Registration Nos. 33-2460
811-4819
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [X]
Pre-Effective Amendment No. [ ]
Post-Effective Amendment No. 20 [X]
and
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
Amendment No. 28 [X]
CONSECO VARIABLE ANNUITY ACCOUNT C
(Exact Name of Registrant)
CONSECO VARIABLE INSURANCE COMPANY
(Name of Depositor)
11815 N. Pennsylvania Street
Carmel, Indiana 46032-4572
(Address of Depositor's Principal Executive Offices)
(317) 817-3700
(Depositor's Telephone Number, including Area Code)
Michael A. Colliflower
Conseco Variable Insurance Company
11815 N. Pennsylvania Street
Carmel, Indiana 46032-4572
(Name and Address of Agent for Service)
It is proposed that this filing will become effective (check appropriate space):
[ ] 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 box:
[ ] this post-effective amendment designates a new effective date
for a previously filed post- effective amendment
Title of Securities Registered:
Individual Variable Deferred Annuity Contracts
CONSECO VARIABLE ANNUITY ACCOUNT C
FORM N-4
CROSS REFERENCE SHEET
Pursuant to Rule 495(a)
Under The Securities Act of 1933
<TABLE>
<CAPTION>
Form N-4
Item No. PART A - Prospectus Caption
- -------- ------------------
<S> <C> <C>
1. Cover Page................................... Cover Page
2. Definitions.................................. Definitions
3. Synopsis or Highlights....................... Summary
4. Condensed Financial Information.............. Appendix A - Condensed Financial Information
5. General Description of Registrant,........... Conseco Variable, The Variable
Depositor and Portfolio Companies Account, and Investment Options
<PAGE>
6. Deductions and Expense....................... Charges and Deductions
7. General Description of Variable.............. The Contracts
Annuity Contracts
8. Annuity Period .............................. The Contracts
Annuity Provisions
9. Death Benefit................................ The Contracts
Section B. Annuity Provisions: Death Benefit During
the Annuity Period
10. Purchase and Contract Values................. Conseco Variable, The Variable Account, and
Investment Options; Appendix B
The Contracts
Section A. Accumulation Provisions
11. Redemptions.................................. The Contracts
Section B. Annuity Provisions
12. Taxes........................................ Federal Tax Status
13. Legal Proceedings............................ Legal Proceedings
14. Table of Contents of the Statement........... Table of Contents of the Statement
of Additional Information of Additional Information
</TABLE>
<TABLE>
<CAPTION>
Form N-4 Item No.
PART B - Statement of Additional Information
-----------------------------------
<S> <C> <C>
15. Cover Page................................... Statement of Additional Information
Cover Page
16. Table of Contents............................ Table of Contents
17. General Information and History.............. General Information and History
18. Services..................................... Not Applicable
19. Purchase of Securities....................... Not Applicable
Being Offered
20. Underwriters................................. Distribution
21. Calculation of Performance Data.............. Calculation of Yield Quotations, Calculation of
Total Return Quotations, and Other Performance Data
<PAGE>
22. Annuity Payments............................. Annuity Provisions
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 of this registration statement.
PART A
The Prospectus was filed in Post-Effective Amendment No. 19 to Form N-4 on April
28, 2000 and is incorporated herein by reference.
MAXIFLEX INDIVIDUAL
CONSECO VARIABLE ANNUITY ACCOUNT C
CONSECO VARIABLE INSURANCE COMPANY
Supplement dated January 1, 2001
The following supplements certain information contained in your prospectus for
the Maxiflex Individual fixed and variable annuity:
1. Effective as of the date of this supplement, you may also invest in the
following Variable Account Investment Options:
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 "Annual Fund Expenses" table:
<TABLE>
<CAPTION>
Total Annual
Portfolio
Other Expenses* Expenses* (after
(after expense expense
reimbursement, reimbursement,
if any, for if any, for
Management certain certain
Fees 12b-1 Fees portfolios) 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%
</TABLE>
* 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.
4. The following Examples are added to the prospectus:
FLEXIBLE PREMIUM PAYMENT CONTACT
You would pay the following expenses on a $1,000 investment, assuming a
hypothetical 5% annual return on assets, and assuming the entire $1,000 is
invested in the sub-account listed: (a) if you surrender the Contract at the end
of the time periods; (b) if you elect to annuitize your Contract; (c) if you do
not surrender your Contract at the end of each time period.
Time Periods
1 Year 3 Years
Pioneer Fund VCT Portfolio (a)$100 (a)$122
(b)$100 (b)$122
(c)$ 20 (c)$ 62
Pioneer Equity-Income VCT Portfolio (a)$100 (a)$123
(b)$100 (b)$123
(c)$ 20 (c)$ 63
Pioneer Europe VCT Portfolio (a)$108 (a)$145
(b)$108 (b)$145
(c)$ 28 (c)$ 85
SINGLE PREMIUM PAYMENT CONTACT (This Contract is no longer offered for sale.)
You would pay the following expenses on a $1,000 investment, assuming a
hypothetical 5% annual return on assets, and assuming the entire $1,000 is
invested in the sub-account listed: (a) if you surrender the Contract at the end
of the time periods; (b) if you elect to annuitize your Contract; (c) if you do
not surrender your Contract at the end of each time period.
Time Periods
1 Year 3 Years
Pioneer Fund VCT Portfolio (a)$ 90 (a)$112
(b)$ 90 (b)$112
(c)$ 20 (c)$ 62
Pioneer Equity-Income VCT Portfolio (a)$ 90 (a)$113
(b)$ 90 (b)$113
(c)$ 20 (c)$ 63
Pioneer Europe VCT Portfolio (a)$ 98 (a)$135
(b)$ 98 (b)$135
(c)$ 28 (c)$ 85
5. The following per accumulation unit values for the period ended September 30,
2000 are added to Appendix A:
THE ALGER AMERICAN FUND:
Leveraged AllCap (a)
Accumulation unit value at 5.109
beginning of period
Accumulation unit value at end of 4.883
period
Percentage change in accumulation -4.42%
unit value
Number of accumulation units 1,508,509
outstanding at end of period
Small Capitalization (a)
Accumulation unit value at 2.257
beginning of period
Accumulation unit value at end of 2.033
period
Percentage change in accumulation -9.92%
unit value
Number of accumulation units 1,560,862
outstanding at end of period
Growth Portfolio (e)
Accumulation unit value at $2.338
beginning of period
Accumulation unit value at end of $2.318
period
Percentage change in accumulation -0.84%
unit value
<PAGE>
Number of accumulation units 1,568,789
outstanding at end of period
Midcap Growth Portfolio (e)
Accumulation unit value at $2.019
beginning of period
Accumulation unit value at end of $2.437
period
Percentage change in accumulation 20.68%
unit value
Number of accumulation units 206,634
outstanding at end of period
------------------------------------------------
AMERICAN CENTURY VARIABLE PORTFOLIO, INC.:
International Fund (e)
Accumulation unit value at $2.093
beginning of period
Accumulation unit value at end of $1.824
period
Percentage change in accumulation -12.84%
unit value
Number of accumulation units 154,690
outstanding at end of period
Value Fund (e)
Accumulation unit value at $1.252
beginning of period
Accumulation unit value at end of $1.299
period
Percentage change in accumulation 3.74%
unit value
Number of accumulation units 218,490
outstanding at end of period
Income and Growth Fund (f)
Accumulation unit value at $1.268
beginning of period
<PAGE>
Accumulation unit value at end of $1.210
period
Percentage change in accumulation -4.54%
unit value
Number of accumulation units 265,971
outstanding at end of period
------------------------------------------------
BERGER INSTITUTIONAL PRODUCTS TRUST:
Growth Fund (e)
Accumulation unit value at $1.930
beginning of period
Accumulation unit value at end of $2.165
period
Percentage change in accumulation 12.16%
unit value
Number of accumulation units 423,200
outstanding at end of period
------------------------------------------------
Growth & Income Fund (e)
Accumulation unit value at $2.375
beginning of period
Accumulation unit value at end of $2.598
period
Percentage change in accumulation 9.37%
unit value
Number of accumulation units 452,165
outstanding at end of period
New Generation Fund (g)
Accumulation unit value at $1.000
beginning of period
Accumulation unit value at end of $1.042
period
Percentage change in accumulation 4.20%
unit value
<PAGE>
Number of accumulation units 162,655
outstanding at end of period
Small Company Growth Fund (e)
Accumulation unit value at $2.626
beginning of period
Accumulation unit value at end of $3.034
period
Percentage change in accumulation 15.52%
unit value
Number of accumulation units 366,378
outstanding at end of period
BIAM International Fund (e)
Accumulation unit value at $1.455
beginning of period
Accumulation unit value at end of $1.308
period
Percentage change in accumulation -10.08%
unit value
Number of accumulation units 6,977
outstanding at end of period
------------------------------------------------
CONSECO SERIES TRUST:
Balanced (b)
Accumulation unit value at $2.874
beginning of period
Accumulation unit value at end of $3.481
period
Percentage change in accumulation 21.11%
unit value
Number of accumulation units 5,983,305
outstanding at end of period
------------------------------------------------
<PAGE>
EQUITY - QUALIFIED (c)
Accumulation unit value at $36.036
beginning of period
Accumulation unit value at end of $45.958
period
Percentage change in accumulation 27.53%
unit value
Number of accumulation units 5,833,919
outstanding at end of period
Equity - Non-Qualified (c)
Accumulation unit value at $28.526
beginning of period
Accumulation unit value at end of $36.380
period
Percentage change in accumulation 27.53%
unit value
Number of accumulation units 135,794
outstanding at end of period
FIXED INCOME - QUALIFIED (d)
Accumulation unit value at $5.674
beginning of period
Accumulation unit value at end of $6.018
period
Percentage change in accumulation 6.06%
unit value
Number of accumulation units 1,781,726
outstanding at end of period
FIXED INCOME - NON-QUALIFIED (d)
Accumulation unit value at $5.452
beginning of period
Accumulation unit value at end of $5.782
period
Percentage change in accumulation 6.06%
unit value
<PAGE>
Number of accumulation units 57,692
outstanding at end of period
------------------------------------------------
Conseco 20 Focus (g)
Accumulation unit value at $1.000
beginning of period
Accumulation unit value at end of $1.338
period
Percentage change in accumulation 33.80%
unit value
Number of accumulation units 43,343
outstanding at end of period
GOVERNMENT SECURITIES (b)
Accumulation unit value at $1.290
beginning of period
Accumulation unit value at end of $1.370
period
Percentage change in accumulation 6.16%
unit value
Number of accumulation units 433,676
outstanding at end of period
CONSECO HIGH YIELD (g)
Accumulation unit value at $1.000
beginning of period
Accumulation unit value at end of $1.012
period
Percentage change in accumulation 1.20%
unit value
Number of accumulation units 11,801
outstanding at end of period
MONEY MARKET (d)
Accumulation unit value at $2.930
beginning of period
Accumulation unit value at end of $3.040
<PAGE>
period
Percentage change in accumulation 3.75%
unit value
Number of accumulation units 2,576,370
outstanding at end of period
------------------------------------------------
DREYFUS STOCK INDEX FUND: (a)
Accumulation unit value at $2.808
beginning of period
Accumulation unit value at end of $2.744
period
Percentage change in accumulation -2.29%
unit value
Number of accumulation units 9,509,845
outstanding at end of period
------------------------------------------------
THE DREYFUS SOCIALLY RESPONSIBLE GROWTH FUND,
INC. (a)
Accumulation unit value at $2.964
beginning of period
Accumulation unit value at end of $2.996
period
Percentage change in accumulation 1.10%
unit value
Number of accumulation units 1,808,290
outstanding at end of period
------------------------------------------------
DREYFUS VARIABLE INVESTMENT FUND:
Disciplined Stock Portfolio (f)
Accumulation unit value at $1.260
beginning of period
Accumulation unit value at end of $1.266
period
Percentage change in accumulation 0.44%
unit value
<PAGE>
Number of accumulation units 229,236
outstanding at end of period
International Value
Portfolio (f)
Accumulation unit value at $1.195
beginning of period
Accumulation unit value at end of $1.089
period
Percentage change in accumulation -8.86%
unit value
Number of accumulation units 32,559
outstanding at end of period
------------------------------------------------
FEDERATED INSURANCE SERIES:
High Income Bond II (a)
Accumulation unit value at $1.405
beginning of period
Accumulation unit value at end of $1.364
period
Percentage change in accumulation -2.91%
unit value
Number of accumulation units 404,126
outstanding at end of period
International Equity II (a)
Accumulation unit value at $2.734
beginning of period
Accumulation unit value at end of $2.328
period
Percentage change in accumulation -14.86%
unit value
Number of accumulation units 183,907
outstanding at end of period
------------------------------------------------
Utility II (a)
<PAGE>
Accumulation unit value at $1.770
beginning of period
Accumulation unit value at end of $1.746
period
Percentage change in accumulation -1.35%
unit value
Number of accumulation units 330,434
outstanding at end of period
------------------------------------------------
INVESCO VARIABLE INVESTMENT FUND:
High Yield Portfolio (f)
Accumulation unit value at $1.030
beginning of period
Accumulation unit value at end of $1.005
period
Percentage change in accumulation -2.47%
unit value
Number of accumulation units 136,613
outstanding at end of period
Equity Income Portfolio (f)
Accumulation unit value at $1.173
beginning of period
Accumulation unit value at end of $1.233
period
Percentage change in accumulation 5.08%
unit value
Number of accumulation units 25,910
outstanding at end of period
------------------------------------------------
JANUS ASPEN SERIES:
Aggressive Growth (a)
Accumulation unit value at $4.489
beginning of period
Accumulation unit value at end of $4.422
period
<PAGE>
Percentage change in accumulation -1.48%
unit value
Number of accumulation units 3,863,502
outstanding at end of period
------------------------------------------------
Growth (a)
Accumulation unit value at $3.193
beginning of period
Accumulation unit value at end of $3.263
period
Percentage change in accumulation 2.20%
unit value
Number of accumulation units 4,558,038
outstanding at end of period
Worldwide Growth (a)
Accumulation unit value at $3.898
beginning of period
Accumulation unit value at end of $3.740
period
Percentage change in accumulation -4.05%
unit value
Number of accumulation units 9,755,975
outstanding at end of period
------------------------------------------------
LAZARD RETIREMENT SERIES INC.:
Equity Portfolio (f)
Accumulation unit value at $1.133
beginning of period
Accumulation unit value at end of $1.126
period
Percentage change in accumulation -0.62%
unit value
Number of accumulation units 17,151
outstanding at end of period
<PAGE>
Small Cap Portfolio (f)
Accumulation unit value at $0.893
beginning of period
Accumulation unit value at end of $1.016
period
Percentage change in accumulation 13.82%
unit value
Number of accumulation units 5,015
outstanding at end of period
------------------------------------------------
LORD ABBETT SERIES FUND, INC. :
Growth & Income Portfolio (f)
Accumulation unit value at $1.164
beginning of period
Accumulation unit value at end of $1.226
period
Percentage change in accumulation 5.31%
unit value
Number of accumulation units 38,326
outstanding at end of period
------------------------------------------------
MITCHELL HUTCHINS SERIES TRUST:
Growth & Income Portfolio (f)
Accumulation unit value at $1.084
beginning of period
Accumulation unit value at end of $1.035
period
Percentage change in accumulation -4.53%
unit value
Number of accumulation units 10,513
outstanding at end of period
------------------------------------------------
NEUBERGER BERMAN ADVISERS MANAGEMENT TRUST
Limited Maturity Bond
Portfolio (e)
<PAGE>
Accumulation unit value at $1.086
beginning of period
Accumulation unit value at end of $1.124
period
Percentage change in accumulation 3.49%
unit value
Number of accumulation units 437,199
outstanding at end of period
Partners Portfolio (e)
Accumulation unit value at $1.363
beginning of period
Accumulation unit value at end of $1.355
period
Percentage change in accumulation -0.62%
unit value
Number of accumulation units 405,603
outstanding at end of period
------------------------------------------------
RYDEX VARIABLE TRUST
Nova Portfolio (h)
Accumulation unit value at $18.407
beginning of period
Accumulation unit value at end of $17.603
period
Percentage change in accumulation -4.37%
unit value
Number of accumulation units 582
outstanding at end of period
OTC Portfolio (h)
Accumulation unit value at $39.086
beginning of period
Accumulation unit value at end of $36.557
period
Percentage change in accumulation -6.47%
unit value
<PAGE>
Number of accumulation units 10,678
outstanding at end of period
------------------------------------------------
SELIGMAN PORTFOLIOS, INC.
Communications and Information
Portfolio (g)
Accumulation unit value at $1.000
beginning of period
Accumulation unit value at end of $0.775
period
Percentage change in accumulation -22.50%
unit value
Number of accumulation units 221,920
outstanding at end of period
Global Technology Portfolio
(g)
Accumulation unit value at $1.000
beginning of period
Accumulation unit value at end of $0.847
period
Percentage change in accumulation -15.30%
unit value
Number of accumulation units 48,140
outstanding at end of period
------------------------------------------------
STRONG VARIABLE INSURANCE FUNDS, INC.:
Mid Cap Growth Fund II (e)
Accumulation unit value at $3.050
beginning of period
Accumulation unit value at end of $3.377
period
Percentage change in accumulation 10.72%
unit value
Number of accumulation units 382,524
outstanding at end of period
------------------------------------------------
STRONG OPPORTUNITY FUND II :
<PAGE>
Accumulation unit value at $1.852
beginning of period
Accumulation unit value at end of $1.945
period
Percentage change in accumulation 5.05%
unit value
Number of accumulation units 170,917
outstanding at end of period
------------------------------------------------
THE VAN ECK WORLDWIDE INSURANCE TRUST:
Worldwide Hard Assets Fund
(a)
Accumulation unit value at $1.006
beginning of period
Accumulation unit value at end of $1.086
period
Percentage change in accumulation 7.92%
unit value
Number of accumulation units 174,519
outstanding at end of period
Worldwide Bond (a)
Accumulation unit value at $1.070
beginning of period
Accumulation unit value at end of $1.028
period
Percentage change in accumulation -3.89%
unit value
Number of accumulation units 47,338
outstanding at end of period
------------------------------------------------
THE VAN ECK WORLDWIDE INSURANCE TRUST
(continued) :
Worldwide Emerging Markets
Fund
Accumulation unit value at $1.044
beginning of period
<PAGE>
Accumulation unit value at end of $0.783
period
Percentage change in accumulation -25.00%
unit value
Number of accumulation units 220,289
outstanding at end of period
Real Estate (f)
Accumulation unit value at $0.828
beginning of period
Accumulation unit value at end of $0.938
period
Percentage change in accumulation 13.26%
unit value
Number of accumulation units 17,257
outstanding at end of period
------------------------------------------------
(a) This unit value was $1.000 on the inception date of June 1, 1995.
(b) This unit value was $1.000 on the inception date of May 1, 1993.
(c) This unit value was $1.000 on the inception date of December 3, 1965.
(d) This unit value was $1.000 on the inception date of May 19, 1981.
(e) This unit value was $1.000 on the inception date of May 1, 1997
(f) This unit value was $1.000 on the inception date of May 1, 1998.
(g) This unit value was $1.000 on the inception date of May 1, 2000.
(h) These unit values were $18.407 for Rydex Nova and $39.086 for Rydex OTC on
the inception date of May 1, 2000
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 the Contract until
the date of this supplement.
<PAGE>
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 VARIABLE DEFERRED ANNUITY CONTRACTS
ISSUED BY
CONSECO VARIABLE INSURANCE COMPANY
AND
CONSECO VARIABLE ANNUITY ACCOUNT C
11815 N. PENNSYLVANIA ST., CARMEL, IN 46032
(317) 817-3700
JANUARY 1, 2001
THIS STATEMENT OF ADDITIONAL INFORMATION IS NOT A PROSPECTUS. IT SHOULD BE READ
IN CONJUNCTION WITH THE PROSPECTUS DATED JANUARY 1, 2001 FOR CONSECO VARIABLE
ANNUITY ACCOUNT C -- INDIVIDUAL VARIABLE DEFERRED ANNUITY CONTRACTS. YOU CAN
OBTAIN A COPY OF THE PROSPECTUS BY CONTACTING CONSECO VARIABLE INSURANCE COMPANY
AT THE ADDRESS OR TELEPHONE NUMBER GIVEN ABOVE.
