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ISSUED BY
CONSECO VARIABLE
INSURANCE COMPANY
MAXIFLEX Group
--------------------------
FIXED AND VARIABLE ANNUITY
MAY 1, 2000
PROSPECTUS
CONSECO VARIABLE INSURANCE COMPANY
CONSECO VARIABLE ANNUITY ACCOUNT C
This cover is not part of the prospectus.
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C O N S E C O(R)
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CONSECO VARIABLE ANNUITY ACCOUNT C
GROUP FLEXIBLE PREMIUM DEFERRED FIXED/VARIABLE ANNUITY CONTRACTS
OFFERED BY
CONSECO VARIABLE INSURANCE COMPANY
Administrative Office: 11815 N. Pennsylvania Street o Carmel, IN 46032
o (317) 817-3700
May 1, 2000
This prospectus describes the group flexible premium deferred
fixed/variable annuity contract ("Contract") issued by Conseco Variable
Insurance Company ("Conseco Variable"). The Contracts are designed for use in
retirement planning.
You can invest your Purchase Payments in one of the Variable Account
Investment Options listed below. Depending on market conditions, you can make or
lose money in any of these Variable Account Investment Options. You can also
invest in the Conseco Variable Fixed Account. Money you direct into the Fixed
Account earns interest at a rate guaranteed by us.
CONSECO SERIES TRUST
o Conseco 20 Focus Portfolio
o Equity Portfolio
o Balanced Portfolio
o High Yield Portfolio
o Fixed Income Portfolio
o Government Securities Portfolio
o Money Market Portfolio
THE ALGER AMERICAN FUND
o Alger American Growth Portfolio
o Alger American Leveraged AllCap Portfolio
o Alger American MidCap Growth Portfolio
o Alger American Small Capitalization Portfolio
AMERICAN CENTURY VARIABLE PORTFOLIOS, INC.
o VP Income & Growth
o VP International
o VP Value
BERGER INSTITUTIONAL PRODUCTS TRUST
o Berger IPT--Growth Fund
(formerly, Berger IPT--100 Fund)
o Berger IPT--Growth and Income Fund
o Berger IPT--Small Company Growth Fund
o Berger IPT--New Generation Fund
o Berger/BIAM IPT--International Fund
THE DREYFUS SOCIALLY RESPONSIBLE
GROWTH FUND, INC.
DREYFUS STOCK INDEX FUND
DREYFUS VARIABLE INVESTMENT FUND
("DREYFUS VIF")
o Dreyfus VIF Disciplined Stock Portfolio
o Dreyfus VIF International Value Portfolio
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THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR DISAPPROVED
THESE SECURITIES OR DETERMINED IF THIS PROSPECTUS IS ACCURATE OR COMPLETE. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
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FEDERATED INSURANCE SERIES
o Federated High Income Bond Fund II
o Federated International Equity Fund II
o Federated Utility Fund II
INVESCO VARIABLE INVESTMENT FUNDS, INC.
(NOT AVAILABLE FOR NEW SALES AS OF MAY 1, 2000)
o INVESCO VIF--High Yield Fund
o INVESCO VIF--Equity Income Fund
JANUS ASPEN SERIES
o Aggressive Growth Portfolio
o Growth Portfolio
o Worldwide Growth Portfolio
LAZARD RETIREMENT SERIES, INC.
o Lazard Retirement Equity Portfolio
o Lazard Retirement Small Cap Portfolio
LORD ABBETT SERIES FUND, INC.
o Growth & Income Portfolio
MITCHELL HUTCHINS SERIES TRUST
o Growth And Income Portfolio
NEUBERGER BERMAN ADVISERS MANAGEMENT TRUST
o Limited Maturity Bond Portfolio
o Partners Portfolio
RYDEX VARIABLE TRUST
o OTC Fund
o Nova Fund
SELIGMAN PORTFOLIOS, INC.
o Seligman Communications and Information Portfolio
o Seligman Global Technology Portfolio
STRONG OPPORTUNITY FUND II, INC.
o Opportunity Fund II
STRONG VARIABLE INSURANCE FUNDS, INC.
o Strong Mid Cap Growth Fund II
VAN ECK WORLDWIDE INSURANCE TRUST
o Worldwide Bond Fund
o Worldwide Emerging Markets Fund
o Worldwide Hard Assets Fund
o Worldwide Real Estate Fund
Please read this prospectus carefully before investing and keep it on file
for future reference. It contains important information about the group fixed
and variable annuity contracts issued by Conseco Variable.
To learn more about the Contracts, you can obtain a copy of the Statement
of Additional Information (SAI) dated May 1, 2000. The SAI has been filed with
the Securities and Exchange Commission (SEC) and is legally a part of this
prospectus. The SEC has a Web site (http://www.sec.gov) that contains the SAI,
material incorporated by reference, and other information regarding companies
that file electronically with the SEC. The Table of Contents of the SAI is on
Page 34 of this prospectus. For a free copy of the SAI, call us or write to us
at the address or telephone number given above.
THE CONTRACTS:
o ARE NOT BANK DEPOSITS
o ARE NOT FEDERALLY INSURED
o ARE NOT ENDORSED BY ANY BANK OR GOVERNMENT AGENCY
o ARE NOT GUARANTEED AND MAY BE SUBJECT TO LOSS OF PRINCIPAL.
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CONSECO VARIABLE INSURANCE COMPANY
2000 ACCOUNT C
GROUP ANNUITY
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TABLE OF CONTENTS
PAGE
DEFINITIONS ............................................................... 5
SUMMARY ................................................................... 5
FEE TABLE ................................................................. 7
CONSECO VARIABLE, THE VARIABLE ACCOUNT AND INVESTMENT OPTIONS ............. 18
Conseco Variable ........................................................ 18
The Variable Account .................................................... 18
Investment Options ...................................................... 19
Voting Rights ......................................................... 21
Fixed Account ......................................................... 21
THE CONTRACT .............................................................. 22
ACCUMULATION PROVISIONS ................................................... 22
Purchase Payments ....................................................... 22
Allocation of Purchase Payments ......................................... 22
Accumulation Units ...................................................... 23
Accumulation Unit Values .............................................. 23
Transfers ............................................................... 23
Dollar Cost Averaging ................................................... 23
Rebalancing ............................................................. 24
Asset Allocation Program ................................................ 24
Sweeps .................................................................. 24
Withdrawals ............................................................. 24
Suspension of Payments .................................................. 24
Restrictions Under Optional Retirement Programs ......................... 25
Restrictions Under Section 403(b) Plans ................................. 25
Conversion to Individual Account Upon Termination in Plan ............... 25
Systematic Withdrawal Plan .............................................. 25
Loans ................................................................... 26
CHARGES AND DEDUCTIONS .................................................... 26
Withdrawal Charge ....................................................... 26
Administrative Charge ................................................... 26
Mortality and Expense Risk Charge ....................................... 27
Premium Taxes ........................................................... 27
Fund Expenses ........................................................... 28
Reduction or Elimination of Contract Charges ............................ 28
Other Charges ........................................................... 28
DEATH BENEFITS ............................................................ 28
THE ANNUITY PERIOD ........................................................ 28
Optional Annuity Period Elections ....................................... 28
Annuity Options ......................................................... 29
Transfers During the Annuity Period ..................................... 30
Death Benefit Amount During the Annuity Period .......................... 30
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TABLE OF CONTENTS (CONT'D)
PAGE
FEDERAL TAX STATUS ........................................................ 31
Annuity Contracts in General ............................................ 31
Qualified and Non-Qualified Contracts ................................... 31
Withdrawals--Non-Qualified Contracts .................................... 31
Withdrawals--Qualified Contracts ........................................ 31
Withdrawals--Tax-Sheltered Annuities .................................... 32
Diversification ......................................................... 32
Investor Control ........................................................ 32
GENERAL MATTERS ........................................................... 32
Performance Information ................................................. 32
Distribution of Contracts ............................................... 32
Legal Proceedings ....................................................... 33
TABLE OF CONTENTS OF THE SAI .............................................. 34
APPENDIX A--CONDENSED FINANCIAL INFORMATION ............................... 35
APPENDIX B--MORE INFORMATION ABOUT THE FUNDS .............................. 40
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CONSECO VARIABLE INSURANCE COMPANY
2000 ACCOUNT C
GROUP ANNUITY
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DEFINITIONS
ACCUMULATION PERIOD: The period before the commencement of Annuity Payments
during which you can make Purchase Payments.
ACCUMULATION UNIT: An accounting unit of measure we use to calculate the
value of your Contract during the Accumulation Period.
ANNUITANT: The named individual upon whose life Annuity Payments are based.
ANNUITY PAYMENTS: A series of income payments we make under an annuity
option.
ANNUITY PERIOD: The period during which we make Annuity Payments.
CONTRACT OWNER: The entity to which the group Contract is issued, usually
the employer. You are a Participant in the group and will receive a certificate
evidencing your ownership. References to "you" and "your" in this prospectus
refer to you as the Participant.
CONTRACT VALUE: The total value of your values held under the Contract in
each Investment Option of the Variable Account plus the Fixed Account.
CODE: Internal Revenue Code of 1986, as amended.
FIXED ACCOUNT: The general account of Conseco Variable. You may choose to
allocate Purchase Payments and Contract Value to the Fixed Account. It provides
guaranteed values and periodically adjusted interest rates.
FUND: The underlying mutual funds (or portfolio of a mutual fund) which the
sub-accounts of the Variable Account invest in.
INDIVIDUAL ACCOUNT: The record we establish to represent your interest as a
Participant in an Investment Option during the Accumulation Period.
INVESTMENT OPTIONS: The investment choices available to Contract Owners.
PARTICIPANT: Any eligible person participating in a Plan and for whom an
Individual Account is established. References to "you" and "your" in this
prospectus refer to you as the Participant.
PLAN: A voluntary program for an employer that qualifies for special tax
treatment.
PURCHASE PAYMENTS: The premium payments made to Conseco Variable under the
terms of the Contract.
VALUATION PERIOD: The period of time from the end of one business day of
the New York Stock Exchange to the end of the next business day.
VARIABLE ACCOUNT: The separate account we established known as Conseco
Variable Annuity Account C. Prior to May 1, 1999, it was known as Great American
Reserve Variable Annuity Account C. The Variable Account is divided into
sub-accounts.
SUMMARY
THE CONTRACT: The Contract described in this prospectus is a flexible
Purchase Payment group variable annuity contract. The Contract provides a way
for you to invest on a tax-deferred basis in the sub-accounts of Conseco
Variable Annuity Account C ("Variable Account"). Your investments in the
Variable Account Investment Options are not guaranteed. You could lose your
money. The Contract also offers you a Fixed Account option.
The Contract provides for the accumulation of Contract Values and the
payment of annuity benefits on a variable and/or fixed basis. In general, this
prospectus describes only the variable portion of the Contract.
RETIREMENT PLANS: The Contract may be issued pursuant to Plans qualifying
for special income tax treatment under the Code. Examples of the Plans
qualifying for special tax treatment are: tax-sheltered annuities (TSAs) and
state and local government deferred compensation plans. (See "Federal Tax
Status.")
PURCHASE PAYMENTS: You may make Purchase Payments on a flexible basis. This
means that you can make payments at any time you like during the Accumulation
Period.
o The minimum for the initial Purchase Payment is $10 and for each
subsequent Purchase Payment is $10 per month.
o If your Purchase Payment is more than $500,000, it requires our prior
approval.
INVESTMENT OPTIONS: You can allocate your Purchase Payment to the Fixed
Account of Conseco Variable or the Variable Account Investment Options.
The portion of your Contract Value allocation to the Variable Account
Investment Options will reflect the Investment performance of the Funds you
select.
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TRANSFERS: During the Accumulation Period, you may make transfers among the
Variable Account Investment Options and from the Variable Account Investment
Options to the Fixed Account Investment Option without charge. Subject to
certain limitations, you may also transfer amounts from the Fixed Account
Investment Option to the Variable Account Investment Options. You may transfer
from the Fixed Account once in any six-month period subject to a limit of 20% of
the Fixed Account value. You may also make transfers under certain programs we
offer known as the dollar cost averaging program, sweep program, and
rebalancing. During the Annuity Period, you may not make transfers from a
variable annuity to a fixed annuity or from a fixed annuity to a variable
annuity. Conseco Variable may impose certain additional limitations on
transfers.
WITHDRAWALS: You may make withdrawals from your Contract. We may impose a
withdrawal charge and an annual contract fee ("administrative fee") when you
make a withdrawal. You may also make withdrawals pursuant to the systematic
withdrawal plan. A withdrawal may be subject to income taxes and tax penalties.
In addition, certain restrictions apply to withdrawals from TSA Contracts.
LOANS: Under certain circumstances, you may make loans from your Contract.
DEATH BENEFIT: Generally, if the Participant dies during the Accumulation
Period, Conseco Variable will pay a death benefit (less any outstanding loans)
to the beneficiary.
ANNUITY PAYMENTS: We offer a variety of fixed and variable annuity options
which you can select to receive your Annuity Payments. Your Annuity Payments
will begin during the Annuity Period. You can select the date when Annuity
Payments begin, the frequency of the payments and the annuity option.
TEN-DAY REVIEW: If you cancel the Contract within 10 days after receiving
it (or whatever period is required in your state) we will refund your Premium
Payment, unless a different amount is required by state law.
TAXES: For TSA Contracts, you can only make withdrawals of amounts
attributable to contributions you made pursuant to a salary reduction agreement
(as defined in the Code) under the following circumstances:
(i) when you attain age 59 1/2
(ii) when you separate from service;
(iii) when you die;
(iv) if you become disabled;
(v) in the case of hardship; or
(vi) made pursuant to a qualified domestic relations order, if otherwise
permitted.
Withdrawals for hardship are restricted to a portion of the Contract Value
which represents contributions made and does not include any investment results.
Your earnings are not taxed until you take them out. If you take money out
during the Accumulation Period, earnings come out first and are taxed as income.
If you are younger than 59 1/2 when you take money out, you may be charged a 10%
federal tax penalty on the earnings.
Payments during the Annuity Period are considered partly a return of your
original investment. That part of each payment is not taxable as income. If your
Contract was purchased under a tax-qualified plan, your payments may be fully
taxable.
CHARGES AND DEDUCTIONS:
o Each year Conseco Variable deducts an Annual Contract Fee (also referred
to as an "Administrative Fee") from your Contract. The amount of the fee
is equal to $15.
o Conseco Variable deducts a Mortality and Expense Risk Fee (referred to
as a "margin deduction" in the Contract) which is equal, on an annual
basis, to 1.00% of the average daily net assets of the Variable Account.
o If you take money out of the Contract, Conseco Variable may assess a
surrender fee (withdrawal charge). The charge ranges from 5% to 0%.
o You may be assessed a premium tax charge which generally ranges from
0%-3.5%, depending on the state.
o As with other professionally managed investments, there are also
investment charges which currently range from .26% to 3.23%, on an
annual basis, of the average daily value of the portfolio, depending
upon the Variable Account Investment Option you select.
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CONSECO VARIABLE INSURANCE COMPANY
2000 ACCOUNT C
GROUP ANNUITY
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CONSECO VARIABLE ANNUITY ACCOUNT C FEE TABLE
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CONTRACT OWNER TRANSACTION EXPENSES(1)
Sales Load Imposed on Purchases............................. None
Deferred Sales Load (as a percentage of amount redeemed)
Completed Annual Contributions
Periods for the Individual Account Charge
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Less than 5..................................... 5.00%
5 but less than 10.............................. 3.00%
10 but less than 15............................. 2.00%
15 or more...................................... None
ANNUAL CONTRACT FEE......................................... $15
ANNUAL EXPENSES OF VARIABLE ACCOUNT
(as a percentage of average account value)
Mortality and Expense Risk Fees(2)...................... 1.00%
Other Expenses.......................................... None
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TOTAL ANNUAL EXPENSES OF THE VARIABLE ACCOUNT(2)............ 1.00%
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(1) Premium taxes are not shown. Any premium tax due may be deducted from
Purchase Payments or from Individual Account Values at the time Annuity
Payments begin or at such other time based on our sole discretion. The
current range of premium taxes in jurisdictions in which we make the
Contracts available is from 0% to 3.5%.
(2) Conseco Variable has guaranteed the total of the investment management fees
charged against Conseco Series Trust's Equity, Fixed Income and Money
Market Portfolios whose shares are purchased by the Variable Account, plus
the mortality and expense risk fee imposed upon the assets of the
corresponding sub-accounts of the Variable Account will not exceed 1.44%,
on an annual basis, which is the amount that is equal to the total amount
of the same charges that would have been imposed under the Contracts had
the Combination not occurred. Currently, the Mortality and Expense Risk
Fees for the Conseco Series Trust's Equity, Fixed Income, and Money Market
sub-accounts are equal to .64%, .74%, and .99%, respectively. (See "Charges
and Deductions--Expense Guarantee Agreement".)
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ANNUAL FUND EXPENSES
(as a percentage of the average daily net assets of a portfolio)
TOTAL
ANNUAL
OTHER PORTFOLIO
EXPENSES EXPENSES
(AFTER (AFTER
EXPENSE EXPENSE
REIMBURSE- REIMBURS-
MENT, IF EMENT, IF
MANAGE- ANY, FOR ANY, FOR
MENT 12b-1 CERTAIN CERTAIN
FEES FEES PORTFOLIOS) PORTFOLIOS)
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CONSECO SERIES TRUST (1)
Conseco 20 Focus Portfolio(2) ........... 0.80% -- 0.10% 0.90%
Equity Portfolio ........................ 0.75% -- 0.02% 0.77%
Balanced Portfolio ...................... 0.75% -- 0.00% 0.75%
High Yield Portfolio (2) ................ 0.80% -- 0.10% 0.90%
Fixed Income Portfolio .................. 0.60% -- 0.07% 0.67%
Government Securities Portfolio ......... 0.60% -- 0.06% 0.66%
Money Market Portfolio (3) .............. 0.35% -- 0.05% 0.40%
THE ALGER AMERICAN FUND
Alger American Growth Portfolio ......... 0.75% -- 0.04% 0.79%
Alger American Leveraged
AllCap Portfolio (4) .................. 0.85% -- 0.08% 0.93%
Alger American Mid Cap Growth
Portfolio ............................. 0.80% -- 0.05% 0.85%
Alger American Small Capitalization
Portfolio ............................. 0.85% -- 0.05% 0.90%
AMERICAN CENTURY VARIABLE PORTFOLIOS, INC.
VP Income & Growth(5) ................... 0.70% -- 0.00% 0.70%
VP International(5) ..................... 1.34% -- 0.00% 1.34%
VP Value(5) ............................. 1.00% -- 0.00% 1.00%
BERGER INSTITUTIONAL PRODUCTS TRUST
Berger IPT--Growth Fund (6) ............. 0.75% -- 0.25% 1.00%
Berger IPT--Growth and Income
Fund (6) .............................. 0.75% -- 0.25% 1.00%
Berger IPT--Small Company Growth
Fund (6) .............................. 0.85% -- 0.30% 1.15%
Berger IPT--New Generation Fund(6) ...... 0.85% -- 0.30% 1.15%
Berger/BIAM IPT--International
Fund (6) .............................. 0.90% -- 0.30% 1.20%
THE DREYFUS SOCIALLY RESPONSIBLE
GROWTH FUND, INC ...................... 0.75% -- 0.04% 0.79%
DREYFUS STOCK INDEX FUND ................ 0.25% -- 0.01% 0.26%
DREYFUS VARIABLE INVESTMENT FUND
Dreyfus VIF Disciplined
Stock Portfolio ....................... 0.75% -- 0.06% 0.81%
Dreyfus VIF International
Value Portfolio ....................... 1.00% -- 0.35% 1.35%
FEDERATED INSURANCE SERIES
Federated High Income Bond Fund II ...... 0.60% -- 0.19% 0.79%
Federated International Equity
Fund II (7) ........................... 0.54% -- 0.71% 1.25%
Federated Utility Fund II ............... 0.75% -- 0.19% 0.94%
INVESCO VARIABLE INVESTMENT FUNDS, INC.
INVESCO VIF--High Yield Fund (8) ........ 0.60% -- 0.47% 1.07%
INVESCO VIF--Equity Income Fund (8) ..... 0.75% -- 0.42% 1.17%
JANUS ASPEN SERIES, INSTITUTIONAL
SHARES
Aggressive Growth Portfolio(9) .......... 0.65% -- 0.02% 0.67%
Growth Portfolio (9) .................... 0.65% -- 0.02% 0.67%
Worldwide Growth Portfolio (9) .......... 0.65% -- 0.05% 0.70%
LAZARD RETIREMENT SERIES, INC.
Lazard Retirement Equity
Portfolio (10) ........................ 0.75% 0.25% 0.25% 1.25%
Lazard Retirement Small Cap
Portfolio (10) ........................ 0.75% 0.25% 0.25% 1.25%
LORD ABBETT SERIES FUND, INC.
Growth & Income Portfolio ............... 0.50% -- 0.37% 0.87%
MITCHELL HUTCHINS SERIES TRUST
Growth and Income Portfolio ............. 0.70% -- 0.53% 1.23%
NEUBERGER BERMAN ADVISERS MANAGEMENT
TRUST
Limited Maturity Bond Portfolio ......... 0.65% -- 0.11% 0.76%
Partners Portfolio ...................... 0.80% -- 0.07% 0.87%
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CONSECO VARIABLE INSURANCE COMPANY
2000 ACCOUNT C
GROUP ANNUITY
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ANNUAL FUND EXPENSES - CONTINUED
(as a percentage of the average daily net assets of a portfolio)
TOTAL
ANNUAL
OTHER PORTFOLIO
EXPENSES EXPENSES
(AFTER (AFTER
EXPENSE EXPENSE
REIMBURSE- REIMBURS-
MENT, IF EMENT, IF
MANAGE- ANY, FOR ANY, FOR
MENT 12b-1 CERTAIN CERTAIN
FEES FEES PORTFOLIOS) PORTFOLIOS)
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RYDEX VARIABLE TRUST
OTCFund ................................ 0.75% -- 0.80% 1.55%
NovaFund ............................... 0.75% -- 0.80% 1.55%
SELIGMAN PORTFOLIOS, INC.
Seligman Communications and
Information Portfolio (11) ........... 0.75% 0.25% 0.11% 1.11%
Seligman Global Technology
Portfolio (11) ....................... 1.00% 0.15% 0.40% 1.55%
STRONG OPPORTUNITY FUND II, INC.
Opportunity Fund II .................... 1.00% -- 0.14% 1.14%
STRONG VARIABLE INSURANCE FUNDS, INC.
Strong Mid Cap Growth Fund II(12) ...... 1.00% -- 0.15% 1.15%
VAN ECK WORLDWIDE INSURANCE TRUST (13)
Worldwide Bond Fund .................... 1.00% -- 0.22% 1.22%
Worldwide Emerging Markets Fund ........ 1.00% -- 0.54% 1.54%
Worldwide Hard Assets Fund ............. 1.00% -- 0.26% 1.26%
Worldwide Real Estate Fund ............. 1.00% -- 2.23% 3.23%
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EXPLANATION OF FEE TABLE
The purpose of the Fee Table is to show you the various Contract expenses
you will pay directly or indirectly. The Fee Table reflects expenses of the
Variable Account as well as the Funds.
(1) The Adviser, Conseco Capital Management, Inc., and the Administrator,
Conseco Services, LLC, have contractually agreed to waive a portion of their
fees and/or pay a portion of the Portfolio's expenses through 4/30/01 to ensure
that total annual operating expenses do not exceed: 0.90% for Conseco 20 Focus
Portfolio; 0.85% for Equity Portfolio; 0.85% for Balanced Portfolio; 0.90% for
High Yield Portfolio; 0.70% for Fixed Income Portfolio; 0.70% for Government
Securities Portfolio and 0.45% for Money Market Portfolio. The Adviser and
Administrator may recover any money waived under the contract provisions, to the
extent that actual fees and expenses are less than the expense limitation, for a
period of 3 years, after the date of the waiver.
(2) Because these Portfolios have not completed a full fiscal year, other
expenses are estimated.
(3) Conseco Capital Management, Inc., since May 1, 1993, has waived its
management fees in excess of the annual rate set forth above. Absent such fee
waivers, the management fees for the Money Market Portfolio would be 0.60%.
(4) The Alger American Leveraged AllCap Portfolio's "Other Expenses"
includes .01% of interest expense.
(5) The fund has a stepped fee schedule. As a result, the fund's management
fee rate generally decreases as the fund's assets increase.
(6) The Funds' investment advisers have agreed to waive their advisory fee
and reimburse the Funds for additional expenses to the extent that normal
operating expenses in any fiscal year, including the investment advisory fee but
excluding brokerage commissions, interest, taxes and extraordinary expenses, of
each of the Berger IPT--Growth Fund and the Berger IPT--Growth and Income Fund
exceed 1.00%, the normal operating expenses in any fiscal year of each of the
Berger IPT--Small Company Growth Fund and the Berger IPT--New Generation Fund
exceed 1.15%, and the normal operating expenses of the Berger/BIAM
IPT--International Fund exceed 1.20% of the respective fund's average daily net
assets. Absent the waiver and reimbursement, the Other Expenses for the Berger
IPT--Growth Fund, the Berger IPT--New Generation Fund, the Berger IPT--Growth
and Income Fund, the Berger IPT--Small Company Growth Fund and the Berger/BIAM
IPT--International Fund would have been 1.43%, 0.43%, 0.64%, 2.10% and 1.55%,
respectively, and their Total Annual Portfolio Expenses would have been 2.18%,
1.18%, 1.49%, 2.95% and 2.45%, respectively. These waivers/reimbursements may
not be terminated or amended except by a vote of the Fund's Board of Trustees.
Expenses shown for the Berger IPT--New Generation Fund are based on estimates
for the Fund's first full year of operations.
(7) Absent a voluntary waiver of the management fee and the voluntary
reimbursement of certain other operating expenses by Federated Global Investment
Management Corp., the Management Fee and Total Annual Portfolio Expenses for
International Equity Fund II would have been 0.75% and 1.46%, respectively.
