your request we
will return the value of your contract. In some states, we may be required to
refund your purchase payment. If you have purchased the contract as an IRA, we
are required to give you back your purchase payment if you decide to cancel your
contract within 10 days after receiving it (or whatever period is required in
your state).
ACCUMULATION UNITS
The accumulation unit value for each account was arbitrarily set initially
at $10.00. The value of the variable annuity portion of your contract will
increase or decrease depending upon the investment performance of the investment
portfolio(s) you choose. In order to keep track of the value of your contract,
we use a unit of measure we call an ACCUMULATION UNIT. (An accumulation unit
works like a share of a mutual fund.) During the income phase of the contract we
call the unit an ANNUITY UNIT.
Every business day we determine the value of an accumulation unit for each
of the investment portfolios by multiplying the accumulation unit value for the
previous period by a factor for the current period. The factor is determined by:
1. dividing the value of an investment portfolio share at the end of the
current period (and any charges for taxes) by the value of an investment
portfolio share for the previous period; and
2. subtracting the daily amount of the insurance charges.
The value of an accumulation unit may go up or down from day to day.
When you make a purchase payment, we credit your contract with accumulation
units. The number of accumulation units credited is determined by dividing the
amount of the purchase payment allocated to an investment portfolio by the value
of the accumulation unit for that investment portfolio.
We calculate the value of an accumulation unit for each investment
portfolio after the New York Stock Exchange closes each day and then credit your
contract.
EXAMPLE: On Wednesday we receive an additional purchase payment of $4,000
from you. You have told us you want this to go to the Equity Portfolio. When the
New York Stock Exchange closes on that Wednesday, we determine that the value of
an accumulation unit for the Equity Portfolio is $12.25. We then divide $4,000
by $12.25 and credit your contract on Wednesday night with 326.53 accumulation
units for the Equity Portfolio.
INVESTMENT OPTIONS
INVESTMENT PORTFOLIOS
The contract offers 47 INVESTMENT PORTFOLIOS which are listed below. YOU
CAN INVEST IN UP TO 15 INVESTMENT PORTFOLIOS AT ANY ONE TIME. Additional
investment portfolios may be available in the future.
You should read the prospectuses for these funds carefully. Copies of these
prospectuses will be sent to you with your contract. If you would like a copy of
the fund prospectuses, call us at: (800) 557-7043. See Appendix B which contains
a summary of investment objectives and strategies for each portfolio.
The investment objectives and policies of certain of the investment
portfolios are similar to the investment objectives and policies of other mutual
funds that certain of the investment advisers manage. Although the objectives
and policies may be similar, the investment results of the investment portfolios
may be higher or lower than the results of such other mutual funds. The
investment advisers cannot guarantee, and make no representation, that the
investment results of similar funds will be
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comparable even though the portfolios have the same investment advisers.
A portfolio's performance may be affected by risks specific to certain
types of investments, such as foreign securities, derivative investments,
non-investment grade debt securities, initial public offerings (IPOs) or
companies with relatively small market capitalizations. IPOs and other
investment techniques may have a magnified performance impact on a portfolio
with a small asset base. A portfolio may not experience similar performance as
its assets grow.
CONSECO SERIES TRUST
Conseco Series Trust is a mutual fund with multiple portfolios. Conseco
Series Trust is managed by Conseco Capital Management, Inc., an affiliate of
Conseco Variable. The following portfolios are available under the contract:
Conseco 20 Focus Portfolio
Equity Portfolio
Balanced Portfolio
High Yield Portfolio
Fixed Income Portfolio
Government Securities Portfolio
Money Market Portfolio
THE ALGER AMERICAN FUND
The Alger American Fund is a mutual fund with multiple portfolios. Fred
Alger Management, Inc. serves as the Fund's investment adviser. The following
portfolios are available under the contract:
Alger American Growth Portfolio
Alger American Leveraged AllCap Portfolio
Alger American MidCap Growth Portfolio
Alger American Small Capitalization Portfolio
AMERICAN CENTURY VARIABLE PORTFOLIOS, INC.
American Century Variable Portfolios, Inc. is a series of funds managed by
American Century Investment Management, Inc. The following portfolios are
available under the contract:
VP Income & Growth
VP International
VP Value
BERGER INSTITUTIONAL PRODUCTS TRUST
Berger Institutional Products Trust is a mutual fund with multiple
portfolios. Berger LLC (formerly, Berger Associates, Inc.) is the investment
adviser to all portfolios except the Berger/BIAM IPT-International Fund. BBOI
Worldwide LLC, a joint venture between Berger LLC and Bank of Ireland Asset
Management (U.S.) Limited (BIAM), is the adviser to the Berger/BIAM
IPT-International Fund. BBOI Worldwide LLC has delegated daily management of the
Fund to BIAM. Berger LLC and BIAM have entered into an agreement to dissolve
BBOI Worldwide LLC. The dissolution of BBOI Worldwide LLC will have no effect on
the investment advisory services provided to the Fund. Contingent upon
shareholder approval, when BBOI Worldwide LLC is dissolved, Berger LLC will
become the Fund's advisor and BIAM will continue to be responsible for
day-to-day management of the Fund's portfolio as sub-advisor. If approved by
shareholders, these advisory changes are expected to take place in the first
half of this year. The following portfolios are available under the contract:
Berger IPT--Growth Fund (formerly, Berger IPT--100 Fund)
Berger IPT--Growth and Income Fund
Berger IPT--Small Company Growth Fund
Berger IPT--New Generation Fund
Berger/BIAM IPT--International Fund
THE DREYFUS SOCIALLY RESPONSIBLE
GROWTH FUND, INC.
The Dreyfus Socially Responsible Growth Fund, Inc. is managed by The
Dreyfus Corporation. Dreyfus has hired NCM Capital Management Group, Inc. to
serve as sub-investment adviser and provide day-to-day management of the Fund's
investments.
DREYFUS STOCK INDEX FUND
The Dreyfus Corporation serves as the Fund's manager. Dreyfus has hired its
affiliate, Mellon Equity Associates, to serve as the Fund's index fund manager
and provide day-to-day management of the Fund's investments.
DREYFUS VARIABLE INVESTMENT FUND
The Dreyfus Variable Investment Fund is a mutual fund with multiple
portfolios. The Dreyfus Corporation serves as the investment adviser. The
following portfolios are available under the contract:
Dreyfus VIF Disciplined Stock Portfolio
Dreyfus VIF International Value Portfolio
FEDERATED INSURANCE SERIES
Federated Insurance Series is a mutual fund with multiple portfolios.
Federated Investment Management Company is the investment adviser of the
Federated High Income Bond Fund II and the Federated Utility Fund II. Federated
Global Investment Management Corp. is the adviser of the
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Federated International Equity Fund II. The following portfolios are available
under the contract:
Federated High Income Bond Fund II
Federated International Equity Fund II
Federated Utility Fund II
INVESCO VARIABLE INVESTMENT FUNDS, INC.
(NOT AVAILABLE FOR NEW SALES AS OF MAY 1, 2000)
INVESCO Variable Investment Funds, Inc. is a mutual fund with multiple
portfolios. INVESCO Funds Group, Inc. is the investment adviser. The following
portfolios are available under the contract:
INVESCO VIF--High Yield Fund
INVESCO VIF--Equity Income Fund
JANUS ASPEN SERIES
The Janus Aspen Series is a mutual fund with multiple portfolios which are
advised by Janus Capital Corporation. The following portfolios are available
under the contract:
Aggressive Growth Portfolio
Growth Portfolio
Worldwide Growth Portfolio
LAZARD RETIREMENT SERIES, INC.
Lazard Retirement Series, Inc. is a mutual fund with multiple portfolios.
Lazard Asset Management, a division of Lazard Freres & Co. LLC, is the
investment manager for each portfolio. The following portfolios are available
under the contract:
Lazard Retirement Equity Portfolio
Lazard Retirement Small Cap Portfolio
LORD ABBETT SERIES FUND, INC.
Lord Abbett Series Fund, Inc. is a mutual fund with multiple portfolios
managed by Lord, Abbett & Co. The following portfolio is available under the
contract:
Growth & Income Portfolio
MITCHELL HUTCHINS SERIES TRUST
Mitchell Hutchins Series Trust is a mutual fund with multiple portfolios.
Mitchell Hutchins Asset Management Inc. provides advisory and administrative
services to the Fund. The following portfolio is available under the contract:
Growth and Income Portfolio
NEUBERGER BERMAN ADVISERS MANAGEMENT TRUST
Neuberger Berman Advisers Management Trust is a mutual fund with multiple
portfolios. Neuberger Berman Management Inc. serves as investment adviser. The
following portfolios are available under the contract:
Limited Maturity Bond Portfolio
Partners Portfolio
RYDEX VARIABLE TRUST
Rydex Variable Trust is a mutual fund with multiple portfolios which are
managed by PADCO Advisors II, Inc. The following portfolios are available under
the contract:
OTC Fund
Nova Fund
SELIGMAN PORTFOLIOS, INC.
Seligman Portfolios, Inc. is a mutual fund with multiple portfolios which
are managed by J. & W. Seligman & Co. Incorporated. The following portfolios are
available under the contract:
Seligman Communications and Information Portfolio
Seligman Global Technology Portfolio
STRONG OPPORTUNITY FUND II, INC.
Strong Opportunity Fund II is a mutual fund and Strong Capital Management,
Inc. serves as the investment advisor. The following portfolio is available
under the contract:
Opportunity Fund II
STRONG VARIABLE INSURANCE FUNDS, INC.
Strong Variable Insurance Funds, Inc. is a mutual fund with multiple
series. Strong Capital Management, Inc. serves as the investment advisor. The
following series is available under the contract:
Strong Mid Cap Growth Fund II
VAN ECK WORLDWIDE INSURANCE TRUST
Van Eck Worldwide Insurance Trust is a mutual fund with multiple portfolios
which are managed by Van Eck Associates Corporation. The following portfolios
are available under the contract:
Worldwide Bond Fund
Worldwide Emerging Markets Fund
Worldwide Hard Assets Fund
Worldwide Real Estate Fund
Shares of the funds are offered in connection with certain variable annuity
contracts and variable life insurance policies of various life insurance
companies which may or may not be affiliated with Conseco Variable. Certain
investment portfolios are also sold directly to qualified plans. The funds do
not believe that offering their shares in this manner will be disadvantageous to
you.
Conseco Variable may enter into certain arrangements under which it is
reimbursed by the investment portfolios' advisers, distributors and/or
affiliates for the administrative services which it provides to the portfolios.
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VOTING RIGHTS
Conseco Variable is the legal owner of the investment portfolio shares.
However, Conseco Variable believes that when an investment portfolio solicits
proxies in conjunction with a vote of shareholders, it is required to obtain
from you and other owners instructions as to how to vote those shares. When we
receive those instructions, we will vote all of the shares we own in proportion
to those instructions. Should Conseco Variable determine that it is no longer
required to comply with the above, it will vote the shares in its own right.
SUBSTITUTION
Conseco Variable may, in the interest of shareholders, deem it necessary to
discontinue one or more of the investment portfolios or substitute one of the
investment portfolios you have selected with another investment portfolio. We
will notify you of our intent to do this. We will obtain prior approval by the
Securities and Exchange Commission before any such change is made.
THE FIXED ACCOUNT AND THE INTEREST ADJUSTMENT ACCOUNT
You can invest in the one year fixed account of Conseco Variable. The fixed
account offers an interest rate that is guaranteed to be no less than 3%
annually by Conseco Variable. If you select the fixed account, your money will
be placed with the other general assets of Conseco Variable.
You can also invest in one of the guarantee periods of the interest
adjustment account of Conseco Variable. If you take money out (whether by
withdrawal, transfer or annuitization) before the end of a guarantee period, an
adjustment will be made to the amount withdrawn. The adjustment may be positive
or negative. However, you will never get back less than your purchase payment
accumulated at 3% (less any applicable contingent deferred sales charge). Prior
to May 1, 2000, the interest adjustment account was known as the market value
adjustment account. The interest adjustment account may not be available in your
state.
TRANSFERS
You can transfer money among the fixed account, the interest adjustment
account and the investment portfolios. Currently, you can allocate money to up
to 15 investment portfolios at any one time.
TRANSFERS DURING THE ACCUMULATION PHASE. You can make one transfer in a
30-day period dur ing the accumulation phase without charge. You can make a
transfer to or from the fixed account, the interest adjustment account and to or
from any investment portfolio. If you make more than one transfer in a 30-day
period, a transfer fee of $25 may be deducted. The following apply to any
transfer during the accumulation phase:
1. The minimum amount which you can transfer is $500 or your entire value
in the investment portfolio or the fixed account, or $2,000 into any guarantee
period of the interest adjustment account. This requirement is waived if the
transfer is pursuant to the dollar cost averaging or rebalancing programs.
2. You must leave at least $500 in each investment portfolio, any guarantee
period of the interest adjustment account or the fixed account after you make a
transfer unless the entire amount is being transferred. Transfers out of the
fixed account are limited to 20% of the value of your contract every 6 months.
3. Your request for a transfer must clearly state which investment
portfolio(s), any guarantee period of the interest adjustment account or the
fixed account are involved in the transfer.
4. Your request for transfer must clearly state how much the transfer is
for.
TRANSFERS DURING THE INCOME PHASE. You can only make two transfers every
year during the income phase. The two transfers are free. We measure a year from
the anniversary of the day we issued your contract. The following apply to any
transfer during the income phase:
1. You can make transfers at least 30 days before the due date of the first
annuity payment for which the transfer will apply.
2. The minimum amount which you can transfer is $500 or your entire value
in the investment portfolio.
3. You must leave at least $500 in each investment portfolio (or $0 if you
are transferring the entire amount) after a transfer.
4. No transfers can be made between the fixed account and the investment
portfolios. You may only make transfers between the investment portfolios.
This product is not designed for professional market timing organizations.
Conseco Variable reserves the right to modify the transfer privileges described
above.
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TELEPHONE/INTERNET TRANSFERS. You can elect to make transfers by telephone.
You may also elect to make transfers over the internet. Internet transfers may
not be available (check with your registered representative). Internet transfers
are subject to our administrative rules and procedures. If you do not want the
ability to make transfers by telephone or through the internet, you should
notify us in writing. You can also authorize someone else to make transfers for
you. If you own the contract with a joint owner, unless Conseco Variable is
instructed otherwise, Conseco Variable will accept instructions from either you
or the other owner. Conseco Variable will use reasonable procedures to confirm
that instructions given to us by telephone are genuine. All telephone calls will
be recorded and the caller will be asked to produce personalized data about the
owner before we will make the telephone transfer. Personalized data will also be
required for internet transfers. We will send you a written confirmation of the
transfer. If Conseco Variable fails to use such procedures, we may be liable for
any losses due to unauthorized or fraudulent instructions.
DOLLAR COST AVERAGING PROGRAM
The Dollar Cost Averaging Program allows you to systematically transfer a
set amount either monthly, quarterly, semi-annually or annually from the Money
Market Portfolio or the fixed account to any of the other investment
portfolio(s). You cannot transfer to the interest adjustment account under this
program. By allocating amounts on a regular schedule as opposed to allocating
the total amount at one particular time, you may be less susceptible to the
impact of market fluctuations. However, this is not guaranteed.
You must have at least $2,000 in the Money Market Portfolio or the fixed
account in order to participate in the dollar cost averaging program.
All Dollar Cost Averaging transfers will be made on the first business day
of the month. Dollar cost averaging will end when the value in the Money Market
Portfolio or the fixed account is zero. We will notify you when that happens.
You cannot cancel the dollar cost averaging program once it starts. A transfer
request will not automatically terminate the program.
You may participate in the dollar cost averaging program and the systematic
withdrawal program at the same time. If you participate in the dollar cost
averaging program, the transfers made under the program are not taken into
account in determining any transfer fee. There is no additional charge for this
program. However, we reserve the right to charge for this program in the future.
We reserve the right, at any time and without prior notice, to terminate,
suspend or modify this program.
Dollar cost averaging does not assure a profit and does not protect against
loss in declining markets. Dollar cost averaging involves continuous investment
in the selected investment portfolio(s) regardless of fluctuating price levels
of the investment portfolio(s). You should consider your financial ability to
continue the dollar cost averaging program through periods of fluctuating price
levels.
REBALANCING PROGRAM
Once your money has been allocated among the investment portfolios, the
performance of each portfolio may cause your allocation to shift. If the value
of your contract is at least $5,000, you can direct us to automatically
rebalance your contract to return to your original percentage allocations by
selecting our rebalancing program. The rebalancing program may also be available
through the internet (check with your registered representative regarding
availability). Rebalancing over the internet is subject to our administrative
rules and procedures. You can tell us whether to rebalance quarterly,
semi-annually or annually. We will measure these periods from the date you
selected. You must use whole percentages in 1% increments for rebalancing. There
will be no rebalancing within the fixed account or the interest adjustment
account. You can discontinue rebalancing at any time. You can change your
rebalancing requests at any time in writing or through internet access which we
must receive before the next rebalancing date. If you participate in the
rebalancing program, the transfers made under the program are not taken into
account in determining any transfer fee. Currently, there is no charge for
participating in the rebalancing program. We reserve the right, at any time and
without prior notice, to terminate, suspend or modify this program.
EXAMPLE:
Assume that you want your initial purchase payment split between 2
investment portfolios. You want 40% to be in the Fixed Income Portfolio and 60%
to be in Growth Portfolio. Over the next 21/2 months the bond market does very
well while the stock market performs poorly. At the end of the
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first quarter, the Fixed Income Portfolio now represents 50% of your holdings
because of its increase in value. If you had chosen to have your holdings
rebalanced quarterly, on the first day of the next quarter, Conseco Variable
would sell some of your units in the Fixed Income Portfolio to bring its value
back to 40% and use the money to buy more units in the Growth Portfolio to
increase those holdings to 60%.
ASSET ALLOCATION PROGRAM
We understand the importance to you of having advice from a financial
adviser regarding your investments in the contract (asset allocation program).
Certain investment advisers have made arrangements with us to make their
services available to you. Conseco Variable has not made any independent
investigation of these advisers and is not endorsing such programs. You may be
required to enter into an advisory agreement with your investment adviser to
have the fees paid out of your contract during the accumulation phase.
Conseco Variable will, pursuant to an agreement with you, make a partial
withdrawal from the value of your contract to pay for the services of the
investment adviser. If the contract is non-qualified, the withdrawal will be
treated like any other distribution and may be included in gross income for
federal tax purposes. Further, if you are under age 591/2, it may be subject to
a tax penalty. If the contract is qualified, the withdrawal for the payment of
fees may not be treated as a taxable distribution if certain conditions are met.
Additionally, any withdrawals for this purpose may be subject to a contingent
deferred sales charge. You should consult a tax adviser regarding the tax
treatment of the payment of investment adviser fees from your contract.
SWEEP PROGRAM
You can elect to transfer (sweep) your earnings from the fixed account to
the investment portfolios on a periodic and systematic basis.
EXPENSES
There are charges and other expenses associated with the contract that
reduce the return on your investment in the contract. These charges and expenses
are:
INSURANCE CHARGES
Each day, Conseco Variable makes a deduction for its insurance charges. The
insurance charges do not apply to amounts allocated to the fixed account or the
interest adjustment account. Conseco Variable does this as part of its
calculation of the value of the accumulation units and the annuity units.
The insurance charge has two parts: 1) the mortality and expense risk
charge, and 2) the administrative charge.
o MORTALITY AND EXPENSE RISK CHARGE. This charge is equal, on an annual
basis, to 1.25% of the average daily value of the contract invested in
an investment portfolio. This charge is for the insurance benefits
provided under the contract and certain administrative and distribution
expenses associated with the contract.
o ADMINISTRATIVE CHARGE. This charge is equal, on an annual basis, to .15%
of the average daily value of the contract invested in an investment
portfolio. This charge may be increased but will not exceed .25% of the
average daily value of the contract invested in an investment portfolio.
We will give you 60 days' notice if this charge is increased. This
charge is for certain administrative expenses.
CONTRACT MAINTENANCE CHARGE
During the accumulation phase, every year on the anniversary of the date
when your contract was issued, Conseco Variable deducts $30 from your contract
as a contract maintenance charge. We reserve the right to change this charge but
it will not be more than $60 each year. No contract maintenance charge is
deducted during the income phase. This charge is for certain administrative
expenses associated with the contract.
Conseco Variable does not deduct this charge if the value of your contract
is $50,000 or more.
If you make a complete withdrawal from your contract, the contract
maintenance charge will also be deducted. The charge will be deducted if the
annuity date is other than an anniversary.
CONTINGENT DEFERRED SALES CHARGE
During the accumulation phase, you can make withdrawals from your contract.
Conseco Variable keeps track of each purchase payment.
Every year you can take money out of your contract, without charge, of an
amount equal to the greater of:
o 10% of the value of your contract (if you do not use the 10% in any
year, it may not be carried over to the next year), or
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o the IRS minimum distribution requirement for this contract if it was
issued under an Individual Retirement Annuity, or
o the total of your purchase payments that have been in the contract more
than 7 complete years.
Withdrawals in excess of these amounts will be charged a contingent
deferred sales charge which equals:
NO. OF YEARS CONTINGENT
FROM RECEIPT DEFERRED SALES
OF PURCHASE PAYMENT CHARGE
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First Year.................................................... 7%
Second Year................................................... 7%
Third Year.................................................... 6%
Fourth Year................................................... 5%
Fifth Year.................................................... 4%
Sixth Year.................................................... 3%
Seventh Year.................................................. 2%
Eighth Year and more.......................................... 0%
In addition, the following circumstances further limit or reduce withdrawal
charges, in some states, as applicable:
o for issue ages up to 52, there is no contingent deferred sales charge
made after the 15th contract year and later;
o for issue ages 53 to 56, there is no contingent deferred sales charge
made after you attain age 67 or later;
o for issue ages 57 and later, any otherwise applicable contingent
deferred sales charge will be multiplied by a factor ranging from .9 to
0 for contract years one through ten and later, respectively.
The contingent deferred sales charge is assessed against each purchase
payment withdrawn and will reduce the remaining value of your contract. For
purposes of the contingent deferred sales charge, Conseco Variable treats
withdrawals as coming from the oldest purchase payment first. The contingent
deferred sales charge compensates us for expenses associated with selling the
contract.
NOTE: FOR TAX PURPOSES, WITHDRAWALS ARE GENERALLY CONSIDERED TO HAVE COME
FROM EARNINGS FIRST.
Conseco Variable does not assess the contingent deferred sales charge on
death benefits or on any payments paid out as annuity payments if your annuity
date is at least four years after we issue your contract and your annuity option
has a life contingency or is for a minimum of 5 years.
REDUCTION OR ELIMINATION OF THE CONTINGENT DEFERRED SALES CHARGE
Conseco Variable will reduce or eliminate the amount of the contingent
deferred sales charge when the contract is sold under circumstances which reduce
its sales expenses. Some examples are: if there is a large group of individuals
that will be purchasing the contract or a prospective purchaser already had a
relationship with Conseco Variable. Conseco Variable will not deduct a
contingent deferred sales charge when a contract is issued to an officer,
director or employee of Conseco Variable or any of its affiliates. Any
circumstances resulting in the reduction or elimination of the contingent
deferred sales charge requires our prior approval. In no event will reduction or
elimination of the contingent deferred sales charge be permitted where it would
be unfairly discriminatory to any person.
TRANSFER FEE
You can make one free transfer every 30 days during the accumulation phase.
If you make more than one transfer in a 30-day period, you could be charged a
transfer fee of $25 per transfer. We reserve the right to change the transfer
fee. The transfer fee is deducted from the account from which the transfer was
made. If the entire amount in the account is transferred, the fee will be
deducted from the amount transferred. If you transfer money from more than one
account, the charge is deducted from the account with the largest balance. The
two transfers permitted each year during the income phase are free.
All reallocations made in the same day count as one transfer. Transfers
made at the end of the free look period by us are not counted in determining the
transfer fee. If the transfer is part of the Dollar Cost Averaging Program, the
Rebalancing Program or the Sweep Program it will not count in determining the
transfer fee.
PREMIUM TAXES
Some states and other governmental entities (e.g., municipalities) charge
premium taxes or similar taxes. Conseco Variable is responsible for the payment
of these taxes and will make a deduction from the value of the contract for
them. These taxes are due either when the contract is issued or when annuity
payments begin. It is Conseco Variable's current practice to deduct these taxes
when either annuity payments begin or upon par-
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tial or full surrender of the contract. Conseco Variable may in the future
discontinue this practice and assess the charge when the tax is due. Premium
taxes currently range from 0% to 3.5%, depending on the jurisdiction.
INCOME TAXES
Conseco Variable will deduct from the contract for any income taxes which
it incurs because of the contract. At the present time, we are not making any
such deductions.
INVESTMENT PORTFOLIO EXPENSES
There are deductions from and expenses paid out of the assets of the
various investment portfolios, which are described in the fund prospectuses.
TAXES
NOTE: CONSECO VARIABLE HAS PREPARED THE FOLLOWING INFORMATION ON TAXES AS A
GENERAL DISCUSSION OF THE SUBJECT. IT IS NOT INTENDED AS TAX ADVICE TO ANY
INDIVIDUAL. YOU SHOULD CONSULT YOUR OWN TAX ADVISER ABOUT YOUR OWN
CIRCUMSTANCES. CONSECO VARIABLE HAS INCLUDED IN THE STATEMENT OF ADDITIONAL
INFORMATION AN ADDITIONAL DISCUSSION REGARDING TAXES.
ANNUITY CONTRACTS IN GENERAL
Annuity contracts are a means of setting aside money for future needs,
usually retirement. Congress recognized how important saving for retirement was
and provided special rules in the Internal Revenue Code (Code) for annuities.
Simply stated, these rules provide that you will not be taxed on the
earnings on the money held in your annuity contract until you take the money
out. This is referred to as TAX-DEFERRAL. There are different rules as to how
you will be taxed depending on how you take the money out and the type of
contract -qualified or non-qualified (see following sections).
You, as the owner, will not be taxed on increases in the value of your
contract until a distribution occurs--either as a withdrawal or as annuity
payments. When you make a withdrawal you are taxed on the amount of the
withdrawal that is earnings. For annuity payments, different rules apply. A
portion of each annuity payment is treated as a partial return of your purchase
payments and will not be taxed. The remaining portion of the annuity payment
will be treated as ordinary income. How the annuity payment is divided between
taxable and non-taxable portions depends upon the period over which the annuity
payments are expected to be made. Annuity payments received after you have
received all of your purchase payments are fully includible in income.
When a non-qualified contract is owned by a non-natural person (e.g.,
corporation or certain other entities other than a trust holding the Contract as
an agent for a natural person), the contract will generally not be treated as an
annuity for tax purposes.
QUALIFIED AND NON-QUALIFIED CONTRACTS
If you purchase the contract as an individual and not under any pension
plan, specially sponsored program or an Individual Retirement Annuity (IRA),
your contract is referred to as a NON-QUALIFIED CONTRACT.
If you purchase the contract under a pension plan, specially sponsored
program or an IRA, your contract is referred to as a QUALIFIED CONTRACT.
A qualified contract will not provide any necessary or additional tax
deferral if it is used to fund a qualified plan that is tax deferred. However,
the contract has features and benefits other than tax deferral that may make it
an appropriate investment for a qualified plan. You should consult your tax
adviser regarding these features and benefits prior to purchasing a qualified
contract.
WITHDRAWALS--NON-QUALIFIED CONTRACTS
If you make a withdrawal from your non-qualified contract, the Code
generally treats such a withdrawal as first coming from earnings and then from
your purchase payments. Such withdrawn earnings are includible in income.
The Code also provides that any amount received under an annuity contract
which is included in income may be subject to a penalty. The amount of the
penalty is equal to 10% of the amount that is includible in income. Some
withdrawals will be exempt from the penalty. They include any amounts:
(1) paid on or after you reach age 59-1/2;
(2) paid after you die;
(3) paid if you become totally disabled (as that term is defined in the
Code);
(4) paid in a series of substantially equal payments made annually (or
more frequently) for life or a period not exceeding life expectancy;
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(5) paid under an immediate annuity; or
(6) which come from purchase payments made prior to August 14, 1982.
WITHDRAWALS--QUALIFIED CONTRACTS
If you make a withdrawal from your qualified contract, a portion of the
withdrawal is treated as taxable income. This portion depends on the ratio of
the pre-tax purchase payments to the after-tax purchase payments in your
contract. If all of your purchase payments were made with pre-tax money then the
full amount of any withdrawal is includible in taxable income. Special rules may
apply to withdrawals from certain types of qualified contracts.
The Code also provides that any amount received under a qualified contract
which is included in income may be subject to a penalty. The amount of the
penalty is equal to 10% of the amount that is includible in income. This penalty
will be increased to 25% for withdrawals from SIMPLE IRA's within the first two
years of your contract. Some withdrawals will be exempt from the penalty. They
include any amounts:
(1) paid on or after you reach age 59-1/2;
(2) paid after you die;
(3) paid if you become totally disabled (as that term is defined in Code);
(4) paid to you after leaving your employment in a series of substantially
equal payments made annually (or more frequently) under a lifetime
annuity;
(5) paid to you after you have attained age 55 and left your employment;
(6) paid for certain allowable medical expenses (as defined in the Code);
(7) paid pursuant to a qualified domestic relations order;
(8) paid on account of an IRS levy upon the qualified contract;
(9) paid from an IRA for medical insurance (as defined in the Code);
(10) paid from an IRA for qualified higher education expenses; or
(11) paid from an IRA up to $10,000 for qualified first time homebuyer
expenses (as defined in the Code).