TABLE OF CONTENTS
PAGE
GENERAL INFORMATION AND HISTORY ............................................
INDEPENDENT ACCOUNTANTS ....................................................
DISTRIBUTION ...............................................................
VOTING RIGHTS ..............................................................
CALCULATION OF YIELD QUOTATIONS ............................................
CALCULATION OF TOTAL RETURN QUOTATIONS .....................................
OTHER PERFORMANCE DATA .....................................................
FEDERAL TAX STATUS .........................................................
ANNUITY PROVISIONS .........................................................
FINANCIAL STATEMENTS .......................................................
<PAGE>
GENERAL INFORMATION AND HISTORY
Conseco Variable Insurance Company (the "Company" or "Conseco Variable") is an
indirect wholly owned subsidiary of Conseco, Inc. On or about October 7,1998,
the Company changed its name from Great American Reserve Insurance Company to
its present name. In certain states, the Company may continue to use the name
Great American Reserve Insurance Company until the name change is approved in
that state. Conseco, Inc. is a publicly held financial services holding company
and one of middle America's leading sources for insurance, investment and
lending products. The Company has its principal offices at 11815 N. Pennsylvania
Street, Carmel, Indiana 46032. The Variable Account was established by the
Company.
INDEPENDENT ACCOUNTANTS
The financial statements of Conseco Variable Annuity Account C and Conseco
Variable Insurance Company have been examined by PricewaterhouseCoopers LLP,
independent accountants, for the periods indicated in their reports as stated in
their opinion and have been so included in reliance upon such opinion given upon
the authority of that firm as experts in accounting and auditing.
DISTRIBUTION
The Company continuously offers the Contracts through associated persons of the
principal underwriter for Variable Account, Conseco Equity Sales, Inc. ("Conseco
Equity Sales"), a registered broker-dealer and member of the National
Association of Securities Dealers, Inc. Conseco Equity Sales is located at 11815
N. Pennsylvania Street, Carmel, Indiana 46032, and is an affiliate of the
Company. In addition, certain Contracts may be sold by life insurance/registered
representatives of other registered broker-dealers.
Conseco Equity Sales performs the sales functions relating to the Contracts and
the company provides all administrative services. To cover the sales expenses
and administrative expenses (including such items as salaries, rent, postage,
telephone, travel, legal, actuarial, audit, office equipment and printing), the
Company makes sales and administrative deductions, varying by type of Contract.
See "Charges and Deductions" in the Prospectus.
VOTING RIGHTS
Contract Owners may instruct Conseco Variable as to the voting of Fund shares
attributable to their respective interests under the Contracts at meetings of
shareholders of the Funds. Contract Owners entitled to vote will receive proxy
material and a form on which voting instructions may be given. Conseco Variable
will vote the shares of each Sub-Account held by the Variable Account
attributable to the Contracts in accordance with instructions received from
Contract Owners. Shares held in each Sub-Account for which timely instructions
have not been received from Contract Owners will be voted by Conseco Variable
for or against any proposition, or Conseco Variable will abstain, in the same
proportion as shares in that Sub-account for which instructions are received.
Conseco Variable will vote, or abstain from voting, any shares that are not
attributable to Contract Owners in the same proportion as all Contract Owners in
the Variable Account vote or abstain. However, if Conseco Variable determines
that it is permitted to vote such shares of the Funds in its own right, it may
elect to do so, subject to the then-current interpretation of the 1940 Act and
the rules thereunder.
Under certain Variable Annuity Contracts, participants and annuitants have the
right to instruct the Contract Owner with respect to the number of votes
attributable to their Individual Accounts or valuation reserve. Votes
attributable to participants and annuitants who do not instruct the Contract
Owner will be cast by the Contract Owner for or against each proposal to be
voted upon, in the same proportion as votes for which instructions have been
received. Participants and annuitants entitled to instruct the casting of votes
will receive a notice of each meeting of Contract Owners, and proxy solicitation
materials, and a statement of the number of votes attributable to their
participation under the Contract.
The number of shares held in a Sub-Account deemed attributable to a Contract
Owner's interest under a Contract will be determined on the basis of the value
of the Accumulation Units credited to the Contract Owner's account as of the
record date. On or after the commencement of Annuity payments, the number of
attributable shares will be based on the amount of assets held to meet annuity
obligations to the payee under the Contract as of the record date. During the
annuity period, the number of votes attributable to a Contract will generally
decrease since funds set aside for Annuitants will decrease as payments are
made.
CALCULATION OF YIELD QUOTATIONS
The Money Market Sub-account's standard yield quotations may appear in sales
material and advertising as calculated by the standard method prescribed by
rules of the Securities and Exchange Commission. Under this method, the yield
quotation is based on a seven-day period and computed as follows: The Money
Market Sub-account's daily net investment factor minus one (1.00) is multiplied
by 365 to produce an annualized yield. The annualized yields of the seven-day
period are then averaged and carried to the nearest one-hundredth of one
percent. This yield reflects investment results less deductions for investment
advisory fees and mortality and expense risk fees but does not include
deductions for any applicable annual administrative fees. Because of these
deductions, the yield for the Money Market Sub-account will be lower than the
yield for the corresponding Portfolio of the Conseco Series Trust.
The Money Market Sub-account's effective yield may appear in sales material and
advertising for the same seven-day period, determined on a compound basis. The
effective yield is calculated by compounding the unannualized base period return
by adding one to the base period return, raising the sum to a power equal to 365
divided by 7, and subtracting one from the result.
The yield on the Money Market Sub-account will generally fluctuate on a daily
basis. Therefore, the yield for any given past period is not an indication or
representation of future yields or rates of return. The actual yield is affected
by changes in interest rates on money market securities, average portfolio
maturity, the types and quality of portfolio securities held by the
corresponding Portfolio of Conseco Series Trust and its operating expenses.
The Portfolios of the eligible Funds may advertise investment performance
figures, including yield. Each Sub-account's yield will be based upon a stated
30-day period and will be computed by dividing the net investment income per
share earned during the period by the maximum offering price per share on the
last day of the period, according to the following formula:
YIELD = 2 ((A - B/CD) + 1)6 - 1)
Where:
A = the net investment income earned during the period by the
Portfolio.
B = the expenses accrued for the period (net of reimbursements, if
any).
C = the average daily number of accumulation units outstanding
during the period.
D = the maximum offering price per accumulation unit on the last
day of the period.
CALCULATION OF TOTAL RETURN QUOTATIONS
Conseco Variable may include certain total return quotations for one or more of
the Portfolios of the eligible Funds in advertising, sales literature or reports
to Contract Owners or prospective purchasers. Such total return quotations will
be expressed as the average annual rate of total return over one-, five- and
10-year periods ended as of the end of the immediately preceding calendar
quarter, and as the dollar amount of annual total return on a year-to-year,
rolling 12-month basis ended as of the end of the immediately preceding calendar
quarter.
Average annual total return quotations are computed according to the following
formula:
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).
INDIVIDUAL FLEXIBLE PREMIUM PAYMENT ANNUITY AVERAGE ANNUAL TOTAL RETURNS FOR THE
PERIODS ENDING 09/30/00:
<TABLE>
<CAPTION>
10 YEARS
OR SINCE
VARIABLE ACCOUNT SUB-ACCOUNTS 1 YEAR 5 YEARS INCEPTION
- ----------------------------- ------ ------- ---------
<S> <C> <C> <C>
CONSECO SERIES TRUST
Equity Portfolio ................................ 55.31 29.74 23.38
Balanced Portfolio (1) .......................... 35.50 20.46 18.11
Fixed Income Portfolio.......................... (1.38) 4.53 8.06
Government Securities Portfolio (1) ............. (2.47) 3.38 4.15
Conseco 20 Focus Portfolio (5) .................. N/A N/A 24.11
High Yield Portfolio (5) ........................ N/A N/A (6.15)
THE ALGER AMERICAN FUND
Alger American Growth Portfolio (3) ............. 11.54 N/A 26.10
Alger American Leveraged AllCap Portfolio (2) ... 23.86 26.64 33.84
Alger American MidCap Growth Portfolio (3) ...... 40.18 N/A 27.96
Alger American Small Capitalization
Portfolio (2) ................................. 9.19 7.98 13.58
AMERICAN CENTURY VARIABLE PORTFOLIOS, INC.
VP International (3) ............................ 18.93 N/A 17.56
<PAGE>
VP Value (3) .................................... (5.53) N/A 6.44
VP Income and Growth (4) ........................ .44 N/A 5.67
BERGER INSTITUTIONAL PRODUCTS TRUST
Berger IPT-- Growth Fund (3) .................... 47.37 N/A 23.60
Berger IPT-- Growth and Income Fund (3) ......... 41.27 N/A 30.38
Berger IPT-- Small Company Growth Fund (3) ...... 65.87 N/A 36.42
Berger/BIAM IPT-- International Fund (3) ........ .85 N/A 6.65
Berger IPT-- New Generation Fund (5) ............ N/A N/A (3.40)
</TABLE>
<TABLE>
<CAPTION>
10 YEARS
OR SINCE
VARIABLE ACCOUNT SUB-ACCOUNTS 1 YEAR 5 YEARS INCEPTION
- ----------------------------- ------ ------- ---------
<S> <C> <C> <C>
THE DREYFUS SOCIALLY RESPONSIBLE
GROWTH FUND, INC (2) ............................ 12.11 20.35 22.14
DREYFUS STOCK INDEX FUND (2) .................... 3.73 19.15 20.14
FEDERATED INSURANCE SERIES
Federated High Income Bond Fund II (2) .......... (8.32) 4.91 5.39
Federated International Equity Fund II (2) ...... 24.73 17.24 16.49
Federated Utility Fund II (2) ................... (5.70) 9.60 10.38
JANUS ASPEN SERIES
Aggressive Growth Portfolio (2) ................. 45.17 28.65 31.37
Growth Portfolio (2) ............................ 16.74 22.92 24.10
Worldwide Growth Portfolio (2) .................. 26.20 25.50 27.32
NEUBERGER BERMAN ADVISERS
MANAGEMENT TRUST
Limited Maturity Bond Portfolio (3) ............. (3.95) N/A 2.03
Partners Portfolio (3) .......................... 0.00 N/A 7.77
STRONG VARIABLE INSURANCE FUNDS, INC.
Strong Mid Cap Growth Fund II (3) ............... 47.87 N/A 40.77
STRONG OPPORTUNITY FUND, INC
Strong Opportunity Fund II (3) .................. 14.51 N/A 19.78
VAN ECK WORLDWIDE INSURANCE TRUST
Worldwide Bond Fund (2) ......................... (13.00) (.32) (.06)
Worldwide Emerging Markets Fund (3) ............. 8.84 N/A (8.22)
Worldwide Hard Assets Fund (2) .................. 2.78 (.86) .98
Worldwide Real Estate Fund (4) .................. .84 N/A (4.86)
DREYFUS VARIABLE INVESTMENT FUND
Dreyfus VIF Disciplined Stock Portfolio (4) ..... 6.44 N/A 7.67
Dreyfus VIF International Value Portfolio (4) ... (7.83) N/A 1.17
INVESCO VARIABLE INVESTMENT FUNDS, INC
<PAGE>
INVESCO VIF-- High Yield Fund (4) ............... (6.57) N/A (2.14)
INVESCO VIF-- Equity Income Fund (4) ............ 4.91 N/A 6.49
LAZARD RETIREMENT SERIES, INC
Lazard Retirement Equity Portfolio (4) .......... (1.60) N/A 2.57
Lazard Retirement Small Cap Portfolio (4) ....... 6.61 N/A (1.70)
LORD ABBETT SERIES FUND, INC
Growth & Income Portfolio (4) ................... 7.56 N/A 6.26
MITCHELL HUTCHINS SERIES TRUST
Growth & Income Portfolio (4) ................... ( .51) N/A ( .94)
RYDEX VARIABLE TRUST
OTC Fund (5) .................................... N/A N/A (13.35)
NOVA Fund (5) ................................... N/A N/A (11.37)
SELIGMAN PORTFOLIOS, INC.
Seligman Communications and Information
Portfolio (5) ................................. N/A N/A (28.16)
Seligman Global Technology Portfolio (5) ........ N/A N/A (21.43)
- ----------
</TABLE>
(1) Since inception (May 1, 1993).
(2) Since inception (June 1, 1995).
(3) Since inception (May 1, 1997).
(4) Since inception (May 1, 1998).
(5) Since inception (May 1, 2000).
4
<PAGE>
INDIVIDUAL SINGLE PREMIUM PAYMENT ANNUITY AVERAGE ANNUAL TOTAL RETURNS FOR THE
PERIODS ENDING 09/30/00:
<TABLE>
<CAPTION>
10 YEARS
OR SINCE
VARIABLE ACCOUNT SUB-ACCOUNTS 1 YEAR 5 YEARS INCEPTION
- ----------------------------- ------ ------- ---------
<S> <C> <C> <C>
CONSECO SERIES TRUST
Equity Portfolio ................................ 55.67 29.99 23.39
Balanced Portfolio (1) .......................... 35.83 20.70 18.27
Fixed Income Portfolio .......................... (1.14) 4.74 8.07
Government Securities Portfolio (1) ............. (2.24) 3.59 4.29
Conseco 20 Focus Portfolio (5) .................. N/A N/A 24.39
High Yield Portfolio (5) ....................... N/A N/A (5.94)
<PAGE>
THE ALGER AMERICAN FUND
Alger American Growth Portfolio (3) ............. 11.81 N/A 26.46
Alger American Leveraged AllCap Portfolio (2) ... 24.16 26.89 34.54
Alger American MidCap Growth Portfolio (3) ...... 40.51 N/A 28.32
Alger American Small Capitalization
Portfolio (2) ................................. 9.45 8.19 14.17
AMERICAN CENTURY VARIABLE PORTFOLIOS, INC.
VP International (3) ............................ 19.21 N/A 17.89
VP Value (3) .................................... (5.30) N/A 6.75
VP Income and Growth (4) ........................ .68 N/A 6.10
BERGER INSTITUTIONAL PRODUCTS TRUST
Berger IPT-- Growth Fund (3) .................... 47.72 N/A 23.96
Berger IPT-- Growth and Income Fund (3) ......... 41.60 N/A 30.75
Berger IPT-- Small Company Growth Fund (3) ...... 66.26 N/A 36.81
Berger/BIAM IPT-- International Fund (3) ........ 1.09 N/A 6.95
Berger IPT-- New Generation Fund (5) ............ N/A N/A (3.18)
THE DREYFUS SOCIALLY RESPONSIBLE
GROWTH FUND, INC. (2) ........................... 12.38 20.58 22.77
DREYFUS STOCK INDEX FUND (2) .................... 3.97 19.38 20.77
FEDERATED INSURANCE SERIES
Federated High Income Bond Fund II (2) .......... (8.10) 5.11 5.95
Federated International Equity Fund II (2) ...... 25.03 17.47 17.10
Federated Utility Fund II (2) ................... (5.47) 9.82 10.96
JANUS ASPEN SERIES
Aggressive Growth Portfolio (2) ................. 45.52 28.91 32.06
Growth Portfolio (2) ............................ 17.02 23.16 24.75
Worldwide Growth Portfolio (2) .................. 26.50 25.75 27.98
NEUBERGER BERMAN ADVISERS
MANAGEMENT TRUST
Limited Maturity Bond Portfolio (3) ............. (3.72) N/A 2.32
Partners Portfolio (3) .......................... .24 N/A 8.08
<PAGE>
10 YEARS
OR SINCE
VARIABLE ACCOUNT SUB-ACCOUNTS 1 YEAR 5 YEARS INCEPTION
- ----------------------------- ------ ------- ---------
STRONG VARIABLE INSURANCE FUNDS, INC.
Strong Mid Cap Growth Fund II (3) ............... 48.22 N/A 41.17
STRONG OPPORTUNITY FUND, INC.
Strong Opportunity Fund II (3) .................. 14.79 N/A 20.12
VAN ECK WORLDWIDE INSURANCE TRUST
Worldwide Bond Fund (2) ......................... (12.79) (0.12) .47
Worldwide Emerging Markets Fund (3) ............. 9.10 N/A (7.95)
Worldwide Hard Assets Fund (2) .................. 3.02 (.66) 1.51
Worldwide Real Estate Fund (4) .................. 1.08 N/A (4.47)
DREYFUS VARIABLE INVESTMENT FUND
Dreyfus VIF Disciplined Stock Portfolio (4) ..... 6.69 N/A 8.11
Dreyfus VIF International Value Portfolio (4) ... (7.61) N/A 1.58
INVESCO VARIABLE INVESTMENT FUNDS, INC.
INVESCO VIF-- High Yield Fund (4) ............... (6.35) N/A (1.74)
INVESCO VIF-- Equity Income Fund (4) ............ (5.16) N/A 6.92
LAZARD RETIREMENT SERIES, INC.
Lazard Retirement Equity Portfolio (4) .......... (1.36) N/A 2.98
Lazard Retirement Small Cap Portfolio (4) ....... 6.87 N/A (1.30)
LORD ABBETT SERIES FUND, INC.
Growth & Income Portfolio (4) ................... 7.82 N/A 6.70
MITCHELL HUTCHINS SERIES TRUST
Growth & Income Portfolio (4) ................... (.27) N/A (.53)
RYDEX VARIABLE TRUST
OTC Fund (5) .................................... N/A N/A (13.13)
NOVA Fund (5) ................................... N/A N/A (11.16)
SELIGMAN PORTFOLIOS, INC.
Seligman Communications and Information
Portfolio (5) ................................. N/A N/A (27.99)
Seligman Global Technology Portfolio (5) ........ N/A N/A (21.25)
- ----------
</TABLE>
(1) Since inception (May 1, 1993).
(2) Since inception (June 1, 1995).
(3) Since inception (May 1, 1997).
(4) Since inception (May 1, 1998).
(5) Since inception (May 1, 2000).
OTHER PERFORMANCE DATA
Conseco Variable may from time to time also illustrate average annual total
returns in a non-standard format as appears in the following "Gross Average
Annual Total Returns" tables, in conjunction with the standard format described
above. The non-standard format will be identical to the standard format except
that the withdrawal charge percentage will be assumed to be zero.
6
INDIVIDUAL FLEXIBLE PREMIUM PAYMENT ANNUITY GROSS AVERAGE ANNUAL TOTAL RETURNS
FOR THE PERIODS ENDINGS 09/30/00:
<TABLE>
<CAPTION>
10 YEARS
OR SINCE
VARIABLE ACCOUNT SUB-ACCOUNTS 1 YEAR 5 YEARS INCEPTION
- ----------------------------- ------ ------- ---------
<S> <C> <C> <C>
CONSECO SERIES TRUST
Equity Portfolio ................................ 67.52 30.75 23.42
Balanced Portfolio (1) .......................... 46.17 21.41 18.30
Fixed Income Portfolio.......................... 6.40 5.36 8.10
Government Securities Portfolio (1) ............. 5.22 4.21 4.34
Conseco 20 Focus Portfolio (5) .................. N/A N/A 33.80
High Yield Portfolio (5) ........................ N/A N/A 1.19
THE ALGER AMERICAN FUND
Alger American Growth Portfolio (3) ............. 20.33 N/A 27.90
Alger American Leveraged AllCap Portfolio (2) ... 33.61 27.64 34.60
Alger American MidCap Growth Portfolio (3) ...... 51.20 N/A 29.79
Alger American Small Capitalization
Portfolio (2) ................................. 17.79 8.85 14.22
AMERICAN CENTURY VARIABLE PORTFOLIOS, INC.
