Registration Nos. 33-74092
811-8288
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [X]
Pre-Effective Amendment No.
Post-Effective Amendment No. 10 [X]
and
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
Amendment No. 10 [X]
CONSECO VARIABLE ANNUITY ACCOUNT E
(Exact Name of Registrant)
CONSECO VARIABLE INSURANCE COMPANY
(Name of Depositor)
11815 N. Pennsylvania Street
Carmel, Indiana 46032-4572
(Address of Depositor's Principal Executive Offices)
(317) 817-3700
(Depositor's Telephone Number, including Area Code)
Michael A. Colliflower
Conseco Variable Insurance Company
11815 N. Pennsylvania Street
Carmel, Indiana 46032-4572
(Name and Address of Agent for Service)
It is proposed that this filing will become effective:
[ ] immediately upon filing pursuant to paragraph (b) of Rule 485
[X] on December 31, 2000 pursuant to paragraph (b) of Rule 485
[ ] 60 days after filing pursuant to paragraph (a) (1) of Rule 485
[ ] on (date) pursuant to paragraph (a)(1) of Rule 485
If appropriate, check the following box:
[ ] this post-effective amendment designates a new effective date for a
previously filed post-effective amendment
Title of Securities Registered:
Individual and Group Deferred Annuity Contracts and Certificates
CONSECO VARIABLE ANNUITY ACCOUNT E
FORM N-4
CROSS REFERENCE SHEET
Pursuant to Rule 495(a)
Under The Securities Act of 1933
<TABLE>
<CAPTION>
Form N-4
Item No. PART A - Prospectus Caption
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<S> <C> <C>
1. Cover Page................................... Cover Page
2. Definitions.................................. Definitions
3. Synopsis or Highlights....................... Summary
4. Condensed Financial Information.............. Appendix A -Condensed Financial Information
5. General Description of Registrant,........... Conseco Variable, The Variable Account, and
Depositor and Portfolio Companies Investment Options; Appendix B
6. Deductions and Expense....................... Charges and Deductions
7. General Description of Variable.............. The Contracts
Annuity Contracts
8. Annuity Period .............................. Annuity Phase
<PAGE>
Settlement Provisions
9. Death Benefit................................ Death Benefit on or
After Maturity Date
10. Purchase and Contract Values................. Conseco Variable, The Variable
Account, and Investment Options;
Accumulation Provisions
11. Redemptions.................................. The Contracts
Section B. Settlement Provisions
12. Taxes........................................ Federal Tax Status
13. Legal Proceedings............................ Legal Proceedings
14. Table of Contents of the Statement........... Table of Contents of the Statement
of Additional Information of Additional Information
</TABLE>
<PAGE>
Form N-4
Item No.
- --------
<TABLE>
<CAPTION>
PART B - Statement of Additional Information
-----------------------------------
<S> <C> <C>
15. Cover Page................................... Statement of Additional Information
Cover Page
16. Table of Contents............................ Table of Contents
17. General Information and History.............. General Information and History
18. Services..................................... Not Applicable
19. Purchase of Securities....................... Not Applicable
Being Offered
20. Underwriters................................. Distribution
21. Calculation of Performance Data.............. Calculation of Yield Quotations, Calculation of
Total Return Quotations, and Other Performance Data
22. Annuity Payments............................. Annuity Provisions
23. Financial Statements......................... Financial Statements
</TABLE>
PART C
Information required to be included in Part C is set forth under the appropriate
item, so numbered, in Part C of this registration statement.
PART A
The Prospectus was filed in Post-Effective Amendment No. 9 to Form N-4 on April
28, 2000 and is incorporated herein by reference.
ACHIEVEMENT SERIES AND EDUCATOR SERIES
CONSECO VARIABLE ANNUITY ACCOUNT E
CONSECO VARIABLE INSURANCE COMPANY
Supplement dated January 1, 2001
The following supplements certain information contained in your prospectus for
the Achievement Series and Educator Series fixed and variable annuity:
1. Effective as of the date of this supplement, you may also invest in the
following Variable Account Investment Options:
Pioneer Variable Contracts Trust, Class II Shares
Managed by Pioneer Investment Management, Inc.
Pioneer Fund VCT Portfolio
Pioneer Equity-Income VCT Portfolio
Pioneer Europe VCT Portfolio
2. As of the date of this Supplement, you may invest in the INVESCO VIF-High
Yield Fund and the INVESCO VIF-Equity-Income Fund of INVESCO Variable Investment
Funds, Inc. Information regarding these funds is contained in the prospectus.
3. The following is added to the "Annual Fund Expenses" table:
<TABLE>
<CAPTION>
Total Annual
Portfolio
Other Expenses* Expenses*(after
(after expense expense
reimbursement, reimbursement,
if any, for if any, for
Management certain certain
Fees 12b-1 Fees portfolios) portfolios)
<S> <C> <C> <C> <C>
Pioneer Fund
VCT Portfolio .65% .25% .07% .97%
Pioneer Equity-
Income VCT Portfolio .65% .25% .09% .99%
Pioneer Europe
VCT Portfolio** 1.00% .25% .47% 1.72%
</TABLE>
* Expenses for fiscal year ended December 31, 2000 are estimated.
** Absent expense offsets, other expenses are estimated to be .49% for the year
ended December 31, 2000.
4. The following Examples are added to the prospectus:
You would pay the following expenses on a $1,000 investment, assuming a
hypothetical 5% annual return on assets, and assuming the entire $1,000 is
invested in the sub-account listed: (a) if you surrender the Contract at the end
of the time periods; (b) if you elect to annuitize your Contract; (c) if you do
not surrender your Contract at the end of each time period.
Time Periods
1 Year 3 Years
Pioneer Fund VCT Portfolio (a)$110 (a)$149
(b)$110 (b)$149
(c)$ 25 (c)$ 78
Pioneer Equity-Income VCT Portfolio (a)$111 (a)$150
(b)$111 (b)$150
(c)$ 26 (c)$ 78
Pioneer Europe VCT Portfolio (a)$118 (a)$172
(b)$118 (b)$172
(c)$ 33 (c)$100
5. The following per accumulation unit values for the period ended September 30,
2000 are added to Appendix A:
THE ALGER AMERICAN FUND:
Leveraged AllCap (a)
Accumulation unit value at $5.016
beginning of period
<PAGE>
Accumulation unit value at end of $4.780
period
Percentage change in accumulation -4.71%
unit value
Number of accumulation units outstanding at end 4,297,989
of period
Small Capitalization (a)
Accumulation unit value at $2.216
beginning of period
Accumulation unit value at end of $1.991
period
Percentage change in accumulation -10.15%
unit value
Number of accumulation units outstanding at end 6,417,164
of period
Growth Portfolio (c)
Accumulation unit value at $2.492
beginning of period
Accumulation unit value at end of $2.463
period
Percentage change in accumulation -1.16%
unit value
Number of accumulation units outstanding at end 8,580,867
of period
Midcap Growth Portfolio
(c)
Accumulation unit value at $1.869
beginning of period
Accumulation unit value at end of $2.249
period
Percentage change in accumulation 20.31%
unit value
Number of accumulation units outstanding at end 2,560,122
of period
<PAGE>
-------------------------------------------------------------
AMERICAN CENTURY VARIABLE PORTFOLIO, INC.:
International Fund (d)
Accumulation unit value at $2.071
beginning of period
Accumulation unit value at end of $1.799
period
Percentage change in accumulation -13.11%
unit value
Number of accumulation units outstanding at end 739,270
of period
Value Fund (d)
Accumulation unit value at $1.239
beginning of period
Accumulation unit value at end of $1.281
period
Percentage change in accumulation 3.40%
unit value
Number of accumulation units outstanding at end 2,497,358
of period
Income and Growth Fund (e)
Accumulation unit value at $1.259
beginning of period
Accumulation unit value at end of $1.198
period
Percentage change in accumulation -4.86%
unit value
Number of accumulation units outstanding at end 1,074,625
of period
-------------------------------------------------------------
BERGER INSTITUTIONAL PRODUCTS TRUST:
Growth Fund (c)
Accumulation unit value at $1.947
beginning of period
<PAGE>
Accumulation unit value at end of $2.178
period
Percentage change in accumulation 11.85%
unit value
Number of accumulation units outstanding at end 1,844,182
of period
-------------------------------------------------------------
Growth & Income Fund (c)
Accumulation unit value at $2.630
beginning of period
Accumulation unit value at end of $2.869
period
Percentage change in accumulation 9.07%
unit value
Number of accumulation units outstanding at end 3,467,018
of period
New Generation Fund (f)
Accumulation unit value at $1.000
beginning of period
Accumulation unit value at end of $1.040
period
Percentage change in accumulation 4.00%
unit value
Number of accumulation units outstanding at end 463,319
of period
Small Company Growth Fund
(c)
Accumulation unit value at $2.234
beginning of period
Accumulation unit value at end of $2.573
period
Percentage change in accumulation 15.16%
unit value
Number of accumulation units outstanding at end 1,513,626
<PAGE>
of period
BIAM International Fund
(d)
Accumulation unit value at $1.439
beginning of period
Accumulation unit value at end of $1.290
period
Percentage change in accumulation -10.37%
unit value
Number of accumulation units outstanding at end 1,859,307
of period
-------------------------------------------------------------
CONSECO SERIES TRUST:
BALANCED (b)
Accumulation unit value at $2.772
beginning of period
Accumulation unit value at end of $3.346
period
Percentage change in accumulation 20.73%
unit value
Number of accumulation units outstanding at end 7,546,254
of period
-------------------------------------------------------------
CONSECO SERIES TRUST: (continued)
EQUITY - (b)
Accumulation unit value at $4.068
beginning of period
Accumulation unit value at end of $5.159
period
Percentage change in accumulation 26.80%
unit value
Number of accumulation units outstanding at end 10,340,325
of period
FIXED INCOME - (b)
<PAGE>
Accumulation unit value at $1.345
beginning of period
Accumulation unit value at end of $1.419
period
Percentage change in accumulation 5.51%
unit value
Number of accumulation units outstanding at end 6,280,489
of period
Conseco 20 Focus Fund (c)
Accumulation unit value at $1.000
beginning of period
Accumulation unit value at end of $1.336
period
Percentage change in accumulation 33.60%
unit value
Number of accumulation units outstanding at end 702,655
of period
GOVERNMENT SECURITIES (b)
Accumulation unit value at $1.268
beginning of period
Accumulation unit value at end of $1.342
period
Percentage change in accumulation 5.86%
unit value
Number of accumulation units outstanding at end 2,883,505
of period
Conseco High Yield Fund(c)
Accumulation unit value at $1.000
beginning of period
Accumulation unit value at end of $1.010
period
Percentage change in accumulation 1.00%
unit value
Number of accumulation units outstanding at end 107,562
of period
<PAGE>
MONEY MARKET (b)
Accumulation unit value at $1.219
beginning of period
Accumulation unit value at end of $1.261
period
Percentage change in accumulation 3.43%
unit value
Number of accumulation units outstanding at end 11,398,125
of period
-------------------------------------------------------------
DREYFUS STOCK INDEX FUND: (a)
Accumulation unit value at $2.757
beginning of period
Accumulation unit value at end of $2.686
period
Percentage change in accumulation -2.59%
unit value
Number of accumulation units outstanding at end 17,347,166
of period
-------------------------------------------------------------
THE DREYFUS SOCIALLY RESPONSIBLE GROWTH FUND, INC. (a)
Accumulation unit value at $2.910
beginning of period
Accumulation unit value at end of $2.933
period
Percentage change in accumulation 0.80%
unit value
Number of accumulation units outstanding at end 3,549,193
of period
-------------------------------------------------------------
DREYFUS VARIABLE INVESTMENT FUND:
Disciplined Stock
Portfolio (e)
Accumulation unit value at $1.252
beginning of period
<PAGE>
Accumulation unit value at end of $1.254
period
Percentage change in accumulation 0.16%
unit value
Number of accumulation units outstanding at end 1,993,776
of period
International Value
Portfolio (e)
Accumulation unit value at $1.187
beginning of period
Accumulation unit value at end of $1.079
period
Percentage change in accumulation -9.10%
unit value
Number of accumulation units outstanding at end 322,296
of period
-------------------------------------------------------------
FEDERATED INSURANCE SERIES:
High Income Bond II (a)
Accumulation unit value at $1.379
beginning of period
Accumulation unit value at end of $1.335
period
Percentage change in accumulation -3.17%
unit value
Number of accumulation units outstanding at end 2,505,538
of period
International Equity II
(a)
Accumulation unit value at $2.683
beginning of period
Accumulation unit value at end of $2.278
period
Percentage change in accumulation -15.10%
unit value
<PAGE>
Number of accumulation units outstanding at end 993,888
of period
Utility II (a)
Accumulation unit value at $1.737
beginning of period
Accumulation unit value at end of $1.708
period
Percentage change in accumulation -1.66%
unit value
Number of accumulation units outstanding at end 1,609,239
of period
-------------------------------------------------------------
INVESCO VARIABLE INVESTMENT FUND:
High Yield Portfolio (e)
Accumulation unit value at $1.024
beginning of period
Accumulation unit value at end of $0.995
period
Percentage change in accumulation -2.80%
unit value
Number of accumulation units outstanding at end 4,635,120
of period
-------------------------------------------------------------
INVESCO VARIABLE INVESTMENT FUND (continued):
Equity Income Portfolio
(e)
Accumulation unit value at $1.166
beginning of period
Accumulation unit value at end of $1.221
period
Percentage change in accumulation 4.75%
unit value
Number of accumulation units outstanding at end 520,348
of period
-------------------------------------------------------------
<PAGE>
JANUS ASPEN SERIES:
Aggressive Growth (a)
Accumulation unit value at $4.407
beginning of period
Accumulation unit value at end of $4.329
period
Percentage change in accumulation -1.77%
unit value
Number of accumulation units outstanding at end 6,128,840
of period
Growth (a)
Accumulation unit value at $3.135
beginning of period
Accumulation unit value at end of $3.194
period
Percentage change in accumulation 1.89%
unit value
Number of accumulation units outstanding at end 10,661,774
of period
Worldwide Growth (a)
Accumulation unit value at $3.827
beginning of period
Accumulation unit value at end of $3.661
period
Percentage change in accumulation -4.34%
unit value
Number of accumulation units outstanding at end 13,512,656
of period
-------------------------------------------------------------
LAZARD RETIREMENT SERIES INC.:
Equity Portfolio (e)
Accumulation unit value at $1.126
beginning of period
Accumulation unit value at end of $1.115
period
<PAGE>
Percentage change in accumulation -0.94%
unit value
Number of accumulation units outstanding at end 184,534
of period
Small Cap Portfolio (e)
Accumulation unit value at $0.887
beginning of period
Accumulation unit value at end of $1.006
period
Percentage change in accumulation 13.45%
unit value
Number of accumulation units outstanding at end 452,736
of period
-------------------------------------------------------------
LORD ABBETT SERIES FUND, INC. :
Growth & Income Portfolio
(e)
Accumulation unit value at $1.156
beginning of period
Accumulation unit value at end of $1.215
period
Percentage change in accumulation 5.06%
unit value
Number of accumulation units outstanding at end 949,637
of period
-------------------------------------------------------------
MITCHELL HUTCHINS SERIES TRUST:
Growth & Income Portfolio
(e)
Accumulation unit value at $1.077
beginning of period
Accumulation unit value at end of $1.025
period
Percentage change in accumulation -4.82%
unit value
<PAGE>
Number of accumulation units outstanding at end 97,020
of period
-------------------------------------------------------------
NEUBERGER BERMAN ADVISERS MANAGEMENT TRUST
Limited Maturity Bond Portfolio (d)
Accumulation unit value at $1.075
beginning of period
Accumulation unit value at end of $1.109
period
Percentage change in accumulation 3.21%
unit value
Number of accumulation units outstanding at end 1,389,105
of period
Partners Portfolio (d)
Accumulation unit value at $1.349
beginning of period
Accumulation unit value at end of $1.337
period
Percentage change in accumulation -0.89%
unit value
Number of accumulation units outstanding at end 3,192,964
of period
-------------------------------------------------------------
RYDEX VARIABLE TRUST
NOVA Portfolio (g)
Accumulation unit value at $18.407
beginning of period
Accumulation unit value at end of $17.573
period
Percentage change in accumulation -4.53%
unit value
Number of accumulation units outstanding at end 3,368
of period
OTC Portfolio (g)
Accumulation unit value at $39.086
<PAGE>
beginning of period
Accumulation unit value at end of $36.495
period
Percentage change in accumulation -6.63%
unit value
Number of accumulation units outstanding at end 44,206
of period
-------------------------------------------------------------
SELIGMAN PORTFOLIOS
Communications and Information
Portfolio (f)
Accumulation unit value at $1.000
beginning of period
Accumulation unit value at end of $0.774
period
Percentage change in accumulation -22.60%
unit value
Number of accumulation units outstanding at end 608,826
of period
Global Technology
Portfolio (f)
Accumulation unit value at $1.000
beginning of period
Accumulation unit value at end of $0.845
period
Percentage change in accumulation -15.50%
unit value
Number of accumulation units outstanding at end 245,440
of period
-------------------------------------------------------------
STRONG VARIABLE INSURANCE FUNDS, INC.:
Mid Cap Growth Fund II (d)
Accumulation unit value at $3.018
beginning of period
Accumulation unit value at end of $3.331
period
<PAGE>
Percentage change in accumulation 10.38%
unit value
Number of accumulation units outstanding at end 2,017,838
of period
-------------------------------------------------------------
STRONG OPPORTUNITY FUND II (d) :
Accumulation unit value at $1.832
beginning of period
Accumulation unit value at end of $1.918
period
Percentage change in accumulation 4.70%
unit value
Number of accumulation units outstanding at end 1,239,774
of period
-------------------------------------------------------------
THE VAN ECK WORLDWIDE INSURANCE TRUST:
Worldwide Hard Assets
Fund (a)
Accumulation unit value at $0.988
beginning of period
Accumulation unit value at end of $1.063
period
Percentage change in accumulation 7.59%
unit value
Number of accumulation units outstanding at end 1,370,857
of period
Worldwide Bond (a)
Accumulation unit value at $1.050
beginning of period
Accumulation unit value at end of $1.006
period
Percentage change in accumulation -4.21%
unit value
Number of accumulation units outstanding at end 488,339
of period
<PAGE>
Worldwide Emerging Markets Fund (c)
Accumulation unit value at $1.270
beginning of period
Accumulation unit value at end of $0.950
period
Percentage change in accumulation -25.19%
unit value
Number of accumulation units outstanding at end 2,402,164
of period
Real Estate (e)
Accumulation unit value at $0.823
beginning of period
Accumulation unit value at end of $0.930
period
Percentage change in accumulation 13.05%
unit value
Number of accumulation units outstanding at end 107,351
of period
-------------------------------------------------------------
(a) This unit value was $1.000 on the inception date of
June 1, 1995.
(b) This unit value was $1.000 on the inception date of
July 25, 1994.
(c) This unit value was $1.000 on the inception date of May
1, 1996.
(d) This unit value was $1.000 on the inception date of May
1, 1997.
(e) This unit value was $1.000 on the inception date of May
1, 1998.
(f) This unit value was $1.000 on the inception date of May
1, 2000.
(g) These unit values were $18.407 for Rydex Nova and $39.086 for Rydex OTC on
the inception date of May 1, 2000.
There are no accumulation unit values shown for the sub-accounts investing
Pioneer Fund VCT Portfolio, Pioneer Equity-Income VCT Portfolio and Pioneer
Europe VCT Portfolio because they were not available under the Contract until
the date of this supplement.
<PAGE>
6. The following is added to Appendix B:
Pioneer Variable Contracts Trust
Pioneer Variable Contracts Trust is managed by Pioneer Investment Management,
Inc. The Pioneer Variable Contracts Trust is a mutual fund with multiple
portfolios. The following Class II portfolios are available under the Contract:
Pioneer Fund VCT Portfolio
The Pioneer Fund VCT Portfolio seeks reasonable income and capital growth. The
Portfolio invests the major portion of its assets in equity securities,
primarily of U.S. issuers.
Pioneer Equity-Income VCT Portfolio
The Pioneer Equity-Income VCT Portfolio seeks current income and long-term
growth of capital from a portfolio consisting primarily of income producing
equity securities of U.S. corporations.
Pioneer Europe VCT Portfolio
The Pioneer Europe VCT Portfolio seeks long-term growth of capital. The
portfolio invests primarily in equity securities of European issuers.
PART B
STATEMENT OF ADDITIONAL INFORMATION
INDIVIDUAL & GROUP VARIABLE DEFERRED ANNUITY CONTRACTS
ISSUED BY
CONSECO VARIABLE INSURANCE COMPANY
AND
CONSECO VARIABLE ANNUITY ACCOUNT E
11815 N. PENNSYLVANIA ST., CARMEL, IN 46032
(317) 817-3700
JANUARY 1, 2001
THIS STATEMENT OF ADDITIONAL INFORMATION IS NOT A PROSPECTUS. IT SHOULD BE READ
IN CONJUNCTION WITH THE PROSPECTUS DATED JANUARY 1, 2001 FOR CONSECO VARIABLE
ANNUITY ACCOUNT E -- INDIVIDUAL AND GROUP VARIABLE DEFERRED ANNUITY CONTRACTS.
YOU CAN OBTAIN A COPY OF THE PROSPECTUS BY CONTACTING CONSECO VARIABLE INSURANCE
COMPANY AT THE ADDRESS TELEPHONE NUMBER GIVEN ABOVE.
<PAGE>
TABLE OF CONTENTS
PAGE
GENERAL INFORMATION AND HISTORY .............................................
INDEPENDENT ACCOUNTANTS .....................................................
DISTRIBUTION ................................................................
VOTING RIGHTS ...............................................................
CALCULATION OF YIELD QUOTATIONS .............................................
CALCULATION OF TOTAL RETURN QUOTATIONS ......................................
OTHER PERFORMANCE DATA ......................................................
FEDERAL TAX STATUS ..........................................................
ANNUITY PROVISIONS ..........................................................
FINANCIAL STATEMENTS ........................................................
<PAGE>
GENERAL INFORMATION AND HISTORY
Conseco Variable Insurance Company (the "Company") is an indirect wholly owned
subsidiary of Conseco, Inc. On or about October 7, 1998, the Company changed its
name from Great American Reserve Insurance Company to its present name. In
certain states, the Company may continue to use the name Great American Reserve
Insurance Company until the name change is approved in that state. Conseco, Inc.
is a publicly held financial services holding company and one of middle
America's leading sources for insurance, investment and lending products. The
Company has its principal offices at 11815 N. Pennsylvania Street, Carmel,
Indiana 46032. The Variable Account was established by the Company.
INDEPENDENT ACCOUNTANTS
The financial statements of Conseco Variable Annuity Account E and Conseco
Variable Insurance Company included in the Prospectus and the Statement of
Additional Information 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 the Variable Account, Conseco Equity Sales, Inc.
("CES"). CES is a registered broker-dealer and member of the National
Association of Securities Dealers, Inc. CES 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.
CES 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 the Company 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. The Company will
vote the shares of each sub-account held by the Variable Account attributable to
the Contracts in accordance with instructions received from Contract Owners.
Shares held in each sub-account for which timely instructions have not been
received from Contract Owners will be voted by the Company for or against any
proposition or the Company will abstain, in the same proportion as shares in
that sub-account for which instructions are received. The Company will vote, or
abstain from voting, any shares that are not attributable to Contract Owners in
the same proportion as all Contract Owners in the Variable Account vote or
abstain. However, if the Company 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 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. Votes
attributable to participants and annuitants who do not instruct the Contract
Owner will be cast by the Contract Owner for or against each proposal to be
voted upon, in the same proportion as votes for which instructions have been
received. Participants and annuitants entitled to instruct the casting of votes
will receive a notice of each meeting of Contract Owners, and proxy solicitation
materials, and a statement of the number of votes attributable to their
participation under the Contract.
The number of shares held in a sub-account deemed attributable to a Contract
Owner's interest under a Contract will be determined on the basis of the value
of the Accumulation Units credited to the Contract Owner's account as of the
record date. On or after the Maturity Date, 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. On or after the Maturity Date,
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 yield 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, mortality and expense risk fees and the administrative charge,
but does not include a deduction of 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 Fund 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 Sub-account
maturity, the types and quality of Portfolio securities held by the
corresponding Fund of the Conseco Series Trust and its operating expenses.
OTHER SUB-ACCOUNTS
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
accumulation unit earned during the period by the maximum offering price per
accumulation unit 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
<PAGE>
CALCULATION OF TOTAL RETURN QUOTATIONS
The Company 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 09/30/00:
<TABLE>
<CAPTION>
SINCE
VARIABLE ACCOUNT SUB-ACCOUNTS 1 YEAR 5 YEARS INCEPTION
- ----------------------------- ------ ------- ---------
<S> <C> <C> <C>
CONSECO SERIES TRUST
Equity Portfolio .................................. 52.29 28.37 30.24
Balanced Portfolio ................................ 33.33 19.62 21.42
Fixed Income Portfolio ............................ (3.25) 3.49 5.66
Government Securities Portfolio ................... (4.08) 2.61 4.70
Conseco 20 Focus Portfolio (6) .................... N/A N/A 22.56
High Yield Portfolio (6) .......................... N/A N/A (7.36)
THE ALGER AMERICAN FUND
Alger American Growth Portfolio ................... 9.74 N/A 21.18
Alger American Leveraged AllCap Portfolio ......... 21.86 25.74 33.21
Alger American MidCap Growth Portfolio ............ 37.95 N/A 18.68
Alger American Small Capitalization Portfolio ..... 7.41 7.18 13.00
AMERICAN CENTURY VARIABLE PORTFOLIOS, INC .........
VP International .................................. 17.01 N/A 16.30
VP Value .......................................... (7.07) N/A 5.29
VP Income and Growth .............................. (1.20) N/A 4.25
BERGER INSTITUTIONAL PRODUCTS TRUST
Berger IPT--Growth Fund ........................... 45.04 N/A 17.81
Berger IPT--Growth and Income Fund ................ 39.02 N/A 25.42
Berger IPT--Small Company Growth Fund ............. 63.23 N/A 22.35
Berger/BIAM IPT--International Fund ............... (.80) N/A 5.48
Berger IPT --New Generation Fund .................. N/A N/A (4.64)
NEUBERGER BERMAN ADVISERS
MANAGEMENT TRUST
Limited Maturity Bond Portfolio ................... (5.53) N/A .90
Partners Portfolio ................................ (1.62) N/A 6.61
SINCE
VARIABLE ACCOUNT SUB-ACCOUNTS 1 YEAR 5 YEARS INCEPTION
- ----------------------------- ------ ------- ---------
STRONG OPPORTUNITY FUND II, INC.