The exceptions in (5) and (7) above do not apply to IRAs. The exception in
(4) above applies to IRAs but without the requirement of leaving employment.
We have provided a more complete discussion in the Statement of Additional
Information.
WITHDRAWALS--TAX-SHELTERED ANNUITIES
The Code limits the withdrawal of amounts attributable to purchase payments
made by owners under a salary reduction agreement. Withdrawals can only be made
when a contract owner:
(1) reaches age 59-1/2;
(2) leaves his or her job;
(3) dies;
(4) becomes disabled (as that term is defined in the Code);
(5) in the case of hardship; or
(6) pursuant to a qualified domestic relations order, if otherwise
permitted.
However, in the case of hardship, the owner can only withdraw the purchase
payments and not any earnings. You should consult your own tax adviser about
your own circumstances.
DIVERSIFICATION
The Code provides that the underlying investments for a variable annuity
must satisfy certain diversification requirements in order to be treated as an
annuity contract. Conseco Variable believes that the investment portfolios are
being managed so as to comply with the requirements.
INVESTOR CONTROL
Neither the Code nor the Internal Revenue Service Regulations issued to
date provide guidance as to the circumstances under which you, because of the
degree of control you exercise over the underlying investments, and not Conseco
Variable would be considered the owner of the shares of the investment
portfolios. If you are considered the owner of the shares, it will result in the
loss of the favorable tax treatment for the contract. It is unknown to what
extent under federal tax law owners are permitted to select investment
portfolios, to make transfers among the investment portfolios or the number and
type of investment portfolios owners may select from without being considered
the owner of the shares. If any guidance is provided which is considered a new
position, then the guidance would generally be applied prospectively. However,
if such guidance is considered not to be a new position, it may be applied
retroactively. This would mean that you, as the owner of the contract, could be
treated as the owner of the investment portfolios.
Due to the uncertainty in this area, Conseco Variable reserves the right to
modify the contract as
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CONSECO VARIABLE INSURANCE COMPANY
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INDIVIDUAL ANNUITY
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reasonably deemed necessary to maintain favorable tax treatment.
ACCESS TO YOUR MONEY
You can have access to the money in your contract:
o by making a withdrawal (either a partial or a complete withdrawal);
o by electing to receive annuity payments; or
o when a death benefit is paid to your beneficiary.
In general, withdrawals can only be made during the accumulation phase.
When you make a complete withdrawal, you will receive the value of the
contract on the day you made the withdrawal, less any applicable contingent
deferred sales charge, less any premium tax, and less any contract maintenance
charge.
You must tell us which account (investment portfolio(s), the interest
adjustment account and/or the fixed account) you want the withdrawal to come
from. Under most circumstances, the amount of any partial withdrawal from any
investment portfolio, the interest adjustment account or the fixed account must
be for at least $500. Conseco Variable requires that after a partial withdrawal
is made there must be at least $500 left in your contract.
Conseco Variable will pay the amount of any withdrawal from the investment
portfolios within 7 days of your request in good order unless the suspension of
payments or transfers provision (see below) is in effect.
INCOME TAXES, TAX PENALTIES AND CERTAIN RESTRICTIONS MAY APPLY TO ANY
WITHDRAWAL YOU MAKE.
There are limits to the amount you can withdraw from a qualified plan
referred to as a 403(b) (tax-sheltered annuity) plan. For a more complete
explanation, see "Taxes" and the discussion in the Statement of Additional
Information.
SYSTEMATIC WITHDRAWAL PROGRAM
The systematic withdrawal program allows you to choose to receive your
automatic payments either monthly, quarterly, semi-annually or annually. You
must have at least $5,000 in your contract to start the program. You cannot take
systematic withdrawals from the interest adjustment account. You can instruct us
to withdraw a level dollar amount or percentage from specified investment
options, largest account balance or on a pro-rata basis. If you do a
reallocation and do not specify investment options, all systematic withdrawals
will then default to a pro-rata basis. The systematic withdrawal program will
end any time you designate. If you make a partial withdrawal outside the program
and the value of your contract is less than $5,000 the program will
automatically terminate. Conseco Variable does not charge for this program,
however, the withdrawal may be subject to a contingent deferred sales charge.
For a discussion of the contingent deferred sales charge, see "Expenses."
All systematic withdrawals will be paid on the last business day of the
month (beginning with the first full month after you bought your contract).
INCOME TAXES, TAX PENALTIES AND CERTAIN RESTRICTIONS (UNDER 403(B)
CONTRACTS) MAY APPLY TO SYSTEMATIC WITHDRAWALS.
SUSPENSION OF PAYMENTS OR TRANSFERS
Conseco Variable may be required to suspend or postpone payments for
withdrawals or transfers for any period when:
1. the New York Stock Exchange is closed (other than customary weekend and
holiday closings);
2. trading on the New York Stock Exchange is restricted;
3. an emergency exists as a result of which disposal of shares of the
investment portfolios is not reasonably practicable or Conseco Variable cannot
reasonably value the shares of the investment portfolios;
4. during any other period when the Securities and Exchange Commission, by
order, so permits for the protection of owners.
Conseco Variable has reserved the right to defer payment for a withdrawal
or transfer from the fixed account and/or the interest adjustment account for
the period permitted by law but not for more than six months.
PERFORMANCE
Conseco Variable may periodically advertise performance of the annuity
investment in the various investment portfolios. Conseco Variable will calculate
performance by determining the percentage change in the value of an accumulation
unit by dividing the increase (decrease) for that unit by the value of the
accumulation unit at the beginning of the period. This performance number
reflects the deduction of the insurance charges and the fees and expenses of the
investment portfolio. It does not reflect the deduction of any applicable
contract
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maintenance charge and contingent deferred sales charge. The deduction of any
applicable contract maintenance charge and contingent deferred sales charge
would reduce the percentage increase or make greater any percentage decrease.
Any advertisement will also include standardized average annual total return
figures which reflect the deduction of the insurance charges, contract
maintenance charge, contingent deferred sales charge and the fees and expenses
of the portfolio.
For periods starting prior to the date the contracts were first offered,
the performance will be based on the historical performance of the corresponding
portfolios, modified to reflect the charges and expenses of the contract as if
the contract had been in existence during the period stated in the
advertisement. These figures should not be interpreted to reflect actual
historical performance.
Conseco Variable may, from time to time, include in its advertising and
sales materials, tax deferred compounding charts and other hypothetical
illustrations, which may include comparisons of currently taxable and tax
deferred investment programs, based on selected tax brackets.
DEATH BENEFIT
UPON YOUR DEATH
If you die before annuity payments begin, Conseco Variable will pay a death
benefit to your beneficiary (see below). If you have a joint owner, the death
benefit will be paid when the first owner dies. The surviving joint owner will
be treated as the beneficiary.
If death occurs prior to age 90, the amount of the death benefit will be
the greater of:
(1) the value of your contract at the time Conseco Variable receives proof
of death and a payment election; or
(2) the total purchase payments you have made, less any adjusted partial
withdrawals, increased by 5% each year up to the date of death.
Adjusted partial withdrawal means the amount of the partial withdrawal,
multiplied by the amount of the death benefit just before the partial
withdrawal, divided by the value of your contract just before the partial
withdrawal. A partial withdrawal is the amount paid to you plus any taxes
withheld less any contingent deferred sales charge.
If death occurs at age 90 or later, the death benefit will be the contract
value at the time Conseco Variable receives proof of death and a payment
election.
The entire death benefit must be paid within 5 years of the date of death
unless the beneficiary elects to have the death benefit payable under an annuity
option. The death benefit payable under an annuity option must be paid over the
beneficiary's lifetime or for a period not extending beyond the beneficiary's
life expectancy. Payment must begin within one year of the date of death. If the
beneficiary is the spouse of the owner, he/she can continue the contract in
his/her own name at the then current value. If a lump sum payment is elected and
all the necessary requirements are met, the payment will be made within 7 days.
Different rules may apply in the case of an Individual Retirement Annuity.
If you or any joint owner (who is not the annuitant) dies during the income
phase, any remaining payments under the annuity option elected will continue at
least as rapidly as under the method of distribution prior to the death of the
owner or joint owner. If you die during the income phase, the beneficiary
becomes the owner. If any joint owner dies during the income phase, the
surviving joint owner, if any, will be treated as the primary beneficiary. Any
other beneficiary on record at the time of death will be treated as a contingent
beneficiary. Different rules may apply in the case of an Individual Retirement
Annuity.
DEATH OF ANNUITANT
If the annuitant, who is not an owner or joint owner, dies during the
accumulation phase, you can name a new annuitant. Unless another annuitant is
named within 30 days of the death of the annuitant, you will become the
annuitant. However, if the owner is a non-natural person (for example, a
corporation), then the death of the annuitant will be treated as the death of
the owner, and a new annuitant may not be named.
Upon the death of the annuitant during the income phase, the death benefit,
if any, will be as provided for in the annuity option selected. The death
benefit will be paid at least as rapidly as under the method of distribution in
effect at the annuitant's death.
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CONSECO VARIABLE INSURANCE COMPANY
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INDIVIDUAL ANNUITY
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OTHER INFORMATION
CONSECO VARIABLE
Conseco Variable Insurance Company was originally organized in 1937. Prior
to October 7, 1998, Conseco Variable Insurance Company was known as Great
American Reserve Insurance Company. In certain states, we may still use the name
Great American Reserve Insurance Company until our name change is approved in
the state. It is principally engaged in the life insurance business in 49 states
and the District of Columbia. Conseco Variable is a stock company organized
under the laws of the state of Texas and is an indirect wholly- owned subsidiary
of Conseco, Inc. Headquartered in Carmel, Indiana, Conseco, Inc. is one of
middle America's leading sources for investment, insurance and lending products.
Through its subsidiaries and a nationwide network of insurance agents and
finance dealers, Conseco, Inc. provides solutions for both wealth protection and
wealth creation to more than 12 million customers.
THE SEPARATE ACCOUNT
Conseco Variable has established a separate account to hold the assets that
underlie the contracts. Conseco Variable Annuity Account F serves the variable
annuity portion of the contract. Prior to May 1, 1999, Conseco Variable Annuity
Account F was known as Great American Reserve Variable Annuity Account F. The
Board of Directors of Conseco Variable adopted a resolution to establish the
Separate Account under Texas Insurance law on September 26, 1997. Conseco
Variable Annuity Account F is registered with the Securities and Exchange
Commission as a unit investment trust under the Investment Company Act of 1940.
Conseco Variable Annuity Account F is divided into sub-accounts.
The assets of the Separate Account are held in Conseco Variable's name on
behalf of the Separate Account and legally belong to Conseco Variable. However,
those assets that underlie the contracts are not chargeable with liabilities
arising out of any other business Conseco Variable may conduct. All the income,
gains and losses (realized or unrealized) resulting from these assets are
credited to or charged against the contracts and not against any other contracts
Conseco Variable may issue.
The obligations under the contracts are obligations of Conseco Variable
Insurance Company.
DISTRIBUTOR
Conseco Equity Sales, Inc. (CES), 11815 N. Pennsylvania Street, Carmel,
Indiana 46032, acts as the distributor of the contracts. CES, an affiliate of
Conseco Variable, is registered as a broker-dealer under the Securities Exchange
Act of 1934. CES is a member of the National Association of Securities Dealers,
Inc.
Commissions will be paid to broker-dealers who sell the contracts.
Broker-dealers' commissions may cost up to 8.25% of purchase payments and may
include reimbursement of promotional or distribution expenses associated with
the marketing of the contracts. Conseco Variable may, by agreement with the
broker-dealer, pay commissions as a combination of a certain percentage amount
at the time of sale and a trail commission. This combination may result in the
broker-dealer receiving more commission over time than would be the case if it
had elected to receive only a commission at the time of sale. The commission
rate paid to the broker-dealer will depend upon the nature and level of services
provided by the broker-dealer.
OWNERSHIP
The contract is an individual fixed and variable deferred annuity contract.
You, as the OWNER of the contract, are entitled to all the rights and privileges
of ownership.
Spousal JOINT OWNERS are allowed with this contract (except if it is issued
pursuant to a qualified plan). Upon the death of either joint owner, the
surviving owner will be the designated beneficiary. Any other beneficiary
designation at the time the contract was issued or as may have been later
changed will be treated as a contingent beneficiary unless otherwise indicated.
BENEFICIARY
The BENEFICIARY is the person(s) or entity you name to receive any death
benefit. The beneficiary is named at the time the contract is issued. Unless an
irrevocable beneficiary has been named, you can change the beneficiary at any
time before you die.
ASSIGNMENT
You can assign the contract at any time during your lifetime. Conseco
Variable will not be bound by the assignment until it receives the written
notice of the assignment. Conseco Variable will not be liable for any payment or
other action we take in accordance with the contract before we receive
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notice of the assignment. AN ASSIGNMENT MAY BE A TAXABLE EVENT.
If the contract is issued pursuant to a qualified plan, there are
limitations on your ability to assign the contract.
FINANCIAL STATEMENTS
The financial statements of Conseco Variable which are included in the
Statement of Additional Information should be considered only as bearing on the
ability of Conseco Variable to meet its obligations under the contracts. They
should not be considered as bearing on the investment performance of the
investment portfolios. The value of the investment portfolios is affected
primarily by the performance of the underlying investments.
The financial statements of Conseco Variable Annuity Account F are included
in the Statement of Additional Information.
TABLE OF CONTENTS OF THE STATEMENT OF ADDITIONAL INFORMATION
Company
Independent Accountants
Legal Opinions
Distribution
Calculation of Performance Information
Federal Tax Status
Annuity Provisions
Financial Statements
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INDIVIDUAL ANNUITY
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APPENDIX A--CONDENSED FINANCIAL INFORMATION
ACCUMULATION UNIT VALUE HISTORY
The following schedule includes Accumulation Unit values for the periods
indicated. This data has been taken from the Conseco Variable Annuity Account
F's financial statements. This information should be read in conjunction with
Conseco Variable Annuity Account F's financial statements and related notes
which are included in the Statement of Additional Information.
YEAR ENDED PERIOD ENDED
SUB-ACCOUNT 12/31/99 12/31/98
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EQUITY
Beginning of Period ........................ $10.878 $10.000
End of Period .............................. $16.013 $10.878
No. of Accum. Units Outstanding ............ 646,422 446,344
BALANCED
Beginning of Period ........................ $10.510 $10.000
End of Period .............................. $13.562 $10.510
No. of Accum. Units Outstanding ............ 675,068 399,217
FIXED INCOME
Beginning of Period ........................ $10.392 $10.000
End of Period .............................. $10.208 $10.392
No. of Accum. Units Outstanding ............ 881,706 308,576
GOVERNMENT SECURITIES
Beginning of Period ........................ $10.480 $10.000
End of Period .............................. $10.079 $10.480
No. of Accum. Units Outstanding ............ 451,882 153,270
MONEY MARKET
Beginning of Period ........................ $10.335 $10.000
End of Period .............................. $10.690 $10.335
No. of Accum. Units Outstanding ............ 4,895,749 779,777
ALGER AMERICAN GROWTH
Beginning of Period ........................ $13.913 $10.000
End of Period .............................. $18.349 $13.913
No. of Accum. Units Outstanding ............ 1,954,848 436,443
ALGER AMERICAN LEVERAGED ALLCAP
Beginning of Period ........................ $14.867 $10.000
End of Period .............................. $26.106 $14.867
No. of Accum. Units Outstanding ............ 1,362,969 109,259
ALGER AMERICAN MIDCAP GROWTH
Beginning of Period ........................ $12.391 $10.000
End of Period .............................. $16.110 $12.391
No. of Accum. Units Outstanding ............ 604,590 155,496
ALGER AMERICAN SMALL CAPITALIZATION
Beginning of Period ........................ $11.196 $10.000
End of Period .............................. $15.834 $11.196
No. of Accum. Units Outstanding ............ 485,731 153,227
VP INCOME & GROWTH
Beginning of Period ........................ $12.058 $10.000
End of Period .............................. $14.033 $12.058
No. of Accum. Units Outstanding ............ 805,221 351,625
VP INTERNATIONAL
Beginning of Period ........................ $11.110 $10.000
End of Period .............................. $17.973 $11.110
No. of Accum. Units Outstanding ............ 286,551 115,687
VP VALUE
Beginning of Period ........................ $10.217 $10.000
End of Period .............................. $9.990 $10.217
No. of Accum. Units Outstanding ............ 615,221 171,138
BERGER IPT--GROWTH
Beginning of Period ........................ $10.694 $10.000
End of Period .............................. $15.727 $10.694
No. of Accum. Units Outstanding ............ 161,596 74,889
33
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SUB-ACCOUNT 12/31/99 12/31/98
- --------------------------------------------------------------------------------
BERGER IPT--GROWTH AND INCOME
Beginning of Period ........................ $12.237 $10.000
End of Period .............................. $19.193 $12.237
No. of Accum. Units Outstanding ............ 827,033 153,114
BERGER IPT--SMALL COMPANY GROWTH
Beginning of Period ........................ $9.799 $10.000
End of Period .............................. $18.501 $9.799
No. of Accum. Units Outstanding ............ 279,265 112,140
BERGER/BIAM IPT--INTERNATIONAL
Beginning of Period ........................ $10.806 $10.000
End of Period .............................. $14.002 $10.806
No. of Accum. Units Outstanding ............ 21,269 20,704
THE DREYFUS SOCIALLY RESPONSIBLE
GROWTH FUND, INC.
Beginning of Period ........................ $12.261 $10.000
End of Period .............................. $15.727 $12.261
No. of Accum. Units Outstanding ............ 931,176 212,780
DREYFUS STOCK INDEX FUND
Beginning of Period ........................ $12.120 $10.000
End of Period .............................. $14.414 $12.120
No. of Accum. Units Outstanding ............ 3,732,395 1,229,906
DREYFUS VIF DISCIPLINED STOCK PORTFOLIO
Beginning of Period ........................ $10.726 $10.000
End of Period .............................. $12.534 $10.726
No. of Accum. Units Outstanding ............ 280,701 64,622
DREYFUS VIF INTERNATIONAL VALUE PORTFOLIO
Beginning of Period ........................ $9.423 $10.000
End of Period .............................. $11.883 $9.423
No. of Accum. Units Outstanding ............ 90,423 14,881
FEDERATED HIGH INCOME BOND II
Beginning of Period ........................ $9.906 $10.000
End of Period .............................. $9.994 $9.906
No. of Accum. Units Outstanding ............ 859,802 449,248
FEDERATED INTERNATIONAL EQUITY II
Beginning of Period ........................ $11.457 $10.000
End of Period .............................. $20.889 $11.457
No. of Accum. Units Outstanding ............ 200,438 49,555
FEDERATED UTILITY II
Beginning of Period ........................ $11.388 $10.000
End of Period .............................. $11.420 $11.388
No. of Accum. Units Outstanding ............ 550,507 227,545
INVESCO VIF--HIGH YIELD
Beginning of Period ........................ $9.512 $10.000
End of Period .............................. $10.251 $9.512
No. of Accum. Units Outstanding ............ 495,081 119,637
INVESCO VIF--EQUITY INCOME
Beginning of Period ........................ $10.300 $10.000
End of Period .............................. $11.674 $10.300
No. of Accum. Units Outstanding ............ 320,678 80,397
AGGRESSIVE GROWTH
Beginning of Period ........................ $12.864 $10.000
End of Period .............................. $28.593 $12.864
No. of Accum. Units Outstanding ............ 1,540,761 189,516
GROWTH
Beginning of Period ........................ $12.663 $10.000
End of Period .............................. $17.980 $12.663
No. of Accum. Units Outstanding ............ 3,067,175 424,913
34
<PAGE>
CONSECO VARIABLE INSURANCE COMPANY
2000 ACCOUNT F
INDIVIDUAL ANNUITY
- --------------------------------------------------------------------------------
YEAR ENDED PERIOD ENDED
SUB-ACCOUNT 12/31/99 12/31/98
- --------------------------------------------------------------------------------
WORLDWIDE GROWTH
Beginning of Period ........................ $11.887 $10.000
End of Period .............................. $19.278 $11.887
No. of Accum. Units Outstanding ............ 2,253,671 698,806
LAZARD RETIREMENT EQUITY
Beginning of Period ........................ $10.950 $10.000
End of Period .............................. $11.679 $10.950
No. of Accum. Units Outstanding ............ 134,126 93,997
LAZARD RETIREMENT SMALL CAP
Beginning of Period ........................ $9.311 $10.000
End of Period .............................. $9.653 $9.311
No. of Accum. Units Outstanding ............ 101,384 45,538
GROWTH & INCOME (LORD ABBETT)
Beginning of Period ........................ $10.812 $10.000
End of Period .............................. $12.447 $10.812
No. of Accum. Units Outstanding ............ 759,960 240,000
GROWTH AND INCOME (MITCHELL HUTCHINS)
Beginning of Period ........................ $11.030 $10.000
End of Period .............................. $12.000 $11.030
No. of Accum. Units Outstanding ............ 45,323 23,636
LIMITED MATURITY BOND
Beginning of Period ........................ $10.229 $10.000
End of Period .............................. $10.236 $10.229
No. of Accum. Units Outstanding ............ 921,343 308,953
PARTNERS
Beginning of Period ........................ $10.056 $10.000
End of Period .............................. $10.647 $10.056
No. of Accum. Units Outstanding ............ 524,039 308,591
STRONG OPPORTUNITY II
Beginning of Period ........................ $10.886 $10.000
End of Period .............................. $14.482 $10.886
No. of Accum. Units Outstanding ............ 489,674 181,752
STRONG MID CAP GROWTH II
Beginning of Period ........................ $12.506 $10.000
End of Period .............................. $23.416 $12.506
No. of Accum. Units Outstanding ............ 620,231 53,572
WORLDWIDE BOND
Beginning of Period ........................ $11.014 $10.000
End of Period .............................. $10.011 $11.014
No. of Accum. Units Outstanding ............ 85,090 31,389
WORLDWIDE EMERGING MARKETS
Beginning of Period ........................ $6.734 $10.000
End of Period .............................. $13.301 $6.734
No. of Accum. Units Outstanding ............ 211,063 36,153
WORLDWIDE HARD ASSETS
Beginning of Period ........................ $7.059 $10.000
End of Period .............................. $8.423 $7.059
No. of Accum. Units Outstanding ............ 67,746 12,476
WORLDWIDE REAL ESTATE
Beginning of Period ........................ $8.643 $10.000
End of Period .............................. $8.351 $8.643
No. of Accum. Units Outstanding ............ 34,645 25,254
There are no accumulation unit values shown for the following sub-accounts
because they were not available under your contract until the date of this
prospectus: Conseco 20 Focus; Conseco High Yield; Berger IPT-New Generation;
Rydex OTC; Rydex Nova; Seligman Communications and Information; and Seligman
Global Technology.
35
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APPENDIX B-PARTICIPATING INVESTMENT PORTFOLIOS
Below is a summary of the investment objectives and strategies of each
investment portfolio available under the contract. THERE CAN BE NO ASSURANCE
THAT THE INVESTMENT OBJECTIVES WILL BE ACHIEVED.
The fund prospectuses contain more complete information including a
description of the investment objectives, policies, restrictions and risks of
each portfolio.
CONSECO SERIES TRUST
Conseco Series Trust is managed by Conseco Capital Management, Inc. (CCM)
which is an affiliate of Conseco Variable. Conseco Series Trust is a mutual fund
with multiple portfolios. The following portfolios are available under the
contract:
CONSECO 20 FOCUS PORTFOLIO
The Conseco 20 Focus Portfolio seeks capital appreciation. Normally, the
Portfolio will invest at least 65% of its assets in common stocks of companies
that the adviser believes have above-average growth prospects. The Portfolio is
non-diversified and will normally concentrate its investments in a core position
of approximately 20-30 common stocks.
EQUITY PORTFOLIO
The Equity Portfolio seeks to provide a high total return consistent with
preservation of capital and a prudent level of risk. The portfolio will invest
primarily in selected equity securities, including common stocks and other
securities having the investment characteristics of common stocks, such as
convertible securities and warrants.
BALANCED PORTFOLIO
The Balanced Portfolio seeks a high total investment return, consistent
with the preservation of capital and prudent investment risk. Normally, the
portfolio invests approximately 50-65% of its assets in equity securities, and
the remainder in a combination of fixed income securities, or cash equivalents.
HIGH YIELD PORTFOLIO
The High Yield Portfolio seeks to provide a high level of current income
with a secondary objective of capital appreciation. Normally, the adviser
invests at least 65% of the Portfolio's assets in below investment grade
securities (those rated BB+/Ba1 or lower by independent rating agencies).
FIXED INCOME PORTFOLIO
The Fixed Income Portfolio seeks the highest level of income consistent
with preservation of capital. The portfolio invests primarily in investment
grade debt securities.
GOVERNMENT SECURITIES PORTFOLIO
The Government Securities Portfolio seeks safety of capital, liquidity and
current income. The portfolio will invest primarily in securities issued by the
U.S. government or an agency or instrumentality of the U.S. government.
MONEY MARKET PORTFOLIO
The Money Market Portfolio seeks current income consistent with stability
of capital and liquidity. The portfolio may invest in U.S. government
securities, bank obligations, commercial paper obligations, short-term corporate
debt securities, and municipal obligations.
THE ALGER AMERICAN FUND
The Alger American Fund is a mutual fund with multiple portfolios. The
manager of the fund is Fred Alger Management, Inc. The following portfolios are
available under the contract:
ALGER AMERICAN GROWTH PORTFOLIO
The Alger American Growth Portfolio seeks long-term capital appreciation.
It focuses on growing companies that generally have broad product lines,
markets, financial resources and depth of management. Under normal
circumstances, the portfolio invests primarily in the equity securities of large
companies.
ALGER AMERICAN LEVERAGED ALLCAP PORTFOLIO
The Alger American Leveraged AllCap Portfolio seeks long-term capital
appreciation. Under normal circumstances, the portfolio invests in the equity
securities of companies of any size which demonstrate promising growth
potential. The portfolio can borrow money up to one-third of its total assets to
buy additional securities.
ALGER AMERICAN MIDCAP GROWTH PORTFOLIO
The Alger American MidCap Growth Portfolio seeks long-term capital
appreciation. It focuses on midsize companies with promising growth potential.
Under normal circumstances, the portfolio invests primarily in the equity
securities of compa-
36
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CONSECO VARIABLE INSURANCE COMPANY
2000 ACCOUNT F
INDIVIDUAL ANNUITY
- --------------------------------------------------------------------------------
nies having a market capitalization within the Index.
ALGER AMERICAN SMALL CAPITALIZATION PORTFOLIO
The Alger American Small Capitalization Portfolio seeks long-term capital
appreciation. It focuses on small, fast-growing companies that offer innovative
products, services or technologies to a rapidly expanding marketplace. Under
normal circumstances, the portfolio invests primarily in the equity securities
of small capitalization companies.
AMERICAN CENTURY VARIABLE PORTFOLIOS, INC.
American Century Variable Portfolios, Inc. is a mutual fund with multiple
portfolios. The fund's investment adviser is American Century Investment
Management, Inc. The following portfolios are available under the contract:
VP INCOME & GROWTH FUND
The VP Income & Growth Fund seeks dividend growth, current income and
capital appreciation by investing in common stocks. The fund's investment
strategy utilizes quantitative management techniques in a two-step process that
draws heavily on computer technology.
VP INTERNATIONAL FUND
The VP International Fund seeks capital growth. The fund managers use a
growth investment strategy developed by American Century to invest in stocks of
companies that they believe will increase in value over time. This strategy
looks for companies with earnings and revenue growth. International investment
involves special risk considerations. These include economic and political
conditions, expected inflation rates and currency fluctuations. VP VALUE FUND
The VP Value Fund seeks long-term capital growth. Income is a secondary
objective. In selecting stocks for the VP Value Fund, the fund managers look for
stocks of medium to large companies that they believe are undervalued at the
time of purchase.
BERGER INSTITUTIONAL PRODUCTS TRUST
Berger Institutional Products Trust is a mutual fund with multiple
portfolios. Berger LLC (formerly, Berger Associates, Inc.) is the investment
advisor for the Berger IPT--Growth Fund, the Berger IPT--Growth and Income Fund,
the Berger IPT--Small Company Growth Fund and the Berger IPT--New Generation
Fund. BBOI Worldwide LLC, a joint venture between Berger LLC and Bank of Ireland
Asset Management (U.S.) Limited (BIAM), is the investment advisor for the
Berger/BIAM IPT-International Fund. BBOI Worldwide LLC has delegated daily
management of the Fund to BIAM. Berger LLC and BIAM have entered into an
agreement to dissolve BBOI Worldwide LLC. The dissolution of BBOI Worldwide LLC
will have no effect on the investment advisory services provided to the Fund.
Contingent upon shareholder approval, when BBOI Worldwide LLC is dissolved,
Berger LLC will become the Fund's advisor and BIAM will continue to be
responsible for day-to-day management of the Fund's portfolio as sub-advisor. If
approved by shareholders, these advisory changes are expected to take place in
the first half of this year. The following portfolios are available under the
contract:
BERGER IPT--GROWTH FUND (FORMERLY, BERGER IPT--100 FUND)
The Berger IPT--Growth Fund aims for long-term capital appreciation. In
pursuing that goal, the fund primarily invests in the common stocks of
established companies with the potential for strong earnings growth.
