-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, QSS09n3FJelVwP0dIxX3GbSHEu+B09KNWQRqNOqxdRW7SJpzfOrVORCdkoR7j4qo zMQasqk0sn1gLTPaXl9c9Q== 0000928389-00-000130.txt : 20000501 0000928389-00-000130.hdr.sgml : 20000501 ACCESSION NUMBER: 0000928389-00-000130 CONFORMED SUBMISSION TYPE: 485BPOS PUBLIC DOCUMENT COUNT: 7 FILED AS OF DATE: 20000428 EFFECTIVENESS DATE: 20000428 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CONSECO VARIABLE ANNUITY ACCOUNT H CENTRAL INDEX KEY: 0001094911 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 750300900 STATE OF INCORPORATION: TX FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 485BPOS SEC ACT: SEC FILE NUMBER: 333-90737 FILM NUMBER: 611483 FILING VALUES: FORM TYPE: 485BPOS SEC ACT: SEC FILE NUMBER: 811-09693 FILM NUMBER: 611484 BUSINESS ADDRESS: STREET 1: 11825 N PENNSYLVANIA ST CITY: CARMEL STATE: IN ZIP: 46032 BUSINESS PHONE: 3178173741 MAIL ADDRESS: STREET 1: 11825 N PENNSYLVANIA ST CITY: CARMEL STATE: IN ZIP: 46032 485BPOS 1 File Nos. 333-90737 811-09693 ================================================================================ SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM N-4 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [ ] Pre-Effective Amendment No. [ ] Post-Effective Amendment No. 1 [X] REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [ ] Amendment No. 2 [X] (Check appropriate box or boxes.) CONSECO VARIABLE ANNUITY ACCOUNT H ------------------------------------------------- (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) (Zip Code) Depositor's Telephone Number, including Area Code (317) 817-3700 Name and Address of Agent for Service Michael A. Colliflower Conseco Variable Insurance Company 11815 N. Pennsylvania Street Carmel, Indiana 46032-4572 (317) 817-3700 Copies to: Judith A. Hasenauer Blazzard, Grodd & Hasenauer, P.C. 943 Post Road East Westport, CT 06880 It is proposed that this filing will become effective: _____ immediately upon filing pursuant to paragraph (b) of Rule 485 __X___ on May 1, 2000 pursuant to paragraph (b) of Rule 485 _____ 60 days after filing pursuant to paragraph (a)(1) of Rule 485 _____ on (date) pursuant to paragraph (a)(1) of Rule 485 If appropriate, check the following: _____ This post-effective amendment designates a new effective date for a previously filed post-effective amendment. Title of Securities Registered: Individual Variable Annuity Contracts CROSS REFERENCE SHEET (required by Rule 495)
ITEM NO. Location - -------- -------- PART A Item 1. Cover Page Cover Page Item 2. Definitions Index of Special Terms Item 3. Synopsis Highlights Item 4. Condensed Financial Information Not Applicable Item 5. General Description of Registrant, Depositor, and Portfolio Companies Other Information - Conseco Variable; The Separate Account; Investment Options; Appendix A Item 6. Deductions and Expenses Expenses Item 7. General Description of Variable Annuity Contracts The Annuity Contract Item 8. Annuity Period Annuity Payments (The Annuity Period) Item 9. Death Benefit Death Benefit Item 10. Purchases and Contract Value Purchase Item 11. Redemptions Access to Your Money Item 12. Taxes Taxes Item 13. Legal Proceedings None Item 14. Table of Contents of the Statement of Additional Information Table of Contents of the Statement of Additional Information
CROSS REFERENCE SHEET (required by Rule 495)
ITEM NO. LOCATION - -------- -------- PART B Item 15. Cover Page Cover Page Item 16. Table of Contents Table of Contents Item 17. General Information and History Company Item 18. Services Not Applicable Item 19. Purchase of Securities Being Offered Not Applicable Item 20. Underwriters Distribution Item 21. Calculation of Performance Data Calculation of Performance Information Item 22. Annuity Payments Annuity Provisions Item 23. Financial Statements Financial Statements
PART C Information required to be included in Part C is set forth under the appropriate Item so numbered in Part C to this Registration Statement. PART A THE FIXED AND VARIABLE ANNUITY ISSUED BY CONSECO VARIABLE ANNUITY ACCOUNT H AND CONSECO VARIABLE INSURANCE COMPANY This prospectus describes the individual flexible premium deferred annuity contract, fixed and variable accounts offered by Conseco Variable Insurance Company (we, us, our). This contract provides for the accumulation of contract values and subsequent annuity payments on a fixed basis, a variable basis or a combination of both. The annuity contract has 48 investment options--a fixed account of ours and 47 investment portfolios listed below. You can put your money in the fixed account and/or the investment portfolios. Your investments in the portfolios are not guaranteed. You could lose your money. Currently, you can invest in up to 15 investment portfolios at one time. In certain states, your contract may not contain a fixed account option. Money you direct into the fixed account earns interest at a rate guaranteed by us. CONSECO SERIES TRUST MANAGED BY CONSECO CAPITAL MANAGEMENT, INC. o Conseco 20 Focus Portfolio o Equity Portfolio o Balanced Portfolio o High Yield Portfolio o Fixed Income Portfolio o Government Securities Portfolio o Money Market Portfolio THE ALGER AMERICAN FUND MANAGED BY FRED ALGER MANAGEMENT, INC. o Alger American Growth Portfolio o Alger American Leveraged AllCap Portfolio o Alger American MidCap Growth Portfolio o Alger American Small Capitalization Portfolio AMERICAN CENTURY VARIABLE PORTFOLIOS, INC. MANAGED BY AMERICAN CENTURY INVESTMENT MANAGEMENT, INC. o VP Income & Growth o VP International o VP Value BERGER INSTITUTIONAL PRODUCTS TRUST MANAGED BY BERGER LLC o Berger IPT-Growth Fund o Berger IPT-Growth and Income Fund o Berger IPT-Small Company Growth Fund o Berger IPT-New Generation Fund MANAGED BY BBOI WORLDWIDE LLC o Berger/BIAM IPT-International Fund THE DREYFUS SOCIALLY RESPONSIBLE GROWTH FUND, INC. MANAGED BY THE DREYFUS CORPORATION DREYFUS STOCK INDEX FUND MANAGED BY THE DREYFUS CORPORATION DREYFUS VARIABLE INVESTMENT FUND ("Dreyfus VIF") MANAGED BY THE DREYFUS CORPORATION o Dreyfus VIF Disciplined Stock Portfolio o Dreyfus VIF International Value Portfolio FEDERATED INSURANCE SERIES MANAGED BY FEDERATED INVESTMENT MANAGEMENT CO. o Federated High Income Bond Fund II o Federated Utility Fund II MANAGED BY FEDERATED GLOBAL INVESTMENT MANAGEMENT CORP. o Federated International Equity Fund II INVESCO VARIABLE INVESTMENT FUNDS, INC. (not available for new sales as of May 1, 2000) MANAGED BY INVESCO FUNDS GROUP, INC. o INVESCO VIF - High Yield Fund o INVESCO VIF - Equity Income Fund JANUS ASPEN SERIES MANAGED BY JANUS CAPITAL CORPORATION o Aggressive Growth Portfolio o Growth Portfolio o Worldwide Growth Portfolio LAZARD RETIREMENT SERIES, INC. MANAGED BY LAZARD ASSET MANAGEMENT o Lazard Retirement Equity Portfolio o Lazard Retirement Small Cap Portfolio LORD ABBETT SERIES FUND, INC. MANAGED BY LORD, ABBETT & CO. o Growth & Income Portfolio MITCHELL HUTCHINS SERIES TRUST MANAGED BY MITCHELL HUTCHINS ASSET MANAGEMENT, INC. o Growth and Income Portfolio NEUBERGER BERMAN ADVISERS MANAGEMENT TRUST MANAGED BY NEUBERGER BERMAN MANAGEMENT INC. o Limited Maturity Bond Portfolio o Partners Portfolio RYDEX VARIABLE TRUST MANAGED BY PADCO ADVISORS II, INC. o OTC Fund o Nova Fund SELIGMAN PORTFOLIOS, INC. MANAGED BY J. & W. SELIGMAN & CO. INCORPORATED o Seligman Communications and Information Portfolio o Seligman Global Technology Portfolio STRONG OPPORTUNITY FUND II, INC. ADVISED BY STRONG CAPITAL MANAGEMENT, INC. o Opportunity Fund II STRONG VARIABLE INSURANCE FUNDS, INC. ADVISED BY STRONG CAPITAL MANAGEMENT, INC. o Strong MidCap Growth Fund II VAN ECK WORLDWIDE INSURANCE TRUST MANAGED BY VAN ECK ASSOCIATES CORPORATION o Worldwide Bond Fund o Worldwide Emerging Markets Fund o Worldwide Hard Assets Fund o Worldwide Real Estate Fund The expenses for a contract with a purchase payment credit are higher than a contract without the purchase payment credit (also referred to as a bonus) and the amount of the purchase payment credit may be more than offset by the additional expenses attributable to the credit. Please read this prospectus before investing. You should keep it for future reference. It contains important information about the contract. To learn more about the contract, you can obtain a copy of our Statement of Additional Information (SAI) dated May 1, 2000. The SAI has been filed with the Securities and Exchange Commission (SEC) and is legally a part of this prospectus. The SEC has a Web site (http://www.sec.gov) that contains the SAI, material incorporated by reference, and other information regarding companies that file electronically with the SEC. The Table of Contents of the SAI is on page __ of this prospectus. For a free copy of the SAI, call us at (800) 824-2726 or write us at our administrative office: 11815 N. Pennsylvania Street, Carmel, Indiana 46032-4555. - - ------------------------------------------------------------------------------ The Securities and Exchange Commission has not approved or disapproved these securities or determined if this prospectus is accurate or complete. Any representation to the contrary is a criminal offense. - - ------------------------------------------------------------------------------ THE CONTRACTS: O ARE NOT BANK DEPOSITS O ARE NOT FEDERALLY INSURED O ARE NOT ENDORSED BY ANY BANK OR GOVERNMENT AGENCY O ARE NOT GUARANTEED AND MAY BE SUBJECT TO LOSS OF PRINCIPAL May 1, 2000 2 CONSECO VARIABLE INSURANCE COMPANY 2000 ACCOUNT H INDIVIDUAL ANNUITY - - ------------------------------------------------------------------------------ TABLE OF CONTENTS PAGE INDEX OF SPECIAL TERMS...................................................... HIGHLIGHTS.................................................................. FEE TABLE................................................................... THE COMPANY................................................................. THE CONSECO ADVANTAGE PLUS ANNUITY CONTRACT................................. PURCHASE.................................................................... Purchase Payments......................................................... Purchase Payment Credit Feature........................................... Allocation of Purchase Payments........................................... Free Look................................................................. INVESTMENT OPTIONS.......................................................... Investment Portfolios..................................................... The Fixed Account......................................................... The General Account....................................................... Voting Rights............................................................. Substitution.............................................................. Transfers................................................................. Dollar Cost Averaging Program............................................. Rebalancing Program....................................................... Asset Allocation Program.................................................. Sweep Program............................................................. EXPENSES.................................................................... Insurance Charges......................................................... Contract Maintenance Charge............................................... Contingent Deferred Sales Charge.......................................... Reduction or Elimination of the Contingent Deferred Sales Charge.......... Transfer Fee.............................................................. Premium Taxes............................................................. Income Taxes.............................................................. Investment Portfolio Expense.............................................. CONTRACT VALUE.............................................................. Accumulation Units........................................................ ACCESS TO YOUR MONEY........................................................ Systematic Withdrawal Program............................................. Suspension of Payments or Transfers....................................... DEATH BENEFIT............................................................... Upon Your Death During the Accumulation Period............................ Death Benefit Amount During the Accumulation Period....................... Payment of Death Benefit During the Accumulation Period.................. Death of Contract Owner During the Annuity Period......................... Death of Annuitant........................................................ ANNUITY PAYMENTS (THE ANNUITY PERIOD)....................................... Annuity Payment Amount.................................................... Annuity Options........................................................... TAXES ...................................................................... Annuity Contracts in General.............................................. Qualified and Non-Qualified Contracts..................................... Withdrawals - Non-Qualified Contracts..................................... Withdrawals - Qualified Contracts......................................... Withdrawals - Tax-Sheltered Annuities..................................... Diversification........................................................... Investor Control.......................................................... PERFORMANCE................................................................. OTHER INFORMATION........................................................... The Separate Account...................................................... Distributor............................................................... Ownership................................................................. Beneficiary............................................................... Assignment................................................................ Financial Statements...................................................... APPENDIX A.................................................................. TABLE OF CONTENTS OF THE STATEMENT OF ADDITIONAL INFORMATION................ INDEX OF SPECIAL TERMS Because of the complex nature of the contract, we have used certain words or terms in this prospectus which may need an explanation. We have identified the following as some of these words or terms. The page that is indicated here is where we believe you will find the best explanation for the word or term. These words and terms are in italics on the indicated page. Page Accumulation Period......................................................... Accumulation Unit........................................................... Annuitant................................................................... Annuity Date................................................................ Annuity Options............................................................. Annuity Payments............................................................ Annuity Period.............................................................. Annuity Unit................................................................ Beneficiary................................................................. Contract.................................................................... Investment Portfolios....................................................... Joint Owner................................................................. Non-Qualified............................................................... Owner....................................................................... Purchase Payment............................................................ Qualified................................................................... Tax-Deferral................................................................ 3 - - ------------------------------------------------------------------------------ HIGHLIGHTS The variable annuity contract that we are offering is a contract between you (the owner) and us (the insurance company). The contract provides a way for you to invest on a tax-deferred basis in the sub-accounts (also referred to as investment portfolios) of the Conseco Variable Annuity Account H (Separate Account) and the fixed account. The contract is intended to be used to accumulate money for retirement or other long-term tax-deferred investment purposes. The contract has a purchase payment credit feature under which we will credit an additional 4% to each purchase payment (purchase payment credit or bonus) you make. We call this the bonus feature. The contract also offers a guaranteed minimum death benefit option and a guaranteed minimum income benefit option. These options guarantee minimum death benefit and annuity payment amounts. There is an additional charge for these options. All deferred annuity contracts, like the contract, have two periods: the accumulation period and the annuity period. During the accumulation period, any earnings accumulate on a tax-deferred basis and are taxed as ordinary income when you make a withdrawal. If you make a withdrawal during the accumulation period, we may assess a charge of up to 8% of each purchase payment withdrawn. The annuity period occurs when you begin receiving regular annuity payments from your contract. You can choose to receive annuity payments on a variable basis, on a fixed basis or a combination of both. If you choose variable payments, the amount of the variable annuity payments will depend upon the investment performance of the investment portfolios you select for the annuity period. If you choose fixed payments, the amount of the fixed annuity payments are constant for the entire annuity period. FREE LOOK. If you cancel the contract within 10 days after receiving it (or whatever longer time period is required in your state), we will cancel the contract without assessing a contingent deferred sales charge. You will receive whatever your contract is worth on the day we receive your request for cancellation (less the purchase payment credit). This may be more or less than your original payment. We will return your original payment if required by law. TAX PENALTY. The earnings in your contract are not taxed until you take money out of your contract. If you take money out during the accumulation period, earnings come out first and are taxed as ordinary income. If you are younger than age 59 1/2 when you take money out, you may be charged a 10% federal tax penalty on those earnings. Payments during the annuity period are considered partly a return of your original investment. The part of each payment that is a return of your investment is not taxable as income. INQUIRIES. If you need more information, please contact us at: Conseco Variable Insurance Company 11815 N. Pennsylvania Street Carmel, Indiana 46032 (800) 824-2726 4 CONSECO VARIABLE INSURANCE COMPANY 2000 ACCOUNT H INDIVIDUAL ANNUITY - - ------------------------------------------------------------------------------ FEE TABLE The purpose of the Fee Table is to show you the various contract expenses you will pay directly or indirectly. The Fee Table reflects expenses of the Separate Account as well as the investment portfolios. OWNER TRANSACTION EXPENSES: Contingent Deferred Sales Charge: (as a percentage of Purchase Payments)(See Note 1 on page __) NO. OF CONTRACT YEARS FROM CONTINGENT DEFERRED RECEIPT OF PURCHASE PAYMENT SALES CHARGE PERCENT ----------------------------------------------------------------------- 0-1............................................... 8% 2................................................. 8% 3................................................. 8% 4................................................. 8% 5................................................. 7% 6................................................. 6% 7................................................. 5% 8................................................. 3% 9................................................. 1% 10 or more........................................ 0% ----------------------------------------------------------------------- TRANSFER FEE: (See Note 2) No charge for one transfer in each 30 day period during the accumulation period. Thereafter, we will charge a fee of $25 per transfer. We will not charge for the two transfers allowed each contract year during the annuity period. CONTRACT MAINTENANCE CHARGE: $30 per contract per year (See Note 3) SEPARATE ACCOUNT ANNUAL EXPENSES: (See Note 4) (as a percentage of average account value)