Opportunity Fund II ............................... 12.67 N/A 18.51
STRONG VARIABLE INSURANCE FUNDS, INC
Strong Mid Cap Growth Fund II ..................... 45.50 N/A 39.30
THE DREYFUS SOCIALLY RESPONSIBLE
GROWTH FUND, INC .................................. 10.30 19.51 21.54
DREYFUS STOCK INDEX FUND .......................... 2.04 18.32 19.55
FEDERATED INSURANCE SERIES
Federated High Income Bond Fund II ................ (9.83) 4.14 4.83
Federated International Equity Fund II ............ 22.71 16.41 15.88
<PAGE>
Federated Utility Fund II ......................... (7.25) 8.82 9.80
JANUS ASPEN SERIES
Aggressive Growth Portfolio ....................... 42.84 27.75 30.73
Growth Portfolio .................................. 14.86 22.06 23.49
Worldwide Growth Portfolio ........................ 24.17 24.64 26.70
VAN ECK WORLDWIDE INSURANCE TRUST
Worldwide Bond Fund ...............................(14.44) (1.07) (.61)
Worldwide Emerging Markets Fund ................... 7.09 N/A (2.40)
Worldwide Hard Assets Fund ........................ 1.10 (1.61) .43
Worldwide Real Estate Fund ........................ (.80) N/A (6.17)
DREYFUS VARIABLE INVESTMENT FUND
Dreyfus VIF Disciplined Stock Portfolio ........... 4.71 N/A 6.23
Dreyfus VIF International Value Portfolio ......... (9.36) N/A (.20)
INVESCO VARIABLE INVESTMENT FUNDS, INC
INVESCO VIF--High Yield Fund ...................... (8.11) N/A (3.47)
INVESCO VIF--Equity Income Fund ................... 3.21 N/A 5.06
LAZARD RETIREMENT SERIES, INC
Lazard Retirement Equity Portfolio ................ (3.20) N/A 1.19
Lazard Retirement Small Cap Portfolio ............. 4.88 N/A (3.04)
LORD ABBETT SERIES FUND, INC
Growth & Income Portfolio ......................... 5.82 N/A 4.84
MITCHELL HUTCHINS SERIES TRUST
Growth & Income Portfolio ......................... (2.14) N/A (2.28)
RYDEX VARIABLE TRUST
OTC Fund (6) ...................................... N/A N/A (14.66)
NOVA Fund (6) ..................................... N/A N/A (12.64)
SELIGMAN PORTFOLIOS, INC.
Seligman Communications and Information Portfolio (6) N/A N/A (29.11)
Seligman Global Technology Portfolio(6) .............. N/A N/A (22.46)
- ----------
(1) Since inception (May 1, 1998).
(2) Since inception (July 25, 1994).
(3) Since inception (June 1, 1995).
(4) Since inception (May 1, 1996).
(5) Since inception (May 1, 1997).
(6) Since inception (May 1, 2000).
</TABLE>
OTHER PERFORMANCE DATA
The Company 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" table, 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.
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 on various mutual funds, stocks, bonds,
certificates of deposit, tax free bonds, or common stock and bond indices, and
other groups of variable annuity separate accounts or other investment products
tracked by Morningstar, Inc., a widely used independent research firm which
ranks mutual funds and other investment companies by overall performance,
investment objectives, and assets, or tracked by other services, companies,
publications, or persons who rank such investment companies on overall
performance or other criteria.
Reports and promotional literature may also contain other information, including
the effect of tax-deferred compounding on an investment option's 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 the Company has
received from independent rating agencies. However, the Company does not
guarantee the investment performance of the Variable Account investment options.
GROSS AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS ENDED 09/30/00:
<TABLE>
<CAPTION>
SINCE
VARIABLE ACCOUNT SUB-ACCOUNTS 1 YEAR 5 YEARS INCEPTION
- ----------------------------- ------ ------- ---------
<S> <C> <C> <C>
CONSECO SERIES TRUST
Equity Portfolio .................................. 66.25 29.76 30.37
Balanced Portfolio ................................ 45.58 20.93 21.56
Fixed Income Portfolio ............................ 5.70 4.67 5.83
Government Securities Portfolio ................... 4.80 3.79 4.87
Conseco 20 Focus Portfolio ........................ N/A N/A 33.58
High Yield Portfolio .............................. N/A N/A 1.02
THE ALGER AMERICAN FUND
Alger American Growth Portfolio ................... 19.85 N/A 22.65
Alger American Leveraged AllCap Portfolio ......... 33.08 27.13 34.06
Alger American MidCap Growth Portfolio ............ 50.60 N/A 20.15
<PAGE>
Alger American Small Capitalization Portfolio ..... 17.32 8.41 13.77
AMERICAN CENTURY VARIABLE PORTFOLIOS, INC .........
VP International .................................. 27.79 N/A 18.76
VP Value .......................................... 1.51 N/A 7.52
VP Income and Growth .............................. 7.92 N/A 7.78
</TABLE>
<TABLE>
<CAPTION>
SINCE
VARIABLE ACCOUNT SUB-ACCOUNTS 1 YEAR 5 YEARS INCEPTION
- ----------------------------- ------ ------- ---------
<S> <C> <C> <C>
BERGER INSTITUTIONAL PRODUCTS TRUST
Berger IPT-Growth Fund ........................... 58.33 N/A 19.27
Berger IPT-Growth and Income Fund ................ 51.77 N/A 26.95
Berger IPT-Small Company Growth Fund ............. 78.20 N/A 23.86
Berger/BIAM IPT-- International Fund ............. 8.37 N/A 7.74
Berger IPT-- New Generation Fund .................. N/A N/A 3.98
NEUBERGER BERMAN ADVISERS
MANAGEMENT TRUST
Limited Maturity Bond Portfolio ................... 3.21 N/A 3.07
Partners Portfolio ................................ 7.45 N/A 8.87
STRONG OPPORTUNITY FUND II, INC.
Opportunity Fund II ............................... 23.04 N/A 21.00
STRONG VARIABLE INSURANCE FUNDS, INC.
Strong Mid Cap Growth Fund II ..................... 58.86 N/A 42.22
THE DREYFUS SOCIALLY RESPONSIBLE
GROWTH FUND, INC .................................. 20.46 20.81 22.34
DREYFUS STOCK INDEX FUND .......................... 11.45 19.60 20.34
FEDERATED INSURANCE SERIES
Federated High Income Bond Fund II ................ (1.48) 5.32 5.56
Federated International Equity Fund II ............ 34.02 17.69 16.68
Federated Utility Fund II ......................... 1.33 10.03 10.55
JANUS ASPEN SERIES
Aggressive Growth Portfolio ....................... 55.98 29.15 31.60
Growth Portfolio .................................. 25.44 23.39 24.31
Worldwide Growth Portfolio ........................ 35.59 25.98 27.53
VAN ECK WORLDWIDE INSURANCE TRUST
Worldwide Bond Fund ............................... (6.50) (.08) .12
Worldwide Emerging Markets Fund ................... 16.94 N/A (1.16)
Worldwide Hard Assets Fund ........................ 10.44 (.46) 1.15
Worldwide Real Estate Fund ........................ 8.35 N/A (2.97)
DREYFUS VARIABLE INVESTMENT FUND
Dreyfus VIF Disciplined Stock Portfolio ........... 14.37 N/A 9.81
Dreyfus VIF International Value Portfolio ......... (.95) N/A 3.18
<PAGE>
INVESCO VARIABLE INVESTMENT FUNDS, INC ............
INVESCO VIF-High Yield Fund ...................... .40 N/A (.19)
INVESCO VIF-Equity Income Fund ................... 12.73 N/A 8.61
LAZARD RETIREMENT SERIES, INC .....................
Lazard Retirement Equity Portfolio ................ 5.74 N/A 4.61
Lazard Retirement Small Cap Portfolio ............. 14.55 N/A .26
LORD ABBETT SERIES FUND, INC ......................
Growth & Income Portfolio ......................... 15.58 N/A 8.38
MITCHELL HUTCHINS SERIES TRUST
Growth & Income Portfolio ......................... 6.90 N/A 1.03
RYDEX VARIABLE TRUST
OTC Fund (6) ...................................... N/A N/A (6.63)
NOVA Fund (6) ..................................... N/A N/A (4.53)
SELIGMAN PORTFOLIOS, INC.
Seligman Communications and Information Portfolio (6)N/A N/A (22.65)
Seligman Global Technology Portfolio (6) .......... N/A N/A (15.41)
- ----------
(1) Since inception (May 1, 1998).
(2) Since inception (July 25, 1994).
(3) Since inception (June 1, 1995).
(4) Since inception (May 1, 1996).
(5) Since inception (May 1, 1997).
(6) Since inception (May 1, 2000).
</TABLE>
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.
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 includible in taxable income. The exclusion amount for payments based on a
fixed annuity option is determined by multiplying the payment by the ratio that
the cost basis of the Contract (adjusted for any period or refund feature) bears
to the expected return under the Contract. The exclusion amount for payments
based on a variable annuity option is determined by dividing the cost basis of
the Contract (adjusted for any period certain or refund guarantee) by the number
of years over which the annuity is expected to be paid. Payments received after
the investment in the Contract has been recovered (i.e. when the total of the
excludable amount equals the investment in the Contract) are fully taxable. The
taxable portion is taxed at ordinary income tax rates. For certain types of
Qualified Plans there may be no cost basis in the Contract within the meaning of
Section 72 of the Code. Owners, annuitants and beneficiaries under the Contracts
should seek competent financial advice about the tax consequences of any
distributions.
The Company is taxed as a life insurance company under the Code. For federal
income tax purposes, the Variable Account is not a separate entity from the
Company, and its operations form a part of the Company.
DIVERSIFICATION
Section 817(h) of the Code imposes certain diversification standards on the
underlying assets of variable annuity contracts. The Code provides that a
variable annuity contract will not be treated as an annuity contract for any
period (and any subsequent period) for which the investments are not, in
accordance with regulations prescribed by the United States Treasury Department
("Treasury Department"), adequately diversified. Disqualification of the
Contract as an annuity contract would result in the imposition of federal income
tax to the Owner with respect to earnings allocable to the Contract prior to the
<PAGE>
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."
The Company intends that all variable 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.
8
<PAGE>
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 Variable Account.
Due to the uncertainty in this area, we reserve the right to modify the Contract
in an attempt to maintain favorable tax treatment.
MULTIPLE CONTRACTS
The Code provides that multiple non-qualified annuity contracts which are issued
within a calendar year to the same contract owner by one company or its
affiliates are treated as one annuity contract for purposes of determining the
tax consequences of any distribution. Such treatment may result in adverse tax
consequences including more rapid taxation of the distributed amounts from such
combination of contracts. For purposes of this rule, contracts received in a
Section 1035 exchange will be considered issued in the year of the exchange.
Owners should consult a tax adviser prior to purchasing more than one
non-qualified annuity contract in any calendar year.
PARTIAL 1035 EXCHANGES
Section 1035 of the Code provides that an annuity contract may be exchanged in a
tax-free transaction for another annuity contract. In 1998 in CONWAY VS.
COMMISSIONER, the Tax Court held that the direct transfer of a portion of an
annuity contract into another annuity contract qualified as a non-taxable
exchange. On November 22, 1999, the Internal Revenue Service filed an Action on
Decision which indicated that it acquiesced in the Tax Court decision in CONWAY.
However, in its acquiescence with the decision of the Tax Court, the Internal
Revenue Service stated that it will challenge transactions where taxpayers enter
into a series of partial exchanges and annuitizations as part of a design to
avoid application of the 10% premature distribution penalty or other limitations
imposed on annuity contracts under the Code. In the absence of further guidance
from the Internal Revenue Service it is unclear what specific types of partial
exchange designs and transactions will be challenged by the Internal Revenue
Service. Due to the uncertainty in this area, owners should consult their own
tax advisers prior to entering into a partial exchange of an annuity contract.
CONTRACTS OWNED BY OTHER THAN NATURAL PERSONS
Under Section 72(u) of the Code, the investment earnings on premiums for the
Contracts will be taxed currently to the Owner if the Owner is a non-natural
person, e.g., a corporation or certain other entities. Such Contracts generally
will not be treated as annuities for federal income tax purposes. However, this
treatment is not applied to a Contract held by a trust or other entity as an
agent for a natural person nor to Contracts held by Qualified Plans. Purchasers
should consult their own tax counsel or other tax adviser before purchasing a
Contract to be owned by a non-natural person.
TAX TREATMENT OF ASSIGNMENTS
An assignment or pledge of a Contract may be a taxable event. Owners should
therefore consult competent tax advisers should they wish to assign or pledge
their Contracts.
If the Contract is issued pursuant to a retirement plan which receives favorable
treatment under the provision of Sections 401, 403(b), 408 or 457 of the Code,
it may not be assigned, pledged or otherwise transferred except as allowed under
applicable law.
9
<PAGE>
DEATH BENEFITS
Any death benefits paid under the contract are taxable to the beneficiary. The
rules governing the taxation of payments from an annuity contract, as discussed
above, generally apply to the payment of death benefits and depend on whether
the death benefits are paid as a lump sum or as annuity payments. Estate taxes
may also apply.
INCOME TAX WITHHOLDING
All distributions or the portion thereof which is includible in the gross income
of the Owner are subject to federal income tax withholding. Generally, amounts
are withheld from periodic payments at the same rate as wages and at the rate of
10% from non-periodic payments. However, the Owner, in many cases, may elect not
to have taxes withheld or to have withholding done at a different rate.
Certain distributions from retirement plans qualified under Section 401 or
Section 403(b) of the Code, which are not directly rolled over to another
eligible retirement plan or individual retirement account or individual
retirement annuity, are subject to a mandatory 20% withholding for federal
income tax. The 20% withholding requirement generally does not apply to: a) a
series of substantially equal payments made at least annually for the life or
life expectancy of the participant or joint and last survivor expectancy of the
participant and a designated beneficiary or for a specified period of 10 years
or more; or b) distributions which are required minimum distributions; or c) the
portion of the distributions not includible in gross income (i.e. returns of
after-tax contributions); or d) hardship withdrawals. Participants should
consult their own tax counsel or other tax adviser regarding withholding
requirements.
TAX TREATMENT OF WITHDRAWALS -- NON-QUALIFIED CONTRACTS
Section 72 of the Code governs treatment of distributions from annuity
contracts. It provides that if the Contract Value exceeds the aggregate Purchase
Payments made, any amount withdrawn will be treated as coming first from the
earnings and then, only after the income portion is exhausted, as coming from
the principal. Withdrawn earnings are includible in gross income. It further
provides that a ten percent (10%) penalty will apply to the income portion of
any premature distribution. However, the penalty is not imposed on amounts
received: (a) after you reach age 59-1/2; (b) after your death; (c) if you
become totally disabled (for this purpose disability is as defined in Section
72(m)(7) of the Code); (d) in a series of substantially equal periodic payments
made not less frequently than annually for your life (or life expectancy) or for
the joint lives (or joint life expectancies) of you and your beneficiary;
(e)under an immediate annuity; or (f) which are allocable to Purchase Payments
made prior to August 14, 1982. 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 Contract provides that upon the death of the Annuitant prior to the Maturity
Date, the death proceeds will be paid to the beneficiary. Such payments made
upon the death of the Annuitant who is not the Owner of the Contract do not
qualify for the death of Owner exception described above, and will be subject to
the ten (10%) percent distribution penalty unless the beneficiary is 59-1/2
years old or one of the other exceptions to the penalty applies.
The above information does not apply to Qualified Contracts. However, separate
tax withdrawal penalties and restrictions may apply to such Qualified Contracts.
(See "Tax Treatment of Withdrawals -- Qualified Contracts" below.)
10
<PAGE>
QUALIFIED PLANS
The Contracts are designed to be suitable for use under various types of
Qualified Plans. Taxation of participants in each Qualified Plan varies with the
type of plan and terms and conditions of each specific plan. Owners, annuitants
and beneficiaries are cautioned that benefits under a Qualified Plan may be
subject to the terms and conditions of the plan regardless of the terms and
conditions of the Contracts issued pursuant to the plan. Some retirement plans
are subject to distribution and other requirements that are not incorporated
into the Company's administrative procedures. The Company is not bound by the
terms and conditions of such plans to the extent such terms conflict with the
terms of a Contract, unless the Company specifically consents to be bound.
Owners, participants and beneficiaries are responsible for determining that
contributions, distributions and other transactions with respect to the
Contracts comply with applicable law.
A qualified contract will not provide any necessary or additional tax deferral
if it is used to fund a qualified plan that is tax deferred. However, the
contract has features and benefits other than tax deferral that may make it an
appropriate investment for a qualified plan. Following are general descriptions
of the types of Qualified Plans with which the Contracts may be used. Such
descriptions are not exhaustive and are for general informational purposes only.
The tax rules regarding Qualified Plans are very complex and will have differing
applications depending on individual facts and circumstances. Each purchaser
should obtain competent tax advice prior to purchasing a Contract issued under a
Qualified Plan.
Contracts issued pursuant to Qualified Plans include special provisions
restricting Contract provisions that may otherwise be available as described
herein. Generally, Contracts issued pursuant to Qualified Plans are not
transferable except upon surrender or annuitization. Various penalty and excise
taxes may apply to contributions or distributions made in violation of
applicable limitations. Furthermore, certain withdrawal penalties and
restrictions may apply to surrenders from Qualified Contracts. (See "Tax
Treatment of Withdrawals -- Qualified Contracts" below.)
On July 6, 1983, the Supreme Court decided in ARIZONA GOVERNING COMMITTEE V.
NORRIS that optional annuity benefits provided under an employer's deferred
compensation plan could not, under Title VII of the Civil Rights Act of 1964,
vary between men and women. The Contracts sold by the Company in connection with
Qualified Plans will utilize annuity tables which do not differentiate on the
basis of sex. Such annuity tables will also be available for use in connection
with certain non-qualified deferred compensation plans.
A. TAX-SHELTERED ANNUITIES
Section 403(b) of the Code permits the purchase of "tax-sheltered annuities" by
public schools and certain charitable, educational and scientific organizations
described in Section 501(c)(3) of the Code. These qualifying employers may make
contributions to the Contracts for the benefit of their employees. Such
contributions are not includible in the gross income of the employees until the
employees receive distributions from the Contracts. The amount of contributions
to the tax-sheltered annuity is limited to certain maximums imposed by the Code.
Furthermore, the Code sets forth additional restrictions governing such items as
transferability, distributions, nondiscrimination and withdrawals. (See "Tax
Treatment of Withdrawals Qualified Contracts" and "Tax-Sheltered Annuities --
Withdrawal Limitations" below.) Any employee should obtain competent tax advice
as to the tax treatment and suitability of such an investment.
B. INDIVIDUAL RETIREMENT ANNUITIES
The Contracts offered by the prospectus are designed to be suitable for use as
an Individual Retirement Annuity (IRA). Generally, individuals who purchase IRAs
are not taxed on increases to the value of the contributions until distribution
occurs. Following is a general description of IRAs with which the Contract may
be used. The description is not exhaustive and is for general informational
purposes only.
Section 408(b) of the Code permits eligible individuals to contribute to an
individual retirement program known as an IRA. Under applicable limitations,
certain amounts may be contributed to an IRA which will be deductible from the
individual's taxable income. These IRAs are subject to limitations on
<PAGE>
eligibility, contributions, transferability and distributions. (See "Tax
Treatment of Withdrawals -- Qualified Contracts" below.) Under certain
conditions, distributions from other IRAs and other Qualified Plans may be
rolled over or transferred on a tax-deferred basis into an IRA. Sales of
Contracts for use with IRAs are subject to special requirements imposed by the
Code, including the requirement that certain informational disclosure be given
to persons desiring to establish an IRA. Purchasers of Contracts to be qualified
as Individual Retirement Annuities should obtain competent tax advice as to the
tax treatment and suitability of such an investment.
SIMPLE IRAS
Section 408(p) of the Code permits certain employers (generally those with less
than 100 employees) to establish a retirement program for employees using
Savings Incentive Match Plan Retirement Annuities ("SIMPLE IRA"). SIMPLE IRA
programs can only be established with the approval of and adoption by the
employer of the Contract Owner of the SIMPLE IRA. Contributions to SIMPLE IRAs
will be made pursuant to a salary reduction agreement in which an Owner would
authorize his/her employer to deduct a certain amount from his/her pay and
contribute it directly to the SIMPLE IRA. The Owner's employer will also make
contributions to the SIMPLE IRA in amounts based upon certain elections of the
employer. The only contributions that can be made to a SIMPLE IRA are salary
reduction contributions and employer contributions as described above, and
rollover contributions from other SIMPLE IRAs. Purchasers of Contracts to be
qualified as SIMPLE IRAs should obtain competent tax advice as to the tax
treatment and suitability of such an investment.
ROTH IRAS
Section 408A of the Code provides that beginning in 1998, individuals may
purchase a new type of non-deductible IRA, known as a Roth IRA. Purchase
payments for a Roth IRA are limited to a maximum of $2,000 per year and are not
deductible from taxable income. Lower maximum limitations apply to individuals
with adjusted gross incomes between $95,000 and $110,000 in the case of single
taxpayers, between $150,000 and $160,000 in the case of married taxpayers filing
joint returns, and between $0 and $10,000 in the case of married taxpayers
filing separately. An overall $2,000 annual limitation continues apply to all of
a taxpayer's IRA contributions, including Roth IRA and non-Roth IRAs.
Qualified distributions from Roth IRAs are free from federal income tax. A
qualified distribution requires that an individual has held a Roth IRA for at
least five taxable years and, in addition, that the distribution is made: (i)
after the individual reaches age 59-1/2, (ii) on the individual's death or
disability, or (iii) as a qualified first-time home purchase (subject to a
$10,000 lifetime maximum) for the individual, a spouse, child, grandchild, or
ancestor. Any distribution which is not a qualified distribution is taxable to
the extent of earnings in the distribution. Distributions are treated as made
from contributions first and therefore no distributions are taxable until
distributions exceed the amount of contributions and conversions to the Roth
IRA. The 10% penalty tax and the regular IRA exceptions to the 10% penalty tax
apply to taxable distributions from a Roth IRA.
<PAGE>
Amounts may be rolled over from one Roth IRA to another Roth IRA. Furthermore,
an individual may make a rollover contribution from a non-Roth IRA to a Roth
IRA, ("conversion deposits") unless the individual has adjusted gross income
over $100,000 or the individual is a married taxpayer filing a separate return.
The individual must pay tax on any portion of the IRA being rolled over that
represents income or a previously deductible IRA contribution. However, for
rollovers in 1998, the individual may pay that tax ratably over the four taxable
year period beginning with tax year 1998. In addition, distribution of amounts
attributable to conversion deposits held for less than 5 taxable years will
also be subject to the penalty tax.
Purchasers of Contracts intended to be qualified as a Roth IRA should obtain
competent tax advice as to the tax treatment and suitability of such an
investment.
C. PENSION AND PROFIT-SHARING PLANS
Sections 401(a) and 401(k) of the Code permit employers, including self-employed
individuals, to establish various types of retirement plans for employees. These
retirement plans may permit the purchase of the Contracts to provide benefits
under the Plan. Contributions to the Plan for the benefit of employees will not
be includible in the gross income of the employees until distributed from the
Plan. The tax consequences to participants may vary depending upon the
particular plan design. However, the Code places limitations and restrictions on
all Plans including on such items as: amount of allowable contributions; form,
manner and timing of distributions; transferability of benefits; vesting and
nonforfeitability of interests; nondiscrimination in eligibility and
participation; and the tax treatment of distributions, withdrawals and
surrenders. Special considerations apply to plans covering self-employed
individuals, including limitations on contributions and benefits for key
employees or 5 percent owners. (See "Tax Treatment of Withdrawals -- Qualified
Contracts" below.) Purchasers of Contracts for use with Pension or Profit
Sharing Plans should obtain competent tax advice as to the tax treatment and
suitability of such an investment.
D. GOVERNMENT AND TAX-EXEMPT ORGANIZATION'S DEFERRED COMPENSATION
PLAN UNDER SECTION 457
Under Code provisions, employees and independent contractors performing services
for state and local governments and other tax-exempt organizations may
participate in Deferred Compensation Plans under Section 457 of the Code. The
amounts deferred under a Plan which meets the requirements of Section 457 of the
Code are not taxable as income to the participant until paid or otherwise made
available to the participant or beneficiary. As a general rule, the maximum
amount which can be deferred in any one year is the lesser of $8,000 or 33-1/3
percent of the participant's includible compensation. However, in limited
circumstances, the plan may provide for additional catch-up contributions in
<PAGE>
each of the last three years before normal retirement age. Furthermore, the Code
provides additional requirements and restrictions regarding eligibility and
distributions.
All of the assets and income of a Plan established by a governmental employer
after August 20, 1996, must be held in trust for the exclusive benefit of
participants and their beneficiaries. For this purpose, custodial accounts and
certain annuity contracts are treated as trusts. Plans that were in existence on
August 20, 1996 may be amended to satisfy the trust and exclusive benefit
requirements any time prior to January 1, 1999, and must be amended not later
than that date to continue to receive favorable tax treatment. The requirement
of a trust does not apply to amounts under a Plan of a tax exempt
(non-governmental) employer. In addition, the requirement of a trust does not
apply to amounts under a Plan of a governmental employer if the Plan is not an
eligible plan within the meaning of section 457(b) of the Code. In the absence
of such a trust, amounts under the plan will be subject to the claims of the
employer's general creditors.
13
<PAGE>
In general, distributions from a Plan are prohibited under section 457 of the
Code unless made after the participating employee:
attains age 70-1/2,
separates from service,
dies, or
suffers an unforeseeable financial emergency as defined in the Code.
Under present federal tax law, amounts accumulated in a Plan under section 457
of the Code cannot be transferred or rolled over on a tax-deferred basis except
for certain transfers to other Plans under section 457.
