File Nos. 333-40309
811-08483
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [ ]
Pre-Effective Amendment No. [ ]
Post-Effective Amendment No. 7 [X]
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [ ]
Amendment No. 8 [X]
(Check appropriate box or boxes.)
CONSECO VARIABLE ANNUITY ACCOUNT F
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(Exact Name of Registrant)
CONSECO VARIABLE INSURANCE COMPANY
----------------------------------------
(Name of Depositor)
11815 N. Pennsylvania Street
Carmel, Indiana 46032-4572
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(Address of Depositor's Principal Executive Offices) (Zip Code)
<PAGE>
Depositor's Telephone Number, including Area Code (317) 817-3700
Name and Address of Agent for Service
Michael A. Colliflower
Conseco Variable Insurance Company
11815 N. Pennsylvania Street
Carmel, Indiana 46032-4572
(317) 817-3700
Copies to:
Judith A. Hasenauer
Blazzard, Grodd & Hasenauer, P.C.
943 Post Road East
Westport, CT 06880
It is proposed that this filing will become effective:
_____ immediately upon filing pursuant to paragraph (b) of Rule 485
__X__ on December 31, 2000 pursuant to paragraph (b) of Rule 485
_____ 60 days after filing pursuant to paragraph (a)(1) of Rule 485
_____ on (date) pursuant to paragraph (a)(1) of Rule 485.
If appropriate, check the following:
_____ This post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
Title of Securities Being Registered:
Variable Annuity Contracts
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CROSS REFERENCE SHEET
(required by Rule 495)
<TABLE>
<CAPTION>
ITEM NO. Location
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<S> <C> <C>
PART A
Item 1. Cover Page Cover Page
Item 2. Definitions Index of Special Terms
Item 3. Synopsis Highlights
<PAGE>
Item 4. Condensed Financial Information Appendix A - Condensed
Financial Information
Item 5. General Description of Registrant,
Depositor, and Portfolio Companies Other Information -
Conseco Variable; The
Separate Account;
Investment Options;
Appendix B
Item 6. Deductions and Expenses Expenses
Item 7. General Description of Variable
Annuity Contracts The Annuity Contract
Item 8. Annuity Period Annuity Payments
(The Income Phase)
Item 9. Death Benefit Death Benefit
Item 10. Purchases and Contract Value Purchase
Item 11. Redemptions Access to Your Money
Item 12. Taxes Taxes
Item 13. Legal Proceedings None
Item 14. Table of Contents of the Statement
of Additional Information Table of Contents of the
Statement of Additional
Information
</TABLE>
CROSS REFERENCE SHEET
(required by Rule 495)
<TABLE>
<CAPTION>
ITEM NO. LOCATION
-------- --------
<S> <C> <C>
PART B
Item 15. Cover Page Cover Page
Item 16. Table of Contents Table of Contents
Item 17. General Information and History Company
Item 18. Services Not Applicable
<PAGE>
Item 19. Purchase of Securities Being Offered Not Applicable
Item 20. Underwriters Distribution
Item 21. Calculation of Performance Data Calculation of Performance
Information
Item 22. Annuity Payments Annuity Provisions
Item 23. Financial Statements Financial Statements
</TABLE>
PART C
Information required to be included in Part C is set forth under the appropriate
Item so numbered in Part C to this Registration Statement.
PART A
The Prospectus was filed in Post-Effective Amendment No. 6 to Form N-4 on April
28, 2000 and is incorporated herein by reference.
CONSECO ADVANTAGE
CONSECO VARIABLE ANNUITY ACCOUNT F
CONSECO VARIABLE INSURANCE COMPANY
Supplement dated January 1, 2001
The following supplements certain information contained in your prospectus for
the Conseco Advantage fixed and variable annuity:
1. Effective as of the date of this supplement, you may also invest in the
following investment portfolios:
Pioneer Variable Contracts Trust, Class II Shares
Managed by Pioneer Investment Management, Inc.
Pioneer Fund VCT Portfolio
Pioneer Equity-Income VCT Portfolio
Pioneer Europe VCT Portfolio
2. As of the date of this supplement, you may invest in the INVESCO VIF - High
Yield Fund and the INVESCO VIF - Equity Income Fund of INVESCO Variable
Investment Funds, Inc. Information regarding these funds is contained in the
prospectus.
3. The following is added to the "Investment Portfolio Expenses" table:
<TABLE>
<CAPTION>
------------------------ --------------------- ---------------------- --------------------- ----------------------
Other Expenses* Total Annual
(after expense Portfolio Expenses*
reimbursement, if (after expense
any, for certain reimbursement, if
portfolios) any, for certain
Management Fees 12b-1 Fees portfolios)
------------------------ --------------------- ---------------------- --------------------- ----------------------
<S> <C> <C> <C> <C>
Pioneer Fund
VCT Portfolio .65% .25% .07% .97%
Pioneer Equity-
Income VCT Portfolio .65% .25% .09% .99%
Pioneer Europe
VCT Portfolio** 1.00% .25% .47% 1.72%
* Expenses for fiscal year ended December 31, 2000 are estimated.
** Absent expense offsets, other expenses are estimated to be .49% for the year
ended December 31, 2000.
</TABLE>
4. The following Examples are added to the prospectus:
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 $1,000 is invested in the option
listed: (a) if you surrender your contract at the end of each time period; (b)
if you do not surrender your contract; (c) if you annuitize your contract
(except under certain circumstances).
Time Periods
1 Year 3 Years
Pioneer Fund VCT Portfolio (a)$ 88 (a)$130
(b)$ 25 (b)$ 76
(c)$ 88 (c)$130
Pioneer Equity-Income VCT Portfolio (a)$ 88 (a)$130
(b)$ 25 (b)$ 77
(c)$ 88 (c)$130
Pioneer Europe VCT Portfolio (a)$ 95 (a)$152
(b)$ 32 (b)$ 98
(c)$ 95 (c)$152
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 $1,000 is
<PAGE>
invested in the option listed: (a) if you surrender your contract at the end of
each time period; (b) if you do not surrender your contract; (c) if you
annuitize your contract (except under certain circumstances).
Time Periods
1 Year 3 Years
Pioneer Fund VCT Portfolio (a)$ 89 (a)$133
(b)$ 26 (b)$ 79
(c)$ 89 (c)$133
Pioneer Equity-Income VCT Portfolio (a)$ 89 (a)$133
(b)$ 26 (b)$ 80
(c)$ 89 (c)$133
Pioneer Europe VCT Portfolio (a)$ 96 (a)$155
(b)$ 33 (b)$101
(c)$ 96 (c)$155
5. The following accumulation unit values for the period ended September 30,
2000 are added to Appendix A:
SUB-ACCOUNT
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THE ALGER AMERICAN FUND:
Leveraged AllCap (a)
Accumulation unit value at beginning of period $26.106
Accumulation unit value at end of period $24.875
Number of accumulation units outstanding at end 2,540,933
of period
Small Capitalization (a)
Accumulation unit value at beginning of period $15.834
Accumulation unit value at end of period $14.224
Number of accumulation units outstanding at end 1,101,511
of period
Growth Portfolio (a)
Accumulation unit value at beginning of period $18.349
<PAGE>
Accumulation unit value at end of period $18.140
Number of accumulation units outstanding at end 3,047,868
of period
Midcap Growth Portfolio
(a)
Accumulation unit value at beginning of period $16.110
Accumulation unit value at end of period $19.384
Number of accumulation units outstanding at end 1,727,060
of period
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AMERICAN CENTURY VARIABLE PORTFOLIO, INC.:
International Fund (a)
Accumulation unit value at beginning of period $17.973
Accumulation unit value at end of period $15.617
Number of accumulation units outstanding at end 664,703
of period
Value Fund (a)
Accumulation unit value at beginning of period $9.990
Accumulation unit value at end of period $10.331
Number of accumulation units outstanding at end 1,062,056
of period
Income and Growth Fund (a)
Accumulation unit value at beginning of period $14.033
Accumulation unit value at end of period $13.356
Number of accumulation units outstanding at end 1,133,903
of period
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BERGER INSTITUTIONAL PRODUCTS TRUST:
Growth Fund (a)
Accumulation unit value at beginning of period $15.727
<PAGE>
Accumulation unit value at end of period $17.588
Number of accumulation units outstanding at end 407,952
of period
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BERGER INSTITUTIONAL PRODUCTS TRUST:
(continued)
Growth & Income Fund (a)
Accumulation unit value at beginning of period $19.193
Accumulation unit value at end of period $20.932
Number of accumulation units outstanding at end 1,963,015
of period
New Generation (c)
Accumulation unit value at beginning of period $10.000
Accumulation unit value at end of period $10.398
Number of accumulation units outstanding at end 167,315
of period
Small Company Growth Fund
(a)
Accumulation unit value at beginning of period $18.501
Accumulation unit value at end of period $21.306
Number of accumulation units outstanding at end 874,880
of period
BIAM International Fund
(a)
Accumulation unit value at beginning of period $14.002
Accumulation unit value at end of period $12.549
Number of accumulation units outstanding at end 74,743
of period
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CONSECO SERIES TRUST:
BALANCED (a)
Accumulation unit value at beginning of period $13.562
<PAGE>
Accumulation unit value at end of period $16.375
Number of accumulation units outstanding at end 1,402,639
of period
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EQUITY (a)
Accumulation unit value at beginning of period $16.013
Accumulation unit value at end of period $20.306
Number of accumulation units outstanding at end 1,360,322
of period
FIXED INCOME (a)
Accumulation unit value at beginning of period $10.208
Accumulation unit value at end of period $10.773
Number of accumulation units outstanding at end 1,183,265
of period
Conseco 20 Focus (c)
Accumulation unit value at beginning of period $10.000
Accumulation unit value at end of period $13.358
Number of accumulation units outstanding at end 132,361
of period
GOVERNMENT SECURITIES (a)
Accumulation unit value at beginning of period $10.079
Accumulation unit value at end of period $10.672
Number of accumulation units outstanding at end 612,707
of period
Conseco High Yield (c)
Accumulation unit value at beginning of period $10.000
Accumulation unit value at end of period $10.102
<PAGE>
Number of accumulation units outstanding at end 217,713
of period
MONEY MARKET (a)
Accumulation unit value at beginning of period $10.690
Accumulation unit value at end of period $11.056
Number of accumulation units outstanding at end 5,348,368
of period
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DREYFUS STOCK INDEX FUND: (a)
Accumulation unit value at beginning of period $14.414
Accumulation unit value at end of period $14.043
Number of accumulation units outstanding at end 5,012,596
of period
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THE DREYFUS SOCIALLY RESPONSIBLE GROWTH FUND, INC. (a)
Accumulation unit value at beginning of period $15.727
Accumulation unit value at end of period $15.853
Number of accumulation units outstanding at end 1,541,977
of period
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DREYFUS VARIABLE INVESTMENT FUND:
Disciplined Stock
Portfolio (a)
Accumulation unit value at beginning of period $12.534
Accumulation unit value at end of period $12.553
Number of accumulation units outstanding at end 497,471
of period
International Value
Portfolio (a)
Accumulation unit value at beginning of period $11.883
Accumulation unit value at end of period $10.798
Number of accumulation units outstanding at end 157,956
<PAGE>
of period
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FEDERATED INSURANCE SERIES:
High Income Bond II (a)
Accumulation unit value at beginning of period $9.994
Accumulation unit value at end of period $9.678
Number of accumulation units outstanding at end 1,029,360
of period
International Equity II
(a)