BERGER IPT--GROWTH AND INCOME FUND
The Berger IPT--Growth and Income Fund aims for capital appreciation and
has a secondary goal of investing in securities that produce current income for
the portfolio. In pursuing these goals, the fund primarily invests in the
securities of well-established, growing companies.
BERGER IPT--SMALL COMPANY GROWTH FUND
The Berger IPT--Small Company Growth Fund aims for capital appreciation. In
pursuing that goal, the fund primarily invests in the common stocks of small
companies with the potential for rapid earnings growth.
BERGER IPT--NEW GENERATION FUND
The Berger IPT--New Generation Fund seeks capital appreciation. In pursuing
that goal, the Fund primarily invests in the common stocks of companies believed
to have the potential to change the direction or dynamics of the industries in
which
37
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they operate or significantly influence the way businesses or consumers conduct
their affairs.
BERGER/BIAM IPT--INTERNATIONAL FUND
The Berger/BIAM IPT--International Fund aims for long-term capital
appreciation. In pursuing that goal, the fund primarily invests in a portfolio
consisting of common stocks of well-established foreign companies.
THE DREYFUS SOCIALLY RESPONSIBLE GROWTH FUND, INC.
The Dreyfus Socially Responsible Growth Fund, Inc. is a mutual fund. The
investment adviser for the fund is The Dreyfus Corporation.
The Dreyfus Socially Responsible Growth Fund, Inc. seeks to provide capital
growth, with current income as a secondary goal. To pursue these goals, the fund
invests primarily in the common stock of companies that, in the opinion of the
fund's management, meet traditional investment standards and conduct their
business in a manner that contributes to the enhancement of the quality of life
in America.
DREYFUS STOCK INDEX FUND
The Dreyfus Stock Index Fund is a mutual fund. The investment adviser for
the fund is The Dreyfus Corporation.
The Dreyfus Stock Index Fund seeks to match the total return of the
Standard & Poor's 500 Composite Stock Price Index. To pursue this goal, the fund
generally invests in all 500 stocks in the S&P 500 in proportion to their
weighting in the index.
DREYFUS VARIABLE INVESTMENT FUND
The Dreyfus Variable Investment Fund ("Dreyfus VIF") is a mutual fund with
multiple portfolios. The investment adviser for the portfolios is The Dreyfus
Corporation. The following portfolios are available under the contract:
DREYFUS VIF DISCIPLINED STOCK PORTFOLIO
The Dreyfus VIF Disciplined Stock Portfolio seeks investment returns
(consisting of capital appreciation and income) that are greater than the total
return performance of stocks represented by the Standard & Poor's 500 Composite
Stock Price Index. To pursue this goal, the portfolio invests in a blended
portfolio of growth and value stocks chosen through a disciplined investment
process.
DREYFUS VIF INTERNATIONAL VALUE PORTFOLIO
The Dreyfus VIF International Value Portfolio seeks long-term capital
growth. To pursue this goal, the portfolio ordinarily invests most of its assets
in equity securities of foreign issuers which Dreyfus considers to be "value"
companies.
FEDERATED INSURANCE SERIES
Federated Insurance Series is a mutual fund with multiple portfolios.
Federated Investment Management Company is the adviser to the Federated High
Income Bond Fund II and the Federated Utility Fund II. Federated Global
Investment Management Corp. is the adviser to the Federated International Equity
Fund II. The following portfolios are available under the contract:
FEDERATED HIGH INCOME BOND FUND II
The Federated High Income Bond Fund II's investment objective is to seek
high current income by investing primarily in a professionally managed,
diversified portfolio of fixed income securities. The fund pursues its
investment objective by investing in a diversified portfolio of high-yield,
lower-rated corporate bonds.
FEDERATED UTILITY FUND II
The Federated Utility Fund II's investment objective is to achieve high
current income and moderate capital appreciation. The fund pursues its
investment objective by investing under normal market conditions, at least 65%
of its assets in equity securities (including convertible securities) of
companies that derive at least 50% of their revenues from the provision of
electricity, gas and telecommunications related services.
FEDERATED INTERNATIONAL EQUITY FUND II
The Federated International Equity Fund II's investment objective is to
obtain a total return on its assets. The fund's total return will consist of two
components: (1) changes in the market value of its portfolio securities (both
realized and unrealized appreciation); and (2) income received from its
portfolio securities.
INVESCO VARIABLE INVESTMENT FUNDS, INC.
(NOT AVAILABLE FOR NEW SALES AS OF MAY 1, 2000)
INVESCO Variable Investment Funds, Inc. is a mutual fund with multiple
portfolios. INVESCO Funds Group, Inc. is the investment adviser for the Fund.
The following portfolios are available under the contract:
38
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CONSECO VARIABLE INSURANCE COMPANY
2000 ACCOUNT F
INDIVIDUAL ANNUITY
- --------------------------------------------------------------------------------
INVESCO VIF--EQUITY INCOME FUND
The INVESCO VIF--Equity Income Fund's primary goal is high current income,
with growth of capital as a secondary objective. The fund normally invests at
least 65% of its assets in dividend-paying common and preferred stocks, although
in recent years that percentage has been somewhat higher.
INVESCO VIF--HIGH YIELD FUND
The INVESCO VIF--High Yield Fund seeks to provide a high level of current
income, with growth of capital as a secondary objective. It invests
substantially all of its assets in lower-rated debt securities, commonly called
"junk bonds" and preferred stock, including securities issued by foreign
companies.
JANUS ASPEN SERIES
Janus Aspen Series is a mutual fund with multiple portfolios. Janus Capital
Corporation is the investment adviser to the fund. The following portfolios are
available under the contract:
AGGRESSIVE GROWTH PORTFOLIO
The Aggressive Growth Portfolio seeks long-term growth of capital. It
pursues its objective by investing primarily in common stocks selected for their
growth potential, and normally invests at least 50% of its equity assets in
medium-sized companies.
GROWTH PORTFOLIO
The Growth Portfolio seeks long-term growth of capital in a manner
consistent with the preservation of capital. It pursues its objective by
investing primarily in common stocks selected for their growth potential.
Although the Portfolio can invest in companies of any size, it generally invests
in larger, more established companies.
WORLDWIDE GROWTH PORTFOLIO
The Worldwide Growth Portfolio seeks long-term growth of capital in a
manner consistent with the preservation of capital. It pursues its objective by
investing primarily in common stocks of companies of any size throughout the
world. The portfolio normally invests in issuers from at least five different
countries, including the United States. The portfolio may at times invest in
fewer than five countries or even a single country.
LAZARD RETIREMENT SERIES, INC.
Lazard Retirement Series, Inc. is a mutual fund with multiple portfolios.
Lazard Asset Manage- ment serves as the investment manager of the portfolios.
The investment manager is a division of Lazard Freres, a New York limited
liability company, which is registered as an investment adviser with the SEC.
The following portfolios are available under the contract:
LAZARD RETIREMENT EQUITY PORTFOLIO
The Lazard Retirement Equity Portfolio seeks long-term capital
appreciation. The portfolio invests primarily in equity securities, principally
common stocks, of relatively large U.S. companies (those whose total market
value is more than $1 billion) that the investment manager believes are
undervalued based on their earnings, cash flow or asset values.
LAZARD RETIREMENT SMALL CAP PORTFOLIO
The Lazard Retirement Small Cap Portfolio seeks long-term capital
appreciation. The portfolio invests primarily in equity securities, principally
common stocks, of relatively small U.S. companies in the range of the Russell
2000 Index that the investment manager believes are undervalued based on their
earnings, cash flow or asset values.
LORD ABBETT SERIES FUND, INC.
Lord Abbett Series Fund, Inc. is a mutual fund with multiple portfolios.
The fund's investment adviser is Lord, Abbett & Co. The following portfolio is
available under the contract:
GROWTH & INCOME PORTFOLIO
The Growth & Income Portfolio's investment objective is long-term growth of
capital and income without excessive fluctuations in market value.
MITCHELL HUTCHINS SERIES TRUST
Mitchell Hutchins Series Trust is a mutual fund with multiple portfolios.
Mitchell Hutchins Asset Management Inc. is the investment adviser of the fund.
The following portfolio is available under the contract:
GROWTH AND INCOME PORTFOLIO
The Growth and Income Portfolio's investment objective is current income
and capital growth. The portfolio invests primarily in dividend-paying stocks of
companies that its investment adviser believes have potential for rapid earnings
growth.
NEUBERGER BERMAN ADVISERS MANAGEMENT TRUST
Neuberger Berman Advisers Management Trust is a mutual fund with multiple
portfolios. Neuberger Berman Management Inc. is the invest-
39
<PAGE>
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ment adviser. The following portfolios are available under the contract:
LIMITED MATURITY BOND PORTFOLIO
The Limited Maturity Bond Portfolio seeks the highest available current
income consistent with liquidity and low risk to principal; total return is a
secondary goal. To pursue these goals, the portfolio invests mainly in
investment-grade bonds and other debt securities from U.S. government and
corporate issuers. These may include mortgage- and asset-backed securities.
PARTNERS PORTFOLIO
The Partners Portfolio seeks growth of capital. To pursue this goal, the
portfolio invests mainly in common stocks of mid- to large-capitalization
companies. The managers look for well-managed companies whose stock prices are
believed to be undervalued.
RYDEX VARIABLE TRUST
Rydex Variable Trust is a mutual fund with multiple portfolios which are
managed by PADCO Advisors II, Inc. The following portfolios are available under
the contract:
OTC FUND
The OTC Fund seeks to provide investment results that correspond to a
benchmark for over-the-counter securities. The Fund's current benchmark is the
NASDAQ 100 IndexTM. The Fund invests principally in securities of companies
included in the NASDAQ 100 IndexTM. It also may invest in other instruments
whose performance is expected to correspond to that of the Index, and may engage
in futures and options transactions.
NOVA FUND
The Nova Fund seeks to provide investment returns that correspond to 150%
of the daily performance of the Standard & Poor's 500 Composite Stock Price
Index. Unlike traditional index funds, as its primary investment strategy, the
Fund invests to a significant extent in futures contracts and options on:
securities, futures contracts and stock indexes. On a day-to-day basis, the Fund
holds U.S. government securities to collateralize these futures and options
contracts.
SELIGMAN PORTFOLIOS, INC.
Seligman Portfolios, Inc. is a mutual fund with multiple portfolios which
are managed by J. & W. Seligman & Co. Incorporated. The following portfolios are
available under the contract:
SELIGMAN COMMUNICATIONS AND INFORMATION PORTFOLIO
The Seligman Communications and Information Portfolio seeks capital gain.
The Portfolio invests at least 80% of its net assets, exclusive of government
securities, short-term notes, and cash and cash equivalents, in securities of
companies operating in the communications, information and related industries.
The Portfolio generally invests at least 65% of its total assets in securities
of companies engaged in these industries. The Portfolio may invest in companies
of any size.
SELIGMAN GLOBAL TECHNOLOGY PORTFOLIO
The Seligman Global Technology Portfolio seeks long-term capital
appreciation. The Portfolio generally invests at least 65% of its assets in
equity securities of U.S. and non-U.S. companies with business operations in
technology and technology-related industries. The Portfolio may invest in
companies of any size.
STRONG OPPORTUNITY FUND II, INC.
Strong Opportunity Fund II, Inc. is a mutual fund. Strong Capital
Management, Inc. is the investment advisor for the fund. The following portfolio
is available under the contract:
OPPORTUNITY FUND II
The Opportunity Fund II seeks capital growth. The fund invests primarily in
stocks of medium-capitalization companies that the fund's manager believes are
underpriced, yet have attractive growth prospects.
STRONG VARIABLE INSURANCE FUNDS, INC.
Strong Variable Insurance Funds, Inc. is a mutual fund. Strong Capital
Management, Inc. is the investment advisor for the fund. The following portfolio
is available under the contract:
MID-CAP GROWTH FUND II
The Mid-Cap Growth Fund II seeks capital appreciation. The fund invests at
least 65% of its assets in stocks of medium-capitalization companies that the
fund's managers believe have favorable prospects for accelerating growth of
earnings, cash flow, or asset value.
40
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CONSECO VARIABLE INSURANCE COMPANY
2000 ACCOUNT F
INDIVIDUAL ANNUITY
- --------------------------------------------------------------------------------
VAN ECK WORLDWIDE INSURANCE TRUST
Van Eck Worldwide Insurance Trust is a mutual fund with multiple
portfolios. Van Eck Associates Corporation serves as investment adviser to the
funds. The following portfolios are available under the contract:
WORLDWIDE BOND FUND
The Worldwide Bond Fund seeks high total return income plus capital
appreciation by investing globally, primarily in a variety of debt securities.
The fund's long-term assets will consist of debt securities rated B or better by
Standard & Poor's or Moody's Investors' Service.
WORLDWIDE EMERGING MARKETS FUND
The Worldwide Emerging Markets Fund seeks long-term capital appreciation by
investing in equity securities in emerging markets around the world. The fund
emphasizes investment in countries that have relatively low gross national
product per capita, as well as the potential for rapid economic growth.
WORLDWIDE HARD ASSETS FUND
The Worldwide Hard Assets Fund seeks long-term capital appreciation by
investing primarily in "hard asset securities." Income is a secondary
consideration.
WORLDWIDE REAL ESTATE FUND
The Worldwide Real Estate Fund seeks a high total return by investing in
equity securities of companies that own significant real estate or that
principally do business in real estate.
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(cut along dotted line)
- --------------------------------------------------------------------------------
If you would like a free copy of the Statement of Additional Information
dated May 1, 2000 for this Prospectus, please complete this form, detach, and
mail to:
Conseco Variable Insurance Company
Administrative Office
11815 N. Pennsylvania Street
Carmel, Indiana 46032
Gentlemen:
Please send me a free copy of the Statement of Additional Information for the
Conseco Variable Annuity Account F fixed and variable annuity at the following
address:
Name:
------------------------------------------------------
Mailing Address:
-------------------------------------------
-----------------------------------------------------------
Sincerely,
-----------------------------------------------------------
(Signature)
- --------------------------------------------------------------------------------
Conseco Variable Insurance Company
11815 N. Pennsylvania Street
Carmel, Indiana 46032
(C) 2000, Conseco Variable Insurance Company
42
<PAGE>
[Logo Omitted]
CONSECO(R)
STEP UP(SM)
ANNUITIES ARE NOT FDIC INSURED. ANNUITIES ARE NOT
OBLIGATIONS OF ANY BANK. THE FINANCIAL INSTITUTION DOES
NOT GUARANTEE PERFORMANCE BY THE INSURER ISSUING THE
ANNUITY, NOR IS IT INSURED BY THE FDIC, NCUSIF,
OR ANY OTHER FEDERAL ENTITY.
[NO FDIC LOGO] [NO BANK LOGO]
CONSECO EQUITY SALES, INC., IS A BROKER-DEALER
FOR CONSECO VARIABLE INSURANCE COMPANY.
CONSECO EQUITY SALES IS THE PRINCIPAL UNDERWRITER OF VARIABLE ANNUITY PRODUCTS,
AND THE SECURITIES WITHIN, THAT ARE ISSUED THROUGH
CONSECO VARIABLE INSURANCE COMPANY.
BOTH COMPANIES ARE SUBSIDIARIES OF CONSECO, INC.,
A FINANCIAL SERVICES ORGANIZATION
HEADQUARTERED IN CARMEL, INDIANA. CONSECO, THROUGH ITS SUBSIDIARY COMPANIES,
HELPS 13 MILLION CUSTOMERS STEP UP TO A BETTER, MORE SECURE FUTURE.
CONSECO EQUITY SALES , INC., IS A MEMBER OF THE NASD.
CONSECO VARIABLE INSURANCE COMPANY
11815 N. Pennsylvania Street
Carmel, IN 46032
05-8318 (03/00) 08445
(C) 1999, 2000 Conseco Variable Insurance Company
conseco.com
[LOGO: INSURANCE MARKETPLACE
STANDARDS ASSOCIATION]
CONSECO, THE OFFICIAL FINANCIAL SERVICES PROVIDER OF [LOGO: NASCAR].
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
INDIVIDUAL FIXED AND VARIABLE DEFERRED ANNUITY CONTRACTS
issued by
CONSECO VARIABLE ANNUITY ACCOUNT F
and
CONSECO VARIABLE INSURANCE COMPANY
THIS IS NOT A PROSPECTUS.THIS STATEMENT OF ADDITIONAL INFORMATION SHOULD BE READ
IN CONJUNCTION WITH THE PROSPECTUS DATED MAY 1, 2000, FOR THE INDIVIDUAL FIXED
AND VARIABLE DEFERRED ANNUITY CONTRACTS WHICH ARE DESCRIBED HEREIN.
THE PROSPECTUS CONCISELY SETS FORTH INFORMATION THAT A PROSPECTIVE INVESTOR
OUGHT TO KNOW BEFORE INVESTING. FOR A COPY OF THE PROSPECTUS CALL US AT ~(800)
342-6307 OR WRITE US AT OUR ADMINISTRATIVE OFFICE: 11815 N. PENNSYLVANIA STREET,
CARMEL, INDIANA 46032.
THIS STATEMENT OF ADDITIONAL INFORMATION IS DATED MAY 1, 2000.
<PAGE>
TABLE OF CONTENTS
Page
COMPANY .............................................................. 1
INDEPENDENT ACCOUNTANTS .............................................. 1
LEGAL OPINIONS ....................................................... 1
DISTRIBUTION ......................................................... 1
Reduction or Elimination of the Contingent Deferred Sales Charge .... 1
CALCULATION OF PERFORMANCE INFORMATION ............................... 2
Total Return ........................................................ 2
Performance Information ............................................. 2
Historical Unit Values .............................................. 7
Reporting Agencies .................................................. 7
FEDERAL TAX STATUS ................................................... 7
General ............................................................. 8
Diversification ..................................................... 8
Multiple Contracts .................................................. 9
Partial 1035 Exchanges .............................................. 9
Contracts Owned by Other than Natural Persons ....................... 10
Tax Treatment of Assignments ........................................ 10
Death Benefits ...................................................... 10
Income Tax Withholding .............................................. 10
Tax Treatment of Withdrawals-- Non-Qualified Contracts .............. 10
Qualified Plans ..................................................... 11
Tax Treatment of Withdrawals-- Qualified Contracts .................. 14
Tax-Sheltered Annuities-- Withdrawal Limitations .................... 14
Mandatory Distributions-- Qualified Plans ........................... 14
ANNUITY PROVISIONS ................................................... 14
Variable Annuity Payout ............................................. 15
Annuity Unit ........................................................ 16
Fixed Annuity Payout ................................................ 16
FINANCIAL STATEMENTS ................................................. 16
<PAGE>
COMPANY
Information regarding Conseco Variable Insurance Company ("Company" or "Conseco
Variable") is contained in the prospectus. On October 7, 1998, the Company
changed its name from Great American Reserve Insurance Company to its present
name.
INDEPENDENT ACCOUNTANTS
The financial statements of Conseco Variable as of December 31, 1999 and 1998,
and for the years ~ended December 31, 1999, 1998 and 1997, included in the
prospectus, have been audited by PricewaterhouseCoopers LLP, 2900 One American
Square, Indianapolis, Indiana 46282, independent accountants, as set forth in
their report appearing therein.
LEGAL OPINIONS
Blazzard, Grodd & Hasenauer, P.C. of Westport, Connecticut has provided advice
on certain matters relating to the federal securities and income tax laws in
connection with the Contracts described in the prospectus.
DISTRIBUTION
Conseco Equity Sales, Inc., an affiliate of the Company, acts as the
distributor. The offering is on a continuous basis.
REDUCTION OR ELIMINATION OF THE CONTINGENT DEFERRED SALES CHARGE
The amount of the Contingent Deferred Sales Charge on the Contracts may be
reduced or eliminated when sales of the Contracts are made to individuals or to
a group of individuals in a manner that results in savings of sales expenses.
The entitlement to reduction of the Contingent Deferred Sales Charge will be
determined by the Company after examination of all the relevant factors such as:
1. The size and type of group to which sales are to be made will be considered.
Generally, the sales expenses for a larger group are less than for a smaller
group because of the ability to implement large numbers of Contracts with fewer
sales contacts.
2. The total amount of purchase payments to be received will be considered. Per
Contract sales expenses are likely to be less on larger purchase payments than
on smaller ones.
3. Any prior or existing relationship with the Company will be considered. Per
Contract sales expenses are likely to be less when there is a prior existing
relationship because of the likelihood of implementing the Contract with fewer
sales contacts.
4. There may be other circumstances, of which the Company is not presently
aware, which could result in reduced sales expenses.
If, after consideration of the foregoing factors, the Company determines that
there will be a reduction in sales expenses, the Company may provide for a
reduction or elimination of the Contingent Deferred Sales Charge.
The Contingent Deferred Sales Charge may be eliminated when the Contracts are
issued to an officer, director or employee of the Company or any of its
affiliates. In no event will any reduction or elimination of the Contingent
Deferred Sales Charge be permitted where the reduction or elimination will be
unfairly discriminatory to any person.
1
<PAGE>
CALCULATION OF PERFORMANCE INFORMATION
TOTAL RETURN
From time to time, we may advertise performance data. Such data will show the
percentage change in the value of an Accumulation Unit based on the performance
of an investment portfolio over a period of time, usually a calendar year,
determined by dividing the increase (decrease) in value for that unit by the
Accumulation Unit value at the beginning of the period.
Any such advertisement will include standardized average annual total return
figures for the time periods indicated in the advertisement. Such total return
figures will reflect the deduction of a 1.25% Mortality and Expense Risk Charge,
a .15% Administrative Charge, the expenses for the underlying investment
portfolio being advertised and any applicable Contract Maintenance Charges and
Contingent Deferred Sales Charges.
The Company may also advertise performance data which will be calculated in the
same manner as described above but which will not reflect the deduction of any
Contract Maintenance Charge and Contingent Deferred Sales Charge. The deduction
of any Contract Maintenance Charge and Contingent Deferred Sales Charge would
reduce any percentage increase or make greater any percentage decrease.
The hypothetical value of a Contract purchased for the time periods described in
the advertisement will be determined by using the actual Accumulation Unit
values for an initial $1,000 purchase payment, and deducting any applicable
Contract Maintenance Charges and any applicable Contingent Deferred Sales
Charges to arrive at the ending hypothetical value. The average annual total
return is then determined by computing the fixed interest rate that a $1,000
purchase payment would have to earn annually, compounded annually, to grow to
the hypothetical value at the end of the time periods described. The formula
used in these calculations is:
n
P (1+T) = ERV
Where:
P = beginning purchase payment of $1,000
T = average annual total return
n = number of years in period
ERV = ending redeemable value of a hypothetical
$1,000 purchase payment made at the
beginning of the one-, five-or 10-year
period at the end of the one-, five- or
10-year period (or fractional portion
thereof).
You should note that the investment results of each investment portfolio will
fluctuate over time, and any presentation of the investment portfolio's total
return for any period should not be considered as a representation of what an
investment may earn or what an your total return may be in any future period.
PERFORMANCE INFORMATION
The Contracts are relatively new and therefore do not have a meaningful
investment performance history. However, certain corresponding Portfolios have
been in existence for some time and consequently have investment performance
history. In order to demonstrate how the actual investment experience of the
Portfolios affects Accumulation Unit values, the Company has developed
performance information. The information is based upon the historical experience
of the Portfolios and is for the periods shown.
2
<PAGE>
Future performance of the portfolios will vary and the results shown are not
necessarily representative of future results. Performance for periods ending
after those shown may vary substantially from the examples shown. The
performance of the portfolios is calculated for a specified period of time by
assuming an initial purchase payment of $1,000 allocated to the portfolio. The
percentage increases (decreases) are determined by subtracting the initial
purchase payment from the ending value and dividing the remainder by the
beginning value. The performance may also show figures when no withdrawal is
assumed.
The following charts reflect performance information for the investment
portfolios of the Separate Account for the periods shown. Chart 1 reflects
performance information commencing from the date the Separate Account first
invested in the portfolio. Chart 2 reflects performance information commencing
from the inception date of the underlying portfolio (which date may precede the
inception date that the Separate Account first invested in the underlying
portfolio). Column A is standardized average annual total return which reflects
the deduction of the insurance charges, contract maintenance charge, contingent
deferred sales charge and the fees and expenses of the portfolios. Column B
reflects the deduction of the insurance charges and the fees and expenses of the
portfolios.
Performance is not shown in Chart 1 for the Conseco 20 Focus Portfolio, High
Yield Portfolio, Berger IPT -- New Generation Fund, OTC Fund, Nova Fund,
Seligman Communications and Information Portfolio and the Seligman Global
Technology Portfolio because they were not available under the Contract until
the date of the prospectus (May 1, 2000).
Performance is not shown in Chart 2 for the Conseco 20 Focus Portfolio, High
Yield Portfolio and Berger IPT -- New Generation Fund because the Portfolios
commenced operations on May 1, 2000. Performance shown in Chart 2 for the
Seligman Communications and Information Portfolio and the Seligman Global
Technology Portfolio does not reflect the 12b-1 fees these portfolios will incur
beginning May 1, 2000. The imposition of 12b-1 fees will reduce future
performance.
CHART 1: TOTAL RETURN FOR THE PERIODS ENDED DECEMBER 31, 1999:
<TABLE>
<CAPTION>
SEPARATE
ACCOUNT COLUMN A COLUMN B
INCEPTION 10 YRS/ 10 YRS/
DATE IN SINCE SINCE
PORTFOLIO 1 YR 3 YRS 5 YRS INCEPTION 1 YR 3 YRS 5 YRS INCEPTION
--------- ----- ----- ----- --------- ---- ----- ----- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
CONSECO SERIES TRUST
Balanced Portfolio .......................... 2/9/98 20.80% N/A N/A 13.49% 29.04% N/A N/A 17.49%
Equity Portfolio ............................ 2/9/98 37.82% N/A N/A 23.92% 47.20% N/A N/A 28.29%
Fixed Income Portfolio ...................... 2/9/98 (8.05%) N/A N/A (2.35%) (1.77%) N/A N/A 1.09%
Government Securities Portfolio ............. 2/9/98 (9.97%) N/A N/A (3.00%) (3.82%) N/A N/A .42%
Money Market Portfolio
THE ALGER AMERICAN FUND
Alger American Growth Portfolio ............. 2/9/98 23.47% N/A N/A 33.18% 31.89 N/A N/A 37.87%
Alger American Leveraged AllCap Portfolio ... 2/9/98 64.40% N/A N/A 60.50% 75.59% N/A N/A 66.15%
Alger American MidCap Growth Portfolio ...... 2/9/98 21.72% N/A N/A 24.32% 30.02% N/A N/A 28.70%
Alger American Small Capitalization Portfolio 2/9/98 32.41% N/A N/A 23.19% 41.43% N/A N/A 27.53%
AMERICAN CENTURY VARIABLE PORTFOLIOS, INC. ..
VP Income & Growth .......................... 2/9/98 8.95% N/A N/A 15.56% 16.38% N/A N/A 19.64%
VP International ............................ 2/9/98 51.46% N/A N/A 31.73% 61.77% N/A N/A 36.37%
VP Value .................................... 2/9/98 (8.48%) N/A N/A (3.46%) (2.23%) N/A N/A (0.05%)
</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
SEPARATE
ACCOUNT COLUMN A COLUMN B
INCEPTION 10 YRS/ 10 YRS/
DATE IN SINCE SINCE
PORTFOLIO 1 YR 3 YRS 5 YRS INCEPTION 1 YR 3 YRS 5 YRS INCEPTION
--------- ----- ----- ----- --------- ---- ----- ----- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
BERGER INSTITUTIONAL PRODUCTS TRUST
Berger IPT-- Growth Fund .................. 2/9/98 37.69% N/A N/A 22.74% 47.06% N/A N/A 27.07%
Berger IPT-- Growth and Income Fund ....... 2/9/98 46.85% N/A N/A 36.39% 56.84% N/A N/A 41.19%
Berger IPT-- Small Company Growth Fund .... 2/9/98 76.77% N/A N/A 33.75% 88.79% N/A N/A 38.47%
Berger/BIAM IPT-- International Fund ...... 2/9/98 21.32% N/A N/A 15.43% 29.59% N/A N/A 19.50%
THE DREYFUS SOCIALLY RESPONSIBLE
GROWTH FUND, INC ........................ 2/9/98 20.09% N/A N/A 22.75% 28.27% N/A N/A 27.07%
DREYFUS STOCK INDEX FUND .................. 2/9/98 11.34% N/A N/A 17.21% 18.93% N/A N/A 21.34%
DREYFUS VARIABLE INVESTMENT FUND
Disciplined Stock Portfolio ............... 5/1/98 9.39% N/A N/A 10.07% 16.85% N/A N/A 14.47%
International Value Portfolio ............. 5/1/98 18.05% N/A N/A 6.61% 26.10% N/A N/A 10.87%
FEDERATED INSURANCE SERIES
Federated High Income Bond Fund II ........ 2/9/98 (5.56%) N/A N/A (3.44%) .88% N/A N/A (0.03%)
Federated Utility Fund II ................. 2/9/98 (6.13%) N/A N/A 3.62% .28% N/A N/A 7.28%
Federated International Equity Fund II .... 2/9/98 70.71% N/A N/A 42.63% 82.32% N/A N/A 47.66%
INVESCO VARIABLE INVESTMENT FUNDS, INC ....