VP International (3) ............................ 28.30 N/A 19.23
VP Value (3) .................................... 1.92 N/A 7.95
VP Income and Growth (4) ........................ 8.35 N/A 8.21
BERGER INSTITUTIONAL PRODUCTS TRUST
Berger IPT-- Growth Fund (3) .................... 58.96 N/A 25.37
Berger IPT-- Growth and Income Fund (3) ......... 52.38 N/A 32.25
Berger IPT-- Small Company Growth Fund (3) ...... 78.92 N/A 38.38
Berger/BIAM IPT-- International Fund (3) ........ 8.80 N/A 8.17
Berger IPT-- New Generation Fund (5) ............ N/A N/A 4.16
THE DREYFUS SOCIALLY RESPONSIBLE
GROWTH FUND, INC (2) ............................ 20.94 21.29 22.83
DREYFUS STOCK INDEX FUND (2) .................... 11.90 20.08 20.82
FEDERATED INSURANCE SERIES
Federated High Income Bond Fund II (2) .......... (1.08) 5.74 6.00
Federated International Equity Fund II (2) ...... 34.55 18.17 17.16
Federated Utility Fund II (2) ................... (1.74) 10.47 11.01
JANUS ASPEN SERIES
Aggressive Growth Portfolio (2) ................. 56.60 29.67 32.12
Growth Portfolio (2) ............................ 25.94 23.88 24.80
Worldwide Growth Portfolio (2) .................. 36.14 26.48 28.04
NEUBERGER BERMAN ADVISERS
MANAGEMENT TRUST
Limited Maturity Bond Portfolio (3) ............. 3.63 N/A 3.48
Partners Portfolio (3) .......................... 7.88 N/A 9.30
STRONG VARIABLE INSURANCE FUNDS, INC.
Strong Mid Cap Growth Fund II (3) ............... 59.50 N/A 42.79
STRONG OPPORTUNITY FUND, INC
Strong Opportunity Fund II (3) .................. 23.53 N/A 21.49
</TABLE>
<TABLE>
<CAPTION>
10 YEARS
OR SINCE
VARIABLE ACCOUNT SUB-ACCOUNTS 1 YEAR 5 YEARS INCEPTION
- ----------------------------- ------ ------- ---------
<S> <C> <C> <C>
VAN ECK WORLDWIDE INSURANCE TRUST
Worldwide Bond Fund (2) ......................... ( 6.13) .48 .52
Worldwide Emerging Markets Fund (3) ............. 17.41 N/A (6.90)
Worldwide Hard Assets Fund (2) .................. 10.88 (.06) 1.56
Worldwide Real Estate Fund (4) .................. 8.78 N/A (2.58)
DREYFUS VARIABLE INVESTMENT FUND
Dreyfus VIF Disciplined Stock Portfolio (4) ..... 14.83 N/A 10.25
Dreyfus VIF International Value Portfolio (4) ... ( .56) N/A 3.59
INVESCO VARIABLE INVESTMENT FUNDS, INC
INVESCO VIF-- High Yield Fund (4) ............... .80 N/A .21
INVESCO VIF-- Equity Income Fund (4) ............ 13.18 N/A 9.05
LAZARD RETIREMENT SERIES, INC
Lazard Retirement Equity Portfolio (4) .......... 6.16 N/A 5.03
Lazard Retirement Small Cap Portfolio (4) ....... 15.01 N/A .66
LORD ABBETT SERIES FUND, INC
Growth & Income Portfolio (4) ................... 16.04 N/A 8.82
MITCHELL HUTCHINS SERIES TRUST
Growth & Income Portfolio (4) ................... 7.33 N/A 1.44
RYDEX VARIABLE TRUST
OTC Fund (5) .................................... N/A N/A (6.47)
NOVA Fund (5) ................................... N/A N/A (4.37)
SELIGMAN PORTFOLIOS, INC.
Seligman Communications and Information
Portfolio (5) ................................. N/A N/A (22.52)
Seligman Global Technology Portfolio (5) ........ N/A N/A (15.27)
- ----------
</TABLE>
(1) Since inception (May 1, 1993).
(2) Since inception (June 1, 1995).
(3) Since inception (May 1, 1997).
(4) Since inception (May 1, 1998).
(5) Since inception (May 1, 2000).
INDIVIDUAL SINGLE PREMIUM PAYMENT ANNUITY GROSS AVERAGE ANNUAL TOTAL RETURNS FOR
THE PERIODS ENDING 09/30/00:
<TABLE>
<CAPTION>
10 YEARS
OR SINCE
VARIABLE ACCOUNT SUB-ACCOUNTS 1 YEAR 5 YEARS INCEPTION
- ----------------------------- ------ ------- ---------
<S> <C> <C> <C>
CONSECO SERIES TRUST
Equity Portfolio ................................ 67.52 30.75 23.42
Balanced Portfolio (1) .......................... 46.17 21.41 18.30
Fixed Income Portfolio.......................... 6.40 5.36 8.10
Government Securities Portfolio (1) ............. 5.22 4.21 4.34
Conseco 20 Focus Portfolio (5) .................. N/A N/A 33.80
High Yield Portfolio (5) ........................ N/A N/A 1.19
THE ALGER AMERICAN FUND
Alger American Growth Portfolio (3) ............. 20.33 N/A 27.90
Alger American Leveraged AllCap Portfolio (2) ... 33.61 27.64 34.60
Alger American MidCap Growth Portfolio (3) ...... 51.20 N/A 29.79
Alger American Small Capitalization
Portfolio (2) ................................. 17.79 8.85 14.22
AMERICAN CENTURY VARIABLE PORTFOLIOS, INC.
VP International (3) ............................ 28.30 N/A 19.23
VP Value (3) .................................... 1.92 N/A 7.95
VP Income and Growth (4) ........................ 8.35 N/A 8.21
</TABLE>
<TABLE>
<CAPTION>
10 YEARS
OR SINCE
VARIABLE ACCOUNT SUB-ACCOUNTS 1 YEAR 5 YEARS INCEPTION
- ----------------------------- ------ ------- ---------
<S> <C> <C> <C>
BERGER INSTITUTIONAL PRODUCTS TRUST
Berger IPT-- Growth Fund (3) .................... 58.96 N/A 25.37
Berger IPT-- Growth and Income Fund (3) ......... 52.38 N/A 32.25
<PAGE>
Berger IPT-- Small Company Growth Fund (3) ...... 78.92 N/A 38.38
Berger/BIAM IPT-- International Fund (3) ........ 8.80 N/A 8.17
Berger IPT-- New Generation Fund (5) ............ N/A N/A 4.16
THE DREYFUS SOCIALLY RESPONSIBLE
GROWTH FUND, INC (2) ............................ 20.94 21.29 22.83
DREYFUS STOCK INDEX FUND (2) .................... 11.90 20.08 20.82
FEDERATED INSURANCE SERIES
Federated High Income Bond Fund II (2) .......... (1.08) 5.74 6.00
Federated International Equity Fund II (2) ...... 34.55 18.17 17.16
Federated Utility Fund II (2) ................... 1.74 10.47 11.01
JANUS ASPEN SERIES
Aggressive Growth Portfolio (2) ................. 56.60 29.67 32.12
Growth Portfolio (2) ............................ 25.94 23.88 24.80
Worldwide Growth Portfolio (2) .................. 36.14 26.48 28.04
NEUBERGER BERMAN ADVISERS
MANAGEMENT TRUST
Limited Maturity Bond Portfolio (3) ............. 3.63 N/A 3.48
Partners Portfolio (3) .......................... 7.88 N/A 9.30
STRONG VARIABLE INSURANCE FUNDS, INC.
Strong Mid Cap Growth Fund II (3) ............... 59.50 N/A 42.79
STRONG OPPORTUNITY FUND, INC
Strong Opportunity Fund II (3) .................. 23.53 N/A 21.49
VAN ECK WORLDWIDE INSURANCE TRUST
Worldwide Bond Fund (2) ......................... ( 6.13) .48 .52
Worldwide Emerging Markets Fund (3) ............. 17.41 N/A (6.90)
Worldwide Hard Assets Fund (2) .................. 10.88 (.06) 1.56
Worldwide Real Estate Fund (4) .................. 8.78 N/A (2.58)
DREYFUS VARIABLE INVESTMENT FUND
Dreyfus VIF Disciplined Stock Portfolio (4) ..... 14.83 N/A 10.25
Dreyfus VIF International Value Portfolio (4) ... ( .56) N/A 3.59
</TABLE>
<TABLE>
<CAPTION>
10 YEARS
OR SINCE
VARIABLE ACCOUNT SUB-ACCOUNTS 1 YEAR 5 YEARS INCEPTION
- ----------------------------- ------ ------- ---------
<S> <C> <C> <C>
INVESCO VARIABLE INVESTMENT FUNDS, INC
INVESCO VIF-- High Yield Fund (4) ............... .80 N/A .21
INVESCO VIF-- Equity Income Fund (4) ............ 13.18 N/A 9.05
LAZARD RETIREMENT SERIES, INC
Lazard Retirement Equity Portfolio (4) .......... 6.16 N/A 5.03
Lazard Retirement Small Cap Portfolio (4) ....... 15.01 N/A .66
LORD ABBETT SERIES FUND, INC
Growth & Income Portfolio (4) ................... 16.04 N/A 8.82
MITCHELL HUTCHINS SERIES TRUST
Growth & Income Portfolio (4) ................... 7.33 N/A 1.44
RYDEX VARIABLE TRUST
OTC Fund (5) .................................... N/A N/A (6.47)
NOVA Fund (5) ................................... N/A N/A (4.37)
SELIGMAN PORTFOLIOS, INC.
Seligman Communications and Information
Portfolio (5) ................................. N/A N/A (22.52)
Seligman Global Technology Portfolio (5) ........ N/A N/A (15.27)
- ----------
</TABLE>
(1) Since inception (May 1, 1993).
(2) Since inception (June 1, 1995).
(3) Since inception (May 1, 1997).
(4) Since inception (May 1, 1998).
(5) Since inception (May 1, 2000).
All non-standard performance data will only be advertised if the standard
performance data for the same period, as well as for the required periods, is
also illustrated.
Performance data for the Variable Account investment options may be compared in
advertisements, sales literature and reports to Contract Owners, with the
investment returns of various mutual funds, stocks, bonds, certificates of
deposit, tax free bonds, or common stock and bond indices, and other groups of
variable annuity separate accounts or other investment products tracked by
Morningstar, Inc., a widely used independent research firm which ranks mutual
funds and other investment companies by overall performance, investment
objectives, and assets, or tracked by other services, companies, publications,
or persons who rank such investment companies on overall performance or other
criteria.
Reports and promotional literature may also contain other information, including
the effect of tax-deferred compounding on an investment options performance
returns, or returns in general, which may be illustrated by graphs, charts or
otherwise, and which may include a comparison, at various points in time, of the
return from an investment in a Contract (or returns in general) on a
tax-deferred basis (assuming one or more tax rates) with the return on a taxable
basis.
Reports and promotional literature may also contain the ratings Conseco Variable
has received from independent rating agencies. However, Conseco Variable does
not guarantee the investment performance of the Variable Account investment
options.
10
<PAGE>
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.
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 includable 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.
Conseco Variable is taxed as a life insurance company under the Code. For
federal income tax purposes, the Variable Account is not a separate entity from
Conseco Variable, and its operations form a part of Conseco Variable.
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."
Conseco Variable intends that all Variable Account Investment Options 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 Variable Account will cause the Owner to be treated as the
owner of the assets of the Variable 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 Variable
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, Conseco Variable 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.
12
<PAGE>
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 acquiescence 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. Owners should
therefore consult competent tax advisers should they wish to assign or pledge
their Contracts.
If the Contract is issued pursuant to a retirement plan which receives favorable
treatment under the provision of Sections 403(b) or 457 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 includable 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
13
<PAGE>
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 includable in gross income (i.e. Returns
of after-tax contributions), or d) hardship withdrawals. Participants should
consult their own tax counsel or other tax adviser regarding withholding
requirements.
TAX TREATMENT OF WITHDRAWALS -- NON-QUALIFIED CONTRACTS
Section 72 of the Code governs treatment of distributions from annuity
contracts. It provides that if the Contract Value exceeds the aggregate purchase
payments made, any amount withdrawn will be treated as coming first from the
earnings and then, only after the income portion is exhausted, as coming from
the principal. Withdrawn earnings are includable 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.
With respect to (d) above, if the series of substantially equal periodic
payments is modified before the later of your attaining age 591/2 or 5 years
from the date of the first periodic payment, then the tax for the year of the
modification is increased by an amount equal to the tax which would have been
imposed (the 10% penalty tax) but for the exception, plus interest for the tax
years in which the exception was used.
The Contract provides that upon the death of the Annuitant prior to Maturity
Date, the death proceeds will be paid to the beneficiary. Such payments made
upon the death of the Annuitant who is not the Owner of the Contract do not
qualify for the death of Owner exception described above, and will be subject to
the ten (10%) percent distribution penalty unless the beneficiary is 591/2 years
old or one of the other exceptions to the penalty applies.
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 offered herein are designed to be suitable for use under various
types of Qualified Plans. Taxation of participants in each Qualified Plan varies
with the type of plan and terms and conditions of each specific plan. Owners,
Annuitants and beneficiaries are cautioned that benefits under a Qualified Plan
may be subject to the terms and conditions of the plan regardless of the terms
and conditions of the Contracts issued pursuant to the plan. Some retirement
plans are subject to distribution and other requirements that are not
incorporated into the Company's administrative procedures. The Company is not
bound by the terms and conditions of such plans to the extent such terms
conflict with the terms of a Contract, unless the Company specifically consents
to be bound. Owners, participants and beneficiaries are responsible for
determining that contributions, distributions and other transactions with
respect to the Contracts comply with applicable law.
A qualified Contract will not provide any necessary or additional tax deferral
if it is used to fund a Qualified plan that is tax deferred. However, the
Contract has features and benefits other than tax deferral that may make it an
appropriate investment for a Qualified plan. Following are general descriptions
of the types of Qualified Plans with which the Contracts may be used. Such
descriptions are not exhaustive and are for general informational purposes only.
The tax rules regarding Qualified Plans are very complex and will have differing
applications depending on individual facts and circumstances. Each
purchaser should obtain competent tax advice prior to purchasing a Contract
issued under a Qualified Plan.
Contracts issued pursuant to Qualified Plans include special provisions
restricting Contract provisions that may otherwise be available as described
herein. Generally, Contracts issued pursuant to Qualified Plans are not
transferable except upon surrender or annuitization. Various penalty and excise
taxes may apply to contributions or distributions made in violation of
applicable limitations. Furthermore, certain withdrawal penalties and
restrictions may apply to surrenders from Qualified Contracts. (See "Tax
Treatment of Withdrawals -- Qualified Contracts" below.)
On July 6, 1983, the Supreme Court decided in ARIZONA GOVERNING COMMITTEE V.
NORRIS that optional annuity benefits provided under an employer's deferred
compensation plan could not, under Title VII of the Civil Rights Act of 1964,
vary between men and women. The Contracts sold by Conseco Variable 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 includable 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. GOVERNMENT AND TAX-EXEMPT ORGANIZATION'S DEFERRED COMPENSATION PLANS 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.
15
<PAGE>
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 Section (403(b)(Tax-Sheltered Annuities). To the
extent amounts are not includable 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; and (f) made to an alternate payee pursuant to a qualified
domestic relations order; and (g) paid on account of an IRS levy on the
qualified contract.
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); or (5) in the case of hardship. 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.
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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. 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
DETERMINATION OF AMOUNT OF THE FIRST MONTHLY VARIABLE ANNUITY PAYMENT. When
annuity payments commence, the value of the Individual Account is determined as
the total of the product(s) of (a) the value of an Accumulation Unit for each
investment medium at the end of the Valuation Period immediately preceding the
Valuation Period in which the first annuity payment is due and (b) the number of
Accumulation Units credited to the Individual Account with respect to each
investment medium as of the date the Annuity is to commence. Premium tax, if
assessed at such time by the applicable jurisdiction, will be deducted from the
Individual Account value. Any portion of the Individual Account value for which
a fixed annuity election has been made is applied to provide fixed-dollar
payments under the option elected.
The amount of the first monthly variable annuity payment is then calculated by
multiplying the Individual Account value which is to be applied to provide
variable payments by the amount of first monthly payment per $1,000 of value, in
accordance with annuity tables contained in the Contract. The annuity tables are
based on the Progressive Annuity Table, assuming births in the year 1900. For
annuitants whose year of birth is after 1915, an "adjusted age" is used, which
is one year less than actual age. The amount of first monthly payment per $1,000
of value varies according to the form of annuity selected, the age of the
annuitant (for certain options) and the assumed net investment rate selected by
the Contract Owner. The standard assumed net investment rate is 3-1/2 percent
per annum; however, an alternative 5 percent per annum, or such other rate as
Conseco Variable may offer, may be selected prior to the commencement of annuity
payments.
The assumed net investment rates built into the annuity tables affect both the
amount of the first monthly variable annuity payment and the amount by which
subsequent payments may increase or decrease. Selection of a 5 percent rate,
rather than the standard 3-1/2 percent rate, would produce a higher first
payment but subsequent payments would increase more slowly in periods when
Annuity Unit values are rising and decrease more rapidly in periods when Annuity
Unit values are declining. With either assumed rate, if the actual net
investment rate during any two or more successive months were equal to the
assumed rate, the annuity payments would be level during that period.
If a greater first monthly payment would result, Conseco Variable will compute
the first monthly payment on the same mortality basis as used in determining the
first payment under immediate annuity contracts being issued for a similar class
of annuitants at the date the first monthly payment is due under the Contract.
VALUE OF AN ANNUITY UNIT. At the commencement of the Annuity Period, a number of
Annuity Units is established for the Contract Owner for each Investment Option
on which variable annuity payments are to be based. For each Sub-Account of
Variable Account, the number of Annuity Units established is calculated
17
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by dividing (i) the amount of the first monthly variable annuity payment on that
basis by (ii) the annuity unit value for that basis for the current Valuation
Period. That number of Annuity Units remains constant throughout the Annuity
Period and is the basis for calculating the amount of the second and subsequent
annuity payments.
The Annuity Unit value is determined for each Valuation Period, for each
Investment Option, and is equal to the Annuity Unit value for the preceding
Valuation Period multiplied by the product of (i) the net investment factor for
the appropriate Sub-Account for the immediately preceding Valuation Period and
(ii) a factor to neutralize the assumed net investment rate built into the
annuity tables (discussed under the preceding caption), for it is replaced by
the actual net investment rate in step (i). The daily factor for a 3-1/2 percent
assumed net investment rate is .99990576; for a 5 percent rate, the daily factor
is .99986634.
AMOUNTS OF SUBSEQUENT MONTHLY VARIABLE ANNUITY PAYMENTS. The amounts of second
and subsequent monthly variable annuity payments are determined by multiplying
(i) the number of Annuity Units established for the annuitant for the applicable
Sub-Account by (ii) the Annuity Unit value for the Sub-Account.
If Annuity Units are established for more than one Sub-Account, the calculation
is made separately and the results are combined to determine the total monthly
variable annuity payment.
1. EXAMPLE OF CALCULATION OF MONTHLY VARIABLE ANNUITY PAYMENTS. The
determination of the amount of the variable annuity payments can be illustrated
by the following hypothetical example. The example assumes that the monthly
payments are based on the investment experience of only one Sub-Account. If
payments were based on the investment experience of more than one Sub-Account,
the same procedure would be followed to determine the portion of the monthly
payment attributed to each Sub-Account.
2. FIRST MONTHLY PAYMENT. Assume that at the date of retirement there are 40,000
Accumulation Units credited under a particular Individual Account and that the
value of an Accumulation Unit for the Valuation Period immediately prior to
retirement was $1.40000000; this produces a total value for the Individual
Account of $56,000. Assume also that no premium tax is payable and that the
annuity tables in the Contract provide, for the option elected, a first monthly
variable annuity payment of $6.57 per $1,000 of value applied; the first monthly
payment to the Annuitant would thus be 56 multiplied by $6.57, or $367.92.