INSURANCE CHARGES (COMPRISED OF THE MORTALITY AND EXPENSE RISK CHARGE AND TOTAL SEPARATE ACCOUNT ADMINISTRATIVE CHARGE) ANNUAL EXPENSES ---------------------- ---------------------- Standard contract .......................................................... 1.40% 1.40% Contract with guaranteed minimum death benefit (current charge)............. 1.70% 1.70% Contract with guaranteed minimum death benefit (maximum charge)............. 1.90% 1.90% Contract with guaranteed minimum death benefit and guaranteed minimum income benefit (current charge) ....................... 2.00% 2.00% Contract with guaranteed minimum death benefit and guaranteed minimum income benefit (maximum charge) ....................... 2.40% 2.40%
5 - - ------------------------------------------------------------------------------ INVESTMENT PORTFOLIO EXPENSES: (as a percentage of the average daily net assets of an investment portfolio)
TOTAL ANNUAL OTHER EXPENSES PORTFOLIO (AFTER EXPENSE EXPENSES REIMBURSEMENT, (AFTER EXPENSE IF ANY, REIMBURSEMENT, MANAGEMENT 12b-1 FOR CERTAIN IF ANY, FOR FEES FEES PORTFOLIOS) CERTAIN PORTFOLIOS) - - --------------------------------------------------------------------------------------------------------------- CONSECO SERIES TRUST (5) Conseco 20 Focus Portfolio (6)................... 0.80% - 0.10% 0.90% Equity Portfolio ................................ 0.75% -- 0.02% 0.77% Balanced Portfolio .............................. 0.75% -- 0.00% 0.75% High Yield Portfolio (6)......................... 0.80% - 0.10% 0.90% Fixed Income Portfolio .......................... 0.60% -- 0.07% 0.67% Government Securities Portfolio ................. 0.60% -- 0.06% 0.66% Money Market Portfolio (7) ...................... 0.35% -- 0.05% 0.40% THE ALGER AMERICAN FUND Alger American Growth Portfolio ................. 0.75% -- 0.04% 0.79% Alger American Leveraged AllCap Portfolio (8) ................................... 0.85% -- 0.08% 0.93% Alger American Mid Cap Growth Portfolio ....................................... 0.80% -- 0.05% 0.85% Alger American Small Capitalization Portfolio ........................ 0.85% -- 0.05% 0.90% AMERICAN CENTURY VARIABLE PORTFOLIOS, INC. VP Income & Growth(9)............................ 0.70% -- 0.00% 0.70% VP International (9)............................. 1.34% -- 0.00% 1.34% VP Value(9)...................................... 1.00% -- 0.00% 1.00% BERGER INSTITUTIONAL PRODUCTS TRUST Berger IPT-Growth Fund (10)...................... 0.75% -- 0.25% 1.00% Berger IPT-Growth and Income Fund (10)........................................ 0.75% -- 0.25% 1.00% Berger IPT-Small Company Growth Fund (10)........ 0.85% -- 0.30% 1.15% Berger IPT New Generation Fund (10).............. 0.85% - 0.30% 1.15% Berger/BIAM IPT-International Fund (10).......... 0.90% -- 0.30% 1.20% THE DREYFUS SOCIALLY RESPONSIBLE GROWTH FUND, INC. ............................... 0.75% -- 0.04% 0.79% DREYFUS STOCK INDEX FUND ........................ 0.25% -- 0.01% 0.26% DREYFUS VARIABLE INVESTMENT FUND Dreyfus VIF Disciplined Stock Portfolio ......... 0.75% -- 0.06% 0.81% Dreyfus VIF International Value Portfolio ....... 1.00% -- 0.35% 1.35% FEDERATED INSURANCE SERIES Federated High Income Bond Fund II .............. 0.60% -- 0.19% 0.79% Federated International Equity Fund II (11)...... 0.54% -- 0.71% 1.25% Federated Utility Fund II ....................... 0.75% -- 0.19% 0.94% INVESCO VARIABLE INVESTMENT FUNDS, INC. INVESCO VIF - High Yield Fund (12)............... 0.60% -- 0.47% 1.07% INVESCO VIF - Equity Income Fund (12)............ 0.75% -- 0.42% 1.17% JANUS ASPEN SERIES, Institutional Shares Aggressive Growth Portfolio (13)................. 0.65% -- 0.02% 0.67% Growth Portfolio (13)............................ 0.65% -- 0.02% 0.67% Worldwide Growth Portfolio (13).................. 0.65% -- 0.05% 0.70% LAZARD RETIREMENT SERIES, INC. Lazard Retirement Equity Portfolio (14).......... 0.75% 0.25% 0.25% 1.25% Lazard Retirement Small Cap Portfolio (14)....... 0.75% 0.25% 0.25% 1.25%
CONSECO VARIABLE INSURANCE COMPANY 2000 ACCOUNT H INDIVIDUAL ANNUITY - - ------------------------------------------------------------------------------
TOTAL ANNUAL OTHER EXPENSES PORTFOLIO (AFTER EXPENSE EXPENSES REIMBURSEMENT, (AFTER EXPENSE IF ANY, REIMBURSEMENT, MANAGEMENT 12b-1 FOR CERTAIN IF ANY, FOR FEES FEES PORTFOLIOS) CERTAIN PORTFOLIOS) - - --------------------------------------------------------------------------------------------------------------- LORD ABBETT SERIES FUND, INC. Growth & Income Portfolio ....................... 0.50% -- 0.37% 0.87% MITCHELL HUTCHINS SERIES TRUST Growth and Income Portfolio ..................... 0.70% -- 0.53% 1.23% NEUBERGER BERMAN ADVISERS MANAGEMENT TRUST Limited Maturity Bond Portfolio ................. 0.65% -- 0.11% 0.76% Partners Portfolio .............................. 0.80% -- 0.07% 0.87% RYDEX VARIABLE TRUST OTC Fund......................................... 0.75% - 0.80% 1.55% Nova Fund........................................ 0.75% - 0.80% 1.55% SELIGMAN PORTFOLIOS, INC. Seligman Communications and Information Portfolio (15) ................................ 0.75% 0.25% 0.11% 1.11% Seligman Global Technology Portfolio (15)........ 1.00% 0.15% 0.40% 1.55% STRONG OPPORTUNITY FUND II, INC. Opportunity Fund II ............................ 1.00% -- 0.14% 1.14% STRONG VARIABLE INSURANCE FUNDS, INC. Strong Mid Cap Growth Fund II (16) .............. 1.00% -- 0.15% 1.15% VAN ECK WORLDWIDE INSURANCE TRUST (17) Worldwide Bond Fund ............................. 1.00% -- 0.22% 1.22% Worldwide Emerging Markets Fund ................. 1.00% -- 0.54% 1.54% Worldwide Hard Assets Fund ...................... 1.00% -- 0.26% 1.26% Worldwide Real Estate Fund ...................... 1.00% -- 2.23% 3.23%
EXPLANATION OF FEE TABLE AND EXAMPLES: 1. Once each contract year, you can take money out of your contract, without the contingent deferred sales charge, of an amount equal to the greater of: (i) 10% of the value of your contract (on a non-cumulative basis); (ii) the IRS minimum distribution requirement for your contract if issued in connection with certain Individual Retirement Annuities; or (iii) the total of your purchase payments that have been in the contract more than 9 complete years. 2. We will not charge you the transfer fee even if there is more than one transfer in a 30-day period during the accumulation period if the transfer is for the dollar cost averaging or rebalancing programs. We will also not charge you a transfer fee on transfers made at the end of the free look period. All reallocations made on the same day count as one transfer. 3. We will not charge the contract maintenance charge if the value of your contract is $50,000 or more. However, if you make a complete withdrawal, we will charge the full contract maintenance charge for the year. 4. The Fee Table and contract refer to Insurance Charges. The Insurance Charge is equivalent to the aggregate charges that until recently were referred to as a Mortality and Expense Risk Charge and an Administrative Charge by many companies issuing variable annuity contracts. Throughout this prospectus we will refer to this charge as an Insurance Charge. The Fee Table reflects the current Insurance Charges for your contract. We reserve the right to increase the Insurance Charge, in the future, for contracts with the guaranteed minimum death benefit and for contracts with the guaranteed minimum death benefit and the guaranteed minimum income benefit. These maximum charges are also reflected in the Fee Table. 5. The Adviser, Conseco Capital Management, Inc., and the Administrator, Conseco Services, LLC, have contractually agreed to waive a portion of their fees and/or pay a portion of the Portfolio's expenses through 4/30/01 to ensure that total annual operating expenses do not exceed: 0.90% for Conseco 20 Focus Portfolio; 0.85% for Equity Portfolio; 0.85% for Balanced Portfolio; 0.90% for High Yield Portfolio; 0.70% for Fixed Income Portfolio; 0.70% for Government Securities Portfolio and 0.45% for Money Market Portfolio. The Adviser and Administrator may recover any money waived under the contract provisions, to the extent that actual fees and expenses are less than the expense limitation, for a period of 3 years, after the date of the waiver. 6. Because these Portfolios have not completed a full fiscal year, other expenses are estimated. 7. Conseco Capital Management, Inc., since May 1, 1993, has waived its management fees in excess of the annual rate set forth above. Absent such fee waivers, the management fees for the Money Market Portfolio would be 0.60%. 8. The Alger American Leveraged AllCap Portfolio's "Other Expenses" includes .01% of interest expense. 9. The fund has a stepped fee schedule. As a result, the fund's management fee rate generally decreases as the fund's assets increase. 10. The Funds' investment advisers have agreed to waive their advisory fee and reimburse the Funds for additional expenses to the extent that normal operating expenses in any fiscal year, including the investment advisory fee but excluding brokerage commissions, interest, taxes and extraordinary expenses, of each of the Berger IPT-Growth Fund and the Berger IPT-Growth and Income Fund exceed 1.00%, the normal operating expenses in any fiscal year of each of the Berger IPT-Small Company Growth Fund and the Berger IPT-New Generation Fund exceed 1.15%, and the normal operating expenses of the Berger/BIAM IPT-International Fund exceed 1.20% of the respective Fund's average daily net assets. Absent the waiver and reimbursement, Other Expenses for the Berger IPT-Growth Fund, the Berger IPT-New Generation Fund, the Berger IPT-Growth and Income Fund, the Berger IPT-Small Company Growth Fund and the Berger/BIAM IPT-International Fund would have been 1.43%, 0.43%, 0.64%, 2.10% and 1.55%, respectively, and their Total Annual Portfolio Expenses would have been 2.18%, 1.18%, 1.49%, 2.95% and 2.45%, respectively. These waivers/reimbursements may not be terminated or amended except by a vote of the Fund's Board of Trustees. Expenses shown for the Berger IPT-New Generation Fund are based on estimates for the Fund's first full year of operations. 11. Absent a voluntary waiver of the management fee and the voluntary reimbursement of certain other operating expenses by Federated Global Investment Management Corp., the Management Fee and Total Annual Portfolio Expenses for International Equity Fund II would have been 0.75% and 1.46%, respectively. 12. The Fund's actual Total Annual Portfolio Expenses were lower than the figures shown because its custodian fees were reduced under an expense offset arrangement. The expense information presented in the table has been restated to reflect a change in the administrative services fee. Certain expenses of the Fund were absorbed voluntarily by INVESCO in order to ensure that expenses did not exceed 1.05% for the High Yield Fund's average net assets and 1.15% for the Equity Income Fund's average net assets pursuant to a commitment between the Fund and INVESCO. This commitment may be changed at any time following consultation with the board of directors. Without such absorption, but excluding any expense offset arrangements, Other Expenses and Total Annual Operating Expenses for the fiscal year ended December 31, 1999 were 0.48% and 1.08% respectively of the High Yield Fund's average net assets, and 0.44% and 1.19% respectively of the Equity Income Fund's average net assets. 13. Expenses are based upon expenses for the fiscal year ended December 31, 1999, restated to reflect a reduction in the management fee for Growth, Aggressive Growth and Worldwide Growth Portfolios. All expenses are shown without the effect of expense offset arrangements. 14. Effective May 1, 1999, Lazard Asset Management, the Fund's investment adviser, has voluntarily agreed to reimburse all expenses through December 31, 2000 to the extent total annual portfolio expenses exceed in any fiscal year 1.25% of the Portfolio's average daily net assets. Absent such an agreement with the adviser, the total annual portfolio expenses for the year ended December 31, 1999 would have been 5.63% for the Lazard Retirement Equity Portfolio and 7.31% for the Lazard Retirement Small Cap Portfolio. 15. The amount of the Management Fee and Other Expenses are actual expenses for the fiscal year ended December 31, 1999. Seligman Communications and Information Fund and Seligman Global Technology Fund began offering shares charging 12b-1 fees effective May 1, 2000. J. & W. Seligman & Co. Incorporated ("Seligman") voluntarily agreed to reimburse expenses of Seligman Global Technology Portfolio, other than the management fee, which exceed .40%. Without reimbursement, other expenses and total annual portfolio expenses would have been .41% and 1.56% respectively, for Seligman Global Technology Portfolio. There is no assurance that Seligman will continue this policy in the future. 16. Strong Capital Management, Inc., the fund's advisor of the Strong Mid Cap Growth Fund II is currently absorbing expenses of 0.02%. Without these absorptions, the expenses would have been 1.17% for the year ended December 31, 1999. The Adviser has no current intention to, but may in the future, discontinue or modify any waiver of fees or absorption of expenses at its discretion with appropriate notification to its shareholders. 17. Van Eck Associates Corporation (the "Adviser") agreed to assume expenses (excluding interest, foreign taxes and brokerage commissions) exceeding 1.50% of the Worldwide Emerging Markets Fund's average daily net assets for the period January 1, 1999 to May 12, 1999. For the period May 13, 1999 to December 31, 1999, the Adviser agreed to assume expenses (excluding interest, foreign taxes and brokerage commissions) exceeding 1.30% of average daily net assets. For the Worldwide Real Estate Fund, the Adviser agreed to assume expenses (excluding interest, foreign taxes and brokerage commissions) for the period January 2, 1999 to February 28, 1999. The Adviser also agreed to assume expenses exceeding 1.50% of the Worldwide Real Estate Fund's average daily net assets for the period March 3, 1999 to December 31, 1999. The Worldwide Real Estate Fund expenses were also reduced by a fee arrangement based on cash balances left on deposit with the custodian and a directed brokerage arrangement where the Fund directs certain portfolio trades to a broker that, in turn, pays a portion of the Fund's expenses. 9 - - ------------------------------------------------------------------------------ EXAMPLES: The Examples should not be considered a representation of past or future expenses. Actual expenses may be greater or less than those shown. For purposes of these examples, the assumed average contract size is $30,000. The examples in Chart 1 below assume that you do not elect the guaranteed minimum death benefit or the guaranteed minimum income benefit. The examples in Chart 2 below assume that you elect the guaranteed minimum death benefit and the guaranteed minimum income benefit and the maximum insurance charges (as opposed to the current charges for your Contract) apply. Premium taxes are not reflected. Premium taxes may apply depending on the state where you live. 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 your contract at the end of each time period or if you annuitize your contract (except if your annuity date is on or after the 5th contract anniversary and you choose an annuity option that has a life contingency for a minimum of 5 years); (b) If you do not surrender your contract.