INVESCO VIF--High Yield Fund .............. 5/1/98 .89% N/A N/A (2.41%) 7.77% N/A N/A 1.50%
INVESCO VIF--Equity Income Fund ........... 5/1/98 6.10% N/A N/A 5.48% 13.34% N/A N/A 9.70%
JANUS ASPEN SERIES
Aggressive Growth Portfolio ............... 2/9/98 108.13% N/A N/A 68.41% 122.28% N/A N/A 74.35%
Growth Portfolio .......................... 2/9/98 32.93% N/A N/A 31.76% 41.98% N/A N/A 36.40%
Worldwide Growth Portfolio ................ 2/9/98 51.83% N/A N/A 36.70% 62.17% N/A N/A 41.52%
LAZARD RETIREMENT SERIES, INC .............
Lazard Retirement Equity Portfolio ........ 2/9/98 (0.15%) N/A N/A 4.86% 6.66% N/A N/A 8.56%
Lazard Retirement Small Cap Portfolio ..... 2/9/98 (2.96%) N/A N/A (5.20%) 3.67% N/A N/A (1.85%)
LORD ABBETT SERIES FUND, INC ..............
Growth and Income Portfolio ............... 2/9/98 7.77% N/A N/A 8.45% 15.12% N/A N/A 12.28%
MITCHELL HUTCHINS SERIES TRUST
Growth and Income Portfolio ............... 2/9/98 1.85% N/A N/A 6.38% 8.80% N/A N/A 10.13%
NEUBERGER BERMAN ADVISERS MANAGEMENT TRUST
Limited Maturity Bond Portfolio ........... 2/9/98 (6.33%) N/A N/A (2.21%) .07% N/A N/A 1.24%
Partners Portfolio ........................ 2/9/98 (0.89%) N/A N/A (0.15%) 5.88% N/A N/A 3.37%
STRONG OPPORTUNITY FUND II, INC ...........
Opportunity Fund II ....................... 2/9/98 24.55% N/A N/A 17.50% 33.03% N/A N/A 21.65%
STRONG VARIABLE INSURANCE FUNDS, INC ......
Strong MidCap Growth Fund II .............. 2/9/98 75.32% N/A N/A 51.52% 87.24% N/A N/A 56.86%
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
SEPARATE
ACCOUNT COLUMN A COLUMN B
INCEPTION 10 YRS/ 10 YRS/
DATE IN SINCE SINCE
PORTFOLIO 1 YR 3 YRS 5 YRS INCEPTION 1 YR 3 YRS 5 YRS INCEPTION
--------- ----- ----- ----- --------- ---- ----- ----- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
VAN ECK WORLDWIDE INSURANCE TRUST
Worldwide Bond Fund ....................... 2/9/98 (14.92%) N/A N/A (3.35%) (9.11%) N/A N/A .06%
Worldwide Emerging Markets Fund............ 2/9/98 84.93% N/A N/A 12.31% 97.51% N/A N/A 16.29%
Worldwide Hard Assets Fund ................ 2/9/98 11.70% N/A N/A (11.80%) 19.32% N/A N/A (8.68%)
Worldwide Real Estate Trust ............... 2/9/98 (9.56%) N/A N/A (12.20%) (3.38%) N/A N/A (9.10%)
</TABLE>
CHART 2: TOTAL RETURN FOR THE PERIODS ENDED DECEMBER 31, 1999:
<TABLE>
<CAPTION>
SEPARATE
ACCOUNT COLUMN A COLUMN B
INCEPTION 10 YRS/ 10 YRS/
DATE IN SINCE SINCE
PORTFOLIO 1 YR 3 YRS 5 YRS INCEPTION 1 YR 3 YRS 5 YRS INCEPTION
--------- ----- ----- ----- --------- ---- ----- ----- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
CONSECO SERIES TRUST
Balanced Portfolio ......................... 07/25/94 19.88% 15.43% 15.74% 15.44% 29.04% 17.91% 16.74% 16.14%
Equity Portfolio ........................... 07/25/94 36.77% 22.78% 22.83% 22.85% 47.20% 25.42% 23.88% 23.60%
Fixed Income Portfolio ..................... 07/25/94 (8.76%) 1.64% 4.32% 5.54% (1.77%) 3.84% 5.23% 6.18%
Government Securities Portfolio ............ 07/25/94 (10.66%) (0.13%) 1.94% 1.94% (3.82%) 2.03% 2.83% 2.56%
Money Market Portfolio ..................... 07/25/94 (3.92%) (0.08%) 0.06% 0.24% 3.43% 2.08% 0.94% 0.86%
THE ALGER AMERICAN FUND
Alger American Growth Portfolio ............ 12/31/89 22.52% 31.05% 28.03% 23.23% 31.89% 33.86% 29.14% 23.27%
Alger American Leveraged AllCap Portfolio .. 01/25/95 63.13% 44.92% N/A 43.72% 75.59% 48.01% N/A 44.98%
Alger American MidCap Growth Portfolio ..... 05/03/93 20.79% 20.65% 23.22% 22.95% 30.02% 23.23% 24.28% 23.35%
Alger American
Small Capitalization Portfolio ........... 12/31/89 31.40% 18.59% 20.11% 18.28% 41.43% 21.14% 21.15% 18.32%
AMERICAN CENTURY VARIABLE PORTFOLIOS, INC.
VP Income & Growth ......................... 02/06/98 8.12% N/A N/A 15.61% 16.38% N/A N/A 20.30%
VP International ........................... 05/02/94 50.31% 27.83% 21.81% 21.71% 61.77% 30.57% 22.87% 22.41%
VP Value ................................... 05/01/96 (9.18%) 6.10% N/A 15.38% (2.23%) 8.39% N/A 17.08%
BERGER INSTITUTIONAL PRODUCTS TRUST
Berger IPT-- Growth Fund ................... 05/01/96 36.63% 21.26% N/A 18.92% 47.06% 23.86% N/A 20.68%
Berger IPT-- Growth and Income Fund ........ 05/01/97 45.72% N/A N/A 36.09% 56.84% N/A N/A 39.39%
Berger IPT-- Small Company Growth Fund ..... 05/01/96 75.44% 28.84% N/A 23.58% 88.79% 31.60% N/A 25.40%
Berger IPT-- New Generation Fund * ......... Fund Inception Date 05/01/2000
Berger/BIAM IPT-- International Fund ....... 04/30/97 20.39% N/A N/A 11.53% 29.58% N/A N/A 14.23%
THE DREYFUS SOCIALLY RESPONSIBLE
GROWTH FUND, INC. ........................ 10/07/93 19.17% 24.94% 26.11% 24.37% 28.27% 27.61% 27.20% 24.83%
DREYFUS STOCK INDEX FUND ................... 12/31/89 10.48% 22.94% 25.31% 18.51% 18.93% 25.57% 26.39% 18.55%
DREYFUS VARIABLE INVESTMENT FUND
Disciplined Stock Portfolio ................ 04/30/96 8.56% 18.32% N/A 20.26% 16.85% 20.86% N/A 22.03%
International Value Portfolio .............. 05/01/96 17.16% 9.34% N/A 8.61% 26.10% 11.69% N/A 10.22%
FEDERATED INSURANCE SERIES
Federated High Income Bond Fund II ......... 03/01/94 (6.28%) 2.37% 8.11% 6.37% 0.88% 4.58% 9.06% 6.99%
Federated Utility Fund II .................. 02/10/94 (6.85%) 9.75% 12.87% 11.91% 0.28% 12.11% 13.86% 12.54%
Federated International Equity Fund II ..... 05/08/95 69.41% 32.19% N/A 23.21% 82.32% 35.02% N/A 24.34%
</TABLE>
5
<PAGE>
<TABLE>
<CAPTION>
SEPARATE
ACCOUNT COLUMN A COLUMN B
INCEPTION 10 YRS/ 10 YRS/
DATE IN SINCE SINCE
PORTFOLIO 1 YR 3 YRS 5 YRS INCEPTION 1 YR 3 YRS 5 YRS INCEPTION
--------- ----- ----- ----- --------- ---- ----- ----- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
INVESCO VARIABLE INVESTMENT FUNDS, INC.
INVESCO VIF--High Yield Fund ................ 12/15/93 0.12% 4.03% 5.80% 8.02% 7.77% 6.27% 6.73% 8.61%
INVESCO VIF--Equity Income Fund ............. 12/15/93 5.29% 12.90% 15.39% 16.68% 13.34% 15.33% 16.39% 17.31%
JANUS ASPEN SERIES
Aggressive Growth Portfolio ................. 09/13/93 106.54% 45.52% 33.51% 35.28% 122.28% 48.64% 34.67% 35.75%
Growth Portfolio ............................ 09/13/93 31.91% 29.40% 27.30% 25.54% 41.98% 32.18% 28.40% 25.98%
Worldwide Growth Portfolio .................. 09/13/93 50.68% 32.78% 30.94% 28.06% 62.17% 35.62% 32.07% 28.51%
LAZARD RETIREMENT SERIES, INC.
Lazard Retirement Equity Portfolio .......... 01/30/98 (0.92%) N/A N/A 4.33% 6.66% N/A N/A 8.42%
Lazard Retirement Small Cap Portfolio ....... 11/04/97 (3.70%) N/A N/A (4.21%) 3.67% N/A N/A (1.26%)
LORD ABBETT SERIES FUND, INC.
Growth and Income Portfolio ................. 12/31/89 6.95% 14.07% 18.15% 14.72% 15.12% 16.51% 19.17% 14.75%
MITCHELL HUTCHINS SERIES TRUST
Growth and Income Portfolio ................. 02/06/98 1.07% N/A N/A 6.12% 8.80% N/A N/A 10.46%
NEUBERGER BERMAN ADVISERS MANAGEMENT TRUST
Limited Maturity Bond Portfolio ............. 12/31/89 (7.04%) 0.72% 3.41% 4.68% 0.07% 2.89% 4.32% 4.73%
Partners Portfolio .......................... 03/22/94 (1.64%) 9.89% 18.62% 17.20% 5.88% 12.25% 19.64% 17.86%
RYDEX VARIABLE TRUST
OTC Fund .................................... 10/25/96 84.01% 52.80% N/A 49.77% 98.07% 56.03% N/A 52.34
Nova Fund ................................... 10/22/96 12.32% 20.58% N/A 19.68% 20.90% 23.14% N/A 21.70%
SELIGMAN PORTFOLIOS, INC.
Seligman Communications and
Information Portfolio ..................... 10/13/94 40.10% 17.08% 17.53% 18.06% 33.03% 22.70% 21.87% 19.78%
Seligman Global Technology Portfolio ........ 05/02/96 79.03% 33.19% N/A 28.31% 87.24% 43.90% N/A 43.90%
STRONG OPPORTUNITY FUND II, INC.
Opportunity Fund II ......................... 05/08/92 23.60% 20.12% 20.82% 19.75% 50.80% 19.60% 18.54% 18.81%
STRONG VARIABLE INSURANCE FUNDS, INC.
Strong MidCap Growth Fund II ................ 12/31/96 73.98% 40.91% N/A 40.91% 92.68% 36.04% 30.20% N/A
VAN ECK WORLDWIDE INSURANCE TRUST
Worldwide Bond Fund ......................... 12/31/89 (15.57%) 2.96% 7.33% (9.10%) 0.82% 3.86% 7.36%
Worldwide Emerging Markets Fund ............. 12/27/95 83.54% 1.74% N/A 7.25% 97.51% 3.94% N/A 8.69%
Worldwide Hard Assets Fund .................. 12/31/89 10.86% (14.87%) (4.16%) 2.95% 19.32% (13.01%) (3.31%) 3.00%
Worldwide Real Estate Trust ................. 02/06/98 (10.24%) N/A N/A (12.21%) (3.38%) N/A N/A (8.58%)
</TABLE>
6
<PAGE>
HISTORICAL UNIT VALUES
The Company may also show historical Accumulation Unit values in certain
advertisements containing illustrations. These illustrations will be based on
actual Accumulation Unit values.
In addition, the Company may distribute sales literature which compares the
percentage change in Accumulation Unit values for any of the investment
portfolios against established market indices such as the Standard & Poor's 500
Composite Stock Price Index, the Dow Jones Industrial Average or other
management investment companies which have investment objectives similar to the
investment portfolio being compared. The Standard & Poor's 500 Composite Stock
Price Index is an unmanaged, unweighted average of 500 stocks, the majority of
which are listed on the New York Stock Exchange. The Dow Jones Industrial
Average is an unmanaged, weighted average of thirty blue chip industrial
corporations listed on the New York Stock Exchange. Both the Standard & Poor's
500 Composite Stock Price Index and the Dow Jones Industrial Average assume
quarterly reinvestment of dividends.
REPORTING AGENCIES
The Company may also distribute sales literature which compares the performance
of the Accumulation Unit values of the Contracts with the unit values of
variable annuities issued by other insurance companies. Such information will be
derived from the Lipper Variable Insurance Products Performance Analysis
Service, the VARDS Report or from Morningstar.
The Lipper Variable Insurance Products Performance Analysis Service is published
by Lipper Analytical Services, Inc., a publisher of statistical data which
currently tracks the performance of almost 4,000 investment companies. The
rankings compiled by Lipper may or may not reflect the deduction of asset-based
insurance charges. The Company's sales literature utilizing these rankings will
indicate whether or not such charges have been deducted. Where the charges have
not been deducted, the sales literature will indicate that if the charges had
been deducted, the ranking might have been lower.
The VARDS Report is a monthly variable annuity industry analysis compiled by
Variable Annuity Research & Data Service of Roswell, Georgia and published by
Financial Planning Resources, Inc. The VARDS rankings may or may not reflect the
deduction of asset-based insurance charges. In addition, VARDS prepares risk
adjusted rankings, which consider the effects of market risk on total return
performance. This type of ranking may address the question as to which funds
provide the highest total return with the least amount of risk. Other ranking
services may be used as sources of performance comparison, such as
CDA/Weisenberger. Morningstar rates a variable annuity against its peers with
similar investment objectives. Morningstar does not rate any variable annuity
that has less than three years of performance data.
FEDERAL TAX STATUS
NOTE: THE FOLLOWING DESCRIPTION IS BASED UPON THE COMPANY'S UNDERSTANDING OF
CURRENT FEDERAL INCOME TAX LAW APPLICABLE TO ANNUITIES IN GENERAL. THE COMPANY
CANNOT PREDICT THE PROBABILITY THAT ANY CHANGES IN SUCH LAWS WILL BE MADE.
PURCHASERS ARE CAUTIONED TO SEEK COMPETENT TAX ADVICE REGARDING THE POSSIBILITY
OF SUCH CHANGES. THE COMPANY DOES NOT GUARANTEE THE TAX STATUS OF THE CONTRACTS.
PURCHASERS BEAR THE COMPLETE RISK THAT THE CONTRACTS MAY NOT BE TREATED AS
"ANNUITY CONTRACTS" UNDER FEDERAL INCOME TAX LAWS. IT SHOULD BE FURTHER
UNDERSTOOD THAT THE FOLLOWING DISCUSSION IS NOT EXHAUSTIVE AND THAT SPECIAL
RULES NOT DESCRIBED HEREIN MAY BE APPLICABLE IN CERTAIN SITUATIONS. MOREOVER, NO
ATTEMPT HAS BEEN MADE TO CONSIDER ANY APPLICABLE STATE OR OTHER TAX LAWS.
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GENERAL
Section 72 of the Internal Revenue Code of 1986, as amended ("Code") governs
taxation of annuities in general. An Owner is not taxed on increases in the
value of a Contract until distribution occurs, either in the form of a lump sum
payment or as annuity payments under the annuity option selected. For a lump sum
payment received as a total withdrawal (total surrender), the recipient is taxed
on the portion of the payment that exceeds the cost basis of the Contract. For
non-qualified Contracts, this cost basis is generally the purchase payments,
while for qualified Contracts there may be no cost basis. The taxable portion of
the lump sum payment is taxed at ordinary income tax rates.
For annuity payments, a portion of each payment in excess of an exclusion amount
is includible in taxable income. The exclusion amount for payments based on a
fixed annuity option is determined by multiplying the payment by the ratio that
the cost basis of the Contract (adjusted for any period or refund feature) bears
to the expected return under the Contract. The exclusion amount for payments
based on a variable annuity option is determined by dividing the cost basis of
the Contract (adjusted for any period certain or refund guarantee) by the number
of years over which the annuity is expected to be paid. Payments received after
the investment in the Contract has been recovered (i.e. when the total of the
excludable amount equals the investment in the Contract) are fully taxable. The
taxable portion is taxed at ordinary income tax rates. For certain types of
Qualified Plans there may be no cost basis in the Contract within the meaning of
Section 72 of the Code. Owners, annuitants and beneficiaries under the Contracts
should seek competent financial advice about the tax consequences of any
distributions.
The Company is taxed as a life insurance company under the Code. For federal
income tax purposes, the Separate Account is not a separate entity from the
Company, and its operations form a part of the Company.
DIVERSIFICATION
Section 817(h) of the Code imposes certain diversification standards on the
underlying assets of variable annuity contracts. The Code provides that a
variable annuity contract will not be treated as an annuity contract for any
period (and any subsequent period) for which the investments are not, in
accordance with regulations prescribed by the United States Treasury Department
("Treasury Department"), adequately diversified. Disqualification of the
Contract as an annuity contract would result in the imposition of federal income
tax to the Owner with respect to earnings allocable to the Contract prior to the
receipt of payments under the Contract. The Code contains a safe harbor
provision which provides that annuity contracts such as the Contract meet the
diversification requirements if, as of the end of each quarter, the underlying
assets meet the diversification standards for a regulated investment company and
no more than fifty-five percent (55%) of the total assets consist of cash, cash
items, U.S. Government securities and securities of other regulated investment
companies.
Regulations issued by the Treasury Department ("the Regulations") amplify the
diversification requirements for variable contracts set forth in the Code and
provide an alternative to the safe harbor provision described above. Under the
Regulations, an investment portfolio will be deemed adequately diversified if:
(1) no more than 55% of the value of the total assets of the portfolio is
represented by any one investment; (2) no more than 70% of the value of the
total assets of the portfolio is represented by any two investments; (3) no more
than 80% of the value of the total assets of the portfolio is represented by any
three investments; and (4) no more than 90% of the value of the total assets of
the portfolio is represented by any four investments.
The Code provides that, for purposes of determining whether or not the
diversification standards imposed on the underlying assets of variable contracts
by Section 817(h) of the Code have been met, "each United States government
agency or instrumentality shall be treated as a separate issuer."
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The Company intends that all investment portfolios underlying the Contracts will
be managed in such a manner as to comply with these diversification
requirements.
The Treasury Department has indicated that the diversification Regulations do
not provide guidance regarding the circumstances in which Owner control of the
investments of the Separate Account will cause the Owner to be treated as the
owner of the assets of the Separate Account, thereby resulting in the loss of
favorable tax treatment for the Contract. At this time it cannot be determined
whether additional guidance will be provided and what standards may be contained
in such guidance.
The amount of Owner control which may be exercised under the Contract is
different in some respects from the situations addressed in published rulings
issued by the Internal Revenue Service in which it was held that the policy
owner was not the owner of the assets of the separate account. It is unknown
whether these differences, such as the Owner's ability to transfer among
investment choices or the number and type of investment choices available, would
cause the Owner to be considered as the owner of the assets of the Separate
Account resulting in the imposition of federal income tax to the Owner with
respect to earnings allocable to the Contract prior to receipt of payments under
the Contract.
In the event any forthcoming guidance or ruling is considered to set forth a new
position, such guidance or ruling will generally be applied only prospectively.
However, if such ruling or guidance was not considered to set forth a new
position, it may be applied retroactively resulting in the Owners being
retroactively determined to be the owners of the assets of the Separate Account.
Due to the uncertainty in this area, the Company reserves the right to modify
the Contract in an attempt to maintain favorable tax treatment.
MULTIPLE CONTRACTS
The Code provides that multiple non-qualified annuity contracts which are issued
within a calendar year to the same contract owner by one company or its
affiliates are treated as one annuity contract for purposes of determining the
tax consequences of any distribution. Such treatment may result in adverse tax
consequences including more rapid taxation of the distributed amounts from such
combination of contracts. For purposes of this rule, contracts received in a
Section 1035 exchange will be considered issued in the year of the exchange.
Owners should consult a tax adviser prior to purchasing more than one
non-qualified annuity contract in any calendar year.
PARTIAL 1035 EXCHANGES
Section 1035 of the Code provides that an annuity contract may be exchanged in a
tax-free transaction for another annuity contract. In 1998 in CONWAY VS.
COMMISSIONER, the Tax Court held that the direct transfer of a portion of an
annuity contract into another annuity contract qualified as a non-taxable
exchange. On November 22, 1999, the Internal Revenue Service filed an Action on
Decision which indicated that it acquiesced in the Tax Court decision in CONWAY.
However, in its acquiesence with the decision of the Tax Court, the Internal
Revenue Service stated that it will challenge transactions where taxpayers enter
into a series of partial exchanges and annuitizations as part of a design to
avoid application of the 10% premature distribution penalty or other limitations
imposed on annuity contracts under the Code. In the absence of further guidance
from the Internal Revenue Service it is unclear what specific types of partial
exchange designs and transactions will be challenged by the Internal Revenue
Service. Due to the uncertainty in this area, owners should consult their own
tax advisers prior to entering into a partial exchange of an annuity contract.
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CONTRACTS OWNED BY OTHER THAN NATURAL PERSONS
Under Section 72(u) of the Code, the investment earnings on premiums for the
Contracts will be taxed currently to the Owner if the Owner is a non-natural
person, e.g., a corporation or certain other entities. Such Contracts generally
will not be treated as annuities for federal income tax purposes. However, this
treatment is not applied to a Contract held by a trust or other entity as an
agent for a natural person nor to Contracts held by Qualified Plans. Purchasers
should consult their own tax counsel or other tax adviser before purchasing a
Contract to be owned by a non-natural person.
TAX TREATMENT OF ASSIGNMENTS
An assignment or pledge of a Contract may be a taxable event. You should
therefore consult competent tax advisers should they wish to assign or pledge
your Contract.
If the Contract is issued pursuant to a retirement plan which receives favorable
treatment under the provision of Section 408 of the Code, it may not be
assigned, pledged or otherwise transferred except as allowed under applicable
law.
DEATH BENEFITS
Any death benefits paid under the contract are taxable to the beneficiary. The
rules governing the taxation of payments from an annuity contract, as discussed
above, generally apply to the payment of death benefits and depend on whether
the death benefits are paid as a lump sum or as annuity payments. Estate taxes
may also apply.
INCOME TAX WITHHOLDING
All distributions or the portion thereof which is includible in the gross income
of the Owner are subject to federal income tax withholding. Generally, amounts
are withheld from periodic payments at the same rate as wages and at the rate of
10% from non-periodic payments. However, the Owner, in many cases, may elect not
to have taxes withheld or to have withholding done at a different rate.
Certain distributions from retirement plans qualified under Section 401 or
Section 403(b) of the Code, which are not directly rolled over to another
eligible retirement plan or individual retirement account or individual
retirement annuity, are subject to a mandatory 20% withholding for federal
income tax. The 20% withholding requirement generally does not apply to: a) a
series of substantially equal payments made at least annually for the life or
life expectancy of the participant or joint and last survivor expectancy of the
participant and a designated beneficiary or for a specified period of 10 years
or more; or b) distributions which are required minimum distributions; or c) the
portion of the distributions not includible in gross income (i.e. returns of
after-tax contributions); or d) hardship withdrawals. Participants should
consult their own tax counsel or other tax adviser regarding withholding
requirements.
TAX TREATMENT OF WITHDRAWALS -- NON-QUALIFIED CONTRACTS
Section 72 of the Code governs treatment of distributions from annuity
contracts. It provides that if the Contract Value exceeds the aggregate purchase
payments made, any amount withdrawn will be treated as coming first coming from
the principal. Withdrawn earnings are includible in gross income. It further
provides that a ten percent (10%) penalty will apply to the income portion of
any premature distribution. However, the penalty is not imposed on amounts
received: (a) after you reach age 591/2; (b) after your death; (c) if you become
totally disabled (for this purpose disability is as defined in Section 72(m)(7)
of the Code); (d) in a series of substantially equal periodic payments made not
less frequently than annually for your life (or life expectancy) or for the
joint lives (or joint life expectancies) of you and your Beneficiary; (e) under
an immediate annuity; or (f) which are allocable to purchase payments made prior
to August 14, 1982.
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With respect to (d) above, if the series of substantially equal periodic
payments is modified before the later of your attaining age 591/2 or 5 years
from the date of the first periodic payment, then the tax for the year of the
modification is increased by an amount equal to the tax which would have been
imposed (the 10% penalty tax) but for the exception, plus interest for the tax
years in which the exception was used.
The above information does not apply to Qualified Contracts. However, separate
tax withdrawal penalties and restrictions may apply to such Qualified Contracts.
(See "Tax Treatment of Withdrawals -- Qualified Contracts" below.)
QUALIFIED PLANS
The Contracts are designed to be suitable for use under various types of
Qualified Plans. Taxation of participants in each Qualified Plan varies with the
type of plan and terms and conditions of each specific plan. Owners, annuitants
and beneficiaries are cautioned that benefits under a Qualified Plan may be
subject to the terms and conditions of the plan regardless of the terms and
conditions of the Contracts issued pursuant to the plan. Some retirement plans
are subject to distribution and other requirements that are not incorporated
into the Company's administrative procedures. The Company is not bound by the
terms and conditions of such plans to the extent such terms conflict with the
terms of a Contract, unless the Company specifically consents to be bound.
Owners, participants and beneficiaries are responsible for determining that
contributions, distributions and other transactions with respect to the
Contracts comply with applicable law.
A Qualified Contract will not provide any necessary or additional tax deferral
if it is used to fund a Qualified Plan that is tax deferred. However, the
Contract has features and benefits other than tax deferral that may make it an
appropriate investment for a Qualified Plan. Following are general descriptions
of the types of Qualified Plans with which the Contracts may be used. Such
descriptions are not exhaustive and are for general informational purposes only.
The tax rules regarding Qualified Plans are very complex and will have differing
applications depending on individual facts and circumstances. Each purchaser
should obtain competent tax advice prior to purchasing a Contract issued under a
Qualified Plan.
Contracts issued pursuant to Qualified Plans include special provisions
restricting Contract provisions that may otherwise be available as described
herein. Generally, Contracts issued pursuant to Qualified Plans are not
transferable except upon surrender or annuitization. Various penalty and excise
taxes may apply to contributions or distributions made in violation of
applicable limitations. Furthermore, certain withdrawal penalties and
restrictions may apply to surrenders from Qualified Contracts. (See "Tax
Treatment of Withdrawals -- Qualified Contracts" below.)
On July 6, 1983, the Supreme Court decided in ARIZONA GOVERNING COMMITTEE V.
NORRIS that optional annuity benefits provided under an employer's deferred
compensation plan could not, under Title VII of the Civil Rights Act of 1964,
vary between men and women. The Contracts sold by the Company in connection with
Qualified Plans will utilize annuity tables which do not differentiate on the
basis of sex. Such annuity tables will also be available for use in connection
with certain non-qualified deferred compensation plans.
A. TAX-SHELTERED ANNUITIES
Section 403(b) of the Code permits the purchase of "tax-sheltered annuities" by
public schools and certain charitable, educational and scientific organizations
described in Section 501(c)(3) of the Code. These qualifying employers may make
contributions to the Contracts for the benefit of their employees. Such
contributions are not includible in the gross income of the employees until the
employees receive distributions from the Contracts. The amount of contributions
to the tax-sheltered annuity is limited to
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certain maximums imposed by the Code. Furthermore, the Code sets forth
additional restrictions governing such items as transferability, distributions,
nondiscrimination and withdrawals. (See "Tax Treatment of Withdrawals Qualified
Contracts" and "Tax-Sheltered Annuities -- Withdrawal Limitations" below.) Any
employee should obtain competent tax advice as to the tax treatment and
suitability of such an investment.
B. INDIVIDUAL RETIREMENT ANNUITIES
The Contracts offered by the prospectus are designed to be suitable for use as
an Individual Retirement Annuity (IRA). Generally, individuals who purchase IRAs
are not taxed on increases to the value of the contributions until distribution
occurs. Following is a general description of IRAs with which the Contract may
be used. The description is not exhaustive and is for general informational
purposes only.
Section 408(b) of the Code permits eligible individuals to contribute to an
individual retirement program known as an IRA. Under applicable limitations,
certain amounts may be contributed to an IRA which will be deductible from the
individual's taxable income. These IRAs are subject to limitations on
eligibility, contributions, transferability and distributions. (See "Tax
Treatment of Withdrawals -- Qualified Contracts" below.) Under certain
conditions, distributions from other IRAs and other Qualified Plans may be
rolled over or transferred on a tax-deferred basis into an IRA. Sales of
Contracts for use with IRAs are subject to special requirements imposed by the
Code, including the requirement that certain informational disclosure be given
to persons desiring to establish an IRA. Purchasers of Contracts to be qualified
as Individual Retirement Annuities should obtain competent tax advice as to the
tax treatment and suitability of such an investment.
SIMPLE IRAs
Section 408(p) of the Code permits certain employers (generally those with less
than 100 employees) to establish a retirement program for employees using
Savings Incentive Match Plan Retirement Annuities ("SIMPLE IRA"). SIMPLE IRA
programs can only be established with the approval of and adoption by the
employer of the Contract Owner of the SIMPLE IRA. Contributions to SIMPLE IRAs
will be made pursuant to a salary reduction agreement in which an Owner would
authorize his/her employer to deduct a certain amount from his/her pay and
contribute it directly to the SIMPLE IRA. The Owner's employer will also make
contributions to the SIMPLE IRA in amounts based upon certain elections of the
employer. The only contributions that can be made to a SIMPLE IRA are salary
reduction contributions and employer contributions as described above, and
rollover contributions from other SIMPLE IRAs. Purchasers of Contracts to be
qualified as SIMPLE IRAs should obtain competent tax advice as to the tax
treatment and suitability of such an investment.