(8) The Fund's actual Total Annual Fund Operating Expenses were lower than
the figures shown because its custodian fees were reduced under an expense
offset arrangement. The expense information presented in the table has been
restated from the financials to reflect a change in the administrative services
fee. Certain expenses of the Fund were absorbed voluntarily by INVESCO in order
to ensure that expenses did not exceed 1.05% of the High Yield Fund's average
net assets and 1.15% of the Equity Income Fund's average net assets pursuant to
a commitment between the Fund and INVESCO. This commitment may be changed at any
time following consultation with the board of directors. Without such
absorption, but excluding any expense offset arrangements, Other Expenses and
Total Annual Operating Expenses for the fiscal year ended December 31, 1999 were
0.48% and 1.08% respectively of the High Yield Fund's average net assets and
0.44% and 1.19% respectively of the Equity Income Fund's average net assets.
(9) Expenses are based upon expenses for the fiscal year ended December 31,
1999, restated to reflect a reduction in the management fee for Growth,
Aggressive Growth and Worldwide Growth Portfolios. All expenses are shown
without the effect of expense offset arrangements.
(10) Effective May 1, 1999, Lazard Asset Management, the Fund's investment
adviser, has
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CONSECO VARIABLE INSURANCE COMPANY
2000 ACCOUNT C
GROUP ANNUITY
================================================================================
voluntarily agreed to reimburse all expenses through December 31, 2000 to the
extent total annual portfolio expenses exceed in any fiscal year 1.25% of the
Portfolio's average daily net assets. Absent such an agreement with the adviser,
the total annual portfolio expenses for the year ended December 31, 1999 would
have been 5.63% for the Lazard Retirement Equity Portfolio and 7.31% for the
Lazard Retirement Small Cap Portfolio.
(11) The amount of the Management Fee and Other Expenses are actual
expenses for the fiscal year ended December 31, 1999. Seligman Communications
and Information Portfolio and Seligman Global Technology Portfolio began
offering shares charging 12b-1 fees effective May 1, 2000. J. & W. Seligman &
Co. Incorporated ("Seligman") voluntarily agreed to reimburse expenses of
Seligman Global Technology Portfolio, other than the management fee, which
exceed .40%. Without reimbursement, Other Expenses and Total Annual Portfolio
Expenses would have been .41% and 1.56% respectively, for Seligman Global
Technology Portfolio. There is no assurance that Seligman will continue this
policy in the future.
(12) Strong Capital Management, Inc., the fund's advisor of the Strong Mid
Cap Growth Fund II is currently absorbing expenses of 0.02%. Without these
absorptions, the expenses would have been 1.17% for the year ended December 31,
1999. The Advisor has no current intention to, but may in the future,
discontinue or modify any waiver of fees or absorption of expenses at its
discretion with appropriate notification to its shareholders.
(13) Van Eck Associates Corporation (the "Adviser") agreed to assume
expenses (excluding interest, foreign taxes and brokerage commissions) exceeding
1.50% of the Worldwide Emerging Markets Fund's average daily net assets for the
period January 1, 1999 to May 12, 1999. For the period May 13, 1999 to December
31, 1999, the Adviser agreed to assume expenses (excluding interest, foreign
taxes and brokerage commissions) exceeding 1.30% of average daily net assets.
For the Worldwide Real Estate Fund, the Adviser agreed to assume expenses
(excluding interest, foreign taxes and brokerage commissions) for the period
January 2, 1999 to February 28, 1999. The Adviser also agreed to assume expenses
exceeding 1.50% of the Worldwide Real Estate Fund's average daily net assets for
the period March 3, 1999 to December 31, 1999. The Worldwide Real Estate Fund
expenses were also reduced by a fee arrangement based on cash balances left on
deposit with the custodian and a directed brokerage arrangement where the Fund
directs certain portfolio trades to a broker that, in turn, pays a portion of
the Fund's expenses.
EXAMPLES:
o Please remember that the examples that follow should not be considered a
representation of past or future expenses. Actual expenses may be
greater or less than those shown. Similarly, the 5% annual rate of
return is not an estimate or a guarantee of future investment
performance.
o This Contract is designed for retirement planning. Surrenders prior to
the Annuity Period are not consistent with the long-term purposes of the
Contract and the applicable tax laws.
o The table reflects estimates of expenses of the Variable Account and the
Funds. The table and examples assume the highest deductions possible
under a Contract, whether or not such deductions actually would be made
under your Contract.
o Annual contract charges have been approximated as a .07% annual asset
charge.
11
<PAGE>
================================================================================
EXAMPLES:
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.
EXAMPLE 1--If you surrender the Contract at the end of the time periods:
1 YEAR 3 YEARS 5 YEARS 10 YEARS
================================================================================
CONSECO SERIES TRUST
Conseco 20 Focus Portfolio ................ $ 70 $112 $155 $257
Equity Portfolio .......................... 69 108 149 243
Balanced Portfolio ........................ 69 107 148 241
High Yield Portfolio ...................... 70 112 155 257
Fixed Income Portfolio .................... 68 105 144 233
Government Securities Portfolio ........... 68 104 143 232
Money Market Portfolio .................... 65 96 130 204
THE ALGER AMERICAN FUND
Alger American Growth Portfolio ........... 69 108 150 246
Alger American Leveraged AllCap
Portfolio ............................... 71 113 157 260
Alger American MidCap Growth Portfolio .... 70 110 153 252
Alger American Small Capitalization
Portfolio ............................... 70 112 155 257
AMERICAN CENTURY VARIABLE PORTFOLIOS, INC.
VP Income and Growth ...................... 68 106 145 236
VP International .......................... 75 125 178 302
VP Value .................................. 71 115 161 267
BERGER INSTITUTIONAL PRODUCTS TRUST
Berger IPT--Growth Fund ................... 71 115 161 267
Berger IPT--Growth and Income Fund ........ 71 115 161 267
Berger IPT--Small Company Growth Fund ..... 73 119 168 283
Berger IPT--New Generation Fund ........... 73 119 168 283
Berger/BIAM IPT--International Fund ....... 73 121 171 288
THE DREYFUS SOCIALLY RESPONSIBLE
GROWTH FUND, INC ........................ 69 108 150 246
DREYFUS STOCK INDEX FUND .................. 64 92 122 188
DREYFUS VARIABLE INVESTMENT FUND, INC.
Dreyfus VIF Disciplined Stock Portfolio ... 70 109 151 248
Dreyfus VIF International Value
Portfolio ............................... 75 125 178 303
FEDERATED INSURANCE SERIES
Federated High Income Bond Fund II ........ 69 108 150 246
Federated International Equity Fund II .... 74 122 173 293
Federated Utility Fund II ................. 71 113 158 261
INVESCO VARIABLE INVESTMENT FUNDS, INC.
INVESCO VIF--High Yield Fund .............. 72 117 165 275
INVESCO VIF--Equity Income Fund ........... 73 120 169 285
JANUS ASPEN SERIES
Aggressive Growth Portfolio ............... 68 105 144 233
Growth Portfolio .......................... 68 105 144 233
Worldwide Growth Portfolio ................ 68 106 145 236
LAZARD RETIREMENT SERIES, INC.
Lazard Retirement Equity Portfolio ........ 74 122 173 293
Lazard Retirement Small Cap Portfolio ..... 74 122 173 293
LORD ABBETT SERIES FUND, INC.
Growth & Income Portfolio ................. 70 111 154 254
MITCHELL HUTCHINS SERIES TRUST
Growth and Income Portfolio ............... 74 122 172 291
NEUBERGER BERMAN ADVISERS MANAGEMENT TRUST
Limited Maturity Bond Portfolio ........... 69 107 148 242
Partners Portfolio ........................ 70 111 154 254
12
<PAGE>
CONSECO VARIABLE INSURANCE COMPANY
2000 ACCOUNT C
GROUP ANNUITY
================================================================================
1 YEAR 3 YEARS 5 YEARS 10 YEARS
================================================================================
RYDEX VARIABLE TRUST
OTC Fund .................................. $ 77 $131 $188 $323
Nova Fund ................................. 77 131 188 323
SELIGMAN PORTFOLIOS, INC.
Seligman Communications and
Information Portfolio ................... 73 118 166 279
Seligman Global Technology Portfolio ...... 77 131 188 323
STRONG OPPORTUNITY FUND II, INC.
Opportunity Fund II ....................... 73 119 168 282
STRONG VARIABLE INSURANCE FUNDS, INC.
Strong Mid Cap Growth Fund II ............. 73 119 168 283
VAN ECK WORLDWIDE INSURANCE TRUST
Worldwide Bond Fund ....................... 74 121 172 290
Worldwide Emerging Markets Fund ........... 77 131 188 322
Worldwide Hard Assets Fund ................ 74 123 174 294
Worldwide Real Estate Fund ................ 94 181 269 475
13
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================================================================================
EXAMPLE 2--If you do not surrender your Contract at the end of the time
periods:
1 YEAR 3 YEARS 5 YEARS 10 YEARS
================================================================================
CONSECO SERIES TRUST
Conseco 20 Focus Portfolio ................ $ 20 $ 61 $105 $226
Equity Portfolio .......................... 18 57 98 212
Balanced Portfolio ........................ 18 56 97 216
High Yield Portfolio ...................... 20 61 105 226
Fixed Income Portfolio .................... 17 54 93 202
Government Securities Portfolio ........... 17 54 92 201
Money Market Portfolio .................... 15 46 79 173
THE ALGER AMERICAN FUND
Alger American Growth Portfolio ........... 19 58 99 215
Alger American Leveraged AllCap
Portfolio ............................... 20 62 106 229
Alger American MidCap Growth Portfolio .... 19 59 102 221
Alger American Small Capitalization
Portfolio ............................... 20 61 105 226
AMERICAN CENTURY VARIABLE PORTFOLIOS, INC.
VP Income and Growth ...................... 18 55 94 205
VP International .......................... 24 74 127 271
VP Value .................................. 21 64 110 237
BERGER INSTITUTIONAL PRODUCTS TRUST
Berger IPT--Growth Fund ................... 21 64 110 237
Berger IPT--Growth and Income Fund ........ 21 64 110 237
Berger IPT--Small Company Growth Fund ..... 22 68 117 252
Berger IPT--New Generation Fund ........... 22 68 117 252
Berger/BIAM IPT--International Fund ....... 23 70 120 257
THE DREYFUS SOCIALLY RESPONSIBLE
GROWTH FUND, INC ........................ 19 58 99 215
DREYFUS STOCK INDEX FUND .................. 13 41 72 157
DREYFUS VARIABLE INVESTMENT FUND, INC.
Dreyfus VIF Disciplined Stock Portfolio ... 19 58 100 217
Dreyfus VIF International Value
Portfolio ............................... 24 74 127 272
FEDERATED INSURANCE SERIES
Federated High Income Bond Fund II ........ 19 58 99 215
Federated International Equity Fund II .... 23 71 122 262
Federated Utility Fund II ................. 20 62 107 230
INVESCO VARIABLE INVESTMENT FUNDS, INC.
INVESCO VIF--High Yield Fund .............. 21 66 113 244
INVESCO VIF--Equity Income Fund ........... 22 68 118 254
JANUS ASPEN SERIES
Aggressive Growth Portfolio ............... 17 54 93 202
Growth Portfolio .......................... 17 54 93 202
Worldwide Growth Portfolio ................ 18 55 94 205
LAZARD RETIREMENT SERIES, INC.
Lazard Retirement Equity Portfolio ........ 23 71 122 262
Lazard Retirement Small Cap Portfolio ..... 23 71 122 262
LORD ABBETT SERIES FUND, INC.
Growth & Income Portfolio ................. 19 60 103 223
MITCHELL HUTCHINS SERIES TRUST
Growth and Income Portfolio ............... 23 71 121 260
NEUBERGER BERMAN ADVISERS MANAGEMENT TRUST
Limited Maturity Bond Portfolio ........... 18 57 97 211
Partners Portfolio ........................ 19 60 103 223
RYDEX VARIABLE TRUST
OTC Fund .................................. 26 80 137 292
Nova Fund ................................. 26 80 137 292
14
<PAGE>
CONSECO VARIABLE INSURANCE COMPANY
2000 ACCOUNT C
GROUP ANNUITY
================================================================================
1 YEAR 3 YEARS 5 YEARS 10 YEARS
================================================================================
SELIGMAN PORTFOLIOS, INC.
Seligman Communications and
Information Portfolio ................... $ 22 $ 67 $115 $248
Seligman Global Technology Portfolio ...... 26 80 137 292
STRONG OPPORTUNITY FUND II, INC.
Opportunity Fund II ....................... 22 68 117 251
STRONG VARIABLE INSURANCE FUNDS, INC.
Strong Mid Cap Growth Fund II ............. 22 68 117 252
VAN ECK WORLDWIDE INSURANCE TRUST
Worldwide Bond Fund ....................... 23 71 121 259
Worldwide Emerging Markets Fund ........... 26 80 137 291
Worldwide Hard Assets Fund ................ 23 72 123 263
Worldwide Real Estate Fund ................ 43 130 218 444
15
<PAGE>
================================================================================
EXAMPLE 3--If you annuitize at the end of the time periods:
1 YEAR 3 YEARS 5 YEARS 10 YEARS
================================================================================
CONSECO SERIES TRUST
Conseco 20 Focus Portfolio ................ $ 70 $112 $105 $227
Equity Portfolio .......................... 69 108 99 213
Balanced Portfolio ........................ 69 107 98 211
High Yield Portfolio ...................... 70 112 105 227
Fixed Income Portfolio .................... 68 105 94 203
Government Securities Portfolio ........... 68 104 93 202
Money Market Portfolio .................... 65 96 80 174
THE ALGER AMERICAN FUND
Alger American Growth Portfolio ........... 69 108 100 216
Alger American Leveraged
AllCap Portfolio ........................ 71 113 107 230
Alger American MidCap Growth Portfolio .... 70 110 103 222
Alger American Small Capitalization
Portfolio ............................... 70 112 105 227
AMERICAN CENTURY VARIABLE PORTFOLIOS, INC.
VP Income and Growth ...................... 68 106 95 206
VP International .......................... 75 125 128 272
VP Value .................................. 71 115 111 237
BERGER INSTITUTIONAL PRODUCTS TRUST
Berger IPT--Growth Fund ................... 71 115 111 237
Berger IPT--Growth and Income Fund ........ 71 115 111 237
Berger IPT--Small Company Growth Fund ..... 73 119 118 253
Berger IPT--New Generation Fund ........... 73 119 118 253
Berger/BIAM IPT--International Fund ....... 73 121 121 258
THE DREYFUS SOCIALLY RESPONSIBLE
GROWTH FUND, INC ........................ 69 108 100 216
DREYFUS STOCK INDEX FUND .................. 64 92 72 158
DREYFUS VARIABLE INVESTMENT FUND, INC.
Dreyfus VIF Disciplined Stock Portfolio ... 70 109 101 218
Dreyfus VIF International Value Portfolio . 75 125 128 273
FEDERATED INSURANCE SERIES
Federated High Income Bond Fund II ........ 69 108 100 216
Federated International Equity Fund II .... 74 122 123 263
Federated Utility Fund II ................. 71 113 108 231
INVESCO VARIABLE INVESTMENT FUNDS, INC.
INVESCO VIF--High Yield Fund .............. 72 117 114 245
INVESCO VIF--Equity Income Fund ........... 73 120 119 255
JANUS ASPEN SERIES
Aggressive Growth Portfolio ............... 68 105 94 203
Growth Portfolio .......................... 68 105 94 203
Worldwide Growth Portfolio ................ 68 106 95 206
LAZARD RETIREMENT SERIES, INC.
Lazard Retirement Equity Portfolio ........ 74 122 123 263
Lazard Retirement Small Cap Portfolio ..... 74 122 123 263
LORD ABBETT SERIES FUND, INC.
Growth & Income Portfolio ................. 70 111 104 224
MITCHELL HUTCHINS SERIES TRUST
Growth and Income Portfolio ............... 74 122 122 261
NEUBERGER BERMAN ADVISERS MANAGEMENT TRUST
Limited Maturity Bond Portfolio ........... 69 107 98 212
Partners Portfolio ........................ 70 110 102 221
RYDEX VARIABLE TRUST
OTC Fund .................................. 77 131 138 293
Nova Fund ................................. 77 131 138 293
16
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CONSECO VARIABLE INSURANCE COMPANY
2000 ACCOUNT C
GROUP ANNUITY
================================================================================
EXAMPLE 3--If you annuitize at the end of the time periods:
1 YEAR 3 YEARS 5 YEARS 10 YEARS
================================================================================
SELIGMAN PORTFOLIOS, INC.
Seligman Communications and
Information Portfolio ................... 73 118 116 249
Seligman Global Technology Portfolio ...... 77 131 138 293
STRONG OPPORTUNITY FUND II, INC.
Opportunity Fund II ....................... 73 119 118 253
STRONG VARIABLE INSURANCE FUNDS, INC.
Strong Mid Cap Growth Fund II ............. 73 119 118 253
VAN ECK WORLDWIDE INSURANCE TRUST
Worldwide Bond Fund ....................... 74 121 122 260
Worldwide Emerging Markets Fund ........... 77 131 138 292
Worldwide Hard Assets Fund ................ 74 123 124 264
Worldwide Real Estate Fund ................ 94 181 219 445
THERE IS AN ACCUMULATION UNIT VALUE HISTORY (CONDENSED FINANCIAL INFORMATION)
CONTAINED IN APPENDIX A.
17
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CONSECO VARIABLE, THE VARIABLE ACCOUNT AND INVESTMENT OPTIONS
CONSECO VARIABLE
Conseco Variable Insurance Company ("Conseco Variable" or the "Company")
was originally organized in 1937. Prior to October 7, 1998, the Company was
known as Great American Reserve Insurance Company. In certain states, we may
continue to use the name Great American Reserve Insurance Company until our name
change is approved in that state. The Company is principally engaged in the life
insurance business in 49 states and the District of Columbia. Conseco Variable
is a stock company organized under the laws of the state of Texas and is an
indirect wholly-owned subsidiary of Conseco, Inc. Conseco, Inc. is a publicly
held financial services holding company and is one of middle America's leading
sources for investment, insurance and lending products. Through its
subsidiaries, Conseco, Inc. is one of the nation's leading providers of
supplemental health insurance, retirement annuities and universal life
insurance.
CONTRACT OWNER INQUIRIES
You should direct any inquiries you have regarding your Individual Account,
the Contracts, or any related matter to the Company's Variable Annuity
Department at the address and telephone number shown under "Administrative
Office" on page 1 of this prospectus.
FINANCIAL STATEMENTS
The financial statements of Conseco Variable and the Variable Account are
contained in the Statement of Additional Information. You should consider the
financial statements of Conseco Variable only as bearing upon the ability of
Conseco Variable to meet its obligations under the Contracts. Neither the assets
of Conseco Variable nor those of any company in the Conseco Variable group of
companies other than Conseco Variable support these obligations.
THE VARIABLE ACCOUNT
The Variable Account was originally established in 1980 by Voyager Life
Insurance Company. The Variable Account is registered with the SEC as a unit
investment trust under the Investment Company Act of 1940 (the "1940 Act").
At a combined Special Meeting held on December 14, 1992, the Contract
Owners and participants in the Variable Account, Great American Reserve Variable
Annuity Account Fund ("Annuity Fund") and Great American Reserve Variable
Annuity Account D ("Account D") approved an Agreement and Plan of Reorganization
and the reorganization (the "Combination") of the Variable Account, Annuity
Fund, and Account D. On May 1, 1993, the effective date of the Combination,
Variable Account, Annuity Fund and Account D were combined and restructured into
a single continuing unit investment trust separate account investing exclusively
in shares of the Conseco Series Trust, and the Variable Account became the
continuing separate account. Also on May 1, 1993, all of the sub-account assets
of the Variable Account, including those of Annuity Fund and Account D, were
sold, assigned and transferred to the Equity (formerly, Common Stock), Fixed
Income (formerly, Corporate Bond) and Money Market Portfolios of Conseco Series
Trust. In exchange for such assets, shares of the Equity, Fixed Income and Money
Market Portfolios were issued to the Equity sub-account, Fixed Income
sub-account and Money Market sub-account of restructured Variable Account,
respectively.
The respective interests of Contract Owners and participants immediately
after the Combination were equal to their former interests in the Variable
Account, Annuity Fund or Account D, as the case may be, immediately before the
Combination. Prior to the Combination, Variable Account, Annuity Fund and
Account D had been operated by Conseco Variable as managed separate accounts
investing directly in securities. As a result of the Combination, the Variable
Account invests in shares of Conseco Series Trust. The Variable Account also
invests in shares of other Funds.
Prior to May 1, 1999, the Variable Account was known as Great American
Reserve Variable Annuity Account C. Registration under the 1940 Act does not
involve the supervision by the SEC of the management or investment policies or
practices of the Variable Account. The Variable Account is regulated by the
Insurance Department of Texas. Regulation by the state, however, does not
involve any supervision of the Variable Account, except to determine compliance
with broad statutory criteria.
The assets of the Variable Account are held in Conseco Variable's name on
behalf of the Variable Account and legally belong to Conseco Variable. However,
those assets that underlie the Contracts are not available to be used to pay the
liabilities
18
<PAGE>
CONSECO VARIABLE INSURANCE COMPANY
2000 ACCOUNT C
GROUP ANNUITY
================================================================================
arising out of any other business Conseco Variable may conduct. All the income,
gains and losses (realized or unrealized) resulting from these assets are
credited to or charged against the Contracts and not against any other contracts
Conseco Variable may issue.
The Variable Account is divided into sub-accounts. Each sub-account invests
in shares of one of the Funds.
Conseco Variable has also reserved the right, subject to compliance with
the law as currently applicable or subsequently changed:
(a) to operate the Variable Account in any form permitted under the 1940
Act or in any other form permitted by law;
(b) to take any action necessary to comply with or obtain and continue any
exemptions from the 1940 Act or to comply with any other applicable
law;
(c) to transfer any assets in any sub-account to another sub-account, or
to one or more separate investment accounts, or to Conseco Variable's
Fixed Account; or to add, combine or remove sub-accounts in the
Variable Account;
(d) to substitute shares of a Fund for shares of another Fund (with prior
approval of the Securities and Exchange Commission); and
(e) to change the way Conseco Variable assesses charges, so long as the
aggregate amount is not increased beyond that currently charged to the
Variable Account and the portfolios in connection with the Contract.
INVESTMENT OPTIONS
The Contract offers 47 Variable Account Investment Options which invest in
the Funds listed below. You bear the investment risk for amounts you allocate to
the Variable Account Investment Options. We may make additional Investment
Options available in the future.
You should read the prospectuses for these Funds carefully. Copies of these
prospectuses will be sent to you with your Contract. If you would like a copy of
the Fund prospectuses, call Conseco Variable at: (800) 557-7043. See Appendix B
which contains a summary of investment objectives and strategies for each
portfolio.
The investment objectives and policies of certain of the Funds are similar
to the investment objectives and policies of other mutual funds that certain of
the investment advisers manage. Although the objectives and policies may be
similar, the investment results of the Funds may be higher or lower than the
results of such other mutual funds. The investment advisers cannot guarantee,
and make no representation, that the investment results of similar funds will be
comparable even though the Funds have the same investment advisers.
A Fund's performance may be affected by risks specific to certain types of
investments, such as foreign securities, derivative investments, non-investment
grade debt securities, initial public offerings (IPOs) or companies with
relatively small market capitalizations. IPOs and other investment techniques
may have a magnified performance impact on a Fund with a small asset base. A
Fund may not experience similar performance as its assets grow.
CONSECO SERIES TRUST
Conseco Series Trust is a mutual fund with multiple portfolios. Conseco
Series Trust is managed by Conseco Capital Management, Inc., an affiliate of
Conseco Variable. The following portfolios are available under the Contract:
Conseco 20 Focus Portfolio
Equity Portfolio
Balanced Portfolio
High Yield Portfolio
Fixed Income Portfolio
Government Securities Portfolio
Money Market Portfolio
THE ALGER AMERICAN FUND
The Alger American Fund is a mutual fund with multiple portfolios. Fred
Alger Management, Inc. serves as the Fund's investment adviser. The following
portfolios are available under the Contract:
Alger American Growth Portfolio
Alger American Leveraged AllCap Portfolio
Alger American MidCap Growth Portfolio
Alger American Small Capitalization Portfolio
AMERICAN CENTURY VARIABLE PORTFOLIOS, INC.
American Century Variable Portfolios, Inc. is a series of funds managed by
American Century Investment Management, Inc. The following portfolios are
available under the Contract:
VP Income & Growth
VP International
VP Value
19
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================================================================================
BERGER INSTITUTIONAL PRODUCTS TRUST
Berger Institutional Products Trust is a mutual fund with multiple
portfolios. Berger LLC (formerly, Berger Associates, Inc.) is the investment
adviser to all portfolios except the Berger/BIAM IPT--International Fund. BBOI
Worldwide LLC, a joint venture between Berger LLC and Bank of Ireland Asset
Management (U.S.) Limited (BIAM), is the adviser to the Berger/BIAM
IPT--International Fund. BBOI Worldwide LLC has delegated daily management of
the Fund to BIAM. Berger LLC and BIAM have entered into an agreement to dissolve
BBOI Worldwide LLC. The dissolution of BBOI Worldwide LLC will have no effect on
the investment advisory services provided to the Fund. Contingent upon
shareholder approval, when BBOI Worldwide LLC is dissolved, Berger LLC will
become the Fund's advisor and BIAM will continue to be responsible for
day-to-day management of the Fund's portfolio as sub-advisor. If approved by
shareholders, these advisory changes are expected to take place in the first
half of this year. The following portfolios are available under the Contract:
Berger IPT--Growth Fund
(formerly, Berger IPT--100 Fund)
Berger IPT--Growth and Income Fund
Berger IPT--Small Company Growth Fund
Berger IPT--New Generation Fund
Berger/BIAM IPT--International Fund
THE DREYFUS SOCIALLY RESPONSIBLE GROWTH FUND, INC.
The Dreyfus Socially Responsible Growth Fund, Inc. is managed by The
Dreyfus Corporation. Dreyfus has hired NCM Capital Management Group, Inc. to
serve as sub-investment adviser and to provide day-to-day management of the
Fund's investments.