TIME PERIODS CHART 1 1 YEAR 3 YEARS - - ------------------------------------------------------------------------------ CONSECO SERIES TRUST Conseco 20 Focus .......................................... (a)$106 (a)$170 (b)$ 31 (b)$ 95 Equity..................................................... (a)$105 (a)$166 (b)$ 30 (b)$ 91 Balanced................................................... (a)$104 (a)$165 (b)$ 30 (b)$ 91 High Yield................................................. (a)$106 (a)$170 (b)$ 31 (b)$ 95 Fixed Income............................................... (a)$104 (a)$163 (b)$ 29 (b)$ 88 Government Securities...................................... (a)$103 (a)$162 (b)$ 29 (b)$ 88 Money Market............................................... (a)$101 (a)$154 (b)$ 26 (b)$ 80 THE ALGER AMERICAN FUND Alger American Growth...................................... (a)$105 (a)$166 (b)$ 30 (b)$ 92 Alger American Leveraged AllCap............................ (a)$106 (a)$171 (b)$ 32 (b)$ 96 Alger American MidCap Growth............................... (a)$105 (a)$168 (b)$ 31 (b)$ 94 Alger American Small Capitalization........................ (a)$106 (a)$170 (b)$ 31 (b)$ 95 AMERICAN CENTURY VARIABLE PORTFOLIOS, INC. VP Income & Growth......................................... (a)$104 (a)$164 (b)$ 29 (b)$ 89 VP International........................................... (a)$111 (a)$183 (b)$ 36 (b)$109 VP Value................................................... (a)$107 (a)$173 (b)$ 32 (b)$ 99 BERGER INSTITUTIONAL PRODUCTS TRUST Berger IPT Growth......................................... (a)$107 (a)$173 (b)$ 32 (b)$ 99 Berger IPT Growth and Income.............................. (a)$107 (a)$173 (b)$ 32 (b)$ 99 Berger IPT Small Company Growth........................... (a)$109 (a)$178 (b)$ 34 (b)$103 Berger IPT New Generation.................................. (a)$109 (a)$178 (b)$ 34 (b)$103 Berger/BIAM IPT International............................. (a)$109 (a)$179 (b)$ 34 (b)$105 THE DREYFUS SOCIALLY RESPONSIBLE GROWTH FUND, INC. ........ (a)$105 (a)$166 (b)$ 30 (b)$ 92 10 CONSECO VARIABLE INSURANCE COMPANY 2000 ACCOUNT H INDIVIDUAL ANNUITY - - -------------------------------------------------------------------------------- TIME PERIODS 1 YEAR 3 YEARS - - -------------------------------------------------------------------------------- DREYFUS STOCK INDEX FUND................................... (a)$ 99 (a)$150 (b)$ 25 (b)$ 76 DREYFUS VARIABLE INVESTMENT FUND Dreyfus VIF Disciplined Stock Portfolio.................... (a)$105 (a)$167 (b)$ 30 (b)$ 93 Dreyfus VIF International Value Portfolio.................. (a)$111 (a)$184 (b)$ 36 (b)$109 FEDERATED INSURANCE SERIES Federated High Income Bond II.............................. (a)$105 (a)$166 (b)$ 30 (b)$ 92 Federated International Equity II.......................... (a)$110 (a)$181 (b)$ 35 (b)$106 Federated Utility II-...................................... (a)$106 (a)$171 (b)$ 32 (b)$ 97 INVESCO VARIABLE INVESTMENT FUNDS, INC. INVESCO VIF - High Yield................................... (a)$108 (a)$175 (b)$ 33 (b)$101 INVESCO VIF - Equity Income................................ (a)$109 (a)$178 (b)$ 34 (b)$104 JANUS ASPEN SERIES Aggressive Growth.......................................... (a)$104 (a)$163 (b)$ 29 (b)$ 88 Growth..................................................... (a)$104 (a)$163 (b)$ 29 (b)$ 88 Worldwide Growth........................................... (a)$104 (a)$164 (b)$ 29 (b)$ 89 LAZARD RETIREMENT SERIES, INC. Lazard Retirement Equity................................... (a)$110 (a)$181 (b)$ 35 (b)$106 Lazard Retirement Small Cap................................. (a)$110 (a)$181 (b)$ 35 (b)$106 LORD ABBETT SERIES FUND, INC. Growth & Income............................................ (a)$106 (a)$169 (b)$ 31 (b)$ 95 MITCHELL HUTCHINS SERIES TRUST Growth and Income.......................................... (a)$109 (a)$180 (b)$ 35 (b)$106 NEUBERGER BERMAN ADVISERS MANAGEMENT TRUST Limited Maturity Bond...................................... (a)$104 (a)$165 (b)$ 30 (b)$ 91 Partners................................................... (a)$106 (a)$169 (b)$ 31 (b)$ 95 RYDEX VARIABLE TRUST OTC........................................................ (a)$113 (a)$190 (b)$ 38 (b)$115 Nova....................................................... (a)$113 (a)$190 (b)$ 38 (b)$115 SELIGMAN PORTFOLIOS, INC. Seligman Communications and Information Portfolio.......... (a)$108 (a)$176 (b)$ 33 (b)$102 Seligman Global Technology Portfolio....................... (a)$113 (a)$190 (b)$ 38 (b)$115 STRONG OPPORTUNITY FUND II, INC. Opportunity Fund II........................................ (a)$108 (a)$177 (b)$ 34 (b)$103 STRONG VARIABLE INSURANCE FUNDS, INC. Strong MidCap Growth II.................................... (a)$109 (a)$178 (b)$ 34 (b)$103 VAN ECK WORLDWIDE INSURANCE TRUST Worldwide Bond............................................. (a)$109 (a)$180 (b)$ 35 (b)$105 Worldwide Emerging Markets................................. (a)$113 (a)$190 (b)$ 38 (b)$115 Worldwide Hard Assets...................................... (a)$110 (a)$181 (b)$ 35 (b)$107 Worldwide Real Estate...................................... (a)$130 (a)$241 (b)$ 55 (b)$166 11 - - -------------------------------------------------------------------------------- TIME PERIODS CHART 2 1 YEAR 3 YEARS - - -------------------------------------------------------------------------------- CONSECO SERIES TRUST Conseco 20 Focus .......................................... (a)$109 (a)$178 (b)$ 34 (b)$103 Equity..................................................... (a)$107 (a)$174 (b)$ 32 (b)$ 99 Balanced................................................... (a)$107 (a)$173 (b)$ 32 (b)$ 99 High Yield ............................................... (a)$109 (a)$178 (b)$ 34 (b)$103 Fixed Income............................................... (a)$106 (a)$170 (b)$ 31 (b)$ 96 Government Securities...................................... (a)$106 (a)$170 (b)$ 31 (b)$ 96 Money Market............................................... (a)$103 (a)$162 (b)$ 29 (b)$ 88 THE ALGER AMERICAN FUND Alger American Growth...................................... (a)$107 (a)$174 (b)$ 33 (b)$100 Alger American Leveraged AllCap............................ (a)$109 (a)$179 (b)$ 34 (b)$104 Alger American MidCap Growth............................... (a)$108 (a)$176 (b)$ 33 (b)$102 Alger American Small Capitalization........................ (a)$109 (a)$178 (b)$ 34 (b)$103 AMERICAN CENTURY VARIABLE PORTFOLIOS, INC. VP Income & Growth......................................... (a)$106 (a)$171 (b)$ 32 (b)$ 97 VP International........................................... (a)$113 (a)$191 (b)$ 38 (b)$117 VP Value................................................... (a)$110 (a)$181 (b)$ 35 (b)$106 BERGER INSTITUTIONAL PRODUCTS TRUST Berger IPT Growth......................................... (a)$110 (a)$181 (b)$ 35 (b)$106 Berger IPT Growth and Income.............................. (a)$110 (a)$181 (b)$ 35 (b)$106 Berger IPT Small Company Growth........................... (a)$111 (a)$185 (b)$ 36 (b)$111 Berger IPT New Generation.................................. (a)$111 (a)$185 (b)$ 36 (b)$111 Berger/BIAM IPT International............................. (a)$112 (a)$187 (b)$ 37 (b)$112 THE DREYFUS SOCIALLY RESPONSIBLE GROWTH FUND, INC.......... (a)$107 (a)$174 (b)$ 33 (b)$100 DREYFUS STOCK INDEX FUND................................... (a)$102 (a)$158 (b)$ 27 (b)$ 83 DREYFUS VARIABLE INVESTMENT FUND Dreyfus VIF Disciplined Stock.............................. (a)$108 (a)$175 (b)$ 33 (b)$100 Dreyfus VIF International Value............................ (a)$113 (a)$191 (b)$ 38 (b)$117 FEDERATED INSURANCE SERIES Federated High Income Bond II.............................. (a)$107 (a)$174 (b)$ 33 (b)$100 Federated International Equity II.......................... (a)$112 (a)$188 (b)$ 37 (b)$114 Federated Utility II....................................... (a)$109 (a)$179 (b)$ 34 (b)$104 INVESCO VARIABLE INVESTMENT FUNDS, INC. INVESCO VIF - High Yield................................... (a)$110 (a)$183 (b)$ 36 (b)$108 INVESCO VIF - Equity Income................................ (a)$111 (a)$186 (b)$ 37 (b)$111 12 CONSECO VARIABLE INSURANCE COMPANY 2000 ACCOUNT H INDIVIDUAL ANNUITY - - -------------------------------------------------------------------------------- TIME PERIODS 1 YEAR 3 YEARS - - -------------------------------------------------------------------------------- JANUS ASPEN SERIES Aggressive Growth.......................................... (a)$106 (a)$170 (b)$ 31 (b)$ 96 Growth..................................................... (a)$106 (a)$170 (b)$ 31 (b)$ 96 Worldwide Growth........................................... (a)$106 (a)$171 (b)$ 32 (b)$ 97 LAZARD RETIREMENT SERIES, INC. Lazard Retirement Equity................................... (a)$112 (a)$188 (b)$ 37 (b)$114 Lazard Retirement Small Cap................................ (a)$112 (a)$188 (b)$ 37 (b)$114 LORD ABBETT SERIES FUND, INC. Growth & Income............................................ (a)$108 (a)$177 (b)$ 33 (b)$102 MITCHELL HUTCHINS SERIES TRUST Growth and Income.......................................... (a)$112 (a)$188 (b)$ 37 (b)$113 NEUBERGER BERMAN ADVISERS MANAGEMENT TRUST Limited Maturity Bond...................................... (a)$107 (a)$173 (b)$ 32 (b)$ 99 Partners................................................... (a)$108 (a)$177 (b)$ 33 (b)$102 RYDEX VARIABLE TRUST OTC........................................................ (a)$115 (a)$198 (b)$ 41 (b)$123 Nova....................................................... (a)$115 (a)$198 (b)$ 41 (b)$123 SELIGMAN PORTFOLIOS, INC. Seligman Communications and Information Portfolio.......... (a)$111 (a)$184 (b)$ 36 (b)$110 Seligman Global Technology Portfolio....................... (a)$115 (a)$198 (b)$ 41 (b)$123 STRONG OPPORTUNITY FUND II, INC. Opportunity Fund II........................................ (a)$111 (a)$185 (b)$ 36 (b)$111 STRONG VARIABLE INSURANCE FUNDS, INC. Strong MidCap Growth II.................................... (a)$111 (a)$185 (b)$ 36 (b)$111 VAN ECK WORLDWIDE INSURANCE TRUST Worldwide Bond............................................. (a)$112 (a)$188 (b)$ 37 (b)$113 Worldwide Emerging Markets................................. (a)$115 (a)$197 (b)$ 40 (b)$123 Worldwide Hard Assets...................................... (a)$112 (a)$189 (b)$ 38 (b)$114 Worldwide Real Estate...................................... (a)$133 (a)$248 (b)$ 58 (b)$173
THE COMPANY Conseco Variable Insurance Company (Conseco Variable) was originally organized in 1937. Prior to October 7, 1998, Conseco Variable Insurance Company was known as Great American Reserve Insurance Company. In certain states, we may still use the name Great American Reserve Insurance Company until our name change is approved in the state. We are principally engaged in the life insurance business in 49 states and the District of Columbia. We are a stock company organized under the laws of the state of Texas and are an indirect wholly-owned subsidiary of Conseco, Inc. Headquartered in Carmel, Indiana, Conseco, Inc. is one of middle America's leading sources for investment, insurance and lending products. Through its subsidiaries and a nationwide network of insurance agents and finance dealers, Conseco, Inc. provides solutions for wealth protection and wealth creation to more than 12 million customers. THE CONSECO ADVANTAGE PLUS ANNUITY CONTRACT This prospectus describes the variable annuity contract we are offering. An annuity is a contract between you (the owner) and our insurance company, where you make purchase payments and we promise to pay you an income in the form of periodic annuity payments. Until you decide to begin receiving annuity payments, your contract is in the accumulation period. Once you begin receiving annuity payments, your contract is in the annuity period. The contract benefits from tax deferral. Tax deferral means that you are not taxed on any earnings or appreciation on the assets in your contract until you take money out of your contract. The contract is called a variable annuity because you can choose among the investment portfolios, and depending upon market conditions, you can make or lose money in any of these portfolios. If you select the variable annuity portion of the contract, the amount of money you are able to accumulate in your contract during the accumulation period depends upon the investment performance of the investment portfolio(s) you select. You can choose to receive annuity payments on a variable basis, fixed basis or a combination of both. If you choose variable payments, the amount of the annuity payments you receive will depend upon the investment performance of the investment portfolio(s) you select for the annuity period. If you select to receive payments on a fixed basis, the payments you receive will remain level. PURCHASE PURCHASE PAYMENTS A PURCHASE PAYMENT is the money you give us to buy the contract. The minimum we will accept is $5,000 when the contract is bought as a non-qualified contract. If you are buying the contract as a qualified contract, the minimum we will accept is $2,000. We will accept up to $2,000,000 in purchase payments without our prior approval. You can make additional purchase payments of $500 or more to a non-qualified contract and $50 each month to a qualified contract. If you select the automatic payment check option, you can make additional payments of $200 each month for non-qualified contracts and $50 each month for qualified contracts. PURCHASE PAYMENT CREDIT FEATURE Each time you make a purchase payment, we will credit an additional 4% to that purchase payment. We refer to these amounts as purchase payment credits or bonus. Purchase payment credits will be allocated in the same way as your purchase payment. An amount equal to the credits will be deducted if you make a withdrawal during the Free Look Period. After the Free Look Period ends, you will have a vested interest in the purchase payment credit amount. We will not deduct any earnings that result from the purchase payment credit at any time. Contract charges are deducted from contract value. Therefore, when we credit your contract with a purchase payment credit, your contract incurs expenses on the total contract value, which includes on the purchase payment credit amount. When you cancel your contract during the Free Look Period, you will forfeit your purchase payment credit. Since charges will have been assessed during the free look period against the higher amount (that is, the purchase payment plus the credit amount), it is possible that upon surrender, particularly in a declining market, you will receive less money back than you would have if you had not received the purchase payment credit. We expect to profit from certain charges assessed under the contract, including certain charges (i.e., the contingent deferred sales charge and the insurance charge) associated with the purchase payment credit. The purchase payment credit feature may not be available in your state. ALLOCATION OF PURCHASE PAYMENTS When you purchase a contract, we will allocate your purchase payment as you direct such as to the fixed account (if available), and/or one or more of the investment portfolios you select. Currently, you can allocate money to as many as 15 investment portfolios at any one time including the fixed account. When you make additional purchase payments, we will allocate them in the same way as your first purchase payment, unless you tell us otherwise. Allocation percentages must be in whole numbers. Once we receive your purchase payment and the necessary information, we will issue your contract and allocate your first purchase payment within 2 business days. If you do not provide us all of the information needed, we will contact you to get it. If for some reason we are unable to complete this process within 5 business days, we will either send back your money or get your permission to keep it until we get all of the necessary information. If you add more money to your contract by making additional purchase payments, we will credit these amounts to your contract as of the business day they are received. Our business day closes when the New York Stock Exchange closes, usually 4:00 P.M. Eastern standard time. FREE LOOK If you change your mind about owning the contract, you can cancel it within 10 days after receiving it (or whatever longer time period is required in your state). When you cancel the contract within this time period, we will not assess a contingent deferred sales charge. On the day we receive your request at our administrative office, we will return the value of your contract, less the purchase payment credits. In some states, we may be required to refund your purchase payment. If you have purchased the contract as an IRA, we are required to return your purchase payment if you decide to cancel your contract within 10 days after receiving it (or whatever period is required in your state). INVESTMENT OPTIONS INVESTMENT PORTFOLIOS The contract offers 47 INVESTMENT PORTFOLIOS which are listed below. YOU CAN INVEST IN UP TO 15 INVESTMENT PORTFOLIOS AT ANY ONE TIME. Additional investment portfolios may be available in the future. You should read the prospectuses for these funds carefully. Copies of these prospectuses will be sent to you with your contract. If you would like a copy of the fund prospectuses, call us at: (800) 557-7043. See Appendix A which contains a summary of investment objectives and strategies for each portfolio. The investment objectives and policies of certain of the investment portfolios are similar to the investment objectives and policies of other mutual funds that certain of the investment advisers manage. Although the objectives and policies may be similar, the investment results of the investment portfolios may be higher or lower than the results of such other mutual funds. The investment advisers cannot guarantee, and make no representation, that the investment results of similar funds will be comparable even though the portfolios have the same investment advisers. A portfolio's performance may be affected by risks specific to certain types of investments, such as foreign securities, derivative investments, non-investment grade debt securities, initial public offerings (IPOs) or companies with relatively small market capitalizations. IPOs and other investment techniques may have a magnified performance impact on a portfolio with a small asset base. A portfolio may not experience similar performance as its assets grow. CONSECO SERIES TRUST Managed by Conseco Capital Management, Inc. (Conseco Capital Management, Inc. is an affiliate of Conseco Variable) Conseco 20 Focus Portfolio Equity Portfolio Balanced Portfolio High Yield Portfolio Fixed Income Portfolio Government Securities Portfolio Money Market Portfolio THE ALGER AMERICAN FUND Managed by Fred Alger Management, Inc. Alger American Growth Portfolio Alger American Leveraged AllCap Portfolio Alger American MidCap Growth Portfolio Alger American Small Capitalization Portfolio AMERICAN CENTURY VARIABLE PORTFOLIOS, INC. Managed by American Century Investment Management, Inc. VP Income & Growth VP International VP Value BERGER INSTITUTIONAL PRODUCTS TRUST Managed by Berger LLC (formerly, Berger Associates, Inc.) Berger IPT Growth Fund Berger IPT Growth and Income Fund Berger IPT Small Company Growth Fund Berger IPT New Generation Fund Managed by BBOI Worldwide LLC Berger/BIAM IPT International Fund THE DREYFUS SOCIALLY RESPONSIBLE GROWTH FUND, INC. Managed by The Dreyfus Corporation (NCM Capital Management Group, Inc.- sub-investment adviser) DREYFUS STOCK INDEX FUND Managed by The Dreyfus Corporation (Mellon Equity Associates-index fund manager) DREYFUS VARIABLE INVESTMENT FUND Managed by The Dreyfus Corporation Dreyfus VIF Disciplined Stock Portfolio Dreyfus VIF International Value Portfolio FEDERATED INSURANCE SERIES Managed by Federated Investment Management Company Federated High Income Bond Fund II Federated Utility Fund II Managed by Federated Global Investment Management Corp. Federated International Equity Fund II INVESCO VARIABLE INVESTMENT FUNDS, INC. (not available for new sales as of May 1, 2000) Managed by INVESCO Funds Group, Inc. INVESCO VIF - High Yield Fund INVESCO VIF - Equity Income Fund JANUS ASPEN SERIES Managed by Janus Capital Corporation Aggressive Growth Portfolio Growth Portfolio Worldwide Growth Portfolio LAZARD RETIREMENT SERIES, INC. Managed by Lazard Asset Management Lazard Retirement Equity Portfolio Lazard Retirement Small Cap Portfolio LORD ABBETT SERIES FUND, INC. Managed by Lord, Abbett & Co. Growth & Income Portfolio MITCHELL HUTCHINS SERIES TRUST Managed by Mitchell Hutchins Asset Management, Inc. Growth and Income Portfolio NEUBERGER BERMAN ADVISERS MANAGEMENT TRUST Managed by Neuberger Berman Management Inc. Limited Maturity Bond Portfolio Partners Portfolio RYDEX VARIABLE TRUST Managed by PADCO Advisors II, Inc. OTC Fund Nova Fund SELIGMAN PORTFOLIOS, INC. Managed by J. & W. Seligman & Co. Incorporated Seligman Communications and Information Portfolio Seligman Global Technology Portfolio STRONG OPPORTUNITY FUND II, INC. Advised by Strong Capital Management, Inc. Opportunity Fund II STRONG VARIABLE INSURANCE FUNDS, INC. Advised by Strong Capital Management, Inc. Strong Mid Cap Growth Fund II VAN ECK WORLDWIDE INSURANCE TRUST Managed by Van Eck Associates Corporation Worldwide Bond Fund Worldwide Emerging Markets Fund Worldwide Hard Assets Fund Worldwide Real Estate Fund Shares of the investment portfolios may be offered in connection with certain variable annuity contracts and variable life insurance policies of various life insurance companies which may or may not be affiliated with us. Certain investment portfolios may also be sold directly to qualified plans. The funds believe that offering their shares in this manner will not be disadvantageous to you. We may enter into certain arrangements under which we are reimbursed by the investment portfolios' advisers, distributors and/or affiliates for the administrative services which we provide to the funds. 16 CONSECO VARIABLE INSURANCE COMPANY 2000 ACCOUNT H INDIVIDUAL ANNUITY - - ------------------------------------------------------------------------------ THE FIXED ACCOUNT You can invest in the fixed account. The fixed account offers an interest rate that is guaranteed to be no less than 3% annually. If you select the fixed account, your money will be placed with our other general account assets. The fixed account option may not be available in your state. THE GENERAL ACCOUNT During the annuity period, if you elect a fixed annuity your annuity payments will be paid out of our general account. We guarantee a specified interest rate used in determining the payments. If you elect a fixed annuity, the payments you receive will remain level. Fixed annuity payments from our general account are only available during the annuity period. VOTING RIGHTS We are the legal owner of the investment portfolio shares. However, when an investment portfolio solicits proxies in conjunction with a vote of shareholders, we are required to obtain from you and other owners instructions as to how to vote those shares. When we receive those instructions, we will vote all of the shares we own in proportion to those instructions. Should we determine that we are no longer required to follow this voting procedure, we will vote the shares ourselves. SUBSTITUTION We may, in the interest of shareholders, deem it necessary to discontinue one or more of the investment portfolios or substitute one of the investment portfolios you have selected with another investment portfolio. We will notify you of our intent to do this. We will obtain prior approval from the Securities and Exchange Commission before any such change is made. TRANSFERS You can transfer money among the fixed account and the investment portfolios. Currently, you can allocate money to up to 15 investment portfolios at any one time. TRANSFERS DURING THE ACCUMULATION PERIOD. You can make a transfer to or from the fixed account, and to or from any investment portfolio by providing us with a written request. The following apply to any transfer during the accumulation period: 1. Currently, there are no limits on the number of transfers that can be made. However, if you make more than one transfer in a 30-day period, a transfer fee of $25 may be deducted. 