TAX TREATMENT OF WITHDRAWALS -- QUALIFIED CONTRACTS
In the case of a withdrawal under a Qualified Contract, a ratable portion of the
amount received is taxable, generally based on the ratio of the individual's
cost basis to the individual's total accrued benefit under the retirement plan.
Special tax rules may be available for certain distributions from a Qualified
Contract. Section 72(t) of the Code imposes a 10% penalty tax on the taxable
portion of any distribution from qualified retirement plans, including Contracts
issued and qualified under Code Sections 401 (Pension and Profit-Sharing Plans),
403(b) (Tax-Sheltered Annuities) and 408 and 408A (Individual Retirement
Annuities). This penalty is increased to 25% instead of 10% for SIMPLE IRAs if
distribution occurs within the first two years after the Owner first
participated in the SIMPLE IRA. To the extent amounts are not includible in
gross income because they have been rolled over to an IRA or to another eligible
Qualified Plan, no tax penalty will be imposed. The tax penalty will not apply
to the following distributions: (a) made on or after the date on which the Owner
or Annuitant (as applicable) reaches age 59-1/2; (b) following the death or
disability of the Owner or Annuitant (as applicable) (for this purpose
<PAGE>
disability is as defined in Section 72(m) (7) of the Code); (c) after separation
from service, distributions that are part of substantially equal periodic
payments made not less frequently than annually for the life (or life
expectancy) of the Owner or Annuitant (as applicable) or the joint lives (or
joint life expectancies) of such Owner or Annuitant (as applicable) and his or
her designated Beneficiary; (d) to an Owner or Annuitant (as applicable) who has
separated from service after he has attained age 55; (e) made to the Owner or
Annuitant (as applicable) to the extent such distributions do not exceed the
amount allowable as a deduction under Code Section 213 to the Owner or Annuitant
(as applicable) for amounts paid during the taxable year for medical care; (f)
made to an alternate payee pursuant to a qualified domestic relations order; (g)
made on account of an IRS levy upon the qualified contract; (h) from an
Individual Retirement Annuity for the purchase of medical insurance (as
described in Section 213(d)(1)(D) of the Code) for the Owner or Annuitant (as
applicable) and his or her spouse and dependents if the Owner or Annuitant (as
applicable) has received unemployment compensation for at least 12 weeks (this
exception will no longer apply after the Owner or Annuitant (as applicable) has
been re-employed for at least 60 days); (i) from an Individual Retirement
Annuity made to the Owner or Annuitant (as applicable) to the extent such
distributions do not exceed the qualified higher education expenses (as defined
in Section 72(t)(7) of the Code) of the Owner or Annuitant (as applicable) for
the taxable year; and (j) distributions up to $10,000 from an Individual
Retirement Annuity made to the Owner or Annuitant (as applicable) which are
qualified first-time home buyer distributions (as defined in Section 72(t)(8) of
the Code). The exceptions stated in (d) and (f) above do not apply in the case
of an Individual Retirement Annuity. The exception stated in (c) above applies
to an Individual Retirement Annuity without the requirement that there be a
separation from service. With respect to (c) above, if the series of
substantially equal periodic payments is modified before the later of your
attaining age 59-1/2 or 5 years from the date of the first periodic payment,
then the tax for the year of the modification is increased by an amount equal to
the tax which would have been imposed (the 10% penalty tax) but for the
exception, plus interest for the tax years in which the exception was used.
14
<PAGE>
TAX-SHELTERED ANNUITIES -- WITHDRAWAL LIMITATIONS
The Code limits the withdrawal of amounts attributable to contributions made
pursuant to a salary reduction agreement (as defined in Section 403(b)(11) of
the Code) to circumstances only when the Owner: (1) attains age 59-1/2; (2)
separates from service; (3) dies; (4) becomes disabled (within the meaning of
Section 72(m)(7) of the Code); (5) in the case of hardship; or (6) made pursuant
to a qualified domestic relations order, if otherwise permissible. However,
withdrawals for hardship are restricted to the portion of the Owner's Contract
Value which represents contributions made by the Owner and does not include any
investment results. The limitations on withdrawals became effective on January
1, 1989 and apply only to salary reduction contributions made after December 31,
1988, to income attributable to such contributions and to income attributable to
amounts held as of December 31, 1988. The limitations on withdrawals do not
<PAGE>
affect rollovers and transfers between certain Qualified Plans. Owners should
consult their own tax counsel or other tax adviser regarding any distributions.
MANDATORY DISTRIBUTIONS -- QUALIFIED PLANS
Generally, distributions from a qualified plan must begin no later than April
1st of the calendar year following the later of (a) the year in which the
employee attains age 70-1/2 or (b) the calendar year in which the employee
retires. The date set forth in (b) does not apply to an Individual Retirement
Annuity. 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. On or
after the Maturity Date when annuity payments commence, we determine the value
of the Individual Account as the total of the product(s) of:
(a) the value of an Accumulation Unit for each Investment Option at the end of
the Valuation Period immediately before the Valuation Period in which the first
annuity payment is due and
(b) the number of Accumulation Units credited to the Individual Account with
respect to each Investment Option as of the date the annuity is to commence. We
will deduct any applicable premium taxes from the Individual Account value.
We then calculate the amount of the first monthly variable annuity payment by
multiplying the Individual Account Value less any outstanding loans and
applicable charges, which is to be applied to provide variable payments, by the
amount of first monthly payment in accordance with annuity tables contained in
the Contract. The amount of the first monthly payment varies according to the
form of annuity you select, the age of the annuitant (for certain options) and
the assumed net investment rate you select. The standard assumed investment rate
(AIR) is 3%. However, you may select a 5% AIR or such other rate as the Company
may offer prior to the Maturity Date.
The AIR 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. If you select a 5% rate, rather than the standard 3% rate,
it 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
was equal to the assumed rate, the annuity payments would be level during that
period.
15
<PAGE>
If a greater first monthly payment would result, Conseco 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. On the Maturity Date, 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 the Variable Account,
the number of Annuity Units established is 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 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, for it is replaced by the actual net investment rate in step
(i). The daily factor for a 3 percent assumed net investment rate is .99991902;
for a 5 percent rate, the daily factor is .99986634.
AMOUNTS OF SUBSEQUENT MONTHLY VARIABLE ANNUITY PAYMENTS. The amounts of
subsequent monthly variable annuity payments are determined by multiplying (i)
the number of Annuity Units established for the annuitant for the applicable
sub-account by (ii) the Annuity Unit value for the sub-account. If Annuity units
are established for more than one sub-account, the calculation is made
separately and the results 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 Investment Option.
If payments were based on the investment experience of more than one Investment
Option, the same procedure would be followed to determine the portion of the
monthly payment attributed to each Investment Option.
2. FIRST MONTHLY PAYMENT. Assume that at the Maturity Date there are 40,000
Accumulation Units credited under a particular Individual Account and that the
value of an Accumulation Unit for the second Valuation Period prior to the
Maturity Date was $1.40000000; this produces a total value for the Individual
sub-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 $5.22 per $1,000 of value applied; the first monthly
payment to the annuitant would thus be 56 multiplied by $5.22, or $292.32.
Assume that the Annuity Unit value for the Valuation Period in which the first
monthly payment was due was $1.30000000. This is divided into the amount of the
first monthly payment to establish the number of Annuity Units for the
participant: $292.32 $1.30000000 produces 224.862 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 second Valuation Period
preceding the due date of the second monthly payment. This is multiplied by
.99753980 to neutralize the assumed net investment rate of 3 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 1.00751520. 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, $1.30976976.
The second monthly payment is then calculated by multiplying the constant number
of Annuity Units by the current Annuity Unit value: 224.862 times $1.30976976
produces a payment of $294.52.
FINANCIAL STATEMENTS
Audited financial statements of Conseco Variable Annuity Account E and Conseco
Variable Insurance Company as of December 31, 1999 are included herein.
Unaudited financial statements of Conseco Variable Annuity Account E as of
September 30, 2000 are also included herein.
<TABLE>
<CAPTION>
CONSECO VARIABLE ANNUITY ACCOUNT E
STATEMENT OF ASSETS AND LIABILITIES
SEPTEMBER 30, 2000
Unaudited
-----------------------------------------------------------------------------------------------------------
ASSETS:
Investments in portfolio shares (Note 2):
Net Asset
Shares Cost Value
------------ ---------- ----------
<S> <C> <C> <C>
The Alger American Fund:
Growth Portfolio 381,918.9 $21,423,697 $21,162,129
Leveraged AllCap Portfolio 413,863.9 19,063,549 20,569,034
MidCap Growth Portfolio 169,051.7 5,063,912 5,764,664
Small Capitalization Portfolio 436,606.8 15,149,391 12,788,214
American Century Variable Portfolios, Inc:
Income and Growth Fund 168,524.0 1,249,819 1,289,209
International Fund 123,359.7 1,231,994 1,332,285
Value Fund 542,967.3 3,094,217 3,203,507
Berger Institutional Products Trust:
Growth Fund 185,096.9 3,055,471 4,020,305
Growth and Income Fund 341,567.2 7,190,253 9,956,683
International Fund 181,210.1 1,891,698 2,401,034
New Generation Fund 46,107.4 422,721 482,283
Small Company Growth Fund 142,498.2 3,134,784 3,898,750
Conseco Series Trust:
Balanced Portfolio 1,441,555.0 20,491,710 25,280,387
Conseco 20 Focus Portfolio 69,908.3 903,413 939,334
Equity Portfolio 1,799,409.6 40,322,400 53,410,367
Fixed Income Portfolio 939,143.9 9,047,361 8,924,830
Government Securities Portfolio 345,825.5 3,845,677 3,874,739
High Yield Portfolio 10,824.8 108,793 108,781
Money Market Portfolio 14,391,588.7 14,391,589 14,391,589
Dreyfus Stock Index Fund 1,242,528.4 38,598,638 46,656,940
The Dreyfus Socially Responsible Growth Fund, Inc. 261,896.7 8,667,793 10,420,869
Dreyfus Variable Investment Fund:
Disciplined Stock Portfolio 91,816.0 2,492,486 2,501,069
International Value Portfolio 24,735.3 357,821 348,026
Federated Insurance Series:
High Income Bond Fund II 368,392.2 3,725,750 3,352,369
International Equity Fund II 110,536.9 2,483,774 2,266,005
Utility Fund II 202,660.0 2,892,944 2,752,123
Invesco Variable Investment Funds, Inc:
Equity Income Fund 28,600.0 613,833 636,064
High Yield Fund 408,385.6 4,745,797 4,618,841
Janus Aspen Series:
Aggressive Growth Portfolio 502,555.5 23,662,372 26,560,058
Growth Portfolio 1,067,665.9 29,207,033 34,090,572
Worldwide Growth Portfolio 1,166,389.2 36,854,498 49,524,885
Lazard Retirement Series, Inc:
Equity Portfolio 17,844.0 203,416 205,920
Small Cap Portfolio 40,497.8 438,338 456,005
Lord Abbett Series Fund, Inc
Growth and Income Portfolio 49,106.0 1,092,067 1,154,974
Mitchell Hutchins Series Trust:
Growth and Income Portfolio 6,801.6 103,924 99,575
Neuberger Berman Advisers Management Trust:
Limited Maturity Bond Portfolio 119,699.7 1,560,390 1,541,732
Partners Portfolio 266,100.3 4,558,364 4,278,893
Rydex Variable Trust:
Nova Fund 3,685.9 62,846 59,232
OTC Fund 45,956.4 1,769,807 1,614,909
Seligman Portfolios, Inc.:
Communications and Information Portfolio 19,916.0 509,069 471,411
Global Technology Portfolio 7,933.7 225,189 207,782
Strong Variable Insurance Funds, Inc:
Mid Cap Growth Fund II 198,636.5 5,491,073 6,729,804
Strong Opportunity Fund II , Inc 86,570.9 2,112,531 2,380,700
Van Eck Worldwide Insurance Trust:
Worldwide Bond Fund 49,911.6 520,344 492,128
Worldwide Emerging Markets Fund 211,923.9 2,378,355 2,284,540
Worldwide Hard Assets Fund
(formerly Gold and Natural
Resources Fund) (Note 1) 123,849.6 1,374,426 1,458,948
Worldwide Real Estate Fund 9,776.5 97,225 99,915
------------------------------------------------------------------------------------------------------------
TOTAL ASSETS 401,062,413
============================================================================================================
LIABILITIES:
Amounts payable to Conseco Variable Insurance Company 440,158
------------------------------------------------------------------------------------------------------------
NET ASSETS (NOTE 6) $ 400,622,255
============================================================================================================
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
CONSECO VARIABLE ANNUITY ACCOUNT E
STATEMENT OF ASSETS AND LIABILITIES
SEPTEMBER 30, 2000
Unaudited
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------
NET ASSETS ATTRIBUTABLE TO: Total Value
Contract owners' deferred annuity reserves: Units Unit Value of Units
----------------------------- -----------
<S> <C> <C> <C>
The Alger American Fund:
Growth Portfolio 8,580,866.6 $2.463449 $21,138,527
Leveraged AllCap Portfolio 4,297,988.6 4.779690 20,543,053
MidCap Growth Portfolio 2,560,121.5 2.249270 5,758,404
Small Capitalization Portfolio 6,417,164.0 1.990627 12,774,180
American Century Variable Portfolios, Inc.:
Income and Growth Fund 1,074,624.6 1.198342 1,287,768
International Fund 739,269.6 1.799166 1,330,069
Value Fund 2,497,357.5 1.281185 3,199,577
Berger Institutional Products Trust:
Growth Fund 1,844,182.2 2.177613 4,015,915
Growth and Income Fund 3,467,018.5 2.868667 9,945,722
International Fund 1,859,307.4 1.289902 2,398,324
New Generation Fund 463,319.3 1.039844 481,780
Small Company Growth Fund 1,513,625.7 2.572988 3,894,541
Conseco Series Trust:
Balanced Portfolio 7,546,254.4 3.346325 25,252,220
Conseco 20 Focus Portfolio 702,655.2 1.335776 938,590
Equity Portfolio 10,340,325.4 5.159191 53,347,714
Fixed Income Portfolio 6,280,489.2 1.419436 8,914,752
Government Securities Portfolio 2,883,505.0 1.342222 3,870,304
High Yield Portfolio 107,562.2 1.010237 108,663
Money Market Portfolio 11,398,125.4 1.260987 14,372,888
Dreyfus Stock Index Fund 17,347,165.9 2.686442 46,602,155
The Dreyfus Socially Responsible Growth Fund, Inc. 3,549,192.7 2.932862 10,409,292
Dreyfus Variable Investment Fund:
Disciplined Stock Portfolio 1,993,776.3 1.253877 2,499,950
International Value Portfolio 322,296.1 1.078618 347,634
Federated Insurance Series:
High Income Bond Fund II 2,505,538.1 1.335120 3,345,194
International Equity Fund II 993,888.3 2.278177 2,264,253
Utility Fund II 1,609,238.6 1.708297 2,749,057
Invesco Variable Investment Funds, Inc.:
Equity Income Fund 520,348.0 1.221009 635,350
High Yield Fund 4,635,120.3 0.995347 4,613,553
Janus Aspen Series:
Aggressive Growth Portfolio 6,128,839.6 4.328951 26,531,446
Growth Portfolio 10,661,773.6 3.193923 34,052,884
Worldwide Growth Portfolio 13,512,656.6 3.660951 49,469,174
Lazard Retirement Series, Inc.:
Equity Portfolio 184,533.8 1.114986 205,753
Small Cap Portfolio 452,736.5 1.006304 455,591
Lord Abbett Series Fund, Inc.:
Growth and Income Portfolio 949,636.5 1.214694 1,153,518
Mitchell Hutchins Series Trust:
Growth and Income Portfolio 97,020.2 1.025193 99,464
Neuberger Berman Advisers Management Trust:
Limited Maturity Bond Portfolio 1,389,104.9 1.108785 1,540,219
Partners Portfolio 3,192,963.5 1.336822 4,268,424
Rydex Variable Trust:
Nova Fund 3,368.4 17.572956 59,193
OTC Fund 44,206.1 36.494889 1,613,297
Seligman Portfolios, Inc.:
Communications and Information Portfolio 608,825.8 0.773517 470,937
Global Technology Portfolio 245,440.3 0.845863 207,609
Strong Variable Insurance Funds, Inc.:
Mid Cap Growth Fund II 2,017,837.9 3.331422 6,722,270
Strong Opportunity Fund II , Inc. 1,239,773.9 1.918130 2,378,048
Van Eck Worldwide InsuranceTrust:
Worldwide Bond Fund 488,339.0 1.006586 491,555
Worldwide Emerging Markets Fund 2,402,163.8 0.949969 2,281,981
Worldwide Hard Assets Fund
(formerly Gold and Natural
Resources Fund) (Note 1) 1,370,856.8 1.063044 1,457,281
Worldwide Hard Assets Fund (Note 1) 65.5 1.363917 89
Worldwide Real Estate Fund 107,350.9 0.929701 99,804
------------------------------------------------------------------------------------------------------------
NET ASSETS $ 400,597,966
===========================================================================================================
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
CONSECO VARIABLE ANNUITY ACCOUNT E
STATEMENT OF ASSETS AND LIABILITIES
SEPTEMBER 30, 2000
Unaudited
<TABLE>
<CAPTION>
===========================================================================================================
Reported
Value
---------------
<S> <C>
Net assets attributable to contract owners' deferred annuity reserves (from page 3) $400,597,966
Contract owners' annuity payment reserves:
Conseco Series Trust:
Equity Portfolio 2,811
Money Market Portfolio 5,557
Alger Leveraged 2,616
Dreyfus Stock Index Fund 2,811
Federated Insurance Series:
High Income Bond Fund II 5,067
Neuberger Berman Advisers Management Trust:
Partners Portfolio 5,427
-----------------------------------------------------------------------------------------------------------
NET ASSETS ATTRIBUTABLE TO CONTRACT OWNERS' ANNUITY PAYMENT RESERVES 24,289
-----------------------------------------------------------------------------------------------------------
NET ASSETS $ 400,622,255
===========================================================================================================
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
<TABLE>
<CAPTION>
THE ALGER AMERICAN FUNDS
------------------------------------------------------
CONSECO VARIABLE ANNUITY ACCOUNT E
STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2000 Leveraged Small
Unaudited Growth All Cap MidCap Capitalization
====================================================================================================================================
<S> <C> <C> <C> <C>
Investment income:
Dividends from investments in portfolio shares $2,257,116 $1,969,076 $509,496 $4,072,890
------------------------------------------------------------------------------------------------------------------------------------
Expenses:
Mortality and expense risk fees 171,490 191,022 42,961 114,318
Administrative fees 20,579 22,923 5,155 13,718
------------------------------------------------------------------------------------------------------------------------------------
Total expenses 192,069 213,945 48,116 128,036
------------------------------------------------------------------------------------------------------------------------------------
Net investment income 2,065,047 1,755,131 461,380 3,944,854
------------------------------------------------------------------------------------------------------------------------------------
Net realized gains (losses) and unrealized appreciation (depreciation)
on investments:
Net realized gains (losses) on sales of investments in portfolio shares 455,152 2,179,893 199,016 (235,274)
Net change in unrealized appreciation (depreciation)
of investments in portfolio shares (2,978,947) (5,162,823) 48,360 (5,044,177)
------------------------------------------------------------------------------------------------------------------------------------
Net gain (loss) on investments in portfolio shares (2,523,795) (2,982,930) 247,376 (5,279,451)
------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets from operations ($458,748) ($1,227,799) $708,756 ($1,334,597)
====================================================================================================================================
AMERICAN CENTURY VARIABLE PORTFOLIOS BERGER INSTITUTIONAL PRODUCTS TRUST
--------------------------------------------- -------------------------------------------------------------------
Income and Growth and New Small
Growth International Value Growth Income International Generation Company
===================================================================================================================
$6,164 $37,300 $144,979 $0 $0 $0 $0 $0
-------------------------------------------------------------------------------------------------------------------
10,912 19,109 31,121 34,813 87,054 25,569 1,603 29,037
1,309 2,293 3,735 4,177 10,446 3,068 192 3,484
-------------------------------------------------------------------------------------------------------------------
12,221 21,402 34,856 38,990 97,500 28,637 1,795 32,521
-------------------------------------------------------------------------------------------------------------------
(6,057) 15,898 110,123 (38,990) (97,500) (28,637) (1,795) (32,521)
-------------------------------------------------------------------------------------------------------------------
47,383 562,840 (487,973) 337,895 758,433 165,416 1,478 476,376
(81,054) (881,151) 460,641 7,105 38,792 (423,341) 59,562 (67,970)
-------------------------------------------------------------------------------------------------------------------
(33,671) (318,311) (27,332) 345,000 797,225 (257,925) 61,040 408,406
-------------------------------------------------------------------------------------------------------------------
($39,728) ($302,413) $82,791 $306,010 $699,725 ($286,562) $59,245 $375,885
===================================================================================================================
CONSECO SERIES TRUST PORTFOLIOS
---------------------------------------------------------------------------------------------------
Conseco Fixed Government High Money
Balanced 20 Focus Equity Income Securities Yield Market
===================================================================================================
$465,338 $0 $38,851 $430,734 $214,598 $815 $575,869
---------------------------------------------------------------------------------------------------
222,008 1,327 448,419 77,879 45,179 193 122,431
26,641 159 53,810 9,346 5,422 23 14,692
---------------------------------------------------------------------------------------------------
248,649 1,486 502,229 87,225 50,601 216 137,123
---------------------------------------------------------------------------------------------------
216,689 (1,486) (463,378) 343,509 163,997 599 438,746
---------------------------------------------------------------------------------------------------
303,960 11,961 510,598 (159,417) (135,440) 59 0
3,920,784 35,921 11,016,962 284,724 240,383 (12) 0
---------------------------------------------------------------------------------------------------
4,224,744 47,882 11,527,560 125,307 104,943 47 0
---------------------------------------------------------------------------------------------------
$4,441,433 $46,396 $11,064,182 $468,816 $268,940 $646 $438,746
===================================================================================================
DREYFUS VARIABLE INVESCO VARIABLE
INVESTMENT FUNDS FEDERATED INSURANCE SERIES INSURANCE FUNDS
------------------------------- ----------------------------------------- ---------------------------
DREYFUS
SOCIALLY DREYFUS
RESPONSIBLE STOCK Disciplined International High Income International Equity
GROWTH INDEX Stock Value Bond II Equity II Utility II Income High Yield
====================================================================================================================================
$1,574 $393,992 $66 $7,254 $355,434 $298,739 $142,170 $0 $0
------------------------------------------------------------------------------------------------------------------------------------
95,808 450,132 6,886 2,746 34,163 16,453 26,613 6,392 47,264
11,497 54,016 826 329 4,100 1,974 3,194 767 5,672
------------------------------------------------------------------------------------------------------------------------------------
107,305 504,148 7,712 3,075 38,263 18,427 29,807 7,159 52,936
------------------------------------------------------------------------------------------------------------------------------------
(105,731) (110,156) (7,646) 4,179 317,171 280,312 112,363 (7,159) (52,936)
------------------------------------------------------------------------------------------------------------------------------------
508,830 2,962,748 47,323 425 (242,094) 348,293 (19,818) 72,518 (114,689)
(307,755) (4,086,924) (31,574) (16,602) (200,133) (918,221) (143,063) (26,125) 31,426
------------------------------------------------------------------------------------------------------------------------------------
201,075 (1,124,176) 15,749 (16,177) (442,227) (569,928) (162,881) 46,393 (83,263)
------------------------------------------------------------------------------------------------------------------------------------
$95,344 ($1,234,332) $8,103 ($11,998) ($125,056) ($289,616) ($50,518) $39,234 ($136,199)
====================================================================================================================================
NEUBERGER BERMAN
LAZARD RETIREMENT ADVISERS MANAGEMENT
JANUS ASPEN SERIES PORTFOLIOS SERIES PORTFOLIOS LORD MITCHELL TRUST PORTFOLIOS
------------------------------------------ ------------------------------- ABBETT HUTCHINS ---------------------------
SERIES SERIES
TRUST TRUST
Aggressive Worldwide GROWTH GROWTH Limited
Growth Growth Growth Equity Small Cap AND INCOME AND INCOME Maturity Bond Partners
====================================================================================================================================
$2,763,652 $2,621,590 $4,114,245 $23 $40 $0 $5,491 $84,913 $1,082,126
------------------------------------------------------------------------------------------------------------------------------------
219,429 312,315 475,371 3,258 2,862 9,851 796 12,090 57,621
26,332 37,478 57,044 391 343 1,182 96 1,451 6,914
------------------------------------------------------------------------------------------------------------------------------------
245,761 349,793 532,415 3,649 3,205 11,033 892 13,541 64,535
------------------------------------------------------------------------------------------------------------------------------------
2,517,891 2,271,797 3,581,830 (3,626) (3,165) (11,033) 4,599 71,372 1,017,591
------------------------------------------------------------------------------------------------------------------------------------
1,137,734 2,903,404 1,711,732 39,623 17,773 16,689 1,651 (34,233) (593,576)
(4,693,870) (4,560,334) (7,684,041) (83,660) 15,004 63,087 (11,396) 3,299 (455,275)
------------------------------------------------------------------------------------------------------------------------------------
(3,556,136) (1,656,930) (5,972,309) (44,037) 32,777 79,776 (9,745) (30,934) (1,048,851)
------------------------------------------------------------------------------------------------------------------------------------
($1,038,245) $614,867 ($2,390,479) ($47,663) $29,612 $68,743 ($5,146) $40,438 ($31,260)
====================================================================================================================================
STRONG
VARIABLE
INSURANCE
RYDEX VARIABLE TRUST SELIGMAN PORTFOLIOS FUNDS
---------------------------- ----------------------------- ----------------
Communications STRONG
and Global Mid Cap OPPORTUNITY
Nova OTC Information Technology Growth II FUND II
================================================================================================
$1,594 $52,797 $0 $0 $0 $0
------------------------------------------------------------------------------------------------
73 3,332 970 358 53,543 20,612
9 400 116 43 6,425 2,473
------------------------------------------------------------------------------------------------
82 3,732 1,086 401 59,968 23,085
------------------------------------------------------------------------------------------------
1,512 49,065 (1,086) (401) (59,968) (23,085)
------------------------------------------------------------------------------------------------
33 9,620 (3,939) (82) 490,646 189,185
(3,614) (154,898) (37,658) (17,407) 92,170 (63,736)