Assume that the Annuity Unit value for the Valuation Period in which the first
monthly payment was due was $1.30000000. This is divided into the amount of the
first monthly payment to establish the number of Annuity Units for the
Participant: $367.92 /$1.30000000 produces 283.015 Annuity Units. The value of
this number of Annuity Units will be paid in each subsequent month.
3. SECOND MONTHLY PAYMENT. The current Annuity Unit value is first calculated.
Assume a net investment factor of 1.01000000 for the Valuation Period
immediately preceding the due date of the second monthly payment. This is
multiplied by .99713732 to neutralize the assumed net investment rate of 3-1/2
percent per annum built into the number of Annuity Units determined above (if an
assumed net investment rate of 5 percent had been elected, the neutralization
factor would be .99594241), producing a result of 1.00710869. This is then
multiplied by the Annuity Unit value for the Valuation Period preceding the due
date of the second monthly payment (assume this value to be $1.30000000) to
produce the current Annuity Unit value, $1.30924130.
The second monthly payment is then calculated by multiplying the constant number
of Annuity Units by the current Annuity Unit value: 283.015 times $1.30924130
produces a payment of $370.53.
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FINANCIAL STATEMENTS
Audited financial statements of Conseco Variable Annuity Account C and Conseco
Variable Insurance Company as of December 31, 1999 are included herein.
Unaudited financial statements of Conseco Variable Annuity Account C as of
September 30, 2000 are also included herein.
CONSECO VARIABLE ANNUITY ACCOUNT C
STATEMENT OF ASSETS AND LIABILITIES
SEPTEMBER 30, 2000
(Unaudited)
<TABLE>
<CAPTION>
=====================================================================================================
Net Asset
Shares Cost Value
------------------------- -----------
<S> <C> <C> <C>
ASSETS:
Investments in portfolio shares, at net asset value (Note 2):
The Alger American Fund:
Growth Portfolio 65,676.3 $ 3,746,521 $ 3,639,126
Leveraged AllCap Portfolio 158,585.7 7,857,358 7,881,711
MidCap Growth Portfolio 14,778.0 463,072 503,931
Small Capitalization Portfolio 108,454.4 3,835,777 3,176,630
American Century Variable Portfolios, Inc:
Income and Growth Fund 42,100.3 312,169 322,067
International Fund 26,149.0 285,162 282,409
Value Fund 48,136.1 289,595 284,003
Berger Institutional Products Trust:
Growth Fund 42,219.0 680,512 916,996
Growth and Income Fund 40,336.5 1,018,267 1,175,809
International Fund 689.1 9,583 9,131
New Generation Fund 16,208.4 172,876 169,540
Small Company Growth Fund 40,654.8 990,449 1,112,315
Conseco Series Trust:
Balanced Portfolio 1,197,315.7 16,862,866 20,997,191
Conseco 20 Focus Portfolio 4,319.4 47,612 58,038
Equity Portfolio 9,337,231.6 203,474,134 277,149,218
Fixed Income Portfolio 1,180,364.8 11,675,781 11,217,190
Government Securities Portfolio 53,086.8 617,136 594,801
High Yield Portfolio 1,189.2 11,972 11,951
Money Market Portfolio 7,862,320.9 7,862,321 7,862,321
The Dreyfus Socially Responsible Growth Fund, Inc 140,512.2 4,836,083 5,590,981
Dreyfus Stock Index Fund 701,938.8 23,134,349 26,357,800
Dreyfus Variable Investment Fund:
Disciplined Stock Portfolio 10,658.4 291,142 290,334
International Value Portfolio 2,522.3 36,955 35,488
Federated Insurance Series:
High Income Bond Fund II 62,342.0 625,340 567,312
International Equity Fund II 20,902.9 475,019 428,509
Utility Fund II 43,224.0 610,817 586,982
Invesco Variable Investment Funds, Inc:
Equity Income Fund 1,437.5 141,242 31,969
High Yield Fund 12,149.3 29,657 137,408
Janus Aspen Series:
Aggressive Growth Portfolio 326,522.3 16,866,074 17,256,705
Growth Portfolio 469,118.0 13,158,401 14,978,937
Worldwide Growth Portfolio 864,770.7 28,469,878 36,718,164
Lazard Retirement Series, Inc:
Equity Portfolio 1,674.5 19,648 19,324
Small Cap Portfolio 452.9 5,102 5,099
Lord Abbett Series Fund, Inc:
Growth and Income Portfolio 2,000.1 43,185 47,042
Mitchell Hutchins Series Trust:
Growth and Income Portfolio 743.9 11,100 10,891
Neuberger Berman Advisers Management Trust:
Limited Maturity Bond Portfolio 38,157.0 491,332 491,462
Partners Portfolio 34,219.8 599,879 550,254
Rydex Variable Trust:
Nova Fund 638.6 10,853 10,262
OTC Fund 11,117.2 432,727 390,658
Seligman Portfolios, Inc.:
Communications and Information Portfolio 7,270.4 195,530 172,089
Global Technology Portfolio 1,558.2 43,105 40,808
Strong Variable Insurance Funds, Inc:
Mid Cap Growth Fund II 38,160.6 1,236,993 1,292,880
Strong Opportunity Fund II, Inc. 12,094.9 333,424 332,609
Van Eck Worldwide Insurance Trust:
Worldwide Bond Fund 4,940.9 54,482 48,717
Worldwide Emerging Markets Fund 16,022.3 204,767 172,720
Worldwide Hard Assets Fund 16,101.8 168,716 189,679
Worldwide Real Estate Fund 1,589.7 16,263 16,247
=====================================================================================================
TOTAL 444,135,708
RECEIVABLES:
Amounts receivable from Conseco Variable Insurance Company 666,382
------------
TOTAL ASSETS (NOTE 6) $444,802,090
=====================================================================================================
The accompanying notes are an integral part of these financial statements.
</TABLE>
<PAGE>
CONSECO VARIABLE ANNUITY ACCOUNT C
STATEMENT OF ASSETS AND LIABILITIES
SEPTEMBER 30, 2000
(Unaudited)
<TABLE>
<CAPTION>
===========================================================================================================
Reported
Units Unit Value Value
----------------------------- ------------
<S> <C> <C> <C>
NET ASSETS ATTRIBUTABLE TO:
Contract owners' deferred annuity reserves:
The Alger American Fund:
Growth Portfolio 1,568,788.7 $ 2.317878 $ 3,636,261
Leveraged AllCap Portfolio 1,508,509.5 4.882747 7,365,670
MidCap Growth Portfolio 206,633.9 2.437008 503,568
Small Capitalization Portfolio 1,560,862.0 2.033580 3,174,138
American Century Variable Portfolios, Inc:
Income and Growth Fund 265,970.7 1.209975 321,818
International Fund 154,689.8 1.823897 282,138
Value Fund 218,489.7 1.298809 283,776
Berger Institutional Products Trust:
Growth Fund 423,199.8 2.165168 916,299
Growth and Income Fund 452,164.6 2.598427 1,174,917
International Fund 6,977.3 1.307640 9,124
New Generation Fund 162,655.1 1.041599 169,421
Small Company Growth Fund 366,377.9 3.033604 1,111,445
Conseco Series Trust:
Balanced Portfolio 5,983,305.3 3.480788 20,826,617
Conseco 20 Focus Portfolio 43,342.6 1.338025 57,993
Equity Portfolio
Qualified 5,833,918.8 45.957867 268,114,465
Nonqualified 135,794.4 36.379554 4,940,140
Fixed Income Portfolio
Qualified 1,781,725.6 6.017896 10,722,239
Nonqualified 57,691.9 5.782131 333,582
Government Securities Portfolio 433,675.9 1.370425 594,320
High Yield Portfolio 11,801.3 1.011943 11,942
Money Market Portfolio
Qualified 2,533,924.0 3.039953 7,703,010
Nonqualified 42,446.1 3.039952 129,034
The Dreyfus Socially Responsible
Growth Fund, Inc 1,808,290.0 2.996095 5,417,809
Dreyfus Stock Index Fund 9,509,845.0 2.744356 26,098,400
Dreyfus Variable Investment Fund:
Disciplined Stock Portfolio 229,236.2 1.266050 290,224
International Value Portfolio 32,559.2 1.089093 35,460
Federated Insurance Series:
High Income Bond Fund II 404,126.1 1.364604 551,472
International Equity Fund II 183,906.8 2.328463 428,220
Utility Fund II 330,433.9 1.746014 576,942
Invesco Variable Investment Funds, Inc:
Equity Income Fund 25,910.2 1.232863 31,944
High Yield Fund 136,612.7 1.005014 137,298
Janus Aspen Series:
Aggressive Growth Portfolio 3,836,756.9 4.422309 16,967,325
Growth Portfolio 4,558,037.7 3.262786 14,871,902
Worldwide Growth Portfolio 9,755,974.5 3.739862 36,485,998
Lazard Retirement Series, Inc:
Equity Portfolio 17,151.1 1.125809 19,309
Small Cap Portfolio 5,015.3 1.016078 5,096
Lord Abbett Series Fund, Inc:
Growth and Income Portfolio 38,325.8 1.226485 47,006
Mitchell Hutchins Series Trust:
Growth and Income Portfolio 10,512.7 1.035149 10,882
Neuberger Berman Advisers Management Trust:
Limited Maturity Bond Portfolio 437,198.8 1.124039 491,429
Partners Portfolio 405,602.6 1.355207 549,675
Rydex Variable Trust:
Nova Fund 582.5 17.602659 10,254
OTC Fund 10,677.6 36.556634 390,337
Seligman Portfolios, Inc.:
Communications and Information Portfolio 221,919.6 0.774826 171,949
Global Technology Portfolio 48,139.7 0.847293 40,788
Strong Variable Insurance Funds, Inc:
Mid Cap Growth Fund II 382,523.6 3.377211 1,291,863
Strong Opportunity Fund II, Inc 170,916.7 1.944502 332,348
===========================================================================================================
The accompanying notes are an integral part of these financial statements.
</TABLE>
<PAGE>
CONSECO VARIABLE ANNUITY ACCOUNT C
STATEMENT OF ASSETS AND LIABILITIES
SEPTEMBER 30, 2000
(Unaudited)
<TABLE>
===========================================================================================================
<S> <C> <C> <C>
Van Eck Worldwide Insurance Trust:
Worldwide Bond Fund 47,338.5 1.028307 48,679
Worldwide Emerging Markets Fund 220,288.9 0.783375 172,569
Worldwide Hard Assets Fund 174,519.8 1.085987 189,526
Worldwide Real Estate Fund 17,257.2 0.938733 16,200
-----------------------------------------------------------------------------------------------------------
NET ASSETS ATTRIBUTABLE TO CONTRACT OWNERS' DEFERRED ANNUITY RESERVES $438,062,821
===========================================================================================================
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
CONSECO VARIABLE ANNUITY ACCOUNT C
STATEMENT OF ASSETS AND LIABILITIES
SEPTEMBER 30, 2000
(Unaudited)
<TABLE>
<CAPTION>
===========================================================================================================
Reported
Value
-----------------
<S> <C>
Contract owners' annuity payment reserves:
Alger American Leveraged AllCap Portfolio 478,595
Conseco Series Trust:
Balanced Portfolio 295,567
Equity Income Portfolio
Qualified 4,425,168
Nonqualified 36,606
Fixed Income Portfolio
Qualified 117,416
Money Market Portfolio
Qualified 23,856
The Dreyfus Socially Responsible Growth Fund, Inc 168,458
Dreyfus Stock Index Fund 253,126
Federated High Income Bond Fund II 15,102
Federated Utility 10,155
Janus Aggressive Growth 253,592
Janus Aspen Growth Portfolio 95,598
Janus Aspen Worldwide Growth Portfolio 566,030
-----------------------------------------------------------------------------------------------------------
NET ASSETS ATTRIBUTABLE TO CONTRACT OWNERS' ANNUITY PAYMENT RESERVES 6,739,269
-----------------------------------------------------------------------------------------------------------
NET ASSETS $ 444,802,090
===========================================================================================================
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
<TABLE>
<CAPTION>
CONSECO VARIABLE ANNUITY ACCOUNT C THE ALGER AMERICAN FUNDS
STATEMENT OF OPERATIONS ----------------------------------------------------
FOR NINE MONTHS ENDED SEPTEMBER 30, 2000
(Unaudited) Small
Leveraged Capital-
Growth All Cap MidCap ization
----------------------------------------------------
<S> <C> <C> <C> <C>
Investment income:
Dividends from investments in portfolio shares $ 438,203 $ 686,477 $ 35,070 $1,190,173
-----------------------------------------------------
Expenses:
Mortality and expense risk fees 24,911 54,020 2,428 25,070
------------------------------------------------------------------------------------------------------------------------------------
Net investment income 413,292 632,457 32,642 1,165,103
------------------------------------------------------------------------------------------------------------------------------------
Net realized gains (losses) and unrealized appreciation (depreciation)
of investments:
Net realized gains (losses) on sales of investments in portfolio shares 23,351 575,291 12,348 (64,031)
Net change in unrealized appreciation (depreciation)
of investments in portfolio shares (487,942) (1,713,467) 6,959 (1,443,578)
------------------------------------------------------------------------------------------------------------------------------------
Net gain (loss) on investments in portfolio shares (464,591) (1,138,176) 19,307 (1,507,609)
------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets from operations ($51,299) ($505,719) $51,949 ($342,506)
====================================================================================================================================
AMERICAN CENTURY VARIABLE PORTFOLIOS BERGER INSTITUTIONAL PRODUCTS TRUST
-------------------------------------------------- -------------------------------------------------------------------------------
Income and Growth and New Small
Growth International Value Growth Income International Generation Company
-----------------------------------------------------------------------------------------------------------------------------------
$3,855 $6,036 $10,867 $ -- $ -- $ -- $ -- $ --
-----------------------------------------------------------------------------------------------------------------------------------
2,326 2,378 1,956 5,831 6,669 219 268 5,356
-----------------------------------------------------------------------------------------------------------------------------------
1,529 3,658 8,911 (5,831) (6,669) (219) (268) (5,356)
-----------------------------------------------------------------------------------------------------------------------------------
21,683 56,694 (34,953) 6,843 104,205 12,471 (2,479) 126,344
(12,936) (108,058) 32,824 81,954 (34,144) (825) (3,336) (42,531)
-----------------------------------------------------------------------------------------------------------------------------------
8,747 (51,364) (2,129) 88,797 70,061 11,646 (5,815) 83,813
-----------------------------------------------------------------------------------------------------------------------------------
$10,276 ($47,706) $6,782 $82,966 $63,392 $11,427 ($6,083) $78,457
===================================================================================================================================
CONSECO SERIES TRUST PORTFOLIOS
--------------------------------------------------------------------------------------------------------------
Conseco Fixed Government High Money
Balanced 20 Focus Equity Income Securities Yield Market
--------------------------------------------------------------------------------------------------------------
$390,456 $ -- $212,448 $587,991 $28,499 $84 $366,880
--------------------------------------------------------------------------------------------------------------
149,277 148 1,250,129 63,518 4,943 11 62,388
--------------------------------------------------------------------------------------------------------------
241,179 (148) (1,037,681) 524,473 23,556 73 304,492
--------------------------------------------------------------------------------------------------------------
404,183 20 6,035,457 (100,610) (78,518) -- --
3,102,056 10,426 56,870,914 237,636 89,149 (21) --
--------------------------------------------------------------------------------------------------------------
3,506,239 10,446 62,906,371 137,026 10,631 (21) --
--------------------------------------------------------------------------------------------------------------
$3,747,418 $10,298 $61,868,690 $661,499 $34,187 $52 $304,492
==============================================================================================================
DREYFUS VARIABLE INVESTMENT FUNDS FEDERATED INSURANCE SERIES
----------------------------------------------------------------- --------------------------------------------------
DREYFUS
SOCIALLY DREYFUS
RESPONSIBLE STOCK Disciplined International High Income International
GROWTH INDEX Stock Value Bond II Equity II Utility II
-----------------------------------------------------------------------------------------------------------------------
$791 $213,549 $7 $166 $68,309 $57,774 $35,551
-----------------------------------------------------------------------------------------------------------------------
39,436 191,598 960 160 4,925 2,871 4,861
-----------------------------------------------------------------------------------------------------------------------
(38,645) 21,951 (953) 6 63,384 54,903 30,690
-----------------------------------------------------------------------------------------------------------------------
203,523 815,197 6,599 -- (52,991) 65,093 (2,633)
(111,245) (1,405,047) (8,064) (1,463) (33,953) (182,471) (36,768)
-----------------------------------------------------------------------------------------------------------------------
92,278 (589,850) (1,465) (1,463) (86,944) (117,378) (39,401)
-----------------------------------------------------------------------------------------------------------------------
$53,633 ($567,899) ($2,418) ($1,457) ($23,560) ($62,475) ($8,711)
=======================================================================================================================
INVESCO VARIABLE LAZARD RETIREMENT
INSURANCE FUNDS JANUS ASPEN SERIES PORTFOLIOS SERIES PORTFOLIOS
---------------------------------- ------------------------------------------------- ---------------------------------
Equity Aggressive Worldwide
Income High Yield Growth Growth Growth Equity Small Cap
-----------------------------------------------------------------------------------------------------------------------------
$ -- $ -- $1,733,432 $1,102,187 $2,955,865 $3 $ --
-----------------------------------------------------------------------------------------------------------------------------
203 1,000 115,874 101,658 274,094 62 7
-----------------------------------------------------------------------------------------------------------------------------
(203) (1,000) 1,617,558 1,000,529 2,681,771 (59) (7)
-----------------------------------------------------------------------------------------------------------------------------
179 (611) 1,501,288 265,321 1,203,078 2 1
1,737 (1,837) (4,150,802) (1,013,693) (5,733,356) (304) (5)
-----------------------------------------------------------------------------------------------------------------------------
1,916 (2,448) (2,649,514) (748,372) (4,530,278) (302) (4)
-----------------------------------------------------------------------------------------------------------------------------
$1,713 ($3,448) ($1,031,956) $252,157 ($1,848,507) ($361) ($11)
=============================================================================================================================
NEUBERGER BERMAN
ADVISERS MANAGEMENT
LORD MITCHELL TRUST PORTFOLIOS RYDEX VARIABLE TRUST SELIGMAN PORTFOLIOS
ABBETT HUTCHINS --------------------------------- --------------------------------- -------------------------------
SERIES SERIES
TRUST TRUST Communications
GROWTH GROWTH Limited and Global
AND INCOME AND INCOME Maturity Bond Partners Nova OTC Information Technology
------------------------------------------------------------------------------------------------------------------------------------
$ -- $733 $2,094 $114,204 $663 $15,818 $ -- $ --
------------------------------------------------------------------------------------------------------------------------------------
254 105 294 5,177 42 738 277 41
------------------------------------------------------------------------------------------------------------------------------------
(254) 628 1,800 109,027 621 15,080 (277) (41)
------------------------------------------------------------------------------------------------------------------------------------
(857) 5 (117) (33,738) 2 337 (2,679) --
3,796 (1,052) (468) (78,111) (591) (42,069) (23,440) (2,297)
------------------------------------------------------------------------------------------------------------------------------------
2,939 (1,047) (585) (111,849) (589) (41,732) (26,119) (2,297)
------------------------------------------------------------------------------------------------------------------------------------
$2,685 ($419) $1,215 ($2,822) $32 ($26,652) ($26,396) ($2,338)
====================================================================================================================================
STRONG
VARIABLE
INSURANCE
FUNDS VAN ECK WORLDWIDE INSURANCE TRUST FUNDS
----------------- ----------------------------------------------------
STRONG
Mid Cap OPPORTUNITY Emerging Hard Real Combined
Growth II FUND II Bond Markets Assets Estate Total
-------------------------------------------------------------------------------------- ----------------
$ -- $ -- $1,935 $ -- $2,956 $270 $ 10,263,346
-------------------------------------------------------------------------------------- ----------------
6,176 2,257 335 1,587 1,958 148 2,418,944
-------------------------------------------------------------------------------------- ----------------
(6,176) (2,257) 1,600 (1,587) 998 122 7,844,402