Accumulation unit value at beginning of period $20.889
Accumulation unit value at end of period $17.736
Number of accumulation units outstanding at end 400,637
of period
Utility II (a)
Accumulation unit value at beginning of period $11.420
Accumulation unit value at end of period $11.233
Number of accumulation units outstanding at end 740,585
of period
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INVESCO VARIABLE INVESTMENT FUND:
High Yield Portfolio (a)
Accumulation unit value at beginning of period $10.251
Accumulation unit value at end of period $9.968
Number of accumulation units outstanding at end 677,517
of period
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INVESCO VARIABLE INVESTMENT FUND (continued):
Equity Income Portfolio
(a)
Accumulation unit value at beginning of period $11.674
<PAGE>
Accumulation unit value at end of period $12.228
Number of accumulation units outstanding at end 435,483
of period
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JANUS ASPEN SERIES:
Aggressive Growth (a)
Accumulation unit value at beginning of period $28.593
Accumulation unit value at end of period $28.088
Number of accumulation units outstanding at end 3,402,191
of period
Growth (a)
Accumulation unit value at beginning of period $17.980
Accumulation unit value at end of period $18.319
Number of accumulation units outstanding at end 5,565,929
of period
Worldwide Growth (a)
Accumulation unit value at beginning of period $19.278
Accumulation unit value at end of period $18.441
Number of accumulation units outstanding at end 4,491,749
of period
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LAZARD RETIREMENT SERIES INC.:
Equity Portfolio (a)
Accumulation unit value at beginning of period $11.679
Accumulation unit value at end of period $11.570
Number of accumulation units outstanding at end 131,019
of period
Small Cap Portfolio (a)
Accumulation unit value at beginning of period $9.653
Accumulation unit value at end of period $10.954
<PAGE>
Number of accumulation units outstanding at end 632,561
of period
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LORD ABBETT SERIES FUND, INC. :
Growth & Income Portfolio
(a)
Accumulation unit value at beginning of period $12.447
Accumulation unit value at end of period $13.073
Number of accumulation units outstanding at end 1,160,191
of period
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MITCHELL HUTCHINS SERIES TRUST:
Growth & Income Portfolio
(a)
Accumulation unit value at beginning of period $12.000
Accumulation unit value at end of period $11.424
Number of accumulation units outstanding at end 90,113
of period
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NEUBERGER BERMAN ADVISERS MANAGEMENT TRUST
Limited Maturity Bond Portfolio (a)
Accumulation unit value at beginning of period $10.236
Accumulation unit value at end of period $10.562
Number of accumulation units outstanding at end 1,073,282
of period
Partners Portfolio (a)
Accumulation unit value at beginning of period $10.647
Accumulation unit value at end of period $10.551
Number of accumulation units outstanding at end 505,242
of period
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RYDEX VARIABLE TRUST
NOVA Portfolio (d)
<PAGE>
Accumulation unit value at beginning of period $18.407
Accumulation unit value at end of period $17.573
Number of accumulation units outstanding at end 97,006
of period
OTC Portfolio (d)
Accumulation unit value at beginning of period $39.086
Accumulation unit value at end of period $36.495
Number of accumulation units outstanding at end 217,852
of period
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SELIGMAN PORTFOLIOS, INC.
Communications and Information Portfolio (c)
Accumulation unit value at beginning of period $10.000
Accumulation unit value at end of period $7.735
Number of accumulation units outstanding at end 406,376
of period
Global Technology
Portfolio (c)
Accumulation unit value at beginning of period $10.000
Accumulation unit value at end of period $8.459
Number of accumulation units outstanding at end 223,456
of period
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STRONG VARIABLE INSURANCE FUNDS, INC.:
Mid Cap Growth Fund II (a)
Accumulation unit value at beginning of period $23.416
Accumulation unit value at end of period $25.851
Number of accumulation units outstanding at end 1,673,647
of period
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STRONG OPPORTUNITY FUND II (a):
Accumulation unit value at beginning of period $14.482
<PAGE>
Accumulation unit value at end of period $15.164
Number of accumulation units outstanding at end 862,383
of period
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THE VAN ECK WORLDWIDE INSURANCE TRUST:
Worldwide Hard Assets
Fund (a)
Accumulation unit value at beginning of period $8.423
Accumulation unit value at end of period $9.062
Number of accumulation units outstanding at end 94,749
of period
Worldwide Bond (a)
Accumulation unit value at beginning of period $10.011
Accumulation unit value at end of period $9.596
Number of accumulation units outstanding at end 135,058
of period
Worldwide Emerging Markets Fund (a)
Accumulation unit value at beginning of period $13.301
Accumulation unit value at end of period $9.950
Number of accumulation units outstanding at end 569,790
of period
Real Estate (a)
Accumulation unit value at beginning of period $8.351
Accumulation unit value at end of period $9.437
Number of accumulation units outstanding at end 105,740
of period
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(a) This unit value was $10.000 on the inception date of
February 9, 1998.
(b) This unit value was $10.000 on the inception date of May
1, 2000.
<PAGE>
There are no accumulation unit values shown for the sub-accounts investing
Pioneer Fund VCT Portfolio, Pioneer Equity-Income VCT Portfolio and Pioneer
Europe VCT Portfolio because they were not available under your contract until
the date of this supplement.
6. The following is added to Appendix B:
Pioneer Variable Contracts Trust
Pioneer Variable Contracts Trust is managed by Pioneer Investment Management,
Inc. The Pioneer Variable Contracts Trust is a mutual fund with multiple
portfolios. The following Class II portfolios are available under the contract:
Pioneer Fund VCT Portfolio
The Pioneer Fund VCT Portfolio seeks reasonable income and capital growth. The
Portfolio invests the major portion of its assets in equity securities,
primarily of U.S. issuers.
Pioneer Equity-Income VCT Portfolio
The Pioneer Equity-Income VCT Portfolio seeks current income and long-term
growth of capital from a portfolio consisting primarily of income producing
equity securities of U.S. corporations.
Pioneer Europe VCT Portfolio
The Pioneer Europe VCT Portfolio seeks long-term growth of capital. The
portfolio invests primarily in equity securities of European issuers.
PART B
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 JANUARY 1, 2001, FOR THE INDIVIDUAL
FIXED AND VARIABLE DEFERRED ANNUITY CONTRACTS WHICH ARE DESCRIBED HEREIN.
<PAGE>
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 JANUARY 1, 2001.
<PAGE>
TABLE OF CONTENTS
Page
COMPANY ..............................................................
INDEPENDENT ACCOUNTANTS ..............................................
LEGAL OPINIONS .......................................................
DISTRIBUTION .........................................................
Reduction or Elimination of the Contingent Deferred Sales Charge ....
CALCULATION OF PERFORMANCE INFORMATION ...............................
Total Return ........................................................
Performance Information .............................................
Historical Unit Values ..............................................
Reporting Agencies ..................................................
FEDERAL TAX STATUS ...................................................
General .............................................................
Diversification .....................................................
Multiple Contracts ..................................................
Partial 1035 Exchanges ..............................................
Contracts Owned by Other than Natural Persons .......................
Tax Treatment of Assignments ........................................
Death Benefits ......................................................
Income Tax Withholding ..............................................
Tax Treatment of Withdrawals-- Non-Qualified Contracts ..............
Qualified Plans .....................................................
Tax Treatment of Withdrawals-- Qualified Contracts ..................
Tax-Sheltered Annuities-- Withdrawal Limitations ....................
Mandatory Distributions-- Qualified Plans ...........................
ANNUITY PROVISIONS ...................................................
Variable Annuity Payout .............................................
Annuity Unit ........................................................
Fixed Annuity Payout ................................................
FINANCIAL STATEMENTS .................................................
<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.
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.
CHART 1: TOTAL RETURN FOR THE PERIODS ENDED SEPTEMBER 30, 2000:
<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 36.30 N/A N/A 17.92 45.58 N/A N/A 20.48
Equity Portfolio ............................ 2/9/98 55.66 N/A N/A 27.91 66.25 N/A N/A 30.69
Fixed Income Portfolio ...................... 2/9/98 (1.05) N/A N/A .67 5.70 N/A N/A 2.85
Government Securities Portfolio ............. 2/9/98 (1.89) N/A N/A .31 4.80 N/A N/A 2.49
Conseco 20 Focus Portfolio ................. 5/1/00 N/A N/A N/A 25.06 N/A N/A N/A 33.58
High Yield Portfolio ........................ 5/1/00 N/A N/A N/A (5.43) N/A N/A N/A 1.02
THE ALGER AMERICAN FUND
Alger American Growth Portfolio ............. 2/9/98 12.20 N/A N/A 22.58 19.85 N/A N/A 25.23
Alger American Leveraged AllCap Portfolio ... 2/9/98 24.59 N/A N/A 38.12 33.08 N/A N/A 41.10
Alger American MidCap Growth Portfolio ...... 2/9/98 41.00 N/A N/A 25.70 50.60 N/A N/A 28.41
Alger American Small Capitalization Portfolio 2/9/98 9.83 N/A N/A 11.82 17.32 N/A N/A 14.24
AMERICAN CENTURY VARIABLE PORTFOLIOS, INC. ..
VP Income & Growth .......................... 2/9/98 1.03 N/A N/A 9.20 7.92 N/A N/A 11.55
VP International ............................ 2/9/98 19.63 N/A N/A 15.83 27.79 N/A N/A 18.35
VP Value .................................... 2/9/98 (4.97) N/A N/A (.92) 1.51 N/A N/A 1.24
</TABLE>
<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 48.24 N/A N/A 21.15 58.33 N/A N/A 23.78
Berger IPT-- Growth and Income Fund ....... 2/9/98 42.09 N/A N/A 29.39 51.77 N/A N/A 32.19
Berger IPT-- Small Company Growth Fund .... 2/9/98 66.85 N/A N/A 30.25 78.20 N/A N/A 33.08
Berger/BIAM IPT-- International Fund ...... 2/9/98 1.45 N/A N/A 6.64 8.37 N/A N/A 8.96
Berger IPT--New Generation Fund ........... 5/1/00 N/A N/A N/A (2.66) N/A N/A N/A 3.98
THE DREYFUS SOCIALLY RESPONSIBLE
GROWTH FUND, INC ........................ 2/9/98 12.77 N/A N/A 16.49 20.46 N/A N/A 19.02
DREYFUS STOCK INDEX FUND .................. 2/9/98 4.34 N/A N/A 11.28 11.45 N/A N/A 13.69
DREYFUS VARIABLE INVESTMENT FUND
Disciplined Stock Portfolio ............... 5/1/98 7.06 N/A N/A 7.30 14.37 N/A N/A 9.86
International Value Portfolio ............. 5/1/98 (7.28) N/A N/A .82 ( .95) N/A N/A 3.23
FEDERATED INSURANCE SERIES
Federated High Income Bond Fund II ........ 2/9/98 (7.77) N/A N/A (3.33) (1.48) N/A N/A (1.23)
Federated Utility Fund II ................. 2/9/98 (5.14) N/A N/A 2.27 1.33 N/A N/A 4.49
Federated International Equity Fund II .... 2/9/98 25.47 N/A N/A 21.54 34.02 N/A N/A 24.17
<PAGE>
INVESCO VARIABLE INVESTMENT FUNDS, INC ....