------------------------------------------------------------------------------------------------
(3,581) (145,278) (41,597) (17,489) 582,816 125,449
------------------------------------------------------------------------------------------------
($2,069) ($96,213) ($42,683) ($17,890) $522,848 $102,364
================================================================================================
VAN ECK WORLDWIDE INSURANCE TRUST FUNDS
-----------------------------------------------------------------
Old (1) Combined
Emerging Hard Real Hard Total
Bond Markets Assets Estate Assets
============================================================== ===============
$108,980 $0 $15,575 $1,594 $0 $22,775,075
-------------------------------------------------------------- ---------------
13,866 19,908 14,016 1,018 0 3,584,191
1,664 2,389 1,682 122 0 430,101
-------------------------------------------------------------- ---------------
15,530 22,297 15,698 1,140 0 4,014,292
-------------------------------------------------------------- ---------------
93,450 (22,297) (123) 454 0 18,760,783
-------------------------------------------------------------- ---------------
(222,952) 340,435 (101,268) 5,583 0 14,463,950
51,389 (899,050) 200,455 6,553 0 (22,458,194)
-------------------------------------------------------------- ---------------
(171,563) (558,615) 99,187 12,136 0 (7,994,244)
-------------------------------------------------------------- ---------------
($78,113) ($580,912) $99,064 $12,590 $0 $10,766,539
============================================================== ===============
</TABLE>
<TABLE>
<CAPTION>
THE ALGER AMERICAN FUNDS
------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2000 Leveraged Small
Unaudited Growth All Cap MidCap Capitalization
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Changes from operations:
Net investment income $ 2,065,047 $ 1,755,131 $ 461,380 $ 3,944,854
Net realized gains (losses) on sales of investments in portfolio shares 455,152 2,179,893 199,016 (235,274)
Net change in unrealized appreciation (depreciation)
of investments in portfolio shares (2,978,947) (5,162,823) 48,360 (5,044,177)
------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets from operations (458,748) (1,227,799) 708,756 (1,334,597)
------------------------------------------------------------------------------------------------------------------------------------
Changes from contract owners' transactions:
Net contract purchase payments 3,870,274 4,781,586 1,202,584 1,337,575
Contract redemptions (1,215,401) (1,176,433) (134,536) (1,145,828)
Net transfers 5,286,263 (590,781) 636,535 2,223,881
------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets from contract owners' transactions 7,941,136 3,014,372 1,704,583 2,415,628
------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets 7,482,388 1,786,573 2,413,339 1,081,031
------------------------------------------------------------------------------------------------------------------------------------
Net assets, beginning of period 13,656,143 18,759,096 3,345,066 11,693,147
------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (Note 6) $21,138,531 $20,545,669 $5,758,405 $12,774,178
====================================================================================================================================
AMERICAN CENTURY VARIABLE PORTFOLIOS BERGER INSTITUTIONAL PRODUCTS TRUST
--------------------------------------------- -------------------------------------------------------------------
Income and Growth and New Small
Growth International Value Growth Income International Generation Company
===================================================================================================================
($6,057) $15,898 $110,123 ($38,990) ($97,500) ( 28,637) ($1,795) ($32,521)
47,383 562,840 (487,973) 337,895 758,433 165,416 1,478 476,376
(81,054) (881,151) 460,641 7,105 38,792 (423,341) 59,562 (67,970)
-------------------------------------------------------------------------------------------------------------------
(39,728) (302,413) 82,791 306,010 699,725 (286,562) 59,245 375,885
-------------------------------------------------------------------------------------------------------------------
225,189 354,920 335,945 337,057 1,664,223 176,475 96,291 1,080,477
(38,800) (72,583) (156,612) (249,248) (804,149) (510,928) (12,088) (112,800)
201,108 (1,254,745) (784,776) 774,656 782,302 23,086 338,332 86,862
-------------------------------------------------------------------------------------------------------------------
387,497 (972,408) (605,443) 862,465 1,642,376 (311,367) 422,535 1,054,539
-------------------------------------------------------------------------------------------------------------------
347,769 (1,274,821) (522,652) 1,168,475 2,342,101 (597,929) 481,780 1,430,424
-------------------------------------------------------------------------------------------------------------------
939,999 2,604,890 3,722,229 2,847,440 7,603,620 2,996,253 0 2,464,116
-------------------------------------------------------------------------------------------------------------------
$1,287,768 $1,330,069 $3,199,577 $4,015,915 $9,945,721 $2,398,324 $481,780 $3,894,540
===================================================================================================================
CONSECO SERIES TRUST PORTFOLIOS
---------------------------------------------------------------------------------------------------
Conseco Fixed Government High Money
Balanced 20 Focus Equity Income Securities Yield Market
===================================================================================================
$216,689 ($1,486) ($463,378) $343,509 $163,997 $599 $438,746
303,960 11,961 510,598 (159,417) (135,440) 59 0
3,920,784 35,921 11,016,962 284,724 240,383 (12) 0
---------------------------------------------------------------------------------------------------
4,441,433 46,396 11,064,182 468,816 268,940 646 438,746
---------------------------------------------------------------------------------------------------
2,044,378 83,094 3,890,674 692,969 655,495 22,668 5,362,262
(1,314,339) (2,027) (2,107,131) (816,874) (716,301) 0 (3,330,691)
(1,676,735) 811,126 (382,312) 1,410,551 (1,101,463) 85,350 (2,787,276)
---------------------------------------------------------------------------------------------------
(946,696) 892,193 1,401,231 1,286,646 (1,162,269) 108,018 (755,705)
---------------------------------------------------------------------------------------------------
3,494,737 938,589 12,465,413 1,755,462 (893,329) 108,664 (316,959)
---------------------------------------------------------------------------------------------------
21,757,485 0 40,885,109 7,159,291 4,763,633 0 14,695,407
---------------------------------------------------------------------------------------------------
$25,252,222 $938,589 $53,350,522 $8,914,753 $3,870,304 $108,664 $14,378,448
===================================================================================================
DREYFUS VARIABLE INVESCO VARIABLE
INVESTMENT FUNDS FEDERATED INSURANCE SERIES INSURANCE FUNDS
------------------------------- ----------------------------------------- ---------------------------
DREYFUS
SOCIALLY DREYFUS
RESPONSIBLE STOCK Disciplined International High Income International Equity
GROWTH INDEX Stock Value Bond II Equity II Utility II Income High Yield
====================================================================================================================================
($105,731) ($110,156) ($7,646) $4,179 $317,171 $280,312 $112,363 ($7,159) ($52,936)
508,830 2,962,748 47,323 425 (242,094) 348,293 (19,818) 72,518 (114,689)
(307,755) (4,086,924) (31,574) (16,602) (200,133) (918,221) (143,063) (26,125) 31,426
------------------------------------------------------------------------------------------------------------------------------------
95,344 (1,234,332) 8,103 (11,998) (125,056) (289,616) (50,518) 39,234 (136,199)
------------------------------------------------------------------------------------------------------------------------------------
1,881,418 7,181,433 281,389 112,576 387,003 467,223 270,349 71,290 398,999
(381,653) (2,792,099) (30,593) (13,832) (253,045) (101,930) (153,646) (76,222) (688,119)
(884,209) (6,084,858) 1,825,082 159,698 (1,028,292) 455,745 (152,032) 26,679 181,575
------------------------------------------------------------------------------------------------------------------------------------
615,556 (1,695,524) 2,075,878 258,442 (894,334) 821,038 (35,329) 21,747 (107,545)
------------------------------------------------------------------------------------------------------------------------------------
710,900 (2,929,856) 2,083,981 246,444 (1,019,390) 531,422 (85,847) 60,981 (243,744)
------------------------------------------------------------------------------------------------------------------------------------
9,698,393 49,534,816 415,970 101,191 4,369,652 1,732,831 2,834,904 574,369 4,857,298
------------------------------------------------------------------------------------------------------------------------------------
$10,409,293 $46,604,960 $2,499,951 $347,635 $3,350,262 $2,264,253 $2,749,057 $635,350 $4,613,554
====================================================================================================================================
NEUBERGER BERMAN
LAZARD RETIREMENT ADVISERS MANAGEMENT
JANUS ASPEN SERIES PORTFOLIOS SERIES PORTFOLIOS LORD MITCHELL TRUST PORTFOLIOS
------------------------------------------ ------------------------------- ABBETT HUTCHINS ---------------------------
SERIES SERIES
TRUST TRUST
Aggressive Worldwide GROWTH GROWTH Limited
Growth Growth Growth Equity Small Cap AND INCOME AND INCOME Maturity Bond Partners
====================================================================================================================================
$2,517,891 $2,271,797 $3,581,830 ($3,626) ($3,165) ($11,033) $4,599 $71,372 $1,017,591
1,137,734 2,903,404 1,711,732 39,623 17,773 16,689 1,651 (34,233) (593,576)
(4,693,870) (4,560,334) (7,684,041) (83,660) 15,004 63,087 (11,396) 3,299 (455,275)
------------------------------------------------------------------------------------------------------------------------------------
(1,038,245) 614,867 (2,390,479) (47,663) 29,612 68,743 (5,146) 40,438 (31,260)
------------------------------------------------------------------------------------------------------------------------------------
6,871,843 6,304,821 7,459,958 21,589 99,004 280,664 62,735 274,747 432,268
(757,298) (3,090,660) (2,233,555) (12,423) (1,084) (31,727) (8,211) (70,289) (289,426)
5,511,880 (1,407,431) (747,031) (768,219) 137,221 (81,854) (27,267) 11,814 (1,214,839)
------------------------------------------------------------------------------------------------------------------------------------
11,626,425 1,806,730 4,479,372 (759,053) 235,141 167,083 27,257 216,272 (1,071,997)
------------------------------------------------------------------------------------------------------------------------------------
10,588,180 2,421,597 2,088,893 (806,716) 264,753 235,826 22,111 256,710 (1,103,257)
------------------------------------------------------------------------------------------------------------------------------------
15,943,265 31,631,290 47,380,277 1,012,468 190,838 917,691 77,353 1,283,509 5,377,108
------------------------------------------------------------------------------------------------------------------------------------
$26,531,445 $34,052,887 $49,469,170 $205,752 $455,591 $1,153,517 $99,464 $1,540,219 $4,273,851
====================================================================================================================================
STRONG
VARIABLE
INSURANCE
RYDEX VARIABLE TRUST SELIGMAN PORTFOLIOS FUNDS
---------------------------- ----------------------------- ----------------
Communications STRONG
and Global Mid Cap OPPORTUNITY
Nova OTC Information Technology Growth II FUND II
================================================================================================
$1,512 $49,065 ($1,086) ($401) ($59,968) ($23,085)
33 9,620 (3,939) (82) 490,646 189,185
(3,614) (154,898) (37,658) (17,407) 92,170 (63,736)
------------------------------------------------------------------------------------------------
(2,069) (96,213) (42,683) (17,890) 522,848 102,364
------------------------------------------------------------------------------------------------
20,035 360,876 124,331 129,985 1,639,670 454,110
0 (4,313) (14,247) (312) (623,055) (99,011)
41,227 1,352,946 403,536 95,826 785,249 116,364
------------------------------------------------------------------------------------------------
61,262 1,709,509 513,620 225,499 1,801,864 471,463
------------------------------------------------------------------------------------------------
59,193 1,613,296 470,937 207,609 2,324,712 573,827
------------------------------------------------------------------------------------------------
0 0 0 0 4,397,558 1,804,221
------------------------------------------------------------------------------------------------
$59,193 $1,613,296 $470,937 $207,609 $6,722,270 $2,378,048
================================================================================================
VAN ECK WORLDWIDE INSURANCE TRUST FUNDS
--------------------------------------------------------------
Old (1) Combined
Emerging Hard Real Hard Total
Bond Markets Assets Estate Assets
============================================================== ===============
$93,450 ($22,297) ($123) $454 $0 $18,760,783
(222,952) 340,435 (101,268) 5,583 0 14,463,950
51,389 (899,050) 200,455 6,553 0 (22,458,194)
-------------------------------------------------------------- ---------------
(78,113) (580,912) 99,064 12,590 0 10,766,539
-------------------------------------------------------------- ---------------
36,997 322,955 126,522 7,606 0 64,296,532
(157,280) (105,766) (127,441) (5,835) 0 (26,039,841)
(1,603,390) 302,275 (50,075) 19,602 0 1,459,186
-------------------------------------------------------------- ---------------
(1,723,673) 519,464 (50,994) 21,373 0 39,715,877
-------------------------------------------------------------- ---------------
(1,801,786) (61,448) 48,070 33,963 0 50,482,416
-------------------------------------------------------------- ---------------
2,293,341 2,343,429 1,409,211 65,841 91 350,139,839
-------------------------------------------------------------- ---------------
$491,555 $2,281,981 $1,457,281 $99,804 $91 $400,622,255
============================================================== ===============
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
CONSECO VARIABLE ANNUITY ACCOUNT E
NOTES TO FINANCIAL STATEMENTS
Unaudited
(1) GENERAL
Conseco Variable Annuity Account E ("Account E") is registered under the
Investment Company Act of 1940, as amended, as a unit investment trust. Account
E was established on November 12, 1993, and commenced operations on July 25,
1994, as a segregated investment account for individual and group variable
annuity contracts which are registered under the Securities Act of 1933. The
operations of Account E 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.
Prior to June 1, 1995, Account E invested solely in shares of the
portfolios of the Conseco Series Trust. Currently, the following investment
options are available (effective date in parenthesis):
THE ALGER AMERICAN FUND
Growth Portfolio (June 1, 1996)
Leveraged AllCap Portfolio (June 1, 1995)
MidCap Growth Portfolio (June 1, 1996)
Small Capitalization Portfolio (June 1, 1995)
AMERICAN CENTURY VARIABLE PORTFOLIOS, INC.
Income and Growth Fund (May 1, 1998)
International Fund (May 1, 1997)
Value Fund (May 1, 1997)
BERGER INSTITUTIONAL PRODUCTS TRUST
Growth Fund (June 1, 1996)
Growth and Income Fund (June 1, 1996)
International Fund (May 1, 1997)
New Generation Fund (May 1, 2000)
Small Company Growth Fund (June 1, 1996)
CONSECO SERIES TRUST
Balanced Portfolio (July 25, 1994)
Conseco 20 Focus Portfolio (May 1, 2000)
Equity Portfolio (July 25, 1994)
Fixed Income Portfolio (July 25, 1994)
Government Securities Portfolio (July 25, 1994)
High Yield Portfolio (May 1, 2000)
Money Market Portfolio (July 25, 1994)
THE DREYFUS SOCIALLY RESPONSIBLE GROWTH FUND, INC. (JUNE 1, 1995)
DREYFUS STOCK INDEX FUND (JUNE 1, 1995)
DREYFUS VARIABLE INVESTMENT FUND (MAY 1, 1998)
Disciplined Stock Portfolio
International Value Portfolio
FEDERATED INSURANCE SERIES (JUNE 1, 1995)
High Income Bond Fund II
International Equity Fund II
Utility Fund II
INVESCO VARIABLE INVESTMENT FUNDS, INC. (MAY 1, 1998)
Equity Income Fund
High Yield Fund
JANUS ASPEN SERIES (JUNE 1, 1995)
Aggressive Growth Portfolio
Growth Portfolio
Worldwide Growth Portfolio
LAZARD RETIREMENT SERIES, INC. (MAY 1, 1998)
Equity Portfolio
Small Cap Portfolio
LORD ABBETT SERIES FUND, INC. (MAY 1, 1998)
Growth and Income Portfolio
MITCHELL HUTCHINS SERIES TRUST (MAY 1, 1998)
Growth and Income Portfolio
NEUBERGER BERMAN ADVISERS MANAGEMENT TRUST (MAY 1, 1997)
Limited Maturity Bond Portfolio
Partners Portfolio
RYDEX VARIABLE TRUST (MAY 1, 2000)
Nova Fund
OTC Fund
<PAGE>
CONSECO VARIABLE ANNUITY ACCOUNT E
NOTES TO FINANCIAL STATEMENTS
Unaudited
(1) GENERAL (CONTINUED)
SELIGMAN PORTFOLIOS, INC. (MAY 1, 2000)
Communications and Information Portfolio
Global Technology Portfolio
STRONG VARIABLE INSURANCE FUNDS, INC.
Mid Cap Growth Fund II (May 1, 1997)
STRONG OPPORTUNITY FUND II (MAY 1, 1997)
VAN ECK WORLDWIDE INSURANCE TRUST
Worldwide Hard Assets Fund
(formerly Gold and Natural Resources Fund) (June 1,1995)
Worldwide Bond Fund (June 1, 1995)
Worldwide Emerging Markets Fund (June 1, 1996)
Worldwide Real Estate Fund (May 1, 1998)
Van Eck 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 remaining units in the terminated fund are owned by a
contract owner who has not transferred the funds.
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 E 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 E 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 E 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 E and are not taxable
until received by the contract owner or beneficiary in the form of annuity
payments or other distributions.
ANNUITY RESERVES
Deferred annuity contract reserves are comprised of net contract purchase
payments less redemptions and benefits. These reserves are adjusted daily for
the net investment income and net realized gains (losses) and unrealized
appreciation (depreciation) on investments.
Annuity payment reserves for contracts under which contract owners are
receiving periodic retirement payments are computed according to the 1983 Group
Annuity Mortality Table. The assumed net investment rate is equal to the assumed
rate of accumulation. The annuity unit values for periodic retirement payments
are as follows:.
September 30, December 31,
2000 1999
--------- --------
Conseco Series Trust:
Equity Portfolio $0.9991360 $N/A
Money Market Portfolio 1.0121570 1.000834
Alger American:
Leveraged Fund 1.0000000 N/A
Dreyfus Stock Index Fund: 1.0303200 N/A
Federated Insurance Series:
High Income Bond Fund II 0.9063450 0.956791
Utility Fund II 0.9847930 N/A
<PAGE>
CONSECO VARIABLE ANNUITY ACCOUNT E
NOTES TO FINANCIAL STATEMENTS
Unaudited
ANNUITY RESERVES (CONTINUED)
Neuberger Berman Advisers Management Trust:
Partners Portfolio 0.9888100 1.013185
(3) PURCHASES AND SALES OF INVESTMENTS IN PORTFOLIO SHARES
The aggregate cost of purchases of investments in portfolio shares were
$149,515,973 and $139,192,174 for the nine months ended September 30, 2000 and
the year ended December 31, 1999, respectively. The aggregate proceeds from
sales of investments in portfolio shares were $91,007,878 and $74,610,705 for
the nine months ended September 30, 2000 and the year ended December 31, 1999,
respectively.
(4) DEDUCTIONS AND EXPENSES
Although periodic retirement payments to contract owners vary according to
the investment performance of the portfolios, such payments are not affected by
mortality or expense experience because the Company assumes the mortality and
expense risks under the contracts.
The mortality risk assumed by the Company results from the life annuity
payment option in the contracts in which the Company agrees to make annuity
payments regardless of how long a particular annuitant or other payee lives. The
annuity payments are determined in accordance with annuity purchase rate
provisions established at the time the contracts are issued. Based on the
actuarial determination of expected mortality, the Company is required to fund
any deficiency in the annuity payment reserves from its general account assets.
The expense risk assumed by the Company is the risk that the deductions for
sales and administrative expenses may prove insufficient to cover the actual
sales and administrative expenses. The Company deducts daily from Account E a
fee, which is equal on an annual basis to 1.25 percent of the daily value of the
total investments of Account E, for assuming the mortality and expense risks.
These fees were $3,584,191 and $3,319,669 for the nine months ended September
30, 2000 and the year ended December 31, 1999, respectively.
Pursuant to an agreement between Account E and the Company (which may be
terminated by the Company at any time), the Company provides sales and
administrative services to Account E, as well as a minimum death benefit prior
to retirement for the contracts. The Company may deduct a percentage of amounts
surrendered to cover sales expenses. The percentage varies up to 9.00 percent
based upon the number of years the contract has been held. In addition, the
Company deducts units from individual contracts annually and upon full surrender
to cover an administrative fee of $30 unless the value of the contract is
$25,000 or greater. This fee is recorded as a redemption in the accompanying
Statements of Changes in Net Assets. Sales and administrative charges were
$1,001,890 and $1,055,120 for the nine months ended September 30, 2000 and the
year ended December 31, 1999, respectively.
The Company also deducts daily from Account E a fee, which is equal on an
annual basis to 0.15 percent of the daily value of the total investments of
Account E, for administrative expenses. These expenses were $430,101 and
$398,359 for the nine months ended September 30, 2000 and the year ended
December 31, 1999, respectively.
(5) OTHER TRANSACTIONS WITH AFFILIATES
Conseco Equity Sales, Inc., an affiliate of the Company, is the principal
underwriter and performs all variable annuity sales functions on behalf of the
Company through various retail broker/dealers including Conseco Securities,
Inc., an affiliate of the Company.
(6) NET ASSETS
Net assets consisted of the following at September 30, 2000:
Proceeds from the sales of units since organization,
less cost of units redeemed ................................... $267,534,768
Undistributed net investment income ............................. 52,950,910
Undistributed net realized gains on sales of investments ........ 26,956,716
Net unrealized appreciation of investments ...................... 53,179,861
------------
Net assets ................................................. $400,622,255
============
CONSECO VARIABLE ANNUITY ACCOUNT E
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 ................................................................. 212,369.9 $10,954,993 $ 13,672,372
Leveraged AllCap Portfolio ....................................................... 323,992.7 12,113,548 18,781,855
MidCap Growth Portfolio .......................................................... 103,913.7 2,696,745 3,349,138
Small Capitalization Portfolio ................................................... 212,283.9 9,024,458 11,707,458
American Century Variable Portfolios, Inc:
Income and Growth Fund ........................................................... 117,633.5 820,625 941,068
International Fund ............................................................... 208,641.0 1,626,572 2,608,013
Value Fund ....................................................................... 626,328.8 4,078,007 3,726,656
Berger Institutional Products Trust:
100 Fund ......................................................................... 148,333.7 1,893,245 2,850,973
Growth and Income Fund ........................................................... 287,825.4 4,885,343 7,612,981
Small Company Growth Fund ........................................................ 104,936.8 1,635,128 2,467,064
BIAM International Fund .......................................................... 204,789.4 2,063,392 2,996,069
Conseco Series Trust:
Balanced Portfolio ............................................................... 1,486,856.9 20,915,762 21,783,656
Equity Portfolio ................................................................. 1,765,906.2 38,863,968 40,934,975
Fixed Income Portfolio ........................................................... 763,707.6 7,575,032 7,167,777
Government Securities Portfolio .................................................. 435,108.5 4,980,560 4,769,239
Money Market Portfolio ........................................................... 14,709,626.8 14,709,627 14,709,627
Dreyfus Stock Index Fund ........................................................... 1,289,837.9 37,449,042 49,594,269
<PAGE>
The Dreyfus Socially Responsible Growth Fund, Inc .................................. 248,528.3 7,649,170 9,710,001
Dreyfus Variable Investment Fund:
Disciplined Stock Portfolio ...................................................... 15,469.5 376,282 416,439
International Value Portfolio .................................................... 6,465.2 94,504 101,309
Federated Insurance Series:
High Income Bond Fund II ......................................................... 427,031.7 4,546,053 4,372,805
International Equity Fund II ..................................................... 62,764.5 1,034,358 1,734,811
Utility Fund II .................................................................. 197,791.4 2,836,065 2,838,306
Invesco Variable Investment Funds, Inc:
Equity Income Fund................................................................ 27,369.7 526,682 575,038
High Yield Fund................................................................... 422,498.5 5,021,340 4,862,957
Janus Aspen Series:
Aggressive Growth Portfolio ...................................................... 267,419.3 8,370,700 15,962,256
Growth Portfolio ................................................................. 941,137.1 22,225,389 31,669,262
Worldwide Growth Portfolio ....................................................... 993,430.2 27,081,865 47,436,293
Lazard Retirement Series, Inc:
Equity Portfolio ................................................................. 87,920.4 927,558 1,013,722
Small Cap Portfolio .............................................................. 19,451.4 188,351 191,013
Lord Abbett Series Fund, Inc
Growth and Income Portfolio ...................................................... 41,458.8 918,907 918,726
Mitchell Hutchins Series Trust:
Growth and Income Portfolio ...................................................... 4,739.2 70,390 77,438
Neuberger Berman Advisers Management Trust:
Limited Maturity Bond Portfolio .................................................. 97,047.3 1,306,863 1,284,906
Partners Portfolio ............................................................... 274,020.8 5,205,965 5,381,769
Strong Variable Insurance Funds, Inc:
Mid Cap Growth Fund II ........................................................... 144,973.8 3,256,292 4,402,854
Strong Opportunity Fund II, Inc .................................................... 69,503.1 1,474,480 1,806,384
Van Eck Worldwide Insurance Trust:
Worldwide Bond Fund .............................................................. 214,785.1 2,375,658 2,296,053
Worldwide Emerging Markets Fund .................................................. 164,529.1 1,540,950 2,346,184
Worldwide Hard Assets Fund (formerly Gold and Natural
Resources Fund) (Note 1) ....................................................... 128,733.9 1,526,857 1,410,924
Worldwide Real Estate Fund ....................................................... 7,204.5 69,783 65,921
-----------------------------------------------------------------------------------------------------------------------------------
Total assets ................................................................................................. 350,548,561
Liabilities:
Net amounts due to Conseco Variable Insurance Company ............................................................. 408,722
-----------------------------------------------------------------------------------------------------------------------------------
Net assets (Note 6) ............................................................................................. $350,139,839
===================================================================================================================================
The accompanying notes are an integral part of these financial statements.