ROTH IRAs
Section 408A of the Code provides that beginning in 1998, individuals may
purchase a new type of non-deductible IRA, known as a Roth IRA. Purchase
payments for a Roth IRA are limited to a maximum of $2,000 per year and are not
deductible from taxable income. Lower maximum limitations apply to individuals
with adjusted gross incomes between $95,000 and $110,000 in the case of single
taxpayers, between $150,000 and $160,000 in the case of married taxpayers filing
joint returns, and between $0 and $10,000 in the case of married taxpayers
filing separately. An overall $2,000 annual limitation continues apply to all of
a taxpayer's IRA contributions, including Roth IRA and non-Roth IRAs.
Qualified distributions from Roth IRAs are free from federal income tax. A
qualified distribution requires that an individual has held a Roth IRA for at
least five taxable years and, in addition, that the distribution is made: (i)
after the individual reaches age 591/2, (ii) on the individual's death or
disability, or (iii) as a qualified first-time home purchase (subject to a
$10,000 lifetime maximum) for the individual, a spouse, child, grandchild, or
ancestor. Any distribution which is not a qualified distribution is taxable to
the extent
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of earnings in the distribution. Distributions are treated as made from
contributions first and therefore no distributions are taxable until
distributions exceed the amount of contributions and conversions to the Roth
IRA. The 10% penalty tax and the regular IRA exceptions to the 10% penalty tax
apply to taxable distributions from a Roth IRA.
Amounts may be rolled over from one Roth IRA to another Roth IRA. Furthermore,
an individual may make a rollover contribution from a non-Roth IRA to a Roth
IRA, ("conversion deposits") unless the individual has adjusted gross income
over $100,000 or the individual is a married taxpayer filing a separate return.
The individual must pay tax on any portion of the IRA being rolled over that
represents income or a previously deductible IRA contribution. However, for
rollovers in 1998, the individual may pay that tax ratably over the four taxable
year period beginning with tax year 1998. In addition, distribution of amounts
attributable to conversion deposits held for less than 5 taxable years will also
be subject to the penalty tax.
Purchasers of Contracts intended to be qualified as a Roth IRA should obtain
competent tax advice as to the tax treatment and suitability of such an
investment.
C. PENSION AND PROFIT-SHARING PLANS
Sections 401(a) and 401(k) of the Code permit employers, including self-employed
individuals, to establish various types of retirement plans for employees. These
retirement plans may permit the purchase of the Contracts to provide benefits
under the Plan. Contributions to the Plan for the benefit of employees will not
be includible in the gross income of the employees until distributed from the
Plan. The tax consequences to participants may vary depending upon the
particular plan design. However, the Code places limitations and restrictions on
all Plans including on such items as: amount of allowable contributions; form,
manner and timing of distributions; transferability of benefits; vesting and
nonforfeitability of interests; nondiscrimination in eligibility and
participation; and the tax treatment of distributions, withdrawals and
surrenders. Special considerations apply to plans covering self-employed
individuals, including limitations on contributions and benefits for key
employees or 5 percent owners. (See "Tax Treatment of Withdrawals -- Qualified
Contracts" below.) Purchasers of Contracts for use with Pension or Profit
Sharing Plans should obtain competent tax advice as to the tax treatment and
suitability of such an investment.
D. GOVERNMENT AND TAX-EXEMPT ORGANIZATION'S DEFERRED COMPENSATION PLAN
UNDER SECTION 457
Under Code provisions, employees and independent contractors performing services
for state and local governments and other tax-exempt organizations may
participate in Deferred Compensation Plans under Section 457 of the Code. The
amounts deferred under a Plan which meets the requirements of Section 457 of the
Code are not taxable as income to the participant until paid or otherwise made
available to the participant or beneficiary. As a general rule, the maximum
amount which can be deferred in any one year is the lesser of $8,000 or 331/3
percent of the participant's includible compensation. However, in limited
circumstances, the plan may provide for additional catch-up contributions in
each of the last three years before normal retirement age. Furthermore, the Code
provides additional requirements and restrictions regarding eligibility and
distributions.
All of the assets and income of a Plan established by a governmental employer
after August 20, 1996, must be held in trust for the exclusive benefit of
participants and their beneficiaries. For this purpose, custodial accounts and
certain annuity contracts are treated as trusts. Plans that were in existence on
August 20, 1996 may be amended to satisfy the trust and exclusive benefit
requirements any time prior to January 1, 1999, and must be amended not later
than that date to continue to receive favorable tax treatment. The
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requirement of a trust does not apply to amounts under a Plan of a tax exempt
(non-governmental) employer. In addition, the requirement of a trust does not
apply to amounts under a Plan of a governmental employer if the Plan is not an
eligible plan within the meaning of section 457(b) of the Code. In the absence
of such a trust, amounts under the plan will be subject to the claims of the
employer's general creditors.
In general, distributions from a Plan are prohibited under section 457 of the
Code unless made after the participating employee:
attains age 701/2,
separates from service,
dies, or
suffers an unforeseeable financial emergency as defined in the Code.
Under present federal tax law, amounts accumulated in a Plan under section 457
of the Code cannot be transferred or rolled over on a tax-deferred basis except
for certain transfers to other Plans under section 457.
TAX TREATMENT OF WITHDRAWALS -- QUALIFIED CONTRACTS
In the case of a withdrawal under a Qualified Contract, a ratable portion of the
amount received is taxable, generally based on the ratio of the individual's
cost basis to the individual's total accrued benefit under the retirement plan.
Special tax rules may be available for certain distributions from a Qualified
Contract. Section 72(t) of the Code imposes a 10% penalty tax on the taxable
portion of any distribution from qualified retirement plans, including Contracts
issued and qualified under Code Sections 401 (Pension and Profit-Sharing Plans),
403(b) (Tax-Sheltered Annuities) and 408 and 408A (Individual Retirement
Annuities). This penalty is increased to 25% instead of 10% for SIMPLE IRAs if
distribution occurs within the first two years after the Owner first
participated in the SIMPLE IRA. To the extent amounts are not includible in
gross income because they have been rolled over to an IRA or to another eligible
Qualified Plan, no tax penalty will be imposed. The tax penalty will not apply
to the following distributions: (a) made on or after the date on which the Owner
or Annuitant (as applicable) reaches age 591/2; (b) following the death or
disability of the Owner or Annuitant (as applicable) (for this purpose
disability is as defined in Section 72(m) (7) of the Code); (c) after separation
from service, distributions that are part of substantially equal periodic
payments made not less frequently than annually for the life (or life
expectancy) of the Owner or Annuitant (as applicable) or the joint lives (or
joint life expectancies) of such Owner or Annuitant (as applicable) and his or
her designated Beneficiary; (d) to an Owner or Annuitant (as applicable) who has
separated from service after he has attained age 55; (e) made to the Owner or
Annuitant (as applicable) to the extent such distributions do not exceed the
amount allowable as a deduction under Code Section 213 to the Owner or Annuitant
(as applicable) for amounts paid during the taxable year for medical care; (f)
made to an alternate payee pursuant to a qualified domestic relations order; (g)
made on account of an IRS levy upon the qualified contract; (h) from an
Individual Retirement Annuity for the purchase of medical insurance (as
described in Section 213(d)(1)(D) of the Code) for the Owner or Annuitant (as
applicable) and his or her spouse and dependents if the Owner or Annuitant (as
applicable) has received unemployment compensation for at least 12 weeks (this
exception will no longer apply after the Owner or Annuitant (as applicable) has
been re-employed for at least 60 days); (i) from an Individual Retirement
Annuity made to the Owner or Annuitant (as applicable) to the extent such
distributions do not exceed the qualified higher education expenses (as defined
in Section 72(t)(7) of the Code) of the Owner or Annuitant (as applicable) for
the taxable year; and (j) distributions up to $10,000 from an Individual
Retirement Annuity made to the Owner or Annuitant (as applicable) which are
qualified first-time home buyer distributions (as defined in Section 72(t)(8) of
the Code). The exceptions stated in (d) and (f) above do not apply in the case
of an Individual Retirement Annuity. The exception stated in (c) above applies
to an Individual Retirement Annuity without the requirement that there be a
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separation from service. With respect to (c) above, if the series of
substantially equal periodic payments is modified before the later of your
attaining age 591/2 or 5 years from the date of the first periodic payment, then
the tax for the year of the modification is increased by an amount equal to the
tax which would have been imposed (the 10% penalty tax) but for the exception,
plus interest for the tax years in which the exception was used.
TAX-SHELTERED ANNUITIES -- WITHDRAWAL LIMITATIONS
The Code limits the withdrawal of amounts attributable to contributions made
pursuant to a salary reduction agreement (as defined in Section 403(b)(11) of
the Code) to circumstances only when the Owner: (1) attains age 591/2; (2)
separates from service; (3) dies; (4) becomes disabled (within the meaning of
Section 72(m)(7) of the Code); (5) in the case of hardship; or (6) made pursuant
to a qualified domestic relations order, if otherwise permissible. However,
withdrawals for hardship are restricted to the portion of the Owner's Contract
Value which represents contributions made by the Owner and does not include any
investment results. The limitations on withdrawals became effective on January
1, 1989 and apply only to salary reduction contributions made after December 31,
1988, to income attributable to such contributions and to income attributable to
amounts held as of December 31, 1988. The limitations on withdrawals do not
affect rollovers and transfers between certain Qualified Plans. Owners should
consult their own tax counsel or other tax adviser regarding any distributions.
MANDATORY DISTRIBUTIONS -- QUALIFIED PLANS
Generally, distributions from a qualified plan must begin no later than April
1st of the calendar year following the later of (a) the year in which the
employee attains age 701/2 or (b) the calendar year in which the employee
retires. The date set forth in (b) does not apply to an Individual Retirement
Annuity. There are no mandatory distribution requirements for Roth IRAs prior to
death. Required distributions must be over a period not exceeding the life
expectancy of the individual or the joint lives or life expectancies of the
individual and his or her designated beneficiary. If the required minimum
distributions are not made, a 50% penalty tax is imposed as to the amount not
distributed.
ANNUITY PROVISIONS
The Company makes available payment plans on a fixed and variable basis.
VARIABLE ANNUITY PAYOUT
A variable annuity is an annuity with payments which: (1) are not predetermined
as to dollar amount; and (2) will vary in amount with the net investment results
of the applicable investment portfolio. Annuity payments also depend upon the
age of the annuitant and any joint annuitant and the assumed interest factor
utilized. The Annuity Table used will depend upon the annuity option chosen. The
dollar amount of annuity payments after the first is determined as follows:
1. The dollar amount of the first variable annuity payment is divided by the
value of an annuity unit for each investment portfolio as of the annuity date.
This sets the number of annuity units for each monthly payment for the
applicable investment portfolio.
2. The fixed number of annuity units for each payment in each investment
portfolio is multiplied by the annuity unit value for that investment portfolio
for the last valuation period of the month preceding the month for which the
payment is due. This result is the dollar amount of the payment for each
applicable investment portfolio.
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The total dollar amount of each variable annuity payment is the sum of all
variable annuity payments reduced by the applicable portion of the Contract
Maintenance Charge.
The calculation of the first annuity payment is made on the annuity date. The
Company assesses the insurance charges during both the accumulation phase and
the annuity phase. The deduction of the insurance charges will affect the amount
of the first and any subsequent annuity payments. In addition, under certain
circumstances, the Company may assess a contingent deferred sales charge and/or
the contract maintenance charge on the annuity date which would affect the
amount of the first annuity payment (see "Expenses" and "Annuity Payments" in
the prospectus).
ANNUITY UNIT
The value of an annuity unit was arbitrarily set initially at $10. The annuity
unit value at the end of any subsequent valuation period is determined as
follows:
1. The net investment factor for the current valuation period is multiplied by
the value of the annuity unit for the immediately preceding valuation period.
2. The result in (1) is then divided by the assumed investment rate factor which
equals 1.00 plus the assumed investment rate for the number of days assumed
investment rate.
FIXED ANNUITY PAYOUT
A fixed annuity is an annuity with payments which are guaranteed as to dollar
amount by the Company and do not vary with the investment experience of the
investment portfolios. The dollar amount of each fixed annuity payment is
determined in accordance with Annuity Tables contained in the Contract.
FINANCIAL STATEMENTS
The financial statements of the Company included in this Statement of Additional
Information should be considered only as bearing upon the ability of the Company
to meet its obligations under the Contracts.
16
<PAGE>
CONSECO VARIABLE ANNUITY ACCOUNT F
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1999
<TABLE>
<CAPTION>
===================================================================================================================================
SHARES COST REPORTED VALUE
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Assets:
Market value adjustment cash account................................................ $ 312,640
Investments in portfolio shares, at net asset value (Note 2):
The Alger American Fund:
Growth Portfolio. 557,806.4 $ 30,720,879 35,911,573
Leveraged AllCap Portfolio...................................................... 614,503.5 26,532,283 35,622,770
MidCap Growth Portfolio......................................................... 302,549.3 8,226,576 9,751,164
Small Capitalization Portfolio.................................................. 139,624.4 6,004,731 7,700,284
American Century Variable Portfolios, Inc.:
Income and Growth Fund.......................................................... 1,414,181.8 9,752,817 11,313,455
International Fund ............................................................. 412,479.0 3,350,113 5,155,987
Value Fund ..................................................................... 1,034,104.4 6,541,567 6,152,921
Berger Institutional Products Trust:
100 Fund ....................................................................... 132,386.3 1,836,756 2,544,464
Growth and Income Fund.......................................................... 600,834.5 11,928,100 15,892,072
Small Company Growth Fund....................................................... 220,004.5 3,545,073 5,172,306
BIAM International Fund......................................................... 20,354.6 246,908 297,787
Conseco Series Trust:
Balanced Portfolio.............................................................. 625,620.0 8,755,822 9,165,838
Equity Portfolio................................................................ 447,077.0 9,573,736 10,363,566
Fixed Income Portfolio.......................................................... 960,082.4 9,385,109 9,010,853
Government Securities Portfolio................................................. 416,009.7 4,803,151 4,559,896
Money Market Portfolio.......................................................... 52,392,728.6 52,392,729 52,392,729
Dreyfus Stock Index Fund.......................................................... 1,400,802.6 46,839,868 53,860,861
The Dreyfus Socially Responsible Growth Fund, Inc. ............................... 375,270.5 12,871,798 14,661,817
Dreyfus Variable Investment Fund:
Disciplined Stock Portfolio.................................................. 130,845.9 3,229,903 3,522,371
International Value Portfolio................................................ 68,645.2 1,046,711 1,075,671
Federated Insurance Series:
High Income Bond Fund II ....................................................... 840,112.9 8,784,364 8,602,756
International Equity Fund II ................................................... 151,587.3 3,378,024 4,189,873
Utility Fund II ................................................................ 438,628.0 6,265,693 6,294,311
Invesco Variable Investment Funds, Inc:
Equity Income Fund.............................................................. 178,386.0 3,582,202 3,747,890
High Yield Fund................................................................. 441,451.8 5,244,619 5,081,110
Janus Aspen Series:
Aggressive Growth Portfolio..................................................... 738,910.9 29,535,602 44,105,593
Growth Portfolio................................................................ 1,640,691.8 44,049,273 55,209,279
Worldwide Growth Portfolio...................................................... 910,881.4 29,200,626 43,494,588
Lazard Retirement Series, Inc.:
Equity Portfolio ............................................................... 136,027.8 1,470,859 1,568,400
Small Cap Portfolio ............................................................ 99,773.2 967,297 979,773
Lord Abbett Series Fund, Inc.:
Growth and Income Portfolio ................................................... 427,328.9 9,417,689 9,469,608
Mitchell Hutchins Series Trust:
Growth and Income Portfolio..................................................... 33,324.9 485,102 544,529
Neuberger Berman Advisers Management Trust:
Limited Maturity Bond Portfolio................................................. 713,102.2 9,490,018 9,441,473
Partners Portfolio.............................................................. 284,442.4 5,270,432 5,586,448
Strong Variable Insurance Funds, Inc.:
Mid Cap Growth Fund II.......................................................... 478,771.7 11,341,233 14,540,297
Strong Opportunity Fund II, Inc. ................................................. 273,166.7 6,030,456 7,099,601
Van Eck Worldwide Insurance Trust:
Worldwide Bond Fund ............................................................ 79,782.2 860,578 852,871
Worldwide Emerging Markets Fund.... 197,090.8 1,964,910 2,810,514
Worldwide Hard Assets Fund......... 52,258.1 537,825 572,749
Worldwide Real Estate Fund ....... 31,655.4 304,627 289,647
- -----------------------------------------------------------------------------------------------------------------------------------
Total assets ............................................................................................ 518,922,335
Liabilities:
Net amounts due to Conseco Variable Insurance Company .......................................................... 595,654
- -----------------------------------------------------------------------------------------------------------------------------------
Net assets (Note 6) ...... .................................................................................. $518,326,681
===================================================================================================================================
</TABLE>
The accompanying notes are an integral part of these financial statements.
17
<PAGE>
CONSECO VARIABLE ANNUITY ACCOUNT F
STATEMENT OF ASSETS AND LIABILITIES - CONTINUED
DECEMBER 31, 1999
<TABLE>
<CAPTION>
===================================================================================================================================
UNITS UNIT VALUE REPORTED VALUE
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net assets attributable to:
Contract owners' deferred annuity reserves:
Market value adjustment accounts - 1 Year... ................................... $ 302,276
Market value adjustment accounts - 5 Year... ................................... 10,486
The Alger American Fund:
Growth Portfolio ............................................................... 1,954,847.9 $18.349209 35,869,913
Leveraged AllCap Portfolio......... ............................................ 1,362,969.0 26.105651 35,581,193
MidCap Portfolio................................................................ 604,589.9 16.109755 9,739,795
Small Capitalization Portfolio ................................................. 485,731.3 15.834233 7,691,183
American Century Variable Portfolios, Inc.:
Income and Growth Fund ......................................................... 805,221.4 14.033340 11,299,946
International Fund ............................................................. 286,551.2 17.972904 5,150,157
Value Fund ..................................................................... 615,220.8 9.989754 6,145,904
Berger Institutional Products Trust:
100 Fund........................................................................ 161,596.2 15.727365 2,541,482
Growth and Income Fund.......................................................... 827,032.9 19.192747 15,873,033
Small Company Growth Fund ...................................................... 279,264.7 18.500508 5,166,539
BIAM International Fund......................................................... 21,269.1 14.002359 297,818
Conseco Series Trust:
Balanced Portfolio ............................................................. 675,068.3 13.562053 9,155,312
Equity Portfolio................................................................ 646,422.4 16.012935 10,351,120
Fixed Income Portfolio.......................................................... 881,706.4 10.207736 9,000,226
Government Securities Portfolio................................................. 451,881.9 10.079080 4,554,554
Money Market Portfolio ......................................................... 4,895,748.7 10.689683 52,334,002
Dreyfus Stock Index Fund.......................................................... 3,732,394.5 14.413769 53,797,872
The Dreyfus Socially Responsible Growth Fund, Inc. ............................... 931,176.3 15.727365 14,644,950
Dreyfus Variable Investment Fund:
Disciplined Stock Portfolio..................................................... 280,700.5 12.534297 3,518,383
International Value Portfolio................................................... 90,422.7 11.882741 1,074,470
Federated Insurance Series:
High Income Bond Fund II........................................................ 859,801.8 9.993764 8,592,656
International Equity Fund II.................................................... 200,437.7 20.888997 4,186,943
Utility Fund II ................................................................ 550,507.2 11.419878 6,286,725
Invesco Variable Investment Funds, Inc.:
Equity Income Fund.............................................................. 320,677.7 11.673618 3,743,469
High Yield Fund................................................................. 495,080.5 10.251437 5,075,287
Janus Aspen Series:
Aggressive Growth Portfolio..................................................... 1,540,760.6 28.593392 44,055,572
Growth Portfolio ............................................................... 3,067,175.0 17.979753 55,147,048
Worldwide Growth Portfolio...................................................... 2,253,670.9 19.277664 43,445,510
Lazard Retirement Series, Inc.:
Equity Portfolio ............................................................... 134,126.2 11.679204 1,566,487
Small Cap Portfolio ............................................................ 101,384.2 9.652585 978,620
Lord Abbett Series Fund, Inc. :
Growth and Income Portfolio..................................................... 759,959.9 12.447055 9,459,263
Mitchell Hutchins Series Trust:
Growth and Income Portfolio..................................................... 45,323.1 12.000004 543,877
Neuberger Berman Advisers Management Trust:
Limited Maturity Bond Portfolio................................................. 921,343.4 10.235735 9,430,627
Partners Portfolio.............................................................. 524,038.9 10.647332 5,579,616
Strong Variable Insurance Funds, Inc.:
Mid Cap Growth Fund II Fund..................................................... 620,231.3 23.416477 14,523,632
Strong Opportunity Fund II, Inc. ................................................. 489,673.9 14.482342 7,091,625
Van Eck Worldwide InsuranceTrust:
Worldwide Bond Fund ............................................................ 85,090.2 10.011282 851,862
Worldwide Emerging Markets Fund................................................. 211,063.4 13.300962 2,807,346
Worldwide Hard Assets Fund...................................................... 67,745.9 8.422660 570,601
Worldwide Real Estate Fund ..................................................... 34,644.5 8.350561 289,301
- -----------------------------------------------------------------------------------------------------------------------------------
Net assets ............................................................................................. $518,326,681
===================================================================================================================================
</TABLE>
The accompanying notes are an integral part of these financial statements.
18
<PAGE>
CONSECO VARIABLE ANNUITY ACCOUNT F
STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1999
<TABLE>
<CAPTION>
====================================================================================================================================
AMERICAN
CENTURY
VARIABLE
THE ALGER AMERICAN FUNDS PORTFOLIOS
------------------------------------------------------- ----------
LEVERAGED SMALL INCOME AND
GROWTH ALL CAP MIDCAP CAPITALIZATION GROWTH
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Investment Income:
Dividends from investments in portfolio shares......... $ 1,430,547 $ 500,458 $ 582,461 $ 338,300 $ 1,088
Expenses:
Mortality and expense risk fees........................ 239,548 162,697 62,770 49,939 92,646
Administrative fees.................................... 28,746 19,524 7,532 5,993 11,117
- ------------------------------------------------------------------------------------------------------------------------------------
Total expenses....................................... 268,294 182,221 70,302 55,932 103,763
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income (loss)..................... 1,162,253 318,237 512,159 282,368 (102,675)
- ------------------------------------------------------------------------------------------------------------------------------------
Net realized gains (losses) and unrealized appreciation
(depreciation) of investments:
Net realized gains (losses) on sales of investments
in portfolio shares ............................... 631,065 835,798 44,078 190,892 275,972
Net change in unrealized appreciation (depreciation)
of investments in portfolio shares ................ 4,270,524 8,807,983 1,300,470 1,534,112 1,113,705
- ------------------------------------------------------------------------------------------------------------------------------------
Net gain (loss) on investments in portfolio shares 4,901,589 9,643,781 1,344,548 1,725,004 1,389,677
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets
from operations .............................. $ 6,063,842 $ 9,962,018 $ 1,856,707 $ 2,007,372 $1,287,002
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1999
<TABLE>
<CAPTION>
====================================================================================================================================
AMERICAN
CENTURY
VARIABLE
THE ALGER AMERICAN FUNDS PORTFOLIOS
----------------------------------------------- ----------
LEVERAGED SMALL INCOME AND
GROWTH ALL CAP MIDCAP CAPITALIZATION GROWTH
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Changes from operations:
Net investment income (loss)........................... $ 1,162,253 $ 318,237 $ 512,159 $ 282,368 $ (102,675)
Net realized gains (losses) on sales of investments
in portfolio shares ................................. 631,065 835,798 44,078 190,892 275,972
Net change in unrealized appreciation (depreciation)
of investments in portfolio shares .................. 4,270,524 8,807,983 1,300,470 1,534,112 1,113,705
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets
from operations ................................. 6,063,842 9,962,018 1,856,707 2,007,372 1,287,002
- ------------------------------------------------------------------------------------------------------------------------------------
Changes from contract owners' transactions:
Net contract purchase payments......................... 23,999,459 22,672,749 5,927,981 4,314,899 6,525,629
Contract redemptions................................... (601,059) (671,251) (125,849) (299,566) (407,475)
Net transfers ......................................... 335,450 1,993,274 154,267 (47,082) (345,171)
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets
from contract owners' transactions ................ 23,733,850 23,994,772 5,956,399 3,968,251 5,772,983
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets ...................... 29,797,692 33,956,790 7,813,106 5,975,623 7,059,985
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, beginning of year............................. 6,072,221 1,624,403 1,926,689 1,715,560 4,239,961
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of year (Note 6) ................ $ 35,869,913 $ 35,581,193 $9,739,795 $ 7,691,183 $ 11,299,946
====================================================================================================================================
</TABLE>
The accompanying notes are an integral part of these financial statements.
19
<PAGE>
<TABLE>
<CAPTION>
====================================================================================================================================
AMERICAN CENTURY
VARIABLE PORTFOLIOS
(CONTINUED) BERGER INSTITUTIONAL PRODUCTS TRUST CONSECO SERIES TRUST PORTFOLIOS
- -------------------------- ----------------------------------------------------- --------------------------------------------------
GROWTH AND SMALL BIAM FIXED
INTERNATIONAL VALUE 100 INCOME COMPANY INTERNATIONAL BALANCED EQUITY INCOME
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$ -- $ 259,443 $ 388 $ -- $ -- $ 1,621 $ 1,615,190 $ 2,905,627 $ 448,871
32,399 48,544 18,601 82,781 26,598 2,821 74,401 85,073 84,189
3,888 5,825 2,232 9,934 3,192 339 8,928 10,209 10,103
- ------------------------------------------------------------------------------------------------------------------------------------
36,287 54,369 20,833 92,715 29,790 3,160 83,329 95,282 94,292
- ------------------------------------------------------------------------------------------------------------------------------------
(36,287) 205,074 (20,445) (92,715) (29,790) (1,539) 1,531,861 2,810,345 354,579
- ------------------------------------------------------------------------------------------------------------------------------------
42,779 (20,013) 149,335 714,562 287,230 31,785 43,280 96,287 (74,662)
1,769,042 (450,172) 596,846 3,728,856 1,576,116 33,827 289,656 218,479 (350,289)
- ------------------------------------------------------------------------------------------------------------------------------------
1,811,821 (470,185) 746,181 4,443,418 1,863,346 65,612 332,936 314,766 (424,951)
- ------------------------------------------------------------------------------------------------------------------------------------
$ 1,775,534 $ (265,111) $ 725,736 $ 4,350,703 $ 1,833,556 $ 64,073 $ 1,864,797 $ 3,125,111 $ (70,372)
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
====================================================================================================================================
AMERICAN CENTURY
VARIABLE PORTFOLIOS
(CONTINUED) BERGER INSTITUTIONAL PRODUCTS TRUST CONSECO SERIES TRUST PORTFOLIOS
- --------------------------- ---------------------------------------------------- --------------------------------------------------
GROWTH AND SMALL BIAM FIXED
INTERNATIONAL VALUE 100 INCOME COMPANY INTERNATIONAL BALANCED EQUITY INCOME
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$(36,287) $ 205,074 $ (20,445) $ (92,715) $ (29,790) $ (1,539) $ 1,531,861 $ 2,810,345 $ 354,579
42,779 (20,013) 149,335 714,562 287,230 31,785 43,280 96,287 (74,662)
1,769,042 (450,172) 596,846 3,728,856 1,576,116 33,827 289,656 218,479 (350,289)
- ------------------------------------------------------------------------------------------------------------------------------------
1,775,534 (265,111) 725,736 4,350,703 1,833,556 64,073 1,864,797 3,125,111 (70,372)
- ------------------------------------------------------------------------------------------------------------------------------------
1,949,052 4,786,556 1,070,592 8,539,084 1,615,245 180,697 4,669,802 2,833,070 6,836,281
(66,096) (281,584) (103,349) (398,035) (164,543) (9,547) (443,212) (265,819) (375,828)
206,351 157,453 47,610 1,507,635 783,390 (161,119) (1,131,962) (196,581) (596,579)
- ------------------------------------------------------------------------------------------------------------------------------------
2,089,307 4,662,425 1,014,853 9,648,684 2,234,092 10,031 3,094,628 2,370,670 5,863,874
- ------------------------------------------------------------------------------------------------------------------------------------
3,864,841 4,397,314 1,740,589 13,999,387 4,067,648 74,104 4,959,425 5,495,781 5,793,502
- ------------------------------------------------------------------------------------------------------------------------------------
1,285,316 1,748,590 800,893 1,873,646 1,098,891 223,714 4,195,887 4,855,339 3,206,724
- ------------------------------------------------------------------------------------------------------------------------------------
$ 5,150,157 $ 6,145,904 $ 2,541,482 $ 15,873,033 $ 5,166,539 $ 297,818 $ 9,155,312 $ 10,351,120 $ 9,000,226
====================================================================================================================================
</TABLE>
20
<PAGE>
CONSECO VARIABLE ANNUITY ACCOUNT F
STATEMENTS OF OPERATIONS - CONTINUED
FOR THE YEAR ENDED DECEMBER 31, 1999
<TABLE>
<CAPTION>
====================================================================================================================================
CONSECO SERIES DREYFUS
TRUST PORTFOLIOS VARIABLE
(CONTINUED) INVESTMENT
------------------------ ----------
DREYFUS
SOCIALLY DREYFUS
GOVERNMENT MONEY RESPONSIBLE STOCK DISCIPLINED
SECURITIES MARKET GROWTH INDEX STOCK
===================================================================================================================================
<S> <C> <C> <C> <C> <C>
Investment Income:
Dividends from investments in portfolio shares......... $ 281,491 $ 1,215,490 $ 488,441 $ 745,968 $ 33,603
Expenses:
Mortality and expense risk fees........................ 44,106 307,888 90,565 416,597 21,719
Administrative fees.................................... 5,293 36,947 10,868 49,992 2,606
- ------------------------------------------------------------------------------------------------------------------------------------
Total expenses....................................... 49,399 344,835 101,433 466,589 24,325
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income (loss) .................... 232,092 870,655 387,008 279,379 9,278
- ------------------------------------------------------------------------------------------------------------------------------------
Net realized gains (losses) and unrealized appreciation
(depreciation) of investments:
Net realized gains (losses) on sales of investments
in portfolio shares .............................. (131,084) -- 297,068 455,568 98,218
Net change in unrealized appreciation (depreciation)
of investments in portfolio shares .............. (226,870) -- 1,579,997 5,525,574 230,188
- ------------------------------------------------------------------------------------------------------------------------------------
Net gain (loss) on investments in
portfolio shares ............................... (357,954) -- 1,877,065 5,981,142 328,406
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets
from operations .............................. $ (125,862) $ 870,655 $ 2,264,073 $ 6,260,521 $ 337,684
====================================================================================================================================
</TABLE>
STATEMENTS OF CHANGES IN NET ASSETS - CONTINUED
FOR THE YEAR ENDED DECEMBER 31, 1999
<TABLE>
<CAPTION>
====================================================================================================================================
CONSECO SERIES DREYFUS
TRUST PORTFOLIOS VARIABLE
(CONTINUED) INVESTMENT
--------------------------- ----------
DREYFUS
SOCIALLY DREYFUS
GOVERNMENT MONEY RESPONSIBLE STOCK DISCIPLINED
SECURITIES MARKET GROWTH INDEX STOCK
====================================================================================================================================
<S> <C> <C> <C> <C> <C>
Changes from operations:
Net investment income (loss)........................... $ 232,092 $ 870,655 $ 387,008 $ 279,379 $ 9,278
Net realized gains (losses) on sales of investments
in portfolio shares ................................. (131,084) -- 297,068 455,568 98,218
Net change in unrealized appreciation (depreciation)
of investments in portfolio shares................... (226,870) -- 1,579,997 5,525,574 230,188
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets
from operations ................................... (125,862) 870,655 2,264,073 6,260,521 337,684
- ------------------------------------------------------------------------------------------------------------------------------------
Changes from contract owners' transactions:
Net contract purchase payments......................... 4,118,914 59,631,055 10,577,697 32,861,489 2,565,980
Contract redemptions................................... (201,285) (1,483,540) (287,765) (1,623,692) (49,554)
Net transfers ......................................... (843,467) (14,743,455) (517,924) 1,393,465 (28,893)
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets
from contract owners' transactions ............... 3,074,162 43,404,060 9,772,008 32,631,262 2,487,533
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets ....................... 2,948,300 44,274,715 12,036,081 38,891,783 2,825,217
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, beginning of year ............................ 1,606,254 8,059,287 2,608,869 14,906,089 693,166
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of year (Note 6).................. $ 4,554,554 $ 52,334,002 $14,644,950 $ 53,797,872 $ 3,518,383
====================================================================================================================================
</TABLE>
The accompanying notes are an integral part of these financial statements.