DREYFUS STOCK INDEX FUND
The Dreyfus Corporation serves as the Fund's manager. Dreyfus has hired its
affiliate, Mellon Equity Associates, to serve as the Fund's index fund manager
and to provide day-to-day management of the Fund's investments.
DREYFUS VARIABLE INVESTMENT FUND
The Dreyfus Variable Investment Fund is a mutual fund with multiple
portfolios. The Dreyfus Corporation serves as the investment adviser. The
following portfolios are available under the Contract:
Dreyfus VIF Disciplined Stock Portfolio
Dreyfus VIF International Value Portfolio
FEDERATED INSURANCE SERIES
Federated Insurance Series is a mutual fund with multiple portfolios.
Federated Investment Management Company is the investment adviser of the
Federated High Income Bond Fund II and the Federated Utility Fund II. Federated
Global Investment Management Corp. is the adviser of the Federated International
Equity Fund II. The following portfolios are available under the Contract:
Federated High Income Bond Fund II
Federated International Equity Fund II
Federated Utility Fund II
INVESCO VARIABLE INVESTMENT FUNDS, INC.
(NOT AVAILABLE FOR NEW SALES AS OF MAY 1, 2000)
INVESCO Variable Investment Funds, Inc. is a mutual fund with multiple
portfolios. INVESCO Funds Group, Inc. is the investment adviser. The following
portfolios are available under the Contract:
INVESCO VIF--High Yield Fund
INVESCO VIF--Equity Income Fund
JANUS ASPEN SERIES
The Janus Aspen Series is a mutual fund with multiple portfolios which are
advised by Janus Capital Corporation. The following portfolios are available
under the Contract:
Aggressive Growth Portfolio
Growth Portfolio
Worldwide Growth Portfolio
LAZARD RETIREMENT SERIES, INC.
Lazard Retirement Series, Inc. is a mutual fund with multiple portfolios.
Lazard Asset Management, a division of Lazard Freres & Co. LLC, is the
investment manager for each portfolio. The following portfolios are available
under the Contract:
Lazard Retirement Equity Portfolio
Lazard Retirement Small Cap Portfolio
LORD ABBETT SERIES FUND, INC.
Lord Abbett Series Fund, Inc. is a mutual fund with multiple portfolios
managed by Lord, Abbet
20
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CONSECO VARIABLE INSURANCE COMPANY
2000 ACCOUNT C
GROUP ANNUITY
================================================================================
& Co. The following portfolio is available under the Contract:
Growth & Income Portfolio
MITCHELL HUTCHINS SERIES TRUST
Mitchell Hutchins Series Trust is a mutual fund with multiple portfolios.
Mitchell Hutchins Asset Management Inc. provides advisory and administrative
services to the Fund. The following portfolio is available under the Contract:
Growth and Income Portfolio
NEUBERGER BERMAN ADVISERS MANAGEMENT TRUST
Neuberger Berman Advisers Management Trust is a mutual fund with multiple
portfolios. Neuberger Berman Management Inc. is the investment adviser. The
following portfolios are available under the Contract:
Limited Maturity Bond Portfolio
Partners Portfolio
RYDEX VARIABLE TRUST
Rydex Variable Trust is a mutual fund with multiple portfolios which are
managed by PADCO Advisors II, Inc. The following portfolios are available under
the contract:
OTC Fund
Nova Fund
SELIGMAN PORTFOLIOS, INC.
Seligman Portfolios, Inc. is a mutual fund with multiple portfolios which
are managed by J. & W. Seligman & Co. Incorporated. The following portfolios are
available under the Contract:
Seligman Communications and
Information Portfolio
Seligman Global Technology Portfolio
STRONG OPPORTUNITY FUND II, INC.
Strong Opportunity Fund II is a mutual fund and Strong Capital Management,
Inc. serves as the investment advisor. The following portfolio is available
under the Contract:
Opportunity Fund II
STRONG VARIABLE INSURANCE FUNDS, INC.
Strong Variable Insurance Funds, Inc. is a mutual fund with multiple
series. Strong Capital Management, Inc. serves as the investment advisor. The
following series is available under the Contract:
Strong Mid Cap Growth Fund II
VAN ECK WORLDWIDE INSURANCE TRUST
Van Eck Worldwide Insurance Trust is a mutual fund with multiple portfolios
which are managed by Van Eck Associates Corporation. The following portfolios
are available under the Contract:
Worldwide Bond Fund
Worldwide Emerging Markets Fund
Worldwide Hard Assets Fund
Worldwide Real Estate Fund
Shares of the Funds are offered in connection with certain variable annuity
contracts and variable life insurance policies of various life insurance
companies which may or may not be affiliated with Conseco Variable. Certain
Funds are also sold directly to qualified plans. The Funds believe that offering
their shares in this manner will not be disadvantageous to you.
Conseco Variable may enter into certain arrangements under which it is
reimbursed by the Funds' advisers, distributors and/or affiliates for the
administrative services which it provides to the Funds.
VOTING RIGHTS
Conseco Variable is the legal owner of the Fund shares. However, Conseco
Variable believes that when a Fund solicits proxies in conjunction with a vote
of shareholders, it is required to obtain from you and other owners instructions
as to how to vote those shares. When we receive those instructions, we will vote
all of the shares we own in proportion to those instructions. If we determine
that we are no longer required to comply with the above, we will vote the shares
in our own right without obtaining instructions from you. We have provided a
further discussion of voting rights in the Statement of Additional Information.
FIXED ACCOUNT
The Fixed Account is not registered with the SEC because of certain
exemptive and exclusionary provisions. Conseco Variable has been advised that
the staff of the SEC has not reviewed the disclosure in this prospectus relating
to the Fixed Account. The disclosure may, however, be subject to certain
generally applicable provisions of the federal securities laws relating to the
accuracy and completeness of statements made in prospectuses.
Purchase Payments and transfers to the Fixed Account become part of the
general account of Conseco Variable. You can transfer Contract
21
<PAGE>
================================================================================
Values between the Fixed and Variable Accounts, but the transfers are subject to
the following:
1. You may transfer Contract Values from the Variable Account to the
Fixed Account once in any 30-day period;
2. You may transfer Contract Values from the Fixed Account to the
Variable Account once in any six-month period subject to a limit of
20% of the Fixed Account value;
3. You may not make transfers from the Fixed Account once Annuity
Payments begin.
The mortality and expense risk charge does not apply to values allocated to
the Fixed Account.
If you buy the Contract as a TSA or under certain other qualified plans,
the Contract may contain a provision that allows you to take a loan against the
Contract Value you have allocated to the Fixed Account. Loan provisions are
described in detail in your Contract.
THE CONTRACT
The Contract, like all deferred annuity Contracts, has two phases: the
Accumulation Period and the Annuity Period. When you are making Purchase
Payments to the Contract, it is called the Accumulation Period. During the
Accumulation Period, earnings accumulate on a tax deferred basis and are taxed
as income when you make a withdrawal. When you begin receiving Annuity Payments
from the Contract, it switches to the Annuity Period.
Unless contrary to law, assignment of the Contract or of a Participant's
Individual Account is prohibited.
ACCUMULATION PROVISIONS
PURCHASE PAYMENTS
The Contract is designed for Plans generally involving 25 or more
Participants. Purchase Payments must be at least $10 per month. Purchase
Payments in excess of $500,000 may be made only with our approval and will be
subject to such terms and conditions as we may require.
Conseco Variable must approve each application. Upon acceptance, a Contract
is issued to the Contract Owner and the Purchase Payment, as applicable to each
Individual Account, is credited to the Participant's account. When Conseco
Variable accepts your application, it will issue you a Contract and allocate
your Purchase Payment as described below.
ALLOCATION OF PURCHASE PAYMENTS
You may elect to have Purchase Payments accumulate:
(a) on a fully variable basis, which means they are invested in the
sub-accounts of the Variable Account (Variable Account Investment
Options);
(b) on a fully fixed basis, which means they are invested in our general
account and receive a periodically adjusted interest rate guaranteed
by Conseco Variable (Fixed Account); or
(c) a combination of both.
You may request to change your allocation of future Purchase Payments 30
days after either we establish your Individual Account, or 30 days after you
have made a prior change in allocation.
TEN-DAY RIGHT TO REVIEW. The Contract provides a "10-day free look" (in
some states, the period may be longer). This allows the Contract Owner or
Participant to revoke the Contract by returning it to either a Conseco Variable
representative or to our Variable Annuity Department within 10 days (or the
period required in your state) of delivery of the Contract. Conseco Variable
deems this period as ending 15 days after it mails a Contract from its Variable
Annuity Department. If you return the Contract under the terms of the free look
provision, Conseco Variable will refund the Purchase Payments, unless a
different amount is required by state law.
Once we receive your Purchase Payment and the necessary information, we
will issue your Contract and allocate your first Purchase Payment within 2
business days. If you do not provide us all of the information needed, we will
contact you. If for some reason we are unable to complete this process within 5
business days, we will either send back your money or get your permission to
keep it until we get all of the necessary information.
If you add more money to your Contract by making additional Purchase
Payments, we will credit these amounts to your Contract within one business day.
Our business day closes when the New York Stock Exchange closes, usually 4:00
P.M. Eastern time.
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ACCUMULATION UNITS
We credit Purchase Payments that you allocate to the sub-accounts with
Accumulation Units. We do this at the end of the Valuation Period when we
receive your Purchase Payment at our Administrative Office. We determine the
number of Accumulation Units credited to your Contract by dividing the Purchase
Payment amount by the value of an Accumulation Unit at the end of that Valuation
Period. We value Accumulation Units for each sub-account separately.
ACCUMULATION UNIT VALUES
Every business day we determine the value of an Accumulation Unit for each
of the sub-accounts by multiplying the Accumulation Unit value for the previous
Valuation Period by a factor for the current Valuation Period. The factor is
determined by:
1. dividing the value of a Fund share at the end of the current Valuation
Period (and any charges for taxes) by the value of a Fund share for
the previous Valuation Period; and
2. subtracting the daily amount of the mortality and expense risk fee.
The value of an Accumulation Unit may go up or down from Valuation Period
to Valuation Period. There is no guarantee that the value of your Individual
Account will equal or exceed the Purchase Payments you have made.
We will tell you at least once each year the number of Accumulation Units
which we credited to your Individual Account, the current Accumulation Unit
values and the value of your Individual Account.
TRANSFERS
During the Accumulation Period, you may make transfers from one sub-account
to another sub-account and/or to the Fixed Account. Except with our permission,
you can only make a transfer once in any 30-day period. You can only make one
transfer from the Fixed Account in any 6 month period of no more than 20% of the
Fixed Account value. You can make transfers between sub-accounts and changes in
allocations in writing or by telephone (if you have completed a telephone
authorization request).
HOW YOU CAN MAKE TRANSFERS
Transfers must be made by written authorization from you or from the person
acting on your behalf as an attorney-in-fact under a power-of-attorney if
permitted by state law. You must request telephone transfers or internet
transfers on forms we provide. Internet transfers may not be available (check
with your registered representative). If you do not want the ability to make
transfers by telephone or through the internet, you should notify us in writing.
By authorizing Conseco Variable to accept telephone and internet transfer
instructions, you agree to accept and be bound by the conditions and procedures
established by Conseco Variable from time to time. We have instituted reasonable
procedures to confirm that any instructions communicated are genuine. We will
record all telephone calls and will ask the caller to produce your personalized
data prior to our initiating any transfer requests by telephone. Personalized
data will also be required for internet transfers. Additionally, as with other
transactions, you will receive a written confirmation of your transfer. If
reasonable procedures are employed, neither Conseco Variable nor Conseco Equity
Sales, Inc. will be liable for following instructions which it reasonably
believes to be genuine.
Transfer requests received by Conseco Variable before the close of trading
on the New York Stock Exchange (currently 4:00 PM Eastern time) will be
initiated at the close of business that day. If we receive a request later it
will be initiated at the close of the next business day.
DOLLAR COST AVERAGING
Conseco Variable offers a Dollar Cost Averaging (DCA) program which enables
you to transfer values from the Fixed Account or Money Market sub-account to
another Investment Option on a predetermined and systematic basis. The DCA
program allows you to make investments in equal installments over time in an
effort to potentially reduce the risk of market fluctuations. There is no
guarantee that this will happen. Currently, there is no charge for participating
in this program. We reserve the right, at any time and without prior notice, to
terminate, suspend or modify this program.
Dollar cost averaging does not assure a profit and does not protect against
loss in declining markets. Dollar cost averaging involves continuous investment
in the selected Variable Account Investment Options regardless of fluctuating
price levels of the Variable Account Investment Option(s). You should consider
your financial ability to continue the dollar cost averaging program through
periods of fluctuating price levels.
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REBALANCING
Rebalancing is a program, which if elected, permits you to pre-authorize
periodic automatic transfers during the Accumulation Period among the
sub-accounts pursuant to your written instructions or over the internet. The
rebalancing program may also be available through the internet (check with your
representative regarding availability). Rebalancing over the internet is subject
to our administrative rules and procedures. The transfers under this program are
made to maintain a particular percentage allocation among the sub-accounts you
select. Any amount you have in the Fixed Account will not be transferred
pursuant to the rebalancing program. You must have at least $5,000 of Contract
Value to have transfers made pursuant to this program. Transfers must be in
whole percentages in one (1%) percent allocation increments. The maximum number
of sub-accounts you can use for rebalancing is 15. You can request that
rebalancing occur quarterly, semi-annually or annually on a date you select.
There is no fee for participating in the program. Conseco Variable reserves the
right to terminate, modify or suspend the rebalancing program at any time.
ASSET ALLOCATION PROGRAM
Conseco Variable understands the importance to you of having advice from a
financial adviser regarding your investments in the Contract (asset allocation
program). Certain investment advisers have made arrangements with us to make
their services available to you. Conseco Variable has not made any independent
investigation of these advisers and is not endorsing such programs. You may be
required to enter into an advisory agreement with your investment adviser to
have the fees paid out of your Contract during the Accumulation Period.
Conseco Variable will, pursuant to an agreement with you, make a partial
withdrawal from the value of your Contract to pay for the services of the
investment adviser. If the Contract is non-qualified, the withdrawal will be
treated like any other distribution and may be included in gross income for
federal tax purposes. Further, if you are under age 59 1/2, it may be subject to
a tax penalty. If the Contract is qualified, the withdrawal for the payment of
fees may not be treated as a taxable distribution if certain conditions are met.
Additionally, any withdrawals for this purpose may be subject to a withdrawal
charge (deferred sales load). You should consult a tax adviser regarding the tax
treatment of the payment of investment adviser fees from your Contract.
SWEEPS
Sweeps is a program which provides for the automatic transfer of the
earnings from the Fixed Account into a Variable Account Investment Option on a
periodic and systematic basis. The transfers under this program do not count
toward the number of transfers you can make in a year. Currently, there is no
charge for participating in this program.
WITHDRAWALS
You can withdraw all or a portion of the Contract Value at any time before
the commencement of Annuity Payments and, under certain circumstances, during
the Annuity Period (subject to any restrictions of the Code). We will determine
the value of the Contract as of the date we receive a written request for a
withdrawal at our Administrative Office or a later date you specify in the
request. The redemption payment will be the value of Accumulation Units then
credited to the Individual Account under the Contract less applicable withdrawal
charges, any outstanding loans and applicable administrative fees. With respect
to any Individual Account value or portion thereof which has been applied to
provide Annuity Payments, Conseco Variable will continue to make Annuity
Payments under the option you selected until its obligations to make such
payments terminates.
For certain qualified Contracts, your withdrawal rights may be restricted
and may require the consent of your spouse as required under the Code.
If you have amounts allocated to more than one Investment Option, a request
for a partial withdrawal must specify the manner in which the amount redeemed is
to be allocated between the Investment Options. If you do not specify how the
withdrawal is to be allocated between Investment Options, Conseco Variable will
call you to get instructions. If Conseco Variable cannot get instructions from
you, it will return the withdrawal request to you.
WITHDRAWALS MAY BE SUBJECT TO INCOME TAXES, PENALTY TAXES AND CERTAIN
RESTRICTIONS.
SUSPENSION OF PAYMENTS
We will pay the amount of any withdrawal from the Variable Account
promptly, and in any event within seven days of the date Conseco Variable
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receives the written request at its Administrative Office. Conseco Variable
reserves the right to defer the right of withdrawal or postpone payments for any
period when:
(1) the New York Stock Exchange is closed (other than customary weekend
and holiday closings);
(2) trading on the New York Stock Exchange is restricted;
(3) an emergency exists as a result of which disposal of securities held
in the Variable Account is not reasonably practicable or it is not
reasonably practical to determine the value of the Variable Account's
net assets; or
(4) the SEC, by order, so permits for the protection of security holders,
provided that applicable rules and regulations of the SEC will govern
as to whether the conditions described in (2) and (3) exist.
RESTRICTIONS UNDER OPTIONAL RETIREMENT PROGRAMS
If you participate in certain Optional Retirement Programs (ORP), you can
withdraw your interest in a Contract only upon:
(1) termination of employment in all public institutions of higher
education as defined by applicable law,
(2) retirement, or
(3) death.
Accordingly, you (as a participant in ORP) may be required to obtain a
certificate of termination from your employer before you can withdraw your
interest. Certain plans may have additional restrictions on distributions.
RESTRICTIONS UNDER SECTION 403(B) PLANS
If you own the Contract under a TSA-403(b) plan, you can only make
withdrawals of amounts attributable to contributions you made pursuant to a
salary reduction agreement (as defined in Section 403(b)(11) of the Code) under
the following circumstances:
(1) when you attain age 59 1/2,
(2) when you separate from service,
(3) when you die,
(4) if you become disabled (within the meaning of Section 72(m)(7) of the
Code),
(5) in the case of hardship, or
(6) made pursuant to a qualified domestic relations order, if otherwise
permitted.
Withdrawals for hardship are restricted to the portion of your Contract
Value which represents contributions you made and does not include any
investment results. The limitations on withdrawals became effective on January
1, 1989, and apply only to:
o salary reduction contributions made after December 31, 1988;
o income attributable to such contributions; and
o income attributable to amounts held as of December 31, 1988.
The limitations on withdrawals do not affect rollovers or transfers between
certain qualified plans. Tax penalties may also apply.
CONVERSION TO INDIVIDUAL ACCOUNT UPON TERMINATION IN PLAN
Upon termination of participation in Plan, the Participant who is entitled
to a benefit under the terms of the Plan may elect, if the Contract Owner so
requests, to convert to an individual annuity contract. The individual annuity
contract will be of the form then currently issued for this class of individual,
at a duration equivalent to the lesser of the number of full years: (a) the
Participant has been in the Plan; or (b) the Contract has been in force.
SYSTEMATIC WITHDRAWAL PLAN
Conseco Variable offers a Systematic Withdrawal Plan (SWP) which enables
you to pre-authorize periodic withdrawals. You can participate in this program
by sending a written request to our Administrative Office. You can instruct
Conseco Variable to withdraw a level dollar amount from specified Investment
Options on a periodic basis. If you do a reallocation and do not specify
Investment Options, all systematic withdrawals will be withdrawn from the Fixed
Account and Variable Account Investment Options on a pro-rata basis. The total
SWP withdrawals in a Contract Year which you are permitted to make is limited to
amounts that can be withdrawn without the withdrawal charge (see "Charges and
Deductions-Withdrawal Charge").
SWP is not available if you participate in the dollar cost averaging
program or if you have Purchase Payments automatically deducted from a bank
account on a periodic basis.
SYSTEMATIC WITHDRAWALS MAY BE SUBJECT TO INCOME TAXES, PENALTY TAXES AND
CERTAIN RESTRICTIONS.
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LOANS
Your Contract may contain a loan provision issued in connection with
certain qualified plans. If you own a Contract which contains a loan provision,
you may obtain loans using the Contract as the only security for the loan. Loans
are subject to provisions of the Code and to applicable retirement program
rules. You should consult a tax adviser and retirement plan fiduciary before
exercising loan privileges. Loan provisions are described in detail in your
Contract.
The amount of any loan outstanding on the date of death will be deducted
from the death benefit. In addition, a loan, whether or not repaid, will have a
permanent effect on the Contract Value because the investment performance of the
Investment Options will apply only to the unborrowed portion of the Contract
Value. The longer the loan is outstanding, the greater the effect is likely to
be. The effect could be favorable or unfavorable. If the investment performance
results are greater than the rate being credited on amounts held in the loan
account while the loan is outstanding, the Contract Value will not increase as
rapidly as it would have if no loan were outstanding. If the investment
performance results are below that rate, the Contract Value will be higher than
it would have been if no loan had been outstanding.
CHARGES AND DEDUCTIONS
WITHDRAWAL CHARGE
If you make a partial or full withdrawal during the Accumulation Period,
Conseco Variable will deduct a withdrawal charge from the amount withdrawn
("amount redeemed") if there are less than 15 completed annual purchase payment
periods (annual purchase payment period means a contract year which is the one
year period beginning on the issue date and each subsequent one year period) for
the Individual Account. During the Annuity Period, withdrawal charges may apply
to the fourth and fifth options.
We do not deduct withdrawal charges from Annuity Payments under an annuity
option involving lifetime payments or from amounts paid due to the death of a
participant.
The withdrawal charge will be a percentage of the amount redeemed, ranging
from 5% to 0% depending upon the number of completed annual Purchase Payment
periods for the Individual Account. In no event, however, will the cumulative
deductions exceed 8.5% of the cumulative Purchase Payments made. Until such
percentage reaches zero, it is possible that the actual dollar amount of the
withdrawal charge will increase, even though the percentage will decline,
because of the increased Participant's Individual Account.
COMPLETED ANNUAL
PURCHASE PAYMENT PERIODS
FOR THE INDIVIDUAL ACCOUNT CHARGE
Less than 5 .......................................................... 5.00%
5 but less than 10 ................................................... 3.00%
10 but less than 15 .................................................. 2.00%
15 or more ........................................................... None
EXAMPLES:
(1) If you make a complete withdrawal of your Individual Account before
five completed Purchase Payment periods:
VALUE OF
CONTRACT OR
INDIVIDUAL
ACCOUNT
(AMOUNT WITHDRAWAL ADMINISTRATIVE REDEMPTION
REDEEMED) CHARGE FEE DEDUCTION* PAYMENTS
- --------------------------------------------------------------------------------
$ 2,000 5% ($100) $15 $ 1,885
* Applicable to full withdrawals only.
(2) If you make a partial withdrawal of your Individual Account before five
completed Purchase Payment periods, assuming you request a $1,000 redemption
payment:
AMOUNT AMOUNT WITHDRAWAL REDEMPTION
REQUESTED REDEEMED CHARGE PAYMENTS
- --------------------------------------------------------------------------------
$1,000.00 $1,052.63 $52.63 (5%) $1,000.00
In order to make a redemption payment of $1,000, the amount redeemed must
be greater than the amount requested by the amount of the withdrawal charge. We
calculate the amount redeemed by dividing (a) the amount requested ($1,000) by
(b) 1.00 minus the deduction rate of 5% (or .95), which produces $1,052.63. The
value of the Individual Account will be reduced by this amount.
ADMINISTRATIVE CHARGE (ANNUAL CONTRACT FEE)
During the Accumulation Period, Conseco Variable deducts an annual contract
fee of $15 on each July 2 from the Individual Account value. If you fully
surrender your Individual Account prior to the commencement of Annuity Payments,
the annual contract fee will be deducted from proceeds paid.
Conseco Variable deducts the administrative fee first from amounts
accumulated in the Fixed Account; if no or an insufficient value exists in the
Fixed
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Account, any balance will then be deducted from the sub-accounts of Variable
Account. These administrative fees have been set at a level that will recover no
more than the actual costs associated with administering the Contracts.
MORTALITY AND EXPENSE RISK CHARGE
Conseco Variable makes daily deductions from the Variable Account at an
effective annual rate equal to 1.00% of the value of the assets of the Variable
Account for the mortality and expense risks it assumes. The amounts are deducted
from the assets of Variable Account in accordance with the Contracts.
Variable Annuity Payments made under the Contracts vary with the investment
performance of the sub-accounts of the Variable Account, but are not affected by
Conseco Variable's actual mortality experience among Annuitants. The life span
of the Annuitant, or changes in life expectancy in general, do not affect the
monthly Annuity Payments payable under the Contracts. If Annuitants live longer
than the life expectancy determined by Conseco Variable, Conseco Variable
provides funds from its general funds to make Annuity Payments. Conversely, if
longevity among Annuitants is lower than Conseco Variable determined, Conseco
Variable realizes a gain. This is the mortality expense risk.
Conseco Variable performs all administrative functions and pays all
administrative expenses with respect to the Contracts. These expenses include
but are not limited to salaries, rents, postage, telephone, travel, legal,
actuarial and accounting fees, office equipment and stationery. Conseco Variable
also provides the death benefits under the Contracts. Conseco Variable also
assumes the risk, the expense risk, that deductions provided for in the
Contracts for sales and administrative expenses may not be enough to cover
actual costs. Where the deductions are not adequate, Conseco Variable will pay
the amount of any shortfall from its general funds. Any amounts paid by Conseco
Variable may consist of, among other things, proceeds derived from mortality and
expense risk charges.
EXPENSE GUARANTEE AGREEMENT. Pursuant to the Combination (See "Variable
Account"), Conseco Variable issued an endorsement with respect to each existing
Contract outstanding immediately prior to the effective time of the Combination
guaranteeing that the total of the investment management fees charged against
the Equity (formerly, Common Stock), Fixed Income (formerly, Corporate Bond),
and Money Market Portfolios of Conseco Series Trust whose shares are purchased
by the Variable Account, plus the mortality and expense risk, administrative and
any other charges imposed upon the assets of the corresponding sub-accounts of
the Variable Account, will not exceed an amount that is equal to the total
amount of the same charges (1.44%, on an annual basis) that would have been
imposed under the Contracts had the Combination not occurred (the "Expense
Guarantee Agreement"). Currently, the Mortality and Expense Risk charge for the
Conseco Series Trust's Equity, Fixed Income, and Money Market sub-accounts are
equal to .64%, .74% and .99%, respectively.