INVESCO VIF--High Yield Fund .............. 5/1/98 (6.01) N/A N/A (2.46) .41 N/A N/A (.13)
INVESCO VIF--Equity Income Fund ........... 5/1/98 5.54 N/A N/A 6.15 12.74 N/A N/A 8.68
JANUS ASPEN SERIES
Aggressive Growth Portfolio ............... 2/9/98 46.03 N/A N/A 44.61 55.98 N/A N/A 47.73
Growth Portfolio .......................... 2/9/98 17.43 N/A N/A 23.04 25.44 N/A N/A 25.70
Worldwide Growth Portfolio ................ 2/9/98 26.94 N/A N/A 23.35 35.59 N/A N/A 26.02
LAZARD RETIREMENT SERIES, INC .............
Lazard Retirement Equity Portfolio ........ 2/9/98 (1.02) N/A N/A 3.43 5.74 N/A N/A 5.66
Lazard Retirement Small Cap Portfolio ..... 2/9/98 7.24 N/A N/A 1.31 14.55 N/A N/A 3.50
LORD ABBETT SERIES FUND, INC ..............
Growth and Income Portfolio ............... 2/9/98 8.20 N/A N/A 8.32 15.58 N/A N/A 10.66
MITCHELL HUTCHINS SERIES TRUST
Growth and Income Portfolio ............... 2/9/98 .03 N/A N/A 2.97 6.90 N/A N/A 5.16
NEUBERGER BERMAN ADVISERS MANAGEMENT TRUST
Limited Maturity Bond Portfolio ........... 2/9/98 (3.38) N/A N/A (.07) 3.21 N/A N/A 2.09
Partners Portfolio ........................ 2/9/98 .58 N/A N/A (.11) 7.45 N/A N/A 2.05
</TABLE>
<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>
RYDEX VARIABLE TRUST
OTC Fund .................................. 5/1/00 N/A N/A N/A (12.60) N/A N/A N/A (6.63)
NOVA Fund ................................. 5/1/00 N/A N/A N/A (10.64) N/A N/A N/A (4.53)
SELIGMAN PORTFOLIOS, INC.
Seligman Communications and Information
Portfolio ......................................5/1/00 N/A N/A N/A (27.60) N/A N/A N/A (22.65)
Seligman Global Technology Portfolio ...........5/1/00 N/A N/A N/A (20.83) N/A N/A N/A (15.41)
STRONG OPPORTUNITY FUND II, INC ...........
Opportunity Fund II ....................... 2/9/98 15.19 N/A N/A 14.57 23.04 N/A N/A 17.04
STRONG VARIABLE INSURANCE FUNDS, INC ......
Strong MidCap Growth Fund II .............. 2/9/98 48.74 N/A N/A 40.15 58.86 N/A N/A 43.17
VAN ECK WORLDWIDE INSURANCE TRUST
Worldwide Bond Fund ....................... 2/9/98 (12.48) N/A N/A (3.62) (6.50) N/A N/A (1.55)
Worldwide Emerging Markets Fund............ 2/9/98 9.48 N/A N/A (2.31) 16.94 N/A N/A (.19)
Worldwide Hard Assets Fund ................ 2/9/98 3.38 N/A N/A (5.70) 10.44 N/A N/A (3.65)
Worldwide Real Estate Trust ............... 2/9/98 1.43 N/A N/A (4.24) 8.35 N/A N/A (2.17)
</TABLE>
CHART 2: TOTAL RETURN FOR THE PERIODS ENDED SEPTEMBER 30, 2000:
<TABLE>
<CAPTION>
COLUMN A COLUMN B
PORTFOLIO 10 YRS/ 10 YRS/
INCEPTION SINCE SINCE
DATE 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 36.30 16.15 20.00 20.21 45.58 18.38 20.93 20.60
Equity Portfolio ........................... 07/25/94 55.66 23.86 28.77 29.05 66.25 26.24 29.76 29.48
Fixed Income Portfolio ..................... 07/25/94 -1.05 1.48 4.05 5.96 5.70 3.44 4.87 6.32
Government Securities Portfolio ............ 07/25/94 -1.89 1.23 2.98 4.49 4.80 3.19 3.79 4.84
Money Market Portfolio ..................... 07/25/94 -2.21 1.90 3.00 2.67 4.46 3.86 3.81 3.02
Conseco 20 Focus Portfolio ................. 05/01/00 N/A N/A N/A 25.12 N/A N/A N/A 33.58
High Yield Portfolio ....................... 05/01/00 N/A N/A N/A -5.39 N/A N/A N/A 1.02
THE ALGER AMERICAN FUND
Alger American Growth Portfolio ............ 01/09/89 12.20 20.12 19.16 24.16 19.85 22.42 20.08 24.19
Alger American Leveraged AllCap Portfolio .. 01/25/95 24.59 32.33 26.41 36.07 33.08 34.86 27.39 36.74
Alger American MidCap Growth Portfolio ..... 05/03/93 41.01 20.00 17.78 25.17 50.60 22.31 18.70 25.19
Alger American
Small Capitalization Portfolio ........... 09/20/88 9.83 8.54 7.69 18.05 17.32 10.64 8.54 18.08
AMERICAN CENTURY VARIABLE PORTFOLIOS, INC.
VP Income & Growth ......................... 02/06/98 1.03 N/A N/A 9.18 7.92 N/A N/A 11.55
VP International ........................... 05/02/94 19.63 14.34 16.69 16.27 27.79 16.53 17.59 16.65
VP Value ................................... 05/01/96 -4.97 -0.80 N/A 8.08 1.51 1.11 N/A 9.03
BERGER INSTITUTIONAL PRODUCTS TRUST
Berger IPT-- Growth Fund ................... 05/01/96 48.24 19.15 N/A 18.41 58.33 21.44 N/A 19.46
Berger IPT-- Growth and Income Fund ........ 05/01/96 42.10 25.20 N/A 25.83 51.77 27.60 N/A 26.95
Berger IPT-- Small Company Growth Fund ..... 05/01/96 66.85 26.10 N/A 22.96 78.20 28.52 N/A 24.06
Berger IPT-- New Generation Fund ......... 05/01/00 N/A N/A N/A -2.61 N/A N/A N/A 3.98
Berger/BIAM IPT-- International Fund ....... 04/30/97 1.45 5.96 N/A 6.23 8.37 8.00 N/A 7.73
THE DREYFUS SOCIALLY RESPONSIBLE
GROWTH FUND, INC. ........................ 10/07/93 12.78 15.71 20.07 21.44 20.46 17.93 21.00 21.77
DREYFUS STOCK INDEX FUND ................... 10/02/89 4.34 12.38 18.71 19.72 11.45 14.54 19.63 19.75
DREYFUS VARIABLE INVESTMENT FUND
Disciplined Stock Portfolio ................ 04/30/96 7.07 9.52 N/A 16.98 14.37 11.63 N/A 18.00
International Value Portfolio .............. 05/01/96 -7.29 1.26 N/A 4.97 -0.95 3.21 N/A 5.90
FEDERATED INSURANCE SERIES
Federated High Income Bond Fund II ......... 03/01/94 -7.77 -1.65 4.55 5.17 -1.48 0.25 5.37 5.50
Federated Utility Fund II .................. 02/10/94 -5.14 5.67 9.32 10.32 1.33 7.70 10.17 10.66
Federated International Equity Fund II ..... 05/08/95 25.47 20.44 17.01 16.09 34.02 22.75 17.92 16.72
</TABLE>
<TABLE>
<CAPTION>
COLUMN A COLUMN B
PORTFOLIO 10 YRS/ 10 YRS/
INCEPTION SINCE SINCE
DATE 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 -6.01 0.29 3.26 6.83 0.41 2.23 4.08 7.15
<PAGE>
INVESCO VIF--Equity Income Fund ............. 12/15/93 5.54 9.12 13.96 15.62 12.74 11.22 14.85 15.95
JANUS ASPEN SERIES
Aggressive Growth Portfolio ................. 09/13/93 46.03 40.53 28.40 30.77 55.98 43.22 29.39 30.80
Growth Portfolio ............................ 09/13/93 17.43 21.75 22.67 23.02 25.44 24.08 23.62 23.05
Worldwide Growth Portfolio .................. 09/13/93 26.94 21.47 25.25 24.09 35.59 23.80 26.22 24.13
LAZARD RETIREMENT SERIES, INC.
Lazard Retirement Equity Portfolio .......... 01/30/98 -1.01 N/A N/A 3.38 5.74 N/A N/A 5.61
Lazard Retirement Small Cap Portfolio ....... 11/04/97 7.24 N/A N/A 1.50 14.55 N/A N/A 3.51
LORD ABBETT SERIES FUND, INC.
Growth and Income Portfolio ................. 12/11/89 8.20 8.25 11.11 14.24 15.58 10.34 11.98 14.28
MITCHELL HUTCHINS SERIES TRUST
Growth and Income Portfolio ................. 02/06/98 0.07 N/A N/A 2.92 6.90 N/A N/A 5.16
NEUBERGER BERMAN ADVISERS MANAGEMENT TRUST
Limited Maturity Bond Portfolio ............. 06/09/86 -3.38 0.46 2.73 4.57 3.21 2.40 3.54 4.62
Partners Portfolio .......................... 03/22/94 0.59 0.32 12.13 15.06 7.45 2.25 13.00 15.41
PIONEER VARIABLE CONTRACTS TRUST
Pioneer Fund VCT Portfolio ................... 05/01/00 N/A N/A N/A -7.37 N/A N/A N/A -1.09
Pioneer Equity-Income VCT Portfolio .......... 09/14/99 -9.72 N/A N/A -12.53 -3.60 N/A N/A -6.81
Pioneer Europe VCT Portfolio ................. 01/02/01 N/A N/A N/A N/A N/A N/A N/A N/A
RYDEX VARIABLE TRUST
OTC Fund .................................... 05/07/97 34.48 42.41 N/A 43.45 43.64 45.13 N/A 45.45
Nova Fund ................................... 05/07/97 2.98 11.00 N/A 15.70 10.00 13.13 N/A 17.32
SELIGMAN PORTFOLIOS, INC.