</TABLE>
2
<PAGE>
<PAGE>
CONSECO VARIABLE ANNUITY ACCOUNT E
STATEMENT OF ASSETS AND LIABILITIES - CONTINUED
DECEMBER 31, 1999
<TABLE>
<CAPTION>
===================================================================================================================================
TOTAL VALUE
UNITS UNIT VALUE OF UNITS
-----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net assets attributable to:
Contract owners' deferred annuity reserves:
The Alger American Fund:
Growth Portfolio ......................................................... 5,480,300.6 $ 2.491860 $ 13,656,143
Leveraged AllCap Portfolio ............................................... 3,739,665.2 5.016250 18,759,096
MidCap Growth Portfolio .................................................. 1,789,442.1 1.869335 3,345,066
Small Capitalization Portfolio ........................................... 5,276,834.2 2.215940 11,693,147
American Century Variable Portfolios, Inc.:
Income and Growth Fund ................................................... 746,541.0 1.259139 939,999
International Fund ....................................................... 1,258,065.8 2.070551 2,604,890
Value Fund ............................................................... 3,004,508.6 1.238881 3,722,229
Berger Institutional Products Trust:
100 Fund ................................................................. 1,462,280.5 1.947260 2,847,440
Growth and Income Fund ................................................... 2,890,714.8 2.630360 7,603,620
Small Company Growth Fund ................................................ 1,102,899.8 2.234216 2,464,116
BIAM International Fund .................................................. 2,081,810.5 1.439253 2,996,253
Conseco Series Trust:
Balanced Portfolio ....................................................... 7,850,427.1 2.771503 21,757,485
Equity Portfolio ......................................................... 10,049,304.8 4.068452 40,885,109
Fixed Income Portfolio ................................................... 5,323,180.1 1.344927 7,159,291
Government Securities Portfolio .......................................... 3,757,732.3 1.267688 4,763,633
Money Market Portfolio ................................................... 12,049,203.3 1.219157 14,689,873
Dreyfus Stock Index Fund ................................................... 17,965,037.4 2.757290 49,534,816
The Dreyfus Socially Responsible Growth Fund, Inc. ......................... 3,333,181.2 2.909651 9,698,393
Dreyfus Variable Investment Fund:
Disciplined Stock Portfolio .............................................. 332,230.6 1.252051 415,970
International Value Portfolio ............................................ 85,251.5 1.186966 101,191
Federated Insurance Series:
High Income Bond Fund II ................................................. 3,165,625.8 1.378642 4,364,264
International Equity Fund II ............................................. 645,820.6 2.683147 1,732,831
Utility Fund II .......................................................... 1,632,263.7 1.736793 2,834,904
Invesco Variable Investment Funds, Inc.:
Equity Income Fund ....................................................... 492,759.7 1.165618 574,369
High Yield Fund .......................................................... 4,745,256.4 1.023611 4,857,298
Janus Aspen Series:
Aggressive Growth Portfolio .............................................. 3,617,752.9 4.406952 15,943,265
Growth Portfolio ......................................................... 10,090,318.2 3.134816 31,631,290
Worldwide Growth Portfolio ............................................... 12,380,622.3 3.826970 47,380,277
Lazard Retirement Series, Inc.:
<PAGE>
Equity Portfolio ......................................................... 899,537.0 1.125543 1,012,468
Small Cap Portfolio ...................................................... 215,217.6 0.886723 190,838
Lord Abbett Series Fund, Inc.:
Growth and Income Portfolio .............................................. 793,510.8 1.156495 917,691
Mitchell Hutchins Series Trust:
Growth and Income Portfolio .............................................. 71,828.8 1.076908 77,353
Neuberger Berman Advisers Management Trust:
Limited Maturity Bond Portfolio .......................................... 1,194,491.4 1.074523 1,283,509
Partners Portfolio ....................................................... 3,981,862.2 1.348993 5,371,504
Strong Variable Insurance Funds, Inc.:
Mid Cap Growth Fund II ................................................... 1,457,235.0 3.017741 4,397,558
Strong Opportunity Fund II , Inc. .......................................... 984,898.5 1.831885 1,804,221
Van Eck Worldwide Insurance Trust:
Worldwide Bond Fund ...................................................... 2,183,728.7 1.050195 2,293,341
Worldwide Emerging Markets Fund .......................................... 1,845,366.5 1.269899 2,343,429
Worldwide Hard Assets Fund
(formerly Gold and Natural Resources Fund) (Note 1) .................... 1,426,277.7 0.988034 1,409,211
Worldwide Hard Assets Fund (Note 1) ..................................... 65.5 1.378275 91
Worldwide Real Estate Fund ............................................... 80,034.5 0.822657 65,841
-----------------------------------------------------------------------------------------------------------------------------------
Net assets ............................................................................................. $350,123,313
===================================================================================================================================
The accompanying notes are an integral part of these financial statements.
</TABLE>
3
<PAGE>
CONSECO VARIABLE ANNUITY ACCOUNT E
STATEMENT OF ASSETS AND LIABILITIES - CONTINUED
DECEMBER 31, 1999
===============================================================================
REPORTED VALUE
-------------------------------------------------------------------------------
Net assets attributable to contract owners'
deferred annuity reserves (from page 3) ....................... $350,123,313
-------------------------------------------------------------------------------
Contract owners' annuity payment reserves:
Conseco Series Trust:
Money Market Portfolio .................................. 5,534
Federated Insurance Series:
High Income Bond Fund II ................................ 5,388
Neuberger Berman Advisers Management Trust:
Partners Portfolio ...................................... 5,604
-------------------------------------------------------------------------------
Net assets attributable to contract owners'
<PAGE>
annuity payment reserves............................. 16,526
--------------------------------------------------------------------------------
Net assets......................................... $350,139,839
================================================================================
The accompanying notes are an integral part of these financial statements.
4
<PAGE>
================================================================================
THIS PAGE INTENTIONALLY LEFT BLANK.
5
<PAGE>
CONSECO VARIABLE ANNUITY ACCOUNT E
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......... $ 776,884 $ 522,645 $ 343,247 $ 749,200 $ 96
-----------------------------------------------------------------------------------------------------------------------------------
Expenses:
Mortality and expense risk fees........................ 115,958 124,584 30,871 92,307 7,684
Administrative fees.................................... 13,915 14,950 3,704 11,077 922
-----------------------------------------------------------------------------------------------------------------------------------
Total expenses....................................... 129,873 139,534 34,575 103,384 8,606
-----------------------------------------------------------------------------------------------------------------------------------
Net investment income (loss)..................... 647,011 383,111 308,672 645,816 (8,510)
-----------------------------------------------------------------------------------------------------------------------------------
Net realized gains (losses) and unrealized appreciation (depreciation) of
investments:
<PAGE>
Net realized gains (losses) on sales of
investments in portfolio shares ................... 102,656 872,252 78,297 80,293 18,320
Net change in unrealized appreciation (depreciation)
of investments in portfolio shares ................ 2,011,423 5,347,823 339,394 2,491,281 93,713
-----------------------------------------------------------------------------------------------------------------------------------
Net gain (loss) on investments
in portfolio shares ........................... 2,114,079 6,220,075 417,691 2,571,574 112,033
-----------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets
from operations ............................. $ 2,761,090 $ 6,603,186 $ 726,363 $ 3,217,390 $ 103,523
===================================================================================================================================
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1999
===================================================================================================================================
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) .......................... $ 647,011 $ 383,111 $ 308,672 $ 645,816 $ (8,510)
Net realized gains (losses) on sales of investments
in portfolio shares ................................. 102,656 872,252 78,297 80,293 18,320
Net change in unrealized appreciation (depreciation)
of investments in portfolio shares .................. 2,011,423 5,347,823 339,394 2,491,281 93,713
-----------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets
from operations ................................. 2,761,090 6,603,186 726,363 3,217,390 103,523
-----------------------------------------------------------------------------------------------------------------------------------
Changes from contract owners' transactions:
Net contract purchase payments ........................ 4,009,371 3,789,407 725,957 860,397 469, 755
Contract redemptions .................................. (385,154) (247,907) (83,518) (457,073) (8,847)
Net transfers ......................................... 2,263,279 3,593,047 (494,377) 2,156,624 143,774
-----------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets
from contract owners' transactions ............ 5,887,496 7,134,547 148,062 2,559,948 604,682
-----------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets ....... 8,648,586 13,737,733 874,425 5,777,338 708,205
-----------------------------------------------------------------------------------------------------------------------------------
Net assets, beginning of year ............................ 5,007,557 5,021,363 2,470,641 5,915,809 231,794
-----------------------------------------------------------------------------------------------------------------------------------
Net assets, end of year (Note 6) ............ $ 13,656,143 $ 18,759,096 $ 3,345,066 $ 11,693,147 $ 939,999
<PAGE>
===================================================================================================================================
The accompanying notes are an integral part of these financial statements.
</TABLE>
6
<PAGE>
<TABLE>
<CAPTION>
AMERICAN CENTURY
VARIABLE PORTFOLIOS
(CONTINUED) BERGER INSTITUTIONAL PRODUCTS TRUST CONSECO SERIES TRUST PORTFOLIOS
---------------------------- -------------------------------------------------------- ------------------------------------------
GROWTH AND SMALL BIAM FIXED
INTERNATIONAL VALUE 100 INCOME COMPANY INTERNATIONAL BALANCED EQUITY INCOME
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$ -- $ 380,194 $ 450 $ -- $ -- $ 16,494 $ 3,987,902 $ 11,479,520 $ 411,110
------------------------------------------------------------------------------------------------------------------------------------
20,304 47,022 28,774 92,882 17,904 28,170 260,655 396,895 79,131
2,436 5,643 3,453 11,146 2,149 3,380 31,279 47,627 9,496
------------------------------------------------------------------------------------------------------------------------------------
22,740 52,665 32,227 104,028 20,053 31,550 291,934 444,522 88,627
------------------------------------------------------------------------------------------------------------------------------------
(22,740) 327,529 (31,777) (104,028) (20,053) (15,056) 3,695,968 11,034,998 322,483
------------------------------------------------------------------------------------------------------------------------------------
63,104 (77,104) 99,951 1,243,906 192,400 8,942 349,105 324,163 (80,270)
937,729 (302,377) 859,250 1,969,994 866,219 690,015 1,152,263 1,730,768 (347,279)
------------------------------------------------------------------------------------------------------------------------------------
1,000,833 (379,481) 959,201 3,213,900 1,058,619 698,957 1,501,368 2,054,931 (427,549)
------------------------------------------------------------------------------------------------------------------------------------
$ 978,093 $ (51,952) $ 927,424 $ 3,109,872 $ 1,038,566 $ 683,901 $ 5,197,336 $ 13,089,929 $ (105,066)
====================================================================================================================================
AMERICAN CENTURY
VARIABLE PORTFOLIOS
(CONTINUED) BERGER INSTITUTIONAL PRODUCTS TRUST CONSECO SERIES TRUST PORTFOLIOS
---------------------------- -------------------------------------------------------- ------------------------------------------
<PAGE>
GROWTH AND SMALL BIAM FIXED
INTERNATIONAL VALUE 100 INCOME COMPANY INTERNATIONAL BALANCED EQUITY INCOME
====================================================================================================================================
$ (22,740) $ 327,529 $ (31,777) $ (104,028) $ (20,053) $ (15,056) $ 3,695,968 $ 11,034,998 $ 322,483
63,104 (77,104) 99,951 1,243,906 192,400 8,942 349,105 324,163 (80,270)
937,729 (302,377) 859,250 1,969,994 866,219 690,015 1,152,263 1,730,768 (347,279)
------------------------------------------------------------------------------------------------------------------------------------
978,093 (51,952) 927,424 3,109,872 1,038,566 683,901 5,197,336 13,089,929 (105,066)
------------------------------------------------------------------------------------------------------------------------------------
203,602 505,927 352,778 1,430,861 286,430 22,843 2,692,288 4,249,667 906,132
(24,933) (153,412) (112,033) (793,457) (65,927) (1,166) (1,238,845) (1,658,283) (405,393)
33,834 13,458 (252,139) (2,685,701) 148,372 (14,553) (7,694,332) (5,608,028) 840,161
------------------------------------------------------------------------------------------------------------------------------------
212,503 365,973 (11,394) (2,048,297) 368,875 7,124 (6,240,889) (3,016,644) 1,340,900
------------------------------------------------------------------------------------------------------------------------------------
1,190,596 314,021 916,030 1,061,575 1,407,441 691,025 (1,043,553) 10,073,285 1,235,834
------------------------------------------------------------------------------------------------------------------------------------
1,414,294 3,408,208 1,931,410 6,542,045 1,056,675 2,305,228 22,801,038 30,811,824 5,923,457
------------------------------------------------------------------------------------------------------------------------------------
$ 2,604,890 $ 3,722,229 $ 2,847,440 $ 7,603,620 $ 2,464,116 $ 2,996,253 $21,757,485 $ 40,885,109 $ 7,159,291
====================================================================================================================================
</TABLE>
7
<PAGE>
CONSECO VARIABLE ANNUITY ACCOUNT E
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>
<PAGE>
Investment Income:
Dividends from investments in portfolio shares......... $ 208,403 $ 466,644 $ 323,807 $ 848,258 $ 3,882
------------------------------------------------------------------------------------------------------------------------------------
Expenses:
Mortality and expense risk fees........................ 35,599 120,813 100,043 514,342 3,126
Administrative fees.................................... 4,272 14,497 12,005 61,721 375
------------------------------------------------------------------------------------------------------------------------------------
Total expenses....................................... 39,871 135,310 112,048 576,063 3,501
------------------------------------------------------------------------------------------------------------------------------------
Net investment income (loss) ...................... 168,532 331,334 211,759 272,195 381
------------------------------------------------------------------------------------------------------------------------------------
Net realized gains (losses) and unrealized appreciation (depreciation) of
investments:
Net realized gains (losses) on sales of investments
in portfolio shares .............................. (53,419) -- 569,099 750,331 27,382
Net change in unrealized appreciation
(depreciation) of investments
in portfolio shares ...................... (216,869) -- 1,295,573 6,256,103 1,880
------------------------------------------------------------------------------------------------------------------------------------
Net gain (loss) on investments
in portfolio shares ................. (270,288) -- 1,864,672 7,006,434 29,262
------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in
net assets from operations ........ $ (101,756) $ 331,334 $ 2,076,431 $ 7,278,629 $ 29,643
====================================================================================================================================
STATEMENTS OF CHANGES IN NET ASSETS - CONTINUED
FOR THE YEAR ENDED DECEMBER 31, 1999
====================================================================================================================================
CONSECO SERIES DREYFUS
TRUST PORTFOLIOS VARIABLE
(CONTINUED) INVESTMENT
--------------------------- ----------
DREYFUS
SOCIALLY DREYFUS
GOVERNMENT MONEY RESPONSIBLE STOCK DISCIPLINED
SECURITIES MARKET GROWTH INDEX STOCK
====================================================================================================================================
Changes from operations:
Net investment income (loss)........................... $ 168,532 $ 331,334 $ 211,759 $ 272,195 $ 381
Net realized gains (losses) on sales of investments
in portfolio shares ................................. (53,419) -- 569,099 750,331 27,382
Net change in unrealized appreciation (depreciation)
of investments in portfolio shares .................. (216,869) -- 1,295,573 6,256,103 1,880
------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets from operations (101,756) 331,334 2,076,431 7,278,629 29,643
<PAGE>
------------------------------------------------------------------------------------------------------------------------------------
Changes from contract owners' transactions:
Net contract purchase payments......................... 413,613 5,982,018 2,198,167 9,744,333 243,883
Contract redemptions................................... (152,438) (1,323,488) (331,772) (2,102,160) (1,559)
Net transfers ......................................... 2,570,373 2,668,928 (751,898) 2,613,043 (149,676)
------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets from contract
owners' transactions .............................. 2,831,548 7,327,458 1,114,497 10,255,216 92,648
------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets ........... 2,729,792 7,658,792 3,190,928 17,533,845 122,291
------------------------------------------------------------------------------------------------------------------------------------
Net assets, beginning of year ............................ 2,033,841 7,036,615 6,507,465 32,000,971 293,679
------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of year (Note 6) ................ $ 4,763,633 $ 14,695,407 $ 9,698,393 $ 49,534,816 $ 415,970
====================================================================================================================================
</TABLE>
The accompanying notes are an integral part of these financial statements.
8
<PAGE>
<TABLE>
<CAPTION>
DREYFUS
VARIABLE
INVESTMENT
(CONTINUED) FEDERATED INSURANCE SERIES FUNDS INVESCO VARIABLE INV. FUNDS JANUS ASPEN SERIES PORTFOLIOS
---------- ----------------------------------------- --------------------------- -------------------------------------------
INTERNATIONAL HIGH INCOME INTERNATIONAL EQUITY AGGRESSIVE WORLDWIDE
VALUE BOND II EQUITY II UTILITY II INCOME HIGH YIELD GROWTH GROWTH GROWTH
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$ 8,041 $ 595,613 $ 53,628 $ 268,518 $ 9,632 $ 325,343 $ 293,381 $ 133,950 $ 63,086
------------------------------------------------------------------------------------------------------------------------------------
879 76,596 22,860 41,951 5,554 20,963 106,419 238,216 434,997
105 9,192 2,743 5,034 667 2,515 12,770 28,586 52,200
------------------------------------------------------------------------------------------------------------------------------------
984 85,788 25,603 46,985 6,221 23,478 119,189 266,802 487,197
------------------------------------------------------------------------------------------------------------------------------------
7,057 509,825 28,025 221,533 3,411 301,865 174,192 (132,852) (424,111)
------------------------------------------------------------------------------------------------------------------------------------
<PAGE>
91 (249,357) 146,565 102,468 7,321 1,541 1,414,594 334,162 2,571,165
10,335 (209,064) 767,800 (287,128) 43,945 (146,439) 6,256,473 7,430,621 15,961,067
------------------------------------------------------------------------------------------------------------------------------------
10,426 (458,421) 914,365 (184,660) 51,266 (144,898) 7,671,067 7,764,783 18,532,232
------------------------------------------------------------------------------------------------------------------------------------
$ 17,483 $ 51,404 $ 942,390 $ 36,873 $ 54,677 $ 156,967 $ 7,845,259 $ 7,631,931 $ 18,108,121
====================================================================================================================================
DREYFUS
VARIABLE
INVESTMENT
(CONTINUED) FEDERATED INSURANCE SERIES FUNDS INVESCO VARIABLE INV. FUNDS JANUS ASPEN SERIES PORTFOLIOS
---------- -------------------------------------------- ------------------------- ------------------------------------------
INTERNATIONAL HIGH INCOME INTERNATIONAL EQUITY AGGRESSIVE WORLDWIDE
VALUE BOND II EQUITY II UTILITY II INCOME HIGH YIELD GROWTH GROWTH GROWTH
====================================================================================================================================
$ 7,057 $ 509,825 $ 28,025 $ 221,533 $ 3,411 $ 301,865 $ 174,192 $ (132,852) $ (424,111)
91 (249,357) 146,565 102,468 7,321 1,541 1,414,594 334,162 2,571,165
10,335 (209,064) 767,800 (287,128) 43,945 (146,439) 6,256,473 7,430,621 15,961,067
------------------------------------------------------------------------------------------------------------------------------------
17,483 51,404 942,390 36,873 54,677 156,967 7,845,259 7,631,931 18,108,121
------------------------------------------------------------------------------------------------------------------------------------
29,652 930,590 85,680 937,941 167,974 403,084 2,346,950 5,238,650 7,151,112
(120) (538,823) (188,919) (227,339) (17,639) (122,694) (355,291) (1,184,221) (1,878,924)
9,328 (2,847,499) (897,172) (1,299,462) 223,672 4,277,974 1,143,153 8,275,443 (3,618,581)
------------------------------------------------------------------------------------------------------------------------------------
38,860 (2,455,732) (1,000,411) (588,860) 374,007 4,558,364 3,134,812 12,329,872 1,653,607
------------------------------------------------------------------------------------------------------------------------------------
56,343 (2,404,328) (58,021) (551,987) 428,684 4,715,331 10,980,071 19,961,803 19,761,728
------------------------------------------------------------------------------------------------------------------------------------
44,848 6,773,980 1,790,852 3,386,891 145,685 141,967 4,963,194 11,669,487 27,618,549
------------------------------------------------------------------------------------------------------------------------------------
$ 101,191 $ 4,369,652 $ 1,732,831 $ 2,834,904 $ 574,369 $ 4,857,298 $ 15,943,265 $ 31,631,290 $ 47,380,277
====================================================================================================================================
</TABLE>
9
<PAGE>
CONSECO VARIABLE ANNUITY ACCOUNT E
<PAGE>
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......... $ 36,196 $ 2,590 $ 70,646 $ 1 $ 51,597
------------------------------------------------------------------------------------------------------------------------------------
Expenses:
Mortality and expense risk fees........................ 14,642 1,461 7,538 940 13,084
Administrative fees.................................... 1,757 175 905 113 1,570
------------------------------------------------------------------------------------------------------------------------------------
Total expenses....................................... 16,399 1,636 8,443 1,053 14,654
------------------------------------------------------------------------------------------------------------------------------------
Net investment income (loss)..................... 19,797 954 62,203 (1,052) 36,943
------------------------------------------------------------------------------------------------------------------------------------
Net realized gains (losses) and unrealized appreciation (depreciation) of
investments:
Net realized gains (losses) on sales of investments
in portfolio shares ............................... 61,034 (1,200) 23,084 (136) 3,040
Net change in unrealized appreciation (depreciation)
of investments in portfolio shares ................ 1,467 (2,123) (7,310) (5,478) (38,552)
------------------------------------------------------------------------------------------------------------------------------------
Net gain (loss) on investments
in portfolio shares .......................... 62,501 (3,323) 15,774 (5,614) (35,512)
------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets
from operations ........................... $ 82,298 $ (2,369) $ 77,977 $ (6,666) $ 1,431
====================================================================================================================================
STATEMENTS OF CHANGES IN NET ASSETS - CONTINUED
<PAGE>
FOR THE YEAR ENDED DECEMBER 31, 1999
====================================================================================================================================
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
====================================================================================================================================
Changes from operations:
Net investment income (loss) .......................... $ 19,797 $ 954 $ 62,203 $ (1,052) $ 36,943
Net realized gains (losses) on sales of investments
in portfolio shares ................................. 61,034 (1,200) 23,084 (136) 3,040
Net change in unrealized appreciation
(depreciation) of investments in portfolio shares ... 1,467 (2,123) (7,310) (5,478) (38,552)
------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets
from operations ................................ 82,298 (2,369) 77,977 (6,666) 1,431
------------------------------------------------------------------------------------------------------------------------------------
Changes from contract owners' transactions:
Net contract purchase payments ........................ 75,768 94,818 341,535 34,644 228,919
Contract redemptions .................................. (17,879) (2,007) (15,618) (1,378) (23,338)
Net transfers ......................................... (316,901) (48,568) 199,363 (145,156) (79,322)
------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets
from contract owners' transactions .............. (259,012) 44,243 525,280 (111,890) 126,259
------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets ........ (176,714) 41,874 603,257 (118,556) 127,690
------------------------------------------------------------------------------------------------------------------------------------
Net assets, beginning of year ............................ 1,189,182 148,964 314,434 195,909 1,155,819
------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of year (Note 6) ............. $ 1,012,468 $ 190,838 $ 917,691 $ 77,353 $ 1,283,509
====================================================================================================================================
</TABLE>
The accompanying notes are an integral part of these financial statements.
10
<PAGE>
<TABLE>
<CAPTION>
<PAGE>
====================================================================================================================================
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>
$ 277,185 $ 1,822 $ 220,843 $ 182,453 $ -- $ 18,473 $ 742 $ -- $ 23,132,476
-------------------------------------------------------------------------------------------------------------- --------------
95,726 27,334 25,173 31,551 18,701 17,441 579 -- 3,319,669
11,487 3,280 3,021 3,786 2,244 2,093 69 -- 398,359
-------------------------------------------------------------------------------------------------------------- --------------
107,213 30,614 28,194 35,337 20,945 19,534 648 -- 3,718,028
-------------------------------------------------------------------------------------------------------------- --------------
169,972 (28,792) 192,649 147,116 (20,945) (1,061) 94 -- 19,414,448
-------------------------------------------------------------------------------------------------------------- --------------
(295,817) 603,446 23,921 46,471 (63,354) (218,833) 1,419 -- 9,081,033
481,873 1,017,981 319,256 (447,508) 1,204,979 447,348 (3,517) -- 57,972,929
-------------------------------------------------------------------------------------------------------------- --------------
186,056 1,621,427 343,177 (401,037) 1,141,625 228,515 (2,098) -- 67,053,962
-------------------------------------------------------------------------------------------------------------- --------------
$ 356,028 $ 1,592,635 $ 535,826 $ (253,921) $ 1,120,680 $ 227,454 $ (2,004) $ -- $ 86,468,410
================================================================================================================================
====================================================================================================================================
NEUBERGER
BERMAN
ADVISERS
MANAGEMENT STRONG
TRUST VARIABLE
PORTFOLIOS INSURANCE
(CONTINUED) FUNDS VAN ECK WORLDWIDE INSURANCE TRUST FUNDS
----------- ----------- ---------------------------------------------------------------------
(NOTE 1)
STRONG OLD
<PAGE>
MID CAP OPPORTUNITY EMERGING HARD REAL HARD COMBINED
PARTNERS GROWTH II FUND II BOND MARKETS ASSETS ESTATE ASSETS TOTAL
================================================================================================================ ==================
$ 169,972 $ (28,792) $ 192,649 $ 147,116 $ (20,945) $ (1,061) $ 94 $ -- $ 19,414,448
(295,817) 603,446 23,921 46,471 (63,354) (218,833) 1,419 -- 9,081,033
481,873 1,017,981 319,256 (447,508) 1,204,979 447,348 (3,517) -- 57,972,929
-------------------------------------------------------------------------------------------------------------- --------------
356,028 1,592,635 535,826 (253,921) 1,120,680 227,454 (2,004) -- 86,468,410
-------------------------------------------------------------------------------------------------------------- --------------
1,134,268 655,531 476,339 121,658 282,332 94,334 7,278 (1,329) 59,925,157
(554,425) (67,689) (94,458) (198,760) (39,666) (111,836) (1,082) -- (15,189,471)
(3,673,565) 1,315,983 (854,529) (640,897) (131,603) (31,123) 26,384 -- 281,111
-------------------------------------------------------------------------------------------------------------- --------------
(3,093,722) 1,903,825 (472,648) (717,999) 111,063 (48,625) 32,580 (1,329) 45,016,797
-------------------------------------------------------------------------------------------------------------- --------------
(2,737,694) 3,496,460 63,178 (971,920) 1,231,743 178,829 30,576 (1,329) 131,485,207
-------------------------------------------------------------------------------------------------------------- --------------
8,114,802 901,098 1,741,043 3,265,261 1,111,686 1,230,382 35,265 1,420 218,654,632
-------------------------------------------------------------------------------------------------------------- --------------
$ 5,377,108 $ 4,397,558 $ 1,804,221 $ 2,293,341 $ 2,343,429 $ 1,409,211 $ 65,841 $ 91 $ 350,139,839
============================================================================================================== ==============
</TABLE>
The accompanying notes are an integral part of these financial statements.