Accordingly, Conseco Variable will reimburse the appropriate sub-account of
the Variable Account an amount that represents the difference between the
investment management fees charged the Variable Account, Annuity Fund or Account
D, as applicable, prior to the Combination and the amount of such fees charged
to Conseco Series Trust, plus any other charges in excess of those that would
have been incurred if the Combination had not taken place.
The mortality and expense risk and administrative charges will not change,
and any other charges imposed on the assets of the Variable Account are not
expected to be more than before the Combination. Conseco Variable will not,
however, assume extraordinary or non-recurring expenses of Conseco Series Trust,
such as legal claims and liabilities, litigation costs and indemnification
payments in connection with litigation. Also, the Expense Guarantee Agreement
will not apply to any federal income tax if Conseco Series Trust fails to
qualify as a "regulated investment company" under applicable provisions of the
Code. The Expense Guarantee Agreement, described above, also applies to
Contracts issued after the Combination. Conseco Variable, however, may eliminate
the Expense Guarantee Agreement with respect to Contracts issued in the future.
PREMIUM TAXES
We may deduct any premium tax due from Purchase Payments or from Individual
Account values at the annuity commencement date or at any
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such other time as Conseco Variable determines in its sole discretion. The
current range of premium taxes in jurisdictions in which we make the Contracts
available is from 0% to 3.5%.
FUND EXPENSES
There are deductions from and expenses paid out of the assets of the Funds,
which are described in the Fund prospectuses.
REDUCTION OR ELIMINATION OF CONTRACT CHARGES
In some cases, Conseco Variable may expect to incur lower sales and
administrative expenses or perform fewer services due to the size of the
Contract, the average contribution and the use of group enrollment procedures.
Then, Conseco Variable may be able to reduce or eliminate the Contract charges
for administrative expense and withdrawal charges.
OTHER CHARGES
Currently, Conseco Variable does not make a charge against the Variable
Account for its federal income taxes, or provisions for such taxes, that may be
as a result of the Variable Account. Conseco Variable may charge each
sub-account of the Variable Account for its portion of any income tax charged to
the sub-account or its assets.
Under present laws, Conseco Variable may incur state and local taxes (in
addition to premium taxes) in several states. At present, these taxes are not
significant. If they increase, however, Conseco Variable may decide to make
charges for such taxes or provisions for such taxes against the Variable
Account. Any such charges against the Variable Account or its sub-accounts could
have an adverse effect on the investment performance of the sub-accounts.
DEATH BENEFITS
In the event of the death of a Participant before Annuity Payments
commence, Conseco Variable will pay the beneficiary the value of the
Participant's Individual Account, less any debt. We will determine the
Individual Account value as of the Valuation Period in which we receive proof of
death acceptable to us at our Administrative Office. There is no withdrawal
charge applicable to amounts paid due to the death of a Participant.
Generally, the distribution of the Owner's interest in the Contract must be
made within five years after the Owner's death. If the beneficiary is an
individual, in lieu of distribution within five years of the Owner's death,
distribution may generally be made as an annuity which begins within one year of
the Owner's death and is payable over the life of the beneficiary or over a
period not in excess of the life expectancy of the beneficiary. If the Owner's
spouse is the beneficiary, that spouse may elect to continue the Contract as the
new Owner in lieu of receiving the distribution. In such a case, the
distribution rules applicable when a Contract Owner dies will apply when that
spouse, as the Owner, dies. In the case of a qualified contract, the date on
which distributions are required to begin must be no later than April 1 of the
first calendar year following the later of: (a) the calendar year in which the
Annuitant attains age 70 1/2, or (b) the calendar year in which the Annuitant
retires. Additional requirements may apply to certain qualified contracts. In
the case of a Contract involving more than one Contract Owner, the death of any
Contract Owner shall cause this section to apply.
In lieu of a lump-sum payment, the death proceeds may be applied under any
of the annuity options available in the Contract and in accordance with the
terms of the Plan.
If a lump sum payment is elected and all the necessary requirements are
met, the payment will be made within 7 days.
THE ANNUITY PERIOD OPTIONAL ANNUITY PERIOD ELECTIONS
The retirement date and the annuity options are normally established by the
terms of the Plan. If you do not elect otherwise (a) the manner of payment will
be a lifetime annuity with 120 monthly payments certain, and (b) the value of
the Participant's Individual Account will be applied as follows:
o any value accumulated in the Fixed Account will be applied to provide a
fixed annuity; and
o the value in the sub-account(s) of Variable Account will be applied,
separately, to provide variable annuity payments.
By giving written notice to Conseco Variable at least 30 days prior to the
commencement of Annuity Payments, the Contract Owner may, as to each
Participant, elect to change:
o the annuity option to any of the annuity options described below, and
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o the manner in which the value of a Participant's Individual Account is
to be applied to provide Annuity Payments (for example, an election that
a portion or all of the amounts accumulated on a variable basis be
applied to provide fixed Annuity Payments or vice versa).
Once Annuity Payments begin, no changes may be elected by the Contract
Owner.
Prior to the selected Annuity Date, an Individual Account may be terminated
by the Contract Owner and the value thereof received in a lump sum. Once Annuity
Payments have begun, neither the Annuitant nor the Contract Owner can terminate
the annuity benefit and receive a lump-sum settlement in lieu thereof, except as
permitted under the Fourth and Fifth Options below.
The assumed investment rate (AIR) is 3 1/2%. The Contract Owner may elect
to have all variable benefits payable for a Participant based on a 5% AIR
instead. The election must be made in writing at least 30 days prior to the
Participant's retirement date. If the performance of the Variable Account
Investment Options exceeds the 3 1/2% or 5% AIR, as applicable, the Annuity
Payments will increase. Similarly, if the actual rate is less than the 3 1/2% or
5% AIR, as applicable, the Annuity Payments will decrease.
You cannot make an election that would result in a first monthly Annuity
Payment of less than $25 if payments are to be on a fully fixed or variable
basis, or less than $25 on each basis if a combination of variable and fixed
annuity payments is elected. If, at any time, payments are or become less than
$25 per monthly payment, Conseco Variable has the right to change the frequency
of payments to an interval which will result in Annuity Payments of at least $25
each, except that it will not make payments less frequently than annually.
See "Federal Tax Status" for information on the federal tax treatment of
Annuity Payments or other settlements.
ANNUITY OPTIONS
You may select one of the following annuity options:
FIRST OPTION-LIFE ANNUITY. Under this option, we will make monthly payments
during the lifetime of the Annuitant. The payments will cease with the last
monthly payment due prior to the death of the Annuitant. Of the first three
options, this option offers the maximum level of monthly payments since there is
no minimum number of payments guaranteed (nor a provision for a death benefit
payable to a beneficiary). It would be possible under this option to receive
only one Annuity Payment if the Annuitant died prior to the due date of the
second Annuity Payment.
SECOND OPTION-LIFE ANNUITY WITH 120, 180 OR 240 MONTHLY PAYMENTS
GUARANTEED. Under this option, we will make monthly payments during the lifetime
of the Annuitant with the guarantee that if, at the death of the Annuitant, we
have made payments for less than 120, 180 or 240 months, as elected, we will
continue to make Annuity Payments during the remainder of such period to your
beneficiary. Because this option provides a specified minimum number of Annuity
Payments, this option results in somewhat lower payments per month than the
First Option.
THIRD OPTION-JOINT AND LAST SURVIVOR LIFE ANNUITY. Under this option, we
will make monthly payments during the joint lifetime of the Annuitant and a
designated second person, and thereafter during the remaining lifetime of the
survivor. Payments to the survivor will be at the rate of 100%, 75%, 66 2/3% or
50% of the amount which would have been payable to the Annuitant (you can select
the rate at the time this option is elected). This option is designed primarily
for couples who require the maximum possible payments during their joint lives
and are not concerned with providing for beneficiaries at the death of the last
to survive.
Under current law, this option is automatically provided for a participant
in a pension plan who is married and for married participants in most other
qualified plans; however, a married participant may waive the joint and last
survivor annuity during the appropriate election period if the participant's
spouse consents in writing (acknowledging the effect of such consent) to such
waiver.
FOURTH OPTION-PAYMENTS FOR A DESIGNATED PERIOD. Under this option, we make
payments for the number of years selected, which may be from one through 30,
except that, if the number of completed annual Purchase Payment periods for the
Individual Account is five or less, the number of years selected for this option
may not be less than five minus the number of completed annual Purchase Payment
periods. For example, if the number of completed annual Purchase Payment periods
is three, then the minimum Annuity Payment period which can be elected for this
29
<PAGE>
================================================================================
Option is two years (i.e., five minus three). If you elect payments under this
option on a variable basis, payments will vary monthly in accordance with the
investment results of the sub-accounts of the Variable Account. If the Annuitant
dies before we have made the specified number of monthly payments, the present
value of the remaining payments (as set forth in your Contract) will be paid to
the designated beneficiary in one sum. If the Annuitant dies within 5 years
after the start of Annuity Payments, Conseco Variable will treat this one sum
payment as a surrender. If the present value of the remaining payment is at
least $5,000 it may be applied under the first three options.
FIFTH OPTION-PAYMENTS OF A DESIGNATED DOLLAR AMOUNT. Under this option, we
will make payments on a monthly, quarterly, semi-annual, or annual basis of a
designated dollar amount until the Individual Account value you applied under
this option, adjusted each Valuation Period to reflect investment experience, is
exhausted within a minimum of three years and a maximum of 20 years. The
designated amount of each installment may not be less than $6.25 per month per
$1,000 of Individual Account value applied. If the number of completed annual
Purchase Payment periods for the Individual Account is five or less, the
designated amount of each installment may not be greater than an amount which
would total the value applied in less than five minus the number of completed
annual Purchase Payment periods. For example, if the number of completed annual
Purchase Payment periods is three, then the payments cannot be greater than an
amount which would total the value applied in two years (i.e., five minus
three). If the Annuitant dies before the value is exhausted, we will pay the
remaining value to the beneficiary in one sum. In lieu of a lump sum payment,
the beneficiary may elect an annuity option for distribution of any amount on
deposit at the date of the Annuitant's death which will result in a rate of
payment at least as rapid as the rate of payment during the life of the
Annuitant.
To the extent that the Fourth or Fifth Option is chosen on a variable
basis, at any time during the payment period you may elect that the remaining
value be applied to provide a lifetime annuity under one of the first three
Options described above, provided that the balance is at least $5,000 and the
distribution will be made at least as rapidly as during the life of the
Annuitant. If this election is made within 5 years after the start of Annuity
Payments, and the remaining balance is elected to be paid in one sum, then such
election will be treated as a surrender. Since you may elect a lifetime annuity
at any time, the annuity rate and expense risks continue during the payment
period. Accordingly, deductions for these risks will continue to be made from
the Individual Account values.
The SAI contains a further discussion of annuity provisions, including how
annuity unit values are calculated.
TRANSFERS DURING THE ANNUITY PERIOD
You can make transfers during the Annuity Period by giving us written
notice at least 30 days before the due date of the first Annuity Payment for
which the change will apply. We will make transfers by converting the number of
annuity units being transferred to the number of annuity units of the
sub-account to which the transfer is made. The next Annuity Payment, if it were
made at that time, would be the same amount that it would have been without the
transfer. After that, Annuity Payments will reflect changes in the value of the
new annuity units. Conseco Variable reserves the right to limit, upon notice,
the maximum number of transfers you can make to one in any six-month period once
Annuity Payments have begun. In addition, you may not make transfers from a
fixed annuity option.
Conseco Variable reserves the right to defer the transfer privilege at any
time that it is unable to purchase or redeem shares of the Funds. Conseco
Variable also reserves the right to modify or terminate the transfer privilege
at any time in accordance with applicable law.
DEATH BENEFIT AMOUNT DURING THE ANNUITY PERIOD
If you selected Annuity Payments based on an annuity option providing
payments for a guaranteed period, and the Annuitant dies during the Annuity
Period, Conseco Variable will make the remaining guaranteed payments to the
beneficiary. Such payments will be made at least as rapidly as under the method
of distribution being used as of the date of the Annuitant's death. If no
beneficiary is living, Conseco Variable will commute any unpaid guaranteed
payments to a single sum (on the basis of the interest rate used in determining
the payments) and pay that single sum to the Annuitant's estate.
30
<PAGE>
CONSECO VARIABLE INSURANCE COMPANY
2000 ACCOUNT C
GROUP ANNUITY
================================================================================
FEDERAL TAX STATUS
NOTE: CONSECO VARIABLE HAS PREPARED THE FOLLOWING INFORMATION ON TAXES AS A
GENERAL DISCUSSION OF THE SUBJECT. IT IS NOT INTENDED AS TAX ADVICE TO ANY
INDIVIDUAL. YOU SHOULD CONSULT YOUR OWN TAX ADVISER ABOUT YOUR OWN
CIRCUMSTANCES. CONSECO VARIABLE HAS INCLUDED AN ADDITIONAL DISCUSSION REGARDING
TAXES IN THE STATEMENT OF ADDITIONAL INFORMATION.
ANNUITY CONTRACTS IN GENERAL
Annuity contracts are a means of setting aside money for future needs,
usually retirement. Congress recognized how important saving for retirement was
and provided special rules in the Internal Revenue Code (Code) for annuities.
Simply stated, these rules provide that you will not be taxed on the
earnings on the money held in your annuity contract until you take the money
out. This is referred to as tax-deferral. There are different rules as to how
you will be taxed depending on how you take the money out and the type of
Contract--Qualified or Non-Qualified (see following sections).
You will not be taxed on increases in the value of your Contract until a
distribution occurs--either as a withdrawal or as annuity payments. When you
make a withdrawal you are taxed on the amount of the withdrawal that is
earnings. For annuity payments, different rules apply. A portion of each annuity
payment is treated as a partial return of your Purchase Payments and will not be
taxed. The remaining portion of the annuity payment will be treated as ordinary
income. How the annuity payment is divided between taxable and non-taxable
portions depends upon the period over which the annuity payments are expected to
be made. Annuity payments received after you have received all of your Purchase
Payments are fully includible in income.
When a non-qualified Contract is owned by a non-natural person (e.g.,
corporation or certain other entities other than a trust holding the Contract as
an agent for a natural person), the Contract will generally not be treated as an
annuity for tax purposes.
QUALIFIED AND NON-QUALIFIED CONTRACTS
If you purchase the Contract as an individual and not under any specially
sponsored program, your Contract is referred to as a non-qualified Contract.
If you purchase the Contract under a specially sponsored program, your
Contract is referred to as a qualified Contract.
A qualified Contract will not provide any necessary or additional tax
deferral if it is used to fund a qualified plan that is tax deferred. However,
the Contract has features and benefits other than tax deferral that may make it
an appropriate investment for a qualified plan. You should consult your tax
adviser regarding these features and benefits prior to purchasing a qualified
Contract.
WITHDRAWALS--NON-QUALIFIED CONTRACTS
If you make a withdrawal from your non-qualified Contract, the Code
generally treats such a withdrawal as first coming from earnings and then from
your Purchase Payments. Such withdrawn earnings are includible in income.
The Code also provides that any amount received under an annuity contract
which is included in income may be subject to a penalty. The amount of the
penalty is equal to 10% of the amount that is includible in income. Some
withdrawals will be exempt from the penalty. They include any amounts:
(1) paid on or after you reach age 59 1/2;
(2) paid after you die;
(3) paid if you become totally disabled (as that term is defined in the
Code);
(4) paid in a series of substantially equal payments made annually (or
more frequently) for life or a period not exceeding life expectancy;
(5) paid under an immediate annuity; or
(6) which are allocable to Purchase Payments made prior to August 14,
1982.
WITHDRAWALS--QUALIFIED CONTRACTS
If you make a withdrawal from your qualified Contract, a portion of the
withdrawal is treated as taxable income. This portion depends on the ratio of
the pre-tax Purchase Payments to the after-tax Purchase Payments in your
Contract. If all of your Purchase Payments were made with pre-tax money then the
full amount of any withdrawal is includible in taxable income. Special rules may
apply to withdrawals from certain types of qualified Contracts. The Code also
provides that any amount received under a qualified Contract which is included
in income may be subject to a penalty. The amount of the penalty is equal to 10%
of the amount that is includible in income. Some with-
31
<PAGE>
================================================================================
drawals will be exempt from the penalty. They include any amounts:
(1) paid on or after you reach age 59 1/2;
(2) paid after you die;
(3) paid if you become totally disabled (as that term is defined in Code);
(4) paid to you after leaving your employment in a series of substantially
equal payments made annually (or more frequently) under a lifetime
annuity;
(5) paid to you after you have attained age 55 and left your employment;
(6) paid for certain allowable medical expenses (as defined in the Code);
(7) paid pursuant to a qualified domestic relations order;
(8) paid on account of an IRS levy on the qualified contract.
We have provided a more complete discussion in the Statement of Additional
Information.
WITHDRAWALS--TAX-SHELTERED ANNUITIES
The Code limits the withdrawal of amounts attributable to Purchase Payments
made by owners under a salary reduction agreement. Withdrawals can only be made
when a Contract Owner:
(1) reaches age 59 1/2;
(2) leaves his or her job;
(3) dies;
(4) becomes disabled (as that term is defined in the Code);
(5) in the case of hardship; or
(6) pursuant to a qualified domestic relations order, if otherwise
permitted.
However, in the case of hardship, the owner can only withdraw the Purchase
Payments and not any earnings. You should consult your own tax adviser about
your own circumstances.
DIVERSIFICATION
The Code provides that the underlying investments for a variable annuity
must satisfy certain diversification requirements in order to be treated as an
annuity contract. Conseco Variable believes that the Funds are being managed so
as to comply with the requirements.
INVESTOR CONTROL
Neither the Code nor the Internal Revenue Service Regulations issued to
date provide guidance as to the circumstances under which you, because of the
degree of control you exercise over the underlying investments, and not Conseco
Variable would be considered the owner of the shares of the portfolios. If you
are considered the owner of the shares, it will result in the loss of the
favorable tax treatment for the Contract. It is unknown to what extent under
federal tax law owners are permitted to select portfolios, to make transfers
among the portfolios or the number and type of portfolios owners may select from
without being considered the owner of the shares. If any guidance is provided
which is considered a new position, then the guidance would generally be applied
prospectively. However, if such guidance is considered not to be a new position,
it may be applied retroactively. This would mean that you, as the owner of the
Contract, could be treated as the owner of the portfolios.
Due to the uncertainty in this area, Conseco Variable reserves the right to
modify the Contract as reasonably deemed necessary to maintain favorable tax
treatment.
GENERAL MATTERS
PERFORMANCE INFORMATION. Conseco Variable may advertise performance
information for the Variable Account Investment Options (sub-accounts) from time
to time in advertisements or sales literature. Performance information reflects
only the performance of a hypothetical investment in the Variable Account
Investment Options during the particular time period on which the calculations
are based. Performance information may consist of yield, effective yield, and
average annual total return quotations reflecting the deduction of all
applicable charges for recent one-year and, when applicable, five- and 10-year
periods and, where less than 10 years, for the period subsequent to the date
each sub-account first became available for investment. We may show additional
total return quotations that do not reflect a withdrawal charge deduction. We
may show performance information by means of schedules, charts or graphs. The
Statement of Additional Information contains a description of the methods we use
to determine yield and total return information for the sub-accounts.
DISTRIBUTION OF CONTRACTS. Conseco Equity Sales, Inc. (Conseco Equity
Sales), 11815 N. Pennsylvania Street, Carmel, IN 46032, an affiliate
32
<PAGE>
CONSECO VARIABLE INSURANCE COMPANY
2000 ACCOUNT C
GROUP ANNUITY
================================================================================
of Conseco Variable, is the principal underwriter of the Contracts. Conseco
Equity Sales is a broker-dealer registered under the Securities Exchange Act of
1934 and a member of the National Association of Securities Dealers, Inc. Sales
of the Contracts will be made by registered representatives of Conseco Equity
Sales and broker-dealers authorized to sell the Contracts. The registered
representatives will also be licensed insurance representatives of Conseco
Variable. See the Statement of Additional Information for more information.
Commissions will be paid to broker-dealers who sell the Contracts.
Broker-dealers may be paid commissions up to 8.5% of Purchase Payments and may
include reimbursement of promotional or distribution expenses associated with
marketing the Contracts. The commission rate paid to the broker-dealer will
depend upon the nature and level of services provided by the broker-dealer.
LEGAL PROCEEDINGS. There are no legal proceedings to which the Variable
Account is a party or to which the assets of the Variable Account are subject.
Neither Conseco Variable nor Conseco Equity Sales is involved in any litigation
that is of material importance in relation to their total assets or that relates
to the Variable Account.
33
<PAGE>
================================================================================
TABLE OF CONTENTS OF THE STATEMENT OF ADDITIONAL INFORMATION
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
- --------------------------------------------------------------------------------
(cut along dotted rule)
If you would like a free copy of the Statement of
Additional Information dated May 1, 2000 for this Prospectus,
please complete this form, detach, and mail to:
Conseco Variable Insurance Company
Administrative Office
11815 N. Pennsylvania Street
Carmel, Indiana 46032
Gentlemen:
Please send me a free copy of the Statement of Additional Information for
Conseco Variable Annuity Account C (group annuity) at the following address:
Name:
---------------------------------------------------------------------------
Mailing Address:
----------------------------------------------------------------
- --------------------------------------------------------------------------------
Sincerely,
- --------------------------------------------------------------------------------
(Signature)
34
<PAGE>
CONSECO VARIABLE INSURANCE COMPANY
2000 ACCOUNT C
GROUP ANNUITY
================================================================================
APPENDIX A
CONDENSED FINANCIAL INFORMATION
The table below provides per unit information about the financial history of the
sub-accounts for the periods indicated.