Seligman Communications and
Information Portfolio ..................... 04/28/00 N/A N/A N/A -27.57 N/A N/A N/A -22.65
Seligman Global Technology Portfolio ........ 04/28/00 N/A N/A N/A -20.79 N/A N/A N/A -15.41
STRONG OPPORTUNITY FUND II, INC.
<PAGE>
Opportunity Fund II ......................... 05/08/92 15.19 13.22 17.66 18.31 23.04 15.40 18.57 18.34
STRONG VARIABLE INSURANCE FUNDS, INC.
Strong MidCap Growth Fund II ................ 12/31/96 48.74 32.24 N/A 35.66 58.86 34.78 N/A 37.40
VAN ECK WORLDWIDE INSURANCE TRUST
Worldwide Bond Fund ......................... 09/01/89 -12.48 -2.55 -0.51 6.13 -6.50 -0.67 0.28 6.17
Worldwide Emerging Markets Fund ............. 12/27/95 9.48 -12.48 N/A 0.09 16.94 -10.76 N/A 0.91
Worldwide Hard Assets Fund .................. 09/01/89 3.39 -10.23 -0.80 6.27 10.44 -8.48 -0.01 6.30
Worldwide Real Estate Trust ................. 02/06/98 1.43 N/A N/A -4.25 8.35 N/A N/A -2.17
</TABLE>
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
<PAGE>
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.
7
<PAGE>
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."
8
<PAGE>
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.
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
<PAGE>
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 59 1/2; (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.
10
<PAGE>
With respect to (d) above, if the series of substantially equal periodic
payments is modified before the later of your attaining age 59 1/2 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
<PAGE>
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 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 59 1/2, (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 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 33 1/3
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 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 70 1/2,
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
<PAGE>
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 59 1/2; (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
14
<PAGE>
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 59 1/2 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 59 1/2; (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 70 1/2 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.
15
<PAGE>
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.
CONSECO VARIABLE ANNUITY ACCOUNT F
STATEMENT OF ASSETS AND LIABILITIES
SEPTEMBER 30, 2000
Unaudited
<TABLE>
<CAPTION>
============================================================================================
Value
----------
<S> <C> <C> <C>
ASSETS:
Interest adjustment cash account $ 631,107
Investments in portfolio shares, at net asset value (Note 2):
Shares Cost
------------ ------------
The Alger American Fund:
Growth Portfolio 998,901.2 $ 58,575,726 55,349,117
Leveraged AllCap Portfolio 1,273,156.9 64,746,597 63,275,898
MidCap Portfolio 982,748.5 33,092,550 33,511,722
Small Capitalization Portfolio 535,523.6 18,533,853 15,685,485
American Century Variable Portfolios, Inc.:
Income and Growth Fund 1,981,823.1 14,785,795 15,160,947
International Fund 962,247.5 10,302,131 10,392,273
Value Fund 1,861,714.8 10,641,968 10,984,117
Berger Institutional Products Trust:
Growth Fund 330,688.8 6,604,395 7,182,562
Growth and Income Fund 1,411,091.1 35,598,517 41,133,305
International Fund 70,870.7 993,751 939,037
New Generation Fund 166,498.1 1,663,865 1,741,570
Small Company Growth Fund 682,018.8 18,341,968 18,660,035
Conseco Series Trust:
Balanced Portfolio 1,311,126.0 20,177,458 22,993,069
Conseco 20 Focus Portfolio 131,719.7 1,731,439 1,769,873
Equity Portfolio 931,614.3 23,305,517 27,652,328
Fixed Income Portfolio 1,342,920.6 12,713,738 12,761,983
Government Securities Portfolio 584,226.9 6,548,644 6,545,863
High Yield Portfolio 219,089.8 2,202,947 2,201,680
Money Market Portfolio 59,191,554.5 59,191,554 59,191,554
Dreyfus Stock Index Fund 1,876,776.8 66,737,737 70,472,970
The Dreyfus Socially Responsible Growth Fund Inc. 615,021.6 22,716,163 24,471,710
Dreyfus Variable Investment Fund:
Disciplined Stock Portfolio 229,479.1 6,052,913 6,251,011
International Value Portfolio 121,361.3 1,825,606 1,707,554
Federated Insurance Series:
High Income Bond Fund II 1,095,998.1 10,799,265 9,973,583
International Equity Fund II 347,008.5 8,561,012 7,113,675
Utility Fund II 613,251.8 8,583,705 8,327,959
Invesco Variable Investment Fund, Inc.
Equity Income Fund 239,712.4 5,009,500 5,331,203
High Yield Fund 597,858.7 6,860,061 6,761,782
Janus Aspen Series:
Aggressive Growth Portfolio 1,810,140.7 107,703,372 95,665,933
Growth Portfolio 3,196,755.2 98,842,812 102,072,395
Worldwide Growth Portfolio 1,953,045.6 81,037,704 82,926,316
Lazard Retirement Series, Inc.:
Equity Portfolio 131,504.7 1,533,461 1,517,564
Small Cap Portfolio 615,765.8 6,802,516 6,933,523
Lord Abbett Series Fund, Inc.:
Growth and Income Portfolio 645,662.9 14,401,194 15,185,991
Mitchell Hutchins Series Trust:
Growth and Income Portfolio 70,394.0 1,040,424 1,030,568
Neuberger Berman Advisers Management Trust:
Limited Maturity Bond Portfolio 880,977.7 11,370,693 11,346,993
Partners Portfolio 331,943.7 5,438,412 5,337,654
Rydex Variable Trust:
Nova Fund 106,188.7 1,869,131 1,706,453
OTC Fund 226,494.9 8,766,525 7,959,031
Seligman Portfolios, Inc.:
Communications and Information Portfolio 132,953.8 3,492,678 3,147,016
Global Technology Portfolio 72,242.1 2,058,205 1,892,020
Strong Variable Insurance Funds, Inc.:
Mid Cap Growth Fund II 1,278,432.5 44,332,643 43,313,293
Strong Opportunity Fund II, Inc. 476,063.4 13,126,847 13,091,743
Van Eck Worldwide Insurance Trust:
Worldwide Bond Fund 131,582.7 1,361,844 1,297,405
Worldwide Emerging Markets Fund 526,501.1 7,142,584 5,675,682
Worldwide Hard Assets Fund 73,010.3 863,146 860,062
Worldwide Real Estate Fund 97,749.0 1,006,320 998,995
============================================================================================
TOTAL ASSETS 950,133,609
LIABILITIES:
Amounts payable to Conseco Variable Insurance Company 1,038,308
--------------------------------------------------------------------------------------------
NET ASSETS (NOTE 6) $949,095,301
============================================================================================
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
CONSECO VARIABLE ANNUITY ACCOUNT F
STATEMENT OF ASSETS AND LIABILITIES
SEPTEMBER 30, 2000
Unaudited
<TABLE>
<CAPTION>
============================================================================================
NET ASSETS ATTRIBUTABLE TO:
Contract owners' deferred annuity reserves: Reported Value
--------------
<S> <C> <C> <C>
Interest adjustment accounts - 1 Year $ 558,462
Interest adjustment accounts - 3 Year 45,618
Interest adjustment accounts - 5 Year 26,155
Units Unit Value
-------------------------
The Alger American Fund:
Growth Portfolio 3,047,868.0 $18.140001 55,288,329
Leveraged AllCap Portfolio 2,540,933.3 24.874542 63,204,552
MidCap Portfolio 1,727,059.7 19.384003 33,477,330
Small Capitalization Portfolio 1,101,511.5 14.224235 15,668,158
American Century Variable Portfolios, Inc.:
Income and Growth Fund 1,133,902.6 13.355742 15,144,111
International Fund 664,702.7 15.617213 10,380,804
Value Fund 1,062,056.5 10.330874 10,971,972
Berger Institutional Products Trust:
Growth Fund 407,951.6 17.587851 7,174,992
Growth and Income Fund 1,963,014.9 20.931583 41,089,009
International Fund 74,743.0 12.549336 937,975
New Generation Fund 167,315.1 10.398444 1,739,817
Small Company Growth Fund 874,880.3 21.305720 18,639,955
Conseco Series Trust:
Balanced Portfolio 1,402,639.2 16.374883 22,968,053
Conseco 20 Focus Portfolio 132,360.8 13.357758 1,768,044
Equity Portfolio 1,360,322.0 20.305953 27,622,635
Fixed Income Portfolio 1,183,265.2 10.773243 12,747,604
Government Securities Portfolio 612,706.8 10.671679 6,538,610
High Yield Portfolio 217,713.0 10.102369 2,199,417
Money Market Portfolio 5,348,367.9 11.056453 59,133,970
Dreyfus Stock Index Fund 5,012,596.0 14.043409 70,393,936
The Dreyfus Socially Responsible
Growth Fund, Inc. 1,541,977.3 15.852828 24,444,701
Dreyfus Variable Investment Fund:
Disciplined Stock Portfolio 497,471.0 12.552580 6,244,545
International Value Portfolio 157,956.3 10.798062 1,705,622
Federated Insurance Series:
High Income Bond Fund II 1,029,360.1 9.678278 9,962,433
International Equity Fund II 400,637.2 17.736201 7,105,782
Utility Fund II 740,584.8 11.232507 8,318,624
Invesco Variable Investment Funds, Inc.:
Equity Income Fund 435,483.0 12.228354 5,325,240
High Yield Fund 677,516.6 9.968372 6,753,738
Janus Aspen Series:
Aggressive Growth Portfolio 3,402,190.9 28.087299 95,558,353
Growth Portfolio 5,565,929.2 18.318764 101,960,943
Worldwide Growth Portfolio 4,491,748.7 18.441370 82,834,000
Lazard Retirement Series, Inc.:
Equity Portfolio 131,019.1 11.569657 1,515,846
Small Cap Portfolio 632,560.7 10.954304 6,929,262
Lord Abbett Series Fund, Inc.:
Growth and Income Portfolio 1,160,191.1 13.073428 15,167,675
Mitchell Hutchins Series Trust:
Growth and Income Portfolio 90,113.4 11.423744 1,029,432
Neuberger Berman Advisers Management Trust:
Limited Maturity Bond Portfolio 1,073,282.3 10.562111 11,336,127
Partners Portfolio 505,241.9 10.551269 5,330,943
Rydex Variable Trust:
Nova Fund 97,006.3 17.572956 1,704,687
OTC Fund 217,851.9 36.494889 7,950,481
Seligman Portfolios, Inc.:
Communications and Information Portfolio 406,375.5 7.735170 3,143,384
Global Technology Portfolio 223,456.4 8.458632 1,890,135
Strong Variable Insurance Funds, Inc.:
Mid Cap Growth Fund II Fund 1,673,647.1 25.850517 43,264,643
Strong Opportunity Fund II, Inc. 862,383.0 15.164171 13,077,323
Van Eck Worldwide Insurance Trust:
Worldwide Bond Fund 135,058.0 9.595568 1,295,958
Worldwide Emerging Markets Fund 569,790.0 9.950003 5,669,412
Worldwide Hard Assets Fund 94,749.2 9.062094 858,626
Worldwide Real Estate Fund 105,739.6 9.437128 997,878
============================================================================================
NET ASSETS $949,095,301
============================================================================================
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
<TABLE>
<CAPTION>
AMERICAN CENTURY
CONSECO VARIABLE ANNUITY ACCOUNT F THE ALGER AMERICAN FUNDS VARIABLE PORTFOLIOS
STATEMENT OF OPERATIONS ----------------------------------------------- ----------------------------------
For the Nine Months Ended September 30, 2000 Leveraged Small Income and
Unaudited Growth All Cap MidCap Capitalization Growth International Value
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C>
Investment income:
Dividends from investments in portfolio
shares .................................. $6,619,904 $5,664,871 $2,545,653 $4,444,685 $69,261 $119,072 $311,714
------------------------------------------------------------------------------------------------------------------------------------
Expenses:
Mortality and expense risk fees 467,151 520,908 195,638 117,441 129,464 73,154 85,305
Administrative fees ....................... 56,061 62,509 23,476 14,093 15,536 8,778 10,237
------------------------------------------------------------------------------------------------------------------------------------
Total expenses .......................... 523,212 583,417 219,114 131,534 145,000 81,932 95,542
------------------------------------------------------------------------------------------------------------------------------------
Net investment income ................. 6,096,692 5,081,454 2,326,539 4,313,151 (75,739) 37,140 216,172
------------------------------------------------------------------------------------------------------------------------------------
Net realized gains (losses) and unrealized
appreciation (depreciation) on investments:
Net realized gains (losses) on sales of
investments in portfolio shares ......... 874,264 1,642,498 1,726,312 (1,902,351) 681,871 360,733 (815,414)
Net change in unrealized appreciation