-------------------------------------------------------------------------------------- ----------------
97,474 59,470 (24) 82,197 18,590 3,303 11,326,308
(53,379) (39,353) (3,363) (135,518) (11,851) 52 43,520,165
-------------------------------------------------------------------------------------- ----------------
44,095 20,117 (3,387) (53,321) 6,739 3,355 54,846,473
-------------------------------------------------------------------------------------- ----------------
$37,919 $17,860 ($1,787) ($54,908) $7,737 $3,477 $62,690,875
====================================================================================== ================
</TABLE>
<TABLE>
<CAPTION>
STATEMENT OF CHANGES IN NET ASSETS THE ALGER AMERICAN FUNDS
FOR NINE MONTHS ENDED SEPTEMBER 30, 2000 ----------------------------------------------------
(Unaudited) Small
Leveraged Capital-
Growth All Cap MidCap ization
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Changes from operations:
Net investment income $ 413,292 $ 632,457 $ 32,642 $1,165,103
Net realized gains (losses) on sales of investments in portfolio shares 23,351 575,291 12,348 (64,031)
Net change in unrealized appreciation (depreciation) of investments (487,942) (1,713,467) 6,959 (1,443,578)
in portfolio shares
------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets from operations (51,299) (505,719) 51,949 (342,506)
====================================================================================================================================
Changes from contract owners' transactions:
Net contract purchase payments 671,220 784,719 58,132 340,856
Contract redemptions (167,822) (195,901) (8,463) (124,192)
Net transfers 416,307 2,108,519 184,387 (35,366)
------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets from contract owners' transactions 919,705 2,697,337 234,056 181,298
------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets 868,406 2,191,618 286,005 (161,208)
------------------------------------------------------------------------------------------------------------------------------------
Net assets, beginning of period 2,767,855 5,652,647 217,563 3,335,346
------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (Note 6) $3,636,261 $7,844,265 $503,568 $3,174,138
====================================================================================================================================
AMERICAN CENTURY VARIABLE PORTFOLIOS BERGER INSTITUTIONAL PRODUCTS TRUST
-------------------------------------------------- -------------------------------------------------------------------------------
Income and Growth and New Small
Growth International Value Growth Income International Generation Company
-----------------------------------------------------------------------------------------------------------------------------------
$ 1,529 $ 3,658 $ 8,911 $ (5,831) $ (6,669) $ (219) $ (268) $ (5,356)
21,683 56,694 (34,953) 6,843 104,205 12,471 (2,479) 126,344
(12,936) (108,058) 32,824 81,954 (34,144) (825) (3,336) (42,531)
-----------------------------------------------------------------------------------------------------------------------------------
10,276 (47,706) 6,782 82,966 63,392 11,427 (6,083) 78,457
-----------------------------------------------------------------------------------------------------------------------------------
19,880 74,275 41,722 50,213 209,876 8,666 2,932 220,293
(212,837) (25,037) (2,221) (12,200) (62,513) -- -- (15,113)
276,246 (29,703) (138,243) 359,908 399,188 (13,744) 172,573 412,501
-----------------------------------------------------------------------------------------------------------------------------------
83,289 19,535 (98,742) 397,921 546,551 (5,078) 175,505 617,681
-----------------------------------------------------------------------------------------------------------------------------------
93,565 (28,171) (91,960) 480,887 609,943 6,349 169,422 696,138
-----------------------------------------------------------------------------------------------------------------------------------
228,253 310,309 375,736 435,412 564,973 2,775 -- 415,307
-----------------------------------------------------------------------------------------------------------------------------------
$321,818 $282,138 $283,776 $916,299 $1,174,916 $ 9,124 $169,422 $1,111,445
====================================================================================================================================
CONSECO SERIES TRUST PORTFOLIOS
--------------------------------------------------------------------------------------------------------------
Conseco Fixed Government High Money
Balanced 20 Focus Equity Income Securities Yield Market
--------------------------------------------------------------------------------------------------------------
$ 241,179 $ (148) $ (1,037,681) $ 524,473 $ 23,556 $ 73 $ 304,492
404,183 20 6,035,457 (100,610) (78,518) -- --
3,102,056 10,426 56,870,914 237,636 89,149 (21) --
--------------------------------------------------------------------------------------------------------------
3,747,418 10,298 61,868,690 661,499 34,187 52 304,492
--------------------------------------------------------------------------------------------------------------
1,320,081 419 7,328,111 454,355 44,545 4,891 679,604
(1,352,313) -- (17,241,368) (1,043,313) (203,597) (1) (1,057,681)
(764,506) 47,276 (4,788,838) (1,521,618) (558,115) 7,000 (1,947,041)
--------------------------------------------------------------------------------------------------------------
(796,738) 47,695 (14,702,095) (2,110,576) (717,167) 11,890 (2,325,118)
--------------------------------------------------------------------------------------------------------------
2,950,680 57,993 47,166,595 (1,449,077) (682,980) 11,942 (2,020,626)
--------------------------------------------------------------------------------------------------------------
18,171,508 -- 230,349,784 12,622,314 1,277,300 -- 9,876,527
--------------------------------------------------------------------------------------------------------------
$21,122,188 $57,993 $277,516,379 $11,173,237 $ 594,320 $11,942 $7,855,901
==============================================================================================================
DREYFUS VARIABLE INVESMENT FUNDS FEDERATED INSURANCE SERIES
----------------------------------------------------------------- --------------------------------------------------
DREYFUS
SOCIALLY DREYFUS
RESPONSIBLE STOCK Disciplined International High Income International
GROWTH INDEX Stock Value Bond II Equity II Utility II
-----------------------------------------------------------------------------------------------------------------------
$ (38,645) $ 21,951 $ (953) $ 6 $ 63,384 $ 54,903 $ 30,690
203,523 815,197 6,599 -- (52,991) 65,093 (2,633)
(111,245) (1,405,047) (8,064) (1,463) (33,953) (182,471) (36,768)
-----------------------------------------------------------------------------------------------------------------------
53,633 (567,899) (2,418) (1,457) (23,560) (62,475) (8,711)
-----------------------------------------------------------------------------------------------------------------------
817,312 2,911,657 50,696 13,898 82,747 32,760 47,543
(203,010) (1,387,222) (2,659) -- (57,645) (2,871) (50,068)
62,970 747,097 172,263 15,978 (185,130) 28,599 (141,346)
-----------------------------------------------------------------------------------------------------------------------
677,272 2,271,532 220,300 29,876 (160,028) 58,488 (143,871)
-----------------------------------------------------------------------------------------------------------------------
730,905 1,703,633 217,882 28,419 (183,588) (3,987) (152,582)
-----------------------------------------------------------------------------------------------------------------------
4,855,361 24,647,895 72,342 7,041 750,162 432,207 739,679
-----------------------------------------------------------------------------------------------------------------------
$5,586,266 $26,351,528 $290,224 $35,460 $566,574 $428,220 $587,097
-----------------------------------------------------------------------------------------------------------------------
INVESCO VARIABLE LAZARD RETIREMENT
INSURANCE FUNDS JANUS ASPEN SERIES PORTFOLIOS SERIES PORTFOLIOS
---------------------------------- ------------------------------------------------- ---------------------------------
Equity Aggressive Worldwide
Income High Yield Growth Growth Growth Equity Small Cap
-----------------------------------------------------------------------------------------------------------------------------
$ (203) $ (1,000) $ 1,617,558 $ 1,000,529 $ 2,681,771 $ (59) $ (7)
179 (611) 1,501,288 265,321 1,203,078 2 1
1,737 (1,837) (4,150,802) (1,013,693) (5,733,356) (304) (5)
-----------------------------------------------------------------------------------------------------------------------------
1,713 (3,448) (1,031,956) 252,157 (1,848,507) (361) (11)
-----------------------------------------------------------------------------------------------------------------------------
4,902 12,270 2,197,018 1,925,913 4,266,097 287 1,989
-- (15,873) (1,088,168) (483,753) (1,590,026) -- --
11,037 21,622 6,446,938 1,783,186 4,057,610 18,225 3,079
-----------------------------------------------------------------------------------------------------------------------------
15,939 18,019 7,555,788 3,225,346 6,733,681 18,512 5,068
-----------------------------------------------------------------------------------------------------------------------------
17,652 14,571 6,523,832 3,477,503 4,885,174 18,151 5,057
-----------------------------------------------------------------------------------------------------------------------------
14,292 122,727 10,609,823 11,577,258 32,166,851 1,158 39
-----------------------------------------------------------------------------------------------------------------------------
$31,944 $137,298 $17,133,655 $15,054,761 $37,052,025 $19,309 $5,096
=============================================================================================================================
NEUBERGER BERMAN
ADVISERS MANAGEMENT
LORD MITCHELL TRUST PORTFOLIOS RYDEX VARIABLE TRUST SELIGMAN PORTFOLIOS
ABBETT HUTCHINS --------------------------------- --------------------------------- -------------------------------
SERIES SERIES
TRUST TRUST Communications
GROWTH GROWTH Limited and Global
AND INCOME AND INCOME Maturity Bond Partners Nova OTC Information Technology
------------------------------------------------------------------------------------------------------------------------------------
$ (254) $ 628 $ 1,800 $109,027 $ 621 $ 15,080 $ (277) $ (41)
(857) 5 (117) (33,738) 2 337 (2,679) --
3,796 (1,052) (468) (78,111) (591) (42,069) (23,440) (2,297)
------------------------------------------------------------------------------------------------------------------------------------
2,685 (419) 1,215 (2,822) 32 (26,652) (26,396) (2,338)
------------------------------------------------------------------------------------------------------------------------------------
24,399 1,484 15,530 85,219 -- 192,605 128,691 418
-- -- (2,791) (19,207) -- (12,185) (17,223) --
4,651 2,418 391,597 (89,507) 10,221 236,568 86,877 42,708
------------------------------------------------------------------------------------------------------------------------------------
29,050 3,902 404,336 (23,495) 10,221 416,988 198,345 43,126
------------------------------------------------------------------------------------------------------------------------------------
31,735 3,483 405,551 (26,317) 10,253 390,336 171,949 40,788
------------------------------------------------------------------------------------------------------------------------------------
15,271 7,399 85,878 575,993 -- -- -- --
------------------------------------------------------------------------------------------------------------------------------------
$47,006 $10,882 $491,429 $549,676 $10,253 $390,336 $171,949 $40,788
====================================================================================================================================
STRONG
VARIABLE
INSURANCE
FUNDS VAN ECK WORLDWIDE INSURANCE TRUST FUNDS
----------------- ----------------------------------------------------
STRONG
Mid Cap OPPORTUNITY Emerging Hard Real Combined
Growth II FUND II Bond Markets Assets Estate Total
-------------------------------------------------------------------------------------- ----------------
(6,176) (2,257) 1,600 (1,587) 998 122 7,844,402
97,474 59,470 (24) 82,197 18,590 3,303 11,326,308
(53,379) (39,353) (3,363) (135,518) (11,851) 52 43,520,165
-------------------------------------------------------------------------------------- ----------------
37,919 17,860 (1,787) (54,908) 7,737 3,477 62,690,875
-------------------------------------------------------------------------------------- ----------------
371,306 8,870 9,004 24,368 13,438 394 25,555,605
(20,861) (73,032) (535) (12,644) (16,218) -- (26,780,563)
566,684 81,703 1,675 (49,332) (374,970) 27 8,540,179
-------------------------------------------------------------------------------------- ----------------
917,129 17,541 10,144 (37,608) (377,750) 421 7,315,221
-------------------------------------------------------------------------------------- ----------------
955,048 35,401 8,357 (92,516) (370,013) 3,898 70,006,096
-------------------------------------------------------------------------------------- ----------------
336,814 296,947 40,321 265,085 559,540 12,302 374,795,994
-------------------------------------------------------------------------------------- ----------------
$1,291,862 $332,348 $48,678 $172,569 $189,527 $16,200 $444,802,090
====================================================================================== ================
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
CONSECO VARIABLE ANNUITY ACCOUNT C
Notes to Financial Statements
(Unaudited)
(1) GENERAL
Conseco Variable Annuity Account C ("Account C") was established in 1980 as
a segregated investment account for individual and group variable annuity
contracts which are registered under the Securities Act of 1933. Account C is
registered under the Investment Company Act of 1940, as amended (the "Act"), as
a unit investment trust. Account C was originally registered with the U.S.
Securities and Exchange Commission as a diversified open-end management
investment company under the Act. Effective May 1, 1993, Account C was
restructured into a single unit investment trust which invested solely in shares
of the portfolios of the Conseco Series Trust, a diversified open-end management
investment company. Thereafter, additional investment options were offered.
The operations of Account C are included in the operations of Conseco
Variable Insurance Company (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.
Currently, the following investment options are available (effective date
in parenthesis):
THE ALGER AMERICAN FUND
Growth Portfolio (May 1, 1997)
Leveraged AllCap Portfolio (June 1, 1995)
MidCap Growth Portfolio (May 1, 1997)
Small Capitalization Portfolio (June 1, 1995)
AMERICAN CENTURY VARIABLE PORTFOLIOS, INC.
Income and Growth Fund (May 1, 1998)
International Fund (May 1, 1997)
Value Fund (May 1, 1997)
BERGER INSTITUTIONAL PRODUCTS TRUST
Growth Fund (May 1, 1997)
Growth and Income Fund (May 1, 1997)
International Fund (May 1, 1997)
New Generation Fund (May 1, 2000)
Small Company Growth Fund (May 1, 1997)
CONSECO SERIES TRUST
Balanced Portfolio (May 1, 1993)
Conseco 20 Focus Portfolio (May 1, 2000)
Equity Portfolio (May 1, 1993)
Fixed Income Portfolio (May 1, 1993)
Government Securities Portfolio (May 1, 1993)
High Yield Portfolio (May 1, 2000)
Money Market Portfolio (May 1, 1993)
THE DREYFUS SOCIALLY RESPONSIBLE GROWTH FUND, INC. (JUNE 1, 1995)
DREYFUS STOCK INDEX FUND (JUNE 1, 1995)
DREYFUS VARIABLE INVESTMENT FUND (MAY 1, 1998)
Disciplined Stock Portfolio
International Value Portfolio
FEDERATED INSURANCE SERIES (JUNE 1, 1995)
High Income Bond Fund II
International Equity Fund II
Utility Fund II
INVESCO VARIABLE INVESTMENT FUNDS, INC. (MAY 1, 1998)
Equity Income Fund
High Yield Fund
JANUS ASPEN SERIES (JUNE 1, 1995)
Aggressive Growth Portfolio
Growth Portfolio
Worldwide Growth Portfolio
LAZARD RETIREMENT SERIES, INC. (MAY 1, 1998)
Equity Portfolio
Small Cap Portfolio
LORD ABBETT SERIES FUND, INC. (MAY 1, 1998)
Growth and Income Portfolio
<PAGE>
CONSECO VARIABLE ANNUITY ACCOUNT C
Notes to Financial Statements
(Unaudited)
(1) GENERAL (CONTINUED)
MITCHELL HUTCHINS SERIES TRUST (MAY 1, 1998)
Growth and Income Portfolio
NEUBERGER BERMAN ADVISERS MANAGEMENT TRUST (MAY 1, 1997)
Limited Maturity Bond Portfolio
Partners Portfolio
RYDEX VARIABLE TRUST (MAY 1, 2000)
Nova Fund
OTC Fund
SELIGMAN PORTFOLIOS, INC. (MAY 1, 2000)
Communications and Information Portfolio
Global Technology Portfolio
STRONG VARIABLE INSURANCE FUNDS, INC. (MAY 1, 1997)
Mid Cap Growth Fund II
STRONG OPPORTUNITY FUND II (MAY 1, 1997)
VAN ECK WORLDWIDE INSURANCE TRUST
Worldwide Bond Fund (June 1, 1995)
Worldwide Emerging Markets Fund (June 1, 1996)
Worldwide Hard Assets Fund (June 1,1995)
Worldwide Real Estate Fund (May 1, 1998)
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 C does not hold any
investments which are restricted as to resale.
Net investment income and net realized gains (losses) and unrealized
appreciation (depreciation) on investments are allocated to the contracts on
each valuation date based on each contract's pro rata share of the assets of
Account C 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 C 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 C 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.
Annuity payment reserves for contracts under which contract owners are
receiving periodic retirement payments are computed according to the Progressive
Annuity Mortality Table and the 1983 Group Annuity Mortality Table. The assumed
net investment rate is equal to the assumed rate of accumulation. The annuity
unit values for periodic retirement payments are as follows:
September 30 December 31
2000 1999
------------ -----------
The Alger American Fund:
Leveraged AllCap $1.177 1.264
<PAGE>
CONSECO VARIABLE ANNUITY ACCOUNT C
Notes to Financial Statements
(Unaudited)
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
September 30 December 31
2000 1999
------------ -----------
Conseco Series Trust:
Balanced 1.566 1.305
Equity
Qualified 13.328 10.473
Nonqualified 12.340 9.697
Fixed Income
Qualified 4.940 4.789
Nonqualified 4.943 4.792
Money Market
Qualified 1.033 1.022
The Dreyfus Socially Responsible Growth Fund 1.033 1.049
Dreyfus Stock Index Fund 1.195 1.255
Federated Insurance Series:
High Income Bond Fund II 0.923 0.975
Utility Fund II 0.956 N/A
Janus Aspen Series:
Aggressive Growth 0.818 N/A
Growth 1.143 1.132
Worldwide Growth 2.482 2.611
(3) PURCHASES AND SALES OF INVESTMENTS IN PORTFOLIO SHARES
The aggregate cost of purchases of investments in portfolio shares was
$65,984,351 and $134,689,005 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 $52,048,436 and $67,907,279 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.
The expense risk assumed by the Company is the risk that the deductions for
sales and administrative expenses may prove insufficient to cover the actual
sales and administrative expenses.
The Company deducts daily from Account C a fee, which is equal on an annual
basis to 1.00 percent of the daily value of the total investments of Account C,
for assuming the mortality and expense risks except for the Equity, Fixed
Income, and Money Market portfolios of the Conseco Series Trust which are 0.64
percent, 0.74 percent and 0.99 percent, respectively. These fees were $2,418,944
and $2,223,024 for the nine months ended September 30, 2000 and the year ended
December 31, 1999, respectively.
Pursuant to an agreement between Account C and the Company (which may be
terminated by the Company at any time), the Company provides sales and
administrative services to Account C, as well as a minimum death benefit prior
to retirement for certain contracts. Under individual contracts and group
deferred compensation contracts, the Company may deduct a percentage of amounts
surrendered to cover sales expenses. The percentage varies up to 8.00 percent
based on the type of contract and the number of years the contract has been
held. In addition, the Company deducts units from certain contracts annually and
upon full surrender to cover an administrative fee of $15, $20, or $25. This fee
is recorded as a redemption in the accompanying Statements of Changes in Net
Assets. Under group contracts no longer being sold, the Company deducts a
percentage of the renewal contract purchase payments to cover sales and
administrative expenses and the minimum death benefit prior to retirement of the
contract owners. Sales and administrative charges were $361,158 and $465,909 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.