21
<PAGE>
<TABLE>
<CAPTION>
DREYFUS
VARIABLE
INVESTMENT
(CONTINUED) FEDERATED INSURANCE SERIES FUNDS INVESCO VARIABLE INV. FUNDS JANUS ASPEN SERIES PORTFOLIOS
- ---------- ----------------------------------------- --------------------------- -------------------------------------------
INTERNATIONAL HIGH INCOME INTERNATIONAL EQUITY AGGRESSIVE WORLDWIDE
VALUE BOND II EQUITY II UTILITY II INCOME HIGH YIELD GROWTH GROWTH GROWTH
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$ 78,832 $ 429,612 $ 20,577 $ 255,143 $ 61,662 $ 332,050 $ 377,706 $ 195,641 $ 36,846
6,746 89,638 15,544 62,734 30,439 38,863 174,776 309,609 264,551
809 10,756 1,865 7,528 3,653 4,664 20,973 37,153 31,746
- ------------------------------------------------------------------------------------------------------------------------------------
7,555 100,394 17,409 70,262 34,092 43,527 195,749 346,762 296,297
- ------------------------------------------------------------------------------------------------------------------------------------
71,277 329,218 3,168 184,881 27,570 288,523 181,957 (151,121) (259,451)
- ------------------------------------------------------------------------------------------------------------------------------------
58,025 (110,092) 358,044 (23,472) 118,345 (40,772) 1,837,085 548,965 279,156
29,284 (263,120) 744,761 (157,650) 131,828 (75,138) 14,145,816 10,359,912 13,666,073
- ------------------------------------------------------------------------------------------------------------------------------------
87,309 (373,212) 1,102,805 (181,122) 250,173 (115,910) 15,982,901 10,908,877 13,945,229
- ------------------------------------------------------------------------------------------------------------------------------------
$ 158,586 $ (43,994) $ 1,105,973 $ 3,759 $ 277,743 $172,613 $16,164,858 $ 10,757,756 $ 13,685,778
====================================================================================================================================
</TABLE>
7
<TABLE>
<CAPTION>
DREYFUS
VARIABLE
INVESTMENT
(CONTINUED) FEDERATED INSURANCE SERIES FUNDS INVESCO VARIABLE INV. FUNDS JANUS ASPEN SERIES PORTFOLIOS
- ---------- -------------------------------------------- ------------------------- ------------------------------------------
INTERNATIONAL HIGH INCOME INTERNATIONAL EQUITY AGGRESSIVE WORLDWIDE
VALUE BOND II EQUITY II UTILITY II INCOME HIGH YIELD GROWTH GROWTH GROWTH
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$ 71,277 $ 329,218 $ 3,168 $ 184,881 $ 27,570 $ 288,523 $ 181,957 $ (151,121) $ (259,451)
58,025 (110,092) 358,044 (23,472) 118,345 (40,772) 1,837,085 548,965 279,156
29,284 (263,120) 744,761 (157,650) 131,828 (75,138) 14,145,816 10,359,912 13,666,073
- ------------------------------------------------------------------------------------------------------------------------------------
158,586 (43,994) 1,105,973 3,759 277,743 172,613 16,164,858 10,757,756 13,685,778
- ------------------------------------------------------------------------------------------------------------------------------------
840,806 7,321,216 933,308 5,844,449 3,018,942 3,486,048 19,543,752 33,785,060 21,071,153
(40,517) (466,202) (61,598) (370,882) (138,318) (197,921) (778,660) (1,112,922) (844,503)
(24,630) (2,668,737) 1,641,488 (1,781,878) (242,967) 476,518 6,687,738 6,336,414 1,226,023
- ------------------------------------------------------------------------------------------------------------------------------------
775,659 4,186,277 2,513,198 3,691,689 2,637,657 3,764,645 25,452,830 39,008,552 21,452,673
- ------------------------------------------------------------------------------------------------------------------------------------
934,245 4,142,283 3,619,171 3,695,448 2,915,400 3,937,258 41,617,688 49,766,308 35,138,451
- ------------------------------------------------------------------------------------------------------------------------------------
140,225 4,450,373 567,772 2,591,277 828,069 1,138,029 2,437,884 5,380,740 8,307,059
- ------------------------------------------------------------------------------------------------------------------------------------
$ 1,074,470 $ 8,592,656 $ 4,186,943 $ 6,286,725 $ 3,743,469 $ 5,075,287 $44,055,572 $ 55,147,048 $ 43,445,510
====================================================================================================================================
</TABLE>
22
<PAGE>
CONSECO VARIABLE ANNUITY ACCOUNT F
STATEMENTS OF OPERATIONS - CONTINUED
FOR THE YEAR ENDED DECEMBER 31, 1999
<TABLE>
<CAPTION>
====================================================================================================================================
NEUBERGER
BERMAN
ADVISERS
MANAGEMENT
LAZARD RETIREMENT TRUST
SERIES PORTFOLIOS PORTFOLIOS
--------------------------- ----------
MITCHELL
LORD ABBETT HUTCHINS
SERIES TRUST SERIES TRUST LIMITED
GROWTH AND GROWTH AND MATURITY
EQUITY SMALL CAP INCOME INCOME BOND
====================================================================================================================================
<S> <C> <C> <C> <C> <C>
Investment Income:
Dividends from investments in portfolio shares......... $ 56,529 $ 17,315 $ 682,606 $ 6 $ 215,089
Expenses:
Mortality and expense risk fees........................ 17,109 9,106 73,203 5,219 73,387
Administrative fees.................................... 2,053 1,093 8,784 626 8,806
- ------------------------------------------------------------------------------------------------------------------------------------
Total expenses....................................... 19,162 10,199 81,987 5,845 82,193
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income (loss)..................... 37,367 7,116 600,619 (5,839) 132,896
- ------------------------------------------------------------------------------------------------------------------------------------
Net realized gains (losses) and unrealized appreciation
(depreciation) of investments:
Net realized gains (losses) on sales of investments
in portfolio shares ............................... 50,644 (2,998) 141,491 (1,884) (24,364)
Net change in unrealized appreciation (depreciation)
of investments in portfolio shares ................ (14,591) 3,120 29,462 53,299 (88,777)
- ------------------------------------------------------------------------------------------------------------------------------------
Net gain (loss) on investments in
portfolio shares .............................. 36,053 122 170,953 51,415 (113,141)
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets
from operations ............................. $ 73,420 $ 7,238 $ 771,572 $ 45,576 $ 19,755
====================================================================================================================================
</TABLE>
STATEMENTS OF CHANGES IN NET ASSETS - CONTINUED
FOR THE YEAR ENDED DECEMBER 31, 1999
<TABLE>
<CAPTION>
====================================================================================================================================
NEUBERGER
BERMAN
ADVISERS
MANAGEMENT
LAZARD RETIREMENT TRUST
SERIES PORTFOLIOS PORTFOLIOS
--------------------------- ----------
MITCHELL
LORD ABBETT HUTCHINS
SERIES TRUST SERIES TRUST LIMITED
GROWTH AND GROWTH AND MATURITY
EQUITY SMALL CAP INCOME INCOME BOND
====================================================================================================================================
<S> <C> <C> <C> <C> <C>
Changes from operations:
Net investment income (loss)........................... $ 37,367 $ 7,116 $ 600,619 $ (5,839) $ 132,896
Net realized gains (losses) on sales of investments
in portfolio shares ................................. 50,644 (2,998) 141,491 (1,884) (24,364)
Net change in unrealized appreciation (depreciation)
of investments in portfolio shares .................. (14,591) 3,120 29,462 53,299 (88,777)
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets from operations 73,420 7,238 771,572 45,576 19,755
- ------------------------------------------------------------------------------------------------------------------------------------
Changes from contract owners' transactions:
Net contract purchase payments......................... 700,824 555,835 6,299,864 290,152 5,057,231
Contract redemptions................................... (154,780) (33,426) (586,145) (25,373) (244,897)
Net transfers.......................................... (82,240) 24,951 379,049 (27,176) 1,438,296
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets
from contract owners' transactions .............. 463,804 547,360 6,092,768 237,603 6,250,630
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets..................... 537,224 554,598 6,864,340 283,179 6,270,385
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, beginning of year............................. 1,029,263 424,022 2,594,923 260,698 3,160,242
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of year (Note 6)............... $ 1,566,487 $ 978,620 $ 9,459,263 $ 543,877 $ 9,430,627
====================================================================================================================================
</TABLE>
The accompanying notes are an integral part of these financial statements.
23
<PAGE>
<TABLE>
<CAPTION>
====================================================================================================================================
NEUBERGER
BERMAN
ADVISERS
MANAGEMENT STRONG
TRUST VARIABLE
PORTFOLIOS INSURANCE
(CONTINUED) FUNDS VAN ECK WORLDWIDE INSURANCE TRUST FUNDS
- ----------- ----------- STRONG ----------------------------------------------------------
MID CAP OPPORTUNITY EMERGING HARD REAL MVA MVA COMBINED
PARTNERS GROWTH II FUND II BOND MARKETS ASSETS ESTATE 1 YEAR 5 YEAR TOTAL
===================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$ 119,531 $ 1,625 $ 272,745 $ 23,948 $ (180) $ 1,398 $ 4,706 $ -- $ -- $ 14,032,374
57,527 52,552 49,053 10,401 12,485 11,065 3,607 -- -- 3,311,496
6,903 6,306 5,886 1,248 1,498 1,328 433 -- -- 397,379
- -----------------------------------------------------------------------------------------------------------------------------------
64,430 58,858 54,939 11,649 13,983 12,393 4,040 -- -- 3,708,875
- -----------------------------------------------------------------------------------------------------------------------------------
55,101 (57,233) 217,806 12,299 (14,163) (10,995) 666 -- -- 10,323,499
- -----------------------------------------------------------------------------------------------------------------------------------
1,536 852,914 6,446 (55,264) 95,619 6,037 (2,034) -- -- 8,061,585
159,379 3,106,033 956,131 (15,426) 855,528 35,225 (11,908) -- -- 75,197,285
- -----------------------------------------------------------------------------------------------------------------------------------
160,915 3,958,947 962,577 (70,690) 951,147 41,262 (13,942) -- -- 83,258,870
- -----------------------------------------------------------------------------------------------------------------------------------
$ 216,016 $ 3,901,714 $1,180,383 $ (58,391) $ 936,984 $ 30,267 $ (13,276) $ -- $ -- $ 93,582,369
===================================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
====================================================================================================================================
NEUBERGER
BERMAN
ADVISERS
MANAGEMENT STRONG
TRUST VARIABLE
PORTFOLIOS INSURANCE
(CONTINUED) FUNDS VAN ECK WORLDWIDE INSURANCE TRUST FUNDS
- ----------- ----------- STRONG ----------------------------------------------------------
MID CAP OPPORTUNITY EMERGING HARD REAL MVA MVA COMBINED
PARTNERS GROWTH II FUND II BOND MARKETS ASSETS ESTATE 1 YEAR 5 YEAR TOTAL
===================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$ 55,101 $ (57,233) $ 217,806 $ 12,299 $ (14,163) $ (10,995) $ 666 $ -- $ -- $ 10,323,499
1,536 852,914 6,446 (55,264) 95,619 6,037 (2,034) -- -- 8,061,585
159,379 3,106,033 956,131 (15,426) 855,528 35,225 (11,908) -- -- 75,197,285
- -----------------------------------------------------------------------------------------------------------------------------------
216,016 3,901,714 1,180,383 (58,391) 936,984 30,267 (13,276) -- -- 93,582,369
- -----------------------------------------------------------------------------------------------------------------------------------
2,582,652 5,903,521 4,320,118 726,162 1,573,173 193,714 194,286 185,339 10,486 330,114,322
(150,240) (216,136) (124,917) (42,225) (173,421) (43,708) (36,747) (3,082) -- (13,705,669)
(172,085) 4,264,561 (262,554) (119,407) 227,140 302,264 (73,229) -- -- 5,516,201
- -----------------------------------------------------------------------------------------------------------------------------------
2,260,327 9,951,946 3,932,647 564,530 1,626,892 452,270 84,310 182,257 10,486 321,924,854
- -----------------------------------------------------------------------------------------------------------------------------------
2,476,343 13,853,660 5,113,030 506,139 2,563,876 482,537 71,034 182,257 10,486 415,507,223
- -----------------------------------------------------------------------------------------------------------------------------------
3,103,273 669,972 1,978,595 345,723 243,470 88,064 218,267 120,019 -- 102,819,458
- -----------------------------------------------------------------------------------------------------------------------------------
$5,579,616 $14,523,632 $7,091,625 $ 851,862 $2,807,346 $ 570,601 $ 289,301 $ 302,276 $ 10,486 $ 518,326,681
===================================================================================================================================
</TABLE>
The accompanying notes are an integral part of these financial statements.
24
<PAGE>
CONSECO VARIABLE ANNUITY ACCOUNT F
STATEMENTS OF OPERATIONS
FOR THE PERIOD FEBRUARY 12, 1998 THROUGH DECEMBER 31, 1998
<TABLE>
<CAPTION>
===================================================================================================================================
AMERICAN
CENTURY
VARIABLE
THE ALGER AMERICAN FUNDS PORTFOLIOS
--------------------------------------------------------- ----------
LEVERAGED SMALL INCOME AND
GROWTH ALL CAP MIDCAP CAPITALIZATION GROWTH
===================================================================================================================================
<S> <C> <C> <C> <C> <C>
Investment Income:
Dividends from investments in portfolio shares......... $ 44,824 $ 5,239 $ 19,215 $ 8,041 $ 20,268
Expenses:
Mortality and expense risk fees........................ 16,142 4,492 5,699 4,156 14,180
Administrative fees.................................... 1,937 539 684 499 1,702
- -----------------------------------------------------------------------------------------------------------------------------------
Total expenses....................................... 18,079 5,031 6,383 4,655 15,882
- -----------------------------------------------------------------------------------------------------------------------------------
Net investment income (loss)..................... 26,745 208 12,832 3,386 4,386
- -----------------------------------------------------------------------------------------------------------------------------------
Net realized gains (losses) and unrealized appreciation
(depreciation) of investments:
Net realized gains (losses) on sales of investments
in portfolio shares ............................... (43,791) (13,041) (1,715) (13,013) (11,738)
Net change in unrealized appreciation (depreciation)
of investments in portfolio shares ................ 920,170 282,503 224,117 161,441 446,932
- -----------------------------------------------------------------------------------------------------------------------------------
Net gain (loss) on investments in
portfolio shares .............................. 876,379 269,462 222,402 148,428 435,194
- -----------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets
from operations ............................. $ 903,124 $ 269,670 $ 235,234 $ 151,814 $ 439,580
===================================================================================================================================
</TABLE>
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE PERIOD FEBRUARY 12, 1998 THROUGH DECEMBER 31, 1998
<TABLE>
<CAPTION>
===================================================================================================================================
AMERICAN
CENTURY
VARIABLE
THE ALGER AMERICAN FUNDS PORTFOLIOS
--------------------------------------------------------- ----------
LEVERAGED SMALL INCOME AND
GROWTH ALL CAP MIDCAP CAPITALIZATION GROWTH
===================================================================================================================================
<S> <C> <C> <C> <C> <C>
Changes from operations:
Net investment income (loss).......................... $ 26,745 $ 208 $ 12,832 $ 3,386 $ 4,386
Net realized gains (losses) on sales of investments
in portfolio shares ................................ (43,791) (13,041) (1,715) (13,013) (11,738)
Net change in unrealized appreciation (depreciation)
of investments in portfolio shares ................. 920,170 282,503 224,117 161,441 446,932
- -----------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net
assets from operations ............................. 903,124 269,670 235,234 151,814 439,580
- -----------------------------------------------------------------------------------------------------------------------------------
Changes from contract owners' transactions:
Net contract purchase payments ....................... 4,317,694 1,143,802 1,451,960 1,231,991 3,142,214
Contract redemptions ................................. (21,245) (11,673) (6,638) (18,187) (29,140)
Net transfers.......................................... 872,648 222,604 246,133 349,942 687,307
- -----------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets ........................
from contract owners' transactions .............. 5,169,097 1,354,733 1,691,455 1,563,746 3,800,381
- -----------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets..................... 6,072,221 1,624,403 1,926,689 1,715,560 4,239,961
- -----------------------------------------------------------------------------------------------------------------------------------
Net assets, beginning of period........................... -- -- -- -- --
- -----------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period...................... $ 6,072,221 $ 1,624,403 $ 1,926,689 $ 1,715,560 $ 4,239,961
===================================================================================================================================
</TABLE>
The accompanying notes are an integral part of these financial statements.
25
<PAGE>
<TABLE>
<CAPTION>
===================================================================================================================================
AMERICAN CENTURY
VARIABLE PORTFOLIOS
(CONTINUED) BERGER INSTITUTIONAL PRODUCTS TRUST CONSECO SERIES TRUST PORTFOLIOS
- --------------------------- ------------------------------------------------------ ---------------------------------------
GROWTH AND SMALL BIAM FIXED
INTERNATIONAL VALUE 100 INCOME COMPANY INTERNATIONAL BALANCED EQUITY INCOME
===================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$ -- $ -- $ 1,732 $ 12,247 $ 447 $ 3,077 $ 79,590 $ 29,115 $ 65,841
5,071 6,462 2,414 6,538 4,116 1,013 20,394 23,088 11,308
609 775 290 784 494 122 2,447 2,770 1,357
- ------------------------------------------------------------------------------------------------------------------------------------
5,680 7,237 2,704 7,322 4,610 1,135 22,841 25,858 12,665
- ------------------------------------------------------------------------------------------------------------------------------------
(5,680) (7,237) (972) 4,925 (4,163) 1,942 56,749 3,257 53,176
- ------------------------------------------------------------------------------------------------------------------------------------
(31,607) (12,093) (6,400) (1,159) (33,167) (7,753) (27,377) (147,801) 953
36,833 61,526 110,862 235,116 51,117 17,053 120,360 571,352 (23,967)
- ------------------------------------------------------------------------------------------------------------------------------------
5,226 49,433 104,462 233,957 17,950 9,300 92,983 423,551 (23,014)
- ------------------------------------------------------------------------------------------------------------------------------------
$ (454) $ 42,196 $ 103,490 $ 238,882 $ 13,787 $ 11,242 $ 149,732 $ 426,808 $ 30,162
===================================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
===================================================================================================================================
AMERICAN CENTURY
VARIABLE PORTFOLIOS
(CONTINUED) BERGER INSTITUTIONAL PRODUCTS TRUST CONSECO SERIES TRUST PORTFOLIOS
- --------------------------- ------------------------------------------------------ ---------------------------------------
GROWTH AND SMALL BIAM FIXED
INTERNATIONAL VALUE 100 INCOME COMPANY INTERNATIONAL BALANCED EQUITY INCOME
===================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$ (5,680) $ (7,237) $ (972) $ 4,925 $ (4,163) $ 1,942 $ 56,749 $ 3,257 $ 53,176
(31,607) (12,093) (6,400) (1,159) (33,167) (7,753) (27,377) (147,801) 953
36,833 61,526 110,862 235,116 51,117 17,053 120,360 571,352 (23,967)
- ------------------------------------------------------------------------------------------------------------------------------------
(454) 42,196 103,490 238,882 13,787 11,242 149,732 426,808 30,162
- ------------------------------------------------------------------------------------------------------------------------------------
1,230,650 1,684,005 477,451 1,404,705 1,080,620 170,977 3,934,083 4,110,264 3,039,345
(9,277) (4,736) (7,805) (16,694) (5,604) (3,228) (10,218) (15,923) (18,393)
64,397 27,125 227,757 246,753 10,088 44,723 122,290 334,190 155,610
- ------------------------------------------------------------------------------------------------------------------------------------
1,285,770 1,706,394 697,403 1,634,764 1,085,104 212,472 4,046,155 4,428,531 3,176,562
- ------------------------------------------------------------------------------------------------------------------------------------
1,285,316 1,748,590 800,893 1,873,646 1,098,891 223,714 4,195,887 4,855,339 3,206,724
- ------------------------------------------------------------------------------------------------------------------------------------
-- -- -- -- -- -- -- -- --
- ------------------------------------------------------------------------------------------------------------------------------------
$1,285,316 $1,748,590 $ 800,893 $1,873,646 $1,098,891 $ 223,714 $4,195,887 $4,855,339 $3,206,724
===================================================================================================================================
</TABLE>
26
<PAGE>
CONSECO VARIABLE ANNUITY ACCOUNT F
STATEMENTS OF OPERATIONS - CONTINUED
FOR THE PERIOD FEBRUARY 12, 1998 THROUGH DECEMBER 31, 1998
<TABLE>
<CAPTION>
===================================================================================================================================
CONSECO SERIES DREYFUS
TRUST PORTFOLIOS VARIABLE
(CONTINUED) INVESTMENT
--------------------------- -----------
DREYFUS
SOCIALLY DREYFUS
GOVERNMENT MONEY RESPONSIBLE STOCK DISCIPLINED
SECURITIES MARKET GROWTH INDEX STOCK
===================================================================================================================================
<S> <C> <C> <C> <C> <C>
Investment Income:
Dividends from investments in portfolio shares......... $ 24,315 $ 139,625 $ 94,038 $ 92,450 $ 3,141
Expenses:
Mortality and expense risk fees........................ 4,736 35,056 7,101 54,979 1,598
Administrative fees.................................... 568 4,207 852 6,598 192
- ------------------------------------------------------------------------------------------------------------------------------------
Total expenses....................................... 5,304 39,263 7,953 61,577 1,790
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income (loss)..................... 19,011 100,362 86,085 30,873 1,351
- ------------------------------------------------------------------------------------------------------------------------------------
Net realized gains (losses) and unrealized appreciation
(depreciation) of investments:
Net realized gains (losses) on sales of investments
in portfolio shares................................ 3,870 -- (5,652) (11,282) (1,834)
Net change in unrealized appreciation (depreciation)
of investments in portfolio shares................. (16,384) -- 210,022 1,495,419 62,278
- ------------------------------------------------------------------------------------------------------------------------------------
Net gain (loss) on investments in
portfolio shares.............................. (12,514) -- 204,370 1,484,137 60,444
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets
from operations.............................. $ 6,497 $ 100,362 $ 290,455 $ 1,515,010 $ 61,795
===================================================================================================================================
</TABLE>
STATEMENTS OF CHANGES IN NET ASSETS - CONTINUED
FOR THE PERIOD FEBRUARY 12, 1998 THROUGH DECEMBER 31, 1998
<TABLE>
<CAPTION>
===================================================================================================================================
CONSECO SERIES DREYFUS
TRUST PORTFOLIOS VARIABLE
(CONTINUED) INVESTMENT
--------------------------- -----------
DREYFUS
SOCIALLY DREYFUS
GOVERNMENT MONEY RESPONSIBLE STOCK DISCIPLINED
SECURITIES MARKET GROWTH INDEX STOCK
===================================================================================================================================
<S> <C> <C> <C> <C> <C>
Changes from operations:
Net investment income (loss)........................... $ 19,011 $ 100,362 $ 86,085 $ 30,873 $ 1,351
Net realized gains (losses) on sales of investments
in portfolio shares.................................. 3,870 -- (5,652) (11,282) (1,834)
Net change in unrealized appreciation (depreciation)
of investments in portfolio shares................... (16,384) -- 210,022 1,495,419 62,278
- -----------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets
from operations.................................. 6,497 100,362 290,455 1,515,010 61,795
- -----------------------------------------------------------------------------------------------------------------------------------
Changes from contract owners' transactions:
Net contract purchase payments................... 1,569,026 15,825,441 1,559,268 12,135,910 408,149
Contract redemptions............................. (11,336) (61,590) (6,160) (101,245) (418)
Net transfers.................................... 42,067 (7,804,926) 765,306 1,356,414 223,640
- -----------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets
from contract owners' transactions.......... 1,599,757 7,958,925 2,318,414 13,391,079 631,371
- -----------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets................ 1,606,254 8,059,287 2,608,869 14,906,089 693,166
- -----------------------------------------------------------------------------------------------------------------------------------
Net assets, beginning of period........................... -- -- -- -- --
- -----------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period................. $ 1,606,254 $ 8,059,287 $ 2,608,869 $ 14,906,089 $ 693,166
===================================================================================================================================
</TABLE>
The accompanying notes are an integral part of these financial statements.