(depreciation) of investments in
portfolio shares ........................ (8,417,303)(10,561,185) (1,105,415) (4,543,921) (1,185,486) (1,715,732) 730,796
------------------------------------------------------------------------------------------------------------------------------------
Net gain (loss) on investments in
portfolio shares .................... (7,543,039) (8,918,687) 620,897 (6,446,272) (503,615) (1,354,999) (84,618)
------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net
assets from operations ............ ($1,446,347)($3,837,233) $2,947,436 ($2,133,121) ($579,354)($1,317,859) $131,554
====================================================================================================================================
CONSECO SERIES TRUST
BERGER INSTITUTIONAL PRODUCTS TRUST PORTFOLIOS
----------------------------------------------------------------- ------------------------
Growth and New Small Conseco
Growth Income International Generation Company Balanced 20 Focus
==========================================================================================
$0 $0 $0 $0 $0 $336,716 $0
------------------------------------------------------------------------------------------
45,656 277,792 5,274 4,464 117,167 145,467 4,483
5,479 33,335 633 536 14,060 17,456 538
------------------------------------------------------------------------------------------
51,135 311,127 5,907 5,000 131,227 162,923 5,021
------------------------------------------------------------------------------------------
(51,135) (311,127) (5,907) (5,000) (131,227) 173,793 (5,021)
------------------------------------------------------------------------------------------
486,246 656,672 38,439 8,637 1,642,906 78,745 142,194
(129,541) 1,570,816 (105,594) 77,705 (1,309,165) 2,405,594 38,434
------------------------------------------------------------------------------------------
356,705 2,227,488 (67,155) 86,342 333,741 2,484,339 180,628
------------------------------------------------------------------------------------------
$305,570 $1,916,361 ($73,062) $81,342 $202,514 $2,658,132 $175,607
==========================================================================================
CONSECO SERIES TRUST PORTFOLIOS
(CONTINUED)
----------------------------------------------------------------- DREYFUS
SOCIALLY DREYFUS
Fixed Government High Money RESPONSIBLE STOCK
Equity Income Securities Yield Market GROWTH INDEX
==========================================================================================
$12,344 $598,091 $247,710 $15,590 $1,994,280 $3,088 $558,885
------------------------------------------------------------------------------------------
170,489 107,255 50,658 3,462 422,873 199,909 614,613
20,459 12,871 6,079 415 50,745 23,989 73,753
------------------------------------------------------------------------------------------
190,948 120,126 56,737 3,877 473,618 223,898 688,366
------------------------------------------------------------------------------------------
(178,604) 477,965 190,973 11,713 1,520,662 (220,810) (129,481)
------------------------------------------------------------------------------------------
192,384 (251,199) (123,024) 1,164 0 696,432 1,981,441
3,556,980 422,500 240,473 (1,267) 0 (34,472) (3,285,759)
------------------------------------------------------------------------------------------
3,749,364 171,301 117,449 (103) 0 661,960 (1,304,318)
------------------------------------------------------------------------------------------
$3,570,760 $649,266 $308,422 $11,610 $1,520,662 $441,150 ($1,433,799)
==========================================================================================
<PAGE>
DREYFUS VARIABLE INVESCO VARIABLE
INVESTMENT FUNDS FEDERATED INSURANCE SERIES INSURANCE FUNDS
--------------------------- ---------------------------------------- ---------------------
Disciplined International High Income International Equity
Stock Value Bond II Equity II Utility II Income High Yield
==========================================================================================
$491 $31,379 $879,352 $944,245 $367,173 $0 $0
------------------------------------------------------------------------------------------
46,188 14,015 90,901 56,413 79,415 47,164 61,865
5,543 1,682 10,908 6,770 9,530 5,660 7,424
------------------------------------------------------------------------------------------
51,731 15,697 101,809 63,183 88,945 52,824 69,289
------------------------------------------------------------------------------------------
(51,240) 15,682 777,543 881,062 278,228 (52,824) (69,289)
------------------------------------------------------------------------------------------
243,217 3,930 (424,008) 179,300 (142,477) 181,244 (126,291)
(94,369) (147,011) (644,075) (2,259,186) (284,364) 156,015 65,230
------------------------------------------------------------------------------------------
148,848 (143,081) (1,068,083) (2,079,886) (426,841) 337,259 (61,061)
------------------------------------------------------------------------------------------
$97,608 ($127,399) ($290,540) ($1,198,824) ($148,613) $284,435 ($130,350)
==========================================================================================
LAZARD RETIREMENT LORD MITCHELL
JANUS ASPEN SERIES PORTFOLIOS SERIES PORTFOLIOS ABBETT HUTCHINS
------------------------------------- ----------------------- SERIES SERIES
TRUST TRUST
Aggressive Worldwide GROWTH GROWTH
Growth Growth Growth Equity Small Cap AND INCOME AND INCOME
==========================================================================================
$10,954,393 $7,439,459 $6,489,403 $262 $303 $0 $42,923
------------------------------------------------------------------------------------------
784,971 791,038 664,145 15,023 19,185 121,845 6,345
94,196 94,924 79,697 1,803 2,302 14,621 761
------------------------------------------------------------------------------------------
879,167 885,962 743,842 16,826 21,487 136,466 7,106
------------------------------------------------------------------------------------------
10,075,226 6,553,497 5,745,561 (16,564) (21,184) (136,466) 35,817
------------------------------------------------------------------------------------------
12,266,914 2,521,998 1,316,508 92,330 123,589 260,151 24,612
(26,607,428) (7,930,422) (12,405,350) (113,439) 118,531 732,878 (69,283)
------------------------------------------------------------------------------------------
(14,340,514) (5,408,424) (11,088,842) (21,109) 242,120 993,029 (44,671)
------------------------------------------------------------------------------------------
($4,265,288) $1,145,073 ($5,343,281) ($37,673) $220,936 $856,563 ($8,854)
==========================================================================================
STRONG
NEUBERGER BERMAN VARIABLE
ADVISERS MANAGEMENT INSURANCE
TRUST PORTFOLIOS RYDEX VARIABLE TRUST SELIGMAN PORTFOLIOS FUNDS
------------------------- ----------------------- -------------------------- -----------
Communications STRONG
Limited and Global Mid Cap OPPORTUNITY
Maturity Bond Partners Nova OTC Information Technology Growth II FUND II
========================================================================================================
$585,891 $1,011,509 $93,521 $298,902 $0 $0 $0 $0
--------------------------------------------------------------------------------------------------------
84,788 57,059 3,792 16,598 8,637 4,505 264,372 111,045
10,174 6,847 455 1,992 1,036 541 31,725 13,325
--------------------------------------------------------------------------------------------------------
94,962 63,906 4,247 18,590 9,673 5,046 296,097 124,370
--------------------------------------------------------------------------------------------------------
490,929 947,603 89,274 280,312 (9,673) (5,046) (296,097) (124,370)
--------------------------------------------------------------------------------------------------------
(240,762) (598,721) 17,739 72,227 (58,399) (15,740) 4,911,266 1,901,533
24,845 (416,774) (162,678) (807,494) (345,662) (166,185) (4,218,415) (1,104,250)
--------------------------------------------------------------------------------------------------------
(215,917) (1,015,495) (144,939) (735,267) (404,061) (181,925) 692,851 797,283
--------------------------------------------------------------------------------------------------------
$275,012 ($67,892) ($55,665) ($454,955) ($413,734) ($186,971) $396,754 $672,913
========================================================================================================
<PAGE>
VAN ECK WORLDWIDE INSURANCE TRUST FUNDS INTEREST ADJUSTMENT ACCOUNTS
----------------------------------------------------- -----------------------------------
Emerging Hard Real Combined
Bond Markets Assets Estate 1 Year 3 Year 5 Year Total
========================================================================================================
$41,442 $0 $6,289 $6,977 $0 $0 $0 $52,735,778
--------------------------------------------------------------------------------------------------------
10,329 48,846 11,930 15,329 0 0 0 7,194,366
1,240 5,862 1,432 1,839 0 0 0 863,327
--------------------------------------------------------------------------------------------------------
11,569 54,708 13,362 17,168 0 0 0 8,057,693
--------------------------------------------------------------------------------------------------------
29,873 (54,708) (7,073) (10,191) 0 0 0 44,678,085
--------------------------------------------------------------------------------------------------------
(19,271) 624,567 (99,107) (86,579) 0 0 0 31,048,720
(56,733) (2,312,506) (38,008) 7,655 0 0 0 (82,430,020)
--------------------------------------------------------------------------------------------------------
(76,004) (1,687,939) (137,115) (78,924) 0 0 0 (51,381,300)
--------------------------------------------------------------------------------------------------------
($46,131) ($1,742,647) ($144,188) ($89,115) $0 $0 $0 ($6,703,215)
========================================================================================================
</TABLE>
<TABLE>
<CAPTION>
AMERICAN CENTURY
THE ALGER AMERICAN FUNDS VARIABLE PORTFOLIOS
STATEMENT OF CHANGES IN NET ASSETS ----------------------------------------------- ----------------------------------
For the Nine Months Ended September 30, 2000 Leveraged Small Income and
Unaudited Growth All Cap MidCap Capitalization Growth International Value
================================================================================================= ==================================
<S> <C> <C> <C> <C> <C> <C> <C>
Changes from operations:
Net investment income ..................... $6,096,692 $5,081,454 $2,326,539 $4,313,151 ($75,739) $37,140 $216,172
Net realized gains (losses) on sales of
investments in portfolio shares ......... 874,264 1,642,498 1,726,312 (1,902,351) 681,871 360,733 (815,414)
Net change in unrealized appreciation
(depreciation) of investments in portfolio
shares .................................. (8,417,303)(10,561,185) (1,105,415) (4,543,921) (1,185,486) (1,715,732) 730,796
--------------------------------------------------------------------------------------------------------------------------------- --
Net increase (decrease) in net assets
from operations ........................ (1,446,347) (3,837,233) 2,947,436 (2,133,121) (579,354) (1,317,859) 131,554
------------------------------------------------------------------------------------------------------------------------------------
Changes from contract owners' transactions:
Net contract purchase payments ............ 21,621,481 33,253,261 10,790,247 7,559,779 4,229,277 5,276,441 2,868,737
Contract redemptions ...................... (3,383,637) (3,107,619) (1,142,529) (864,135) (1,048,423) (239,261) (476,863)
Net transfers ............................. 2,626,918 1,314,949 11,142,381 3,414,452 1,242,665 1,511,326 2,302,639
------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets
from contract owners' transactions .... 20,864,762 31,460,591 20,790,099 10,110,096 4,423,519 6,548,506 4,694,513
------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets . 19,418,415 27,623,358 23,737,535 7,976,975 3,844,165 5,230,647 4,826,067
Net assets, beginning of period .............. 35,869,913 35,581,193 9,739,795 7,691,183 11,299,946 5,150,157 6,145,904
------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (Note 6) $55,288,328 $63,204,551 $33,477,330 $15,668,158 $15,144,111 $10,380,804 $10,971,971
====================================================================================================================================
CONSECO SERIES TRUST
BERGER INSTITUTIONAL PRODUCTS TRUST PORTFOLIOS
----------------------------------------------------------------- ------------------------
Growth and New Small Conseco
Growth Income International Generation Company Balanced 20 Focus
==========================================================================================
($51,135) ($311,127) ($5,907) ($5,000) ($131,227) $173,793 ($5,021)
486,246 656,672 38,439 8,637 1,642,906 78,745 142,194
(129,541) 1,570,816 (105,594) 77,705 (1,309,165) 2,405,594 38,434
------------------------------------------------------------------------------------------
305,570 1,916,361 (73,062) 81,342 202,514 2,658,132 175,607
------------------------------------------------------------------------------------------
3,467,742 17,214,907 358,451 1,009,889 9,412,639 9,222,875 681,440
(236,652) (1,398,124) (36,245) (6,296) (1,090,493) (616,622) (7,688)
1,096,850 7,482,834 391,013 654,881 4,948,754 2,548,356 918,684
------------------------------------------------------------------------------------------
4,327,940 23,299,617 713,219 1,658,474 13,270,900 11,154,609 1,592,436
------------------------------------------------------------------------------------------
4,633,510 25,215,978 640,157 1,739,816 13,473,414 13,812,741 1,768,043
2,541,482 15,873,033 297,818 0 5,166,539 9,155,312 0
------------------------------------------------------------------------------------------
$7,174,992 $41,089,011 $937,975 $1,739,816 $18,639,953 $22,968,053 $1,768,043
==========================================================================================
<PAGE>
CONSECO SERIES TRUST PORTFOLIOS
(CONTINUED)
----------------------------------------------------------------- DREYFUS
SOCIALLY DREYFUS
Fixed Government High Money RESPONSIBLE STOCK
Equity Income Securities Yield Market GROWTH INDEX
==========================================================================================
($178,604) $477,965 $190,973 $11,713 $1,520,662 ($220,810) ($129,481)
192,384 (251,199) (123,024) 1,164 0 696,432 1,981,441
3,556,980 422,500 240,473 (1,267) 0 (34,472) (3,285,759)
------------------------------------------------------------------------------------------
3,570,760 649,266 308,422 11,610 1,520,662 441,150 (1,433,799)
------------------------------------------------------------------------------------------
7,471,264 3,204,988 2,231,149 413,613 68,133,898 9,446,905 22,119,343
(864,287) (948,716) (379,088) (3,336) (4,196,059) (1,337,797) (4,217,760)
7,093,777 841,839 (176,427) 1,777,530 (58,658,525) 1,249,492 128,281
------------------------------------------------------------------------------------------
13,700,754 3,098,111 1,675,634 2,187,807 5,279,314 9,358,600 18,029,864
------------------------------------------------------------------------------------------
17,271,514 3,747,377 1,984,056 2,199,417 6,799,976 9,799,750 16,596,065
10,351,120 9,000,226 4,554,554 0 52,334,002 14,644,950 53,797,872
------------------------------------------------------------------------------------------
$27,622,634 $12,747,603 $6,538,610 $2,199,417 $59,133,978 $24,444,700 $70,393,937
==========================================================================================
DREYFUS VARIABLE INVESCO VARIABLE
INVESTMENT FUNDS FEDERATED INSURANCE SERIES INSURANCE FUNDS
--------------------------- ---------------------------------------- ---------------------
Disciplined International High Income International Equity
Stock Value Bond II Equity II Utility II Income High Yield
==========================================================================================
($51,240) $15,682 $777,543 $881,062 $278,228 ($52,824) ($69,289)
243,217 3,930 (424,008) 179,300 (142,477) 181,244 (126,291)
(94,369) (147,011) (644,075) (2,259,186) (284,364) 156,015 65,230
------------------------------------------------------------------------------------------
97,608 (127,399) (290,540) (1,198,824) (148,613) 284,435 (130,350)
------------------------------------------------------------------------------------------
2,109,436 569,037 3,003,313 4,399,291 2,792,197 1,209,232 3,006,203
(508,294) (160,162) (692,665) (404,673) (720,138) (264,302) (384,557)
1,027,412 349,676 (650,330) 123,045 108,452 352,406 (812,846)
------------------------------------------------------------------------------------------
2,628,554 758,551 1,660,318 4,117,663 2,180,511 1,297,336 1,808,800
------------------------------------------------------------------------------------------
2,726,162 631,152 1,369,778 2,918,839 2,031,898 1,581,771 1,678,450
3,518,383 1,074,470 8,592,656 4,186,943 6,286,725 3,743,469 5,075,287
------------------------------------------------------------------------------------------
$6,244,545 $1,705,622 $9,962,434 $7,105,782 $8,318,623 $5,325,240 $6,753,737
==========================================================================================
LAZARD RETIREMENT LORD MITCHELL
JANUS ASPEN SERIES PORTFOLIOS SERIES PORTFOLIOS ABBETT HUTCHINS
------------------------------------- ----------------------- SERIES SERIES
TRUST TRUST
Aggressive Worldwide GROWTH GROWTH
Growth Growth Growth Equity Small Cap AND INCOME AND INCOME
==========================================================================================
$10,075,226 $6,553,497 $5,745,561 ($16,564) ($21,184) ($136,466) $35,817
12,266,914 2,521,998 1,316,508 92,330 123,589 260,151 24,612
(26,607,428) (7,930,422) (12,405,350) (113,439) 118,531 732,878 (69,283)
------------------------------------------------------------------------------------------
(4,265,288) 1,145,073 (5,343,281) (37,673) 220,936 856,563 (8,854)
------------------------------------------------------------------------------------------
55,904,424 44,880,746 40,326,288 328,783 1,424,906 4,991,666 585,081
(4,422,595) (4,501,257) (2,815,897) (246,906) (118,770) (1,030,923) (73,472)
4,286,238 5,289,335 7,221,378 (94,846) 4,423,571 891,106 (17,200)
------------------------------------------------------------------------------------------
55,768,067 45,668,824 44,731,769 (12,969) 5,729,707 4,851,849 494,409
------------------------------------------------------------------------------------------
51,502,779 46,813,897 39,388,488 (50,642) 5,950,643 5,708,412 485,555
44,055,572 55,147,048 43,445,510 1,566,487 978,620 9,459,263 543,877
------------------------------------------------------------------------------------------
$95,558,351 $101,960,945 $82,833,998 $1,515,845 $6,929,263 $15,167,675 $1,029,432
==========================================================================================
<PAGE>
STRONG
NEUBERGER BERMAN VARIABLE
ADVISERS MANAGEMENT INSURANCE
TRUST PORTFOLIOS RYDEX VARIABLE TRUST SELIGMAN PORTFOLIOS FUNDS
------------------------- ----------------------- -------------------------- -----------
Communications STRONG
Limited and Global Mid Cap OPPORTUNITY
Maturity Bond Partners Nova OTC Information Technology Growth II FUND II
========================================================================================================
$490,929 $947,603 $89,274 $280,312 ($9,673) ($5,046) ($296,097) ($124,370)
(240,762) (598,721) 17,739 72,227 (58,399) (15,740) 4,911,266 1,901,533
24,845 (416,774) (162,678) (807,494) (345,662) (166,185) (4,218,415) (1,104,250)
--------------------------------------------------------------------------------------------------------
275,012 (67,892) (55,665) (454,955) (413,734) (186,971) 396,754 672,913
--------------------------------------------------------------------------------------------------------
2,911,600 947,635 711,755 3,109,707 2,082,783 1,363,608 21,170,060 5,666,021
(585,923) (339,738) (45,411) (240,484) (18,958) (5,770) (1,337,416) (795,241)
(695,189) (788,678) 1,094,007 5,536,214 1,493,293 719,269 8,511,613 442,006
--------------------------------------------------------------------------------------------------------
1,630,488 (180,781) 1,760,351 8,405,437 3,557,118 2,077,107 28,344,257 5,312,786
--------------------------------------------------------------------------------------------------------
1,905,500 (248,673) 1,704,686 7,950,482 3,143,384 1,890,136 28,741,011 5,985,699
9,430,627 5,579,616 0 0 0 0 14,523,632 7,091,625
--------------------------------------------------------------------------------------------------------
$11,336,127 $5,330,943 $1,704,686 $7,950,482 $3,143,384 $1,890,136 $43,264,643 $13,077,324
========================================================================================================
VAN ECK WORLDWIDE INSURANCE TRUST FUNDS INTEREST ADJUSTMENT ACCOUNTS
----------------------------------------------------- -----------------------------------
Emerging Hard Real Combined
Bond Markets Assets Estate 1 Year 3 Year 5 Year Total
========================================================================================================
$29,873 ($54,708) ($7,073) ($10,191) $0 $0 $0 $44,678,085
(19,271) 624,567 (99,107) (86,579) 0 0 0 31,048,720
(56,733) (2,312,506) (38,008) 7,655 0 0 0 (82,430,020)
--------------------------------------------------------------------------------------------------------
(46,131) (1,742,647) (144,188) (89,115) 0 0 0 (6,703,215)
--------------------------------------------------------------------------------------------------------
509,598 4,962,485 133,144 370,380 286,889 45,618 22,671 449,812,883
(48,858) (326,406) (343,434) (119,020) (671) 0 0 (46,153,571)
29,487 (31,366) 642,503 546,332 (30,032) 0 (7,002) 33,812,523
--------------------------------------------------------------------------------------------------------
490,227 4,604,713 432,213 797,692 256,186 45,618 15,669 437,471,835
--------------------------------------------------------------------------------------------------------
444,096 2,862,066 288,025 708,577 256,186 45,618 15,669 430,768,620
851,862 2,807,346 570,601 289,301 302,276 0 10,486 518,326,681
--------------------------------------------------------------------------------------------------------
$1,295,958 $5,669,412 $858,626 $997,878 $558,462 $45,618 $26,155 $949,095,301
========================================================================================================
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
CONSECO VARIABLE ANNUITY ACCOUNT F
NOTES TO FINANCIAL STATEMENTS
Unaudited
(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 Interest Adjustment Account
("IAA"), offers an investment option which pays 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 IAA. The IAA is not registered as an
investment company under the Investment Company Act of 1940. The operations of
Account F are included in the operations 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 IAA 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
Growth Fund
Growth and Income Fund
International Fund
New Generation Fund
Small Company Growth Fund
CONSECO SERIES TRUST
Balanced Portfolio
Conseco 20 Focus Portfolio
Equity Portfolio
Fixed Income Portfolio
Government Securities Portfolio
High Yield 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
<PAGE>
CONSECO VARIABLE ANNUITY ACCOUNT F
NOTES TO FINANCIAL STATEMENTS
Unaudited
1) GENERAL (continued)
NEUBERGER BERMAN ADVISERS MANAGEMENT TRUST
Limited Maturity Bond Portfolio
Partners Portfolio
RYDEX VARIABLE TRUST
Nova Fund
OTC Fund
SELIGMAN PORTFOLIOS, INC.