2. The minimum amount which you can transfer is $500 or your entire value in the investment portfolio. This requirement is waived if the transfer is pursuant to the dollar cost averaging or rebalancing programs, or made at the end of the Free Look Period. 3. You must leave at least $500 in each investment portfolio after you make a transfer unless the entire amount is being transferred. 4. Transfers out of the Fixed Account are limited to 20% of the value of your contract in the fixed account every 6 months. This requirement is waived if the transfer is pursuant to the dollar cost averaging program. 5. Your right to make transfers is subject to modification if we determine, in our sole opinion, that the exercise of the right by one or more owners is, or would be, to the disadvantage of other owners. Restrictions may be applied in any manner reasonably designed to prevent any use of the transfer right which is considered by us to be to the disadvantage of other owners. A modification could be applied to transfers to, or from, one or more of the investment portfolios and could include, but is not limited to: a. the requirement of a minimum time period between each transfer; b. not accepting a transfer request from an agent acting under a power of attorney on behalf of more than one owner; or c. limiting the dollar amount that may be transferred between investment portfolios by an owner at any one time. 6. We reserve the right, at any time, and without prior notice to any party, to terminate, suspend or modify the transfer privilege during the accumulation period. TRANSFERS DURING THE ANNUITY PERIOD. You can only make 2 transfers every contract year during the annuity period. The 2 transfers are free. The following also apply to any transfer during the annuity period: 1. You can make transfers at least 30 days before the due date of the next annuity payment for which the transfer will apply. 2. The minimum amount which you can transfer is $500 or your entire value in the investment portfolio. 3. You must leave at least $500 in each investment portfolio after a transfer unless the entire amount is being transferred. 4. No transfers can be made between the general account and the investment portfolios. You may only make transfers between the investment portfolios. 5. We reserve the right, at any time, and without prior notice to any party, to terminate, suspend or modify the transfer privilege during the annuity period. TELEPHONE/INTERNET TRANSFERS. You can elect to make transfers by telephone. You may also elect to make transfers over the internet. Internet transfers may not be available (check with your registered representative). Internet transfers are subject to our administrative rules and procedures. If you do not want the ability to make transfers by telephone or through the internet, you should notify us in writing. You can also authorize someone else to make transfers for you. If you own the contract with a joint owner, unless we are instructed otherwise, we will accept instructions from either you or the other owner. We will use reasonable procedures to confirm that instructions given to us by telephone are genuine. All telephone calls will be recorded and the caller will be asked to produce personalized data about the owner before we will make the telephone transfer. Personalized data will also be required for internet transfers. We will send you a written confirmation of the transfer. If we fail to use such procedures we may be liable for any losses due to unauthorized or fraudulent instructions. This product is not designed for professional market timing organizations. We reserve the right to modify the transfer privileges described above. DOLLAR COST AVERAGING PROGRAM The dollar cost averaging program allows you to systematically transfer a set amount either monthly, quarterly, semi-annually or annually from the Money Market Portfolio or the fixed account to any of the other investment portfolio(s). By allocating amounts on a regular schedule as opposed to allocating the total amount at one particular time, you may be less susceptible to the impact of market fluctuations. However, this is not guaranteed. You must have at least $2,000 in the Money Market Portfolio or the fixed account in order to participate in the dollar cost averaging program. All dollar cost averaging transfers will be made on the first business day of the month. Dollar cost averaging must be for between 6-60 months. Dollar cost averaging will end when the value in the Money Market Portfolio or the fixed account is zero. We will notify you when that happens. You cannot cancel the dollar cost averaging program once it starts. A transfer request will not automatically terminate the program. If you participate in the dollar cost averaging program, the transfers made under the program are not taken into account in determining any transfer fee. There is no additional charge for this program. However, we reserve the right to charge for this program in the future. We reserve the right, at any time and without prior notice, to terminate, suspend or modify this program. Dollar cost averaging does not assure a profit and does not protect against loss in declining markets. Dollar cost averaging involves continuous investment in the selected investment portfolio(s) regardless of fluctuating price levels of the investment portfolio(s). You should consider your financial ability to continue the dollar cost averaging program through periods of fluctuating price levels. REBALANCING PROGRAM Once your money has been allocated among the investment portfolios, the performance of each portfolio may cause your allocation to shift. If the value of your contract is at least $5,000, you can direct us to automatically rebalance your contract to return to your original percentage allocations by selecting our rebalancing program. The rebalancing program may also be available through the internet (check with your registered representative regarding availability). Rebalancing over the internet is subject to our administrative rules and procedures. You can tell us whether to rebalance quarterly, semi-annually or annually. We will measure these periods from the date you selected. You must use whole percentages in 1% increments for rebalancing. There will be no rebalancing within the fixed account. You can discontinue rebalancing at any time. You can change your rebalancing requests at any time in writing or through internet access which we must receive before the next rebalancing date. If you participate in the rebalancing program, the transfers made under the program are not taken into account in determining any transfer fee. Currently, there is no charge for participating in the rebalancing program. We reserve the right, at any time and without prior notice, to terminate, suspend or modify this program. EXAMPLE: Assume that you want your initial purchase payment split between 2 investment portfolios. You want 40% to be in the Fixed Income Portfolio and 60% to be in the Growth Portfolio. Over the next 21/2 months the bond market does very well while the stock market performs poorly. At the end of the first quarter, the Fixed Income Portfolio now represents 50% of your holdings because of its increase in value. If you had chosen to have your holdings rebalanced quarterly, on the first day of the next quarter, we would sell some of your units in the Fixed Income Portfolio to bring its value back to 40% and use the money to buy more units in the Growth Portfolio to increase those holdings to 60%. ASSET ALLOCATION PROGRAM We understand the importance to you of having advice from a financial adviser regarding your investments in the contract (asset allocation program). Certain investment advisers have made arrangements with us to make their services available to you. Conseco Variable has not made any independent investigation of these advisers and is not endorsing such programs. You may be required to enter into an advisory agreement with your investment adviser to have the fees paid out of your contract during the accumulation phase. Conseco Variable will, pursuant to an agreement with you, make a partial withdrawal from the value of your contract to pay for the services of the investment adviser. If the contract is non-qualified, the withdrawal will be treated like any other distribution and may be included in gross income for federal tax purposes. Further, if you are under age 591/2, it may be subject to a tax penalty. If the contract is qualified, the withdrawal for the payment of fees may not be treated as a taxable distribution if certain conditions are met. Additionally, any withdrawals for this purpose may be subject to a contingent deferred sales charge. You should consult a tax adviser regarding the tax treatment of the payment of investment adviser fees from your contract. SWEEP PROGRAM You can elect to transfer (sweep) your earnings from the fixed account to the investment portfolios on a periodic and systematic basis. EXPENSES There are charges and other expenses associated with the contract that reduce the return on your investment in the contract. These charges and expenses are: INSURANCE CHARGES Each day, we make a deduction for our insurance charges. The insurance charges do not apply to amounts allocated to the fixed account. The insurance charges do not apply to amounts allocated to the fixed account. The insurance charges, on an annual basis, are equal to 1.40% of the average daily value of the contract invested in an investment portfolio if you do not select either the guaranteed minimum death benefit or the guaranteed minimum income benefit. If, at the time of application, you select the guaranteed minimum death benefit, the insurance charges for your contract are equal to 1.70% on an annual basis. If, at the time of application, you select the guaranteed minimum death benefit and the guaranteed minimum income benefit, the insurance charges for your contract are equal to 2.00% on an annual basis. We may increase the insurance charges for your contract up to 1.90%, on an annual basis, if you select the guaranteed minimum death benefit. We may increase the insurance charges for your contract up to 2.40%, on an annual basis, if you select the guaranteed minimum death benefit and the guaranteed minimum income benefit. This charge is included in part of our calculation of the value of the accumulation units and the annuity units. The insurance charge is for all the insurance benefits, e.g., guarantee of annuity rates, the death benefit, for certain expenses of the contract, and for assuming the risk (expense risk) that the current charges will be insufficient in the future to cover the cost of administering the contract. If the charges are insufficient, then we will bear the loss. We do, however, expect to profit from this charge. CONTRACT MAINTENANCE CHARGE During the accumulation period, every year on the anniversary of the date when your contract was issued, we deduct $30 from your contract as a contract maintenance charge. This charge is for certain administrative expenses associated with the contract. No contract maintenance charge is deducted during the annuity period. We do not deduct the contract maintenance charge if the value of your contract is $50,000 or more on the contract anniversary. If you make a full withdrawal on other than a contract anniversary, and the value of your contract is less than $50,000, we will deduct the full contract maintenance charge at the time of the full withdrawal. If, when you begin to receive annuity payments, the annuity date is a different date than your contract anniversary we will deduct the full contract maintenance charge on the annuity date unless the contract value on the annuity date is $50,000 or more. The contract maintenance charge will be deducted first from the fixed account. If there is insufficient value in the fixed account, the fee will then be deducted from the investment portfolio with the largest balance. CONTINGENT DEFERRED SALES CHARGE During the accumulation period, you can make withdrawals from your contract. A contingent deferred sales charge may be assessed against purchase payments withdrawn. We keep track of each purchase payment you make. Subject to the waivers discussed below, if you make a withdrawal and it has been less than the stated number of years since you made your purchase payment, we will assess a contingent deferred sales charge. The contingent deferred sales charge compensates us for expenses associated with selling the contract. The charge is as follows: NO. OF CONTRACT YEARS FROM CONTINGENT DEFERRED RECEIPT OF PURCHASE PAYMENT SALES CHARGE ----------------------------------------------------------------------- 0-1............................................... 8% 2................................................. 8% 3................................................. 8% 4................................................. 8% 5................................................. 7% 6................................................. 6% 7................................................. 5% 8................................................. 3% 9................................................. 1% 10 or more........................................ 0% Each purchase payment has its own contingent deferred sales charge period. When you make a withdrawal, the charge is deducted first from purchase payments (oldest to newest), and then from earnings. For tax purposes, withdrawals are generally considered to have come from earnings first. FREE WITHDRAWALS. Once each contract year you can take money out of your contract, without the contingent deferred sales charge, of an amount equal to the greater of: o 10% of the value of your contract (on a non-cumulative basis); o the IRS minimum distribution requirement for this contract if it was issued as an individual retirement annuity; or o the total of your purchase payments that have been in the contract for more than 9 complete years. UNEMPLOYMENT BENEFIT. We will allow a one time free partial withdrawal of up to 50% of your contract value if: o your contract has been in force for at least 1 year; o you provide us with a letter of determination from your state's Department of Labor indicating that you qualify for and have been receiving unemployment benefits for at least 60 consecutive days; o you were employed on a full time basis and working at least 30 hours per week on the date your contract was issued; o your employment was involuntarily terminated by your employer; and o you certify to us that you are still unemployed when you make the withdrawal request. This benefit may not be available in your state. REDUCTION OR ELIMINATION OF THE CONTINGENT DEFERRED SALES CHARGE We will reduce or eliminate the amount of the contingent deferred sales charge when the contract is sold under circumstances which reduce our sales expenses. Some examples are: if there is a large group of individuals that will be purchasing the contract or a prospective purchaser already had a relationship with us. We will not deduct a contingent deferred sales charge when a contract is issued to an officer, director or employee of our company or any of our affiliates. Any circumstances resulting in the reduction or elimination of the contingent deferred sales charge requires our prior approval. In no event will reduction or elimination of the contingent deferred sales charge be permitted where it would be unfairly discriminatory to any person. TRANSFER FEE You can make one free transfer every 30 days during the accumulation period. If you make more than one transfer in a 30-day period, you may be charged a transfer fee of $25 per transfer. The two transfers permitted each year during the annuity period are free. We reserve the right to change the transfer fee. The transfer fee is deducted from the investment option that you transfer your funds from. If you transfer your entire interest from an investment option, the transfer fee is deducted from the amount transferred. If there are multiple investment options from which you transfer funds, the transfer fee will be deducted first from the fixed account, and then from the investment portfolio with the largest balance that is involved in the transfer. Transfers made at the end of the Free Look Period by us are not counted in determining the transfer fee. If the transfer is part of the dollar cost averaging or rebalancing program it will not count in determining the transfer fee. All reallocations made on the same date count as one transfer. PREMIUM TAXES Some states and other governmental entities (e.g., municipalities) charge premium taxes or similar taxes. We are responsible for the payment of these taxes and will make a deduction from the value of the contract for them. These taxes are due either when the contract is issued or when annuity payments begin. It is our current practice to deduct these taxes when either annuity payments begin, a death benefit is paid or upon partial or full surrender of the contract. We may in the future discontinue this practice and assess the charge when the tax is due. Premium taxes currently range from 0% to 3.5%, depending on the jurisdiction. INCOME TAXES We will deduct from the contract any income taxes which we incur because of the contract. At the present time, we are not making any such deductions. INVESTMENT PORTFOLIO EXPENSES There are deductions from and expenses paid out of the assets of the various investment portfolios, which are described in the attached fund prospectuses. CONTRACT VALUE Your contract value is the sum of your interest in the various investment portfolios and our fixed account. Your interest in the investment portfolio(s) will vary depending upon the investment performance of the portfolios you choose. In order to keep track of your contract value in an investment portfolio, we use a unit of measure called an accumulation unit. During the annuity period of your contract we call the unit an annuity unit. The value of your contract is affected by the investment performance of the portfolios, the expenses of the portfolios and the deduction of charges under the contract. ACCUMULATION UNITS Initially, the accumulation unit value for each account was arbitrarily set. Every business day, we determine the value of an accumulation unit for each of the investment portfolios by multiplying the accumulation unit value for the previous period by a factor for the current period. The factor is determined by: 1. dividing the value of an investment portfolio share at the end of the current period (and any charges for taxes) by the value of an investment portfolio share for the previous period; and 2. subtracting the daily amount of the insurance charges. The value of an accumulation unit may go up or down from business day to business day. When you make a purchase payment, we credit your contract with accumulation units. The number of accumulation units credited is determined by dividing the amount of the purchase payment allocated, including any purchase payment credit, to an investment portfolio by the value of the accumulation unit for that investment portfolio. When you make a withdrawal, we deduct accumulation units from your contract representing the withdrawal. We also deduct accumulation units when we deduct certain charges under the contract. We calculate the value of an accumulation unit for each investment portfolio after the New York Stock Exchange closes each day and then credit your contract. EXAMPLE On Wednesday, we receive an additional purchase payment of $4,000 from you and we credit your contract with the 4% purchase payment credit. You have told us you want this to go to the Equity Portfolio. When the New York Stock Exchange closes on that Wednesday, we determine that the value of an accumulation unit for the Equity Portfolio is $12.25. We then divide $4,160 ($4,000 purchase payment plus $160 credit) by $12.25 and credit your contract on Wednesday night with 339.59 accumulation units for the Equity Portfolio. ACCESS TO YOUR MONEY You can have access to the money in your contract: o by making a withdrawal (either a partial or a complete withdrawal); o by electing to receive annuity payments; or o when a death benefit is paid to your beneficiary. In general, withdrawals can only be made during the accumulation period. When you make a complete withdrawal, you will receive the value of the contract on the day you made the withdrawal, (i) less any applicable contingent deferred sales charge; (ii) less any contract maintenance charge; and (iii) less any applicable premium tax. This amount is the contract withdrawal value. You must tell us which account (investment portfolio(s), and/or the fixed account) you want the partial withdrawal to come from. Under most circumstances, the amount of any partial withdrawal from any investment portfolio, or the fixed account must be at least $500. We require that after a partial withdrawal is made, that at least $500 is left in at least one investment portfolio. If you do not have at least $500 in one investment portfolio, we reserve the right to terminate the contract and pay you the contract withdrawal value. Once we receive your written request for a withdrawal from an investment portfolio we will pay the amount of any withdrawal within 7 days. INCOME TAXES, TAX PENALTIES AND CERTAIN RESTRICTIONS MAY APPLY TO ANY WITHDRAWAL YOU MAKE. SYSTEMATIC WITHDRAWAL PROGRAM The systematic withdrawal program allows you to choose to receive your automatic payments either monthly, quarterly, semi-annually or annually. You must have at least $5,000 in your contract to start the program. You can instruct us to withdraw a specific amount which can be a percentage of the value of your contract or a dollar amount. You can instruct us to withdraw a level dollar amount or percentage from specified investment options (largest account balance or on a pro-rata basis). If you do a reallocation and do not specify investment options, all systematic withdrawals will then default to a pro-rata basis. The systematic withdrawal program will end any time you designate or when the contract value is exhausted, whichever occurs first. If you make a partial withdrawal outside the program and the value of your contract is less than $5,000 the program will automatically terminate. We do not have any charge for this program, however, the withdrawal may be subject to a contingent deferred sales charge. INCOME TAXES, TAX PENALTIES AND CERTAIN RESTRICTIONS (UNDER 403(B) CONTRACTS, SEE "TAXES--WITHDRAWALS--TAX-SHELTERED ANNUITIES") MAY APPLY TO SYSTEMATIC WITHDRAWALS. SUSPENSION OF PAYMENTS OR TRANSFERS We may be required to suspend or postpone payments for withdrawals or transfers for any period when: 1. the New York Stock Exchange is closed (other than customary weekend and holiday closings); 2. trading on the New York Stock Exchange is restricted; 3. an emergency exists as a result of which disposal of shares of the investment portfolios is not reasonably practicable or we cannot reasonably value the shares of the investment portfolios; 4. during any other period when the SEC, by order, so permits for the protection of owners. We have reserved the right to defer payment for a withdrawal or transfer from the fixed account for the period permitted by law but not for more than six months. DEATH BENEFIT UPON YOUR DEATH DURING THE ACCUMULATION PERIOD If you, or your joint owner, die before annuity payments begin, we will pay a death benefit to your beneficiary. If you have a joint owner, the surviving joint owner will be treated as the primary beneficiary. Any other beneficiary designation on record at the time of death will be treated as a contingent beneficiary. 