27
<PAGE>
<TABLE>
<CAPTION>
DREYFUS
VARIABLE
INVESTMENT
(CONTINUED) FEDERATED INSURANCE SERIES FUNDS INVESCO VARIABLE INV. FUNDS JANUS ASPEN SERIES PORTFOLIOS
- ------------- ------------------------------------------- --------------------------- ---------------------------------------
INTERNATIONAL HIGH INCOME INTERNATIONAL EQUITY AGGRESSIVE WORLDWIDE
VALUE BOND II EQUITY II UTILITY II INCOME HIGH YIELD GROWTH GROWTH GROWTH
===================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$ 9,429 $ 175 $ -- $ -- $ 35,026 $ 102,311 $ -- $ 36,996 $ 68,213
345 18,760 2,322 9,110 2,158 3,237 7,592 14,610 29,356
41 2,251 279 1,093 259 388 911 1,753 3,523
- -----------------------------------------------------------------------------------------------------------------------------------
386 21,011 2,601 10,203 2,417 3,625 8,503 16,363 32,879
- -----------------------------------------------------------------------------------------------------------------------------------
9,043 (20,836) (2,601) (10,203) 32,609 98,686 (8,503) 20,633 35,334
- -----------------------------------------------------------------------------------------------------------------------------------
(117) (11,727) (44,568) 4,967 (4,300) (3,555) (15,714) (7,738) 966
(324) 81,512 67,088 186,268 33,860 (88,371) 424,175 800,093 627,889
- -----------------------------------------------------------------------------------------------------------------------------------
(441) 69,785 22,520 191,235 29,560 (91,926) 408,461 792,355 628,855
- -----------------------------------------------------------------------------------------------------------------------------------
$ 8,602 $ 48,949 $ 19,919 $ 181,032 $ 62,169 $ 6,760 $ 399,958 $ 812,988 $ 664,189
===================================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
DREYFUS
VARIABLE
INVESTMENT
(CONTINUED) FEDERATED INSURANCE SERIES FUNDS INVESCO VARIABLE INV. FUNDS JANUS ASPEN SERIES PORTFOLIOS
- ------------- ------------------------------------------- --------------------------- ---------------------------------------
INTERNATIONAL HIGH INCOME INTERNATIONAL EQUITY AGGRESSIVE WORLDWIDE
VALUE BOND II EQUITY II UTILITY II INCOME HIGH YIELD GROWTH GROWTH GROWTH
===================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$ 9,043 $ (20,836) $ (2,601) $ (10,203) $ 32,609 $ 98,686 $ (8,503) $ 20,633 $ 35,334
(117) (11,727) (44,568) 4,967 (4,300) (3,555) (15,714) (7,738) 966
(324) 81,512 67,088 186,268 33,860 (88,371) 424,175 800,093 627,889
- -----------------------------------------------------------------------------------------------------------------------------------
8,602 48,949 19,919 181,032 62,169 6,760 399,958 812,988 664,189
- -----------------------------------------------------------------------------------------------------------------------------------
135,146 4,354,443 508,305 2,177,715 756,675 1,078,012 1,830,473 3,908,010 6,838,671
(7,000) (49,908) (2,340) (34,186) (4,889) (18,269) (11,640) (27,028) (62,473)
3,477 96,889 41,888 266,716 14,114 71,526 219,093 686,770 866,672
- -----------------------------------------------------------------------------------------------------------------------------------
131,623 4,401,424 547,853 2,410,245 765,900 1,131,269 2,037,926 4,567,752 7,642,870
- -----------------------------------------------------------------------------------------------------------------------------------
140,225 4,450,373 567,772 2,591,277 828,069 1,138,029 2,437,884 5,380,740 8,307,059
- -----------------------------------------------------------------------------------------------------------------------------------
-- -- -- -- -- -- -- -- --
- -----------------------------------------------------------------------------------------------------------------------------------
$ 140,225 $ 4,450,373 $ 567,772 $ 2,591,277 $ 828,069 $ 1,138,029 $ 2,437,884 $ 5,380,740 $ 8,307,059
===================================================================================================================================
</TABLE>
28
<PAGE>
CONSECO VARIABLE ANNUITY ACCOUNT F
STATEMENTS OF OPERATIONS - CONTINUED
FOR THE PERIOD FEBRUARY 12, 1998 THROUGH DECEMBER 31, 1998
<TABLE>
<CAPTION>
NEUBERGER
BERMAN
ADVISERS
MANAGEMENT
LAZARD RETIREMENT TRUST
SERIES PORTFOLIOS PORTFOLIOS
-------------------------- -------------
MITCHELL
LORD ABBETT HUTCHINS
SERIESTRUST SERIES TRUST LIMITED
GROWTH AND GROWTH AND MATURITY
EQUITY SMALL CAP INCOME INCOME BOND
===================================================================================================================================
<S> <C> <C> <C> <C> <C>
Investment Income:
Dividends from investments in portfolio shares......... $ 3,310 $ 102 $ 158,981 $ 18,134 $ --
Expenses:
Mortality and expense risk fees........................ 3,366 1,896 9,783 920 18,429
Administrative fees.................................... 404 227 1,174 110 2,212
- -----------------------------------------------------------------------------------------------------------------------------------
Total expenses....................................... 3,770 2,123 10,957 1,030 20,641
- -----------------------------------------------------------------------------------------------------------------------------------
Net investment income (loss)....................... (460) (2,021) 148,024 17,104 (20,641)
- -----------------------------------------------------------------------------------------------------------------------------------
Net realized gains (losses) and unrealized appreciation
(depreciation) of investments:
Net realized gains (losses) on sales of investments
in portfolio shares............................... (11,087) (736) (16,190) (1,355) 12,267
Net change in unrealized appreciation (depreciation)
of investments in portfolio shares................ 112,132 9,356 22,457 6,129 40,232
- -----------------------------------------------------------------------------------------------------------------------------------
Net gain (loss) on investments in
portfolio shares.............................. 101,045 8,620 6,267 4,774 52,499
- -----------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets
from operations............................... $ 100,585 $ 6,599 $ 154,291 $ 21,878 $ 31,858
===================================================================================================================================
</TABLE>
STATEMENTS OF CHANGES IN NET ASSETS - CONTINUED
FOR THE PERIOD FEBRUARY 12, 1998 THROUGH DECEMBER 31, 1998
<TABLE>
<CAPTION>
NEUBERGER
BERMAN
ADVISERS
MANAGEMENT
LAZARD RETIREMENT TRUST
SERIES PORTFOLIOS PORTFOLIOS
-------------------------- -------------
MITCHELL
LORD ABBETT HUTCHINS
SERIESTRUST SERIES TRUST LIMITED
GROWTH AND GROWTH AND MATURITY
EQUITY SMALL CAP INCOME INCOME BOND
===================================================================================================================================
<S> <C> <C> <C> <C> <C>
Changes from operations:
Net investment income (loss)........................... $ (460) $ (2,021) $ 148,024 $ 17,104 $ (20,641)
Net realized gains (losses) on sales of investments
in portfolio shares.................................. (11,087) (736) (16,190) (1,355) 12,267
Net change in unrealized appreciation (depreciation)
of investments in portfolio shares................... 112,132 9,356 22,457 6,129 40,232
- -----------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets from operations......... 100,585 6,599 154,291 21,878 31,858
- -----------------------------------------------------------------------------------------------------------------------------------
Changes from contract owners' transactions:
Net contract purchase payments......................... 876,175 421,467 2,410,638 238,350 3,759,396
Contract redemptions................................... (16,447) (5,060) (37,669) (1,623) (21,138)
Net transfers.......................................... 68,950 1,016 67,663 2,093 (609,874)
- -----------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets
from contract owners' transactions................. 928,678 417,423 2,440,632 238,820 3 ,128,384
- -----------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets...................... 1,029,263 424,022 2,594,923 260,698 3,160,242
- -----------------------------------------------------------------------------------------------------------------------------------
Net assets, beginning of period........................ -- -- -- -- --
- -----------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period....................... $1,029,263 $ 424,022 $ 2,594,923 $ 260,698 $ 3,160,242
===================================================================================================================================
</TABLE>
The accompanying notes are an integral part of these financial statements.
29
<PAGE>
<TABLE>
<CAPTION>
NEUBERGER
BERMAN
ADVISERS
MANAGEMENT STRONG
TRUST VARIABLE
PORTFOLIOS INSURANCE
(CONTINUED) FUNDS VAN ECK WORLDWIDE INSURANCE TRUST FUNDS
- ---------------------------- -------------------------------------------------------
STRONG
MID CAP OPPORTUNITY EMERGING HARD REAL MVA COMBINED
PARTNERS GROWTH II FUND II BOND MARKETS ASSETS ESTATE 1 YEAR TOTAL
===================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$ -- $ -- $ 12,544 $ -- $ -- $ -- $ -- $ -- $1,088,426
14,590 2,289 7,328 1,464 1,021 306 891 -- 378,316
1,751 275 879 176 122 37 106 -- 45,397
- -----------------------------------------------------------------------------------------------------------------------------------
16,341 2,564 8,207 1,640 1,143 343 997 -- 423,713
- -----------------------------------------------------------------------------------------------------------------------------------
(16,341) (2,564) 4,337 (1,640) (1,143) (343) (997) -- 664,713
- -----------------------------------------------------------------------------------------------------------------------------------
(31,441) (133) (10,406) 7,950 (11,927) (6,210) (1,023) -- (516,677)
156,637 93,031 113,013 7,720 (9,923) (301) (3,072) -- 7,646,351
- -----------------------------------------------------------------------------------------------------------------------------------
125,196 92,898 102,607 15,670 (21,850) (6,511) (4,095) -- 7,129,674
- -----------------------------------------------------------------------------------------------------------------------------------
$ 108,855 $ 90,334 $ 106,944 $ 14,030 $ (22,993) $ (6,854) $ (5,092) -- $7,794,387
===================================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
NEUBERGER
BERMAN
ADVISERS
MANAGEMENT STRONG
TRUST VARIABLE
PORTFOLIOS INSURANCE
(CONTINUED) FUNDS VAN ECK WORLDWIDE INSURANCE TRUST FUNDS
- ---------------------------- ---------------------------------------------------
STRONG
MID CAP OPPORTUNITY EMERGING HARD REAL MVA COMBINED
PARTNERS GROWTH II FUND II BOND MARKETS ASSETS ESTATE 1 YEAR TOTAL
===================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$ (16,341) $ (2,564) $ 4,337 $ (1,640) $ (1,143) $ (343) $ (997) $ -- $ 664,713
(31,441) (133) (10,406) 7,950 (11,927) (6,210) (1,023) -- (516,677)
156,637 93,031 113,013 7,720 (9,923) (301) (3,072) -- 7,646,351
- -----------------------------------------------------------------------------------------------------------------------------------
108,855 90,334 106,944 14,030 (22,993) (6,854) (5,092) -- 7,794,387
- -----------------------------------------------------------------------------------------------------------------------------------
2,802,173 565,903 1,665,434 367,032 261,623 94,936 215,374 175,272 95,358,778
(12,839) (1,429) (6,171) (3,447) (6,492) -- (600) -- (690,158)
205,084 15,164 212,388 (31,892) 11,332 (18) 8,585 (55,253) 356,451
- -----------------------------------------------------------------------------------------------------------------------------------
2,994,418 579,638 1,871,651 331,693 266,463 94,918 223,359 120,019 95,025,071
- -----------------------------------------------------------------------------------------------------------------------------------
3,103,273 669,972 1,978,595 345,723 243,470 88,064 218,267 120,019 102,819,458
- -----------------------------------------------------------------------------------------------------------------------------------
-- -- -- -- -- -- -- -- --
- -----------------------------------------------------------------------------------------------------------------------------------
$ 3,103,273 $ 669,972 $1,978,595 $ 345,723 $ 243,470 $ 88,064 $ 218,267 $ 120,019 $102,819,458
===================================================================================================================================
</TABLE>
30
<PAGE>
CONSECO VARIABLE ANNUITY ACCOUNT F
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 1998
- --------------------------------------------------------------------------------
(1) GENERAL
Conseco Variable Insurance Company (the "Company") has established two
separate accounts within Conseco Variable Annuity Account F ("Account F"). Both
accounts were established on September 26, 1997, and commenced operations on
February 12, 1998. Account F is a segregated investment account for individual
and group variable annuity contracts which are registered under the Securities
Act of 1933. One account, also named Conseco Variable Annuity Account F
("Variable Account"), which serves the variable annuity portion of the contract,
is registered under the Investment Company Act of 1940, as amended, as a unit
investment trust. The other account, Conseco Variable Market Value Adjustment
Account ("MVA"), offers investment options which pay fixed rates of interest as
declared by the Company for specified periods (one, three and five years) from
the date amounts are allocated to the MVA. The MVA is not registered as an
investment company under the Investment Company Act of 1940. The operations of
Account F are included in the operations of the Company pursuant to the
provisions of the Texas Insurance Code. The Company is an indirect wholly owned
subsidiary of Conseco, Inc., a publicly-held specialized financial services
holding company listed on the New York Stock Exchange.
Besides the three guarantee periods of the MVA option, the following Variable
Account investment options are currently available:
THE ALGER AMERICAN FUND
Growth Portfolio
Leveraged AllCap Portfolio
MidCap Growth Portfolio
Small Capitalization Portfolio
AMERICAN CENTURY VARIABLE PORTFOLIOS, INC.
Income and Growth Fund
International Fund
Value Fund
BERGER INSTITUTIONAL PRODUCTS TRUST
100 Fund
Growth and Income Fund
Small Company Growth Fund
BIAM International Fund
CONSECO SERIES TRUST
Balanced Portfolio
Equity Portfolio
Fixed Income Portfolio
Government Securities Portfolio
Money Market Portfolio
THE DREYFUS SOCIALLY RESPONSIBLE GROWTH FUND, INC.
DREYFUS STOCK INDEX FUND
DREYFUS VARIABLE INVESTMENT FUND
International Value Portfolio
Disciplined Stock Portfolio
FEDERATED INSURANCE SERIES
High Income Bond Fund II
International Equity Fund II
Utility Fund II
INVESCO VARIABLE INVESTMENT FUNDS, INC.
Equity Income Fund
High Yield Fund
JANUS ASPEN SERIES
Aggressive Growth Portfolio
Growth Portfolio
Worldwide Growth Portfolio
LAZARD RETIREMENT SERIES, INC.
Equity Portfolio
Small Cap Portfolio
LORD ABBETT SERIES FUND, INC.
Growth and Income Portfolio
MITCHELL HUTCHINS SERIES TRUST
Growth and Income Portfolio
NEUBERGER BERMAN ADVISERS MANAGEMENT TRUST
Limited Maturity Bond Portfolio
Partners Portfolio
STRONG VARIABLE INSURANCE FUNDS, INC.
Mid Cap Growth Fund II
STRONG OPPORTUNITY FUND II, INC.
VAN ECK WORLDWIDE INSURANCE TRUST
Worldwide Bond Fund
Worldwide Emerging Markets Fund
Worldwide Hard Assets Fund
Worldwide Real Estate Fund
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported increases and decreases in net assets from operations during the
reporting period. Actual results could differ from those estimates.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
INVESTMENT VALUATION, TRANSACTIONS AND INCOME
Investments in portfolio shares are valued using the net asset value of the
respective portfolios at the end of each New York Stock Exchange business day.
Investment share transactions are accounted for on a trade date basis (the date
the order to purchase or redeem shares is executed) and dividend income is
recorded on the ex-dividend date. The cost of investments in portfolio shares
sold is determined on a first-in first-out basis. Account F does not hold any
investments which are restricted as to resale.
Net investment income and net realized gains (losses) and unrealized
appreciation (depreciation) on investments are allocated to the contracts on
each valuation date based on each contract's pro rata share of the assets of the
Variable Account as of the beginning of the valuation date.
FEDERAL INCOME TAXES
No provision for federal income taxes has been made in the accompanying
financial statements because the operations of Account F are included in the
total operations of the Company, which is treated as a life insurance company
for federal income tax purposes under the Internal Revenue Code. Net investment
income and realized gains (losses) are retained in Account F and are not taxable
until received by the contract owner or beneficiary in the form of annuity
payments or other distributions.
31
<PAGE>
CONSECO VARIABLE ANNUITY ACCOUNT F
NOTES TO FINANCIAL STATEMENTS - CONTINUED
DECEMBER 31, 1999 AND 1998
- --------------------------------------------------------------------------------
ANNUITY RESERVES
Deferred annuity contract reserves are comprised of net contract purchase
payments less redemptions and benefits. These reserves are adjusted daily for
the net investment income and net realized gains (losses) and unrealized
appreciation (depreciation) on investments.
(3) PURCHASES AND SALES OF INVESTMENTS IN PORTFOLIO SHARES
The aggregate cost of purchases of investments in portfolio shares was
$428,880,284 and $110,554,029 for the year ended December 31, 1999 and the
period February 12, 1998 through December 31, 1998, respectively. The aggregate
proceeds from sales of investments in portfolio shares were $96,341,276 and
$14,871,886 for the year ended December 31, 1999 and the period February 12,
1998 through December 31, 1998, respectively.
(4) DEDUCTIONS AND EXPENSES
Although periodic retirement payments to contract owners vary according to
the investment performance of the portfolios, such payments are not affected by
mortality or expense experience because the Company assumes the mortality and
expense risks under the contracts.
The mortality risk assumed by the Company results from the life annuity
payment option in the contracts in which the Company agrees to make annuity
payments regardless of how long a particular annuitant or other payee lives. The
annuity payments are determined in accordance with annuity purchase rate
provisions established at the time the contracts are issued. Based on the
actuarial determination of expected mortality, the Company is required to fund
any deficiency in the annuity payment reserves from its general account assets.
The expense risk assumed by the Company is the risk that the deductions for
sales and administrative expenses may prove insufficient to cover the actual
sales and administrative expenses. The Company deducts daily from the Variable
Account a fee, which is equal on an annual basis to 1.25 percent of the daily
value of the total investments of the Variable Account, for assuming the
mortality and expense risks. These fees were $3,311,496 and $378,316 for the
year ended December 31, 1999 and the period February 12, 1998 through December
31, 1998, respectively.
Pursuant to an agreement between the Variable Account and the Company (which
may be terminated by the Company at any time), the Company provides sales and
administrative services to the Variable Account, as well as a minimum death
benefit prior to retirement for the contracts. The Company may deduct a
percentage of amounts surrendered to cover sales expenses. The percentage varies
up to 7.00 percent based upon the number of years the contract has been held. In
addition, the Company deducts units from individual contracts annually and upon
full surrender to cover an administrative fee of $30, unless the value of the
contract is $50,000 or greater. This fee is recorded as a redemption in the
accompanying Statements of Changes in Net Assets. Sales and administrative
charges were $366,942 for the year ended December 31, 1999. There were no sales
and administrative charges for the period February 12, 1998 through December 31,
1998. The Company also deducts daily from the Variable Account a fee, which is
equal on an annual basis to 0.15 percent of the daily value of the total
investments of the Variable Account, for administrative expenses. These expenses
were $397,379 and $45,397 for the year ended December 31, 1999 and the period
February 12, 1998 through December 31, 1998, respectively.
The MVA account is subject to a market value adjustment if the amounts are
withdrawn prior to the end of the guarantee period (with certain exceptions).
The adjustment can be positive or negative depending on changes in the U.S.
Treasury rates during the holding period of the MVA contract. The adjustment
charges were $16 and $527 for the year ended December 31, 1999 and the period
February 12, 1998, through December 31, 1998, respectively.
(5) OTHER TRANSACTIONS WITH AFFILIATES
Conseco Equity Sales, Inc., an affiliate of the Company, is the principal
underwriter and performs all variable annuity sales functions on behalf of the
Company through various retail broker/dealers including Conseco Securities, Inc.
(formerly Conseco Financial Services, Inc. prior to its name change in August
1999) an affiliate of the Company.
(6) NET ASSETS
Net assets consisted of the following at December 31, 1999:
- --------------------------------------------------------------------------------
Proceeds from the sales of units since organization,
less cost of units redeemed.............................. $ 416,949,925
Undistributed net investment income........................ 10,988,212
Undistributed net realized gain on sales of investments.... 7,544,908
Net unrealized appreciation of investments................. 82,843,636
- --------------------------------------------------------------------------------
Net assets................................................. $ 518,326,681
================================================================================
32
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
TO THE BOARD OF DIRECTORS OF CONSECO VARIABLE
INSURANCE COMPANY AND CONTRACT OWNERS OF
CONSECO VARIABLE ANNUITY ACCOUNT F
In our opinion, the accompanying statement of assets and liabilities and the
related statements of operations and of changes in net assets present fairly, in
all material respects, the financial position of the Variable Annuity Account F
(the "Account") at December 31, 1999, and the results of its operations and the
changes in its net assets for the year ended December 31, 1999 and from
inception (February 12, 1998) through December 31, 1998, in conformity with
accounting principles generally accepted in the United States. These financial
statements are the responsibility of the Account's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these financial statements in accordance
with auditing standards generally accepted in the United States, which require
that we plan and perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall financial
statement presentation. We believe that our audits, which included confirmation
of portfolio shares owned at December 31, 1999 by correspondence with the funds,
provide a reasonable basis for the opinion expressed above.
/s/ PRICEWATERHOUSECOOPERS LLP
- ------------------------------
PRICEWATERHOUSECOOPERS LLP
Indianapolis, Indiana
February 10, 2000
33
<PAGE>
- --------------------------------------------------------------------------------
Conseco Variable Insurance Company
Financial Statements as of December 31, 1999 and 1998,
and for the years ended December 31, 1999, 1998 and 1997
34
<PAGE>
- --------------------------------------------------------------------------------
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholder and Board of Directors
Conseco Variable Insurance Company
In our opinion, the accompanying balance sheet and the related statements
of operations, shareholder's equity and cash flows present fairly, in all
material respects, the financial position of Conseco Variable Insurance Company
(the "Company") at December 31, 1999 and 1998, and the results of its operations
and its cash flows for each of the three years in the period ended December 31,
1999, in conformity with accounting principles generally accepted in the United
States. These financial statements are the responsibility of the Company's
management; our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these statements in
accordance with auditing standards generally accepted in the United States which
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for the opinion expressed above.
/s/ PricewaterhouseCoopers LLP
April 13, 2000
35
<PAGE>
CONSECO VARIABLE INSURANCE COMPANY
BALANCE SHEET
December 31, 1999 and 1998
(Dollars in millions)
ASSETS
1999 1998
-------- --------
Investments:
Actively managed fixed maturities at
fair value (amortized cost:
1999 - $1,491.8; 1998 - $1,520.5) ............ $1,398.7 $1,524.1
Equity securities at fair value
(cost: 1999 - $47.8 million;
1998 - $46.0 million) ......................... 49.8 45.7
Mortgage loans .................................... 108.0 110.2
Policy loans ...................................... 75.5 79.6
Other invested assets ............................. 50.8 120.3
-------- --------
Total investments ........................... 1,682.8 1,879.9
Cash and cash equivalents ............................. 81.5 48.4
Accrued investment income ............................. 35.6 30.5
Cost of policies purchased ............................ 131.6 98.0
Cost of policies produced ............................. 147.6 82.5
Reinsurance receivables ............................... 26.4 22.2
Goodwill .............................................. 45.3 46.7
Assets held in separate accounts ...................... 1,457.0 696.4
Other assets .......................................... 6.0 7.1
-------- --------
Total assets ................................ $3,613.8 $2,911.7
======== ========
(continued on next page)
The accompanying notes are an integral part
of the financial statements.
36
<PAGE>
CONSECO VARIABLE INSURANCE COMPANY
BALANCE SHEET (Continued)
December 31, 1999 and 1998
(Dollars in millions, except per share amount)
LIABILITIES AND SHAREHOLDER'S EQUITY
1999 1998
-------- --------
Liabilities:
Insurance liabilities:
Interest-sensitive products ....................... $1,289.2 $1,365.2
Traditional products .............................. 242.8 246.2
Claims payable and other policyholder funds ....... 64.1 62.6
Liabilities related to separate accounts .......... 1,457.0 696.4
Income tax liabilities ............................... 33.4 37.5
Investment borrowings ................................ 135.1 65.7
Other liabilities .................................... 16.5 33.0
-------- --------
Total liabilities ............................ 3,238.1 2,506.6
-------- --------
Shareholder's equity:
Common stock and additional paid-in capital
(par value $4.80 per share, 1,065,000
shares authorized, 1,043,565 shares issued
and outstanding) .................................. 380.8 380.8
Accumulated other comprehensive loss ................. (28.4) (.8)
Retained earnings .................................... 23.3 25.1
-------- --------
Total shareholder's equity ................... 375.7 405.1
-------- --------
Total liabilities and shareholder's equity ... $3,613.8 $2,911.7
======== ========
The accompanying notes are an integral part
of the financial statements.
37
<PAGE>
CONSECO VARIABLE INSURANCE COMPANY
STATEMENT OF OPERATIONS
for the years ended December 31, 1999, 1998 and 1997
(Dollars in millions)
1999 1998 1997
------- ------- -------
Revenues:
Insurance policy income .................. $ 72.1 $ 73.6 $ 75.7
Net investment income .................... 297.6 198.0 222.6
Net gains (losses) from
sale of investments .................... (10.0) 18.5 13.3
------- ------- -------
Total revenues ..................... 359.7 290.1 311.6
------- ------- -------
Benefits and expenses:
Insurance policy benefits ................ 266.8 170.6 191.0
Amortization ............................. 13.8 33.6 27.1
Other operating costs and expenses ....... 40.3 38.7 32.2
------- ------- -------
Total benefits and expenses ........ 320.9 242.9 250.3
------- ------- -------
Income before income taxes ......... 38.8 47.2 61.3
Income tax expense ........................... 13.6 16.6 22.1
------- ------- -------
Net income ......................... $ 25.2 $ 30.6 $ 39.2
======= ======= =======
The accompanying notes are an integral part
of the financial statements.
38
<PAGE>
CONSECO VARIABLE INSURANCE COMPANY
STATEMENT OF SHAREHOLDER'S EQUITY
for the years ended December 31, 1999, 1998 and 1997
(Dollars in millions)
Accumulated
Common other
stock and compre-
additional hensive
paid-in income Retained
Total capital (loss) earnings
------ ------ ------ ------
Balance, December 31, 1996 ................ $396.9 $380.8 $ (4.6) $ 20.7
Comprehensive income, net of tax:
Net income ............................ 39.2 -- -- 39.2
Change in unrealized appreciation
(depreciation) of securities
(net of applicable income tax
expense of $7.2) .................... 13.3 -- 13.3 --
------
Total comprehensive income ........ 52.5
Dividends on common stock ............... (32.5) -- -- (32.5)
------ ------ ------ ------
Balance, December 31, 1997 ................ 416.9 380.8 8.7 27.4
Comprehensive income, net of tax:
Net income ........................... 30.6 -- -- 30.6
Change in unrealized appreciation
(depreciation) of securities
(net of applicable income tax
benefit of $5.1) ................... (9.5) -- (9.5) --
------
Total comprehensive income ........ 21.1
Dividends on common stock ............... (32.9) -- -- (32.9)
------ ------ ------ ------
Balance, December 31, 1998 ................ 405.1 380.8 (.8) 25.1
Comprehensive loss, net of tax:
Net income .............................. 25.2 -- -- 25.2
Change in unrealized depreciation of
securities (net of applicable income
tax benefit of $15.7 million) ........ (27.6) -- (27.6) --
------
Total comprehensive loss ......... (2.4)
Dividends on common stock ............... (27.0) -- -- (27.0)
------ ------ ------ ------
Balance, December 31, 1999 ................ $375.7 $380.8 $(28.4) $ 23.3
====== ====== ====== ======
The accompanying notes are an integral part
of the financial statements.
39
<PAGE>
CONSECO VARIABLE INSURANCE COMPANY
STATEMENT OF CASH FLOWS
for the years ended December 31, 1999, 1998 and 1997
(Dollars in millions)
1999 1998 1997
------- ------- -------
Cash flows from operating activities:
Net income .................................. $ 25.2 $ 30.6 $ 39.2
Adjustments to reconcile net income
to net cash provided by operating
activities:
Amortization .......................... 13.8 43.0 27.1
Income taxes .......................... 11.4 (1.2) 6.7
Insurance liabilities ................. 162.6 120.0 95.2
Accrual and amortization of
investment income ................... (11.4) 1.6 .3
Deferral of cost of policies
produced ............................ (62.7) (35.3) (31.8)
Net (gains) losses from sale
of investments ...................... 10.0 (18.5) (13.3)
Other ................................. .7 (38.3) (4.6)
------- ------- -------
Net cash provided by operating
activities .......................... 149.6 101.9 118.8
------- ------- -------
Cash flows from investing activities:
Sales of investments ........................ 904.8 1,185.0 755.2
Maturities and redemptions .................. 109.0 145.5 150.4
Purchases of investments .................... (1,502.0) (1,420.7) (923.5)
------- ------- -------
Net cash used by investing
activities .......................... (488.2) (90.2) (17.9)
------- ------- -------
Cash flows from financing activities:
Deposits to insurance liabilities ........... 654.1 400.4 255.9
Investment borrowings ....................... 69.4 4.7 12.6
Withdrawals from insurance liabilities ...... (324.8) (385.0) (302.2)
Dividends paid on common stock .............. (27.0) (32.9) (32.5)
------- ------- -------
Net cash provided (used) by
financing activities ................ 371.7 (12.8) (66.2)
------- ------- -------
Net increase (decrease) in cash
and cash equivalents ................ 33.1 (1.1) 34.7
Cash and cash equivalents, beginning of year ... 48.4 49.5 14.8
------- ------- -------
Cash and cash equivalents, end of year ......... $ 81.5 $ 48.4 $ 49.5
======= ======= =======
The accompanying notes are an integral part
of the financial statements.
40
<PAGE>
CONSECO VARIABLE INSURANCE COMPANY
Notes to Financial Statements
------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
Conseco Variable Insurance Company ("we" or the "Company") markets
tax-qualified annuities and certain employee benefit-related insurance products
through professional independent agents. Prior to its name change in October
1998, the Company was named Great American Reserve Insurance Company. Since
August 1995, the Company has been a wholly owned subsidiary of Conseco, Inc.
("Conseco"), a financial services holding company operating throughout the
United States. Conseco's life insurance subsidiaries develop, market and
administer supplemental health insurance, annuity, individual life insurance,
individual and group major medical insurance and other insurance products.
Conseco's finance subsidiaries originate, purchase, sell and service consumer
and commercial finance loans. On March 31, 2000, Conseco announced its plan to
explore the sale of its finance subsidiaries and its hiring of Lehman Brothers
to assist in the planned sale.