Communications and Information Portfolio
Global Technology 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.
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 were
$810,270,671 and $428,880,284 for the nine months ended September 30, 2000 and
the year ended December 31, 1999, respectively. The aggregate proceeds from
sales of investments in portfolio shares were $327,996,564 and $96,341,276 for
the nine months ended September 30, 2000 and the year ended December 31, 1999,
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.
<PAGE>
CONSECO VARIABLE ANNUITY ACCOUNT F
NOTES TO FINANCIAL STATEMENTS
Unaudited
(4) DEDUCTION AND EXPENSES (continued)
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 Variable Account, for assuming the mortality
and expense risks. These fees were $7,194,366 and $3,311,496 for the nine months
ended September 30, 2000 and the year ended December 31, 1999, 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 $1,333,777 and $366,942 for the nine months ended September 30,
2000 and the year ended December 31, 1999, respectively. 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 $863,327 and $397,379
for the nine months ended September 30, 2000 and the year ended December 31,
1999, respectively.
The IAA account is subject to an interest 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 the changes in the U.S.
Treasury rates during the holding period of the IAA contract. The adjustment
charges were $2 and $16 for the nine months ended September 30, 2000 and the
year ended December 31, 1999, 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., an affiliate of the Company.
(6) NET ASSETS
Net assets consisted of the following at September 30, 2000:
Proceeds from the sales of units since organization,
less cost of units redeemed ................................... $854,421,760
Undistributed net investment income ............................. 55,666,297
Undistributed net realized gain on sales of investments ......... 38,593,628
Net unrealized appreciation of investments ...................... 413,616
------------
Net assets ................................................ $949,095,301
============
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.
2
<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.
3
<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.
4
<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>
5
<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.
6
<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>
7
<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.
8
<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.
9
<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.
10
<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>
11
<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.
12
<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>
13
<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.
14
<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>
15
<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.
16
<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
================================================================================
17
<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
18
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
--------------------------------
PricewaterhouseCoopers LLP
April 13, 2000
F-1
<PAGE>
<TABLE>
<CAPTION>
CONSECO VARIABLE INSURANCE COMPANY
BALANCE SHEET
December 31, 1999 and 1998
(Dollars in millions)
ASSETS
1999 1998
---- ----
<S> <C> <C>
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
======== ========
</TABLE>
(continued on next page)
The accompanying notes are an
integral part of the financial
statements.
F-2
<PAGE>
<TABLE>
<CAPTION>
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
---- ----
<S> <C> <C>
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
======== ========
</TABLE>
The accompanying notes are an
integral part of the financial
statements.
F-3
<PAGE>
<TABLE>
<CAPTION>
CONSECO VARIABLE INSURANCE COMPANY
STATEMENT OF OPERATIONS
for the years ended December 31, 1999, 1998 and 1997
(Dollars in millions)
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
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
====== ====== ======
</TABLE>
The accompanying notes are an
integral part of the financial
statements.
F-4
<PAGE>
<TABLE>
<CAPTION>
CONSECO VARIABLE INSURANCE COMPANY
STATEMENT OF SHAREHOLDER'S EQUITY
for the years ended December 31, 1999, 1998 and 1997
(Dollars in millions)
Common stock Accumulated other
and additional comprehensive Retained
Total paid-in capital income (loss) earnings
----- --------------- ------------- --------
<S> <C> <C> <C> <C>
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
====== ====== ====== ======
</TABLE>
The accompanying notes are an
integral part of the financial
statements.
F-5
<PAGE>
<TABLE>
<CAPTION>
CONSECO VARIABLE INSURANCE COMPANY
STATEMENT OF CASH FLOWS
for the years ended December 31, 1999, 1998 and 1997
(Dollars in millions)
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
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
========= ========= =======
</TABLE>
The accompanying notes are an
integral part of the financial
statements.
F-6
<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.
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.
F-7
<PAGE>
CONSECO VARIABLE INSURANCE COMPANY
Notes to Financial Statements
------------------------------
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 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
F-8
<PAGE>
CONSECO VARIABLE INSURANCE COMPANY
Notes to Financial Statements
------------------------------
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 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.
F-9
<PAGE>
CONSECO VARIABLE INSURANCE COMPANY
Notes to Financial Statements
------------------------------
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:
<TABLE>
<CAPTION>
1999 1998
--------------------------- ------------------------
Carrying Fair Carrying Fair
Amount Value Amount Value
------ ----- ------ -----
(Dollars in millions)
<S> <C> <C> <C> <C>
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
F-10
<PAGE>
CONSECO VARIABLE INSURANCE COMPANY
Notes to Financial Statements
------------------------------
<FN>
(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.
</FN>
</TABLE>
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:
<TABLE>
<CAPTION>
Gross Gross Estimated
Amortized unrealized unrealized fair
cost gains losses value
---- ----- ------ -----
(Dollars in millions)
<S> <C> <C> <C> <C>
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
===== ==== ==== =====
</TABLE>
F-11
<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:
<TABLE>
<CAPTION>
Gross Gross Estimated
Amortized unrealized unrealized fair
cost gains losses value
---- ----- ------ -----
(Dollars in millions)
<S> <C> <C> <C> <C>
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
======== ===== ===== ========
</TABLE>
Accumulated other comprehensive loss included in shareholder's equity as of
December 31, 1999 and 1998, is summarized as follows:
<TABLE>
<CAPTION>
1999 1998
---- ----
(Dollars in millions)
<S> <C> <C>
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)
====== =====
</TABLE>
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.
<TABLE>
<CAPTION>
Estimated
Amortized fair
cost value
---- -----
(Dollars in millions)
<S> <C> <C>
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
======== ========
<FN>
--------------------
(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.
</FN>
</TABLE>
F-12
<PAGE>
CONSECO VARIABLE INSURANCE COMPANY
Notes to Financial Statements
------------------------------
Net investment income consisted of the following:
<TABLE>
<CAPTION>
1999 1998 1997
---- ---- ----
(Dollars in millions)
<S> <C> <C> <C>
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
====== ====== ======
</TABLE>
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:
<TABLE>
<CAPTION>
1999 1998 1997
---- ---- ----
(Dollars in millions)
<S> <C> <C> <C>
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
====== ====== =====
</TABLE>
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.
F-13
<PAGE>
CONSECO VARIABLE INSURANCE COMPANY
Notes to Financial Statements
------------------------------
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>
4. INCOME TAXES:
Income tax liabilities were comprised of the following:
<TABLE>
<CAPTION>
1999 1998
---- ----
(Dollars in millions)
<S> <C> <C>
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
====== ======
</TABLE>
F-14
<PAGE>
CONSECO VARIABLE INSURANCE COMPANY
Notes to Financial Statements
------------------------------
Income tax expense was as follows:
<TABLE>
<CAPTION>
1999 1998 1997
---- ---- ----
(Dollars in millions)
<S> <C> <C> <C>
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
===== ===== =====
</TABLE>
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:
<TABLE>
<CAPTION>
1999 1998 1997
---- ---- ----
(Dollars in millions)
<S> <C> <C> <C>
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%
==== ==== ====
</TABLE>
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 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.
F-15
<PAGE>
CONSECO VARIABLE INSURANCE COMPANY
Notes to Financial Statements
------------------------------
6. OTHER OPERATING STATEMENT DATA:
Insurance policy income consisted of the following:
<TABLE>
<CAPTION>
1999 1998 1997
---- ---- ----
(Dollars in millions)
<S> <C> <C> <C>
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
====== ====== ======
</TABLE>
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:
<TABLE>
<CAPTION>
1999 1998 1997
---- ---- ----
(Dollars in millions)
<S> <C> <C> <C>
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
====== ====== ======
</TABLE>
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:
<TABLE>
<CAPTION>
1999 1998 1997
---- ---- ----
(Dollars in millions)
<S> <C> <C> <C>
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
====== ====== =====
</TABLE>
F-16
<PAGE>
CONSECO VARIABLE INSURANCE COMPANY
Notes to Financial Statements
------------------------------
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:
<TABLE>
<CAPTION>
1999 1998
---- ----
(Dollars in millions)
<S> <C> <C>
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
====== ======
</TABLE>
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.
F-17
PART C
OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS
A. FINANCIAL STATEMENTS
The financial statements of Conseco Variable Annuity Account F (the "Separate
Account") and the financial statements of Conseco Variable Insurance Company
(the "Company") are included in Part B hereof.