22 CONSECO VARIABLE INSURANCE COMPANY 2000 ACCOUNT H INDIVIDUAL ANNUITY - - ------------------------------------------------------------------------------ DEATH BENEFIT AMOUNT DURING THE ACCUMULATION PERIOD If death occurs prior to age 80, the amount of the death benefit will be the greater of: (1) the value of your contract as of the business day we receive proof of death and a payment election; or (2) the total purchase payments you have made, less any adjusted partial withdrawals and contingent deferred sales charges. If you are age 80 or over, the death benefit will be equal to the value of your contract. OPTIONAL GUARANTEED MINIMUM DEATH BENEFIT. For an extra charge, at the time you purchase the contract, you can choose the optional guaranteed minimum death benefit option. Under this option, if you die before age 80, the death benefit will be the greater of: (1) the total purchase payments you have made, less all partial withdrawals, contingent deferred sales charges and any applicable premium taxes; (2) the value of your contract as of the business day we receive proof of death and a payment election; or (3) the largest contract value on any contract anniversary before the owner or joint owner's death, less any adjusted partial withdrawals, and limited to no more than twice the amount of purchase payments paid less any adjusted partial withdrawals. Adjusted partial withdrawal means: o the amount of the partial withdrawal (including the applicable contingent deferred sales charges and premium taxes); multiplied by o the amount of the death benefit just before the partial withdrawal; divided by o the value of your contract just before the partial withdrawal. If death occurs at age 80 or later, the death benefit will be the greater of: (1) the contract value as of the business day we receive proof of death and a payment election; or (2) the death benefit as of the last contract anniversary before your 80th birthday, less any adjusted partial withdrawal. If joint owners are named, the death benefit is determined based on the age of the oldest owner and is payable on the first death. If the owner is a non-natural person, the death of an annuitant will be treated as the death of the owner. This benefit may not be available in your state. The value of your contract for purposes of calculating any death benefit amount will be determined as of the business day we receive due proof of death and an election for the payment method (see below). After the death benefit amount is calculated, it will remain in the investment portfolios and/or the fixed account until distribution begins. Until we distribute the death benefit amount, the death benefit amount in the investment portfolios will be subject to investment risk. PAYMENT OF THE DEATH BENEFIT DURING THE ACCUMULATION PERIOD Unless already selected by you, a beneficiary must elect the death benefit to be paid under one of the options described below in the event of your death during the accumulation period. OPTION 1 - lump sum payment of the death benefit; or OPTION 2 - the payment of the entire death benefit within 5 years of the date of death of the owner or any joint owner; or OPTION 3 - payment of the death benefit under an annuity option over the lifetime of the beneficiary, or over a period not extending beyond the life expectancy of the beneficiary, with distribution beginning within 1 year of the date of your death or of any joint owner. Any portion of the death benefit not applied under Option 3 within 1 year of the date of your death, or that of a joint owner, must be distributed within 5 years of the date of death. Unless you have previously designated one of the payment options above, a beneficiary who is a spouse of the owner may elect to: o continue the contract in his or her own name at the then current contract value; o elect a lump sum payment of the death benefit; or o apply the death benefit to an annuity option. If a lump sum payment is requested, the amount will be paid within 7 days, unless the suspension of payments provision is in effect. Payment to the beneficiary, in any other form than a lump sum, may only be elected during the 60 day period beginning with the date of receipt by us of proof of death. 23 - - ------------------------------------------------------------------------------ DEATH OF CONTRACT OWNER DURING THE ANNUITY PERIOD If you or a joint owner, who is not the annuitant, dies during the annuity period, any remaining payments under the annuity option elected will continue to be made at least as rapidly as under the method of distribution in effect at the time of the owner's or joint owner's death. Upon the owner's death during the annuity period, the beneficiary becomes the owner. Upon the death of any Joint Owner during the annuity period, the surviving owner, if any, will be treated as the primary beneficiary. DEATH OF ANNUITANT If the annuitant, who is not an owner or joint owner, dies during the accumulation period, you will automatically become the annuitant. You may designate a new annuitant subject to our approval. If the owner is a non-natural person (for example, a corporation), then the death of the annuitant will be treated as the death of the owner, and a new annuitant may not be named. Upon the death of the annuitant during the annuity period, the death benefit, if any, will be as provided for in the annuity option selected. The death benefit will be paid at least as rapidly as under the method of distribution in effect at the annuitant's death. ANNUITY PAYMENTS (THE ANNUITY PERIOD) Under the contract you can receive regular income payments. We call these payments annuity payments. You can choose the month and year in which those payments begin. We call that date the annuity date. Your annuity date must be the first day of a calendar month and cannot be any earlier than 90 days after we issue the contract. Annuity payments must begin by the earlier of the annuitant's 90th birthday or the maximum date allowed by law. To receive the guaranteed minimum income benefit, there are certain annuity date requirements (see below). The annuitant is the person whose life we look to when we determine annuity payments. You can change the annuity date at any time prior to 30 days of the existing annuity date by providing us with a written request. You can also choose among income plans. We call those annuity options. You can elect an annuity option by providing us with a written request. You can change the annuity option any time before 30 days of the existing annuity date. If you do not choose an annuity option, we will assume that you selected Option 2 which provides a life annuity with 10 years of guaranteed payments. During the annuity period, you can choose to have payments come from the investment portfolios, the fixed account or both. If you do not tell us otherwise, your annuity payments will be based on the investment allocations in the investment portfolios and fixed account that were in place on the annuity date. ANNUITY PAYMENT AMOUNT If you choose to have any portion of your annuity payments come from the investment portfolio(s), the dollar amount of your payment will depend upon 3 things: 1) The value of your contract in the investment portfolio(s) on the annuity date; 2) The 3% or 5% (as you selected) assumed investment rate used in the annuity table for the contract; and 3) The performance of the investment portfolio(s) you selected. You can choose either a 3% or a 5% assumed investment rate. If the actual performance exceeds the 3% or 5% (as you selected) assumed investment rate, your annuity payments will increase. Similarly, if the actual rate is less than 3% or 5% (as you selected) your annuity payments will decrease. On the annuity date, the value of your contract, less any premium tax, less any contingent deferred sales charge, and less any contract maintenance charge will be applied under the annuity option you selected. If you select an annuity date that is on or after the 5th contract anniversary, and you choose an annuity option that has a life contingency for a minimum of 5 years, we will apply the value of your contract, less any premium tax and less any contract maintenance charge to the annuity option you elect. Annuity payments are made monthly unless you have less than $5,000 to apply toward a payment. In that case, we may make a single lump sum payment to you instead of annuity payments. Likewise, if your annuity payments would be less than $50 a month, we have the right to change the frequency of payments so that your annuity payments are at least $50. 24 OPTIONAL GUARANTEED MINIMUM INCOME BENEFIT. For an extra charge, you can elect the guaranteed minimum income benefit. You may not select this benefit unless you also select the optional guaranteed minimum death benefit. Under the guaranteed minimum income benefit, a guaranteed minimum amount will be applied to your annuity option to provide annuity payments. Prior to your 80th birthday, this amount is equal to: 1) the largest contract value on any contract anniversary; less 2) any adjusted partial withdrawals. This amount is limited to no more than twice the amount of purchase payments made less any adjusted partial withdrawals. Adjusted partial withdrawal is equal to the partial withdrawal amount, including the contingent deferred sales charge and any applicable premium taxes; multiplied by the amount of the guaranteed minimum income benefit just before the partial withdrawal; divided by the value of your contract just before the partial withdrawal. The guaranteed minimum income amount after your 80th birthday is equal to the greater of (1) the value of your contract, less any premium tax, less any contingent deferred sales charge, and less any contract maintenance charge; or (2) the guaranteed minimum income benefit as of the last contract anniversary before your 80th birthday less any adjusted partial withdrawals. If you elect this benefit, the following limitations will apply: o You must choose either annuity option 2 or 4, unless otherwise agreed to by us. If you do not choose an annuity option, Annuity Option 2. Life Income With Period Certain, will be applied. o If you are age 50 or over on the date we issue the contract, the annuity date must be on or after the later of your 65th birthday, or the 7th contract anniversary. o If you are under age 50 on the date we issue your contract, the annuity date must be on or after the 15th contract anniversary. o The annuity date selected must occur within 30 days following a contract anniversary. o If there are joint owners, the age of the oldest owner will be used to determine the guaranteed minimum income benefit. If the contract is owned by a non-natural person, then owner will mean the annuitant for purposes of this benefit. On the annuity date, the initial income benefit will not be less than the guaranteed minimum income benefit base applied to the guaranteed annuity payment factors under the annuity option elected. This benefit may not be available in your state. ANNUITY OPTIONS You can choose one of the following annuity options or any other annuity option which is acceptable to us. After annuity payments begin, you cannot change the annuity option. OPTION 1. Income for a Specified Period. We will pay income for a specific number of years in equal installments. However, you may elect to receive a single lump sum payment which will be equal to the present value of the remaining payments (as of the date of proof of death) discounted at the assumed investment rate for a variable annuity payout option. OPTION 2. Life Income With Period Certain. We will make monthly annuity payments so long as the annuitant is alive and then for a specified period certain. If an annuitant, who is not the owner, dies before we have made all of the payments, we will continue to make the payments for the remainder of the guaranteed period to you. If you do not want to receive payments, you can request a single lump sum payment which will be equal to the present value of the remaining payments (as of the date of proof of death) discounted at the assumed investment rate for a variable annuity payout option. OPTION 3. Income of Specified Amount. We will pay income of a specified amount until the principal and interest are exhausted. However, you may elect to receive a single lump sum payment which will be equal to the present value of the remaining payments (as of the date of proof of death) discounted at the assumed investment rate for a variable annuity payout option. OPTION 4. Joint And Survivor Annuity. We will make monthly annuity payments so long as the annuitant and a joint annuitant are both alive. The annuitant must be at least 50 years old, and the joint annuitant must be at least 45 years old at the time of the first payment. TAXES NOTE: WE HAVE PREPARED THE FOLLOWING INFORMATION ON TAXES AS A GENERAL DISCUSSION OF THE SUBJECT. IT IS NOT INTENDED AS TAX ADVICE TO ANY INDIVIDUAL. YOU SHOULD CONSULT YOUR OWN TAX ADVISER ABOUT YOUR OWN CIRCUMSTANCES. WE HAVE INCLUDED AN ADDITIONAL DISCUSSION REGARDING TAXES IN THE STATEMENT OF ADDITIONAL INFORMATION. ANNUITY CONTRACTS IN GENERAL Annuity contracts are a means of setting aside money for future needs, usually retirement. Congress recognized how important saving for retirement was and provided special rules in the Internal Revenue Code (Code) for annuities. Simply stated, these rules provide that you will not be taxed on the earnings on the money held in your annuity contract until you take the money out. This is referred to as TAX-DEFERRAL. There are different rules as to how you will be taxed depending on how you take the money out and the type of contract -- qualified or non-qualified (see following sections). You, as the owner, will not be taxed on increases in the value of your contract until a distribution occurs -- either as a withdrawal or as annuity payments. When you make a withdrawal you are taxed on the amount of the withdrawal that is earnings. For annuity payments, different rules apply. A portion of each annuity payment is treated as a partial return of your purchase payments and will not be taxed. The remaining portion of the annuity payment will be treated as ordinary income. How the annuity payment is divided between taxable and non-taxable portions depends upon the period over which the annuity payments are expected to be made. Annuity payments received after you have received all of your purchase payments are fully includible in income. When a non-qualified contract is owned by a non-natural person (e.g., corporation or certain other entities other than a trust holding the contract as an agent for a natural person), the contract will generally not be treated as an annuity for tax purposes. QUALIFIED AND NON-QUALIFIED CONTRACTS If you purchase the contract as an individual and not under any pension plan, specially sponsored program or an Individual Retirement Annuity (IRA), your contract is referred to as a NON-QUALIFIED CONTRACT. If you purchase the contract under a pension plan, specially sponsored program or an IRA, your contract is referred to as a QUALIFIED CONTRACT. A qualified contract will not provide any necessary or additional tax deferral if it is used to fund a qualified plan that is tax deferred. However, the contract has features and benefits other than tax deferral that may make it an appropriate investment for a qualified plan. You should consult your tax adviser regarding these features and benefits prior to purchasing a qualified contract. WITHDRAWALS--NON-QUALIFIED CONTRACTS If you make a withdrawal from your contract, the Code generally treats such a withdrawal as first coming from earnings and then from your purchase payments. Such withdrawn earnings are includible in income. The Code also provides that any amount received under an annuity contract which is included in income may be subject to a penalty. The amount of the penalty is equal to 10% of the amount that is includible in income. Some withdrawals will be exempt from the penalty. They include any amounts: (1) paid on or after you reach age 591/2; (2) paid after you die; (3) paid if you become totally disabled (as that term is defined in the Code); (4) paid in a series of substantially equal payments made annually (or more frequently) for life or a period not exceeding life expectancy; (5) paid under an immediate annuity; or (6) which are allocable to purchase payments made prior to August 14, 1982. WITHDRAWALS--QUALIFIED CONTRACTS If you make a withdrawal from your qualified contract, a portion of the withdrawal is treated as taxable income. This portion depends on the ratio of pre-tax purchase payments to the after-tax purchase payments in your contract. If all of your purchase payments were made with pre-tax money then the full amount of any withdrawal is includible in taxable income. Special rules may apply to withdrawals from certain types of qualified contracts. The Code also provides that any amount received under a qualified contract which is included in income may be subject to a penalty. The amount of the penalty is equal to 10% of the amount that is includible in income. Some withdrawals will be exempt from the penalty. They include any amounts: (1) paid on or after you reach age 591/2; (2) paid after you die; (3) paid if you become totally disabled (as that term is defined in the Code); (4) paid to you after leaving your employment in a series of substantially equal periodic payments made annually (or more frequently) under a lifetime annuity; (5) paid to you after you have attained age 55 and you have left your employment; (6) paid for certain allowable medical expenses (as defined in the Code); (7) paid pursuant to a qualified domestic relations order; (8) paid on account of an IRS levy upon the qualified contract; (9) paid from an IRA for medical insurance (as defined in the Code); (10) paid from an IRA for qualified higher education expenses; or (11) paid from an IRA for up to $10,000 for qualified first-time homebuyer expenses (as defined in the Code). The exceptions in (5) and (7) above do not apply to IRAs. The exception in (4) above applies to IRAs but without the requirement of leaving employment. We have provided a more complete discussion in the Statement of Additional Information. WITHDRAWALS--TAX-SHELTERED ANNUITIES The Code limits the withdrawal of amounts attributable to purchase payments made by owners under a salary reduction agreement. Withdrawals can only be made when a contract owner: (1) reaches age 591/2; (2) leaves his or her job; (3) dies; (4) becomes disabled (as that term is defined in the Code); (5) in the case of hardship; or (6) pursuant to a qualified domestic relations order, if otherwise permitted. However, in the case of hardship, the owner can only withdraw the purchase payments and not any earnings. You should consult your own tax adviser about your own circumstances. DIVERSIFICATION The Code provides that the underlying investments for a variable annuity must satisfy certain diversification requirements in order to be treated as an annuity contract. We believe that the investment portfolios are being managed so as to comply with the requirements. INVESTOR CONTROL Neither the Code nor the Internal Revenue Service Regulations issued to date provide guidance as to the circumstances under which you, because of the degree of control you exercise over the underlying investments, and not us would be considered the owner of the shares of the investment portfolios. If you are considered the owner of the shares, it will result in the loss of the favorable tax treatment for the contract. It is unknown to what extent under federal tax law, owners are permitted to select investment portfolios, to make transfers among the investment portfolios or the number and type of investment portfolios owners may select from without being considered the owner of the shares. If any guidance is provided which is considered a new position, then the guidance would generally be applied prospectively. However, if such guidance is considered not to be a new position, it may be applied retroactively. This would mean that you, as the owner of the contract, could be treated as the owner of the investment portfolios. Due to the uncertainty in this area, we reserve the right to modify the contract as reasonably deemed necessary to maintain favorable tax treatment. PERFORMANCE We may periodically advertise performance of the annuity investment in the various investment portfolios. We will calculate performance by determining the percentage change in the value of an accumulation unit by dividing the increase (decrease) for that unit by the value of the accumulation unit at the beginning of the period. This performance number reflects the deduction of the insurance charges and the fees and expenses of the investment portfolio. It does not reflect the deduction of any applicable contract maintenance charge and contingent deferred sales charge. The deduction of any applicable contract maintenance charge and contingent deferred sales charge would reduce the percentage increase or make greater any percentage decrease. Any advertisement will also include standardized average annual total return figures which reflect the deduction of the insurance charges, contract maintenance charge, contingent deferred sales charge and the fees and expenses of the investment portfolio. Any performance advertised will reflect the bonus credits applied to a contract. For periods starting prior to the date the contracts were first offered, the performance will be based on the historical performance of the corresponding portfolios, modified to reflect the charges and expenses of the contract as if the contract had been in existence during the period stated in the advertisement. These figures should not be interpreted to reflect actual historical performance. We may, from time to time, include in its advertising and sales materials, tax deferred compounding charts and other hypothetical illustrations, which may include comparisons of currently taxable and tax deferred investment programs, based on selected tax brackets. OTHER INFORMATION THE SEPARATE ACCOUNT We established a separate account, Conseco Variable Annuity Account H (Separate Account), to hold the assets that underlie the contracts. Our Board of Directors adopted a resolution to establish the Separate Account under Texas Insurance law on November 1, 1999. The Separate Account is registered with the SEC as a unit investment trust under the Investment Company Act of 1940. The assets of the Separate Account are held in our name on behalf of the Separate Account and legally belong to us. However, those assets that underlie the contracts, are not chargeable with liabilities arising out of any other business we may conduct. All the income, gains and losses (realized or unrealized) resulting from these assets are credited to or charged against the contracts and not against any other contracts we may issue. The obligations under the contracts are obligations of Conseco Variable Insurance Company. DISTRIBUTOR Conseco Equity Sales, Inc. (CES), 11815 N. Pennsylvania Street, Carmel, Indiana 46032, acts as the distributor of the contracts. CES, our affiliate, is registered as a broker-dealer under the Securities Exchange Act of 1934. CES is a member of the National Association of Securities Dealers, Inc. Commissions will be paid to broker-dealers who sell the contracts. Broker-dealer commissions may cost up to 8.50% of purchase payments and may include reimbursement of promotional or distribution expenses associated with the marketing of the contracts. We may, by agreement with the broker-dealer, pay commissions as a combination of a certain percentage amount at the time of sale and a trail commission. This combination may result in the broker-dealer receiving more commission over time than would be the case if it had elected to receive only a commission at the time of sale. The commission rate paid to the broker-dealer will depend upon the nature and level of services provided by the broker-dealer. OWNERSHIP OWNER. You, as the OWNER of the contract, have all the rights under the contract. The owner is as designated at the time the contract is issued, unless changed. You can change the owner at any time. A change will automatically revoke any prior owner designation. The change request must be in writing. JOINT OWNER. The contract can be owned by JOINT OWNERS. Any joint owner must be the spouse of the other owner (except where not permitted under state law). Upon the death of either joint owner, the surviving joint owner will be the primary beneficiary. Any other beneficiary designation at the time the contract was issued or as may have been later changed will be treated as a contingent beneficiary unless otherwise indicated in a written notice. BENEFICIARY The BENEFICIARY is the person(s) or entity you name to receive any death benefit. The