The following summary explains the accounting policies we use to arrive at
the more significant numbers in our financial statements. We prepare our
financial statements in accordance with generally accepted accounting principles
("GAAP"). We follow the accounting standards established by the Financial
Accounting Standards Board, the American Institute of Certified Public
Accountants and the Securities and Exchange Commission. We reclassified certain
amounts in our 1998 and 1997 financial statements and notes to conform with the
1999 presentation.
INVESTMENTS
FIXED MATURITIES are securities that mature more than one year after
issuance and include bonds, notes receivable and redeemable preferred stock.
Fixed maturities that we may sell prior to maturity are classified as ACTIVELY
MANAGED and are carried at estimated fair value, with any unrealized gain or
loss, net of tax and related adjustments, recorded as a component of
shareholder's equity. Fixed maturity securities that we intend to sell in the
near term are classified as TRADING and included in other invested assets. We
include any unrealized gain or loss on trading securities in net investment
gains.
EQUITY SECURITIES include investments in common stocks and non-redeemable
preferred stock. We carry these investments at estimated fair value. We record
any unrealized gain or loss, net of tax and related adjustments, as a component
of shareholder's equity.
MORTGAGE LOANS held in our investment portfolio are carried at amortized
unpaid balances, net of provisions for estimated losses.
POLICY LOANS are stated at their current unpaid principal balances.
OTHER INVESTED ASSETS include trading securities and certain
non-traditional investments. Non-traditional investments include investments in
certain limited partnerships, mineral rights and promissory notes; we account
for them using either the cost method, or for investments in partnerships over
whose operations the Company exercises significant influence, the equity method.
We defer any fees received or costs incurred when we originate investments
(primarily mortgage loans). We amortize fees, costs, discounts and premiums as
yield adjustments over the contractual lives of the investments. We consider
anticipated prepayments on mortgage-backed securities in determining estimated
future yields on such securities.
41
<PAGE>
CONSECO VARIABLE INSURANCE COMPANY
Notes to Financial Statements
------------------------------
When we sell a security (other than a trading security), we report the
difference between our sale proceeds and its amortized cost (determined based on
specific identification) as an investment gain or loss.
We regularly evaluate all of our investments based on current economic
conditions, credit loss experience and other investee-specific developments. If
there is a decline in a security's net realizable value that is other than
temporary, we treat it as a realized loss and reduce our cost basis of the
security to its estimated fair value.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents include commercial paper, invested cash and other
investments purchased with maturities of less than three months. We carry them
at amortized cost, which approximates their estimated fair value.
SEPARATE ACCOUNTS
Separate accounts are funds on which investment income and gains or losses
accrue directly to certain policyholders. The assets of these accounts are
legally segregated. They are not subject to the claims that may arise out of any
other business of the Company. We report separate account assets at market
value; the underlying investment risks are assumed by the contract holders. We
record the related liabilities at amounts equal to the market value of the
underlying assets. We record the fees earned for administrative and
contractholder services performed for the separate accounts in insurance policy
income.
COST OF POLICIES PRODUCED
The costs that vary with, and are primarily related to, producing new
insurance business are referred to as cost of policies produced. We amortize
these costs using the interest rate credited to the underlying policy: (i) in
relation to the estimated gross profits for universal life-type and
investment-type products; or (ii) in relation to future anticipated premium
revenue for other products.
When we realize a gain or loss on investments backing our universal life or
investment-type products, we adjust the amortization to reflect the change in
estimated gross profits from the products due to the current realized gain or
loss and the effect of the event on future investment yields. We also adjust the
cost of policies produced for the change in amortization that would have been
recorded if actively managed fixed maturity securities had been sold at their
stated aggregate fair value and the proceeds reinvested at current yields. We
include the impact of this adjustment in accumulated other comprehensive income
(loss) within shareholder's equity.
Each year, we evaluate the recoverability of the unamortized balance of the
cost of policies produced. We consider estimated future gross profits or future
premiums, expected mortality or morbidity, interest earned and credited rates,
persistency and expenses in determining whether the balance is recoverable.
COST OF POLICIES PURCHASED
The cost assigned to the right to receive future cash flows from contracts
existing at the date of an acquisition is referred to as the cost of policies
purchased. The balance of this account is amortized, evaluated for recovery, and
adjusted for the impact of unrealized gains (losses) in the same manner as the
cost of policies produced described above.
The discount rate we use to determine the value of the cost of policies
purchased is the rate of return we need to earn in order to invest in the
business being acquired. In determining this required rate of return, we
consider many factors including: (i) the magnitude of the risks associated with
each of the actuarial assumptions used in determining expected future cash
flows; (ii) the cost of our capital required to fund the acquisition; (iii) the
likelihood of changes in projected future cash flows that might occur if there
are changes in insurance regulations and tax laws; (iv) the acquired company's
compatibility with other
42
<PAGE>
CONSECO VARIABLE INSURANCE COMPANY
Notes to Financial Statements
------------------------------
Company activities that may favorably affect future cash flows; (v) the
complexity of the acquired company; and (vi) recent prices (i.e., discount rates
used in determining valuations) paid by others to acquire similar blocks of
business.
GOODWILL
Goodwill is the excess of the amount paid to acquire the Company over the
fair value of its net assets. Our analysis indicates that the anticipated
ongoing cash flows from the earnings of the Company extends significantly beyond
the maximum 40-year period allowed for goodwill amortization. Accordingly, we
amortize goodwill on the straight-line basis generally over a 40-year period. At
December 31, 1999, the total accumulated amortization of goodwill was $16.1
million. We continually monitor the value of our goodwill based on our estimates
of future earnings. We determine whether goodwill is fully recoverable from
projected undiscounted net cash flows from our earnings over the remaining
amortization period. If we were to determine that changes in such projected cash
flows no longer support the recoverability of goodwill over the remaining
amortization period, we would reduce its carrying value with a corresponding
charge to expense or shorten the amortization period (no such changes have
occurred).
RECOGNITION OF INSURANCE POLICY INCOME AND RELATED BENEFITS AND EXPENSES ON
INSURANCE CONTRACTS
Generally, we recognize insurance premiums for traditional life and
accident and health contracts as earned over the premium-paying periods. We
establish reserves for future benefits on a net-level premium method based upon
assumptions as to investment yields, mortality, morbidity, withdrawals and
dividends. We record premiums for universal life-type and investment-type
contracts that do not involve significant mortality or morbidity risk as
deposits to insurance liabilities. Revenues for these contracts consist of
mortality, morbidity, expense and surrender charges. We establish reserves for
the estimated present value of the remaining net costs of all reported and
unreported claims.
REINSURANCE
In the normal course of business, we seek to limit our exposure to loss on
any single insured or to certain groups of policies by ceding reinsurance to
other insurance enterprises. We currently retain no more than $.5 million of
mortality risk on any one policy. We diversify the risk of reinsurance loss by
using a number of reinsurers that have strong claims-paying ratings. If any
reinsurer could not meet its obligations, the Company would assume the
liability. The likelihood of a material loss being incurred as the result of the
failure of one of our reinsurers is considered remote. The cost of reinsurance
is recognized over the life of the reinsured policies using assumptions
consistent with those used to account for the underlying policy. The cost of
reinsurance ceded totaled $23.1 million, $21.0 million and $24.2 million in
1999, 1998 and 1997, respectively. A receivable is recorded for the reinsured
portion of insurance policy benefits paid and liabilities for insurance
products. Reinsurance recoveries netted against insurance policy benefits
totaled $20.8 million, $21.8 million and $14.9 million in 1999, 1998 and 1997,
respectively.
INCOME TAXES
Our income tax expense includes deferred income taxes arising from
temporary differences between the tax and financial reporting bases of assets
and liabilities. In assessing the realization of deferred income tax assets, we
consider whether it is more likely than not that the deferred income tax assets
will be realized. The ultimate realization of deferred income tax assets depends
upon generating future taxable income during the periods in which temporary
differences become deductible. If future income is not generated as expected,
deferred income tax assets may need to be written off (no such write-offs have
occurred).
INVESTMENT BORROWINGS
As part of our investment strategy, we may enter into reverse repurchase
agreements and dollar-roll transactions to increase our investment return or to
improve our liquidity. We account for these transactions as collateral
borrowings, where the amount borrowed is equal to the sales price of the
underlying securities. Reverse repurchase agreements involve a sale of
securities and an agreement to repurchase the same securities at a later date at
an agreed-upon price. Dollar rolls are similar to reverse
43
<PAGE>
CONSECO VARIABLE INSURANCE COMPANY
Notes to Financial Statements
------------------------------
repurchase agreements except that, with dollar rolls, the repurchase involves
securities that are only substantially the same as the securities sold. Such
borrowings averaged $137.7 million during 1999 and $66.0 million during 1998.
These borrowings were collateralized by investment securities with fair values
approximately equal to the loan value. The weighted average interest rate on
short-term collateralized borrowings was 5.0 percent and 4.4 percent in 1999 and
1998, respectively. The primary risk associated with short-term collateralized
borrowings is that a counterparty will be unable to perform under the terms of
the contract. Our exposure is limited to the excess of the net replacement cost
of the securities over the value of the short-term investments (such excess was
not material at December 31, 1999). We believe the counterparties to our reverse
repurchase and dollar-roll agreements are financially responsible and that the
counterparty risk is minimal.
USE OF ESTIMATES
When we prepare financial statements in conformity with GAAP, we are
required to make estimates and assumptions that significantly affect various
reported amounts of assets and liabilities, and the disclosure of contingent
assets and liabilities at the date of the financial statements and revenues and
expenses during the reporting periods. For example, we use significant estimates
and assumptions in calculating values for the cost of policies produced, the
cost of policies purchased, goodwill, insurance liabilities, liabilities related
to litigation, guaranty fund assessment accruals and deferred income taxes. If
our future experience differs materially from these estimates and assumptions,
our financial statements could be affected.
FAIR VALUES OF FINANCIAL INSTRUMENTS
We use the following methods and assumptions to determine the estimated
fair values of financial instruments:
INVESTMENT SECURITIES. For fixed maturity securities (including redeemable
preferred stocks) and for equity and trading securities, we use quotes from
independent pricing services, where available. For investment securities
for which such quotes are not available, we use values obtained from
broker-dealer market makers or by discounting expected future cash flows
using a current market rate appropriate for the yield, credit quality, and
(for fixed maturity securities) the maturity of the investment being
priced.
CASH AND CASH EQUIVALENTS. The carrying amount for these instruments
approximates their estimated fair value.
MORTGAGE LOANS AND POLICY LOANS. We discount future expected cash flows for
loans included in our investment portfolio based on interest rates
currently being offered for similar loans to borrowers with similar credit
ratings. We aggregate loans with similar characteristics in our
calculations.
OTHER INVESTED ASSETS. We use quoted market prices, where available. When
quotes are not available, we estimate the fair value based on: (i)
discounted future expected cash flows; or (ii) independent transactions
which establish a value for our investment. When we are unable to estimate
a fair value, we assume a market value equal to carrying value.
INSURANCE LIABILITIES FOR INTEREST-SENSITIVE PRODUCTS. We discount future
expected cash flows based on interest rates currently being offered for
similar contracts with similar maturities.
INVESTMENT BORROWINGS. Due to the short-term nature of these borrowings
(terms generally less than 30 days), estimated fair values are assumed to
approximate the carrying amount reported in the balance sheet.
Here are the estimated fair values of our financial instruments:
44
<PAGE>
CONSECO VARIABLE INSURANCE COMPANY
Notes to Financial Statements
------------------------------
1999 1998
------------------ ------------------
Carrying Fair Carrying Fair
Amount Value Amount Value
-------- -------- -------- --------
(Dollars in millions)
Financial assets:
Actively managed fixed maturities ... $1,398.7 $1,398.7 $1,524.1 $1,524.1
Equity securities ................... 49.8 49.8 45.7 45.7
Mortgage loans ...................... 108.0 102.8 110.2 119.0
Policy loans ........................ 75.5 75.5 79.6 79.6
Other invested assets ............... 50.8 50.8 120.3 120.3
Cash and cash equivalents ........... 81.5 81.5 48.4 48.4
Financial liabilities:
Insurance liabilities for
interest-sensitive products (1) ... 1,289.2 1,289.2 1,365.2 1,365.2
Investment borrowings ............... 135.1 135.1 65.7 65.7
- -------------------
(1) The estimated fair value of the liabilities for interest-sensitive
products was approximately equal to its carrying value at December 31,
1999 and 1998. This was because interest rates credited on the vast
majority of account balances approximate current rates paid on similar
products and because these rates are not generally guaranteed beyond
one year. We are not required to disclose fair values for insurance
liabilities, other than those for interest-sensitive products .
However, we take into consideration the estimated fair values of all
insurance liabilities in our overall management of interest rate risk.
We attempt to minimize exposure to changing interest rates by matching
investment maturities with amounts due under insurance contracts.
RECENTLY ISSUED ACCOUNTING STANDARDS
Statement of Financial Accounting Standards No. 133, "Accounting for
Derivative Instruments and Hedging Activities" ("SFAS 133"), as amended by
Statement of Financial Accounting Standards No. 137, "Deferral of the Effective
Date of FASB Statement No. 133" requires all derivative instruments to be
recorded on the balance sheet at estimated fair value. Changes in the fair value
of derivative instruments are to be recorded each period either in current
earnings or other comprehensive income, depending on whether a derivative is
designated as part of a hedge transaction and, if it is, on the type of hedge
transaction. SFAS 133 is required to be implemented in year 2001. We are
currently evaluating the impact of SFAS 133; at present, we do not believe it
will have a material effect on our consolidated financial position or results of
operations. Because of ongoing changes to implementation guidance, we do not
plan on adopting the new standard until the first quarter of 2001.
We implemented the Statement of Position 98-1, "Accounting for the Costs of
Computer Software Developed or Obtained for Internal Use" ("SOP 98-1") on
January 1, 1999. SOP 98-1 defines internal use software and when the costs
associated with internal use software should be capitalized. The implementation
of SOP 98-1 did not have a material effect on our consolidated financial
position or results of operations.
2. INVESTMENTS:
At December 31, 1999, the amortized cost and estimated fair value of
actively managed fixed maturities and equity securities were as follows:
Gross Gross Esti-
unre- unre- mated
Amortized alized alized fair
cost gains losses value
-------- ------ ----- --------
(Dollars in millions)
Investment grade:
Corporate securities ..................... $ 840.6 $ 2.2 $59.3 $ 783.5
United States Treasury securities
and obligations of United States
government corporations and agencies ... 15.5 .1 .7 14.9
States and political subdivisions ........ 11.7 -- 1.1 10.6
Debt securities issued by
foreign governments .................... 12.2 -- 1.6 10.6
Mortgage-backed securities ............... 482.3 .2 22.7 459.8
Below-investment grade
(primarily corporate securities) .......... 129.5 2.4 12.6 119.3
-------- ------ ----- --------
Total actively managed
fixed maturities ..................... $1,491.8 $ 4.9 $98.0 $1,398.7
======== ====== ===== ========
Equity securities ........................... $47.8 $3.9 $1.9 $49.8
===== ==== ==== =====
45
<PAGE>
CONSECO VARIABLE INSURANCE COMPANY
Notes to Financial Statements
------------------------------
At December 31, 1998, the amortized cost and estimated fair value of
actively managed fixed maturities and equity securities were as follows:
Gross Gross Esti-
unre- unre- mated
Amortized alized alized fair
cost gains losses value
-------- ------ ----- --------
(Dollars in millions)
Investment grade:
Corporate securities ...................... $ 860.4 $20.7 $15.0 $ 866.1
United States Treasury securities
and obligations of United States
government corporations
and agencies ............................ 26.9 .8 .2 27.5
States and political subdivisions ......... 17.3 .3 -- 17.6
Debt securities issued by
foreign governments ..................... 11.7 -- .8 10.9
Mortgage-backed securities ................ 487.4 8.0 1.2 494.2
Below-investment grade
(primarily corporate securities) ........... 116.8 1.2 10.2 107.8
-------- ----- ----- --------
Total actively managed
fixed maturities ...................... $1,520.5 $31.0 $27.4 $1,524.1
======== ===== ===== ========
Equity securities ............................ $ 46.0 $ .8 $ 1.1 $ 45.7
======== ===== ===== ========
Accumulated other comprehensive loss included in shareholder's equity as of
December 31, 1999 and 1998, is summarized as follows:
1999 1998
------- -------
(Dollars in millions)
Unrealized gains (losses) on investments ............. $ (90.8) $ .9
Adjustments to cost of policies purchased
and cost of policies produced ...................... 46.3 (2.1)
Deferred income tax benefit .......................... 16.1 .4
------- -------
Accumulated other comprehensive loss .......... $ (28.4) $ (.8)
======= =======
The following table sets forth the amortized cost and estimated fair value
of actively managed fixed maturities at December 31, 1999, by contractual
maturity. Actual maturities will differ from contractual maturities because
borrowers may have the right to call or prepay obligations with or without call
or prepayment penalties. Most of the mortgage-backed securities shown below
provide for periodic payments throughout their lives.
46
<PAGE>
CONSECO VARIABLE INSURANCE COMPANY
Notes to Financial Statements
------------------------------
Estimated
Amortized fair
cost value
-------- --------
(Dollars in millions)
Due in one year or less ................................ $ 8.2 $ 8.2
Due after one year through five years .................. 90.8 89.5
Due after five years through ten years ................. 279.9 259.6
Due after ten years .................................... 628.2 579.4
-------- --------
Subtotal .......................................... 1,007.1 936.7
Mortgage-backed securities (a) ......................... 484.7 462.0
-------- --------
Total actively managed fixed maturities ........ $1,491.8 $1,398.7
======== ========
- ----------
(a) Includes below-investment grade mortgage-backed securities with an
amortized cost and estimated fair value of $2.4 million and $2.2 million,
respectively.
Net investment income consisted of the following:
1999 1998 1997
------- ------- -------
(Dollars in millions)
Actively managed fixed maturity securities ....... $ 114.8 $ 118.4 $ 133.6
Equity securities ................................ 12.2 3.2 1.7
Mortgage loans ................................... 9.9 12.1 16.4
Policy loans ..................................... 4.8 5.1 5.4
Other invested assets ............................ 3.5 13.3 7.7
Cash and cash equivalents ........................ 2.1 2.9 3.4
Separate accounts ................................ 151.8 44.1 55.7
------- ------- -------
Gross investment income ...................... 299.1 199.1 223.9
Investment expenses .............................. 1.5 1.1 1.3
------- ------- -------
Net investment income ..................... $ 297.6 $ 198.0 $ 222.6
======= ======= =======
The Company had no significant fixed maturity investments or mortgage loans
that were not accruing investment income in 1999, 1998 and 1997.
Investment gains (losses), net of investment expenses, were included in
revenue as follows:
1999 1998 1997
------- ------- -------
(Dollars in millions)
Fixed maturities:
Gross gains .................................... $ 8.6 $ 34.0 $ 20.6
Gross losses ................................... (14.5) (12.4) (5.1)
Other than temporary decline in fair value ..... (1.3) -- (.3)
------- ------- -------
Net investment gains (losses) from fixed
maturities before expenses ................. (7.2) 21.6 15.2
Other ............................................ .7 .1 2.2
------- ------- -------
Net investment gains (losses) before expenses (6.5) 21.7 17.4
Investment expenses .............................. 3.5 3.2 4.1
------- ------- -------
Net investment gains (losses) ................ $ (10.0) $ 18.5 $ 13.3
======= ======= =======
47
<PAGE>
CONSECO VARIABLE INSURANCE COMPANY
Notes to Financial Statements
------------------------------
At December 31, 1999, the mortgage loan balance was primarily comprised of
commercial loans. Approximately 16 percent, 11 percent, 10 percent, 8 percent, 8
percent and 8 percent of the mortgage loan balance were on properties located in
Michigan, Texas, Florida, California, Georgia and Tennessee, respectively. No
other state comprised greater than 7 percent of the mortgage loan balance.
Noncurrent mortgage loans were insignificant at December 31, 1999. At December
31, 1999, our allowance for loss on mortgage loans was $.3 million.
Life insurance companies are required to maintain certain investments on
deposit with state regulatory authorities. Such assets had an aggregate carrying
value of $11.5 million at December 31, 1999.
The Company had no investments in any single entity in excess of 10 percent
of shareholder's equity at December 31, 1999, other than investments issued or
guaranteed by the United States government or a United States government agency.
3. INSURANCE LIABILITIES:
These liabilities consisted of the following:
<TABLE>
<CAPTION>
Interest
Withdrawal Mortality rate
assumption assumption assumption 1999 1998
----------- ---------- ---------- -------- --------
(Dollars in millions)
<S> <C> <C> <C> <C> <C>
Future policy benefits:
Interest-sensitive products:
Investment contracts ........ N/A N/A (c) $ 976.7 $1,036.0
Universal life-type contracts N/A N/A N/A 312.5 329.2
-------- --------
Total interest-sensitive
products ................ 1,289.2 1,365.2
-------- --------
Traditional products:
Traditional life insurance
contracts ................. Company (a) 7.6% 137.0 139.9
experience
Limited-payment contracts ... Company (b) 7.5% 105.8 106.3
experience, -------- --------
if applicable
Total traditional
products ............... 242.8 246.2
-------- --------
Claims payable and other
policyholder funds ............ N/A N/A N/A 64.1 62.6
Liabilities related to
separate accounts ............. N/A N/A N/A 1,457.0 696.4
-------- --------
Total ....................... $3,053.1 $2,370.4
======== ========
<FN>
- -------------
(a) Principally, modifications of the 1975 - 80 Basic, Select and Ultimate
Tables.
(b) Principally, the 1984 United States Population Table and the NAIC 1983
Individual Annuitant Mortality Table.
(c) At December 31, 1999 and 1998, approximately 97 percent and 95 percent,
respectively, of this liability represented account balances where future
benefits are not guaranteed. The weighted average interest rate on the
remainder of the liabilities representing the present value of guaranteed
future benefits was approximately 6 percent at December 31, 1999.
</FN>
</TABLE>
48
<PAGE>
CONSECO VARIABLE INSURANCE COMPANY
Notes to Financial Statements
------------------------------
4. INCOME TAXES:
Income tax liabilities were comprised of the following:
1999 1998
----- -----
(Dollars in millions)
Deferred income tax liabilities (assets):
Investments (primarily actively managed
fixed maturities) ................................ $ 3.6 $ 5.4
Cost of policies purchased and cost
of policies produced ............................. 75.3 56.7
Insurance liabilities .............................. (39.2) (28.2)
Unrealized depreciation ............................ (16.1) (.4)
Other .............................................. 10.2 (2.2)
----- -----
Deferred income tax liabilities ............... 33.8 31.3
Current income tax liabilities (assets) ................ (.4) 6.2
----- -----
Income tax liabilities ........................ $33.4 $37.5
===== =====
Income tax expense was as follows:
1999 1998 1997
------- ------- -------
(Dollars in millions)
Current tax provision ..................... $ 4.3 $ 20.8 $ 16.3
Deferred tax provision (benefit) .......... 9.3 (4.2) 5.8
------- ------- -------
Income tax expense ............... $ 13.6 $ 16.6 $ 22.1
======= ======= =======
A reconciliation of the income tax provisions based on the U.S. statutory
corporate tax rate to the provisions reflected in the statement of operations is
as follows:
1999 1998 1997
------- ------- -------
(Dollars in millions)
Tax on income before income taxes at
statutory rate .......................... 35.0% 35.0% 35.0%
State taxes ............................... 1.5 1.0 .7
Other ..................................... (1.4) (.8) .3
------- ------- -------
Income tax expense ............... 35.1% 35.2% 36.0%
======= ======= =======
5. OTHER DISCLOSURES:
LITIGATION
The Company is involved on an ongoing basis in lawsuits related to its
operations. Although the ultimate outcome of certain of such matters cannot be
predicted, such lawsuits currently pending against the Company are not expected,
individually or in the aggregate, to have a material adverse effect on the
Company's financial condition, cash flows or results of operations.
GUARANTY FUND ASSESSMENTS
The balance sheet at December 31, 1999, includes: (i) accruals of $1.6
million, representing our estimate of all known assessments that will be levied
against the Company by various state guaranty associations based on premiums
written through
49
<PAGE>
CONSECO VARIABLE INSURANCE COMPANY
Notes to Financial Statements
------------------------------
December 31, 1999; and (ii) receivables of $1.1 million that we estimate will be
recovered through a reduction in future premium taxes as a result of such
assessments. These estimates are subject to change when the associations
determine more precisely the losses that have occurred and how such losses will
be allocated among the insurance companies. We recognized expense for such
assessments of $1.1 million in 1999, $1.1 million in 1998 and $1.2 million in
1997.
RELATED PARTY TRANSACTIONS
The Company operates without direct employees through management and
service agreements with subsidiaries of Conseco. Fees for such services
(including data processing, executive management and investment management
services) are based on Conseco's direct and directly allocable costs plus a 10
percent margin. Total fees incurred by the Company under such agreements were
$43.4 million in 1999, $37.8 million in 1998 and $36.7 million in 1997.
During 1998 and 1997, the Company purchased $13.0 million and $11.2 million
par value, respectively, of senior subordinated notes issued by subsidiaries of
Conseco. The total carrying value of such notes purchased during 1998, 1997 and
prior years was $45.5 million at December 31, 1998. Such notes are classified as
"other invested assets" in the accompanying balance sheet. In 1999, all such
notes were repurchased from the Company by Conseco or its subsidiaries.
6. OTHER OPERATING STATEMENT DATA:
Insurance policy income consisted of the following:
1999 1998 1997
------- ------- -------
(Dollars in millions)
Traditional products:
Direct premiums collected ...................... $ 700.4 $ 445.8 $ 309.6
Reinsurance assumed ............................ 18.7 15.6 14.9
Reinsurance ceded .............................. (23.1) (21.0) (24.2)
------- ------- -------
Premiums collected, net of reinsurance ..... 696.0 440.4 300.3
Less premiums on universal life and
products without mortality and morbidity
risk which are recorded as additions to
insurance liabilities ........................ 654.1 400.4 255.9
------- ------- -------
Premiums on traditional products with
mortality or morbidity risk, recorded
as insurance policy income ............... 41.9 40.0 44.4
Fees and surrender charges on interest-
sensitive products ............................. 30.2 33.6 31.3
------- ------- -------
Insurance policy income .................... $ 72.1 $ 73.6 $ 75.7
======= ======= =======
The five states with the largest shares of 1999 collected premiums were
California (14 percent), Texas (14 percent), Florida (13 percent), Michigan (8.8
percent) and Indiana (5.2 percent). No other state accounted for more than 4
percent of total collected premiums.
Changes in the cost of policies purchased were as follows:
50
<PAGE>
CONSECO VARIABLE INSURANCE COMPANY
Notes to Financial Statements
------------------------------
1999 1998 1997
------- ------- -------
(Dollars in millions)
Balance, beginning of year ....................... $ 98.0 $ 106.4 $ 143.0
Amortization ................................. (4.1) (21.1) (15.4)
Amounts related to fair value adjustment
of actively managed fixed maturities ....... 37.7 11.8 (21.2)
Other ........................................ -- .9 --
------- ------- -------
Balance, end of year ............................. $ 131.6 $ 98.0 $ 106.4
======= ======= =======
Based on current conditions and assumptions as to future events on all
policies in force, the Company expects to amortize approximately 9 percent of
the December 31, 1999, balance of cost of policies purchased in 2000, 10 percent
in 2001, 9 percent in 2002, 7 percent in 2003 and 6 percent in 2004. The
discount rates used to determine the amortization of the cost of policies
purchased ranged from 3.6 percent to 8.0 percent and averaged 5.8 percent.
Changes in the cost of policies produced were as follows:
1999 1998 1997
------- ------- -------
(Dollars in millions)
Balance, beginning of year ....................... $ 82.5 $ 55.9 $ 38.2
Additions .................................... 62.7 35.3 31.8
Amortization ................................. (8.3) (11.0) (10.2)
Amounts related to fair value adjustment
of actively managed fixed maturities ....... 10.7 2.3 (3.9)
------- ------- -------
Balance, end of year ............................. $ 147.6 $ 82.5 $ 55.9
======= ======= =======
7. STATEMENT OF CASH FLOWS:
Income taxes paid during 1999, 1998, and 1997, were $2.1 million, $17.1
million and $14.8 million, respectively.
8. STATUTORY INFORMATION:
Statutory accounting practices prescribed or permitted by regulatory
authorities for insurance companies differ from GAAP. The Company reported the
following amounts to regulatory agencies:
1999 1998
------ ------
(Dollars
in millions)
Statutory capital and surplus .................................. $112.6 $134.0
Asset valuation reserve ........................................ 41.4 30.9
Interest maintenance reserve ................................... 66.7 73.1
------ ------
Total .......................................................... $220.7 $238.0
====== ======
Our statutory net income was $14.6 million, $32.7 million and $32.7 million
in 1999, 1998 and 1997, respectively. Statutory net income differs from net
income presented in our financial statements prepared in accordance with GAAP,
primarily because for GAAP reporting we are required to defer and amortize costs
that vary with and are primarily related to the production of new business as
described in note 1.
State insurance laws generally restrict the ability of insurance companies
to pay dividends or make other distributions. We may pay dividends to our parent
in 2000 of $12.8 million without permission from state regulatory authorities.
In 1998, the National Association of Insurance Commissioners adopted
codified statutory accounting principles, which are expected to constitute the
only source of prescribed statutory accounting practices and are effective in
2001. The changes to statutory accounting practices resulting from the
codification are not expected to have a material effect on the statutory capital
and surplus or statutory operating earnings data shown above.
51