B. EXHIBITS
1. Resolution of Board of Directors of the Company authorizing the
establishment of the Separate Account.*
2. Not Applicable.
3. (i) Form of Principal Underwriters Agreement.**
(ii) Form of Selling Agreement.*
4. (i) Individual Fixed and Variable Deferred Annuity
Contract.*
(ii) Allocated Fixed and Variable Group Annuity
Contract.*
(iii) Allocated Fixed and Variable Group Annuity
Certificate.*
(iv) Endorsement Amending MVA Provision+
5. Application Form.*
6. (i) Articles of Incorporation of the Company.*
(ii) Articles of Amendment to the Articles of Incorporation
of the Company.++
(iii) Amended and Restated By-Laws of the Company.++
7. Not Applicable.
8. (i) Form of Fund Participation Agreement by and among The Alger American
Fund, Great American Reserve Insurance Company and Fred Alger and
Company, Incorporated.**
(ii) Form of Fund Participation Agreement by and among Great American
Reserve Insurance Company, Berger Institutional Products Trust and
BBOI Worldwide LLC.**
<PAGE>
(iii)Form of Fund Participation by and between Great American Reserve
Insurance Company, Insurance Management Series and Federated
Securities Corp.**
(iv) Form of Fund Participation between Great American Reserve Insurance
Company, Van Eck Worldwide Insurance Trust and Van Eck Associates
Corporation.**
(v) Form of Fund Participation Agreement by and between Lord Abbett Series
Fund, Inc., Lord, Abbett and Co. and Great American Reserve Insurance
Company.**
(vi) Form of Fund Participation Agreement by and between American Century
Investment Services, Inc. and Great American Reserve Insurance
Company.**
(vii) Form of Fund Participation Agreement between INVESCO Variable
Investment Funds, Inc., INVESCO Funds Group, Inc. and the Company.***
(viii) Form of Fund Participation Agreement between Rydex Variable Trust and
the Company.++
(ix) Form of Fund Participation Agreement between Pioneer Variable
Contracts Trust and the Company
9. Opinion and Consent of Counsel.
10. Consent of Independent Accountants.
11. Not Applicable.
12. Not Applicable.
13. Calculation of Performance Information.
14. Not Applicable.
15. Company Organizational Chart.++
27. Not Applicable.
*Incorporated by reference to Registrant's Form N-4 filed electronically on
November 14, 1997.
**Incorporated by reference to Registrant's Pre-Effective Amendment No. 1 to
Form N-4 filed electronically on February 3, 1998.
***Incorporated by reference to Great American Reserve Variable Annuity Account
G, Form N-4, File Nos. 333-00373 and 811-07501, filed electronically on January
23, 1996.
+ Incorporated by reference to Registrant's Post-Effective Amendment No. 5 to
<PAGE>
Form N-4, File Nos. 333-40309 and 811-08483, filed electronically on March 2,
1999.
++Incorporated by reference to Registrant's Post-Effective Amendment No. 6
(File No. 333-40309) filed electronically on April 28, 2000.
ITEM 25. DIRECTORS AND OFFICERS OF THE DEPOSITOR
The following are the Executive Officers and Directors of the Company which
are engaged directly or indirectly in activities relating to the Registrant or
the Contracts offered by the Registrant:
Name and Principal Position and Offices
Business Address* with Depositor
------------------- ---------------------------------------
Ngaire E. Cuneo Director
John M. Howard Director
David K. Herzog Director, Executive Vice President, General
Counsel and Secretary
Thomas J. Kilian Director and President
James S. Adams Director, Senior Vice President, Chief Accounting
Officer and Treasurer
*The Principal business address for all officers and directors listed above is
11825 N. Pennsylvania Street, Carmel, Indiana 46032.
ITEM 26. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH THE DEPOSITOR OR
REGISTRANT
The Company organizational chart was filed as Exhibit 15 in Post-Effective
Amendment No. 6 and is incorporated herein by reference.
ITEM 27. NUMBER OF CONTRACT OWNERS
As of September 30, 2000, there were 7,157 Non-Qualified Contract Owners
and 10,305 Qualified Contract Owners.
ITEM 28. INDEMNIFICATION
The Bylaws (Article VI) of the Company provide, in part, that:
The Corporation shall indemnify any person who was or is a party, or is
threatened to be made a party, to any threatened, pending, or completed
<PAGE>
action, suit or proceeding, whether civil, criminal, administrative, or
investigative, by reason of the fact that he is or was a director or officer of
the Corporation, or is or was serving at the request of the Corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise (collectively, "Agent") against expenses
(including attorneys' fees), judgments, fines, penalties, court costs and
amounts paid in settlement actually and reasonably incurred by him in connection
with such action, suit or proceeding if he acted in good faith and in a manner
he reasonably believed to be in or not opposed to the best interests of the
Corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful. The termination of any
action, suit, or proceeding by judgment, order, settlement (whether with or
without court approval), conviction or upon a plea of nolo contendere or its
equivalent, shall not, of itself, create a presumption that the Agent did not
act in good faith and in a manner which he reasonably believed to be in or not
opposed to the best interests of the Corporation, and, with respect to any
criminal action or proceeding, had no reasonable cause to believe that his
conduct was unlawful. If several claims, issues or matters are involved, an
Agent may be entitled to indemnification as to some matters even though he is
not entitled as to other matters. Any director or officer of the Corporation
serving in any capacity of another corporation, of which a majority of the
shares entitled to vote in the election of its directors is held, directly or
indirectly, by the Corporation, shall be deemed to be doing so at the request of
the Corporation.
Insofar as indemnification for liability arising under the Securities Act
of 1933 may be permitted directors and officers or controlling persons of the
Company pursuant to the foregoing, or otherwise, the Company has been advised
that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act and, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the Company of expenses incurred or paid
by a director, officer or controlling person of the Company in the successful
defense of any action, suit or proceeding) is asserted by such director, officer
or controlling person in connection with the securities being registered, the
Company will, unless in the opinion of its counsel the matter has been settled
by controlling precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against public policy as
expressed in the Act and will be governed by the final adjudication of such
issue.
ITEM 29. PRINCIPAL UNDERWRITERS
(a) Conseco Equity Sales, Inc. is the principal underwriter for the following
investment companies (other than the Registrant):
Conseco Variable Annuity Account C
Conseco Variable Annuity Account E
Conseco Variable Annuity Account G
Conseco Variable Annuity Account H
Conseco Fund Group
Rydex Advisor Variable Annuity Account
BMA Variable Life Account A
(b) Conseco Equity Sales, Inc. ("CES") is the principal underwriter for the
Contracts. The following persons are the officers and directors of CES. The
principal business address for each officer and director of CES is 11815 N.
Pennsylvania Street, Carmel, Indiana 46032.
Name and Principal Positions and Offices
Business Address with Underwriter
------------------------ ---------------------------------------
L. Gregory Gloeckner President and Director
William P. Kovacs Vice President, General Counsel,
Secretary and Director
James S. Adams Senior Vice President, Chief Accounting Officer,
Treasurer and Director
William T. Devanney, Jr. Senior Vice President, Corporate
Taxes
Donald B. Johnston Vice President, Director Mutual Fund
Sales & Marketing
(c) Not Applicable.
ITEM 30. LOCATION OF ACCOUNTS AND RECORDS
Lowell Short, whose address is 11815 N. Pennsylvania Street, Carmel, IN
46032, maintains physical possession of the accounts, books or documents of the
Separate Account required to be maintained by Section 31(a) of the Investment
Company Act of 1940 and the rules promulgated thereunder.
ITEM 31. MANAGEMENT SERVICES
Not Applicable.
ITEM 32. UNDERTAKINGS
a. Registrant hereby undertakes to file a post-effective amendment to this
registration statement as frequently as is necessary to ensure that the audited
financial statements in the registration statement are never more than sixteen
(16) months old for so long as payment under the variable annuity contracts may
be accepted.
b. Registrant hereby undertakes to include either (1) as part of any
application to purchase a contract offered by the Prospectus, a space that an
applicant can check to request a Statement of Additional Information, or (2) a
postcard or similar written communication affixed to or included in the
Prospectus that the applicant can remove to send for a Statement of Additional
Information.
c. Registrant hereby undertakes to deliver any Statement of Additional
Information and any financial statement required to be made available under this
Form promptly upon written or oral request.
d. Conseco Variable Insurance Company (the "Company") hereby represents
that the fees and charges deducted under the Contracts described in the
Prospectus, in the aggregate, are reasonable in relation to the services
rendered, the expenses to be incurred and the risks assumed by the Company.
e. The Securities and Exchange Commission (the "SEC") issued the American
Council of Life Insurance an industry wide no-action letter dated November 28,
1988, stating that the SEC would not recommend any enforcement action if
registered separate accounts funding tax-sheltered annuity contracts restrict
distributions to plan participants in accordance with the requirements of
Section 403(b)(11), provided certain conditions and requirements were met. Among
these conditions and requirements, any registered separate account relying on
the no-action position of the SEC must:
(1) Include appropriate disclosure regarding the redemption
restrictions imposed by Section 403(b)(11) in each registration statement,
including the prospectus, used in connection with the offer of the
contract;
(2) Include appropriate disclosure regarding the redemption
restrictions imposed by Section 403 (b)(11) in any sales literature used in
connection with the offer in the contract;
(3) Instruct sales representatives who solicit participants to
purchase the contract specifically to bring the redemption restrictions
imposed by Section 403(b)(11) to the attention of the potential
participants; and
(4) Obtain from each plan participant who purchases a Section 403(b)
annuity contract, prior to or at the time of such purchase, a signed
statement acknowledging the participant's understanding of (i) the
restrictions on redemption imposed by Section 403(b)(11), and (ii) the
investment alternatives available under the employer's Section 403(b)
arrangement, to which the participant may elect to transfer his contract
value.
The Registrant is relying on the no-action letter. Accordingly, the
provisions of paragraphs (1) - (4) above have been complied with.
SIGNATURES
As required by the Securities Act of 1933 and the Investment Company Act of
1940, the Registrant certifies that it meets the requirements of Securities Act
<PAGE>
Rule 485(b) for effectiveness of this Registration Statement and has caused this
Registration Statement to be signed on its behalf, in the City of Carmel, and
State of Indiana on this 26th day of December, 2000.
CONSECO VARIABLE ANNUITY
ACCOUNT F
Registrant
By: CONSECO VARIABLE INSURANCE COMPANY
By: /S/ THOMAS J. KILIAN
------------------------------
By: CONSECO VARIABLE INSURANCE COMPANY
Depositor
By: /S/ THOMAS J. KILIAN
-------------------------------
As required by the Securities Act of 1933, this Registration Statement has been
signed by the following persons in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
<S> <C> <C>
Director
--------------------------------- --------------
Ngaire E. Cuneo
/S/ THOMAS J. KILIAN Director and President December 26, 2000
-------------------------------- (principal executive officer) -----------------
Thomas J. Kilian
/S/ JAMES S. ADAMS Senior Vice President, December 26, 2000
--------------------------------- Chief Accounting Officer and Treasurer -----------------
James S. Adams and Director (principal financial
officer and principal accounting officer)
/S/ DAVID K. HERZOG December 26, 2000
--------------------------------- Director --------------
David K. Herzog
/S/ JOHN M. HOWARD December 26, 2000
------------------------------ Director ------------------
John M. Howard
</TABLE>
EXHIBITS TO POST-EFFECTIVE
AMENDMENT NO. 7 TO
FORM N-4
INDEX TO EXHIBITS
EX-99.B8(ix) Form of Fund Participation Agreement between Pioneer
Variable Contracts Trust and the Company
EX-99.B9 Opinion and Consent of Counsel
EX-99.B10 Consent of Independent Accountants
EX-99.B13 Calculation of Performance