beneficiary is named at the time the contract is issued. Unless an irrevocable beneficiary has been named, you can change the beneficiary at any time before you die. ASSIGNMENT You can assign the contract at any time during your lifetime. We will not be bound by the assignment until we receive the written notice of the assignment. We will not be liable for any payment or other action we take in accordance with the contract before we receive notice of the assignment. An assignment may be a taxable event. If the contract is issued pursuant to a qualified plan, there are limitations on your ability to assign the contract. FINANCIAL STATEMENTS Our consolidated financial statements have been included in the Statement of Additional Information. There are no financial statements for the Separate Account because the Separate Account commenced operations on February 11, 2000. APPENDIX A PARTICIPATING INVESTMENT PORTFOLIOS Below is a summary of the investment objectives and strategies of each investment portfolio available under the contract. THERE CAN BE NO ASSURANCE THAT THE INVESTMENT OBJECTIVES WILL BE ACHIEVED. The fund prospectuses contain more complete information including a description of the investment objectives, policies, restrictions and risks of each portfolio. CONSECO SERIES TRUST Conseco Series Trust is managed by Conseco Capital Management, Inc. (CCM) which is an affiliate of Conseco Variable. Conseco Series Trust is a mutual fund with multiple portfolios. The following portfolios are available under the contract: Conseco 20 Focus Portfolio The Conseco 20 Focus Portfolio seeks capital appreciation. Normally, the Portfolio will invest at least 65% of its assets in common stocks of companies that the Adviser believes have above-average growth prospects. The Portfolio is non-diversified and will normally concentrate its investments in a core position of approximately 20 - 30 common stocks. Equity Portfolio The Equity Portfolio seeks to provide a high total return consistent with preservation of capital and a prudent level of risk. The portfolio will invest primarily in selected equity securities, including common stocks and other securities having the investment characteristics of common stocks, such as convertible securities and warrants. Balanced Portfolio The Balanced Portfolio seeks a high total investment return, consistent with the preservation of capital and prudent investment risk. Normally, the portfolio invests approximately 50-65% of its assets in equity securities, and the remainder in a combination of fixed income securities, or cash equivalents. High Yield Portfolio The High Yield Portfolio seeks to provide a high level of current income with a secondary objective of capital appreciation. Normally, the adviser invests at least 65% of the Portfolio's assets in below investment grade securities (those rated BB+/Ba1 or lower by independent rating agencies). Fixed Income Portfolio The Fixed Income Portfolio seeks the highest level of income consistent with preservation of capital. The portfolio invests primarily in investment grade debt securities. Government Securities Portfolio The Government Securities Portfolio seeks safety of capital, liquidity and current income. The portfolio will invest primarily in securities issued by the U.S. government or an agency or instrumentality of the U.S. government. Money Market Portfolio The Money Market Portfolio seeks current income consistent with stability of capital and liquidity. The portfolio may invest in U.S. government securities, bank obligations, commercial paper obligations, short-term corporate debt securities and municipal obligations. THE ALGER AMERICAN FUND The Alger American Fund is a mutual fund with multiple portfolios. The manager of the fund is Fred Alger Management, Inc. The following portfolios are available under the contract: Alger American Growth Portfolio The Alger American Growth Portfolio seeks long-term capital appreciation. It focuses on growing companies that generally have broad product lines, markets, financial resources and depth of management. Under normal circumstances, the portfolio invests primarily in the equity securities of large companies. Alger American Leveraged AllCap Portfolio The Alger American Leveraged AllCap Portfolio seeks long-term capital appreciation. Under normal circumstances, the portfolio invests in the equity securities of companies of any size which demonstrate promising growth potential. The portfolio can borrow money in amounts of up to one-third of its total assets to buy additional securities. Alger American MidCap Growth Portfolio The Alger American MidCap Growth Portfolio seeks long-term capital appreciation. It focuses on midsize companies with promising growth potential. Under normal circumstances, the portfolio invests primarily in the equity securities of companies having a market capitalization within the range of companies in the S&P MidCap 400 Index. Alger American Small Capitalization Portfolio The Alger American Small Capitalization Portfolio seeks long-term capital appreciation. It focuses on small, fast-growing companies that offer innovative products, services or technologies to a rapidly expanding marketplace. Under normal circumstances, the portfolio invests primarily in the equity securities of small capitalization companies. AMERICAN CENTURY VARIABLE PORTFOLIOS, INC. American Century Variable Portfolios, Inc. is a mutual fund with multiple portfolios. The fund's investment adviser is American Century Investment Management, Inc. The following portfolios are available under the contract: VP Income & Growth Fund The VP Income & Growth Fund seeks dividend growth, current income and capital appreciation by investing in common stocks. The fund's investment strategy utilizes quantitative management techniques in a two-step process that draws heavily on computer technology. VP International Fund The VP International Fund seeks capital growth. The fund managers use a growth investment strategy developed by American Century to invest in stocks of companies that they believe will increase in value over time. This strategy looks for companies with earnings and revenue growth. International investment involves special risk considerations. These include economic and political conditions, expected inflation rates and currency fluctuations. VP Value Fund The VP Value Fund seeks long-term capital growth. Income is a secondary objective. In selecting stocks for the VP Value Fund, the fund managers look for stocks of medium to large companies that they believe are undervalued at the time of purchase. BERGER INSTITUTIONAL PRODUCTS TRUST Berger Institutional Products Trust is a mutual fund with multiple portfolios. Berger LLC (formerly, Berger Associates, Inc.) is the investment advisor for the Berger IPT-Growth Fund, the Berger IPT-Growth and Income Fund, the Berger IPT-Small Company Growth Fund and the Berger IPT-New Generation Fund. BBOI Worldwide LLC, a joint venture between Berger LLC and Bank of Ireland Asset Management (U.S.) Limited (BIAM), is the investment advisor for the Berger/BIAM IPT-International Fund. BBOI Worldwide LLC has delegated daily management of the Fund to BIAM. Berger LLC and BIAM have entered into an agreement to dissolve BBOI Worldwide LLC. The dissolution of BBOI Worldwide LLC will have no effect on the investment advisory services provided to the Fund. Contingent upon shareholder approval, when BBOI Worldwide LLC is dissolved, Berger LLC will become the Fund's advisor and BIAM will continue to be responsible for day- to-day management of the Fund's portfolio as sub-advisor. If approved by shareholders, these advisory changes are expected to take place in the first half of this year. The following portfolios are available under the contract: Berger IPT-Growth Fund (formerly, Berger IPT-100 Fund) The Berger IPT-Growth Fund aims for long-term capital appreciation. In pursuing that goal, the fund primarily invests in the common stocks of established companies with the potential for strong earnings growth. Berger IPT-Growth and Income Fund The Berger IPT-Growth and Income Fund aims for capital appreciation and has a secondary goal of investing in securities that produce current income for the portfolio. In pursuing these goals, the fund primarily invests in the securities of well-established, growing companies. Berger IPT-Small Company Growth Fund The Berger IPT-Small Company Growth Fund aims for capital appreciation. In pursuing that goal, the fund primarily invests in the common stocks of small companies with the potential for rapid earnings growth. Berger IPT - New Generation Fund The Berger IPT - New Generation Fund seeks capital appreciation. In pursuing that goal, the Fund primarily invests in the common stocks of companies believed to have the potential to change the direction or dynamics of the industries in which they operate or significantly influence the way businesses or consumers conduct their affairs. Berger/BIAM IPT-International Fund The Berger/BIAM IPT-International Fund aims for long-term capital appreciation. In pursuing that goal, the fund primarily invests in a portfolio consisting of common stocks of well-established foreign companies. THE DREYFUS SOCIALLY RESPONSIBLE GROWTH FUND, INC. The Dreyfus Socially Responsible Growth Fund, Inc. is a mutual fund. The investment adviser for the fund is The Dreyfus Corporation. The Dreyfus Socially Responsible Growth Fund, Inc. seeks to provide capital growth, with current income as a secondary goal. To pursue these goals, the fund invests primarily in the common stock of companies that, in the opinion of the fund's management, meet traditional investment standards and conduct their business in a manner that contributes to the enhancement of the quality of life in America. DREYFUS STOCK INDEX FUND The Dreyfus Stock Index Fund is a mutual fund. The investment adviser for the fund is The Dreyfus Corporation. The Dreyfus Stock Index Fund seeks to match the total return of the Standard & Poor's 500 Composite Stock Price Index. To pursue this goal, the fund generally invests in all 500 stocks in the S&P 500 in proportion to their weighting in the index. DREYFUS VARIABLE INVESTMENT FUND The Dreyfus Variable Investment Fund ("Dreyfus VIF") is a mutual fund with multiple portfolios. The investment adviser for the portfolios is The Dreyfus Corporation. The following portfolios are available under the contract: Dreyfus VIF Disciplined Stock Portfolio The Disciplined Stock Portfolio seeks investment returns (consisting of capital appreciation and income) that are greater than the total return performance of stocks represented by the Standard & Poor's 500 Composite Stock Price Index. To pursue this goal, the portfolio invests in a blended portfolio of growth and value stocks chosen through a disciplined investment process. Dreyfus VIF International Value Portfolio The International Value Portfolio seeks long-term capital growth. To pursue this goal, the portfolio ordinarily invests most of its assets in equity securities of foreign issuers which Dreyfus considers to be "value" companies. FEDERATED INSURANCE SERIES Federated Insurance Series is a mutual fund with multiple portfolios. Federated Investment Management Company is the adviser to the Federated High Income Bond Fund II and the Federated Utility Fund II. Federated Global Investment Management Corp. is the adviser to the Federated International Equity Fund II. The following portfolios are available under the contract: Federated High Income Bond Fund II The Federated High Income Bond Fund II's investment objective is to seek high current income by investing primarily in a professionally managed, diversified portfolio of fixed income securities. The fund pursues its investment objective by investing in a diversified portfolio of high-yield, lower-rated corporate bonds. Federated Utility Fund II The Federated Utility Fund II's investment objective is to achieve high current income and moderate capital appreciation. The fund pursues its investment objective by investing under normal market conditions, at least 65% of its assets in equity securities (including convertible securities) of companies that derive at least 50% of their revenues from the provision of electricity, gas and telecommunications related services. Federated International Equity Fund II The Federated International Equity Fund II's investment objective is to obtain a total return on its assets. The fund's total return will consist of two components: (1) changes in the market value of its portfolio securities (both realized and unrealized appreciation); and (2) income received from its portfolio securities. INVESCO VARIABLE INVESTMENT FUNDS, INC. (not available for new sales as of May 1, 2000) INVESCO Variable Investment Funds, Inc. is a mutual fund with multiple portfolios. INVESCO Funds Group, Inc. is the investment adviser for the Fund. The following portfolios are available under the contract: INVESCO VIF - Equity Income Fund The INVESCO VIF - Equity Income Fund's primary goal is high current income, with growth of capital as a secondary objective. The fund normally invests at least 65% of its assets in dividend-paying common and preferred stocks, although in recent years that percentage has been somewhat higher. INVESCO VIF - High Yield Fund The INVESCO VIF - High Yield Fund seeks to provide a high level of current income, with growth of capital as a secondary objective. It invests substantially all of its assets in lower-rated debt securities, commonly called "junk bonds" and preferred stock, including securities issued by foreign companies. JANUS ASPEN SERIES Janus Aspen Series is a mutual fund with multiple portfolios. Janus Capital Corporation is the investment adviser to the fund. The following portfolios are available under your contract: Aggressive Growth Portfolio The Aggressive Growth Portfolio seeks long-term growth of capital. It pursues its objective by investing primarily in common stocks selected for their growth potential, and normally invests at least 50% of its equity assets in medium-sized companies. Growth Portfolio The Growth Portfolio seeks long-term growth of capital in a manner consistent with the preservation of capital. It pursues its objective by investing primarily in common stocks selected for their growth potential. Although the Portfolio can invest in companies of any size, it generally invests in larger, more established companies. Worldwide Growth Portfolio The Worldwide Growth Portfolio seeks long-term growth of capital in a manner consistent with the preservation of capital. It pursues its objective by investing primarily in common stocks of companies of any size throughout the world. The portfolio normally invests in issuers from at least five different countries, including the United States. The portfolio may at times invest in fewer than five countries or even a single country. LAZARD RETIREMENT SERIES, INC. Lazard Retirement Series, Inc. is a mutual fund with multiple portfolios. Lazard Asset Management serves as the investment manager of the portfolios. The investment manager is a division of Lazard Freres, a New York limited liability company, which is registered as an investment adviser with the SEC. The following portfolios are available under the contract: Lazard Retirement Equity Portfolio The Lazard Retirement Equity Portfolio seeks long-term capital appreciation. The portfolio invests primarily in equity securities, principally common stocks, of relatively large U.S. companies (those whose total market value is more than $1 billion) that the investment manager believes are undervalued based on their earnings, cash flow or asset values. Lazard Retirement Small Cap Portfolio The Lazard Retirement Small Cap Portfolio seeks long-term capital appreciation. The portfolio invests primarily in equity securities, principally common stocks, of relatively small U.S. companies in the range of the Russell 2000 Index that the investment manager believes are undervalued based on their earnings, cash flow or asset values. LORD ABBETT SERIES FUND, INC. Lord Abbett Series Fund, Inc. is a mutual fund with multiple portfolios. The fund's investment adviser is Lord, Abbett & Co. The following portfolio is available under the contract: Growth & Income Portfolio The Growth & Income Portfolio's investment objective is long-term growth of capital and income without excessive fluctuations in market value. MITCHELL HUTCHINS SERIES TRUST Mitchell Hutchins Series Trust is a mutual fund with multiple portfolios. Mitchell Hutchins Asset Management Inc. is the investment adviser of the fund. The following portfolio is available under the contract: Growth and Income Portfolio The Growth and Income Portfolio's investment objective is current income and capital growth. The portfolio invests primarily in dividend-paying stocks of companies that its investment adviser believes have potential for rapid earnings growth. NEUBERGER BERMAN ADVISERS MANAGEMENT TRUST Neuberger Berman Advisers Management Trust is a mutual fund with multiple portfolios. Neuberger Berman Management Inc. is the investment adviser. The following portfolios are available under the contract: Limited Maturity Bond Portfolio The Limited Maturity Bond Portfolio seeks the highest available current income consistent with liquidity and low risk to principal; total return is a secondary goal. To pursue these goals, the portfolio invests mainly in investment-grade bonds and other debt securities from U.S. government and corporate issuers. These may include mortgage- and asset-backed securities. Partners Portfolio The Partners Portfolio seeks growth of capital. To pursue this goal, the portfolio invests mainly in common stocks of mid- to large-capitalization companies. The managers look for well-managed companies whose stock prices are believed to be undervalued. RYDEX VARIABLE TRUST Rydex Variable Trust is a mutual fund with multiple portfolios which are managed by PADCO Advisors II, Inc. The following portfolios are available under the contract: OTC Fund The OTC Fund seeks to provide investment results that correspond to a benchmark for over-the-counter securities. The Fund's current benchmark is the NASDAQ 100 Index . The Fund invests principally in securities of companies included in the NASDAQ 100 Index. It also may invest in other instruments whose performance is expected to correspond to that of the Index, and may engage in futures and options transactions. Nova Fund The Nova Fund seeks to provide investment returns that correspond to 150% of the daily performance of the Standard & Poor's 500 Composite Stock Price Index. Unlike traditional index funds, as its primary investment strategy, the Fund invests to a significant extent in futures contracts and options on: securities, futures contracts and stock indexes. On a day-to-day basis, the Fund holds US government securities to collateralize these futures and options contracts. SELIGMAN PORTFOLIOS, INC. Seligman Portfolios, Inc. is a mutual fund with multiple portfolios which are managed by J. & W. Seligman & Co. Incorporated. The following portfolios are available under the contract: Seligman Communications and Information Portfolio The Seligman Communications and Information Portfolio seeks capital gain. The Portfolio invests at least 80% of its net assets, exclusive of government securities, short-term notes, and cash and cash equivalents, in securities of companies operating in the communications, information and related industries. The Portfolio generally invests at least 65% of its total assets in securities of companies engaged in these industries. The Portfolio may invest in companies of any size. Seligman Global Technology Portfolio The Seligman Global Technology Portfolio seeks long-term capital appreciation. The Portfolio generally invests at least 65% of its assets in equity securities of US and non-US companies with business operations in technology and technology-related industries. The Portfolio may invest in companies of any size. STRONG OPPORTUNITY FUND II, INC. Strong Opportunity Fund II, Inc. is a mutual fund. Strong Capital Management, Inc. is the investment advisor for the fund. The following portfolio is available under the contract: Opportunity Fund II The Opportunity Fund II seeks capital growth. The fund invests primarily in stocks of medium-capitalization companies that the fund's manager believes are underpriced, yet have attractive growth prospects. STRONG VARIABLE INSURANCE FUNDS, INC. Strong Variable Insurance Funds, Inc. is a mutual fund. Strong Capital Management, inc. is the investment advisor for the fund. The following portfolio is available under the contract: Mid-Cap Growth Fund II The Mid-Cap Growth Fund II seeks capital appreciation. The fund invests at least 65% of its assets in stocks of medium-capitalization companies that the fund's managers believe have favorable prospects for accelerating growth of earnings, cash flow, or asset value. VAN ECK WORLDWIDE INSURANCE TRUST Van Eck Worldwide Insurance Trust is a mutual fund with multiple portfolios. Van Eck Associates Corporation serves as investment adviser to the funds. The following portfolios are available under the contract: Worldwide Bond Fund The Worldwide Bond Fund seeks high total return income plus capital appreciation by investing globally, primarily in a variety of debt securities. The fund's long-term assets will consist of debt securities rated B or better by Standard & Poor's or Moody's Investors' Service. Worldwide Emerging Markets Fund The Worldwide Emerging Markets Fund seeks long-term capital appreciation by investing in equity securities in emerging markets around the world. The fund emphasizes investment in countries that have relatively low gross national product per capita, as well as the potential for rapid economic growth. Worldwide Hard Assets Fund The Worldwide Hard Assets Fund seeks long-term capital appreciation by investing primarily in "hard asset securities." Income is a secondary consideration. Worldwide Real Estate Fund The Worldwide Real Estate Fund seeks a high total return by investing in equity securities of companies that own significant real estate or that principally do business in real estate. - - ------------------------------------------------------------------------------ TABLE OF CONTENTS OF THE STATEMENT OF ADDITIONAL INFORMATION Company Independent Accountants Legal Opinions Distribution Reduction or Elimination of Contingent Deferred Sales Charge Calculation of Performance Information Federal Tax Status Annuity Provisions Financial Statements - - ------------------------------------------------------------------------------ If you would like a free copy of the Statement of Additional Information dated May 1, 2000 for this Prospectus, please complete this form, detach, and mail to: Conseco Variable Insurance Company Administrative Office 11815 N. Pennsylvania Street Carmel, Indiana 46032 Gentlemen: Please send me a free copy of the Statement of Additional Information for the Conseco Variable Annuity Account H fixed and variable annuity at the following address: Name: --------------------------------------------------------------------------- Mailing Address: ---------------------------------------------------------------- - - ------------------------------------------------------------------------------ Sincerely, -------------------------------------------------- (Signature) - - ------------------------------------------------------------------------------ Conseco Variable Insurance Company 11815 N. Pennsylvania Street Carmel, Indiana 46032 (C) 2000, Conseco Variable Insurance Company PART B STATEMENT OF ADDITIONAL INFORMATION INDIVIDUAL VARIABLE DEFERRED ANNUITY CONTRACTS ISSUED BY CONSECO VARIABLE ANNUITY ACCOUNT H AND CONSECO VARIABLE INSURANCE COMPANY THIS IS NOT A PROSPECTUS. THIS STATEMENT OF ADDITIONAL INFORMATION SHOULD BE READ IN CONJUNCTION WITH THE PROSPECTUS DATED MAY 1, 2000, FOR THE INDIVIDUAL VARIABLE DEFERRED ANNUITY CONTRACTS WHICH ARE DESCRIBED HEREIN. THE PROSPECTUS CONCISELY SETS FORTH INFORMATION THAT A PROSPECTIVE INVESTOR OUGHT TO KNOW BEFORE INVESTING. FOR A COPY OF THE PROSPECTUS CALL US AT (800) 342-6307 OR WRITE US AT OUR ADMINISTRATIVE OFFICE: 11815 N. PENNSYLVANIA STREET, CARMEL, INDIANA 46032. THIS STATEMENT OF ADDITIONAL INFORMATION IS DATED MAY 1, 2000.