<PAGE>
CONSECO VARIABLE ANNUITY ACCOUNT C
Notes to Financial Statements
(Unaudited)
(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 $ 67,283,122
Undistributed net investment income 214,728,287
Undistributed net realized gains on sales of investments 71,410,191
Net unrealized appreciation of investments 91,380,490
------------
Net assets $444,802,090
============
<PAGE>
CONSECO VARIABLE ANNUITY ACCOUNT C
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1999
<TABLE>
<CAPTION>
==============================================================================================================
NET ASSET
SHARES COST VALUE
--------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Assets:
Investments in portfolio shares, at net asset value (Note 2):
The Alger American Fund:
Growth Portfolio ........................................... 43,028.2 $ 2,389,606 $ 2,770,153
Leveraged AllCap Portfolio ................................. 97,531.3 3,916,067 5,653,887
MidCap Growth Portfolio .................................... 6,756.2 183,851 217,752
Small Capitalization Portfolio ............................. 60,530.3 2,553,816 3,338,248
American Century Variable Portfolios, Inc:
Income and Growth Fund ..................................... 28,556.7 205,620 228,454
International Fund ......................................... 24,844.9 205,256 310,561
Value Fund ................................................. 63,197.1 414,438 376,022
Berger Institutional Products Trust:
100 Fund ................................................... 22,673.8 281,260 435,790
Growth and Income Fund ..................................... 21,378.5 373,775 565,461
Small Company Growth Fund .................................. 17,680.6 251,273 415,670
BIAM International Fund .................................... 189.6 2,401 2,774
Conseco Series Trust:
Balanced Portfolio ......................................... 1,243,454.6 17,185,347 18,217,616
Equity Portfolio ........................................... 9,951,546.8 213,879,824 230,683,998
Fixed Income Portfolio ..................................... 1,345,328.2 13,322,804 12,626,577
Government Securities Portfolio ............................ 116,636.0 1,389,935 1,278,451
Money Market Portfolio ..................................... 9,963,869.7 9,963,870 9,963,870
The Dreyfus Socially Responsible Growth Fund, Inc ........... 124,252.7 3,988,409 4,854,553
Dreyfus Stock Index Fund .................................... 641,747.1 20,046,678 24,675,176
Dreyfus Variable Investment Fund:
<PAGE>
Disciplined Stock Portfolio ................................ 2,689.5 65,147 72,403
International Value Portfolio .............................. 449.7 7,051 7,047
Federated Insurance Series:
High Income Bond Fund II ................................... 73,383.1 775,518 751,443
International Equity Fund II ............................... 15,649.5 296,590 432,552
Utility Fund II ............................................ 51,589.3 727,373 740,307
Invesco Variable Investment Funds, Inc:
Equity Income Fund ......................................... 680.8 13,729 14,303
High Yield Fund ............................................ 10,671.7 124,829 122,832
Janus Aspen Series:
Aggressive Growth Portfolio ................................ 177,897.4 6,077,262 10,618,695
Growth Portfolio ........................................... 344,062.6 8,743,478 11,577,707
Worldwide Growth Portfolio ................................. 674,395.7 18,220,755 32,202,396
Lazard Retirement Series, Inc:
Equity Portfolio ........................................... 100.5 1,179 1,159
Small Cap Portfolio ........................................ 4.0 37 40
Lord Abbett Series Fund, Inc:
Growth and Income Portfolio ................................ 689.8 15,224 15,285
Mitchell Hutchins Series Trust:
Growth and Income Portfolio ................................ 453.2 6,562 7,405
Neuberger Berman Advisers Management Trust:
Limited Maturity Bond Portfolio ............................. 6,491.8 85,354 85,951
Partners Portfolio ......................................... 29,353.0 548,008 576,493
Strong Variable Insurance Funds, Inc:
Mid Cap Growth Fund II ..................................... 11,099.6 227,828 337,094
Strong Opportunity Fund II, Inc ............................. 11,435.0 258,657 297,196
Van Eck Worldwide Insurance Trust:
Worldwide Bond Fund ........................................ 3,775.0 42,757 40,355
Worldwide Emerging Markets Fund ............................ 18,605.0 161,836 265,307
Worldwide Hard Assets Fund ................................. 51,097.4 527,213 560,027
Worldwide Real Estate Fund ................................. 1,345.6 12,381 12,313
--------------------------------------------------------------------------------------------------------------
Total assets ............................................ 375,353,323
Liabilities:
Net amount due to Conseco Variable Insurance Company ........ 557,329
--------------------------------------------------------------------------------------------------------------
Net assets (Note 6) ..................................... $374,795,994
==============================================================================================================
</TABLE>
The accompanying notes are an integral part of these financial statements.
2
<PAGE>
CONSECO VARIABLE ANNUITY ACCOUNT C
STATEMENT OF ASSETS AND LIABILITIES - CONTINUED
DECEMBER 31, 1999
<PAGE>
<TABLE>
<CAPTION>
=============================================================================================================
NET ASSET
SHARES COST VALUE
-------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net assets attributable to:
Contract owners' deferred annuity reserves:
The Alger American Fund:
Growth Portfolio........................................ 1,184,056.2 $2.337604 $2,767,855
Leveraged AllCap Portfolio ............................. 1,092,625.9 5.109085 5,582,319
Midcap Growth Portfolio................................. 107,741.1 2.019311 217,563
Small Capitalization Portfolio ......................... 1,477,791.4 2.256980 3,335,346
American Century Variable Portfolios, Inc:
Income and Growth Fund.................................. 180,072.1 1.267565 228,253
International Fund...................................... 148,279.0 2.092737 310,309
Value Fund.............................................. 300,067.3 1.252172 375,736
Berger Institutional Products Trust:
100 Fund................................................ 225,561.6 1.930345 435,412
Growth and Income Fund.................................. 237,838.2 2.375451 564,973
Small Company Growth Fund .............................. 158,133.4 2.626310 415,307
BIAM International Fund................................. 1,907.4 1.454682 2,775
Conseco Series Trust:
Balanced Portfolio ..................................... 6,250,753.5 2.874258 17,966,277
Equity Portfolio
Qualified ............................................ 6,177,794.7 36.036177 222,624,107
Nonqualified ......................................... 154,728.4 28.525694 4,413,735
Fixed Income Portfolio
Qualified ............................................ 2,139,411.3 5.673933 12,138,877
Nonqualified ......................................... 69,191.3 5.451644 377,206
Government Securities Portfolio ........................ 989,802.9 1.290459 1,277,300
Money Market Portfolio
Qualified ............................................ 3,343,310.9 2.930114 9,796,281
Nonqualified ......................................... 18,871.5 2.930112 55,295
The Dreyfus Socially Responsible Growth Fund, Inc ....... 1,607,963.6 2.963507 4,765,212
Dreyfus Stock Index Fund ................................ 8,745,043.0 2.808320 24,558,883
Dreyfus Variable Investment Fund:
Disciplined Stock Portfolio ............................ 57,394.8 1.260430 72,342
International Value Portfolio .......................... 5,892.4 1.194910 7,041
Federated Insurance Series:
High Income Bond Fund II................................ 521,674.5 1.404876 732,888
International Equity Fund II ........................... 158,076.2 2.734170 432,207
Utility Fund II ........................................ 417,936.4 1.769836 739,679
Invesco Variable Investment Funds, Inc:
Equity Income Fund...................................... 12,179.6 1.173420 14,292
High Yield Fund......................................... 119,098.6 1.030465 122,727
Janus Aspen Series:
Aggressive Growth Portfolio ............................ 2,363,771.3 4.488515 10,609,823
Growth Portfolio ....................................... 3,595,530.3 3.192835 11,479,937
Worldwide Growth Portfolio ............................. 8,203,822.8 3.897775 31,976,652
Lazard Retirement Series, Inc:
<PAGE>
Equity Portfolio........................................ 1,021.9 1.133077 1,158
Small Cap Portfolio..................................... 44.2 0.892662 39
Lord Abbett Series Fund, Inc:
Growth and Income Portfolio............................. 13,117.1 1.164236 15,271
Mitchell Hutchins Series Trust:
Growth and Income Portfolio ............................ 6,824.5 1.084118 7,399
Neuberger Berman Advisers Management Trust:
Limited Maturity Bond Portfolio ......................... 79,073.7 1.086053 85,878
Partners Portfolio...................................... 422,449.4 1.363460 575,993
Strong Variable Insurance Funds, Inc:
Mid Cap Growth Fund II.................................. 110,428.3 3.050073 336,814
Strong Opportunity Fund II, Inc ......................... 160,379.9 1.851524 296,947
Van Eck Worldwide Insurance Trust:
Worldwide Bond Fund .................................... 37,695.5 1.069651 40,321
Worldwide Emerging Markets Fund ........................ 253,897.1 1.044064 265,085
Worldwide Hard Assets Fund.............................. 556,013.0 1.006344 559,540
Worldwide Real Estate Fund ............................. 14,854.6 0.828169 12,302
-------------------------------------------------------------------------------------------------------------
Net assets attributable to contract owners' deferred
annuity reserves...................................... $370,593,356
=============================================================================================================
</TABLE>
The accompanying notes are an integral part of these financial statements.
3
<PAGE>
CONSECO VARIABLE ANNUITY ACCOUNT C
STATEMENT OF ASSETS AND LIABILITIES - CONTINUED
DECEMBER 31, 1999
================================================================================
REPORTED
VALUE
--------------------------------------------------------------------------------
Net assets attributable to contract owners' deferred
annuity reserves (from page 3) $370,593,356
--------------------------------------------------------------------------------
Contract owners' annuity payment reserves:
Alger American Leveraged AllCap Portfolio..................... 70,328
Conseco Series Trust:
Balanced Portfolio
Qualified................................................... 205,231
Equity Income Portfolio
Qualified .................................................. 3,281,836
Nonqualified ............................................... 30,106
Fixed Income Portfolio
Qualified .................................................. 106,231
Money Market Portfolio
<PAGE>
Qualified .................................................. 24,951
The Dreyfus Socially Responsible Growth Fund, Inc ............. 90,149
Dreyfus Stock Index Fund ...................................... 89,012
Federated High Income Bond Fund II............................. 17,274
Janus Aspen Growth Portfolio .................................. 97,321
Janus Aspen Worldwide Growth Portfolio ........................ 190,199
--------------------------------------------------------------------------------
Net assets attributable to contract owners' annuity
payment reserves... 4,202,638
--------------------------------------------------------------------------------
Net assets .............................................. $374,795,994
================================================================================
The accompanying notes are an integral part of these financial statements.
4
<PAGE>
================================================================================
THIS PAGE INTENTIONALLY LEFT BLANK.
5
<PAGE>
CONSECO VARIABLE ANNUITY ACCOUNT C
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>
<PAGE>
Investment Income:
Dividends from investments in portfolio shares ..................... $128,480 $ 173,044 $15,904 $313,672 $ 27
Expenses:
Mortality and expense risk fees .................................... 17,060 31,692 1,384 25,908 1,856
------------------------------------------------------------------------------------------------------------------------------------
Net investment income (loss) ................................... 111,420 141,352 14,520 287,764 (1,829)
------------------------------------------------------------------------------------------------------------------------------------
Net realized gains (losses) and unrealized appreciation (depreciation) of
investments:
Net realized gains (losses) on sales of investments
in portfolio shares ............................................. 111,748 558,078 10,857 50,558 2,160
Net change in unrealized appreciation (depreciation)
of investments in portfolio shares .............................. 295,980 1,309,281 19,785 638,612 8,273
------------------------------------------------------------------------------------------------------------------------------------
Net gain (loss) on investments in portfolio shares ............. 407,728 1,867,359 30,642 689,170 10,433
------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets from operations ........ $519,148 $2,008,711 $45,162 $976,934 $ 8,604
====================================================================================================================================
</TABLE>
STATEMENTS 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) ................................... $ 111,420 $ 141,352 $ 14,520 $ 287,764 $ (1,829)
Net realized gains (losses) on sales of investments
in portfolio shares ........................................... 111,748 558,078 10,857 50,558 2,160
Net change in unrealized appreciation (depreciation)
of investments in portfolio shares ............................ 295,980 1,309,281 19,785 638,612 8,273
------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets from operations ....... 519,148 2,008,711 45,162 976,934 8,604
------------------------------------------------------------------------------------------------------------------------------------
Changes from contract owners' transactions:
Net contract purchase payments ................................. 536,875 709,993 59,860 411,916 54,378
Contract redemptions ........................................... (245,853) (236,059) (2,797) (216,597) (5,265)
Net transfers .................................................. 1,364,778 1,780,573 (17,279) (236,971) 71,174
------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets
<PAGE>
from contract owners' transactions ......................... 1,655,800 2,254,507 39,784 (41,652) 120,287
------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets .................... 2,174,948 4,263,218 84,946 935,282 128,891
------------------------------------------------------------------------------------------------------------------------------------
Net assets, beginning of year .................................... 592,907 1,389,429 132,617 2,400,064 99,362
------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of year (Note 6) ......................... $ 2,767,855 $ 5,652,647 $ 217,563 $ 3,335,346 $ 228,253
====================================================================================================================================
</TABLE>
The accompanying notes are an integral part of these financial statements.
6
<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>
$ -- $ 16,781 $ 67 $ -- $ -- $ 15 $3,303,327 $64,761,215 $ 890,651
1,617 2,993 3,068 3,685 2,143 15 160,412 1,193,037 103,858
---------------------------------------------------------------------------------------------------------------------------
(1,617) 13,788 (3,001) (3,685) (2,143) -- 3,142,915 63,568,178 786,793
---------------------------------------------------------------------------------------------------------------------------
3,093 (24,861) 7,460 23,544 11,746 (1,677) 419,126 10,008,486 (184,733)
104,334 (35,009) 132,558 168,678 164,105 373 729,573 3,199,282 (792,858)
---------------------------------------------------------------------------------------------------------------------------
107,427 (59,870) 140,018 192,222 175,851 (1,304) 1,148,699 13,207,768 (977,591)
---------------------------------------------------------------------------------------------------------------------------
$ 105,810 $(46,082) $ 137,017 $ 188,537 $ 173,708 $(1,304) $4,291,614 $76,775,946 $(190,798)
===========================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
==============================================================================================================================
AMERICAN CENTURY
VARIABLE PORTFOLIOS
(CONTINUED) BERGER INSTITUTIONAL PRODUCTS TRUST CONSECO SERIES TRUST PORTFOLIOS
--------------------------- ---------------------------------------------------- --------------------------------------------
GROWTH AND SMALL BIAM FIXED
<PAGE>
INTERNATIONAL VALUE 100 INCOME COMPANY INTERNATIONAL BALANCED EQUITY INCOME
------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$ (1,617) $ 13,788 $ (3,001) $ (3,685) $ (2,143) $ 00 $ 3,142,915 $ 63,568,178 $ 786,793
3,093 (24,861) 7,460 23,544 11,746 (1,677) 419,126 10,008,486 (184,733)
104,334 (35,009) 132,558 168,678 164,105 373 729,573 3,199,282 (792,858)
------------------------------------------------------------------------------------------------------------------------------
105,810 (46,082) 137,017 188,537 173,708 (1,304) 4,291,614 76,775,946 (190,798)
------------------------------------------------------------------------------------------------------------------------------
34,926 66,180 46,621 103,748 42,921 4,918 1,850,837 9,915,752 948,729
(34,093) (797) (13,320) (77,541) (13,080) 00 (1,231,243) (19,376,258) (1,468,531)
68,072 214,621 8,401 176,231 96,668 (839) (3,030,882) (20,639,749) (1,366,270)
------------------------------------------------------------------------------------------------------------------------------
68,905 280,004 41,702 202,438 126,509 4,079 (2,411,288) (30,100,255) (1,886,072)
------------------------------------------------------------------------------------------------------------------------------
174,715 233,922 178,719 390,975 300,217 2,775 1,880,326 46,675,691 (2,076,870)
------------------------------------------------------------------------------------------------------------------------------
135,594 141,814 256,693 173,998 115,090 00 16,291,182 183,674,093 14,699,184
------------------------------------------------------------------------------------------------------------------------------
$ 310,309 $ 375,736 $ 435,412 $ 564,973 $ 415,307 $ 2,775 $ 18,171,508 $ 230,349,784 $ 12,622,314
==============================================================================================================================
</TABLE>
7
<PAGE>
CONSECO VARIABLE ANNUITY ACCOUNT C
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 ................ $ 107,961 $ 361,663 $ 161,066 $ 411,370 $ 699
Expenses:
Mortality and expense risk fees ............................... 13,829 74,500 31,289 198,788 420
<PAGE>
-----------------------------------------------------------------------------------------------------------------------------------
Net investment income (loss) .............................. 94,132 287,163 129,777 212,582 279
-----------------------------------------------------------------------------------------------------------------------------------
Net realized gains (losses) and unrealized appreciation
(depreciation) of investments:
Net realized gains (losses) on sales of investments
in portfolio shares .......................................... (39,974) -- 121,526 1,264,839 3,050
Net change in unrealized appreciation (depreciation)
of investments in portfolio shares ........................... (103,269) -- 661,999 2,084,671 4,512
-----------------------------------------------------------------------------------------------------------------------------------
Net gain (loss) on investments in portfolio shares ........... (143,243) -- 783,525 3,349,510 7,562
-----------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets from operations ...... $ (49,111) $ 287,163 $ 913,302 $3,562,092 $ 7,841
===================================================================================================================================
STATEMENTS OF CHANGES IN NET ASSETS - CONTINUED
FOR THE YEAR ENDED DECEMBER 31, 1999
<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) ................................... $ 94,132 $ 287,163 $ 129,777 $ 212,582 $ 279
Net realized gains (losses) on sales of investments
in portfolio shares ........................................... (39,974) -- 121,526 1,264,839 3,050
Net change in unrealized appreciation (depreciation)
of investments in portfolio shares ............................ (103,269) -- 661,999 2,084,671 4,512
-----------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets from operations ....... (49,111) 287,163 913,302 3,562,092 7,841
-----------------------------------------------------------------------------------------------------------------------------------
Changes from contract owners' transactions:
Net contract purchase payments ................................. 68,158 1,321,953 980,324 4,113,547 26,306
Contract redemptions ........................................... (205,996) (2,655,856) (140,733) (1,780,271) --
Net transfers .................................................. 525,195 5,473,590 1,256,049 4,598,908 18,846
-----------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets
from contract owners' transactions ......................... 387,357 4,139,687 2,095,640 6,932,184 45,152
-----------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets ............................... 338,246 4,426,850 3,008,942 10,494,276 52,993
<PAGE>
-----------------------------------------------------------------------------------------------------------------------------------
Net assets, beginning of year .................................... 939,054 5,449,677 1,846,419 14,153,619 19,349
-----------------------------------------------------------------------------------------------------------------------------------
Net assets, end of year (Note 6) ......................... $1,277,300 $9,876,527 $4,855,361 $24,647,895 $ 72,342
===================================================================================================================================
</TABLE>
The accompanying notes are an integral part of these financial statements.