<TABLE>
<CAPTION>
1999 1998 1997 1996 1995 1994 1993 1992 1991 1990
===================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------------------
CONSECO SERIES TRUST:
BALANCED (c)
- -----------------------------------------------------------------------------------------------------------------------------------
Accumulation unit
value at beginning
of period ......... $2.219 $2.030 $1.740 $1.370 $1.052 $1.068 $1.000 N/A N/A N/A
Accumulation unit
value at end of
period ............ $2.874 $2.219 $2.030 $1.740 $1.370 $1.052 $1.068 N/A N/A N/A
Percentage change
in accumulation
unit value ........ 29.55% 9.27% 16.68% 27.01% 30.19% (1.51)% 6.84% N/A N/A N/A
Number of
accumulation units
outstanding at end
of period ......... 6,250,754 7,300,114 6,907,154 5,801,102 5,007,682 3,888,125 2,257,426 N/A N/A N/A
- -----------------------------------------------------------------------------------------------------------------------------------
EQUITY--QUALIFIED (a)
- -----------------------------------------------------------------------------------------------------------------------------------
Accumulation unit
value at beginning
of period ......... $24.295 $21.148 $17.933 $12.448 $9.191 $9.069 $8.492 $8.292 $5.827 $6.313
Accumulation unit
value at end of
period ............ $36.036 $24.295 $21.148 $17.933 $12.448 $9.191 $9.069 $8.492 $8.292 $5.827
Percentage change
in accumulation
unit value ........ 48.33% 14.88% 17.93% 44.06% 35.44% 1.35% 6.79% 2.41% 42.30% (7.70)%
Number of
accumulation units
outstanding at end
of period ......... 6,177,795 7,294,849 8,714,598 8,464,009 7,950,068 7,356,167 6,310,119 5,499,342 4,667,263 4,275,235
- -----------------------------------------------------------------------------------------------------------------------------------
EQUITY--NON-QUALIFIED (a)
- -----------------------------------------------------------------------------------------------------------------------------------
Accumulation unit
value at beginning
of period ......... $19.232 $16.740 $14.195 $9.854 $7.275 $7.179 $6.722 $6.564 $4.612 $4.997
Accumulation unit
value at end of
period ............ $28.526 $19.232 $16.740 $14.195 $9.854 $7.275 $7.179 $6.722 $6.564 $4.612
Percentage change in
accumulation unit
value ............. 48.33% 14.88% 17.93% 44.06% 35.44% 1.35% 6.79% 2.41% 42.30% (7.70)%
Number of
accumulation units
outstanding at end
of period ......... 154,728 223,506 274,648 283,828 286,775 271,457 252,573 191,299 152,332 125,393
- -----------------------------------------------------------------------------------------------------------------------------------
FIXED INCOME--QUALIFIED (b)
- -----------------------------------------------------------------------------------------------------------------------------------
Accumulation unit
value at beginning
of period ......... $5.738 $5.445 $4.990 $4.790 $4.080 $4.224 $3.768 $3.466 $2.899 $2.743
Accumulation unit
value at end of
period ............ $5.674 $5.738 $5.445 $4.990 $4.790 $4.080 $4.224 $3.768 $3.466 $2.899
Percentage change in
accumulation unit
value ............. (1.12)% 5.39% 9.11% 4.19% 17.38% (3.41)% 12.12% 8.70% 19.57% 5.66%
Number of
accumulation units
outstanding at end
of period ......... 2,139,411 2,455,411 2,784,065 2,973,412 3,072,607 2,961,739 3,003,770 2,490,084 2,145,672 1,998,622
- -----------------------------------------------------------------------------------------------------------------------------------
FIXED INCOME--NON-QUALIFIED (b)
- -----------------------------------------------------------------------------------------------------------------------------------
Accumulation unit
value at beginning
of period ......... $5.514 $5.232 $4.795 $4.602 $3.921 $4.059 $3.620 $3.330 $2.785 $2.636
Accumulation unit
value at end of
period ............ $5.452 $5.514 $5.232 $4.795 $4.602 $3.921 $4.059 $3.620 $3.330 $2.785
Percentage change in
accumulation unit
value ............. (1.12)% 5.39% 9.11% 4.19% 17.38% (3.41)% 12.12% 8.70% 19.57% 5.66%
Number of
accumulation units
outstanding at end
of period ......... 69,191 93,115 125,557 136,642 179,684 197,847 185,569 123,618 98,273 118,597
- -----------------------------------------------------------------------------------------------------------------------------------
GOVERNMENT SECURITIES (c)
- -----------------------------------------------------------------------------------------------------------------------------------
Accumulation unit
value at beginning
of period ......... $1.336 $1.261 $1.176 $1.156 $0.995 $1.034 $1.000 N/A N/A N/A
Accumulation unit
value at end of
period ............ $1.290 $1.336 $1.261 $1.176 $1.156 $0.995 $1.034 N/A N/A N/A
Percentage change in
accumulation unit
value ............. (3.44)% 6.01% 7.19% 1.72% 16.18% (3.79)% 3.42% N/A N/A N/A
Number of
accumulation units
outstanding at end
of period ......... 989,803 702,665 485,631 365,164 422,359 335,451 535,607 N/A N/A N/A
- -----------------------------------------------------------------------------------------------------------------------------------
MONEY MARKET (b)
- -----------------------------------------------------------------------------------------------------------------------------------
Accumulation unit
value at beginning
of period ......... $2.821 $2.708 $2.598 $2.496 $2.387 $2.321 $2.280 $2.224 $2.120 $1.978
Accumulation unit
value at end of
period ............ $2.930 $2.821 $2.708 $2.598 $2.496 $2.387 $2.321 $2.280 $2.224 $2.120
Percentage change in
accumulation unit
value ............. 3.85% 4.18% 4.22% 4.10% 4.57% 2.85% 1.79% 2.52% 4.89% 7.22%
Number of
accumulation units
outstanding at end
of period ......... 3,362,182 1,922,118 1,624,326 1,849,618 1,538,629 1,619,841 1,465,429 1,790,486 1,762,019 1,798,156
- -----------------------------------------------------------------------------------------------------------------------------------
THE ALGER AMERICAN FUND:
ALGER AMERICAN GROWTH (e)
- -----------------------------------------------------------------------------------------------------------------------------------
Accumulation unit
value at beginning
of period ......... $1.765 $1.204 $1.000 N/A N/A N/A N/A N/A N/A N/A
Accumulation unit
value at end of
period ............ $2.338 $1.765 $1.204 N/A N/A N/A N/A N/A N/A N/A
Percentage change in
accumulation unit
value ............. 32.41% 46.60% 20.42% N/A N/A N/A N/A N/A N/A N/A
Number of
accumulation units
outstanding at end
of period ......... 1,184,056 335,852 120,648 N/A N/A N/A N/A N/A N/A N/A
</TABLE>
35
<PAGE>
================================================================================
CONDENSED FINANCIAL INFORMATION (CONTINUED)
<TABLE>
<CAPTION>
1999 1998 1997 1996 1995 1994 1993 1992 1991 1990
===================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------------------
ALGER AMERICAN LEVERAGED ALLCAP (d)
- -----------------------------------------------------------------------------------------------------------------------------------
Accumulation unit
value at beginning
of period ......... $2.898 $1.855 $1.565 $1.411 $1.000 N/A N/A N/A N/A N/A
Accumulation unit
value at end of
period ............ $5.109 $2.898 $1.855 $1.565 $1.411 N/A N/A N/A N/A N/A
Percentage change
in accumulation
unit value ........ 76.29% 56.26% 18.49% 10.92% 41.12% N/A N/A N/A N/A `N/A
Number of
accumulation units
outstanding at end
of period ......... 1,092,626 479,432 388,810 332,180 48,284 N/A N/A N/A N/A N/A
- -----------------------------------------------------------------------------------------------------------------------------------
ALGER AMERICAN MIDCAP GROWTH (e)
- -----------------------------------------------------------------------------------------------------------------------------------
Accumulation unit
value at beginning
of period ......... $1.547 $1.199 $1.000 N/A N/A N/A N/A N/A N/A N/A
Accumulation unit
value at end of
period ............ $2.019 $1.547 $1.199 N/A N/A N/A N/A N/A N/A N/A
Percentage change in
accumulation unit
value ............. 30.54% 29.00% 19.91% N/A N/A N/A N/A N/A N/A N/A
Number of
accumulation units
outstanding at end
of period .......... 107,741 85,729 10,680 N/A N/A N/A N/A N/A N/A N/A
- -----------------------------------------------------------------------------------------------------------------------------------
ALGER AMERICAN SMALL CAPITALIZATION (d)
- ---------------------------------------------------------------------------------------------------------------------------
Accumulation unit
value at beginning
of period ......... $1.590 $1.390 $1.260 $1.222 $1.000 N/A N/A N/A N/A N/A
Accumulation unit
value at end of
period ............ $2.257 $1.590 $1.390 $1.260 $1.222 N/A N/A N/A N/A N/A
Percentage change
in accumulation
unit value ........ 41.99% 14.38% 10.28% 3.14% 22.18% N/A N/A N/A N/A N/A
Number of
accumulation units
outstanding at end
of period ......... 1,477,791 1,509,932 1,616,358 1,294,236 421,326 N/A N/A N/A N/A N/A
- -----------------------------------------------------------------------------------------------------------------------------------
AMERICAN CENTURY VARIABLE PORTFOLIOS, INC.:
VP INTERNATIONAL (e)
- -----------------------------------------------------------------------------------------------------------------------------------
Accumulation unit
value at beginning
of period ......... $1.289 $1.096 $1.000 N/A N/A N/A N/A N/A N/A N/A
Accumulation unit
value at end of
period ............ $2.093 $1.289 $1.096 N/A N/A N/A N/A N/A N/A N/A
Percentage change in
accumulation unit
value ............. 62.41% 17.58% 9.59% N/A N/A N/A N/A N/A N/A N/A
Number of
accumulation units
outstanding at end
of period ......... 148,279 105,233 95 N/A N/A N/A N/A N/A N/A N/A
- -----------------------------------------------------------------------------------------------------------------------------------
VP VALUE (e)
- -----------------------------------------------------------------------------------------------------------------------------------
Accumulation unit
value at beginning
of period ......... $1.276 $1.229 $1.000 N/A N/A N/A N/A N/A N/A N/A
Accumulation unit
value at end of
period ............ $1.252 $1.276 $1.229 N/A N/A N/A N/A N/A N/A N/A
Percentage change
in accumulation
unit value ........ (1.84)% 3.77% 22.93% N/A N/A N/A N/A N/A N/A N/A
Number of
accumulation units
outstanding at end
of period ......... 300,067 111,175 19,126 N/A N/A N/A N/A N/A N/A N/A
- -----------------------------------------------------------------------------------------------------------------------------------
VP INCOME & GROWTH (f)
- -----------------------------------------------------------------------------------------------------------------------------------
Accumulation unit
value at beginning
of period ......... $1.085 $1.000 N/A N/A N/A N/A N/A N/A N/A N/A
Accumulation unit
value at end of
period ............ $1.268 $1.085 N/A N/A N/A N/A N/A N/A N/A N/A
Percentage change
in accumulation
unit value ........ 16.85% 8.48% N/A N/A N/A N/A N/A N/A N/A N/A
Number of
accumulation units
outstanding at end
of period ......... 180,072 91,593 N/A N/A N/A N/A N/A N/A N/A N/A
- -----------------------------------------------------------------------------------------------------------------------------------
BERGER INSTITUTIONAL PRODUCTS TRUST:
BERGER IPT--GROWTH (e)
- -----------------------------------------------------------------------------------------------------------------------------------
Accumulation unit
value at beginning
of period ......... $1.307 $1.136 $1.000 N/A N/A N/A N/A N/A N/A N/A
Accumulation unit
value at end of
period ............ $1.930 $1.307 $1.136 N/A N/A N/A N/A N/A N/A N/A
Percentage change
in accumulation
unit value ........ 47.65% 15.13% 13.55% N/A N/A N/A N/A N/A N/A N/A
Number of
accumulation units
outstanding at end
of period ......... 225,562 196,342 42,167 N/A N/A N/A N/A N/A N/A N/A
- -----------------------------------------------------------------------------------------------------------------------------------
BERGER IPT--GROWTH AND INCOME (e)
- -----------------------------------------------------------------------------------------------------------------------------------
Accumulation unit
value at beginning
of period ......... $1.509 $1.219 $1.000 N/A N/A N/A N/A N/A N/A N/A
Accumulation unit
value at end of
period ............ $2.375 $1.509 $1.219 N/A N/A N/A N/A N/A N/A N/A
Percentage change
in accumulation
unit value ........ 57.47% 23.79% 21.87% N/A N/A N/A N/A N/A N/A N/A
Number of
accumulation units
outstanding at end
of period ......... 237,838 115,344 64,326 N/A N/A N/A N/A N/A N/A N/A
- -----------------------------------------------------------------------------------------------------------------------------------
BERGER IPT--SMALL COMPANY GROWTH (e)
- -----------------------------------------------------------------------------------------------------------------------------------
Accumulation unit
value at beginning
of period ......... $1.386 $1.374 $1.000 N/A N/A N/A N/A N/A N/A N/A
Accumulation unit
value at end of
period ............ $2.626 $1.386 $1.374 N/A N/A N/A N/A N/A N/A N/A
Percentage change
in accumulation
unit value ........ 89.55% 0.85% 37.38% N/A N/A N/A N/A N/A N/A N/A
Number of
accumulation units
outstanding at end
of period ......... 158,133 83,064 1,949 N/A N/A N/A N/A N/A N/A N/A
</TABLE>
36
<PAGE>
CONSECO VARIABLE INSURANCE COMPANY
2000 ACCOUNT C
GROUP ANNUITY
================================================================================
CONDENSED FINANCIAL INFORMATION (CONTINUED)
<TABLE>
<CAPTION>
1999 1998 1997 1996 1995 1994 1993 1992 1991 1990
===================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------------------
BERGER/BIAM IPT--INTERNATIONAL (e)
- ----------------------------------------------------------------------------------------------------------------------------------
Accumulation unit
value at beginning
of period ......... $1.118 $0.972 $1.000 N/A N/A N/A N/A N/A N/A N/A
Accumulation unit
value at end of
period ............ $1.455 $1.118 $0.972 N/A N/A N/A N/A N/A N/A N/A
Percentage change in
accumulation unit
value ............. 30.10% 14.97% (2.75)% N/A N/A N/A N/A N/A N/A N/A
Number of
accumulation units
outstanding at end
of period ......... 1,907 0 3,085 N/A N/A N/A N/A N/A N/A N/A
- -----------------------------------------------------------------------------------------------------------------------------------
THE DREYFUS SOCIALLY RESPONSIBLE GROWTH FUND, INC. (d)
- -----------------------------------------------------------------------------------------------------------------------------------
Accumulation unit
value at beginning
of period ......... $2.301 $1.796 $1.413 $1.178 $1.000 N/A N/A N/A N/A N/A
Accumulation unit
value at end of
period ............ $2.964 $2.301 $1.796 $1.413 $1.178 N/A N/A N/A N/A N/A
Percentage change in
accumulation unit
value ............. 28.79% 28.09% 27.11% 20.01% 17.76% N/A N/A N/A N/A N/A
Number of
accumulation units
outstanding at end
of period ......... 1,607,964 802,406 359,437 114,173 27,728 N/A N/A N/A N/A N/A
- -----------------------------------------------------------------------------------------------------------------------------------
DREYFUS STOCK INDEX FUND (d)
- -----------------------------------------------------------------------------------------------------------------------------------
Accumulation unit
value at beginning
of period ......... $2.352 $1.853 $1.402 $1.160 $1.000 N/A N/A N/A N/A N/A
Accumulation unit
value at end of
period ............ $2.808 $2.352 $1.853 $1.402 $1.160 N/A N/A N/A N/A N/A
Percentage change in
accumulation unit
value ............. 19.40% 26.94% 32.20% 20.79% 16.03% N/A N/A N/A N/A N/A
Number of
accumulation units
outstanding at end
of period ......... 8,745,043 5,996,870 3,025,807 1,395,520 561,967 N/A N/A N/A N/A N/A
- -----------------------------------------------------------------------------------------------------------------------------------
FEDERATED INSURANCE SERIES:
FEDERATED HIGH INCOME BOND II (d)
- -----------------------------------------------------------------------------------------------------------------------------------
Accumulation unit
value at beginning
of period ......... $1.387 $1.364 $1.210 $1.070 $1.000 N/A N/A N/A N/A N/A
Accumulation unit
value at end of
period ............ $1.405 $1.387 $1.364 $1.210 $1.070 N/A N/A N/A N/A N/A
Percentage change in
accumulation unit
value ............. 1.29% 1.68% 12.70% 13.17% 6.96% N/A N/A N/A N/A N/A
Number of
accumulation units
outstanding at end
of period .......... 521,675 402,613 103,898 44,124 1,178 N/A N/A N/A N/A N/A
- -----------------------------------------------------------------------------------------------------------------------------------
FEDERATED INTERNATIONAL EQUITY II (d)
- -----------------------------------------------------------------------------------------------------------------------------------
Accumulation unit
value at beginning
of period ......... $1.494 $1.201 $1.102 $1.028 $1.000 N/A N/A N/A N/A N/A
Accumulation unit
value at end of
period ............ $2.734 $1.494 $1.201 $1.102 $1.028 N/A N/A N/A N/A N/A
Percentage change in
accumulation unit
value ............. 83.05% 24.33% 8.99% 7.23% 2.80% N/A N/A N/A N/A N/A
Number of
accumulation units
outstanding at end
of period ......... 158,076 153,805 117,785 70,090 9,399 N/A N/A N/A N/A N/A
- -----------------------------------------------------------------------------------------------------------------------------------
FEDERATED UTILITY II (d)
- -----------------------------------------------------------------------------------------------------------------------------------
Accumulation unit
value at beginning
of period ......... $1.758 $1.558 $1.243 $1.125 $1.000 N/A N/A N/A N/A N/A
Accumulation unit
value at end of
period ............ $1.770 $1.758 $1.558 $1.243 $1.125 N/A N/A N/A N/A N/A
Percentage change in
accumulation unit
value ............. 0.68% 12.82% 25.38% 10.45% 12.53% N/A N/A N/A N/A N/A
Number of
accumulation units
outstanding at end
of period ......... 417,936 428,133 196,753 111,929 53,189 N/A N/A N/A N/A N/A
- -----------------------------------------------------------------------------------------------------------------------------------
JANUS ASPEN SERIES:
AGGRESSIVE GROWTH (d)
- -----------------------------------------------------------------------------------------------------------------------------------
Accumulation unit
value at beginning
of period ......... $2.011 $1.513 $1.357 $1.269 $1.000 N/A N/A N/A N/A N/A
Accumulation unit
value at end of
period ............ $4.489 $2.011 $1.513 $1.357 $1.269 N/A N/A N/A N/A N/A
Percentage change in
accumulation unit
value ............. 123.17% 32.92% 11.54% 6.87% 26.93% N/A N/A N/A N/A N/A
Number of
accumulation units
outstanding at end
of period ......... 2,363,771 1,484,765 1,145,154 881,491 398,348 N/A N/A N/A N/A N/A
- -----------------------------------------------------------------------------------------------------------------------------------
GROWTH (d)
- -----------------------------------------------------------------------------------------------------------------------------------
Accumulation unit
value at beginning
of period ......... $2.240 $1.668 $1.372 $1.170 $1.000 N/A N/A N/A N/A N/A
Accumulation unit
value at end of
period ............ $3.193 $2.240 $1.668 $1.372 $1.170 N/A N/A N/A N/A N/A
Percentage change in
accumulation unit
value ............. 42.55% 34.31% 21.53% 17.27% 17.02% N/A N/A N/A N/A N/A
Number of
accumulation units
outstanding at end
of period ......... 3,595,530 1,772,621 1,026,609 570,927 144,293 N/A N/A N/A N/A N/A
</TABLE>
37
<PAGE>
CONDENSED FINANCIAL INFORMATION (CONTINUED)
<TABLE>
<CAPTION>
1999 1998 1997 1996 1995 1994 1993 1992 1991 1990
===================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------------------
WORLDWIDE GROWTH (d)
- -----------------------------------------------------------------------------------------------------------------------------------
Accumulation unit
value at beginning
of period ......... $2.394 $1.876 $1.551 $1.214 $1.000 N/A N/A N/A N/A N/A
Accumulation unit
value at end of
period ............ $3.898 $2.394 $1.876 $1.551 $1.214 N/A N/A N/A N/A N/A
Percentage change in
accumulation unit
value ............. 62.82% 27.64% 20.94% 27.74% 21.40% N/A N/A N/A N/A N/A
Number of
accumulation units
outstanding at end
of period ......... 8,203,823 6,332,820 4,929,502 1,845,276 230,889 N/A N/A N/A N/A N/A
- -----------------------------------------------------------------------------------------------------------------------------------
NEUBERGER BERMAN ADVISERS MANAGEMENT TRUST:
LIMITED MATURITY BOND (e)
- -----------------------------------------------------------------------------------------------------------------------------------
Accumulation unit
value at beginning
of period ......... $1.081 $1.046 $1.000 N/A N/A N/A N/A N/A N/A N/A
Accumulation unit
value at end of
period ............ $1.086 $1.081 $1.046 N/A N/A N/A N/A N/A N/A N/A
Percentage change in
accumulation unit
value ............. 0.47% 3.35% 4.59% N/A N/A N/A N/A N/A N/A N/A
Number of
accumulation units
outstanding at end
of period ......... 79,074 225,717 0 N/A N/A N/A N/A N/A N/A N/A
- -----------------------------------------------------------------------------------------------------------------------------------
PARTNERS (e)
- -----------------------------------------------------------------------------------------------------------------------------------
Accumulation unit
value at beginning
of period ......... $1.283 $1.243 $1.000 N/A N/A N/A N/A N/A N/A N/A
Accumulation unit
value at end of
period ............ $1.363 $1.283 $1.243 N/A N/A N/A N/A N/A N/A N/A
Percentage change in
accumulation unit
value ............. 6.30% 3.17% 24.32% N/A N/A N/A N/A N/A N/A N/A
Number of
accumulation units
outstanding at end
of period ......... 422,449 336,371 60,137 N/A N/A N/A N/A N/A N/A N/A
- -----------------------------------------------------------------------------------------------------------------------------------
STRONG OPPORTUNITY FUND II, INC.:
OPPORTUNITY FUND II (e)
- -----------------------------------------------------------------------------------------------------------------------------------
Accumulation unit
value at beginning
of period ......... $1.386 $1.233 $1.000 N/A N/A N/A N/A N/A N/A N/A
Accumulation unit
value at end of
period ............ $1.852 $1.386 $1.233 N/A N/A N/A N/A N/A N/A N/A
Percentage change in
accumulation unit
value ............. 33.57% 12.41% 23.32% N/A N/A N/A N/A N/A N/A N/A
Number of
accumulation units
outstanding at end
of period ......... 160,380 89,350 4,089 N/A N/A N/A N/A N/A N/A N/A
- -----------------------------------------------------------------------------------------------------------------------------------
STRONG VARIABLE INSURANCE FUNDS, INC.:
STRONG MID CAP GROWTH II (e)
- -----------------------------------------------------------------------------------------------------------------------------------
Accumulation unit
value at beginning
of period ......... $1.622 $1.274 $1.000 N/A N/A N/A N/A N/A N/A N/A
Accumulation unit
value at end of
period ............ $3.050 $1.622 $1.274 N/A N/A N/A N/A N/A N/A N/A
Percentage change in
accumulation unit
value ............. 87.99% 27.40% 27.35% N/A N/A N/A N/A N/A N/A N/A
Number of
accumulation units
outstanding at end
of period ......... 110,428 145,329 3,989 N/A N/A N/A N/A N/A N/A N/A
- -----------------------------------------------------------------------------------------------------------------------------------
VAN ECK WORLDWIDE INSURANCE TRUST:
WORLDWIDE BOND (d)
- -----------------------------------------------------------------------------------------------------------------------------------
Accumulation unit
value at beginning
of period ......... $1.172 $1.050 $1.036 $1.021 $1.000 N/A N/A N/A N/A N/A
Accumulation unit
value at end of
period ............ $1.070 $1.172 $1.050 $1.036 $1.021 N/A N/A N/A N/A N/A
Percentage change in
accumulation unit
value ............. (8.74)% 11.63% 1.37% 1.50% 2.05% N/A N/A N/A N/A N/A
Number of
accumulation units
outstanding at end
of period ......... 37,696 30,830 16,578 23,735 6,030 N/A N/A N/A N/A N/A
- -----------------------------------------------------------------------------------------------------------------------------------
WORLDWIDE EMERGING MARKETS (e)
- -----------------------------------------------------------------------------------------------------------------------------------
Accumulation unit
value at beginning
of period ......... $0.527 $0.808 $1.000 N/A N/A N/A N/A N/A N/A N/A
Accumulation unit
value at end of
period ............ $1.044 $0.527 $0.808 N/A N/A N/A N/A N/A N/A N/A
Percentage change in
accumulation unit
value ............. 98.29% (34.80)% (19.24)% N/A N/A N/A N/A N/A N/A N/A
Number of
accumulation units
outstanding at end
of period ......... 253,897 177,924 99,333 N/A N/A N/A N/A N/A N/A N/A
- -----------------------------------------------------------------------------------------------------------------------------------
WORLDWIDE HARD ASSETS (d)
- -----------------------------------------------------------------------------------------------------------------------------------
Accumulation unit
value at beginning
of period ......... $0.840 $1.228 $1.262 $1.080 $1.000 N/A N/A N/A N/A N/A
Accumulation unit
value at end of
period ............ $1.006 $0.840 $1.228 $1.262 $1.080 N/A N/A N/A N/A N/A
Percentage change in
accumulation unit
value ............. 19.80% (31.62)% (2.66)% 16.88% 7.97% N/A N/A N/A N/A N/A
Number of
accumulation units
outstanding at end
of period ......... 556,013 198,619 $280,960 49,773 27,240 N/A N/A N/A N/A N/A
- -----------------------------------------------------------------------------------------------------------------------------------
WORLDWIDE REAL ESTATE (f)
- -----------------------------------------------------------------------------------------------------------------------------------
Accumulation unit
value at beginning
of period ......... $0.854 $1.00 N/A N/A N/A N/A N/A N/A N/A N/A
Accumulation unit
value at end of
period ............ $0.828 $0.854 N/A N/A N/A N/A N/A N/A N/A N/A
Percentage change in
accumulation unit
value ............. (2.99)% 14.60% N/A N/A N/A N/A N/A N/A N/A N/A
Number of
accumulation units
outstanding at end
of period ......... 14,855 3,276 N/A N/A N/A N/A N/A N/A N/A N/A
</TABLE>
38
<PAGE>
CONSECO VARIABLE INSURANCE COMPANY
2000 ACCOUNT C
GROUP ANNUITY
================================================================================
CONDENSED FINANCIAL INFORMATION (CONTINUED)
<TABLE>
<CAPTION>
1999 1998 1997 1996 1995 1994 1993 1992 1991 1990
===================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------------------
DREYFUS VARIABLE INVESTMENT FUND:
DREYFUS VIF DISCIPLINED STOCK (f)
- -----------------------------------------------------------------------------------------------------------------------------------
Accumulation unit
value at beginning
of period ......... $1.075 $1.000 N/A N/A N/A N/A N/A N/A N/A N/A
Accumulation unit
value at end of
period ............ $1.260 $1.075 N/A N/A N/A N/A N/A N/A N/A N/A
Percentage change in
accumulation unit
value ............. 17.27% 7.48% N/A N/A N/A N/A N/A N/A N/A N/A
Number of
accumulation units
outstanding at end
of period ......... 57,395 18,002 N/A N/A N/A N/A N/A N/A N/A N/A
- -----------------------------------------------------------------------------------------------------------------------------------
DREYFUS VIF INTERNATIONAL VALUE (f)
- -----------------------------------------------------------------------------------------------------------------------------------
Accumulation unit
value at beginning
of period ......... $0.944 $1.000 N/A N/A N/A N/A N/A N/A N/A N/A
Accumulation unit
value at end of
period ............ $1.195 $0.944 N/A N/A N/A N/A N/A N/A N/A N/A
Percentage change
in accumulation
unit value ........ 26.55% (5.58)% N/A N/A N/A N/A N/A N/A N/A N/A
Number of
accumulation units
outstanding at end
of period ......... 5,892 0 N/A N/A N/A N/A N/A N/A N/A N/A
- -----------------------------------------------------------------------------------------------------------------------------------
INVESCO VARIABLE INVESTMENT FUNDS, INC.:
INVESCO VIF--HIGH YIELD (f)
- -----------------------------------------------------------------------------------------------------------------------------------
Accumulation unit
value at beginning
of period ......... $0.953 $1.000 N/A N/A N/A N/A N/A N/A N/A N/A
Accumulation unit
value at end of
period ............ $1.030 $0.953 N/A N/A N/A N/A N/A N/A N/A N/A
Percentage change in
accumulation unit
value ............. 8.11% (4.69)% N/A N/A N/A N/A N/A N/A N/A N/A
Number of
accumulation units
outstanding at end
of period ......... 119,099 22,719 N/A N/A N/A N/A N/A N/A N/A N/A
- -----------------------------------------------------------------------------------------------------------------------------------
INVESCO VIF--EQUITY INCOME (f)
- -----------------------------------------------------------------------------------------------------------------------------------
Accumulation unit
value at beginning
of period ......... $1.032 $1.000 N/A N/A N/A N/A N/A N/A N/A N/A
Accumulation unit
value at end of
period ............ $1.173 $1.032 N/A N/A N/A N/A N/A N/A N/A N/A
Percentage change in
accumulation unit
value ............. 13.70% 3.20% N/A N/A N/A N/A N/A N/A N/A N/A
Number of
accumulation units
outstanding at end
of period ......... 12,180 34,697 N/A N/A N/A N/A N/A N/A N/A N/A
- -----------------------------------------------------------------------------------------------------------------------------------
LAZARD RETIREMENT SERIES, INC. :
LAZARD RETIREMENT EQUITY (f)
- -----------------------------------------------------------------------------------------------------------------------------------
Accumulation unit
value at beginning
of period ......... $1,058 $1,000 N/A N/A N/A N/A N/A N/A N/A N/A
Accumulation unit
value at end of
period ............ $1.133 $1.058 N/A N/A N/A N/A N/A N/A N/A N/A
Percentage change in
accumulation unit
value ............. 7.09% 5.81% N/A N/A N/A N/A N/A N/A N/A N/A
Number of
accumulation units
outstanding at end
of period ......... 1,022 0 N/A N/A N/A N/A N/A N/A N/A N/A
- -----------------------------------------------------------------------------------------------------------------------------------
LAZARD RETIREMENT SMALL CAP (f)
- -----------------------------------------------------------------------------------------------------------------------------------
Accumulation unit
value at beginning
of period ......... $0.858 $1.000 N/A N/A N/A N/A N/A N/A N/A N/A
Accumulation unit
value at end of
period ............ $0.893 $0.858 N/A N/A N/A N/A N/A N/A N/A N/A
Percentage change in
accumulation unit
value ............. 4.08% (14.23)% N/A N/A N/A N/A N/A N/A N/A N/A
Number of
accumulation units
outstanding at end
of period ......... 44 4,307 N/A N/A N/A N/A N/A N/A N/A N/A
- -----------------------------------------------------------------------------------------------------------------------------------
LORD ABBETT SERIES FUND, INC.:
GROWTH & INCOME (f)
- -----------------------------------------------------------------------------------------------------------------------------------
Accumulation unit
value at beginning
of period ......... $1.007 $1.000 N/A N/A N/A N/A N/A N/A N/A N/A
Accumulation unit
value at end of
period ............ $1.164 $1.007 N/A N/A N/A N/A N/A N/A N/A N/A
Percentage change in
accumulation unit
value ............. 15.58% 0.73% N/A N/A N/A N/A N/A N/A N/A N/A
Number of
accumulation units
outstanding at end
of period ......... 13,117 13,870 N/A N/A N/A N/A N/A N/A N/A N/A
- -----------------------------------------------------------------------------------------------------------------------------------
MITCHELL HUTCHINS SERIES TRUST:
GROWTH & INCOME (f)
- -----------------------------------------------------------------------------------------------------------------------------------
Accumulation unit
value at beginning
of period ......... $0.992 $1.000 N/A N/A N/A N/A N/A N/A N/A N/A
Accumulation unit
value at end of
period ............ $1.084 $0.992 N/A N/A N/A N/A N/A N/A N/A N/A
Percentage change in
accumulation unit
value ............. 9.23% (0.75)% N/A N/A N/A N/A N/A N/A N/A N/A
Number of
accumulation units
outstanding at end
of period ......... 6,825 5,287 N/A N/A N/A N/A N/A N/A N/A N/A
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) The unit value was $1.000 on the inception date of December 3, 1965.