TABLE OF CONTENTS Page COMPANY ....................................................................................................... INDEPENDENT ACCOUNTANTS.......................................................................................... LEGAL OPINIONS................................................................................................... DISTRIBUTION..................................................................................................... Reduction or Elimination of the Contingent Deferred Sales Charge........................................ CALCULATION OF PERFORMANCE INFORMATION........................................................................... Total Return............................................................................................ Performance Information................................................................................. Historical Unit Values.................................................................................. Reporting Agencies...................................................................................... FEDERAL TAX STATUS............................................................................................... General ............................................................................................... Diversification......................................................................................... Multiple Contracts...................................................................................... Partial 1035 Exchanges.................................................................................. Contracts Owned by Other than Natural Persons........................................................... Tax Treatment of Assignments............................................................................ Death Benefits.......................................................................................... Income Tax Withholding.................................................................................. Tax Treatment of Withdrawals - Non-Qualified Contracts.................................................. Qualified Plans......................................................................................... Roth IRAs............................................................................................... Tax Treatment of Withdrawals - Qualified Contracts...................................................... Tax-Sheltered Annuities - Withdrawal Limitations........................................................ Mandatory Distributions - Qualified Plans............................................................... ANNUITY PROVISIONS............................................................................................... Variable Annuity Payout................................................................................. Annuity Unit............................................................................................ Fixed Annuity Payout.................................................................................... FINANCIAL STATEMENTS.............................................................................................
COMPANY Information regarding Conseco Variable Insurance Company ("Company" or "Conseco Variable") is contained in the prospectus. On October 7, 1998, the Company changed its name from Great American Reserve Insurance Company to its present name. INDEPENDENT ACCOUNTANTS The financial statements of Conseco Variable as of December 31, 1999 and 1998, and for the years ended December 31, 1999, 1998 and 1997, included in this statement of additional information, have been audited by PricewaterhouseCoopers LLP, 2900 One American Square, Indianapolis, Indiana 46282, independent accountants, as set forth in their report appearing therein. LEGAL OPINIONS Blazzard, Grodd & Hasenauer, P.C. of Westport, Connecticut has provided advice on certain matters relating to the federal securities and income tax laws in connection with the Contracts described in the prospectus. DISTRIBUTION Conseco Equity Sales, Inc., an affiliate of the Company, acts as the distributor. The offering is on a continuous basis. REDUCTION OR ELIMINATION OF THE CONTINGENT DEFERRED SALES CHARGE The amount of the Contingent Deferred Sales Charge on the Contracts may be reduced or eliminated when sales of the Contracts are made to individuals or to a group of individuals in a manner that results in savings of sales expenses. The entitlement to reduction of the Contingent Deferred Sales Charge will be determined by the Company after examination of all the relevant factors such as: 1. The size and type of group to which sales are to be made will be considered. Generally, the sales expenses for a larger group are less than for a smaller group because of the ability to implement large numbers of Contracts with fewer sales contacts. 2. The total amount of purchase payments to be received will be considered. Per Contract sales expenses are likely to be less on larger purchase payments than on smaller ones. 3. Any prior or existing relationship with the Company will be considered. Per Contract sales expenses are likely to be less when there is a prior existing relationship because of the likelihood of implementing the Contract with fewer sales contacts. 4. There may be other circumstances, of which the Company is not presently aware, which could result in reduced sales expenses. If, after consideration of the foregoing factors, the Company determines that there will be a reduction in sales expenses, the Company may provide for a reduction or elimination of the Contingent Deferred Sales Charge. The Contingent Deferred Sales Charge may be eliminated when the Contracts are issued to an officer, director or employee of the Company or any of its affiliates. In no event will any reduction or elimination of the Contingent Deferred Sales Charge be permitted where the reduction or elimination will be unfairly discriminatory to any person. CALCULATION OF PERFORMANCE INFORMATION TOTAL RETURN From time to time, we may advertise performance data. Such data will show the percentage change in the value of an Accumulation Unit based on the performance of an investment portfolio over a period of time, usually a calendar year, determined by dividing the increase (decrease) in value for that unit by the Accumulation Unit value at the beginning of the period. Any such advertisement will include standardized average annual total return figures for the time periods indicated in the advertisement. Such total return figures will reflect the deduction of the Insurance Charge and the expenses for the underlying investment portfolio being advertised and any applicable Contract Maintenance Charges and Contingent Deferred Sales Charges. The Company may also advertise performance data which will be calculated in the same manner as described above but which will not reflect the deduction of any Contract Maintenance Charge and Contingent Deferred Sales Charge. The deduction of any Contract Maintenance Charge and Contingent Deferred Sales Charge would reduce any percentage increase or make greater any percentage decrease. The hypothetical value of a Contract purchased for the time periods described in the advertisement will be determined by using the actual Accumulation Unit values for an initial $1,000 purchase payment, and deducting any applicable Contract Maintenance Charges and any applicable Contingent Deferred Sales Charges to arrive at the ending hypothetical value. The average annual total return is then determined by computing the fixed interest rate that a $1,000 purchase payment would have to earn annually, compounded annually, to grow to the hypothetical value at the end of the time periods described. The formula used in these calculations is: n P (1 + T) = ERV Where: P = a hypothetical initial payment of $1,000 T = average annual total return n = number of years ERV = ending redeemable value at the end of the time periods used (or fractional portion thereof) of a hypothetical $1,000 payment made at the beginning of the time periods used. You should note that the investment results of each investment portfolio will fluctuate over time, and any presentation of the investment portfolio's total return for any period should not be considered as a representation of what an investment may earn or what your total return may be in any future period. PERFORMANCE INFORMATION The Contracts and the Separate Account are new and therefore do not have a meaningful investment performance history. However, certain corresponding Portfolios have been in existence for some time and consequently have investment performance history. In order to demonstrate how the actual investment experience of the Portfolios affects Accumulation Unit values, the Company has developed performance information. The information is based upon the historical experience of the Portfolios and is for the periods shown. Future performance of the portfolios will vary and the results shown are not necessarily representative of future results. Performance for periods ending after those shown may vary substantially from the examples shown. The performance of the portfolios is calculated for a specified period of time by assuming an initial purchase payment of $1,000 allocated to the portfolio. The percentage increases (decreases) are determined by subtracting the initial purchase payment from the ending value and dividing the remainder by the beginning value. The performance may also show figures when no withdrawal is assumed. The following charts reflect performance information for the periods shown. The performance information reflects performance commencing from the inception date of the underlying portfolio (which date may precede the inception date that the Separate Account first invested in the underlying portfolio). Column A is average annual total return which reflects the deduction of the insurance charges, contract maintenance charge, contingent deferred sales charge and the fees and expenses of the portfolios. Column B reflects the deduction of the insurance charges and the fees and expenses of the portfolios. Chart 1 is for the standard contracts; Chart 2 is for contracts with the guaranteed minimum death benefit; and Chart 3 is for contracts with the guaranteed minimum death benefit and guaranteed minimum income benefit. Performance is not shown for the Conseco 20 Focus Portfolio, the High Yield Portfolio and the Berger IPT - New Generation Fund because the Portfolios commenced operations on May 1, 2000. Performance shown for the Seligman Communications and Information Portfolio and the Seligman Global Technology Portfolio does not reflect the 12b-1 fees these portfolios will incur beginning May 1, 2000. The imposition of 12b-1 fees will reduce future performance.
TOTAL RETURN FOR THE PERIODS ENDED DECEMBER 31, 1999: CHART 1 Column A Column B Portfolio 1 yr 3 yrs 5 yrs 10 yrs/ 1 yr 3 yrs Inception Date since inception -------------------------------------------------------------------------------------------------- CONSECO SERIES TRUST Balanced Portfolio 07/25/94 18.59% 14.61% 15.01% 14.77% 29.04% Equity Portfolio 07/25/94 35.30% 21.90% 22.05% 22.14% 47.20% Fixed Income Portfolio 07/25/94 (9.74%) 0.92% 3.66% 4.93% (1.77%) Government Securities Portfolio 07/25/94 (11.62%) (0.84%) 1.30% 1.35% (3.82%) Money Market Portfolio 07/25/94 (4.95%) (0.79%) (0.57%) (0.34%) 3.43% THE ALGER AMERICAN FUND Alger American Growth Portfolio 12/31/89 21.20% 30.12% 27.22% 23.23% 31.89% Alger American Leveraged AllCap Portfolio 01/24/95 61.38% 43.88% N/A 42.41% 75.59% Alger American MidCap Growth Portfolio 04/30/93 19.49% 19.78% 22.44% 23.94% 30.02% Alger American Small Capitalization Portfolio 12/31/89 29.98% 17.74% 19.35% 18.28% 41.43% AMERICAN CENTURY VARIABLE PORTFOLIOS, INC. VP Income & Growth 02/06/98 6.95% N/A N/A 14.92% 16.38% VP International 05/02/94 48.19% 26.65% 20.81% 20.84% 61.77% VP Value 05/01/96 (10.55%) 5.06% N/A 14.17% (2.23%) BERGER INSTITUTIONAL PRODUCTS TRUST Berger IPT--Growth Fund 05/01/96 35.16% 20.39% N/A 17.86% 47.06% Berger IPT--Growth and Income Fund 05/01/96 44.15% 29.84% N/A 27.94% 56.84% Berger IPT--Small Company Growth Fund 05/01/96 73.55% 27.92% N/A 22.48% 88.79% Berger/BIAM IPT--International Fund 04/30/97 19.10% N/A N/A 10.64% 29.58% THE DREYFUS SOCIALLY RESPONSIBLE GROWTH FUND, INC. 10/07/93 17.89% 24.04% 25.31% 23.74% 28.27% DREYFUS STOCK INDEX FUND 12/31/89 9.29% 22.06% 24.52% 18.51% 18.93% DREYFUS VARIABLE INVESTMENT FUND Dreyfus VIF Disciplined Stock Portfolio 04/30/96 7.39% 17.48% N/A 19.21% 16.85% Dreyfus VIF International Value Portfolio 05/01/96 15.90% 8.56% N/A 7.64% 26.10% FEDERATED INSURANCE SERIES Federated High Income Bond Fund II 03/01/94 (7.29%) 1.64% 7.43% 5.79% 0.88% Federated Utility Fund II 02/10/94 (7.85%) 8.97% 12.16% 11.31% 0.28% Federated International Equity Fund II 05/08/95 67.59% 31.25% N/A 22.35% 82.32% INVESCO VARIABLE INVESTMENT FUNDS, INC. INVESCO VIF - High Yield Fund 12/15/93 (0.96%) 3.29% 5.13% 7.45% 7.77% INVESCO VIF - Equity Income Fund 12/15/93 4.16% 12.10% 14.66% 16.07% 13.34% JANUS ASPEN SERIES Aggressive Growth Portfolio 09/13/93 104.31% 44.48% 32.66% 34.61% 122.28% Growth Portfolio 09/13/93 30.49% 28.48% 26.49% 24.92% 41.98% Worldwide Growth Portfolio 09/13/93 49.06% 31.83% 30.11% 27.43% 62.17% LAZARD RETIREMENT SERIES, INC. Lazard Retirement Equity Portfolio 01/30/98 (2.41%) N/A N/A 3.53% 6.66% Lazard Retirement Small Cap Portfolio 11/04/97 (4.73%) N/A N/A (5.19%) 3.67% LORD ABBETT SERIES FUND, INC. Growth & Income Portfolio 12/31/89 5.36% 12.98% 17.20% 14.58% 15.12% MITCHELL HUTCHINS SERIES TRUST Growth and Income Portfolio 02/06/98 (0.01%) N/A N/A 5.50% 8.80% NEUBERGER BERMAN ADVISERS MANAGEMENT TRUST Limited Maturity Bond Portfolio 12/31/89 (8.04%) 0.00% 2.75% 4.68% 0.07% Partners Portfolio 03/22/94 (2.70%) 9.10% 17.87% 16.56% 5.88% RYDEX VARIABLE TRUST OTC Fund 10/25/96 82.03% 51.70% N/A 48.26% 98.07% Nova Fund 10/25/96 11.11% 19.72% N/A 18.47% 20.90% SELIGMAN PORTFOLIOS, INC. Seligman Communications and Information Portfolio 10/13/94 38.59% 16.24% 16.79% 17.34% 50.80% Seligman Global Technology Portfolio 05/02/96 77.10% 32.23% N/A 27.17% 92.68% STRONG OPPORTUNITY FUND II, INC. Opportunity Fund II 05/08/92 22.27% 19.27% 20.06% 19.27% 33.03% STRONG VARIABLE INSURANCE FUNDS, INC. Strong MidCap Growth Fund II 12/31/96 72.10% 39.91% N/A 39.91% 87.24% VAN ECK WORLDWIDE INSURANCE TRUST Worldwide Bond Fund 12/31/89 (16.48%) (2.01%) 2.31% 7.33% (9.10%) Worldwide Emerging Markets Fund 12/27/95 81.04% 0.70% N/A 6.20% 97.51% Worldwide Hard Assets Fund 12/31/89 9.28% (15.78%) (5.01%) 2.78% 19.32% Worldwide Real Estate Fund 02/06/98 (11.59%) N/A N/A (12.96%) (3.38%)