8
<PAGE>
<TABLE>
<CAPTION>
====================================================================================================================================
DREYFUS
VARIABLE
INVESTMENT INVESCO VARIABLE
(CONTINUED) FEDERATED INSURANCE SERIES FUNDS 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>
$ 497 $ 53,015 $ 6,865 $ 52,867 $ 185 $ 7,078 $ 170,221 $ 53,182 $ 37,051
18 7,373 2,752 7,442 237 652 49,307 69,843 211,547
------------------------------------------------------------------------------------------------------------------------------------
479 45,642 4,113 45,425 (52) 6,426 120,914 (16,661) (174,496)
------------------------------------------------------------------------------------------------------------------------------------
-- (19,531) 57,813 8,985 4,665 41 862,750 671,059 803,052
(4) (23,518) 133,905 (48,438) (739) (816) 3,700,827 2,118,576 11,240,473
------------------------------------------------------------------------------------------------------------------------------------
(4) (43,049) 191,718 (39,453) 3,926 (775) 4,563,577 2,789,635 12,043,525
------------------------------------------------------------------------------------------------------------------------------------
$ 475 $ 2,593 $195,831 $ 5,972 $ 3,874 $ 5,651 $ 4,684,491 $ 2,772,974 $ 11,869,029
====================================================================================================================================
<CAPTION>
====================================================================================================================================
DREYFUS
VARIABLE
INVESTMENT INVESCO VARIABLE
(CONTINUED) FEDERATED INSURANCE SERIES FUNDS 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
====================================================================================================================================
<PAGE>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$ 479 $ 45,642 $ 4,113 $ 45,425 $ (52) $ 6,426 $ 120,914 $ (16,661) $ (174,496)
-- (19,531) 57,813 8,985 4,665 41 862,750 671,059 803,052
(4) (23,518) 133,905 (48,438) (739) (816) 3,700,827 2,118,576 11,240,473
------------------------------------------------------------------------------------------------------------------------------------
475 2,593 195,831 5,972 3,874 5,651 4,684,491 2,772,974 11,869,029
------------------------------------------------------------------------------------------------------------------------------------
1,121 248,365 46,235 160,218 6,527 17,301 867,225 1,432,168 3,759,132
-- (131,357) (40,030) (130,590) (39,449) (169) (850,365) (605,936) (1,445,920)
5,445 72,129 433 (48,512) 7,531 78,290 2,922,201 4,119,809 2,721,386
------------------------------------------------------------------------------------------------------------------------------------
6,566 189,137 6,638 (18,884) (25,391) 95,422 2,939,061 4,946,041 5,034,598
------------------------------------------------------------------------------------------------------------------------------------
7,041 191,730 202,469 (12,912) (21,517) 101,073 7,623,552 7,719,015 16,903,627
------------------------------------------------------------------------------------------------------------------------------------
-- 558,432 229,738 752,591 35,809 21,654 2,986,271 3,858,243 15,263,224
------------------------------------------------------------------------------------------------------------------------------------
$ 7,041 $750,162 $432,207 $739,679 $ 14,292 $122,727 $ 10,609,823 $ 11,577,258 $ 32,166,851
====================================================================================================================================
</TABLE>
9
<PAGE>
CONSECO VARIABLE ANNUITY ACCOUNT C
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
---------- ---------- ---------- ---------- ----------
<PAGE>
====================================================================================================================================
<S> <C> <C> <C> <C> <C>
Investment Income:
Dividends from investments in portfolio shares ................ $ 38 $ -- $ 1,204 $ -- $ 13,707
Expenses:
Mortality and expense risk fees ............................... 5 35 234 60 2,419
------------------------------------------------------------------------------------------------------------------------------------
Net investment income (loss) .............................. 33 (35) 970 (60) 11,288
------------------------------------------------------------------------------------------------------------------------------------
Net realized gains (losses) and unrealized appreciation (depreciation) of
investments:
Net realized gains (losses) on sales of investments
in portfolio shares ........................................ -- 403 2,442 5 (9,505)
Net change in unrealized appreciation (depreciation)
of investments in portfolio shares ......................... (20) (359) (434) 687 (453)
------------------------------------------------------------------------------------------------------------------------------------
Net gain (loss) on investments in portfolio shares ........ (20) 44 2,008 692 (9,958)
------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets from operations ... $ 13 $ 9 $ 2,978 $ 632 $ 1,330
====================================================================================================================================
STATEMENTS OF CHANGES IN NET ASSETS - CONTINUED
FOR THE YEAR ENDED DECEMBER 31, 1999
<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) .................................. $ 33 $ (35) $ 970 $ (60) $ 11,288
Net realized gains (losses) on sales of investments
in portfolio shares .......................................... -- 403 2,442 5 (9,505)
Net change in unrealized appreciation (depreciation)
of investments in portfolio shares ........................... (20) (359) (434) 687 (453)
<PAGE>
------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets from operations ...... 13 9 2,978 632 1,330
------------------------------------------------------------------------------------------------------------------------------------
Changes from contract owners' transactions:
Net contract purchase payments ................................ 470 23 2,114 1,597 18,533
Contract redemptions .......................................... -- -- (2,618) -- (1,945)
Net transfers ................................................. 675 (3,687) (1,174) (77) (176,039)
------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets
from contract owners' transactions ........................ 1,145 (3,664) (1,678) 1,520 (159,451)
------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets ................... 1,158 (3,655) 1,300 2,152 (158,121)
------------------------------------------------------------------------------------------------------------------------------------
Net assets, beginning of year ................................... -- 3,694 13,971 5,247 243,999
------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of year (Note 6) ........................ $ 1,158 $ 39 $ 15,271 $ 7,399 $ 85,878
====================================================================================================================================
</TABLE>
The accompanying notes are an integral part of these financial statements.
10
<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 COMBINED
PARTNERS GROWTH II FUND II BOND MARKETS ASSETS ESTATE TOTAL
------------------------------------------------------------------------------------------------------------------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C>
$ 14,677 $ 99 $ 15,306 $ 2,318 $ -- $ 2,415 $ 58 $ 71,076,725
5,325 1,397 2,006 403 1,425 2,876 114 2,233,024
------------------------------------------------------------------------------------------------------------------- ---------------
9,352 (1,298) 13,300 1,915 (1,425) (461) (56) 68,843,701
------------------------------------------------------------------------------------------------------------------- ---------------
<PAGE>
(6,481) 3,848 15,250 285 (3,381) (42,065) 17 14,694,678
26,253 104,993 29,993 (5,860) 121,754 100,379 (232) 26,087,847
------------------------------------------------------------------------------------------------------------------- ---------------
19,772 108,841 45,243 (5,575) 118,373 58,314 (215) 40,782,525
------------------------------------------------------------------------------------------------------------------- ---------------
$ 29,124 $107,543 $ 58,543 $ (3,660) $116,948 $ 57,853 $ (271) $109,626,226
=================================================================================================================== ===============
<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 COMBINED
PARTNERS GROWTH II FUND II BOND MARKETS ASSETS ESTATE TOTAL
------------------------------------------------------------------------------------------------------------------- ---------------
<C> <C> <C> <C> <C> <C> <C> <C>
$ 9,352 $ (1,298) $ 13,300 $ 1,915 $ (1,425) $ (461) $ (56) $ 68,843,701
(6,481) 3,848 15,250 285 (3,381) (42,065) 17 14,694,678
26,253 104,993 29,993 (5,860) 121,754 100,379 (232) 26,087,847
------------------------------------------------------------------------------------------------------------------- ---------------
29,124 107,543 58,543 (3,660) 116,948 57,853 (271) 109,626,226
------------------------------------------------------------------------------------------------------------------- ---------------
166,393 30,192 70,611 13,252 18,011 24,652 382 28,182,464
(29,377) (3,003) (54,554) (5,053) (2,937) (1,281) -- (31,048,874)
(21,587) (33,708) 98,488 (354) 39,382 311,470 9,394 462,611
------------------------------------------------------------------------------------------------------------------- ---------------
115,429 (6,519) 114,545 7,845 54,456 334,841 9,776 (2,403,799)
------------------------------------------------------------------------------------------------------------------- ---------------
144,553 101,024 173,088 4,185 171,404 392,694 9,505 107,222,427
------------------------------------------------------------------------------------------------------------------- ---------------
431,440 235,790 123,859 36,136 93,681 166,846 2,797 267,573,567
------------------------------------------------------------------------------------------------------------------- ---------------
$ 575,993 $336,814 $296,947 $ 40,321 $265,085 $559,540 $ 12,302 $374,795,994
------------------------------------------------------------------------------------------------------------------- ---------------
</TABLE>
11
<PAGE>
<PAGE>
CONSECO VARIABLE ANNUITY ACCOUNT C
STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED 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 ................. $ 26,144 $ 36,253 $ 6,544 $ 270,282 $ 485
Expenses:
Mortality and expense risk fees ................................ 2,618 9,102 798 20,373 205
------------------------------------------------------------------------------------------------------------------------------------
Net investment income (loss) ............................... 23,526 27,151 5,746 249,909 280
------------------------------------------------------------------------------------------------------------------------------------
Net realized gains (losses) and unrealized appreciation (depreciation) of
investments:
Net realized gains (losses) on sales of investments
in portfolio shares ......................................... 7,619 80,329 (2,335) 36,865 (245)
Net change in unrealized appreciation (depreciation)
of investments in portfolio shares .......................... 86,212 334,099 15,345 30,953 14,561
------------------------------------------------------------------------------------------------------------------------------------
Net gain (loss) on investments in portfolio shares ......... 93,831 414,428 13,010 67,818 14,316
------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets from operations .... $ 117,357 $ 441,579 $ 18,756 $ 317,727 $ 14,596
====================================================================================================================================
<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) ................................... $ 23,526 $ 27,151 $ 5,746 $ 249,909 $ 280
<PAGE>
Net realized gains (losses) on sales of investments
in portfolio shares .......................................... 7,619 80,329 (2,335) 36,865 (245)
Net change in unrealized appreciation (depreciation)
of investments in portfolio shares ........................... 86,212 334,099 15,345 30,953 14,561
------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets from operations ....... 117,357 441,579 18,756 317,727 14,596
------------------------------------------------------------------------------------------------------------------------------------
Changes from contract owners' transactions:
Net contract purchase payments ................................. 83,527 169,533 22,749 450,527 34,949
Contract redemptions ........................................... (5,654) (126,978) (2,059) (716,237) --
Net transfers .................................................. 252,392 184,203 80,365 101,839 49,817
------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets
from contract owners' transactions ......................... 330,265 226,758 101,055 (163,871) 84,766
------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets .................... 447,622 668,337 119,811 153,856 99,362
------------------------------------------------------------------------------------------------------------------------------------
Net assets, beginning of year .................................... 145,285 721,092 12,806 2,246,208 --
------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of year .................................. $ 592,907 $1,389,429 $ 132,617 $2,400,064 $ 99,362
====================================================================================================================================
</TABLE>
The accompanying notes are an integral part of these financial statements.
12
<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>
$ 1,313 $ 5,413 $ 565 $ 1,005 $ 46 $ -- $ 1,153,158 $ 15,752,727 $ 1,035,769
937 1,231 1,184 956 517 31 154,368 1,178,671 111,522
------------------------------------------------------------------------------------------------------------------------------------
376 4,182 (619) 49 (471) (31) 998,790 14,574,056 924,247
------------------------------------------------------------------------------------------------------------------------------------
1,818 (3,973) 684 2,512 (318) 373 340,355 7,214,092 39,407
<PAGE>
975 (3,479) 24,584 23,975 382 -- (29,185) 3,784,130 (170,505)
------------------------------------------------------------------------------------------------------------------------------------
2,793 (7,452) 25,268 26,487 64 373 311,170 10,998,222 (131,098)
------------------------------------------------------------------------------------------------------------------------------------
$ 3,169 $ (3,270) $ 24,649 $ 26,536 $ (407) $ 342 $ 1,309,960 $ 25,572,278 $ 793,149
====================================================================================================================================
<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>
$ 376 $ 4,182 $ (619) $ 49 $ (471) $ (31) $ 998,790 $ 14,574,056 $ 924,247
1,818 (3,973) 684 2,512 (318) 373 340,355 7,214,092 39,407
975 (3,479) 24,584 23,975 382 -- (29,185) 3,784,130 (170,505)
------------------------------------------------------------------------------------------------------------------------------------
3,169 (3,270) 24,649 26,536 (407) 342 1,309,960 25,572,278 793,149
------------------------------------------------------------------------------------------------------------------------------------
21,242 36,363 104,218 32,961 25,129 (33) 2,454,610 12,980,634 1,173,981
(45) (273) -- (3,854) (1,462) -- (1,184,970) (24,815,715) (3,238,373)
111,123 85,483 79,944 39,965 89,153 (3,309) (401,921) (20,876,437) 57,978
------------------------------------------------------------------------------------------------------------------------------------
132,320 121,573 184,162 69,072 112,820 (3,342) 867,719 (32,711,518) (2,006,414)
------------------------------------------------------------------------------------------------------------------------------------
135,489 118,303 208,811 95,608 112,413 (3,000) 2,177,679 (7,139,240) (1,213,265)
------------------------------------------------------------------------------------------------------------------------------------
105 23,511 47,882 78,390 2,677 3,000 14,113,503 190,813,333 15,912,449
------------------------------------------------------------------------------------------------------------------------------------
$135,594 $141,814 $256,693 $173,998 $115,090 $ -- $16,291,182 $183,674,093 $14,699,184
====================================================================================================================================
</TABLE>
13
<PAGE>
CONSECO VARIABLE ANNUITY ACCOUNT C
<PAGE>
STATEMENTS OF OPERATIONS - CONTINUED
FOR THE YEAR ENDED 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 ................ $ 48,886 $ 255,531 $ 67,412 $ 152,478 $ 91
Expenses:
Mortality and expense risk fees ............................... 8,378 49,938 11,421 90,857 46
------------------------------------------------------------------------------------------------------------------------------------
Net investment income (loss) .............................. 40,508 205,593 55,991 61,621 45
------------------------------------------------------------------------------------------------------------------------------------
Net realized gains (losses) and unrealized appreciation (depreciation) of
investments:
Net realized gains (losses) on sales of investments
in portfolio shares ........................................ 17,349 -- 73,930 502,333 --
Net change in unrealized appreciation (depreciation)
of investments in portfolio shares ......................... (14,738) -- 160,015 1,688,088 2,744
------------------------------------------------------------------------------------------------------------------------------------
Net gain (loss) on investments in portfolio shares ........ 2,611 -- 233,945 2,190,421 2,744
------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets from operations ... $ 43,119 $ 205,593 $ 289,936 $2,252,042 $ 2,789
====================================================================================================================================
STATEMENTS OF CHANGES IN NET ASSETS - CONTINUED
FOR THE YEAR ENDED DECEMBER 31, 1998
<CAPTION>
====================================================================================================================================
CONSECO SERIES DREYFUS
TRUST PORTFOLIOS VARIABLE
(CONTINUED) INVESTMENT
------------------------ ----------
DREYFUS
SOCIALLY DREYFUS
GOVERNMENT MONEY RESPONSIBLE STOCK DISCIPLINED
<PAGE>
SECURITIES MARKET GROWTH INDEX STOCK
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Changes from operations:
Net investment income (loss) ................................... $ 40,508 $ 205,593 $ 55,991 $ 61,621 $ 45
Net realized gains (losses) on sales of investments
in portfolio shares ........................................... 17,349 -- 73,930 502,333 --
Net change in unrealized appreciation
(depreciation) of investments in portfolio shares ............. (14,738) -- 160,015 1,688,088 2,744
------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets from operations ....... 43,119 205,593 289,936 2,252,042 2,789
------------------------------------------------------------------------------------------------------------------------------------
Changes from contract owners' transactions:
Net contract purchase payments ................................. 68,785 280,659 495,636 2,668,744 398
Contract redemptions ........................................... (111,079) (1,403,691) (98,716) (253,677) --
Net transfers .................................................. 326,004 1,940,167 513,868 3,880,194 16,162
------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets
from contract owners' transactions ......................... 283,710 817,135 910,788 6,295,261 16,560
------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets .................... 326,829 1,022,728 1,200,724 8,547,303 19,349
------------------------------------------------------------------------------------------------------------------------------------
Net assets, beginning of year .................................. 612,225 4,426,949 645,695 5,606,316 --
------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of year .................................. $ 939,054 $5,449,677 $1,846,419 $14,153,619 $19,349
====================================================================================================================================
</TABLE>
The accompanying notes are an integral part of these financial statements.
14
<PAGE>
<TABLE>
<CAPTION>
====================================================================================================================================
DREYFUS
VARIABLE
INVESTMENT INVESCO
(CONTINUED) FEDERATED INSURANCE SERIES FUNDS 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>
$ -- $ 6,718 $ 198 $ 29,269 $ 1,814 $ 2,253 $ -- $ 157,855 $ 464,175
-- 3,099 2,125 5,388 120 54 21,327 25,410 120,229
------------------------------------------------------------------------------------------------------------------------------------
-- 3,619 (1,927) 23,881 1,694 2,199 (21,327) 132,445 343,946
------------------------------------------------------------------------------------------------------------------------------------
<PAGE>
-- 5,201 46,233 44,535 1 (4) 53,509 187,231 728,557
-- (7,710) (8,218) 8,673 1,313 (1,181) 657,242 507,794 1,763,273
------------------------------------------------------------------------------------------------------------------------------------
-- (2,509) 38,015 53,208 1,314 (1,185) 710,751 695,025 2,491,830
------------------------------------------------------------------------------------------------------------------------------------
$ -- $ 1,110 $ 36,088 $ 77,089 $ 3,008 $ 1,014 $ 689,424 $ 827,470 $ 2,835,776
====================================================================================================================================
<CAPTION>
====================================================================================================================================
DREYFUS
VARIABLE
INVESTMENT INVESCO
(CONTINUED) FEDERATED INSURANCE SERIES FUNDS 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>
$ -- $ 3,619 $ (1,927) $ 23,881 $ 1,694 $ 2,199 $ (21,327) $ 132,445 $ 343,946
-- 5,201 46,233 44,535 1 (4) 53,509 187,231 728,557
-- (7,710) (8,218) 8,673 1,313 (1,181) 657,242 507,794 1,763,273
------------------------------------------------------------------------------------------------------------------------------------
-- 1,110 36,088 77,089 3,008 1,014 689,424 827,470 2,835,776
------------------------------------------------------------------------------------------------------------------------------------
-- 130,446 36,964 101,816 -- 8,399 314,457 575,858 3,035,033
-- (31,009) (2,387) (16,382) -- -- (81,251) (119,797) (2,091,287)
-- 316,153 17,561 283,497 32,801 12,241 330,898 862,739 2,193,731
------------------------------------------------------------------------------------------------------------------------------------
-- 415,590 52,138 368,931 32,801 20,640 564,104 1,318,800 3,137,477
------------------------------------------------------------------------------------------------------------------------------------
-- 416,700 88,226 446,020 35,809 21,654 1,253,528 2,146,270 5,973,253
------------------------------------------------------------------------------------------------------------------------------------
-- 141,732 141,512 306,571 -- -- 1,732,743 1,711,973 9,289,971
------------------------------------------------------------------------------------------------------------------------------------
$ -- $558,432 $229,738 $752,591 $ 35,809 $ 21,654 $ 2,986,271 $ 3,858,243 $15,263,224
====================================================================================================================================
</TABLE>
15
<PAGE>
<PAGE>
CONSECO VARIABLE ANNUITY ACCOUNT C
STATEMENTS OF OPERATIONS - CONTINUED
FOR THE YEAR ENDED DECEMBER 31, 1998
<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 ................. $ -- $ 1 $ 868 $ 365 $ 156
------------------------------------------------------------------------------------------------------------------------------------
Expenses:
Mortality and expense risk fees ................................ -- 7 26 17 286
------------------------------------------------------------------------------------------------------------------------------------
Net investment income (loss) ............................... -- (6) 842 348 (130)
------------------------------------------------------------------------------------------------------------------------------------
Net realized gains (losses) and unrealized appreciation
(depreciation) of investments:
Net realized gains (losses) on sales of investments
in portfolio shares ......................................... -- -- -- -- (72)
Net change in unrealized appreciation (depreciation)
of investments in portfolio shares .......................... -- 361 495 156 1,051
------------------------------------------------------------------------------------------------------------------------------------
Net gain (loss) on investments in portfolio shares .......... -- 361 495 156 979
------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets from operations ...... $ -- $ 355 $ 1,337 $ 504 $ 849
====================================================================================================================================
STATEMENTS OF CHANGES IN NET ASSETS - CONTINUED
FOR THE YEAR ENDED DECEMBER 31, 1998
<CAPTION>
====================================================================================================================================
<PAGE>
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) ................................... $ -- $ (6) $ 842 $ 348 $ (130)
Net realized gains (losses) on sales of investments
in portfolio shares ........................................... -- -- -- -- (72)
Net change in unrealized appreciation (depreciation)
of investments in portfolio shares ............................ -- 361 495 156 1,051
------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets from operations ....... -- 355 1,337
504 849
------------------------------------------------------------------------------------------------------------------------------------
Changes from contract owners' transactions:
Net contract purchase payments ................................. -- 3,339 11,680 719 12,525
Contract redemptions ........................................... -- -- -- -- --
Net transfers .................................................. -- -- 954 4,024 230,625
------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets
from contract owners' transactions .......................... -- 3,339 12,634 4,743 243,150
------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets ...................... -- 3,694 13,971 5,247 243,999
------------------------------------------------------------------------------------------------------------------------------------
Net assets, beginning of year .................................. -- -- -- -- --
------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of year .................................... $ -- $ 3,694 $ 13,971 $ 5,247 $ 243,999
====================================================================================================================================
</TABLE>
The accompanying notes are an integral part of these financial statements.