(b) The unit value was $1.000 on the inception date of May 19, 1981.
(c) The unit value was $1.000 on the inception date of May 1, 1993.
(d) The unit value was $1.000 on the inception date of June 1, 1995.
(e) The unit value was $1.000 on the inception date of May 1, 1997.
(f) The unit value was $1.000 on the inception date of May 1, 1998.
There are no accumulation unit values shown for the following sub-accounts
because they were not available under your Contract until the date of this
prospectus: Conseco 20 Focus; Conseco High Yield; Berger IPT--New
Generation; Rydex OTC; Rydex Nova; Seligman Communications and Information;
and Seligman Global Technology.
39
<PAGE>
================================================================================
APPENDIX B--MORE INFORMATION ABOUT THE FUNDS
Below is a summary of the investment objectives and strategies of each
portfolio available under the Contract. THERE CAN BE NO ASSURANCE THAT THE
INVESTMENT OBJECTIVES WILL BE ACHIEVED.
The Fund prospectuses contain more complete information including a
description of the investment objectives, policies, restrictions and risks of
each portfolio.
CONSECO SERIES TRUST
Conseco Series Trust is managed by Conseco Capital Management, Inc. (CCM)
which is an affiliate of Conseco Variable. Conseco Series Trust is a mutual fund
with multiple portfolios. The following portfolios are available under the
Contract:
CONSECO 20 FOCUS PORTFOLIO
The Conseco 20 Focus Portfolio seeks capital appreciation. Normally, the
Portfolio will invest at least 65% of its assets in common stocks of companies
that the Adviser believes have above-average growth prospects. The Portfolio is
non-diversified and will normally concentrate its investments in a core position
of approximately 20-30 common stocks.
EQUITY PORTFOLIO
The Equity Portfolio seeks to provide a high total return consistent with
preservation of capital and a prudent level of risk. The portfolio will invest
primarily in selected equity securities, including common stocks and other
securities having the investment characteristics of common stocks, such as
convertible securities and warrants.
BALANCED PORTFOLIO
The Balanced Portfolio seeks a high total investment return, consistent with
the preservation of capital and prudent investment risk. Normally, the portfolio
invests approximately 50-65% of its assets in equity securities, and the
remainder in a combination of fixed income securities, or cash equivalents.
HIGH YIELD PORTFOLIO
The High Yield Portfolio seeks to provide a high level of current income with
a secondary objective of capital appreciation. Normally, the adviser invests at
least 65% of the Portfolio's assets in below investment grade securities (those
rated BB+/Ba1 or lower by independent rating agencies).
FIXED INCOME PORTFOLIO
The Fixed Income Portfolio seeks the highest level of income consistent with
preservation of capital. The portfolio invests primarily in investment grade
debt securities.
GOVERNMENT SECURITIES PORTFOLIO
The Government Securities Portfolio seeks safety of capital, liquidity and
current income. The portfolio will invest primarily in securities issued by the
U.S. government or an agency or instrumentality of the U.S. government.
MONEY MARKET PORTFOLIO
The Money Market Portfolio seeks current income consistent with stability of
capital and liquidity. The portfolio may invest in U.S. government securities,
bank obligations, commercial paper obligations, short-term corporate debt
securities and municipal obligations.
THE ALGER AMERICAN FUND
The Alger American Fund is a mutual fund with multiple portfolios. The
manager of the fund is Fred Alger Management, Inc. The following portfolios are
available under the Contract:
ALGER AMERICAN GROWTH PORTFOLIO
The Alger American Growth Portfolio seeks long-term capital appreciation. It
focuses on growing companies that generally have broad product lines, markets,
financial resources and depth of management. Under normal circumstances, the
portfolio invests primarily in the equity securities of large companies.
ALGER AMERICAN LEVERAGED
ALLCAP PORTFOLIO
The Alger American Leveraged AllCap Portfolio seeks long-term capital
appreciation. Under normal circumstances, the portfolio invests in the equity
securities of companies of any size which demonstrate promising growth
potential. The portfolio can borrow money in amounts of up to one-third of its
total assets to buy additional securities.
40
<PAGE>
Conseco Variable Insurance Company
2000 Account C
GROUP ANNUITY
================================================================================
ALGER AMERICAN MIDCAP
GROWTH PORTFOLIO
The Alger American MidCap Growth Portfolio seeks long-term capital
appreciation. It focuses on midsize companies with promising growth potential.
Under normal circumstances, the portfolio invests primarily in the equity
securities of companies having a market capitalization within the range of
companies in the S&P MidCap 400 Index.
ALGER AMERICAN SMALL
CAPITALIZATION PORTFOLIO
The Alger American Small Capitalization Portfolio seeks long-term capital
appreciation. It focuses on small, fast-growing companies that offer innovative
products, services or technologies to a rapidly expanding marketplace. Under
normal circumstances, the portfolio invests primarily in the equity securities
of small capitalization companies.
AMERICAN CENTURY VARIABLE PORTFOLIOS, INC.
American Century Variable Portfolios, Inc. is a mutual fund with multiple
portfolios. The fund's investment adviser is American Century Investment
Management, Inc. The following portfolios are available under the Contract:
VP INCOME & GROWTH FUND
The VP Income & Growth Fund seeks dividend growth, current income and capital
appreciation by investing in common stocks. The fund's investment strategy
utilizes quantitative management techniques in a two-step process that draws
heavily on computer technology.
VP INTERNATIONAL FUND
The VP International Fund seeks capital growth. The fund managers use a
growth investment strategy developed by American Century to invest in stocks of
companies that they believe will increase in value over time. This strategy
looks for companies with earnings and revenue growth. International investment
involves special risk considerations. These include economic and political
conditions, expected inflation rates and currency fluctuations. VP VALUE FUND
The VP Value Fund seeks long-term capital growth. Income is a secondary
objective. In selecting stocks for the VP Value Fund, the fund managers look for
stocks of medium to large companies that they believe are undervalued at the
time of purchase.
BERGER INSTITUTIONAL
PRODUCTS TRUST
Berger Institutional Products Trust is a mutual fund with multiple
portfolios. Berger LLC (formerly, Berger Associates, Inc.) is the investment
adviser to all Portfolios except the Berger/BIAM IPT--International Fund. BBOI
Worldwide LLC, a joint venture between Berger LLC and Bank of Ireland Asset
Management (U.S.) Limited (BIAM), is the adviser to the Berger/BIAM
IPT--International Fund. BBOI Worldwide LLC has delegated daily management of
the Fund to BIAM. Berger LLC and BIAM have entered into an agreement to dissolve
BBOI Worldwide LLC. The dissolution of BBOI Worldwide LLC will have no effect on
the investment advisory services provided to the Fund. Contingent upon
shareholder approval, when BBOI Worldwide LLC is dissolved, Berger LLC will
become the Fund's advisor and BIAM will continue to be responsible for
day-to-day management of the Fund's portfolio as sub-advisor. If approved by
shareholders, these advisory changes are expected to take place in the first
half of this year. The following portfolios are available under the Contract:
BERGER IPT--GROWTH FUND (FORMERLY, BERGER IPT--100 FUND)
The Berger IPT--Growth Fund aims for long-term capital appreciation. In
pursuing that goal, the fund primarily invests in the common stocks of
established companies with the potential for strong earnings growth.
BERGER IPT--GROWTH AND INCOME FUND
The Berger IPT--Growth and Income Fund aims for capital appreciation and has
a secondary goal of investing in securities that produce current income for the
portfolio. In pursuing these goals, the fund primarily invests in the securities
of well-established, growing companies.
BERGER IPT--SMALL COMPANY
GROWTH FUND
The Berger IPT--Small Company Growth Fund aims for capital appreciation. In
pursuing that goal, the fund primarily invests in the common stocks of small
companies with the potential for rapid earnings growth.
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BERGER IPT--NEW GENERATION FUND
The Berger IPT--New Generation Fund seeks capital appreciation. In pursuing
that goal, the fund primarily invests in the common stocks of companies believed
to have the potential to change the direction or dynamics of the industries in
which they operate or significantly influence the way businesses or consumers
conduct their affairs.
BERGER/BIAM IPT--INTERNATIONAL FUND
The Berger/BIAM IPT--International Fund aims for long-term capital
appreciation. In pursuing that goal, the fund primarily invests in a portfolio
consisting of common stocks of well-established foreign companies.
THE DREYFUS SOCIALLY RESPONSIBLE GROWTH FUND, INC.
The Dreyfus Socially Responsible Growth Fund, Inc. is a mutual fund. The
investment adviser for the fund is The Dreyfus Corporation.
The Dreyfus Socially Responsible Growth Fund, Inc. seeks to provide capital
growth, with current income as a secondary goal. To pursue these goals, the fund
invests primarily in the common stock of companies that, in the opinion of the
fund's management, meet traditional investment standards and conduct their
business in a manner that contributes to the enhancement of the quality of life
in America.
DREYFUS STOCK INDEX FUND
The Dreyfus Stock Index Fund is a mutual fund. The investment adviser for the
fund is The Dreyfus Corporation.
The Dreyfus Stock Index Fund seeks to match the total return of the
Standard & Poor's 500 Composite Stock Price Index. To pursue this goal, the fund
generally invests in all 500 stocks in the S&P 500 in proportion to their
weighting in the index.
DREYFUS VARIABLE INVESTMENT FUND
The Dreyfus Variable Investment Fund ("Dreyfus VIF") is a mutual fund with
multiple portfolios. The investment adviser for the portfolios is The Dreyfus
Corporation. The following portfolios are available under the Contract:
DREYFUS VIF DISCIPLINED STOCK PORTFOLIO
The Dreyfus VIF Disciplined Stock Portfolio seeks investment returns
(consisting of capital appreciation and income) that are greater than the total
return performance of stocks represented by the Standard & Poor's 500 Composite
Stock Price Index. To pursue this goal, the portfolio invests in a blended
portfolio of growth and value stocks chosen through a disciplined investment
process.
DREYFUS VIF INTERNATIONAL VALUE PORTFOLIO
The Dreyfus VIF International Value Portfolio seeks long-term capital growth.
To pursue this goal, the portfolio ordinarily invests most of its assets in
equity securities of foreign issuers which Dreyfus considers to be "value"
companies.
FEDERATED INSURANCE SERIES
Federated Insurance Series is a mutual fund with multiple portfolios.
Federated Investment Management Company is the adviser to the Federated High
Income Bond Fund II and the Federated Utility Fund II. Federated Global
Investment Management Corp. is the adviser to the Federated International Equity
Fund II. The following portfolios are available under the Contract:
FEDERATED HIGH INCOME BOND FUND II
The Federated High Income Bond Fund II's investment objective is to seek high
current income by investing primarily in a professionally managed, diversified
portfolio of fixed income securities. The fund pursues its investment objective
by investing in a diversified portfolio of high-yield, lower-rated corporate
bonds.
FEDERATED UTILITY FUND II
The Federated Utility Fund II's investment objective is to achieve high
current income and moderate capital appreciation. The fund pursues its
investment objective by investing under normal market conditions, at least 65%
of its assets in equity securities (including convertible securities) of
companies that derive at least 50% of their revenues from the provision of
electricity, gas and telecommunications related services.
FEDERATED INTERNATIONAL EQUITY FUND II
The Federated International Equity Fund II's investment objective is to
obtain a total return on its assets. The fund's total return will consist of two
components: (1) changes in the market value of its portfolio securities (both
realized and unrealized appreciation); and (2) income received from its
portfolio securities.
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CONSECO VARIABLE INSURANCE COMPANY
2000 ACCOUNT C
GROUP ANNUITY
================================================================================
INVESCO VARIABLE INVESTMENT FUNDS, INC.
(NOT AVAILABLE FOR NEW SALES AS OF MAY 1, 2000)
INVESCO Variable Investment Funds, Inc. is a mutual fund with multiple
portfolios. INVESCO Funds Group, Inc. is the investment adviser for the Fund.
The following portfolios are available under the Contract:
INVESCO VIF--EQUITY INCOME FUND
The INVESCO VIF--Equity Income Fund's primary goal is high current income,
with growth of capital as a secondary objective. The fund normally invests at
least 65% of its assets in dividend-paying common and preferred stocks, although
in recent years that percentage has been somewhat higher.
INVESCO VIF--HIGH YIELD FUND
The INVESCO VIF--High Yield Fund seeks to provide a high level of current
income, with growth of capital as a secondary objective. It invests
substantially all of its assets in lower-rated debt securities, commonly called
"junk bonds" and preferred stock, including securities issued by foreign
companies.
JANUS ASPEN SERIES
Janus Aspen Series is a mutual fund with multiple portfolios. Janus Capital
Corporation is the investment adviser to the fund. The following portfolios are
available under your Contract:
AGGRESSIVE GROWTH PORTFOLIO
The Aggressive Growth Portfolio seeks long-term growth of capital. It pursues
its objective by investing primarily in common stocks selected for their growth
potential, and normally invests at least 50% of its equity assets in
medium-sized companies.
GROWTH PORTFOLIO
The Growth Portfolio seeks long-term growth of capital in a manner consistent
with the preservation of capital. It pursues its objective by investing
primarily in common stocks selected for their growth potential. Although the
Portfolio can invest in companies of any size, it generally invests in larger,
more established companies.
WORLDWIDE GROWTH PORTFOLIO
The Worldwide Growth Portfolio seeks long-term growth of capital in a
manner consistent with the preservation of capital. It pursues its objective by
investing primarily in common stocks of companies of any size throughout the
world. The portfolio normally invests in issuers from at least five
different countries, including the United States. The portfolio may at times
invest in fewer than five countries or even a single country.
LAZARD RETIREMENT SERIES, INC.
Lazard Retirement Series, Inc. is a mutual fund with multiple portfolios.
Lazard Asset Management serves as the investment manager of the portfolios. The
investment manager is a division of Lazard Freres, a New York limited liability
company, which is registered as an investment adviser with the SEC. The
following portfolios are available under the Contract:
LAZARD RETIREMENT EQUITY PORTFOLIO
The Lazard Retirement Equity Portfolio seeks long-term capital appreciation.
The portfolio invests primarily in equity securities, principally common stocks,
of relatively large U.S. companies (those whose total market value is more than
$1 billion) that the investment manager believes are undervalued based on their
earnings, cash flow or asset values.
LAZARD RETIREMENT SMALL CAP PORTFOLIO
The Lazard Retirement Small Cap Portfolio seeks long-term capital
appreciation. The portfolio invests primarily in equity securities, principally
common stocks, of relatively small U.S. companies in the range of the Russell
2000 Index that the investment manager believes are undervalued based on their
earnings, cash flow or asset values.
LORD ABBETT SERIES FUND, INC.
Lord Abbett Series Fund, Inc. is a mutual fund with multiple portfolios. The
fund's investment adviser is Lord, Abbett & Co. The following portfolio is
available under the Contract:
GROWTH & INCOME PORTFOLIO
The Growth & Income Portfolio's investment objective is long-term growth of
capital and income without excessive fluctuations in market value.
MITCHELL HUTCHINS SERIES TRUST
Mitchell Hutchins Series Trust is a mutual fund with multiple portfolios.
Mitchell Hutchins Asset Management Inc. is the investment adviser of the fund.
The following portfolio is available under the Contract:
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================================================================================
GROWTH AND INCOME PORTFOLIO
The Growth and Income Portfolio's investment objective is current income and
capital growth. The portfolio invests primarily in dividend-paying stocks of
companies that its investment adviser believes have potential for rapid earnings
growth.
NEUBERGER BERMAN ADVISERS MANAGEMENT TRUST
Neuberger Berman Advisers Management Trust is a mutual fund with multiple
portfolios. Neuberger Berman Management Inc. is the investment adviser. The
following portfolios are available under the Contract:
LIMITED MATURITY BOND PORTFOLIO
The Limited Maturity Bond Portfolio seeks the highest available current
income consistent with liquidity and low risk to principal; total return is a
secondary goal. To pursue these goals, the portfolio invests mainly in
investment-grade bonds and other debt securities from U.S. government and
corporate issuers. These may include mortgage- and asset-backed securities.
PARTNERS PORTFOLIO
The Partners Portfolio seeks growth of capital. To pursue this goal, the
portfolio invests mainly in common stocks of mid- to large-capitalization
companies. The managers look for well-managed companies whose stock prices are
believed to be undervalued.
RYDEX VARIABLE TRUST
Rydex Variable Trust is a mutual fund with multiple portfolios which are
managed by PADCO Advisors II, Inc. The following portfolios are available under
the Contract:
OTC FUND
The OTC Fund seeks to provide investment results that correspond to a
benchmark for over-the-counter securities. The Fund's current benchmark is the
NASDAQ 100 IndexTM. The Fund invests principally in securities of companies
included in the NASDAQ 100 IndexTM. It also may invest in other instruments
whose performance is expected to correspond to that of the Index, and may engage
in futures and options transactions.
NOVA FUND
The Nova Fund seeks to provide investment returns that correspond to 150% of
the daily performance of the Standard & Poor's 500 Composite Stock Price Index.
Unlike traditional index funds, as its primary investment strategy, the Fund
invests to a significant extent in futures contracts and options on: securities,
futures contracts and stock indexes. On a day-to-day basis, the Fund holds U.S.
government securities to collateralize these futures and options contracts.
SELIGMAN PORTFOLIOS, INC.
Seligman Portfolios, Inc. is a mutual fund with multiple portfolios which are
managed by J. & W. Seligman & Co. Incorporated. The following portfolios are
available under the Contract:
SELIGMAN COMMUNICATIONS AND INFORMATION PORTFOLIO
The Seligman Communications and Information Portfolio seeks capital gain. The
Portfolio invests at least 80% of its net assets, exclusive of government
securities, short-term notes, and cash and cash equivalents, in securities of
companies operating in the communications, information and related industries.
The Portfolio generally invests at least 65% of its total assets in securities
of companies engaged in these industries. The Portfolio may invest in companies
of any size.
SELIGMAN GLOBAL TECHNOLOGY PORTFOLIO
The Seligman Global Technology Portfolio seeks long-term capital
appreciation. The Portfolio generally invests at least 65% of its assets in
equity securities of US and non-US companies with business operations in
technology and technology-related industries. The Portfolio may invest in
companies of any size.
STRONG OPPORTUNITY FUND II, INC.
Strong Opportunity Fund II, Inc. is a mutual fund. Strong Capital Management,
Inc. is the investment advisor for the fund. The following portfolio is
available under the Contract:
OPPORTUNITY FUND II
The Opportunity Fund II seeks capital growth. The fund invests primarily in
stocks of medium-capitalization companies that the fund's manager believes are
underpriced, yet have attractive growth prospects.
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CONSECO VARIABLE INSURANCE COMPANY
2000 ACCOUNT C
GROUP ANNUITY
================================================================================
STRONG VARIABLE INSURANCE FUNDS, INC.
Strong Variable Insurance Funds, Inc. is a mutual fund. Strong Capital
Management, inc. is the investment advisor for the fund. The following portfolio
is available under the Contract:
MID-CAP GROWTH FUND II
The Mid-Cap Growth Fund II seeks capital appreciation. The fund invests at
least 65% of its assets in stocks of medium-capitalization companies that the
fund's managers believe have favorable prospects for accelerating growth of
earnings, cash flow, or asset value.
VAN ECK WORLDWIDE INSURANCE TRUST
Van Eck Worldwide Insurance Trust is a mutual fund with multiple portfolios.
Van Eck Associates Corporation serves as investment adviser to the funds. The
following portfolios are available under the Contract:
WORLDWIDE BOND FUND
The Worldwide Bond Fund seeks high total return income plus capital
appreciation by investing globally, primarily in a variety of debt securities.
The fund's long-term assets will consist of debt securities rated B or better by
Standard & Poor's or Moody's Investors' Service.
WORLDWIDE EMERGING MARKETS FUND
The Worldwide Emerging Markets Fund seeks long-term capital appreciation by
investing in equity securities in emerging markets around the world. The fund
emphasizes investment in countries that have relatively low gross national
product per capita, as well as the potential for rapid economic growth.
WORLDWIDE HARD ASSETS FUND
The Worldwide Hard Assets Fund seeks long-term capital appreciation by
investing primarily in "hard asset securities." Income is a secondary
consideration.
WORLDWIDE REAL ESTATE FUND
The Worldwide Real Estate Fund seeks a high total return by investing in
equity securities of companies that own significant real estate or that
principally do business in real estate.
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[LOGO](SM)
C O N S E C O(R)
Step up.(SM)
ANNUITIES ARE NOT FDIC INSURED. ANNUITIES ARE NOT
OBLIGATIONS OF ANY BANK. THE FINANCIAL INSTITUTION DOES NOT
GUARANTEE PERFORMANCE BY THE INSURER ISSUING THE ANNUITY,
NOR IS IT INSURED BY THE FDIC, NCUSIF,
OR ANY OTHER FEDERAL ENTITY.
[LOGO: NOT AN FDIC BANK]
CONSECO EQUITY SALES, INC., IS A BROKER-DEALER FOR CONSECO VARIABLE
INSURANCE COMPANY. CONSECO EQUITY SALES IS THE PRINCIPAL UNDERWRITER OF
VARIABLE ANNUITY PRODUCTS, AND THE SECURITIES WITHIN, THAT ARE ISSUED THROUGH
CONSECO VARIABLE INSURANCE COMPANY. BOTH COMPANIES ARE SUBSIDIARIES OF
CONSECO, INC., A FINANCIAL SERVICES ORGANIZATION HEADQUARTERED IN CARMEL,
INDIANA. CONSECO, THROUGH ITS SUBSIDIARY COMPANIES, HELPS 12 MILLION
CUSTOMERS STEP UP TO A BETTER, MORE SECURE FUTURE.
CONSECO EQUITY SALES, INC., IS A MEMBER OF THE NASD.
CONSECO VARIABLE INSURANCE COMPANY
11815 N. Pennsylvania Street
Carmel, IN 46032
CV205 (2/00) 07792
(C)2000 Conseco Variable Insurance Company
conseco.com
[LOGO: INSURANCE MARKETPLACE
STANDARDS ASSOCIATION]
CONSECO, THE OFFICIAL FINANCIAL SERVICES PROVIDER OF [LOGO: NASCAR].
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
GROUP VARIABLE DEFERRED ANNUITY CONTRACTS
ISSUED BY
CONSECO VARIABLE INSURANCE COMPANY
AND
CONSECO VARIABLE ANNUITY ACCOUNT C
11815 N. PENNSYLVANIA STREET o CARMEL, IN 46032 o (317) 817-3700
MAY 1, 2000
THIS STATEMENT OF ADDITIONAL INFORMATION IS NOT A PROSPECTUS. IT SHOULD BE READ
IN CONJUNCTION WITH THE PROSPECTUS DATED MAY 1, 2000 FOR CONSECO VARIABLE
ANNUITY ACCOUNT C -- GROUP 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.
<PAGE>
TABLE OF CONTENTS
PAGE
GENERAL INFORMATION AND HISTORY ............................................. 1
INDEPENDENT ACCOUNTANTS ..................................................... 1
DISTRIBUTION ................................................................ 1
VOTING RIGHTS ............................................................... 1
CALCULATION OF YIELD QUOTATIONS ............................................. 2
CALCULATION OF TOTAL RETURN QUOTATIONS ...................................... 3
OTHER PERFORMANCE DATA ...................................................... 5
FEDERAL TAX STATUS .......................................................... 7
ANNUITY PROVISIONS .......................................................... 13
FINANCIAL STATEMENTS ........................................................ 15
<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. The operations of the Company are handled by Conseco, Inc. 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 Sub-Accounts held by 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 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, not including contracts issued in
connection with governmental employers deferred compensation plans described in
the Prospectus, 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
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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
MONEY MARKET SUB-ACCOUNT
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) + 1)6 - 1)
---
CD
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.
2
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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).
AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS ENDED 12/31/99:
10 YEARS
OR SINCE
VARIABLE ACCOUNT SUB-ACCOUNTS 1 YEAR 5 YEARS INCEPTION
- ----------------------------- ------ ------- ---------
CONSECO SERIES TRUST
Balanced Portfolio (1) .......................... 23.64% 21.55% 16.64%
Equity Portfolio ................................ 41.56% 30.69% 18.81%
Fixed Income Portfolio .......................... (5.65%) 6.19% 7.31%
Government Securities Portfolio (1) ............. (7.86%) 1.52% 3.44%
THE ALGER AMERICAN FUND
Alger American Growth Portfolio (3) ............. 26.37% N/A 35.04%
Alger American Leveraged AllCap Portfolio (2) ... 68.25% N/A 41.83%
Alger American MidCap Growth Portfolio (3) ...... 24.57% N/A 27.83%
Alger American Small Capitalization
Portfolio (2) ................................. 35.52% N/A 18.68%
AMERICAN CENTURY VARIABLE PORTFOLIOS, INC
VP International (3) ............................ 55.02% N/A 29.56%
VP Value (3) .................................... (6.33%) N/A 6.89%
VP Income and Growth (4) ........................ 11.51% N/A 12.07%
BERGER INSTITUTIONAL PRODUCTS TRUST
Berger IPT--Growth Fund (3) ..................... 40.91% N/A 25.69%
Berger IPT--Growth and Income Fund (3) .......... 50.29% N/A 35.85%
Berger IPT--Small Company Growth Fund (3) ....... 80.92% N/A 41.06%
Berger/BIAM IPT--International Fund (3) ......... 24.17% N/A 13.06%
THE DREYFUS SOCIALLY RESPONSIBLE
GROWTH FUND, INC (2) ............................ 22.91% N/A 25.94%
3
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10 YEARS
OR SINCE
VARIABLE ACCOUNT SUB-ACCOUNTS 1 YEAR 5 YEARS INCEPTION
- ----------------------------- ------ ------- ---------
DREYFUS STOCK INDEX FUND (2) .................. 13.95% N/A 24.48%
FEDERATED INSURANCE SERIES
Federated High Income Bond Fund II (2) ........ (3.34%)% N/A 7.02%
Federated International Equity Fund II (2) .... 13.08% N/A 12.55%
Federated Utility Fund II (2) ................. 48.45% N/A 23.75%
JANUS ASPEN SERIES
Aggressive Growth Portfolio (2) ............... 113.00% N/A 37.88%
Growth Portfolio (2) .......................... 36.04% N/A 28.01%
Worldwide Growth Portfolio (2) ................ 55.39% N/A 33.70%
NEUBERGER BERMAN ADVISERS
MANAGEMENT TRUST
Limited Maturity Bond Portfolio (3) ........... (4.13%) N/A 1.34%
Partners Portfolio (3) ........................ 1.45% N/A 10.35%
STRONG VARIABLE INSURANCE FUNDS, INC
Strong Mid Cap Growth Fund II (3) ............. 79.42% N/A 49.18%
STRONG OPPORTUNITY FUND, INC
Strong Opportunity Fund II (3) ................ 27.47% N/A 23.75%
VAN ECK WORLDWIDE INSURANCE TRUST
Worldwide Bond Fund (2) ....................... (12.92%) N/A .84%
Worldwide Emerging Markets Fund (3) ........... 89.28% N/A (0.16%)
Worldwide Hard Assets Fund (2) ................ 14.34% N/A (0.49%)
Worldwide Real Estate Fund (4) ................ (7.43%) N/A (13.14%)
DREYFUS VARIABLE INVESTMENT FUND
Dreyfus VIF Disciplined Stock
Portfolio (4) ............................... 11.91% N/A 11.69%
Dreyfus VIF International Value
Portfolio (4) ............................... 20.78% N/A 8.18%
INVESCO VARIABLE INVESTMENT FUNDS, INC
INVESCO VIF--High Yield Fund (4) .............. 3.17% N/A (1.00%)
INVESCO VIF--Equity Income Fund (4) ........... 8.50% N/A 7.01%
LAZARD RETIREMENT SERIES, INC
Lazard Retirement Equity Portfolio (4) ........ 2.18% N/A 5.37%
Lazard Retirement Small Cap Portfolio (4) ..... (0.68%) N/A (9.16%)
LORD ABBETT SERIES FUND, INC
Growth & Income Portfolio (4) ................. 10.29% N/A 6.50%
MITCHELL HUTCHINS SERIES TRUST
Growth & Income Portfolio (4) ................. 4.23% N/A 2.05%
- ----------
(1) Since Inception (May 1, 1993).
(2) Since Inception (June 1, 1995).
(3) Since Inception (May 1, 1997).
(4) Since Inception (May 1, 1998).
4
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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.
GROSS AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS ENDED 12/31/99:
10 YEARS
OR SINCE
VARIABLE ACCOUNT SUB-ACCOUNTS 1 YEAR 5 YEARS INCEPTION
- ----------------------------- ------ ------- ---------
CONSECO SERIES TRUST
Balanced Portfolio (1) ........................... 29.55% 22.26% 17.15%
Equity Portfolio ................................. 48.33% 31.42% 19.03%
Fixed Income Portfolio ........................... (1.12%) 6.82% 7.54%
Government Securities Portfolio (1) .............. (3.44%) 5.33% 3.90%
THE ALGER AMERICAN FUND
Alger American Growth Portfolio (3) .............. 32.41% N/A 37.42%
Alger American Leveraged AllCap Portfolio (2) .... 76.29% N/A 42.71%
Alger American MidCap Growth Portfolio (3) ....... 30.54% N/A 30.10%
Alger American Small Capitalization
Portfolio (2) .................................. 41.99% N/A 19.42%
AMERICAN CENTURY VARIABLE PORTFOLIOS, INC ........
VP International (3) ............................. 62.41% N/A 31.85%
VP Value (3) ..................................... (1.84%) N/A 8.78%
VP Income and Growth (4) ......................... 16.85% N/A 15.25%
BERGER INSTITUTIONAL PRODUCTS TRUST
Berger IPT--Growth Fund (3) ...................... 47.65% N/A 27.92%
Berger IPT--Growth and Income Fund (3) ........... 57.47% N/A 38.25%
Berger IPT--Small Company Growth Fund (3) ........ 89.55% N/A 43.55%
Berger/BIAM IPT--International Fund (3) .......... 30.10% N/A 15.06%
THE DREYFUS SOCIALLY RESPONSIBLE
GROWTH FUND, INC. (2) ............................ 28.79% N/A 26.73%
DREYFUS STOCK INDEX FUND (2) ..................... 19.41% N/A 25.25%
FEDERATED INSURANCE SERIES
Federated High Income Bond Fund II (2) ........... 1.29% N/A 7.69%
Federated International Equity Fund II (2) ....... 18.49% N/A 13.26%
Federated Utility Fund II (2) .................... 55.54% N/A 24.52%
JANUS ASPEN SERIES
Aggressive Growth Portfolio (2) .................. 123.17% N/A 38.74%
Growth Portfolio (2) ............................. 42.55% N/A 28.81%
Worldwide Growth Portfolio (2) ................... 62.82% N/A 34.53%
NEUBERGER BERMAN ADVISERS MANAGEMENT TRUST
Limited Maturity Bond Portfolio (3) .............. .47% N/A 3.14%
Partners Portfolio (3) ........................... 6.30% N/A 12.31%
5
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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) ................ 87.99% N/A 51.82%
STRONG OPPORTUNITY FUND, INC .....................
Strong Opportunity Fund II (3) ................... 33.57% N/A 25.94%
VAN ECK WORLDWIDE INSURANCE TRUST
Worldwide Bond Fund (2) .......................... (8.74%) N/A 1.48%
Worldwide Emerging Markets Fund (3) .............. 98.29% N/A 1.63%
Worldwide Hard Assets Fund (2) ................... 19.80% N/A 0.14%
Worldwide Real Estate Fund (4) ................... (2.99%) N/A (10.67%)
DREYFUS VARIABLE INVESTMENT FUND
Dreyfus VIF Disciplined Stock Portfolio (4) ...... 17.27% N/A 14.86%
Dreyfus VIF International Value Portfolio (4) .... 26.55% N/A 11.25%
INVESCO VARIABLE INVESTMENT FUNDS, INC ...........
INVESCO VIF--High Yield Fund (4) ................. 8.11% N/A 1.81%
INVESCO VIF--Equity Income Fund (4) .............. 13.70% N/A 10.04%
LAZARD RETIREMENT SERIES, INC ....................
Lazard Retirement Equity Portfolio (4) ........... 7.09% N/A 7.76%
Lazard Retirement Small Cap Portfolio (4) ........ 4.08% N/A (6.57%)
LORD ABBETT SERIES FUND, INC .....................
Growth & Income Portfolio (4) .................... 15.58% N/A 9.53%
MITCHELL HUTCHINS SERIES TRUST
Growth & Income Portfolio (4) .................... 9.23% N/A 4.95%
There is no performance shown for the following sub-accounts because they were
not available under the Contract until the date of the prospectus (May 1, 2000):
Conseco 20 Focus; Conseco High Yield; Berger IPT -- New Generation; Rydex OTC;
Rydex Nova; Seligman Communications and Information; and Seligman Global
Technology.
- ----------
(1) Since inception (May 1, 1993).
(2) Since inception (June 1, 1995).
(3) Since inception (May 1, 1997).
(4) Since inception (May 1, 1998).
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.
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<PAGE>
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.
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.
7
<PAGE>
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.
8
<PAGE>
MULTIPLE CONTRACTS
The Code provides that multiple non-qualified annuity contracts which are issued
within a calendar year to the same contract owner by one company or its
affiliates are treated as one annuity contract for purposes of determining the
tax consequences of any distribution. Such treatment may result in adverse tax
consequences including more rapid taxation of the distributed amounts from such
combination of contracts. For purposes of this rule, contracts received in a
Section 1035 exchange will be considered issued in the year of the exchange.
Owners should consult a tax adviser prior to purchasing more than one
non-qualified annuity contract in any calendar year.
PARTIAL 1035 EXCHANGES
Section 1035 of the Code provides that an annuity contract may be exchanged in a
tax-free transaction for another annuity contract. In 1998 in CONWAY VS.
COMMISSIONER, the Tax Court held that the direct transfer of a portion of an
annuity contract into another annuity contract qualified as a non-taxable
exchange. On November 22, 1999, the Internal Revenue Service filed an Action on
Decision which indicated that it acquiesced in the Tax Court decision in CONWAY.
However, in its acquiesence with the decision of the Tax Court, the Internal
Revenue Service stated that it will challenge transactions where taxpayers enter
into a series of partial exchanges and annuitizations as part of a design to
avoid application of the 10% premature distribution penalty or other limitations
imposed on annuity contracts under the Code. In the absence of further guidance
from the Internal Revenue Service it is unclear what specific types of partial
exchange designs and transactions will be challenged by the Internal Revenue
Service. Due to the uncertainty in this area, owners should consult their own
tax advisers prior to entering into a partial exchange of an annuity contract.
CONTRACTS OWNED BY OTHER THAN NATURAL PERSONS
Under Section 72(u) of the Code, the investment earnings on premiums for the
Contracts will be taxed currently to the Owner if the Owner is a non-natural
person, e.g., a corporation or certain other entities. Such Contracts generally
will not be treated as annuities for federal income tax purposes. However, this
treatment is not applied to a Contract held by a trust or other entity as an
agent for a natural person nor to Contracts held by Qualified Plans. Purchasers
should consult their own tax counsel or other tax adviser before purchasing a
Contract to be owned by a non-natural person.
TAX TREATMENT OF ASSIGNMENTS
An assignment or pledge of a Contract may be a taxable event. 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
9
<PAGE>
as wages and at the rate of 10% from non-periodic payments. However, the Owner,
in many cases, may elect not to have taxes withheld or to have withholding done
at a different rate.
Certain distributions from retirement plans qualified under Section 401 or
Section 403(b) of the Code, which are not directly rolled over to another
eligible retirement plan or individual retirement account or individual
retirement annuity, are subject to a mandatory 20% withholding for federal
income tax. The 20% withholding requirement generally does not apply to: a) a
series of substantially equal payments made at least annually for the life or
life expectancy of the participant or joint and last survivor expectancy of the
participant and a designated beneficiary or for a specified period of 10 years
or more; or b) distributions which are required minimum distributions; or c) the
portion of the distributions not 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 59-1/2 or 5 years
from the date of the first periodic payment, then the tax for the year of the
modification is increased by an amount equal to the tax which would have been
imposed (the 10% penalty tax) but for the exception, plus interest for the tax
years in which the exception was used.
The above information does not apply to Qualified Contracts. However, separate
tax withdrawal penalties and restrictions may apply to such Qualified Contracts.
(See "Tax Treatment of Withdrawals -- Qualified Contracts" below.)
QUALIFIED PLANS
The Contracts 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
10
<PAGE>
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
atransferable 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
11
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governmental employer if the Plan is not an eligible plan within the meaning of
section 457(b) of the Code. In the absence of such a trust, amounts under the
plan will be subject to the claims of the employer's general creditors.
In general, distributions from a Plan are prohibited under section 457 of the
Code unless made after the participating employee:
attains age 70 1/2,
separates from service,
dies, or
suffers an unforeseeable financial emergency as defined in the Code.
Under present federal tax law, amounts accumulated in a Plan under section 457of
the Code cannot be transferred or rolled over on a tax-deferred basis except for
certain transfers to other Plans under section 457.
TAX TREATMENT OF WITHDRAWALS -- QUALIFIED CONTRACTS
In the case of a withdrawal under a Qualified Contract, a ratable portion of the
amount received is taxable, generally based on the ratio of the individual's
cost basis to the individual's total accrued benefit under the retirement plan.
Special tax rules may be available for certain distributions from a Qualified
Contract. Section 72(t) of the Code imposes a 10% penalty tax on the taxable
portion of any distribution from qualified retirement plans, including Contracts
issued and qualified under Code 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; (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
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attributable to such contributions and to income attributable to amounts held as
of December 31, 1988. The limitations on withdrawals do not affect rollovers and
transfers between certain Qualified Plans. Owners should consult their own tax
counsel or other tax adviser regarding any distributions.
MANDATORY DISTRIBUTIONS -- QUALIFIED PLANS
Generally, distributions from a qualified plan must begin no later than April
1st of the calendar year following the later of (a) the year in which the
employee attains age 70-1/2 or (b) the calendar year in which the employee
retires. 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
portfolio 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
portfolio 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 (see "Annuity Options"
in the prospectus), 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
13
<PAGE>
calculated 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 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 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 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 $1.3000000000. 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.
14
<PAGE>
FINANCIAL STATEMENTS
Audited financial statements of Conseco Variable Annuity Account C as of
December 31, 1999 are included below as well as audited financial statements of
Conseco Variable Insurance Company as of December 31, 1999.
15
<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:
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.
16
<PAGE>
CONSECO VARIABLE ANNUITY ACCOUNT C
STATEMENT OF ASSETS AND LIABILITIES - CONTINUED
DECEMBER 31, 1999
<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:
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.
17
<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
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.
18
<PAGE>
================================================================================
THIS PAGE INTENTIONALLY LEFT BLANK.
19
<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>
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
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.
20
<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
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) (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>
21
<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
- -----------------------------------------------------------------------------------------------------------------------------------
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
- -----------------------------------------------------------------------------------------------------------------------------------
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.
22
<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
====================================================================================================================================
<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>
23
<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
---------- ---------- ---------- ---------- ----------
====================================================================================================================================
<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)
- ------------------------------------------------------------------------------------------------------------------------------------
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.
24
<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
- ------------------------------------------------------------------------------------------------------------------- ---------------
(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>
25
<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
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.
26
<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
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>
27
<PAGE>
CONSECO VARIABLE ANNUITY ACCOUNT C
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
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.
28
<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
- ------------------------------------------------------------------------------------------------------------------------------------
-- 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>
29
<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>
====================================================================================================================================
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.
30
<PAGE>
<TABLE>
<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>
$ 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
(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>
31
<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
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
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
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.
32
<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
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
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
================================================================================
33
<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
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
34
<PAGE>
Conseco Variable Insurance Company
Financial Statements as of December 31, 1999 and 1998,
and for the years ended December 31, 1999, 1998 and 1997
35
<PAGE>
- --------------------------------------------------------------------------------
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholder and Board of Directors
Conseco Variable Insurance Company
In our opinion, the accompanying balance sheet and the related statements
of operations, shareholder's equity and cash flows present fairly, in all
material respects, the financial position of Conseco Variable Insurance Company
(the "Company") at December 31, 1999 and 1998, and the results of its operations
and its cash flows for each of the three years in the period ended December 31,
1999, in conformity with accounting principles generally accepted in the United
States. These financial statements are the responsibility of the Company's
management; our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these statements in
accordance with auditing standards generally accepted in the United States which
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for the opinion expressed above.
/s/ PricewaterhouseCoopers LLP
April 13, 2000
36
<PAGE>
CONSECO VARIABLE INSURANCE COMPANY
BALANCE SHEET
December 31, 1999 and 1998
(Dollars in millions)
ASSETS
1999 1998
-------- --------
Investments:
Actively managed fixed maturities at
fair value (amortized cost:
1999 - $1,491.8; 1998 - $1,520.5) ............ $1,398.7 $1,524.1
Equity securities at fair value
(cost: 1999 - $47.8 million;
1998 - $46.0 million) ......................... 49.8 45.7
Mortgage loans .................................... 108.0 110.2
Policy loans ...................................... 75.5 79.6
Other invested assets ............................. 50.8 120.3
-------- --------
Total investments ........................... 1,682.8 1,879.9
Cash and cash equivalents ............................. 81.5 48.4
Accrued investment income ............................. 35.6 30.5
Cost of policies purchased ............................ 131.6 98.0
Cost of policies produced ............................. 147.6 82.5
Reinsurance receivables ............................... 26.4 22.2
Goodwill .............................................. 45.3 46.7
Assets held in separate accounts ...................... 1,457.0 696.4
Other assets .......................................... 6.0 7.1
-------- --------
Total assets ................................ $3,613.8 $2,911.7
======== ========
(continued on next page)
The accompanying notes are an integral part
of the financial statements.
37
<PAGE>
CONSECO VARIABLE INSURANCE COMPANY
BALANCE SHEET (Continued)
December 31, 1999 and 1998
(Dollars in millions, except per share amount)
LIABILITIES AND SHAREHOLDER'S EQUITY
1999 1998
-------- --------
Liabilities:
Insurance liabilities:
Interest-sensitive products ....................... $1,289.2 $1,365.2
Traditional products .............................. 242.8 246.2
Claims payable and other policyholder funds ....... 64.1 62.6
Liabilities related to separate accounts .......... 1,457.0 696.4
Income tax liabilities ............................... 33.4 37.5
Investment borrowings ................................ 135.1 65.7
Other liabilities .................................... 16.5 33.0
-------- --------
Total liabilities ............................ 3,238.1 2,506.6
-------- --------
Shareholder's equity:
Common stock and additional paid-in capital
(par value $4.80 per share, 1,065,000
shares authorized, 1,043,565 shares issued
and outstanding) .................................. 380.8 380.8
Accumulated other comprehensive loss ................. (28.4) (.8)
Retained earnings .................................... 23.3 25.1
-------- --------
Total shareholder's equity ................... 375.7 405.1
-------- --------
Total liabilities and shareholder's equity ... $3,613.8 $2,911.7
======== ========
The accompanying notes are an integral part
of the financial statements.
38
<PAGE>
CONSECO VARIABLE INSURANCE COMPANY
STATEMENT OF OPERATIONS
for the years ended December 31, 1999, 1998 and 1997
(Dollars in millions)
1999 1998 1997
------- ------- -------
Revenues:
Insurance policy income .................. $ 72.1 $ 73.6 $ 75.7
Net investment income .................... 297.6 198.0 222.6
Net gains (losses) from
sale of investments .................... (10.0) 18.5 13.3
------- ------- -------
Total revenues ..................... 359.7 290.1 311.6
------- ------- -------
Benefits and expenses:
Insurance policy benefits ................ 266.8 170.6 191.0
Amortization ............................. 13.8 33.6 27.1
Other operating costs and expenses ....... 40.3 38.7 32.2
------- ------- -------
Total benefits and expenses ........ 320.9 242.9 250.3
------- ------- -------
Income before income taxes ......... 38.8 47.2 61.3
Income tax expense ........................... 13.6 16.6 22.1
------- ------- -------
Net income ......................... $ 25.2 $ 30.6 $ 39.2
======= ======= =======
The accompanying notes are an integral part
of the financial statements.
39
<PAGE>
CONSECO VARIABLE INSURANCE COMPANY
STATEMENT OF SHAREHOLDER'S EQUITY
for the years ended December 31, 1999, 1998 and 1997
(Dollars in millions)
Accumulated
Common other
stock and compre-
additional hensive
paid-in income Retained
Total capital (loss) earnings
------ ------ ------ ------
Balance, December 31, 1996 ................ $396.9 $380.8 $ (4.6) $ 20.7
Comprehensive income, net of tax:
Net income ............................ 39.2 -- -- 39.2
Change in unrealized appreciation
(depreciation) of securities
(net of applicable income tax
expense of $7.2) .................... 13.3 -- 13.3 --
------
Total comprehensive income ........ 52.5
Dividends on common stock ............... (32.5) -- -- (32.5)
------ ------ ------ ------
Balance, December 31, 1997 ................ 416.9 380.8 8.7 27.4
Comprehensive income, net of tax:
Net income ........................... 30.6 -- -- 30.6
Change in unrealized appreciation
(depreciation) of securities
(net of applicable income tax
benefit of $5.1) ................... (9.5) -- (9.5) --
------
Total comprehensive income ........ 21.1
Dividends on common stock ............... (32.9) -- -- (32.9)
------ ------ ------ ------
Balance, December 31, 1998 ................ 405.1 380.8 (.8) 25.1
Comprehensive loss, net of tax:
Net income .............................. 25.2 -- -- 25.2
Change in unrealized depreciation of
securities (net of applicable income
tax benefit of $15.7 million) ........ (27.6) -- (27.6) --
------
Total comprehensive loss ......... (2.4)
Dividends on common stock ............... (27.0) -- -- (27.0)
------ ------ ------ ------
Balance, December 31, 1999 ................ $375.7 $380.8 $(28.4) $ 23.3
====== ====== ====== ======
The accompanying notes are an integral part
of the financial statements.
40
<PAGE>
CONSECO VARIABLE INSURANCE COMPANY
STATEMENT OF CASH FLOWS
for the years ended December 31, 1999, 1998 and 1997
(Dollars in millions)
1999 1998 1997
------- ------- -------
Cash flows from operating activities:
Net income .................................. $ 25.2 $ 30.6 $ 39.2
Adjustments to reconcile net income
to net cash provided by operating
activities:
Amortization .......................... 13.8 43.0 27.1
Income taxes .......................... 11.4 (1.2) 6.7
Insurance liabilities ................. 162.6 120.0 95.2
Accrual and amortization of
investment income ................... (11.4) 1.6 .3
Deferral of cost of policies
produced ............................ (62.7) (35.3) (31.8)
Net (gains) losses from sale
of investments ...................... 10.0 (18.5) (13.3)
Other ................................. .7 (38.3) (4.6)
------- ------- -------
Net cash provided by operating
activities .......................... 149.6 101.9 118.8
------- ------- -------
Cash flows from investing activities:
Sales of investments ........................ 904.8 1,185.0 755.2
Maturities and redemptions .................. 109.0 145.5 150.4
Purchases of investments .................... (1,502.0) (1,420.7) (923.5)
------- ------- -------
Net cash used by investing
activities .......................... (488.2) (90.2) (17.9)
------- ------- -------
Cash flows from financing activities:
Deposits to insurance liabilities ........... 654.1 400.4 255.9
Investment borrowings ....................... 69.4 4.7 12.6
Withdrawals from insurance liabilities ...... (324.8) (385.0) (302.2)
Dividends paid on common stock .............. (27.0) (32.9) (32.5)
------- ------- -------
Net cash provided (used) by
financing activities ................ 371.7 (12.8) (66.2)
------- ------- -------
Net increase (decrease) in cash
and cash equivalents ................ 33.1 (1.1) 34.7
Cash and cash equivalents, beginning of year ... 48.4 49.5 14.8
------- ------- -------
Cash and cash equivalents, end of year ......... $ 81.5 $ 48.4 $ 49.5
======= ======= =======
The accompanying notes are an integral part
of the financial statements.
41
<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.
42
<PAGE>
CONSECO VARIABLE INSURANCE COMPANY
Notes to Financial Statements
------------------------------
When we sell a security (other than a trading security), we report the
difference between our sale proceeds and its amortized cost (determined based on
specific identification) as an investment gain or loss.
We regularly evaluate all of our investments based on current economic
conditions, credit loss experience and other investee-specific developments. If
there is a decline in a security's net realizable value that is other than
temporary, we treat it as a realized loss and reduce our cost basis of the
security to its estimated fair value.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents include commercial paper, invested cash and other
investments purchased with maturities of less than three months. We carry them
at amortized cost, which approximates their estimated fair value.
SEPARATE ACCOUNTS
Separate accounts are funds on which investment income and gains or losses
accrue directly to certain policyholders. The assets of these accounts are
legally segregated. They are not subject to the claims that may arise out of any
other business of the Company. We report separate account assets at market
value; the underlying investment risks are assumed by the contract holders. We
record the related liabilities at amounts equal to the market value of the
underlying assets. We record the fees earned for administrative and
contractholder services performed for the separate accounts in insurance policy
income.
COST OF POLICIES PRODUCED
The costs that vary with, and are primarily related to, producing new
insurance business are referred to as cost of policies produced. We amortize
these costs using the interest rate credited to the underlying policy: (i) in
relation to the estimated gross profits for universal life-type and
investment-type products; or (ii) in relation to future anticipated premium
revenue for other products.
When we realize a gain or loss on investments backing our universal life or
investment-type products, we adjust the amortization to reflect the change in
estimated gross profits from the products due to the current realized gain or
loss and the effect of the event on future investment yields. We also adjust the
cost of policies produced for the change in amortization that would have been
recorded if actively managed fixed maturity securities had been sold at their
stated aggregate fair value and the proceeds reinvested at current yields. We
include the impact of this adjustment in accumulated other comprehensive income
(loss) within shareholder's equity.