11
<PAGE>
CONSECO VARIABLE ANNUITY ACCOUNT E
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:
<PAGE>
Dividends from investments in portfolio shares......... $ 374,254 $ 129,677 $ 129,887 $ 673,096 $ 1,070
-----------------------------------------------------------------------------------------------------------------------------------
Expenses:
Mortality and expense risk fees........................ 33,919 40,525 19,951 68,876 922
Administrative fees.................................... 4,070 4,863 2,394 8,265 111
-----------------------------------------------------------------------------------------------------------------------------------
Total expenses....................................... 37,989 45,388 22,345 77,141 1,033
-----------------------------------------------------------------------------------------------------------------------------------
Net investment income (loss) .................... 336,265 84,289 107,542 595,955 37
-----------------------------------------------------------------------------------------------------------------------------------
Net realized gains (losses) and unrealized appreciation (depreciation) of
investments:
Net realized gains (losses) on sales of investments
in portfolio shares ............................... 8,941 374,595 (10,849) 363,207 (4,106)
Net change in unrealized appreciation (depreciation)
of investments in portfolio shares ................ 676,695 1,030,800 313,657 (112,117) 26,730
-----------------------------------------------------------------------------------------------------------------------------------
Net gain (loss) on investments
in portfolio shares ........................... 685,636 1,405,395 302,808 251,090 22,624
-----------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets
from operations ............................. $ 1,021,901 $ 1,489,684 $ 410,350 $ 847,045 $ 22,661
===================================================================================================================================
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1998
===================================================================================================================================
AMERICAN
CENTURY
VARIABLE
THE ALGER AMERICAN FUNDS PORTFOLIOS
--------------------------------------------------------- ----------
LEVERAGED SMALL INCOME AND
GROWTH ALL CAP MIDCAP CAPITALIZATION GROWTH
===================================================================================================================================
Changes from operations:
Net investment income (loss) .......................... $ 336,265 $ 84,289 $ 107,542 $ 595,955 $ 37
Net realized gains (losses) on sales of investments
in portfolio shares ................................. 8,941 374,595 (10,849) 363,207 (4,106)
Net change in unrealized appreciation (depreciation)
of investments in portfolio shares .................. 676,695 1,030,800 313,657 (112,117) 26,730
-----------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets
from operations ................................. 1,021,901 1,489,684 410,350 847,045 22,661
-----------------------------------------------------------------------------------------------------------------------------------
<PAGE>
Changes from contract owners' transactions:
Net contract purchase payments ........................ 2,215,629 1,041,432 1,080,010 1,987,015 201,735
Contract redemptions .................................. (53,824) (105,224) (28,677) (175,370) (1,637)
Net transfers ......................................... 863,424 247,311 248,802 (2,228,408) 9,035
-----------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets
from contract owners' transactions ................ 3,025,229 1,183,519 1,300,135 (416,763) 209,133
-----------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets ...................... 4,047,130 2,673,203 1,710,485 430,282 231,794
-----------------------------------------------------------------------------------------------------------------------------------
Net assets, beginning of year ............................ 960,427 2,348,160 760,156 5,485,527 --
-----------------------------------------------------------------------------------------------------------------------------------
Net assets, end of year .......................... $ 5,007,557 $ 5,021,363 $ 2,470,641 $ 5,915,809 $ 231,794
===================================================================================================================================
The accompanying notes are an integral part of these financial statements.
</TABLE>
12
<PAGE>
<TABLE>
<CAPTION>
====================================================================================================================================
AMERICAN CENTURY
VARIABLE PORTFOLIOS
(CONTINUED) BERGER INSTITUTIONAL PRODUCTS TRUST CONSECO SERIES TRUST PORTFOLIOS
---------------------------- -------------------------------------------------------- ------------------------------------------
GROWTH AND SMALL BIAM FIXED
INTERNATIONAL VALUE 100 INCOME COMPANY INTERNATIONAL BALANCED EQUITY INCOME
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$ 27,110 $ 92,413 $ 4,392 $ 43,198 $ 435 $ 32,039 $ 1,230,591 $ 1,912,300 $ 389,710
-----------------------------------------------------------------------------------------------------------------------------------
11,080 27,348 18,963 54,118 8,690 27,185 226,010 316,150 71,545
1,330 3,282 2,276 6,494 1,043 3,262 27,121 37,938 8,585
-----------------------------------------------------------------------------------------------------------------------------------
12,410 30,630 21,239 60,612 9,733 30,447 253,131 354,088 80,130
-----------------------------------------------------------------------------------------------------------------------------------
14,700 61,783 (16,847) (17,414) (9,298) 1,592 977,460 1,558,212 309,580
-----------------------------------------------------------------------------------------------------------------------------------
14,441 (10,313) 60,729 102,712 (33,023) 2,777 25,118 (42,192) 70,842
42,844 (53,898) 126,081 741,672 (46,639) 284,596 35,650 1,669,037 (125,689)
-----------------------------------------------------------------------------------------------------------------------------------
<PAGE>
57,285 (64,211) 186,810 844,384 (79,662) 287,373 60,768 1,626,845 (54,847)
-----------------------------------------------------------------------------------------------------------------------------------
$ 71,985 $ (2,428) $ 169,963 $ 826,970 $ (88,960) $ 288,965 $ 1,038,228 $ 3,185,057 $ 254,733
====================================================================================================================================
====================================================================================================================================
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>
$ 14,700 $ 61,783 $ (16,847) $ (17,414) $ (9,298) $ 1,592 $ 977,460 $ 1,558,212 $ 309,580
14,441 (10,313) 60,729 102,712 (33,023) 2,777 25,118 (42,192) 70,842
42,844 (53,898) 126,081 741,672 (46,639) 284,596 35,650 1,669,037 (125,689)
-----------------------------------------------------------------------------------------------------------------------------------
71,985 (2,428) 169,963 826,970 (88,960) 288,965 1,038,228 3,185,057 254,733
-----------------------------------------------------------------------------------------------------------------------------------
812,918 1,994,912 909,579 1,791,325 793,463 61,604 7,357,525 10,463,939 3,411,455
(11,147) (31,566) (22,486) (258,723) (12,235) (908) (578,798) (741,888) (324,089)
361,982 937,413 150,316 3,090,981 143,546 (12,544) 3,656,283 (1,397,363) (2,737,088)
-----------------------------------------------------------------------------------------------------------------------------------
1,163,753 2,900,759 1,037,409 4,623,583 924,774 48,152 10,435,010 8,324,688 350,278
-----------------------------------------------------------------------------------------------------------------------------------
1,235,738 2,898,331 1,207,372 5,450,553 835,814 337,117 11,473,238 11,509,745 605,011
-----------------------------------------------------------------------------------------------------------------------------------
178,556 509,877 724,038 1,091,492 220,861 1,968,111 11,327,800 19,302,079 5,318,446
-----------------------------------------------------------------------------------------------------------------------------------
$ 1,414,294 $ 3,408,208 $ 1,931,410 $ 6,542,045 $1,056,675 $ 2,305,228 $ 22,801,038 $ 30,811,824 $ 5,923,457
====================================================================================================================================
</TABLE>
13
<PAGE>
CONSECO VARIABLE ANNUITY ACCOUNT E
STATEMENTS OF OPERATIONS - CONTINUED
FOR THE YEAR ENDED DECEMBER 31, 1998
<TABLE>
<CAPTION>
====================================================================================================================================
<PAGE>
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......... $ 78,409 $ 269,620 $ 244,730 $ 398,526 $ 2,600
-----------------------------------------------------------------------------------------------------------------------------------
Expenses:
Mortality and expense risk fees........................ 16,251 66,728 51,873 306,045 1,229
Administrative fees.................................... 1,950 8,007 6,225 36,725 147
-----------------------------------------------------------------------------------------------------------------------------------
Total expenses....................................... 18,201 74,735 58,098 342,770 1,376
-----------------------------------------------------------------------------------------------------------------------------------
Net investment income (loss)..................... 60,208 194,885 186,632 55,756 1,224
-----------------------------------------------------------------------------------------------------------------------------------
Net realized gains (losses) and unrealized appreciation (depreciation) of
investments:
Net realized gains (losses) on sales of investments
in portfolio shares ................................ 6,375 -- 185,607 962,916 36,116
Net change in unrealized appreciation (depreciation)
of investments in portfolio shares.................. 1,874 -- 633,149 4,438,654 38,277
-----------------------------------------------------------------------------------------------------------------------------------
Net gain (loss) on investments
in portfolio shares ........................... 8,249 -- 818,756 5,401,570 74,393
-----------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets
from operations ............................. $ 68,457 $ 194,885 $ 1,005,388 $ 5,457,326 $ 75,617
====================================================================================================================================
STATEMENTS OF CHANGES IN NET ASSETS - CONTINUED
FOR THE YEAR ENDED DECEMBER 31, 1998
====================================================================================================================================
CONSECO SERIES DREYFUS
TRUST PORTFOLIOS VARIABLE
(CONTINUED) INVESTMENT
--------------------------- ----------
DREYFUS
SOCIALLY DREYFUS
GOVERNMENT MONEY RESPONSIBLE STOCK DISCIPLINED
SECURITIES MARKET GROWTH INDEX STOCK
<PAGE>
====================================================================================================================================
Changes from operations:
Net investment income (loss) .......................... $ 60,208 $ 194,885 $ 186,632 $ 55,756 $ 1,224
Net realized gains (losses) on sales of investments
in portfolio shares ................................. 6,375 -- 185,607 962,916 36,116
Net change in unrealized appreciation (depreciation)
of investments in portfolio shares .................. 1,874 -- 633,149 4,438,654 38,277
-----------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets
from operations ................................. 68,457 194,885 1,005,388 5,457,326 75,617
------------------------------------------------------------------------------------------------------------------------------------
Changes from contract owners' transactions:
Net contract purchase payments ........................ 1,230,619 5,610,327 2,915,040 11,843,387 78,723
Contract redemptions .................................. (20,365) (635,311) (68,419) (690,753) (4,197)
Net transfers ......................................... 312,083 (1,673,324) 529,759 (901,334) 143,536
------------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets from contract owners'
transactions .................................... 1,522,337 3,301,692 3,376,380 10,251,300 218,062
------------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets .................... 1,590,794 3,496,577 4,381,768 15,708,626 293,679
------------------------------------------------------------------------------------------------------------------------------------
Net assets, beginning of year ............................ 443,047 3,540,038 2,125,697 16,292,345 --
------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of year ....................... $ 2,033,841 $ 7,036,615 $ 6,507,465 $ 32,000,971 $ 293,679
====================================================================================================================================
</TABLE>
The accompanying notes are an integral part of these financial statements.
14
<PAGE>
<TABLE>
<CAPTION>
====================================================================================================================================
DREYFUS
VARIABLE
INVESTMENT
(CONTINUED) FEDERATED INSURANCE SERIES FUNDS INVESCO VARIABLE INV. FUNDS JANUS ASPEN SERIES PORTFOLIOS
---------- ----------------------------------------- --------------------------- -------------------------------------------
INTERNATIONAL HIGH INCOME INTERNATIONAL EQUITY AGGRESSIVE WORLDWIDE
VALUE BOND II EQUITY II UTILITY II INCOME HIGH YIELD GROWTH GROWTH GROWTH
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$ 3,163 $ 112,989 $ 570 $ 78,210 $ 7,194 $ 14,716 $ -- $ 590,460 $ 848,719
-----------------------------------------------------------------------------------------------------------------------------------
140 61,051 18,837 22,948 604 699 43,724 122,807 277,413
<PAGE>
17 7,326 2,260 2,754 73 84 5,247 14,737 33,290
-----------------------------------------------------------------------------------------------------------------------------------
157 68,377 21,097 25,702 677 783 48,971 137,544 310,703
-----------------------------------------------------------------------------------------------------------------------------------
3,006 44,612 (20,527) 52,508 6,517 13,933 (48,971) 452,916 538,016
-----------------------------------------------------------------------------------------------------------------------------------
(15) 83,981 66,748 78,346 25 (13,130) 69,888 1,278,856 1,098,639
(3,529) (117,533) (73,328) 125,778 4,411 (11,944) 1,055,063 1,296,335 3,129,436
-----------------------------------------------------------------------------------------------------------------------------------
(3,544) (33,552) (6,580) 204,124 4,436 (25,074) 1,124,951 2,575,191 4,228,075
-----------------------------------------------------------------------------------------------------------------------------------
$ (538) $ 11,060 $ (27,107) $ 256,632 $ 10,953 $ (11,141) $ 1,075,980 $ 3,028,107 $ 4,766,091
====================================================================================================================================
====================================================================================================================================
DREYFUS
VARIABLE
INVESTMENT
(CONTINUED) FEDERATED INSURANCE SERIES FUNDS INVESCO VARIABLE INV. FUNDS JANUS ASPEN SERIES PORTFOLIOS
---------- ----------------------------------------- --------------------------- -------------------------------------------
INTERNATIONAL HIGH INCOME INTERNATIONAL EQUITY AGGRESSIVE WORLDWIDE
VALUE BOND II EQUITY II UTILITY II INCOME HIGH YIELD GROWTH GROWTH GROWTH
====================================================================================================================================
$ 3,006 $ 44,612 $ (20,527) $ 52,508 $ 6,517 $ 13,933 $ (48,971) $ 452,916 $ 538,016
(15) 83,981 66,748 78,346 25 (13,130) 69,888 1,278,856 1,098,639
(3,529) (117,533) (73,328) 125,778 4,411 (11,944) 1,055,063 1,296,335 3,129,436
-----------------------------------------------------------------------------------------------------------------------------------
(538) 11,060 (27,107) 256,632 10,953 (11,141) 1,075,980 3,028,107 4,766,091
-----------------------------------------------------------------------------------------------------------------------------------
45,401 2,790,736 436,482 1,356,794 118,885 214,857 1,160,560 4,424,471 10,235,818
(15) (315,350) (54,450) (41,667) (935) (460) (179,148) (305,746) (602,821)
-- 1,339,407 1,043,767 773,434 16,782 (61,289) 109,728 (3,994,752) (2,066,063)
-----------------------------------------------------------------------------------------------------------------------------------
45,386 3,814,793 1,425,799 2,088,561 134,732 153,108 1,091,140 123,973 7,566,934
-----------------------------------------------------------------------------------------------------------------------------------
44,848 3,825,853 1,398,692 2,345,193 145,685 141,967 2,167,120 3,152,080 12,333,025
-----------------------------------------------------------------------------------------------------------------------------------
-- 2,948,127 392,160 1,041,698 -- -- 2,796,074 8,517,407 15,285,524
-----------------------------------------------------------------------------------------------------------------------------------
$ 44,848 $ 6,773,980 $ 1,790,852 $ 3,386,891 $ 145,685 $ 141,967 $ 4,963,194 $ 11,669,487 $ 27,618,549
====================================================================================================================================
<PAGE>
</TABLE>
15
<PAGE>
CONSECO VARIABLE ANNUITY ACCOUNT E
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......... $ 4,020 $ 20 $ 19,184 $ 13,648 $ 2,889
-----------------------------------------------------------------------------------------------------------------------------------
Expenses:
Mortality and expense risk fees........................ 2,407 332 1,171 939 6,711
Administrative fees.................................... 289 40 140 113 805
-----------------------------------------------------------------------------------------------------------------------------------
Total expenses....................................... 2,696 372 1,311 1,052 7,516
-----------------------------------------------------------------------------------------------------------------------------------
Net investment income (loss) .................... 1,324 (352) 17,873 12,596 (4,627)
-----------------------------------------------------------------------------------------------------------------------------------
Net realized gains (losses) and unrealized appreciation (depreciation) of
investments:
Net realized gains (losses) on sales of investments
in portfolio shares ................................ 30 (183) (1,465) 26,752 514
Net change in unrealized appreciation (depreciation)
of investments in portfolio shares ................. 84,696 4,785 7,130 12,525 16,409
-----------------------------------------------------------------------------------------------------------------------------------
Net gain (loss) on investments
in portfolio shares ............................ 84,726 4,602 5,665 39,277 16,923
-----------------------------------------------------------------------------------------------------------------------------------
<PAGE>
Net increase (decrease) in net assets
from operations ............................ $ 86,050 $ 4,250 $ 23,538 $ 51,873 $ 12,296
====================================================================================================================================
STATEMENTS OF CHANGES IN NET ASSETS - CONTINUED
FOR THE YEAR ENDED DECEMBER 31, 1998
====================================================================================================================================
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
====================================================================================================================================
Changes from operations:
Net investment income (loss) .......................... $ 1,324 $ (352) $ 17,873 $ 12,596 $ (4,627)
Net realized gains (losses) on sales of investments
in portfolio shares ................................. 30 (183) (1,465) 26,752 514
Net change in unrealized appreciation (depreciation) of
investments in portfolio shares ..................... 84,696 4,785 7,130 12,525 16,409
-----------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets
from operations ................................. 86,050 4,250 23,538 51,873 12,296
-----------------------------------------------------------------------------------------------------------------------------------
Changes from contract owners' transactions:
Net contract purchase payments......................... 34,427 41,117 298,670 34,614 681,124
Contract redemptions................................... (712) (321) (1,230) (3,248) (14,874)
Net transfers.......................................... 1,069,417 103,918 (6,544) 112,670 451,102
-----------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets
from contract owners' transactions .............. 1,103,132 144,714 290,896 144,036 1,117,352
-----------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets.......... 1,189,182 148,964 314,434 195,909 1,129,648
-----------------------------------------------------------------------------------------------------------------------------------
Net assets, beginning of year............................. -- -- -- -- 26,171
-----------------------------------------------------------------------------------------------------------------------------------
Net assets, end of year........................ $ 1,189,182 $ 148,964 $ 314,434 $ 195,909 $ 1,155,819
====================================================================================================================================
<PAGE>
The accompanying notes are an integral part of these financial statements.
</TABLE>
16
<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>
$ 227,138 $ 3 $ 61,848 $ 33,029 $ 31,237 $ 666,685 $ -- $ -- $ 8,749,779
---------------------------------------------------------------------------------------------------------------- -------------
74,561 6,683 16,228 42,545 17,529 34,829 233 -- 2,119,799
8,947 802 1,947 5,105 2,104 4,180 28 -- 254,376
---------------------------------------------------------------------------------------------------------------- -------------
83,508 7,485 18,175 47,650 19,633 39,009 261 -- 2,374,175
---------------------------------------------------------------------------------------------------------------- -------------
143,630 (7,482) 43,673 (14,621) 11,604 627,676 (261) -- 6,375,604
---------------------------------------------------------------------------------------------------------------- -------------
(245,137) 10,860 (66,197) 61,830 (528,657) (1,068,009) (3,058) -- 2,964,511
(324,545) 130,770 11,247 305,864 40,753 (567,677) (346) 17 14,847,690
---------------------------------------------------------------------------------------------------------------- -------------
(569,682) 141,630 (54,950) 367,694 (487,904) (1,635,686) (3,404) 17 17,812,201
---------------------------------------------------------------------------------------------------------------- -------------
$ (426,052) $ 134,148 $ (11,277) $ 353,073 $ (476,300) $ (1,008,010) $ (3,665) $ 17 $ 24,187,805
================================================================================================================ =============
<PAGE>
====================================================================================================================================
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
================================================================================================================ ==============
<C> <C> <C> <C> <C> <C> <C> <C> <C>
$ 143,630 $ (7,482) $ 43,673 $ (14,621) $ 11,604 $ 627,676 $ (261) $ -- $ 6,375,604
(245,137) 10,860 (66,197) 61,830 (528,657) (1,068,009) (3,058) -- 2,964,511
(324,545) 130,770 11,247 305,864 40,753 (567,677) (346) 17 14,847,690
---------------------------------------------------------------------------------------------------------------- -------------
(426,052) 134,148 (11,277) 353,073 (476,300) (1,008,010) (3,665) 17 24,187,805
---------------------------------------------------------------------------------------------------------------- -------------
4,153,659 712,421 764,227 623,450 866,750 573,578 58,434 (23,550) 85,403,562
(149,179) (6,257) (22,064) (343,267) (62,766) (294,353) -- -- (6,164,480)
3,295,749 (40,591) 704,394 (830,498) (1,132,261) (2,574,019) (19,504) 24,730 63,987
---------------------------------------------------------------------------------------------------------------- -------------
7,300,229 665,573 1,446,557 (550,315) (328,277) (2,294,794) 38,930 1,180 79,303,069
---------------------------------------------------------------------------------------------------------------- -------------
6,874,177 799,721 1,435,280 (197,242) (804,577) (3,302,804) 35,265 1,197 103,490,874
---------------------------------------------------------------------------------------------------------------- -------------
1,240,625 101,377 305,763 3,462,503 1,916,263 4,533,186 -- 223 115,163,758
---------------------------------------------------------------------------------------------------------------- -------------
$ 8,114,802 $ 901,098 $ 1,741,043 $3,265,261 $ 1,111,686 $ 1,230,382 $ 35,265 $ 1,420 $ 218,654,632
================================================================================================================ ==============
</TABLE>
17
<PAGE>
CONSECO VARIABLE ANNUITY ACCOUNT E
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 1998
<PAGE>
================================================================================
(1) GENERAL
Conseco Variable Annuity Account E ("Account E") is registered under the
Investment Company Act of 1940, as amended, as a unit investment trust. Account
E was established on November 12, 1993, and commenced operations on July 25,
1994, as a segregated investment account for individual and group variable
annuity contracts which are registered under the Securities Act of 1933. The
operations of Account E 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.
Prior to June 1, 1995, Account E invested solely in shares of the portfolios
of the Conseco Series Trust. Currently, the following investment options are
available (effective date in parenthesis):
THEALGER AMERICAN FUND Growth Portfolio (June 1, 1996) Leveraged AllCap
Portfolio (June 1, 1995) MidCap Growth Portfolio (June 1, 1996)
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
100 Fund (June 1, 1996)
Growth and Income Fund (June 1, 1996)
Small Company Growth Fund (June 1, 1996)
BIAM International Fund (May 1, 1997)
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
<PAGE>
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.
Mid Cap Growth Fund II (May 1, 1997)
STRONG OPPORTUNITY FUND II (MAY 1, 1997)
VAN ECK WORLDWIDE INSURANCE TRUST
Worldwide Hard Assets Fund (formerly Gold and Natural
Resources Fund) (June 1,1995)
Worldwide Bond Fund (June 1, 1995)
Worldwide Emerging Markets Fund (June 1, 1996)
Worldwide Real Estate Fund (May 1, 1998)
Van Eck 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 remaining units in the terminated fund are owned by a
contract owner who has not transferred the funds.
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 E 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 E 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 E 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 E and are not taxable
<PAGE>
until received by the contract owner or beneficiary in the form of annuity
payments or other distributions.
18
<PAGE>
CONSECO VARIABLE ANNUITY ACCOUNT E
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 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
--------------------------------------------------------------------------------
Conseco Series Trust:
Money Market Portfolio................................ 1.000834
Federated Insurance Series:
High Income Bond Fund II.............................. 0.956791
Neuberger Berman Advisers Management Trust:
Partners Portfolio.................................... 1.013185
--------------------------------------------------------------------------------
(3) PURCHASES AND SALES OF INVESTMENTS IN PORTFOLIO SHARES
The aggregate cost of purchases of investments in portfolio shares was
$139,192,174 and $137,408,045 for the years ended December 31, 1999 and 1998,
respectively. The aggregate proceeds from sales of investments in portfolio
shares were $74,610,705 and $51,611,210 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
<PAGE>
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 E a
fee, which is equal on an annual basis to 1.25 percent of the daily value of the
total investments of Account E, for assuming the mortality and expense risks.
These fees were $3,319,669 and $2,119,799 for the years ended December 31, 1999
and 1998, respectively.
Pursuant to an agreement between Account E and the Company (which may be
terminated by the Company at any time), the Company provides sales and
administrative services to Account E, as well as a minimum death benefit prior
to retirement for the contracts. The Company may deduct a percentage of amounts
surrendered to cover sales expenses. The percentage varies up to 9.00 percent
based upon the number of years the contract has been held. In addition, the
Company deducts units from individual contracts annually and upon full surrender
to cover an administrative fee of $30 unless the value of the contract is
$25,000 or greater. This fee is recorded as a redemption in the accompanying
Statements of Changes in Net Assets. Sales and administrative charges were
$1,055,120 and $489,585 for the years ended December 31, 1999 and 1998,
respectively.
The Company also deducts daily from Account E a fee, which is equal on an
annual basis to 0.15 percent of the daily value of the total investments of
Account E, for administrative expenses. These expenses were $398,359 and
$254,376 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 ................................ $227,818,892
Undistributed net investment income .......................... 34,190,128
Undistributed net realized gains on sales of investments...... 12,492,767
Net unrealized appreciation of investments ................... 75,638,052
--------------------------------------------------------------------------------
Net assets ................................................. $350,139,839
================================================================================
19
<PAGE>
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
================================================================================
TO THE BOARD OF DIRECTORS OF CONSECO VARIABLE
INSURANCE COMPANY AND CONTRACT OWNERS OF
CONSECO VARIABLE ANNUITY ACCOUNT E
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 E (the Account) at December 31, 1999, and the results of its operations
and the changes for 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.
/s/ PricewaterhouseCoopers
--------------------------
Indianapolis, Indiana
February 10, 2000
20
<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
--------------------------------
PricewaterhouseCoopers LLP
April 13, 2000
F-1
<PAGE>
<TABLE>
<CAPTION>
CONSECO VARIABLE INSURANCE COMPANY
BALANCE SHEET
December 31, 1999 and 1998
(Dollars in millions)
ASSETS
1999 1998
---- ----
<S> <C> <C>
Investments:
Actively managed fixed maturities at fair value (amortized cost:
1999 - $1,491.8; 1998 - $1,520.5)............................................... $1,398.7 $1,524.1
Equity securities at fair value (cost: 1999 - $47.8 million; 1998 - $46.0 million). 49.8 45.7
Mortgage loans..................................................................... 108.0 110.2
Policy loans....................................................................... 75.5 79.6
Other invested assets ............................................................. 50.8 120.3
-------- --------
Total investments............................................................ 1,682.8 1,879.9
Cash and cash equivalents.............................................................. 81.5 48.4
Accrued investment income.............................................................. 35.6 30.5
Cost of policies purchased............................................................. 131.6 98.0
Cost of policies produced.............................................................. 147.6 82.5
Reinsurance receivables................................................................ 26.4 22.2
Goodwill............................................................................... 45.3 46.7
Assets held in separate accounts....................................................... 1,457.0 696.4
Other assets........................................................................... 6.0 7.1
-------- --------
Total assets................................................................. $3,613.8 $2,911.7
======== ========
</TABLE>
(continued on next page)
The accompanying notes are an
integral part of the financial
statements.