16
<PAGE>
<TABLE>
<CAPTION>
====================================================================================================================================
NEUBERGER
<PAGE>
BERMAN
ADVISERS
MANAGEMENT STRONG
TRUST VARIABLE
PORTFOLIOS INSURANCE
(CONTINUED) FUNDS VAN ECK WORLDWIDE INSURANCE TRUST FUNDS
---------- -------- -----------------------------------------------------------------
(NOTE 1)
STRONG OLD
MID CAP OPPORTUNITY EMERGING HARD REAL HARD COMBINED
PARTNERS GROWTH II FUND II BOND MARKETS ASSETS ESTATE ASSETS TOTAL
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$ 8,709 $ -- $ 1,483 $ 169 $ 1,250 $ 50,996 $ -- $ -- $19,540,381
2,368 154 447 279 745 2,656 5 2 1,827,897
------------------------------------------------------------------------------------------------------------------------------------
6,341 (154) 1,036 (110) 505 48,340 (5) (2) 17,712,484
------------------------------------------------------------------------------------------------------------------------------------
(10,055) 480 (2,663) 199 (21,681) (69,021) -- -- 9,273,246
556 4,306 8,517 3,119 (6,249) (75,494) 164 -- 8,806,323
------------------------------------------------------------------------------------------------------------------------------------
(9,499) 4,786 5,854 3,318 (27,930) (144,515) 164 -- 18,079,569
------------------------------------------------------------------------------------------------------------------------------------
$ (3,158) $ 4,632 $ 6,890 $ 3,208 $(27,425) $(96,175) $ 159 $ (2) $35,792,053
====================================================================================================================================
<CAPTION>
====================================================================================================================================
NEUBERGER
BERMAN
ADVISERS
MANAGEMENT STRONG
TRUST VARIABLE
PORTFOLIOS INSURANCE
(CONTINUED) FUNDS VAN ECK WORLDWIDE INSURANCE TRUST FUNDS
---------- -------- -----------------------------------------------------------------
(NOTE 1)
STRONG OLD
MID CAP OPPORTUNITY EMERGING HARD REAL HARD COMBINED
PARTNERS GROWTH II FUND II BOND MARKETS ASSETS ESTATE ASSETS TOTAL
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$ 6,341 $ (154) $ 1,036 $ (110) $ 505 $ 48,340 $ (5) $ (2) $17,712,484
<PAGE>
(10,055) 480 (2,663) 199 (21,681) (69,021) -- -- 9,273,246
556 4,306 8,517 3,119 (6,249) (75,494) 164 -- 8,806,323
------------------------------------------------------------------------------------------------------------------------------------
(3,158) 4,632 6,890 3,208 (27,425) (96,175) 159 (2) 35,792,053
------------------------------------------------------------------------------------------------------------------------------------
157,481 11,715 45,152 9,453 22,033 34,250 2,638 9,511 25,628,081
(2,370) (190) (980) (436) (1,843) (3,409) -- -- (34,314,124)
204,724 214,553 67,755 6,504 20,696 (112,948) -- (9,824) (8,796,326)
------------------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------------
359,835 226,078 111,927 15,521 40,886 (82,107) 2,638 (313) (17,482,369)
------------------------------------------------------------------------------------------------------------------------------------
356,677 230,710 118,817 18,729 13,461 (178,282) 2,797 (315) 18,309,684
------------------------------------------------------------------------------------------------------------------------------------
74,763 5,080 5,042 17,407 80,220 345,128 -- 315 249,263,883
------------------------------------------------------------------------------------------------------------------------------------
$431,440 $235,790 $123,859 $ 36,136 $ 93,681 $166,846 $ 2,797 $ -- $267,573,567
====================================================================================================================================
</TABLE>
17
<PAGE>
CONSECO VARIABLE ANNUITY ACCOUNT C
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 1998
================================================================================
(1) GENERAL
Conseco Variable Annuity Account C ("Account C") was established in 1980 as
a segregated investment account for individual and group variable annuity
contracts which are registered under the Securities Act of 1933. Account C is
registered under the Investment Company Act of 1940, as amended (the "Act"), as
a unit investment trust. Account C was originally registered with the U.S.
Securities and Exchange Commission as a diversified open-end management
investment company under the Act. Effective May 1, 1993, Account C was
restructured into a single unit investment trust which invested solely in shares
of the portfolios of the Conseco Series Trust, a diversified open-end management
investment company. Thereafter, additional investment options were offered.
The operations of Account C are included in the operations of Conseco
Variable Insurance Company (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
<PAGE>
listed on the New York Stock Exchange.
Currently, the following investment options are available (effective date in
parenthesis):
THE ALGER AMERICAN FUND
Growth Portfolio (May 1, 1997)
Leveraged AllCap Portfolio (June 1, 1995)
MidCap Growth Portfolio (May 1, 1997)
Small Capitalization Portfolio (June 1, 1995)
AMERICAN CENTURY VARIABLE PORTFOLIOS, INC.
Income and Growth Fund (May 1, 1998)
International Fund (May 1, 1997)
Value Fund (May 1, 1997)
BERGER INSTITUTIONAL PRODUCTS TRUST (MAY 1, 1997) 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.
(JUNE 1, 1995)
DREYFUS STOCK INDEX FUND (JUNE 1, 1995)
DREYFUS VARIABLE INVESTMENT FUND (MAY 1, 1998) International Value Portfolio
Disciplined Stock Portfolio
FEDERATED INSURANCE SERIES (JUNE 1, 1995) High Income Bond Fund II International
Equity Fund II
Utility Fund II
INVESCO VARIABLE INVESTMENT FUNDS, INC. (MAY 1, 1998)
Equity Income Fund
High Yield Fund
JANUS ASPEN SERIES (JUNE 1, 1995)
Aggressive Growth Portfolio
Growth Portfolio
Worldwide Growth Portfolio
<PAGE>
LAZARD RETIREMENT SERIES, INC. (MAY 1, 1998)
Equity Portfolio
Small Cap Portfolio
LORD ABBETT SERIES FUND, INC. (MAY 1, 1998)
Growth and Income Portfolio
MITCHELL HUTCHINS SERIES TRUST (MAY 1, 1998)
Growth and Income Portfolio
NEUBERGER BERMAN ADVISERS MANAGEMENT TRUST (MAY 1, 1997) Limited Maturity Bond
Portfolio Partners Portfolio
STRONG VARIABLE INSURANCE FUNDS, INC. (MAY 1, 1997)
Mid Cap Growth Fund II
STRONG OPPORTUNITY FUND II (MAY 1, 1997)
VAN ECK WORLDWIDE INSURANCE TRUST
Worldwide Bond Fund (June 1, 1995)
Worldwide Emerging Markets Fund (June 1, 1996)
Worldwide Hard Assets Fund (June 1,1995)
Worldwide Real Estate Fund (May 1, 1998)
VanEck Worldwide Insurance Trust terminated the Worldwide Hard Assets Fund
on May 1, 1997, and the Gold and Natural Resources Fund was renamed the
Worldwide Hard Assets Fund. The 1998 activity was due to final transfers being
processed.
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 C 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
<PAGE>
each valuation date based on each contract's pro rata share of the assets of
Account C 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 C 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 C and are not taxable
until received by the contract owner or beneficiary in the form of annuity
payments or other distributions.
18
<PAGE>
CONSECO VARIABLE ANNUITY ACCOUNT C
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.
Annuity payment reserves for contracts under which contract owners are
receiving periodic retirement payments are computed according to the Progressive
Annuity Mortality Table and the 1983 Group Annuity Mortality Table. The assumed
net investment rate is equal to the assumed rate of accumulation. The annuity
unit values for periodic retirement payments are as follows:
DECEMBER 31,
1999 1998
================================================================================
The Alger American Fund:
Leveraged AllCap ..................................... $ 1.264 N/A
Conseco Series Trust:
Balanced ............................................. 1.305 $ 1.043
Equity
Qualified ........................................... 10.473 7.308
Nonqualified ........................................ 9.697 6.766
Fixed Income
Qualified ........................................... 4.789 5.012
Nonqualified ........................................ 4.792 5.016
Money Market
<PAGE>
Qualified ........................................... 1.022 1.019
The Dreyfus Socially Responsible Growth Fund ........... 1.049 N/A
Dreyfus Stock Index Fund ............................... 1.255 1.097
Federated Insurance Series:
High Income Bond Fund II ............................. 0.975 N/A
Janus Aspen Series:
Growth ............................................... 1.132 N/A
Worldwide Growth ..................................... 2.611 1.660
--------------------------------------------------------------------------------
(3) PURCHASES AND SALES OF INVESTMENTS IN PORTFOLIO SHARES
The aggregate cost of purchases of investments in portfolio shares was
$134,689,005 and $63,530,550 for the years ended December 31, 1999 and 1998,
respectively. The aggregate proceeds from sales of investments in portfolio
shares were $67,907,279 and $63,152,626 for the years ended December 31, 1999
and 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 Account C a fee, which is equal on an annual
basis to 1.00 percent of the daily value of the total investments of Account C,
for assuming the mortality and expense risks except for the Equity, Fixed
Income, and Money Market portfolios of the Conseco Series Trust which are 0.64
percent, 0.74 percent and 0.99 percent, respectively. These fees were $2,233,024
and $1,827,897 for the years ended December 31, 1999 and 1998, respectively.
Pursuant to an agreement between Account C and the Company (which may be
terminated by the Company at any time), the Company provides sales and
administrative services to Account C, as well as a minimum death benefit prior
to retirement for certain contracts. Under individual contracts and group
deferred compensation contracts, the Company may deduct a percentage of amounts
surrendered to cover sales expenses. The percentage varies up to 8.00 percent
based on the type of contract and the number of years the contract has been
held. In addition, the Company deducts units from certain contracts annually and
<PAGE>
upon full surrender to cover an administrative fee of $15, $20, or $25. This fee
is recorded as a redemption in the accompanying Statements of Changes in Net
Assets. Under group contracts no longer being sold, the Company deducts a
percentage of the renewal contract purchase payments to cover sales and
administrative expenses and the minimum death benefit prior to retirement of the
contract owners. Sales and administrative charges were $465,909 and $597,806 for
the years ended December 31, 1999 and 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 ................................. $ 59,967,901
Undistributed net investment income ........................... 206,883,885
Undistributed net realized gains on sales of investments ...... 60,083,883
Net unrealized appreciation of investments .................... 47,860,325
--------------------------------------------------------------------------------
Net assets ................................................ $374,795,994
================================================================================
19
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
================================================================================
TO THE BOARD OF DIRECTORS OF CONSECO VARIABLE
INSURANCE COMPANY AND CONTRACT OWNERS OF
CONSECO VARIABLE ANNUITY ACCOUNT C
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 Conseco Variable Annuity
Account C (the "Account") at December 31, 1999, and the results of its
operations and the changes in its net assets for each of the two years in the
period then ended, 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
<PAGE>
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.
PricewaterhouseCoopers LLP
Indianapolis, Indiana
February 10, 2000
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) The financial statements of the Separate Account and Conseco Variable
Insurance Company (the "Company") are included in Part B hereof.
(b) Exhibits
(1) -Resolution of the Board of Directors of Great American Reserve
authorizing the reorganization of Separate Account dated July 27,
1992.***
(2) -Not Applicable.
(3) -Form of Principal Underwriting Agreement by and among Great American
Reserve, Variable Account and GARCO Equity Sales.***
(4)(a) -- Form of Stipulated Single Premium Deferred Fixed/Variable Annuity
Contract.***
(4)(b) -- Form of Individual Flexible Premium Deferred Fixed/Variable
Annuity Contract.***
(5) -- Application for Contracts listed at Exhibits 4(a) and 4(b).***
(6) (i) -Articles of Incorporation of Great American Reserve.**
(ii) -Articles of Amendment to the Articles of Incorporation of
the Company.+
(6) (iii) -Amended and Restated By-Laws of Conseco Variable Insurance
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 Reserve
Insurance Company, Berger Institutional Products Trust and BBOI
Worldwide LLC.*
(iii)Form of Fund Participation Agreement by and between Great
American Reserve Insurance Company, Insurance Management Series
and Federated Securities Corp.*
(iv) Form of Fund Participation Agreement between Great American
Reserve Insurance Company, Van Eck Worldwide Insurance Trust and
Van Eck Worldwide Insurance Trust and Van Eck Associates
Corporation.*
<PAGE>
(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) -- None.
(13) -- Schedule for computation of performance quotations.
(27) -- Not Applicable.
*Incorporated by reference to Pre-Effective Amendment No. 1 to Form N-4, Great
American Reserve Variable Annuity Account F, File Nos. 333-40309/811-08483 filed
electronically on February 3, 1998.
**Incorporated by reference to Form N-4, Great American Reserve Variable Annuity
Account G, File Nos 333-00373/811-07501, filed electronically on January 23,
1996.
***Incorporated by reference to Post-Effective Amendment No. 16 to Form N-4
(File Nos. 33-2460 and 811-4819) filed electronically on May 15, 1998.
+Incorporated by reference to Registrant's Post-Effective Amendment No. 19
(File No. 33-2460) filed electronically on April 28, 2000.
ITEM 25. DIRECTORS AND OFFICERS OF CONSECO VARIABLE
The following table sets forth certain information regarding the executive
officers and directors of the Company who are engaged directly or indirectly in
activities relating to the Variable Account or the Contracts. Their principal
business address is 11815 N. Pennsylvania Street, Carmel, IN 46032.
Positions and Offices
Name with the Company
------------------------ ----------------------------
Ngaire E. Cuneo Director
John M. Howard Director
Thomas J. Kilian Director and President
David K. Herzog Director, Executive Vice President,
General Counsel and Secretary
James S. Adams Director, Senior Vice President, Chief
Accounting Officer and Treasurer
ITEM 26. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT
The following information concerns those companies that may be deemed to be
controlled by or under common control with Registrant (all 100% owned unless
indicated otherwise):
CONSECO, INC. (Indiana) - (publicly traded)
CIHC, Incorporated (Delaware)
Bankers National Life Insurance Company (Texas)
Bankers Life Insurance Company of Illinois (Illinois)
Bankers Life & Casualty Company (Illinois)
Conseco Life Insurance Company of Texas (Texas)
Conseco Variable Insurance Company (Texas)
Conseco Annuity Assurance Company (Illinois)
Vulcan Life Insurance Company (Indiana)
Conseco Direct Life Insurance Company (Pennsylvania)
Wabash Life Insurance Company (Indiana)
Conseco Life Insurance Company (Indiana)
Washington National Insurance Company (Illinois)
Conseco Senior Health Insurance Company (Pennsylvania)
Pioneer Life Insurance Company (Illinois)
<PAGE>
Conseco Life Insurance Company of New York (New York)
Conseco Medical Insurance Company (Illinois)
Continental Life Insurance Company (Texas)
United Presidential Life Insurance Company (Indiana)
Conseco Health Insurance Company (Arizona)
Frontier National Life Insurance Company (Ohio)
Conseco Capital Management, Inc. (Delaware)
Conseco Equity Sales, Inc. (Texas)
Conseco Securities, Inc. (Delaware)
Conseco Services, LLC (Indiana)
Marketing Distribution Systems Consulting Group, Inc. (Delaware)
Conseco Finance Corp. (Delaware)
Conseco Finance Servicing Corp. (Delaware)
Conseco Series Trust (Massachusetts)*
Conseco Fund Group (Massachusetts) (publicly held)**
* The shares of Conseco Series Trust currently are sold to Bankers National
Variable Account B, Conseco Variable Annuity Account C, Conseco Variable
Annuity Account E, Conseco Variable Annuity Account F, Conseco Variable
Account G, Conseco Variable Annuity Account H, each being segregated asset
accounts established pursuant to Texas law by Bankers National Life
Insurance Company and Conseco Variable Insurance Company, respectively.
Shares of Conseco Series Trust are also sold to BMA Variable Life Account A
of Business Men's Assurance Company of America.
** The shares of the Conseco Fund Group are sold to the public.
ITEM 27. NUMBER OF CONTRACT OWNERS
As of September 30, 2000, there were 18,043 Contract Owners of qualified
contracts and 387 Contract owners of non-qualified contracts.
ITEM 28. INDEMNIFICATION
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 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 liabilities arising under the Securities Act
of 1933 may be permitted to members of Conseco Variable's Board of Directors,
officers and controlling persons of the Registrant pursuant to the provisions
described under "Indemnification" or otherwise, the Registrant 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 is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than payment by the Registrant of expenses incurred or
paid by a member of the Board of Directors, officer or controlling person of the
Registrant in the successful defense of any action, suit or proceeding) is
asserted by such member of the Board of Directors, officer or controlling person
in connection with the securities being registered, the Registrant 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.
The Variable Account has no officers or employees. The officers, directors
and employees of Conseco Variable as well as those of an affiliated company who
perform administrative services for the Variable Account are covered by an
officers and directors liability policy.
ITEM 29. PRINCIPAL UNDERWRITER
(a) Conseco Equity Sales, Inc. ("Conseco Equity Sales") is the principal
underwriter for the following investment companies (other than Registrant):
<PAGE>
Conseco Variable Annuity Account E
Conseco Variable Annuity Account F
Conseco Variable Annuity Account G
Conseco Variable Annuity Account H
Conseco Fund Group
Rydex Advisor Variable Annuity Account
BMA Variable Life Account A
(b) The following table sets forth certain information regarding such
underwriter's officers and directors. Their address is 11815 N.
Pennsylvania Street, Carmel, IN 46032.
Positions and Offices
Name with Conseco Equity Sales, Inc.
---------------------- --------------------------------
L. Gregory Gloeckner President and Director
Senior Vice President, Chief Accounting
James S. Adams Officer, Treasurer and Director
Vice President, General Counsel,
William P. Kovacs Secretary and Director
William T. Devanney, Jr. Senior Vice President,
Corporate Taxes
Donald B. Johnston Vice President, Director
Mutual Fund Sales & Marketing
<TABLE>
<CAPTION>
(c)
Net Underwriting Compensation on
Name of Discounts and Redemption or Brokerage
Principal Underwriter Commissions Annuitization Commissions Compensation*
- --------------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Conseco Equity None None None None
Sales, Inc.
</TABLE>
*Fees paid by the Company for serving as underwriter
ITEM 30. LOCATION OF ACCOUNTS AND RECORDS
The accounts, books, or other documents required to be maintained by the
Registrant pursuant to Section 31(a) of the Investment Company Act of 1940 and
the rules promulgated thereunder are in the possession of the Company, 11815 N.
Pennsylvania Street, Carmel, Indiana 46032.
ITEM 31. MANAGEMENT SERVICES
Not Applicable.
ITEM 32. UNDERTAKINGS
1. The 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
16 months old for so long as payments under the variable annuity contracts may
be accepted.
2. The 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.
3. The Registrant hereby undertakes to deliver any Statement of Additional
Information and any financial statements required to be made available under
Form N-4 promptly upon written or oral request.
4. 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:
(a) 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;
(b) 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;
(c) 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
(d) 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 (a) - (d) above have been complied with.
5. The Company represents that the fees and charges deducted under the
Contracts, in the aggregate, are reasonable in relation to the services
rendered, the expenses expected to be incurred, and the risks assumed by the
Company.
SIGNATURES
As required by the Securities Act of 1933 and the Investment Company Act of
1940, as amended, the Registrant certifies that it meets the requirements of
Securities Act 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, State of Indiana, on this 26th day of December, 2000.
CONSECO VARIABLE ANNUITY
ACCOUNT C
Registrant
By: Conseco Variable Insurance Company
By: /S/ THOMAS J. KILIAN
-------------------------------------------
CONSECO VARIABLE INSURANCE COMPANY
Depositor
By: /S/ THOMAS J. KILIAN
--------------------------------------------
As required by the Securities Act of 1933, this Registration Statement has
been signed below 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>
INDEX TO EXHIBITS
Exhibit Number Exhibit
-------------- -------
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 Schedule for Computation of Performance Quotations