Each year, we evaluate the recoverability of the unamortized balance of the
cost of policies produced. We consider estimated future gross profits or future
premiums, expected mortality or morbidity, interest earned and credited rates,
persistency and expenses in determining whether the balance is recoverable.
COST OF POLICIES PURCHASED
The cost assigned to the right to receive future cash flows from contracts
existing at the date of an acquisition is referred to as the cost of policies
purchased. The balance of this account is amortized, evaluated for recovery, and
adjusted for the impact of unrealized gains (losses) in the same manner as the
cost of policies produced described above.
The discount rate we use to determine the value of the cost of policies
purchased is the rate of return we need to earn in order to invest in the
business being acquired. In determining this required rate of return, we
consider many factors including: (i) the magnitude of the risks associated with
each of the actuarial assumptions used in determining expected future cash
flows; (ii) the cost of our capital required to fund the acquisition; (iii) the
likelihood of changes in projected future cash flows that might occur if there
are changes in insurance regulations and tax laws; (iv) the acquired company's
compatibility with other
43
<PAGE>
CONSECO VARIABLE INSURANCE COMPANY
Notes to Financial Statements
------------------------------
Company activities that may favorably affect future cash flows; (v) the
complexity of the acquired company; and (vi) recent prices (i.e., discount rates
used in determining valuations) paid by others to acquire similar blocks of
business.
GOODWILL
Goodwill is the excess of the amount paid to acquire the Company over the
fair value of its net assets. Our analysis indicates that the anticipated
ongoing cash flows from the earnings of the Company extends significantly beyond
the maximum 40-year period allowed for goodwill amortization. Accordingly, we
amortize goodwill on the straight-line basis generally over a 40-year period. At
December 31, 1999, the total accumulated amortization of goodwill was $16.1
million. We continually monitor the value of our goodwill based on our estimates
of future earnings. We determine whether goodwill is fully recoverable from
projected undiscounted net cash flows from our earnings over the remaining
amortization period. If we were to determine that changes in such projected cash
flows no longer support the recoverability of goodwill over the remaining
amortization period, we would reduce its carrying value with a corresponding
charge to expense or shorten the amortization period (no such changes have
occurred).
RECOGNITION OF INSURANCE POLICY INCOME AND RELATED BENEFITS AND EXPENSES ON
INSURANCE CONTRACTS
Generally, we recognize insurance premiums for traditional life and
accident and health contracts as earned over the premium-paying periods. We
establish reserves for future benefits on a net-level premium method based upon
assumptions as to investment yields, mortality, morbidity, withdrawals and
dividends. We record premiums for universal life-type and investment-type
contracts that do not involve significant mortality or morbidity risk as
deposits to insurance liabilities. Revenues for these contracts consist of
mortality, morbidity, expense and surrender charges. We establish reserves for
the estimated present value of the remaining net costs of all reported and
unreported claims.
REINSURANCE
In the normal course of business, we seek to limit our exposure to loss on
any single insured or to certain groups of policies by ceding reinsurance to
other insurance enterprises. We currently retain no more than $.5 million of
mortality risk on any one policy. We diversify the risk of reinsurance loss by
using a number of reinsurers that have strong claims-paying ratings. If any
reinsurer could not meet its obligations, the Company would assume the
liability. The likelihood of a material loss being incurred as the result of the
failure of one of our reinsurers is considered remote. The cost of reinsurance
is recognized over the life of the reinsured policies using assumptions
consistent with those used to account for the underlying policy. The cost of
reinsurance ceded totaled $23.1 million, $21.0 million and $24.2 million in
1999, 1998 and 1997, respectively. A receivable is recorded for the reinsured
portion of insurance policy benefits paid and liabilities for insurance
products. Reinsurance recoveries netted against insurance policy benefits
totaled $20.8 million, $21.8 million and $14.9 million in 1999, 1998 and 1997,
respectively.
INCOME TAXES
Our income tax expense includes deferred income taxes arising from
temporary differences between the tax and financial reporting bases of assets
and liabilities. In assessing the realization of deferred income tax assets, we
consider whether it is more likely than not that the deferred income tax assets
will be realized. The ultimate realization of deferred income tax assets depends
upon generating future taxable income during the periods in which temporary
differences become deductible. If future income is not generated as expected,
deferred income tax assets may need to be written off (no such write-offs have
occurred).
INVESTMENT BORROWINGS
As part of our investment strategy, we may enter into reverse repurchase
agreements and dollar-roll transactions to increase our investment return or to
improve our liquidity. We account for these transactions as collateral
borrowings, where the amount borrowed is equal to the sales price of the
underlying securities. Reverse repurchase agreements involve a sale of
securities and an agreement to repurchase the same securities at a later date at
an agreed-upon price. Dollar rolls are similar to reverse
44
<PAGE>
CONSECO VARIABLE INSURANCE COMPANY
Notes to Financial Statements
------------------------------
repurchase agreements except that, with dollar rolls, the repurchase involves
securities that are only substantially the same as the securities sold. Such
borrowings averaged $137.7 million during 1999 and $66.0 million during 1998.
These borrowings were collateralized by investment securities with fair values
approximately equal to the loan value. The weighted average interest rate on
short-term collateralized borrowings was 5.0 percent and 4.4 percent in 1999 and
1998, respectively. The primary risk associated with short-term collateralized
borrowings is that a counterparty will be unable to perform under the terms of
the contract. Our exposure is limited to the excess of the net replacement cost
of the securities over the value of the short-term investments (such excess was
not material at December 31, 1999). We believe the counterparties to our reverse
repurchase and dollar-roll agreements are financially responsible and that the
counterparty risk is minimal.
USE OF ESTIMATES
When we prepare financial statements in conformity with GAAP, we are
required to make estimates and assumptions that significantly affect various
reported amounts of assets and liabilities, and the disclosure of contingent
assets and liabilities at the date of the financial statements and revenues and
expenses during the reporting periods. For example, we use significant estimates
and assumptions in calculating values for the cost of policies produced, the
cost of policies purchased, goodwill, insurance liabilities, liabilities related
to litigation, guaranty fund assessment accruals and deferred income taxes. If
our future experience differs materially from these estimates and assumptions,
our financial statements could be affected.
FAIR VALUES OF FINANCIAL INSTRUMENTS
We use the following methods and assumptions to determine the estimated
fair values of financial instruments:
INVESTMENT SECURITIES. For fixed maturity securities (including redeemable
preferred stocks) and for equity and trading securities, we use quotes from
independent pricing services, where available. For investment securities
for which such quotes are not available, we use values obtained from
broker-dealer market makers or by discounting expected future cash flows
using a current market rate appropriate for the yield, credit quality, and
(for fixed maturity securities) the maturity of the investment being
priced.
CASH AND CASH EQUIVALENTS. The carrying amount for these instruments
approximates their estimated fair value.
MORTGAGE LOANS AND POLICY LOANS. We discount future expected cash flows for
loans included in our investment portfolio based on interest rates
currently being offered for similar loans to borrowers with similar credit
ratings. We aggregate loans with similar characteristics in our
calculations.
OTHER INVESTED ASSETS. We use quoted market prices, where available. When
quotes are not available, we estimate the fair value based on: (i)
discounted future expected cash flows; or (ii) independent transactions
which establish a value for our investment. When we are unable to estimate
a fair value, we assume a market value equal to carrying value.
INSURANCE LIABILITIES FOR INTEREST-SENSITIVE PRODUCTS. We discount future
expected cash flows based on interest rates currently being offered for
similar contracts with similar maturities.
INVESTMENT BORROWINGS. Due to the short-term nature of these borrowings
(terms generally less than 30 days), estimated fair values are assumed to
approximate the carrying amount reported in the balance sheet.
Here are the estimated fair values of our financial instruments:
45
<PAGE>
CONSECO VARIABLE INSURANCE COMPANY
Notes to Financial Statements
------------------------------
1999 1998
------------------ ------------------
Carrying Fair Carrying Fair
Amount Value Amount Value
-------- -------- -------- --------
(Dollars in millions)
Financial assets:
Actively managed fixed maturities ... $1,398.7 $1,398.7 $1,524.1 $1,524.1
Equity securities ................... 49.8 49.8 45.7 45.7
Mortgage loans ...................... 108.0 102.8 110.2 119.0
Policy loans ........................ 75.5 75.5 79.6 79.6
Other invested assets ............... 50.8 50.8 120.3 120.3
Cash and cash equivalents ........... 81.5 81.5 48.4 48.4
Financial liabilities:
Insurance liabilities for
interest-sensitive products (1) ... 1,289.2 1,289.2 1,365.2 1,365.2
Investment borrowings ............... 135.1 135.1 65.7 65.7
- --------------------
(1) The estimated fair value of the liabilities for interest-sensitive
products was approximately equal to its carrying value at December 31,
1999 and 1998. This was because interest rates credited on the vast
majority of account balances approximate current rates paid on similar
products and because these rates are not generally guaranteed beyond
one year. We are not required to disclose fair values for insurance
liabilities, other than those for interest-sensitive products .
However, we take into consideration the estimated fair values of all
insurance liabilities in our overall management of interest rate risk.
We attempt to minimize exposure to changing interest rates by matching
investment maturities with amounts due under insurance contracts.
RECENTLY ISSUED ACCOUNTING STANDARDS
Statement of Financial Accounting Standards No. 133, "Accounting for
Derivative Instruments and Hedging Activities" ("SFAS 133"), as amended by
Statement of Financial Accounting Standards No. 137, "Deferral of the Effective
Date of FASB Statement No. 133" requires all derivative instruments to be
recorded on the balance sheet at estimated fair value. Changes in the fair value
of derivative instruments are to be recorded each period either in current
earnings or other comprehensive income, depending on whether a derivative is
designated as part of a hedge transaction and, if it is, on the type of hedge
transaction. SFAS 133 is required to be implemented in year 2001. We are
currently evaluating the impact of SFAS 133; at present, we do not believe it
will have a material effect on our consolidated financial position or results of
operations. Because of ongoing changes to implementation guidance, we do not
plan on adopting the new standard until the first quarter of 2001.
We implemented the Statement of Position 98-1, "Accounting for the Costs of
Computer Software Developed or Obtained for Internal Use" ("SOP 98-1") on
January 1, 1999. SOP 98-1 defines internal use software and when the costs
associated with internal use software should be capitalized. The implementation
of SOP 98-1 did not have a material effect on our consolidated financial
position or results of operations.
2. INVESTMENTS:
At December 31, 1999, the amortized cost and estimated fair value of
actively managed fixed maturities and equity securities were as follows:
Gross Gross Esti-
unre- unre- mated
Amortized alized alized fair
cost gains losses value
-------- ------ ----- --------
(Dollars in millions)
Investment grade:
Corporate securities ..................... $ 840.6 $ 2.2 $59.3 $ 783.5
United States Treasury securities
and obligations of United States
government corporations and agencies ... 15.5 .1 .7 14.9
States and political subdivisions ........ 11.7 -- 1.1 10.6
Debt securities issued by
foreign governments .................... 12.2 -- 1.6 10.6
Mortgage-backed securities ............... 482.3 .2 22.7 459.8
Below-investment grade
(primarily corporate securities) .......... 129.5 2.4 12.6 119.3
-------- ------ ----- --------
Total actively managed
fixed maturities ..................... $1,491.8 $ 4.9 $98.0 $1,398.7
======== ====== ===== ========
Equity securities ........................... $47.8 $3.9 $1.9 $49.8
===== ==== ==== =====
46
<PAGE>
CONSECO VARIABLE INSURANCE COMPANY
Notes to Financial Statements
------------------------------
At December 31, 1998, the amortized cost and estimated fair value of
actively managed fixed maturities and equity securities were as follows:
Gross Gross Esti-
unre- unre- mated
Amortized alized alized fair
cost gains losses value
-------- ------ ----- --------
(Dollars in millions)
Investment grade:
Corporate securities ...................... $ 860.4 $20.7 $15.0 $ 866.1
United States Treasury securities
and obligations of United States
government corporations
and agencies ............................ 26.9 .8 .2 27.5
States and political subdivisions ......... 17.3 .3 -- 17.6
Debt securities issued by
foreign governments ..................... 11.7 -- .8 10.9
Mortgage-backed securities ................ 487.4 8.0 1.2 494.2
Below-investment grade
(primarily corporate securities) ........... 116.8 1.2 10.2 107.8
-------- ----- ----- --------
Total actively managed
fixed maturities ...................... $1,520.5 $31.0 $27.4 $1,524.1
======== ===== ===== ========
Equity securities ............................ $ 46.0 $ .8 $ 1.1 $ 45.7
======== ===== ===== ========
Accumulated other comprehensive loss included in shareholder's equity as of
December 31, 1999 and 1998, is summarized as follows:
1999 1998
------- -------
(Dollars in millions)
Unrealized gains (losses) on investments ............. $ (90.8) $ .9
Adjustments to cost of policies purchased
and cost of policies produced ...................... 46.3 (2.1)
Deferred income tax benefit .......................... 16.1 .4
------- -------
Accumulated other comprehensive loss .......... $ (28.4) $ (.8)
======= =======
The following table sets forth the amortized cost and estimated fair value
of actively managed fixed maturities at December 31, 1999, by contractual
maturity. Actual maturities will differ from contractual maturities because
borrowers may have the right to call or prepay obligations with or without call
or prepayment penalties. Most of the mortgage-backed securities shown below
provide for periodic payments throughout their lives.
47
<PAGE>
CONSECO VARIABLE INSURANCE COMPANY
Notes to Financial Statements
------------------------------
Estimated
Amortized fair
cost value
-------- --------
(Dollars in millions)
Due in one year or less ................................ $ 8.2 $ 8.2
Due after one year through five years .................. 90.8 89.5
Due after five years through ten years ................. 279.9 259.6
Due after ten years .................................... 628.2 579.4
-------- --------
Subtotal .......................................... 1,007.1 936.7
Mortgage-backed securities (a) ......................... 484.7 462.0
-------- --------
Total actively managed fixed maturities ........ $1,491.8 $1,398.7
======== ========
- ----------
(a) Includes below-investment grade mortgage-backed securities with an
amortized cost and estimated fair value of $2.4 million and $2.2 million,
respectively.
Net investment income consisted of the following:
1999 1998 1997
------- ------- -------
(Dollars in millions)
Actively managed fixed maturity securities ....... $ 114.8 $ 118.4 $ 133.6
Equity securities ................................ 12.2 3.2 1.7
Mortgage loans ................................... 9.9 12.1 16.4
Policy loans ..................................... 4.8 5.1 5.4
Other invested assets ............................ 3.5 13.3 7.7
Cash and cash equivalents ........................ 2.1 2.9 3.4
Separate accounts ................................ 151.8 44.1 55.7
------- ------- -------
Gross investment income ...................... 299.1 199.1 223.9
Investment expenses .............................. 1.5 1.1 1.3
------- ------- -------
Net investment income ..................... $ 297.6 $ 198.0 $ 222.6
======= ======= =======
The Company had no significant fixed maturity investments or mortgage loans
that were not accruing investment income in 1999, 1998 and 1997.
Investment gains (losses), net of investment expenses, were included in
revenue as follows:
1999 1998 1997
------- ------- -------
(Dollars in millions)
Fixed maturities:
Gross gains .................................... $ 8.6 $ 34.0 $ 20.6
Gross losses ................................... (14.5) (12.4) (5.1)
Other than temporary decline in fair value ..... (1.3) -- (.3)
------- ------- -------
Net investment gains (losses) from fixed
maturities before expenses ................. (7.2) 21.6 15.2
Other ............................................ .7 .1 2.2
------- ------- -------
Net investment gains (losses) before expenses (6.5) 21.7 17.4
Investment expenses .............................. 3.5 3.2 4.1
------- ------- -------
Net investment gains (losses) ................ $ (10.0) $ 18.5 $ 13.3
======= ======= =======
48
<PAGE>
CONSECO VARIABLE INSURANCE COMPANY
Notes to Financial Statements
------------------------------
At December 31, 1999, the mortgage loan balance was primarily comprised of
commercial loans. Approximately 16 percent, 11 percent, 10 percent, 8 percent, 8
percent and 8 percent of the mortgage loan balance were on properties located in
Michigan, Texas, Florida, California, Georgia and Tennessee, respectively. No
other state comprised greater than 7 percent of the mortgage loan balance.
Noncurrent mortgage loans were insignificant at December 31, 1999. At December
31, 1999, our allowance for loss on mortgage loans was $.3 million.
Life insurance companies are required to maintain certain investments on
deposit with state regulatory authorities. Such assets had an aggregate carrying
value of $11.5 million at December 31, 1999.
The Company had no investments in any single entity in excess of 10 percent
of shareholder's equity at December 31, 1999, other than investments issued or
guaranteed by the United States government or a United States government agency.
3. INSURANCE LIABILITIES:
These liabilities consisted of the following:
<TABLE>
<CAPTION>
Interest
Withdrawal Mortality rate
assumption assumption assumption 1999 1998
----------- ---------- ---------- -------- --------
(Dollars in millions)
<S> <C> <C> <C> <C> <C>
Future policy benefits:
Interest-sensitive products:
Investment contracts ........ N/A N/A (c) $ 976.7 $1,036.0
Universal life-type contracts N/A N/A N/A 312.5 329.2
-------- --------
Total interest-sensitive
products ................ 1,289.2 1,365.2
-------- --------
Traditional products:
Traditional life insurance
contracts ................. Company (a) 7.6% 137.0 139.9
experience
Limited-payment contracts ... Company (b) 7.5% 105.8 106.3
experience, -------- --------
if applicable
Total traditional
products ............... 242.8 246.2
-------- --------
Claims payable and other
policyholder funds ............ N/A N/A N/A 64.1 62.6
Liabilities related to
separate accounts ............. N/A N/A N/A 1,457.0 696.4
-------- --------
Total ....................... $3,053.1 $2,370.4
======== ========
<FN>
- -------------
(a) Principally, modifications of the 1975 - 80 Basic, Select and Ultimate
Tables.
(b) Principally, the 1984 United States Population Table and the NAIC 1983
Individual Annuitant Mortality Table.
(c) At December 31, 1999 and 1998, approximately 97 percent and 95 percent,
respectively, of this liability represented account balances where future
benefits are not guaranteed. The weighted average interest rate on the
remainder of the liabilities representing the present value of guaranteed
future benefits was approximately 6 percent at December 31, 1999.
</FN>
</TABLE>
49
<PAGE>
CONSECO VARIABLE INSURANCE COMPANY
Notes to Financial Statements
------------------------------
4. INCOME TAXES:
Income tax liabilities were comprised of the following:
1999 1998
----- -----
(Dollars in millions)
Deferred income tax liabilities (assets):
Investments (primarily actively managed
fixed maturities) ................................ $ 3.6 $ 5.4
Cost of policies purchased and cost
of policies produced ............................. 75.3 56.7
Insurance liabilities .............................. (39.2) (28.2)
Unrealized depreciation ............................ (16.1) (.4)
Other .............................................. 10.2 (2.2)
----- -----
Deferred income tax liabilities ............... 33.8 31.3
Current income tax liabilities (assets) ................ (.4) 6.2
----- -----
Income tax liabilities ........................ $33.4 $37.5
===== =====
Income tax expense was as follows:
1999 1998 1997
------- ------- -------
(Dollars in millions)
Current tax provision ..................... $ 4.3 $ 20.8 $ 16.3
Deferred tax provision (benefit) .......... 9.3 (4.2) 5.8
------- ------- -------
Income tax expense ............... $ 13.6 $ 16.6 $ 22.1
======= ======= =======
A reconciliation of the income tax provisions based on the U.S. statutory
corporate tax rate to the provisions reflected in the statement of operations is
as follows:
1999 1998 1997
------- ------- -------
(Dollars in millions)
Tax on income before income taxes at
statutory rate .......................... 35.0% 35.0% 35.0%
State taxes ............................... 1.5 1.0 .7
Other ..................................... (1.4) (.8) .3
------- ------- -------
Income tax expense ............... 35.1% 35.2% 36.0%
======= ======= =======
5. OTHER DISCLOSURES:
LITIGATION
The Company is involved on an ongoing basis in lawsuits related to its
operations. Although the ultimate outcome of certain of such matters cannot be
predicted, such lawsuits currently pending against the Company are not expected,
individually or in the aggregate, to have a material adverse effect on the
Company's financial condition, cash flows or results of operations.
GUARANTY FUND ASSESSMENTS
The balance sheet at December 31, 1999, includes: (i) accruals of $1.6
million, representing our estimate of all known assessments that will be levied
against the Company by various state guaranty associations based on premiums
written through
50
<PAGE>
CONSECO VARIABLE INSURANCE COMPANY
Notes to Financial Statements
------------------------------
December 31, 1999; and (ii) receivables of $1.1 million that we estimate will be
recovered through a reduction in future premium taxes as a result of such
assessments. These estimates are subject to change when the associations
determine more precisely the losses that have occurred and how such losses will
be allocated among the insurance companies. We recognized expense for such
assessments of $1.1 million in 1999, $1.1 million in 1998 and $1.2 million in
1997.
RELATED PARTY TRANSACTIONS
The Company operates without direct employees through management and
service agreements with subsidiaries of Conseco. Fees for such services
(including data processing, executive management and investment management
services) are based on Conseco's direct and directly allocable costs plus a 10
percent margin. Total fees incurred by the Company under such agreements were
$43.4 million in 1999, $37.8 million in 1998 and $36.7 million in 1997.
During 1998 and 1997, the Company purchased $13.0 million and $11.2 million
par value, respectively, of senior subordinated notes issued by subsidiaries of
Conseco. The total carrying value of such notes purchased during 1998, 1997 and
prior years was $45.5 million at December 31, 1998. Such notes are classified as
"other invested assets" in the accompanying balance sheet. In 1999, all such
notes were repurchased from the Company by Conseco or its subsidiaries.
6. OTHER OPERATING STATEMENT DATA:
Insurance policy income consisted of the following:
1999 1998 1997
------- ------- -------
(Dollars in millions)
Traditional products:
Direct premiums collected ...................... $ 700.4 $ 445.8 $ 309.6
Reinsurance assumed ............................ 18.7 15.6 14.9
Reinsurance ceded .............................. (23.1) (21.0) (24.2)
------- ------- -------
Premiums collected, net of reinsurance ..... 696.0 440.4 300.3
Less premiums on universal life and
products without mortality and morbidity
risk which are recorded as additions to
insurance liabilities ........................ 654.1 400.4 255.9
------- ------- -------
Premiums on traditional products with
mortality or morbidity risk, recorded
as insurance policy income ............... 41.9 40.0 44.4
Fees and surrender charges on interest-
sensitive products ............................. 30.2 33.6 31.3
------- ------- -------
Insurance policy income .................... $ 72.1 $ 73.6 $ 75.7
======= ======= =======
The five states with the largest shares of 1999 collected premiums were
California (14 percent), Texas (14 percent), Florida (13 percent), Michigan (8.8
percent) and Indiana (5.2 percent). No other state accounted for more than 4
percent of total collected premiums.
Changes in the cost of policies purchased were as follows:
51
<PAGE>
CONSECO VARIABLE INSURANCE COMPANY
Notes to Financial Statements
------------------------------
1999 1998 1997
------- ------- -------
(Dollars in millions)
Balance, beginning of year ....................... $ 98.0 $ 106.4 $ 143.0
Amortization ................................. (4.1) (21.1) (15.4)
Amounts related to fair value adjustment
of actively managed fixed maturities ....... 37.7 11.8 (21.2)
Other ........................................ -- .9 --
------- ------- -------
Balance, end of year ............................. $ 131.6 $ 98.0 $ 106.4
======= ======= =======
Based on current conditions and assumptions as to future events on all
policies in force, the Company expects to amortize approximately 9 percent of
the December 31, 1999, balance of cost of policies purchased in 2000, 10 percent
in 2001, 9 percent in 2002, 7 percent in 2003 and 6 percent in 2004. The
discount rates used to determine the amortization of the cost of policies
purchased ranged from 3.6 percent to 8.0 percent and averaged 5.8 percent.
Changes in the cost of policies produced were as follows:
1999 1998 1997
------- ------- -------
(Dollars in millions)
Balance, beginning of year ....................... $ 82.5 $ 55.9 $ 38.2
Additions .................................... 62.7 35.3 31.8
Amortization ................................. (8.3) (11.0) (10.2)
Amounts related to fair value adjustment
of actively managed fixed maturities ....... 10.7 2.3 (3.9)
------- ------- -------
Balance, end of year ............................. $ 147.6 $ 82.5 $ 55.9
======= ======= =======
7. STATEMENT OF CASH FLOWS:
Income taxes paid during 1999, 1998, and 1997, were $2.1 million, $17.1
million and $14.8 million, respectively.
8. STATUTORY INFORMATION:
Statutory accounting practices prescribed or permitted by regulatory
authorities for insurance companies differ from GAAP. The Company reported the
following amounts to regulatory agencies:
1999 1998
------ ------
(Dollars
in millions)
Statutory capital and surplus .................................. $112.6 $134.0
Asset valuation reserve ........................................ 41.4 30.9
Interest maintenance reserve ................................... 66.7 73.1
------ ------
Total .......................................................... $220.7 $238.0
====== ======
Our statutory net income was $14.6 million, $32.7 million and $32.7 million
in 1999, 1998 and 1997, respectively. Statutory net income differs from net
income presented in our financial statements prepared in accordance with GAAP,
primarily because for GAAP reporting we are required to defer and amortize costs
that vary with and are primarily related to the production of new business as
described in note 1.
State insurance laws generally restrict the ability of insurance companies
to pay dividends or make other distributions. We may pay dividends to our parent
in 2000 of $12.8 million without permission from state regulatory authorities.
In 1998, the National Association of Insurance Commissioners adopted
codified statutory accounting principles, which are expected to constitute the
only source of prescribed statutory accounting practices and are effective in
2001. The changes to statutory accounting practices resulting from the
codification are not expected to have a material effect on the statutory capital
and surplus or statutory operating earnings data shown above.
52