F-2
<PAGE>
<TABLE>
<CAPTION>
CONSECO VARIABLE INSURANCE COMPANY
BALANCE SHEET (Continued)
December 31, 1999 and 1998
(Dollars in millions, except per share amount)
LIABILITIES AND SHAREHOLDER'S EQUITY
1999 1998
---- ----
<S> <C> <C>
Liabilities:
Insurance liabilities:
Interest-sensitive products..................................................... $1,289.2 $1,365.2
Traditional products............................................................ 242.8 246.2
Claims payable and other policyholder funds..................................... 64.1 62.6
Liabilities related to separate accounts........................................ 1,457.0 696.4
Income tax liabilities............................................................. 33.4 37.5
Investment borrowings.............................................................. 135.1 65.7
Other liabilities.................................................................. 16.5 33.0
-------- --------
Total liabilities.......................................................... 3,238.1 2,506.6
-------- --------
Shareholder's equity:
Common stock and additional paid-in capital (par value $4.80 per share, 1,065,000
shares authorized, 1,043,565 shares issued and outstanding).................... 380.8 380.8
Accumulated other comprehensive loss............................................... (28.4) (.8)
Retained earnings.................................................................. 23.3 25.1
-------- --------
Total shareholder's equity................................................. 375.7 405.1
-------- --------
Total liabilities and shareholder's equity................................. $3,613.8 $2,911.7
======== ========
</TABLE>
The accompanying notes are an
integral part of the financial
statements.
F-3
<PAGE>
<TABLE>
<CAPTION>
CONSECO VARIABLE INSURANCE COMPANY
STATEMENT OF OPERATIONS
for the years ended December 31, 1999, 1998 and 1997
(Dollars in millions)
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Revenues:
Insurance policy income.......................................... $ 72.1 $ 73.6 $ 75.7
Net investment income............................................ 297.6 198.0 222.6
Net gains (losses) from sale of investments...................... (10.0) 18.5 13.3
------ ------ ------
Total revenues............................................. 359.7 290.1 311.6
------ ------ ------
Benefits and expenses:
Insurance policy benefits........................................ 266.8 170.6 191.0
Amortization..................................................... 13.8 33.6 27.1
Other operating costs and expenses............................... 40.3 38.7 32.2
------ ------ ------
Total benefits and expenses................................ 320.9 242.9 250.3
------ ------ ------
Income before income taxes................................. 38.8 47.2 61.3
Income tax expense................................................... 13.6 16.6 22.1
------ ------ ------
Net income................................................. $ 25.2 $ 30.6 $ 39.2
====== ====== ======
</TABLE>
The accompanying notes are an
integral part of the financial
statements.
F-4
<PAGE>
<TABLE>
<CAPTION>
CONSECO VARIABLE INSURANCE COMPANY
STATEMENT OF SHAREHOLDER'S EQUITY
for the years ended December 31, 1999, 1998 and 1997
(Dollars in millions)
Common stock Accumulated other
and additional comprehensive Retained
Total paid-in capital income (loss) earnings
----- --------------- ------------- --------
<S> <C> <C> <C> <C>
Balance, December 31, 1996................................. $396.9 $380.8 $ (4.6) $ 20.7
Comprehensive income, net of tax:
Net income............................................ 39.2 - - 39.2
Change in unrealized appreciation (depreciation) of
securities (net of applicable income tax expense
of $7.2)........................................... 13.3 - 13.3 -
------
Total comprehensive income........................ 52.5 - - -
Dividends on common stock............................... (32.5) - - (32.5)
------ ------ ------ ------
Balance, December 31, 1997................................. 416.9 380.8 8.7 27.4
Comprehensive income, net of tax:
Net income............................................ 30.6 - - 30.6
Change in unrealized appreciation (depreciation) of
securities (net of applicable income tax benefit
of $5.1)........................................... (9.5) - (9.5) -
------
Total comprehensive income........................ 21.1
Dividends on common stock............................... (32.9) - - (32.9)
------ ------ ------ ------
Balance, December 31, 1998................................. 405.1 380.8 (.8) 25.1
Comprehensive loss, net of tax:
Net income.............................................. 25.2 - - 25.2
Change in unrealized depreciation of securities (net
of applicable income tax benefit of $15.7 million).... (27.6) - (27.6) -
------
Total comprehensive loss.......................... (2.4)
Dividends on common stock............................... (27.0) - - (27.0)
------ ------ ------ ------
Balance, December 31, 1999................................. $375.7 $380.8 $(28.4) $ 23.3
====== ====== ====== ======
</TABLE>
The accompanying notes are an
integral part of the financial
statements.
F-5
<PAGE>
<TABLE>
<CAPTION>
CONSECO VARIABLE INSURANCE COMPANY
STATEMENT OF CASH FLOWS
for the years ended December 31, 1999, 1998 and 1997
(Dollars in millions)
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Cash flows from operating activities:
Net income........................................................ $ 25.2 $ 30.6 $ 39.2
Adjustments to reconcile net income to net
cash provided by operating activities:
Amortization................................................ 13.8 43.0 27.1
Income taxes................................................ 11.4 (1.2) 6.7
Insurance liabilities....................................... 162.6 120.0 95.2
Accrual and amortization of investment income............... (11.4) 1.6 .3
Deferral of cost of policies produced....................... (62.7) (35.3) (31.8)
Net (gains) losses from sale of investments................. 10.0 (18.5) (13.3)
Other....................................................... .7 (38.3) (4.6)
--------- --------- -------
Net cash provided by operating activities................... 149.6 101.9 118.8
--------- --------- -------
Cash flows from investing activities:
Sales of investments.............................................. 904.8 1,185.0 755.2
Maturities and redemptions........................................ 109.0 145.5 150.4
Purchases of investments.......................................... (1,502.0) (1,420.7) (923.5)
--------- --------- -------
Net cash used by investing activities....................... (488.2) (90.2) (17.9)
--------- --------- -------
Cash flows from financing activities:
Deposits to insurance liabilities................................. 654.1 400.4 255.9
Investment borrowings............................................. 69.4 4.7 12.6
Withdrawals from insurance liabilities............................ (324.8) (385.0) (302.2)
Dividends paid on common stock.................................... (27.0) (32.9) (32.5)
--------- --------- -------
Net cash provided (used) by financing activities............ 371.7 (12.8) (66.2)
--------- --------- -------
Net increase (decrease) in cash and cash equivalents........ 33.1 (1.1) 34.7
Cash and cash equivalents, beginning of year......................... 48.4 49.5 14.8
--------- --------- -------
Cash and cash equivalents, end of year............................... $ 81.5 $ 48.4 $ 49.5
========= ========= =======
</TABLE>
The accompanying notes are an
integral part of the financial
statements.
F-6
<PAGE>
CONSECO VARIABLE INSURANCE COMPANY
Notes to Financial Statements
------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
Conseco Variable Insurance Company ("we" or the "Company") markets
tax-qualified annuities and certain employee benefit-related insurance products
through professional independent agents. Prior to its name change in October
1998, the Company was named Great American Reserve Insurance Company. Since
August 1995, the Company has been a wholly owned subsidiary of Conseco, Inc.
("Conseco"), a financial services holding company operating throughout the
United States. Conseco's life insurance subsidiaries develop, market and
administer supplemental health insurance, annuity, individual life insurance,
individual and group major medical insurance and other insurance products.
Conseco's finance subsidiaries originate, purchase, sell and service consumer
and commercial finance loans. On March 31, 2000, Conseco announced its plan to
explore the sale of its finance subsidiaries and its hiring of Lehman Brothers
to assist in the planned sale.
The following summary explains the accounting policies we use to arrive at
the more significant numbers in our financial statements. We prepare our
financial statements in accordance with generally accepted accounting principles
("GAAP"). We follow the accounting standards established by the Financial
Accounting Standards Board, the American Institute of Certified Public
Accountants and the Securities and Exchange Commission. We reclassified certain
amounts in our 1998 and 1997 financial statements and notes to conform with the
1999 presentation.
Investments
Fixed maturities are securities that mature more than one year after
issuance and include bonds, notes receivable and redeemable preferred stock.
Fixed maturities that we may sell prior to maturity are classified as actively
managed and are carried at estimated fair value, with any unrealized gain or
loss, net of tax and related adjustments, recorded as a component of
shareholder's equity. Fixed maturity securities that we intend to sell in the
near term are classified as trading and included in other invested assets. We
include any unrealized gain or loss on trading securities in net investment
gains.
Equity securities include investments in common stocks and non-redeemable
preferred stock. We carry these investments at estimated fair value. We record
any unrealized gain or loss, net of tax and related adjustments, as a component
of shareholder's equity.
Mortgage loans held in our investment portfolio are carried at amortized
unpaid balances, net of provisions for estimated losses.
Policy loans are stated at their current unpaid principal balances.
Other invested assets include trading securities and certain
non-traditional investments. Non-traditional investments include investments in
certain limited partnerships, mineral rights and promissory notes; we account
for them using either the cost method, or for investments in partnerships over
whose operations the Company exercises significant influence, the equity method.
We defer any fees received or costs incurred when we originate investments
(primarily mortgage loans). We amortize fees, costs, discounts and premiums as
yield adjustments over the contractual lives of the investments. We consider
anticipated prepayments on mortgage-backed securities in determining estimated
future yields on such securities.
When we sell a security (other than a trading security), we report the
difference between our sale proceeds and its amortized cost (determined based on
specific identification) as an investment gain or loss.
We regularly evaluate all of our investments based on current economic
conditions, credit loss experience and other investee-specific developments. If
there is a decline in a security's net realizable value that is other than
temporary, we treat it as a realized loss and reduce our cost basis of the
security to its estimated fair value.
F-7
<PAGE>
CONSECO VARIABLE INSURANCE COMPANY
Notes to Financial Statements
------------------------------
Cash and Cash Equivalents
Cash and cash equivalents include commercial paper, invested cash and other
investments purchased with maturities of less than three months. We carry them
at amortized cost, which approximates their estimated fair value.
Separate Accounts
Separate accounts are funds on which investment income and gains or losses
accrue directly to certain policyholders. The assets of these accounts are
legally segregated. They are not subject to the claims that may arise out of any
other business of the Company. We report separate account assets at market
value; the underlying investment risks are assumed by the contract holders. We
record the related liabilities at amounts equal to the market value of the
underlying assets. We record the fees earned for administrative and
contractholder services performed for the separate accounts in insurance policy
income.
Cost of Policies Produced
The costs that vary with, and are primarily related to, producing new
insurance business are referred to as cost of policies produced. We amortize
these costs using the interest rate credited to the underlying policy: (i) in
relation to the estimated gross profits for universal life-type and
investment-type products; or (ii) in relation to future anticipated premium
revenue for other products.
When we realize a gain or loss on investments backing our universal life or
investment-type products, we adjust the amortization to reflect the change in
estimated gross profits from the products due to the current realized gain or
loss and the effect of the event on future investment yields. We also adjust the
cost of policies produced for the change in amortization that would have been
recorded if actively managed fixed maturity securities had been sold at their
stated aggregate fair value and the proceeds reinvested at current yields. We
include the impact of this adjustment in accumulated other comprehensive income
(loss) within shareholder's equity.
Each year, we evaluate the recoverability of the unamortized balance of the
cost of policies produced. We consider estimated future gross profits or future
premiums, expected mortality or morbidity, interest earned and credited rates,
persistency and expenses in determining whether the balance is recoverable.
Cost of Policies Purchased
The cost assigned to the right to receive future cash flows from contracts
existing at the date of an acquisition is referred to as the cost of policies
purchased. The balance of this account is amortized, evaluated for recovery, and
adjusted for the impact of unrealized gains (losses) in the same manner as the
cost of policies produced described above.
The discount rate we use to determine the value of the cost of policies
purchased is the rate of return we need to earn in order to invest in the
business being acquired. In determining this required rate of return, we
consider many factors including: (i) the magnitude of the risks associated with
each of the actuarial assumptions used in determining expected future cash
flows; (ii) the cost of our capital required to fund the acquisition; (iii) the
likelihood of changes in projected future cash flows that might occur if there
are changes in insurance regulations and tax laws; (iv) the acquired company's
compatibility with other Company activities that may favorably affect future
cash flows; (v) the complexity of the acquired company; and (vi) recent prices
(i.e., discount rates used in determining valuations) paid by others to acquire
similar blocks of business.
Goodwill
Goodwill is the excess of the amount paid to acquire the Company over the
fair value of its net assets. Our analysis indicates that the anticipated
ongoing cash flows from the earnings of the Company extends significantly beyond
the maximum 40-year period allowed for goodwill amortization. Accordingly, we
amortize goodwill on the straight-line basis generally over a 40-year period. At
December 31, 1999, the total accumulated amortization of goodwill was $16.1
million. We continually
F-8
<PAGE>
CONSECO VARIABLE INSURANCE COMPANY
Notes to Financial Statements
------------------------------
monitor the value of our goodwill based on our estimates of future earnings. We
determine whether goodwill is fully recoverable from projected undiscounted net
cash flows from our earnings over the remaining amortization period. If we were
to determine that changes in such projected cash flows no longer support the
recoverability of goodwill over the remaining amortization period, we would
reduce its carrying value with a corresponding charge to expense or shorten the
amortization period (no such changes have occurred).
Recognition of Insurance Policy Income and Related Benefits and Expenses
on Insurance Contracts
Generally, we recognize insurance premiums for traditional life and
accident and health contracts as earned over the premium-paying periods. We
establish reserves for future benefits on a net-level premium method based upon
assumptions as to investment yields, mortality, morbidity, withdrawals and
dividends. We record premiums for universal life-type and investment-type
contracts that do not involve significant mortality or morbidity risk as
deposits to insurance liabilities. Revenues for these contracts consist of
mortality, morbidity, expense and surrender charges. We establish reserves for
the estimated present value of the remaining net costs of all reported and
unreported claims.
Reinsurance
In the normal course of business, we seek to limit our exposure to loss on
any single insured or to certain groups of policies by ceding reinsurance to
other insurance enterprises. We currently retain no more than $.5 million of
mortality risk on any one policy. We diversify the risk of reinsurance loss by
using a number of reinsurers that have strong claims-paying ratings. If any
reinsurer could not meet its obligations, the Company would assume the
liability. The likelihood of a material loss being incurred as the result of the
failure of one of our reinsurers is considered remote. The cost of reinsurance
is recognized over the life of the reinsured policies using assumptions
consistent with those used to account for the underlying policy. The cost of
reinsurance ceded totaled $23.1 million, $21.0 million and $24.2 million in
1999, 1998 and 1997, respectively. A receivable is recorded for the reinsured
portion of insurance policy benefits paid and liabilities for insurance
products. Reinsurance recoveries netted against insurance policy benefits
totaled $20.8 million, $21.8 million and $14.9 million in 1999, 1998 and 1997,
respectively.
Income Taxes
Our income tax expense includes deferred income taxes arising from
temporary differences between the tax and financial reporting bases of assets
and liabilities. In assessing the realization of deferred income tax assets, we
consider whether it is more likely than not that the deferred income tax assets
will be realized. The ultimate realization of deferred income tax assets depends
upon generating future taxable income during the periods in which temporary
differences become deductible. If future income is not generated as expected,
deferred income tax assets may need to be written off (no such write-offs have
occurred).
Investment Borrowings
As part of our investment strategy, we may enter into reverse repurchase
agreements and dollar-roll transactions to increase our investment return or to
improve our liquidity. We account for these transactions as collateral
borrowings, where the amount borrowed is equal to the sales price of the
underlying securities. Reverse repurchase agreements involve a sale of
securities and an agreement to repurchase the same securities at a later date at
an agreed-upon price. Dollar rolls are similar to reverse repurchase agreements
except that, with dollar rolls, the repurchase involves securities that are only
substantially the same as the securities sold. Such borrowings averaged $137.7
million during 1999 and $66.0 million during 1998. These borrowings were
collateralized by investment securities with fair values approximately equal to
the loan value. The weighted average interest rate on short-term collateralized
borrowings was 5.0 percent and 4.4 percent in 1999 and 1998, respectively. The
primary risk associated with short-term collateralized borrowings is that a
counterparty will be unable to perform under the terms of the contract. Our
exposure is limited to the excess of the net replacement cost of the securities
over the value of the short-term investments (such excess was not material at
December 31, 1999). We believe the counterparties to our reverse repurchase and
dollar-roll agreements are financially responsible and that the counterparty
risk is minimal.
F-9
<PAGE>
CONSECO VARIABLE INSURANCE COMPANY
Notes to Financial Statements
------------------------------
Use of Estimates
When we prepare financial statements in conformity with GAAP, we are
required to make estimates and assumptions that significantly affect various
reported amounts of assets and liabilities, and the disclosure of contingent
assets and liabilities at the date of the financial statements and revenues and
expenses during the reporting periods. For example, we use significant estimates
and assumptions in calculating values for the cost of policies produced, the
cost of policies purchased, goodwill, insurance liabilities, liabilities related
to litigation, guaranty fund assessment accruals and deferred income taxes. If
our future experience differs materially from these estimates and assumptions,
our financial statements could be affected.
Fair Values of Financial Instruments
We use the following methods and assumptions to determine the estimated
fair values of financial instruments:
Investment securities. For fixed maturity securities (including redeemable
preferred stocks) and for equity and trading securities, we use quotes from
independent pricing services, where available. For investment securities
for which such quotes are not available, we use values obtained from
broker-dealer market makers or by discounting expected future cash flows
using a current market rate appropriate for the yield, credit quality, and
(for fixed maturity securities) the maturity of the investment being
priced.
Cash and cash equivalents. The carrying amount for these instruments
approximates their estimated fair value.
Mortgage loans and policy loans. We discount future expected cash flows for
loans included in our investment portfolio based on interest rates
currently being offered for similar loans to borrowers with similar credit
ratings. We aggregate loans with similar characteristics in our
calculations.
Other invested assets. We use quoted market prices, where available. When
quotes are not available, we estimate the fair value based on: (i)
discounted future expected cash flows; or (ii) independent transactions
which establish a value for our investment. When we are unable to estimate
a fair value, we assume a market value equal to carrying value.
Insurance liabilities for interest-sensitive products. We discount future
expected cash flows based on interest rates currently being offered for
similar contracts with similar maturities.
Investment borrowings. Due to the short-term nature of these borrowings
(terms generally less than 30 days), estimated fair values are assumed to
approximate the carrying amount reported in the balance sheet.
Here are the estimated fair values of our financial instruments:
<TABLE>
<CAPTION>
1999 1998
--------------------------- ------------------------
Carrying Fair Carrying Fair
Amount Value Amount Value
------ ----- ------ -----
(Dollars in millions)
<S> <C> <C> <C> <C>
Financial assets:
Actively managed fixed maturities............................ $1,398.7 $1,398.7 $1,524.1 $1,524.1
Equity securities ........................................... 49.8 49.8 45.7 45.7
Mortgage loans............................................... 108.0 102.8 110.2 119.0
Policy loans................................................. 75.5 75.5 79.6 79.6
Other invested assets........................................ 50.8 50.8 120.3 120.3
Cash and cash equivalents.................................... 81.5 81.5 48.4 48.4
Financial liabilities:
Insurance liabilities for interest-sensitive products (1).... 1,289.2 1,289.2 1,365.2 1,365.2
Investment borrowings........................................ 135.1 135.1 65.7 65.7
F-10
<PAGE>
CONSECO VARIABLE INSURANCE COMPANY
Notes to Financial Statements
------------------------------
<FN>
(1) The estimated fair value of the liabilities for interest-sensitive
products was approximately equal to its carrying value at December 31,
1999 and 1998. This was because interest rates credited on the vast
majority of account balances approximate current rates paid on similar
products and because these rates are not generally guaranteed beyond
one year. We are not required to disclose fair values for insurance
liabilities, other than those for interest-sensitive products .
However, we take into consideration the estimated fair values of all
insurance liabilities in our overall management of interest rate risk.
We attempt to minimize exposure to changing interest rates by matching
investment maturities with amounts due under insurance contracts.
</FN>
</TABLE>
Recently Issued Accounting Standards
Statement of Financial Accounting Standards No. 133, "Accounting for
Derivative Instruments and Hedging Activities" ("SFAS 133"), as amended by
Statement of Financial Accounting Standards No. 137, "Deferral of the Effective
Date of FASB Statement No. 133" requires all derivative instruments to be
recorded on the balance sheet at estimated fair value. Changes in the fair value
of derivative instruments are to be recorded each period either in current
earnings or other comprehensive income, depending on whether a derivative is
designated as part of a hedge transaction and, if it is, on the type of hedge
transaction. SFAS 133 is required to be implemented in year 2001. We are
currently evaluating the impact of SFAS 133; at present, we do not believe it
will have a material effect on our consolidated financial position or results of
operations. Because of ongoing changes to implementation guidance, we do not
plan on adopting the new standard until the first quarter of 2001.
We implemented the Statement of Position 98-1, "Accounting for the Costs of
Computer Software Developed or Obtained for Internal Use" ("SOP 98-1") on
January 1, 1999. SOP 98-1 defines internal use software and when the costs
associated with internal use software should be capitalized. The implementation
of SOP 98-1 did not have a material effect on our consolidated financial
position or results of operations.
2. INVESTMENTS:
At December 31, 1999, the amortized cost and estimated fair value of
actively managed fixed maturities and equity securities were as follows:
<TABLE>
<CAPTION>
Gross Gross Estimated
Amortized unrealized unrealized fair
cost gains losses value
---- ----- ------ -----
(Dollars in millions)
<S> <C> <C> <C> <C>
Investment grade:
Corporate securities................................................ $ 840.6 $2.2 $59.3 $ 783.5
United States Treasury securities and obligations of
United States government corporations and agencies................ 15.5 .1 .7 14.9
States and political subdivisions................................... 11.7 - 1.1 10.6
Debt securities issued by foreign governments....................... 12.2 - 1.6 10.6
Mortgage-backed securities ......................................... 482.3 .2 22.7 459.8
Below-investment grade (primarily corporate securities)................ 129.5 2.4 12.6 119.3
-------- ---- ----- --------
Total actively managed fixed maturities........................... $1,491.8 $4.9 $98.0 $1,398.7
======== ==== ===== ========
Equity securities...................................................... $47.8 $3.9 $1.9 $49.8
===== ==== ==== =====
</TABLE>
F-11
<PAGE>
CONSECO VARIABLE INSURANCE COMPANY
Notes to Financial Statements
------------------------------
At December 31, 1998, the amortized cost and estimated fair value of
actively managed fixed maturities and equity securities were as follows:
<TABLE>
<CAPTION>
Gross Gross Estimated
Amortized unrealized unrealized fair
cost gains losses value
---- ----- ------ -----
(Dollars in millions)
<S> <C> <C> <C> <C>
Investment grade:
Corporate securities................................................ $ 860.4 $20.7 $15.0 $ 866.1
United States Treasury securities and obligations of
United States government corporations and agencies................ 26.9 .8 .2 27.5
States and political subdivisions................................... 17.3 .3 - 17.6
Debt securities issued by foreign governments....................... 11.7 - .8 10.9
Mortgage-backed securities ......................................... 487.4 8.0 1.2 494.2
Below-investment grade (primarily corporate securities)................ 116.8 1.2 10.2 107.8
-------- ----- ----- --------
Total actively managed fixed maturities........................... $1,520.5 $31.0 $27.4 $1,524.1
======== ===== ===== ========
Equity securities...................................................... $ 46.0 $ .8 $ 1.1 $ 45.7
======== ===== ===== ========
</TABLE>
Accumulated other comprehensive loss included in shareholder's equity as of
December 31, 1999 and 1998, is summarized as follows:
<TABLE>
<CAPTION>
1999 1998
---- ----
(Dollars in millions)
<S> <C> <C>
Unrealized gains (losses) on investments............................................................. $(90.8) .9
Adjustments to cost of policies purchased and cost of policies produced.............................. 46.3 (2.1)
Deferred income tax benefit.......................................................................... 16.1 .4
------ -----
Accumulated other comprehensive loss.......................................................... $(28.4) $ (.8)
====== =====
</TABLE>
The following table sets forth the amortized cost and estimated fair value
of actively managed fixed maturities at December 31, 1999, by contractual
maturity. Actual maturities will differ from contractual maturities because
borrowers may have the right to call or prepay obligations with or without call
or prepayment penalties. Most of the mortgage-backed securities shown below
provide for periodic payments throughout their lives.
<TABLE>
<CAPTION>
Estimated
Amortized fair
cost value
---- -----
(Dollars in millions)
<S> <C> <C>
Due in one year or less........................................................................ $ 8.2 $ 8.2
Due after one year through five years.......................................................... 90.8 89.5
Due after five years through ten years......................................................... 279.9 259.6
Due after ten years............................................................................ 628.2 579.4
-------- --------
Subtotal.................................................................................. 1,007.1 936.7
Mortgage-backed securities (a)................................................................. 484.7 462.0
-------- --------
Total actively managed fixed maturities ............................................... $1,491.8 $1,398.7
======== ========
<FN>
--------------------
(a) Includes below-investment grade mortgage-backed securities with an amortized
cost and estimated fair value of $2.4 million and $2.2 million,
respectively.
</FN>
</TABLE>
F-12
<PAGE>
CONSECO VARIABLE INSURANCE COMPANY
Notes to Financial Statements
------------------------------
Net investment income consisted of the following:
<TABLE>
<CAPTION>
1999 1998 1997
---- ---- ----
(Dollars in millions)
<S> <C> <C> <C>
Actively managed fixed maturity securities........................................... $114.8 $118.4 $133.6
Equity securities.................................................................... 12.2 3.2 1.7
Mortgage loans....................................................................... 9.9 12.1 16.4
Policy loans......................................................................... 4.8 5.1 5.4
Other invested assets................................................................ 3.5 13.3 7.7
Cash and cash equivalents............................................................ 2.1 2.9 3.4
Separate accounts.................................................................... 151.8 44.1 55.7
------ ------ ------
Gross investment income.......................................................... 299.1 199.1 223.9
Investment expenses.................................................................. 1.5 1.1 1.3
------ ------ ------
Net investment income......................................................... $297.6 $198.0 $222.6
====== ====== ======
</TABLE>
The Company had no significant fixed maturity investments or mortgage loans
that were not accruing investment income in 1999, 1998 and 1997.
Investment gains (losses), net of investment expenses, were included in
revenue as follows:
<TABLE>
<CAPTION>
1999 1998 1997
---- ---- ----
(Dollars in millions)
<S> <C> <C> <C>
Fixed maturities:
Gross gains........................................................................ $ 8.6 $ 34.0 $20.6
Gross losses....................................................................... (14.5) (12.4) (5.1)
Other than temporary decline in fair value......................................... (1.3) - (.3)
------ ------ -----
Net investment gains (losses) from fixed maturities before expenses........... (7.2) 21.6 15.2
Other.................................................................................. .7 .1 2.2
------ ------ -----
Net investment gains (losses) before expenses................................. (6.5) 21.7 17.4
Investment expenses.................................................................... 3.5 3.2 4.1
------ ------ -----
Net investment gains (losses)................................................. $(10.0) $ 18.5 $13.3
====== ====== =====
</TABLE>
At December 31, 1999, the mortgage loan balance was primarily comprised of
commercial loans. Approximately 16 percent, 11 percent, 10 percent, 8 percent, 8
percent and 8 percent of the mortgage loan balance were on properties located in
Michigan, Texas, Florida, California, Georgia and Tennessee, respectively. No
other state comprised greater than 7 percent of the mortgage loan balance.
Noncurrent mortgage loans were insignificant at December 31, 1999. At December
31, 1999, our allowance for loss on mortgage loans was $.3 million.
Life insurance companies are required to maintain certain investments on
deposit with state regulatory authorities. Such assets had an aggregate carrying
value of $11.5 million at December 31, 1999.
The Company had no investments in any single entity in excess of 10 percent
of shareholder's equity at December 31, 1999, other than investments issued or
guaranteed by the United States government or a United States government agency.
F-13
<PAGE>
CONSECO VARIABLE INSURANCE COMPANY
Notes to Financial Statements
------------------------------
3. INSURANCE LIABILITIES:
These liabilities consisted of the following:
<TABLE>
<CAPTION>
Interest
Withdrawal Mortality rate
assumption assumption assumption 1999 1998
---------- ---------- ---------- ---- ----
(Dollars in millions)
<S> <C> <C> <C> <C> <C>
Future policy benefits:
Interest-sensitive products:
Investment contracts............................ N/A N/A (c) $ 976.7 $1,036.0
Universal life-type contracts................... N/A N/A N/A 312.5 329.2
---------- --------
Total interest-sensitive products............. 1,289.2 1,365.2
--------- --------
Traditional products:
Traditional life insurance contracts............ Company (a) 7.6% 137.0 139.9
experience
Limited-payment contracts....................... Company (b) 7.5% 105.8 106.3
experience, ---------- --------
if applicable
Total traditional products.................... 242.8 246.2
---------- --------
Claims payable and other policyholder funds ........ N/A N/A N/A 64.1 62.6
Liabilities related to separate accounts............ N/A N/A N/A 1,457.0 696.4
--------- --------
Total........................................... $3,053.1 $2,370.4
======== ========
<FN>
-------------
(a) Principally, modifications of the 1975 - 80 Basic, Select and Ultimate
Tables.
(b) Principally, the 1984 United States Population Table and the NAIC 1983
Individual Annuitant Mortality Table.
(c) At December 31, 1999 and 1998, approximately 97 percent and 95 percent,
respectively, of this liability represented account balances where
future benefits are not guaranteed. The weighted average interest rate
on the remainder of the liabilities representing the present value of
guaranteed future benefits was approximately 6 percent at December 31,
1999.
</FN>
</TABLE>
4. INCOME TAXES:
Income tax liabilities were comprised of the following:
<TABLE>
<CAPTION>
1999 1998
---- ----
(Dollars in millions)
<S> <C> <C>
Deferred income tax liabilities (assets):
Investments (primarily actively managed fixed maturities).................................. $ 3.6 $ 5.4
Cost of policies purchased and cost of policies produced................................... 75.3 56.7
Insurance liabilities...................................................................... (39.2) (28.2)
Unrealized depreciation.................................................................... (16.1) (.4)
Other...................................................................................... 10.2 (2.2)
------ ------
Deferred income tax liabilities....................................................... 33.8 31.3
Current income tax liabilities (assets)........................................................ (.4) 6.2
------ ------
Income tax liabilities................................................................ $ 33.4 $ 37.5
====== ======
</TABLE>
F-14
<PAGE>
CONSECO VARIABLE INSURANCE COMPANY
Notes to Financial Statements
------------------------------
Income tax expense was as follows:
<TABLE>
<CAPTION>
1999 1998 1997
---- ---- ----
(Dollars in millions)
<S> <C> <C> <C>
Current tax provision..................................................................... $ 4.3 $20.8 $16.3
Deferred tax provision (benefit).......................................................... 9.3 (4.2) 5.8
----- ----- -----
Income tax expense............................................................... $13.6 $16.6 $22.1
===== ===== =====
</TABLE>
A reconciliation of the income tax provisions based on the U.S. statutory
corporate tax rate to the provisions reflected in the statement of operations is
as follows:
<TABLE>
<CAPTION>
1999 1998 1997
---- ---- ----
(Dollars in millions)
<S> <C> <C> <C>
Tax on income before income taxes at statutory rate....................................... 35.0% 35.0% 35.0%
State taxes............................................................................... 1.5 1.0 .7
Other..................................................................................... (1.4) (.8) .3
---- ---- ----
Income tax expense............................................................... 35.1% 35.2% 36.0%
==== ==== ====
</TABLE>
5. OTHER DISCLOSURES:
Litigation
The Company is involved on an ongoing basis in lawsuits related to its
operations. Although the ultimate outcome of certain of such matters cannot be
predicted, such lawsuits currently pending against the Company are not expected,
individually or in the aggregate, to have a material adverse effect on the
Company's financial condition, cash flows or results of operations.
Guaranty Fund Assessments
The balance sheet at December 31, 1999, includes: (i) accruals of $1.6
million, representing our estimate of all known assessments that will be levied
against the Company by various state guaranty associations based on premiums
written through December 31, 1999; and (ii) receivables of $1.1 million that we
estimate will be recovered through a reduction in future premium taxes as a
result of such assessments. These estimates are subject to change when the
associations determine more precisely the losses that have occurred and how such
losses will be allocated among the insurance companies. We recognized expense
for such assessments of $1.1 million in 1999, $1.1 million in 1998 and $1.2
million in 1997.
Related Party Transactions
The Company operates without direct employees through management and
service agreements with subsidiaries of Conseco. Fees for such services
(including data processing, executive management and investment management
services) are based on Conseco's direct and directly allocable costs plus a 10
percent margin. Total fees incurred by the Company under such agreements were
$43.4 million in 1999, $37.8 million in 1998 and $36.7 million in 1997.
During 1998 and 1997, the Company purchased $13.0 million and $11.2 million
par value, respectively, of senior subordinated notes issued by subsidiaries of
Conseco. The total carrying value of such notes purchased during 1998, 1997 and
prior years was $45.5 million at December 31, 1998. Such notes are classified as
"other invested assets" in the accompanying balance sheet. In 1999, all such
notes were repurchased from the Company by Conseco or its subsidiaries.
F-15
<PAGE>
CONSECO VARIABLE INSURANCE COMPANY
Notes to Financial Statements
------------------------------
6. OTHER OPERATING STATEMENT DATA:
Insurance policy income consisted of the following:
<TABLE>
<CAPTION>
1999 1998 1997
---- ---- ----
(Dollars in millions)
<S> <C> <C> <C>
Traditional products:
Direct premiums collected......................................................... $700.4 $445.8 $309.6
Reinsurance assumed............................................................... 18.7 15.6 14.9
Reinsurance ceded................................................................. (23.1) (21.0) (24.2)
------ ------ ------
Premiums collected, net of reinsurance...................................... 696.0 440.4 300.3
Less premiums on universal life and products
without mortality and morbidity risk which are
recorded as additions to insurance liabilities ................................ 654.1 400.4 255.9
------ ------ ------
Premiums on traditional products with mortality or morbidity risk,
recorded as insurance policy income...................................... 41.9 40.0 44.4
Fees and surrender charges on interest-sensitive products............................. 30.2 33.6 31.3
------ ------ ------
Insurance policy income..................................................... $ 72.1 $ 73.6 $ 75.7
====== ====== ======
</TABLE>
The five states with the largest shares of 1999 collected premiums were
California (14 percent), Texas (14 percent), Florida (13 percent), Michigan (8.8
percent) and Indiana (5.2 percent). No other state accounted for more than 4
percent of total collected premiums.
Changes in the cost of policies purchased were as follows:
<TABLE>
<CAPTION>
1999 1998 1997
---- ---- ----
(Dollars in millions)
<S> <C> <C> <C>
Balance, beginning of year............................................................ $ 98.0 $106.4 $143.0
Amortization...................................................................... (4.1) (21.1) (15.4)
Amounts related to fair value adjustment of actively managed fixed maturities 37.7 11.8 (21.2)
Other ............................................................................ - .9 -
------ ------ ------
Balance, end of year.................................................................. $131.6 $ 98.0 $106.4
====== ====== ======
</TABLE>
Based on current conditions and assumptions as to future events on all
policies in force, the Company expects to amortize approximately 9 percent of
the December 31, 1999, balance of cost of policies purchased in 2000, 10 percent
in 2001, 9 percent in 2002, 7 percent in 2003 and 6 percent in 2004. The
discount rates used to determine the amortization of the cost of policies
purchased ranged from 3.6 percent to 8.0 percent and averaged 5.8 percent.
Changes in the cost of policies produced were as follows:
<TABLE>
<CAPTION>
1999 1998 1997
---- ---- ----
(Dollars in millions)
<S> <C> <C> <C>
Balance, beginning of year............................................................ $ 82.5 $ 55.9 $38.2
Additions......................................................................... 62.7 35.3 31.8
Amortization...................................................................... (8.3) (11.0) (10.2)
Amounts related to fair value adjustment of actively managed fixed maturities 10.7 2.3 (3.9)
------ ------ -----
Balance, end of year.................................................................. $147.6 $ 82.5 $55.9
====== ====== =====
</TABLE>
F-16
<PAGE>
CONSECO VARIABLE INSURANCE COMPANY
Notes to Financial Statements
------------------------------
7. STATEMENT OF CASH FLOWS:
Income taxes paid during 1999, 1998, and 1997, were $2.1 million, $17.1
million and $14.8 million, respectively.
8. STATUTORY INFORMATION:
Statutory accounting practices prescribed or permitted by regulatory
authorities for insurance companies differ from GAAP. The Company reported the
following amounts to regulatory agencies:
<TABLE>
<CAPTION>
1999 1998
---- ----
(Dollars in millions)
<S> <C> <C>
Statutory capital and surplus.................................................. $112.6 $134.0
Asset valuation reserve........................................................ 41.4 30.9
Interest maintenance reserve................................................... 66.7 73.1
------- ------
Total...................................................................... $220.7 $238.0
====== ======
</TABLE>
Our statutory net income was $14.6 million, $32.7 million and $32.7 million
in 1999, 1998 and 1997, respectively. Statutory net income differs from net
income presented in our financial statements prepared in accordance with GAAP,
primarily because for GAAP reporting we are required to defer and amortize costs
that vary with and are primarily related to the production of new business as
described in note 1.
State insurance laws generally restrict the ability of insurance companies
to pay dividends or make other distributions. We may pay dividends to our parent
in 2000 of $12.8 million without permission from state regulatory authorities.
In 1998, the National Association of Insurance Commissioners adopted
codified statutory accounting principles, which are expected to constitute the
only source of prescribed statutory accounting practices and are effective in
2001. The changes to statutory accounting practices resulting from the
codification are not expected to have a material effect on the statutory capital
and surplus or statutory operating earnings data shown above.
F-17
<PAGE>
PART C
OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS
(a) The financial statements of the Separate Account and Conseco Variable
Insurance Company (the "Company") are included in Part B hereof.
(b) Exhibits
(1) -Resolution of the Board of Directors of Great American Reserve
authorizing the establishment of Variable Account dated November
12, 1993.***
(2) -Not Applicable.
(3) -Form of Principal Underwriting Agreement by and among Great
American Reserve, Variable Account and GARCO Equity Sales.***
(4)(a) -- Form of Individual Fixed/Variable Annuity Contract.***
(4)(b) -- Form of Group Fixed/Variable Annuity Contract.***
(5) -Application for Contracts.***
(6) (i)-Articles of Incorporation of Great American Reserve.**
(6) (ii)-Articles of Amendment to the Articles of Incorporation
of the Company.+
(6) (iii) - Amended and Restated By-Laws of Conseco Variable
Insurance Company.+
(7) -Not Applicable.
(8) (i)-Form of Fund Participation Agreement by and among The Alger
American Fund, Great American Reserve Insurance Company and Fred
Alger and Company, Incorporated.*
(8) (ii)-Form of Fund Participation Agreement by and among Great
American Reserve Insurance Company, Berger Institutional Products
Trust and BBOI Worldwide LLC.*
(8) (iii)-Form of Fund Participation by and between Great American
Reserve Insurance Company, Insurance Management Series and
Federated Securities Corp.*
(8) (iv)-Form of Fund Participation between Great American Reserve
Insurance Company, Van Eck Worldwide Insurance Trust and Van Eck
Associates Corporation.*
<PAGE>
(8) (v)-Form of Fund Participation Agreement by and between Lord
Abbett Series Fund, Inc., Lord, Abbett & Co. and Great American
Reserve Insurance Company.*
(8) (vi)-Form of Fund Participation Agreement between American
Century Investment Services, Inc. and Great American Reserve
Insurance Company.*
(8) (vii)-Form of Fund Participation Agreement between INVESCO
Variable Investment Funds, Inc., INVESCO Funds Group, Inc. and
the Company.**
(8) (viii)-Form of Fund Participation Agreement between Rydex
Variable Trust and the Company.+
(8) (ix)-Form of Fund Participation Agreement between Pioneer
Variable Contracts Trust and the Company.
(9) -- Opinion and Consent of Counsel.
(10) -- Consent of Independent Accountants.
(11) -- Not Applicable.
(12) -- None.
(13) -- Schedule for computation of performance quotations.
(27) -- Not Applicable
*Incorporated by reference to Pre-Effective Amendment No. 1 to Form N-4,
Great American Reserve Variable Annuity Account F, File Nos. 333-40309/811-08483
filed electronically on February 3, 1998.
**Incorporated by reference to Form N-4, Great American Reserve Variable
Annuity Account G, File Nos. 333-00373/811-07501, filed electronically on
January 23, 1996.
***Incorporated by reference to Post-Effective Amendment No. 6 to Form N-4
(File Nos. 33-74092 and 811-08288) filed electronically on May 15, 1998.
+Incorporated by reference to Registrant's Post-Effective Amendment No. 9
(File No. 33-74092) filed electronically on April 28, 2000.
ITEM 25. DIRECTORS AND OFFICERS OF CONSECO VARIABLE
The following table sets forth certain information regarding the executive
officers and Directors of the Company who are engaged directly or indirectly in
activities relating to the Variable Account or the Contracts. Their principal
business address is 11825 N. Pennsylvania Street, Carmel, IN 46032.
Name and Principal Position and Offices
Business Address* with Depositor
------------------- ---------------------------------------
Ngaire E. Cuneo Director
John M. Howard Director
David K. Herzog Director, Executive Vice President, General Counsel
and Secretary
Thomas J. Kilian Director and President
James S. Adams Senior Vice President, Chief Accounting
Officer and Treasurer and Director
ITEM 26. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT
The following information concerns those companies that may be deemed to be
controlled by or under common control with Registrant (all 100% owned unless
indicated otherwise):
CONSECO, INC. (Indiana) - (publicly traded)
CIHC, Incorporated (Delaware)
Bankers National Life Insurance Company (Texas)
Bankers Life Insurance Company of Illinois (Illinois)
Bankers Life & Casualty Company (Illinois)
Conseco Life Insurance Company of Texas (Texas)
Conseco Variable Insurance Company (Texas)
Conseco Annuity Assurance Company (Illinois)
Vulcan Life Insurance Company (Indiana)
Conseco Direct Life Insurance Company (Pennsylvania)
Wabash Life Insurance Company (Indiana)
Conseco Life Insurance Company (Indiana)
Washington National Insurance Company (Illinois)
Conseco Senior Health Insurance Company (Pennsylvania)
Pioneer Life Insurance Company (Illinois)
<PAGE>
Conseco Life Insurance Company of New York (New York)
Conseco Medical Insurance Company (Illinois)
Continental Life Insurance Company (Texas)
United Presidential Life Insurance Company (Indiana)
Conseco Health Insurance Company (Arizona)
Frontier National Life Insurance Company (Ohio)
Conseco Capital Management, Inc. (Delaware)
Conseco Equity Sales, Inc. (Texas)
Conseco Securities, Inc. (Delaware)
Conseco Services, LLC (Indiana)
Marketing Distribution Systems Consulting Group, Inc. (Delaware)
Conseco Finance Corp. (Delaware)
Conseco Finance Servicing Corp. (Delaware)
Conseco Series Trust (Massachusetts)*
Conseco Fund Group (Massachusetts) (publicly held)**
* The shares of Conseco Series Trust currently are sold to Bankers National
Variable Account B, Conseco Variable Annuity Account C, Conseco Variable
Annuity Account E, Conseco Variable Annuity Account F, Conseco Variable
Account G, Conseco Variable Annuity Account H, each being segregated asset
accounts established pursuant to Texas law by Bankers National Life
Insurance Company and Conseco Variable Insurance Company, respectively.
Shares of Conseco Series Trust are also sold to BMA Variable Life Account A
of Business Men's Assurance Company of America.
** The shares of the Conseco Fund Group are sold to the public.
ITEM 27. NUMBER OF CONTRACT OWNERS
As of September 30, 2000, there were 16,722 Qualified Contract Owners and
2,004 Non-Qualified Contract Owners.
ITEM 28. INDEMNIFICATION
The Corporation shall indemnify any person who was or is a party, or is
threatened to be made a party, to any threatened, pending, or completed
<PAGE>
action, suit or proceeding, whether civil, criminal, administrative, or
investigative, by reason of the fact that he is or was a director or officer of
the Corporation, or is or was serving at the request of the Corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise (collectively, "Agent") against expenses
(including attorneys' fees), judgments, fines, penalties, court costs and
amounts paid in settlement actually and reasonably incurred by him in connection
with such action, suit or proceeding if he acted in good faith and in a manner
he reasonably believed to be in or not opposed to the best interests of the
Corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful. The termination of any
action, suit, or proceeding by judgment, order, settlement (whether with or
without court approval), conviction or upon a plea of nolo contendere or its
equivalent, shall not, of itself, create a presumption that the Agent did not
act in good faith and in a manner which he reasonably believed to be in or not
opposed to the best interests of the Corporation, and, with respect to any
criminal action or proceeding, had no reasonable cause to believe that his
conduct was unlawful. If several claims, issues or matters are involved, an
Agent may be entitled to indemnification as to some matters even though he is
not entitled as to other matters. Any director or officer of the Corporation
serving in any capacity of another corporation, of which a majority of the
shares entitled to vote in the election of its directors is held, directly or
indirectly, by the Corporation, shall be deemed to be doing so at the request of
the Corporation.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to members of the Company's Board of Directors,
officers and controlling persons of the Registrant pursuant to the provisions
described under "Indemnification" or otherwise, the Registrant has been advised
that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than payment by the Registrant of expenses incurred or
paid by a member of the Board of Directors, officer or controlling person of the
Registrant in the successful defense of any action, suit or proceeding) is
asserted by such member of the Board of Directors, officer or controlling person
in connection with the securities being registered, the Registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
The Variable Account has no officers or employees. The officers, directors
and employees of Conseco Variable as well as those of an affiliated company who
perform administrative services for the Variable Account are covered by an
officers and directors liability policy.
ITEM 29. PRINCIPAL UNDERWRITER
(a) Conseco Equity Sales, Inc. ("Conseco Equity Sales") is the principal
underwriter for the following investment companies (other than Registrant):
<PAGE>
Conseco Variable Annuity Account C
Conseco Variable Annuity Account F
Conseco Variable Annuity Account G
Conseco Variable Annuity Account H
Conseco Fund Group
Rydex Advisor Variable Annuity Account
BMA Variable Life Account A
(b) The following table sets forth certain information regarding the officers
and directors of Conseco Equity Sales. Their address is 11815 N.
Pennsylvania Street, Carmel, IN 46032.
NAME AND PRINCIPAL POSITIONS AND OFFICES
BUSINESS ADDRESS WITH CONSECO EQUITY SALES, INC.
- -------------------- --------------------------------
L. Gregory Gloeckner President and Director
James S. Adams Senior Vice President, Chief Accounting
Officer, Treasurer and Director
Vice President, General Counsel,
William P. Kovacs Secretary, and Director
William T. Devanney, Jr. Senior Vice President, Corporate Taxes
Donald B. Johnston Vice President, Director Mutual Fund
Sales & Marketing
<TABLE>
<CAPTION>
NET UNDERWRITING
NAME OF DISCOUNTS AND COMPENSATION ON BROKERAGE
PRINCIPAL UNDERWRITER COMMISSIONS REDEMPTION COMMISSIONS COMPENSATION*
- --------------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Conseco Equity None None None None
Sales, Inc.
</TABLE>
*Fees paid by the Company for serving as underwriter
ITEM 30. LOCATION OF ACCOUNTS AND RECORDS
The accounts, books, or other documents required to be maintained by the
Registrant pursuant to Section 31(a) of the Investment Company Act of 1940 and
the rules promulgated thereunder are in the possession of Conseco Variable
Insurance Company, 11815 N. Pennsylvania Street, Carmel, Indiana 46032.
<PAGE>
ITEM 31. MANAGEMENT SERVICES
Not Applicable.
ITEM 32. UNDERTAKINGS
1. The Registrant hereby undertakes to file a post-effective amendment to
this registration statement as frequently as is necessary to ensure that the
audited financial statements in the registration statement are never more than
16 months old for so long as payments under the variable annuity contracts may
be accepted.
2. The Registrant hereby undertakes to include either (1) as part of any
application to purchase a contract offered by the prospectus, a space that an
applicant can check to request a Statement of Additional Information, or (2) a
postcard or similar written communication affixed to or included in the
prospectus that the applicant can remove to send for a Statement of Additional
Information.
3. The Registrant hereby undertakes to deliver any Statement of Additional
Information and any financial statements required to be made available under
Form N-4 promptly upon written or oral request.
4. The Securities and Exchange Commission (the "SEC") issued the American
Council of Life Insurance an industry wide no-action letter dated November 28,
1988, stating that the SEC would not recommend any enforcement action if
registered separate accounts funding tax-sheltered annuity contracts restrict
distributions to plan participants in accordance with the requirements of
Section 403(b)(11), provided certain conditions and requirements were met. Among
these conditions and requirements, any registered separate account relying on
the no-action position of the SEC must:
(a) Include appropriate disclosure regarding the redemption
restrictions imposed by Section 403(b)(11) in each registration statement,
including the prospectus, used in connection with the offer of the
contract;
(b) Include appropriate disclosure regarding the redemption
restrictions imposed by Section 403 (b)(11) in any sales literature used in
connection with the offer in the contract;
(c) Instruct sales representatives who solicit participants to
purchase the contract specifically to bring the redemption restrictions
imposed by Section 403(b)(11) to the attention of the potential
participants; and
(d) Obtain from each plan participant who purchases a Section 403(b)
annuity contract, prior to or at the time of such purchase, a signed
statement acknowledging the participant's understanding of (i) the
restrictions on redemption imposed by Section 403(b)(11), and (ii) the
investment alternatives available under the employer's Section 403(b)
arrangement, to which the participant may elect to transfer his contract
value.
The Registrant is relying on the no-action letter. Accordingly, the
provisions of paragraphs (a) - (d) above have been complied with.
5. The Company represents that the fees and charges deducted under the
Contracts, in the aggregate, are reasonable in relation to the services
rendered, the expenses expected to be incurred, and the risks assumed by the
Company.
SIGNATURES
As required by the Securities Act of 1933 and the Investment Company Act of
1940, as amended, the Registrant certifies that it meets the requirements of
Securities Act Rule 485(b) for effectiveness of this Registration Statement and
has caused this Registration Statement to be signed on its behalf, in the City
of Carmel, State of Indiana, on this 26th day of December, 2000.
CONSECO VARIABLE ANNUITY
ACCOUNT E
(Registrant)
By: Conseco Variable Insurance Company
By: /S/ THOMAS J. KILIAN
----------------------------------------
CONSECO VARIABLE INSURANCE COMPANY
(Depositor)
By: /S/ THOMAS J. KILIAN
------------------------------------------
As required by the Securities Act of 1933, this Registration Statement has
been signed below by the following persons in the capacities and on the dates
indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
---------- ----- ----
<S> <C>
Director
--------------------------------- --------------
Ngaire E. Cuneo
/S/ THOMAS J. KILIAN Director and President December 26, 2000
-------------------------------- (principal executive officer) -----------------
Thomas J. Kilian
/S/ JAMES S. ADAMS Senior Vice President, December 26, 2000
--------------------------------- Chief Accounting Officer and Treasurer -----------------
James S. Adams and Director (principal financial
officer and principal accounting officer)
/S/ DAVID K. HERZOG December 26, 2000
--------------------------------- Director --------------
David K. Herzog
/S/ JOHN M. HOWARD December 26, 2000
------------------------------ Director ------------------
John M. Howard
</TABLE>
INDEX TO EXHIBITS
Exhibit
Number Exhibit
-------- -------
EX-99.B8 (ix) Form of Fund Participation Agreement between Pioneer Variable
Contracts Trust and the Company
EX-99.B9 Opinion and Consent of Counsel
EX-99.B10 Consent of Independent Accountants
EX-99.B13 Schedule for Computation of Performance Quotations