5 yrs 10 yrs/ since inception - --------------- 17.91% 16.74% 16.14% 25.42% 23.88% 23.60% 3.84% 5.23% 6.18% 2.03% 2.83% 2.56% 2.08% 0.94% 0.86% 33.86% 29.14% 23.27% 48.01% N/A 44.60% 23.23% 24.28% 24.94% 21.14% 21.15% 18.32% N/A N/A 20.30% 30.57% 22.87% 22.41% 8.39% N/A 17.08% 23.86% N/A 20.68% 33.58% N/A 30.98% 31.60% N/A 25.40% N/A N/A 14.23% 27.61% 27.20% 24.83% 25.57% 26.39% 18.55% 20.86% N/A 22.03% 11.69% N/A 10.22% 4.58% 9.06% 6.99% 12.11% 13.86% 12.54% 35.02% N/A 24.34% 6.27% 6.73% 8.61% 15.33% 16.39% 17.31% 48.64% 34.67% 35.75% 32.18% 28.40% 25.98% 35.62% 32.07% 28.51% N/A N/A 8.42% N/A N/A (1.26%) 16.51% 19.17% 14.75% N/A N/A 10.46% 2.89% 4.32% 4.73% 12.25% 19.64% 17.86% 56.03% N/A 52.34% 23.14% N/A 21.70% 19.60% 18.54% 18.81% 36.04% N/A 30.20% 22.70% 21.87% 19.78% 43.90% N/A 43.90% 0.82% 3.86% 7.36% 3.94% N/A 8.69% (13.01%) (3.31%) 3.00% N/A N/A (8.58%)
TOTAL RETURN FOR THE PERIODS ENDED DECEMBER 31, 1999: CHART 2 Column A Column B Portfolio 1 yr 3 yrs 5 yrs 10 yrs/ 1 yr 3 yrs Inception Date since inception -------------------------------------------------------------------------------------------------- CONSECO SERIES TRUST Balanced Portfolio 07/25/94 18.24% 14.09% 14.66% 14.42% 28.65% Equity Portfolio 07/25/94 34.89% 21.36% 21.64% 21.73% 46.76% Fixed Income Portfolio 07/25/94 (10.01%) 0.47% 3.09% 4.34% (2.07%) Government Securities Portfolio 07/25/94 (11.89%) (1.11%) 1.03% 1.08% (4.11%) Money Market Portfolio 07/25/94 (5.28%) (1.12%) (0.90%) (0.67%) 3.08% THE ALGER AMERICAN FUND Alger American Growth Portfolio 12/31/89 20.34% 29.26% 26.61% 22.45& 31.49% Alger American Leveraged AllCap Portfolio 01/24/95 60.90% 43.19% N/A 41.98% 75.06% Alger American MidCap Growth Portfolio 04/30/93 19.13% 19.42% 22.17% 23.56% 29.63% Alger American Small Capitalization Portfolio 12/31/89 29.60% 17.22% 18.78% 17.58% 41.00% AMERICAN CENTURY VARIABLE PORTFOLIOS, INC. VP Income & Growth 02/06/98 6.63% N/A N/A 14.57% 16.03% VP International 05/02/94 47.89% 26.35% 20.38% 20.33% 61.28% VP Value 05/01/96 (10.42%) 4.56% N/A 13.67% (2.52%) BERGER INSTITUTIONAL PRODUCTS TRUST Berger IPT--Growth Fund 05/01/96 34.25% 19.57% N/A 17.04% 46.62% Berger IPT--Growth and Income Fund 05/01/96 43.18% 29.16% N/A 27.33% 56.37% Berger IPT--Small Company Growth Fund 05/01/96 72.49% 27.06% N/A 21.63% 88.23% Berger/BIAM IPT--International Fund 04/30/97 18.29% N/A N/A 10.47% 29.20% THE DREYFUS SOCIALLY RESPONSIBLE GROWTH FUND, INC. 10/07/93 17.53% 23.55% 24.61% 23.01% 27.89% DREYFUS STOCK INDEX FUND 12/31/89 8.97% 21.52% 24.05% 17.87% 18.57% DREYFUS VARIABLE INVESTMENT FUND Dreyfus VIF Disciplined Stock Portfolio 04/30/96 7.02% 17.24% N/A 18.87% 16.45% Dreyfus VIF International Value Portfolio 05/01/96 15.50% 8.36% N/A 7.33% 25.67% FEDERATED INSURANCE SERIES Federated High Income Bond Fund II 03/01/94 (7.57%) 1.43% 6.99% 5.51% 0.58% Federated Utility Fund II 02/10/94 (8.13%) 8.59% 11.61% 10.73% (0.02%) Federated International Equity Fund II 05/08/95 67.09% 30.66% N/A 21.69% 81.77% INVESCO VARIABLE INVESTMENT FUNDS, INC. INVESCO VIF - High Yield Fund 12/15/93 (1.34%) 1.99% 3.83% 7.12% 7.36% INVESCO VIF - Equity Income Fund 12/15/93 3.76% 11.70% 14.26% 15.71% 12.91% JANUS ASPEN SERIES Aggressive Growth Portfolio 09/13/93 103.70% 43.84% 31.94% 33.83% 121.62% Growth Portfolio 09/13/93 30.10% 27.91% 25.80% 24.19% 41.56% Worldwide Growth Portfolio 09/13/93 48.61% 31.24% 29.40% 26.68% 61.68% LAZARD RETIREMENT SERIES, INC. Lazard Retirement Equity Portfolio 01/30/98 (2.28%) N/A N/A 3.43% 6.34% Lazard Retirement Small Cap Portfolio 11/04/97 (5.02%) N/A N/a (5.61%) 3.35% LORD ABBETT SERIES FUND, INC. Growth & Income Portfolio 12/31/89 5.04% 12.66% 16.88% 14.26% 14.78% MITCHELL HUTCHINS SERIES TRUST Growth and Income Portfolio 02/06/98 (0.31%) N/A N/A 5.17% 8.47% Limited Maturity Bond Portfolio 12/31/89 (8.32%) (0.47)% 2.18% 4.20% (0.23%) Partners Portfolio 03/22/94 (2.99%) 8.60% 17.21% 15.88% 5.56% OTC Fund 10/25/96 80.77% 50.65% N/A 47.23% 96.69% Nova Fund 10/25/96 10.78% 19.36% N/A 18.12% 20.54% SELIGMAN PORTFOLIOS, INC. Seligman Communications and Information Portfolio 10/13/94 38.18% 15.90% 16.44% 16.99% 50.35% Seligman Global Technology Portfolio 05/02/96 76.58% 31.84% N/A 26.78% 92.10% STRONG OPPORTUNITY FUND II, INC. Opportunity Fund II 05/08/92 21.90% 18.78% 19.43% 18.56% 32.64% STRONG VARIABLE INSURANCE FUNDS, INC. Strong MidCap Growth Fund II 12/31/96 71.59% 39.40% N/A 39.40% 86.68% VAN ECK WORLDWIDE INSURANCE TRUST Worldwide Bond Fund 12/31/89 (16.76%) (2.29%) 2.03% 7.05% (9.38%) Worldwide Emerging Markets Fund 12/27/95 80.50% 0.25% N/A 5.66% 96.92% Worldwide Hard Assets Fund 12/31/89 8.95% (16.11%) (5.34%) 2.45% 18.96% Worldwide Real Estate Fund 02/06/98 (11.85%) N/A N/A (13.98%) (3.67%)
5 yrs 10 yrs/ since inception - --------------- 17.39% 16.35% 15.75% 24.86% 23.44% 23.16% 3.38% 4.65% 5.59% 1.74% 2.54% 2.27% 1.73% 0.59% 2.50% 33.26% 28.73% 22.65% 47.31% N/A 44.16% 22.84% 24.01% 24.57% 20.60% 20.57% 17.62% N/A N/A 19.93% 29.98% 22.20% 21.70% 7.58% N/A 16.27% 23.31% N/A 20.07% 33.18% N/A 30.58% 31.01% N/A 24.77% N/A N/A 14.06% 27.10% 26.48% 24.08% 25.01% 25.91% 17.91% 20.62% N/A 21.67% 11.48% N/A 9.91% 4.36% 8.61% 6.69% 11.72% 13.30% 11.95% 34.42% N/A 23.67% 5.86% 6.32% 8.28% 14.90% 15.99% 16.96% 47.98% 33.93% 34.96% 31.59% 27.70% 25.25% 35.01% 31.35% 27.76% N/A N/A 8.10% N/A N/A (1.69%) 16.19% 18.85% 14.43% N/A N/A 10.11% 2.41% 3.73% 4.25% 11.73% 18.97% 17.18% 54.95 N/A 51.27% 22.77% N/A 21.33% 19.24% 18.19% 18.45% 35.63% N/A 29.80% 22.20% 21.23% 19.07% 43.34% N/A 43.34% 0.54% 3.58% 7.08% 3.47% N/A 8.14% (13.37%) (3.67%) 2.64% N/A N/A (9.65%)
TOTAL RETURN FOR THE PERIODS ENDED DECEMBER 31, 1999: CHART 3 Column A Column B Portfolio 1 yr 3 yrs 5 yrs 10 yrs/ 1 yr 3 yrs Inception Date since inception -------------------------------------------------------------------------------------------------- CONSECO SERIES TRUST Balanced Portfolio 07/25/94 17.88% 13.75% 14.30% 14.06% 28.26% Equity Portfolio 07/25/94 34.49% 21.00% 21.23% 21.32% 46.32% Fixed Income Portfolio 07/25/94 (10.28%) 0.17% 2.78% 4.03% (2.36%) Government Securities Portfolio 07/25/94 (12.15%) (1.37%) 0.77% 0.82% (4.40%) Money Market Portfolio 07/25/94 (5.56%) (1.40%) (1.18%) (0.95%) 2.77% THE ALGER AMERICAN FUND Alger American Growth Portfolio 12/31/89 20.48% 29.15% 26.44% 22.24% 31.10% Alger American Leveraged AllCap Portfolio 01/24/95 60.42% 42.76% N/A 41.56% 74.54% Alger American MidCap Growth Portfolio 04/30/93 18.78% 19.07% 21.80% 23.19% 29.24% Alger American Small Capitalization Portfolio 12/31/89 29.21% 16.87% 18.43% 17.23% 40.58% AMERICAN CENTURY VARIABLE PORTFOLIOS, INC. VP Income & Growth 02/06/98 6.31% N/A N/A 14.21% 15.68% VP International 05/02/94 47.51% 25.97% 20.02% 19.96% 60.80% VP Value 05/01/96 (10.69%) 4.25% N/A 13.36% (2.81%) BERGER INSTITUTIONAL PRODUCTS TRUST Berger IPT--Growth Fund 05/01/96 33.84% 19.21% N/A 16.68% 46.18% Berger IPT--Growth and Income Fund 05/01/96 42.75% 28.77% N/A 26.94% 55.91% Berger IPT--Small Company Growth Fund 05/01/96 71.98% 26.68% N/A 21.26% 87.67% Berger/BIAM IPT--International Fund 04/30/97 17.93% N/A N/A 10.13% 28.81% THE DREYFUS SOCIALLY RESPONSIBLE GROWTH FUND, INC. 10/07/93 17.18% 23.18% 24.24% 22.63% 27.51% DREYFUS STOCK INDEX FUND 12/31/89 8.64% 21.15% 23.67% 17.52% 18.22% DREYFUS VARIABLE INVESTMENT FUND Dreyfus VIF Disciplined Stock Portfolio 04/30/96 6.70% 16.89% N/A 18.51% 16.10% Dreyfus VIF International Value Portfolio 05/01/96 15.15% 8.03% N/A 7.00% 25.29% FEDERATED INSURANCE SERIES Federated High Income Bond Fund II 03/01/94 (7.85%) 1.12% 6.67% 5.23% 0.28% Federated Utility Fund II 02/10/94 (8.40%) 8.26% 11.28% 10.39% (0.32%) Federated International Equity Fund II 05/08/95 66.59% 30.27% N/A 21.32% 81.23% INVESCO VARIABLE INVESTMENT FUNDS, INC. INVESCO VIF - High Yield Fund 12/15/93 (1.63%) 1.29% 3.13% 6.80% 7.04% INVESCO VIF - Equity Income Fund 12/15/93 3.45% 11.39% 13.86% 15.36% 12.57% JANUS ASPEN SERIES Aggressive Growth Portfolio 09/13/93 103.10% 43.41% 31.54% 33.42% 120.95% Growth Portfolio 09/13/93 29.71% 27.52% 25.42% 23.82% 41.14% Worldwide Growth Portfolio 09/13/93 48.17% 30.85% 29.01% 26.30% 61.20% LAZARD RETIREMENT SERIES, INC. Lazard Retirement Equity Portfolio 01/30/98 (2.57%) N/A N/A 3.12% 6.02% Lazard Retirement Small Cap Portfolio 11/04/97 (5.30%) N/A N/A (5.90%) 3.05% LORD ABBETT SERIES FUND, INC. Growth & Income Portfolio 12/31/89 4.73% 12.35% 16.57% 13.95% 14.43% MITCHELL HUTCHINS SERIES TRUST Growth and Income Portfolio 02/06/98 (0.61%) N/A N/A 4.84% 8.15% NEUBERGER BERMAN ADVISERS MANAGEMENT TRUST Limited Maturity Bond Portfolio 12/31/89 (8.59%) (0.77%) 1.87% 3.89% (0.53%) Partners Portfolio 03/22/94 (3.28%) 8.27% 16.85% 15.53% 5.24% RYDEX VARIABLE TRUST OTC Fund 10/25/96 80.23% 50.20% N/A 46.79% 96.11% Nova Fund 10/25/96 10.45% 19.00% N/A 17.76% 20.18% SELIGMAN PORTFOLIOS, INC. Seligman Communications and Information Portfolio 10/13/94 37.77% 15.55% 16.09% 16.63% 49.90% Seligman Global Technology Portfolio 05/02/96 76.05% 31.44% N/A 26.39% 91.53% STRONG OPPORTUNITY FUND II, INC. Opportunity Fund II 05/08/92 21.54% 18.42% 19.07% 18.20% 32.24% STRONG VARIABLE INSURANCE FUNDS, INC. Strong MidCap Growth Fund II 12/31/96 71.08% 38.89% N/A 38.89% 86.12% VAN ECK WORLDWIDE INSURANCE TRUST Worldwide Bond Fund 12/31/89 (17.06%) (2.59%) 1.73% 6.75% (9.68%) Worldwide Emerging Markets Fund 12/27/95 79.96% (0.29%) N/A 5.12% 96.38% Worldwide Hard Assets Fund 12/31/89 8.62% (16.44%) (5.67%) 2.12% 18.61% Worldwide Real Estate Fund 02/06/98 (12.11%) N/A N/A (14.24%) (4.06%)
5 yrs 10 yrs/ since inception - --------------- 17.03% 15.99% 15.39% 24.49% 23.00% 22.72% 3.07% 4.34% 5.27% 1.45% 2.25% 1.98% 1.42% 0.28% 2.19% 32.86% 28.35% 22.28% 46.87% N/A 43.73% 22.45% 23.64% 24.20% 20.24% 20.21% 17.27% N/A N/A 19.56% 29.59% 21.83% 21.33% 7.26% N/A 15.95% 22.94% N/A 19.70% 32.78% N/A 30.18% 30.62% N/A 24.39% N/A N/A 13.72% 26.72% 26.11% 23.71% 24.64% 25.54% 17.56% 20.26% N/A 21.31% 11.15% N/A 9.57% 4.05% 8.29% 6.39% 11.39% 12.96% 11.61% 34.02% N/A 23.29% 5.54% 6.00% 7.95% 14.56% 15.65% 16.60% 47.53% 33.53% 34.56% 31.19% 27.31% 24.87% 34.61% 30.95% 27.38% N/A N/A 7.77% N/A N/A (1.99%) 15.88% 18.54% 14.12% N/A N/A 9.77% 2.10% 3.42% 3.42% 11.39% 18.61% 16.82% 54.49% N/A 50.82% 22.40% N/A 20.97% 18.89% 17.83% 18.09% 35.23% N/A 29.40% 21.83% 20.86% 18.71% 43.42% N/A 43.42% 0.24% 3.28% 6.78% 2.93% N/A 7.60% (13.72%) (4.02%) 2.29% N/A N/A (9.94%) HISTORICAL UNIT VALUES The Company may also show historical Accumulation Unit values in certain advertisements containing illustrations. These illustrations will be based on actual Accumulation Unit values. In addition, the Company may distribute sales literature which compares the percentage change in Accumulation Unit values for any of the investment portfolios against established market indices such as the Standard & Poor's 500 Composite Stock Price Index, the Dow Jones Industrial Average or other management investment companies which have investment objectives similar to the investment portfolio being compared. The Standard & Poor's 500 Composite Stock Price Index is an unmanaged, unweighted average of 500 stocks, the majority of which are listed on the New York Stock Exchange. The Dow Jones Industrial Average is an unmanaged, weighted average of thirty blue chip industrial corporations listed on the New York Stock Exchange. Both the Standard & Poor's 500 Composite Stock Price Index and the Dow Jones Industrial Average assume quarterly reinvestment of dividends. REPORTING AGENCIES The Company may also distribute sales literature which compares the performance of the Accumulation Unit values of the Contracts with the unit values of variable annuities issued by other insurance companies. Such information will be derived from the Lipper Variable Insurance Products Performance Analysis Service, the VARDS Report or from Morningstar. The Lipper Variable Insurance Products Performance Analysis Service is published by Lipper Analytical Services, Inc., a publisher of statistical data which currently tracks the performance of almost 4,000 investment companies. The rankings compiled by Lipper may or may not reflect the deduction of asset-based insurance charges. The Company's sales literature utilizing these rankings will indicate whether or not such charges have been deducted. Where the charges have not been deducted, the sales literature will indicate that if the charges had been deducted, the ranking might have been lower. The VARDS Report is a monthly variable annuity industry analysis compiled by Variable Annuity Research & Data Service of Roswell, Georgia and published by Financial Planning Resources, Inc. The VARDS rankings may or may not reflect the deduction of asset-based insurance charges. In addition, VARDS prepares risk adjusted rankings, which consider the effects of market risk on total return performance. This type of ranking may address the question as to which funds provide the highest total return with the least amount of risk. Other ranking services may be used as sources of performance comparison, such as CDA/Weisenberger. Morningstar rates a variable annuity against its peers with similar investment objectives. Morningstar does not rate any variable annuity that has less than three years of performance data. FEDERAL TAX STATUS NOTE: THE FOLLOWING DESCRIPTION IS BASED UPON THE COMPANY'S UNDERSTANDING OF CURRENT FEDERAL INCOME TAX LAW APPLICABLE TO ANNUITIES IN GENERAL. THE COMPANY CANNOT PREDICT THE PROBABILITY THAT ANY CHANGES IN SUCH LAWS WILL BE MADE. PURCHASERS ARE CAUTIONED TO SEEK COMPETENT TAX ADVICE REGARDING THE POSSIBILITY OF SUCH CHANGES. THE COMPANY DOES NOT GUARANTEE THE TAX STATUS OF THE CONTRACTS. PURCHASERS BEAR THE COMPLETE RISK THAT THE CONTRACTS MAY NOT BE TREATED AS "ANNUITY CONTRACTS" UNDER FEDERAL INCOME TAX LAWS. IT SHOULD BE FURTHER UNDERSTOOD THAT THE FOLLOWING DISCUSSION IS NOT EXHAUSTIVE AND THAT SPECIAL RULES NOT DESCRIBED HEREIN MAY BE APPLICABLE IN CERTAIN SITUATIONS. MOREOVER, NO ATTEMPT HAS BEEN MADE TO CONSIDER ANY APPLICABLE STATE OR OTHER TAX LAWS. GENERAL Section 72 of the Internal Revenue Code of 1986, as amended ("Code") governs taxation of annuities in general. An Owner is not taxed on increases in the value of a Contract until distribution occurs, either in the form of a lump sum payment or as annuity payments under the annuity option selected. For a lump sum payment received as a total withdrawal (total surrender), the recipient is taxed on the portion of the payment that exceeds the cost basis of the Contract. For non-qualified Contracts, this cost basis is generally the purchase payments, while for qualified Contracts there may be no cost basis. The taxable portion of the lump sum payment is taxed at ordinary income tax rates. For annuity payments, a portion of each payment in excess of an exclusion amount is includible in taxable income. The exclusion amount for payments based on a fixed annuity option is determined by multiplying the payment by the ratio that the cost basis of the Contract (adjusted for any period or refund feature) bears to the expected return under the Contract. The exclusion amount for payments based on a variable annuity option is determined by dividing the cost basis of the Contract (adjusted for any period certain or refund guarantee) by the number of years over which the annuity is expected to be paid. Payments received after the investment in the Contract has been recovered (i.e. when the total of the excludable amount equals the investment in the Contract) are fully taxable. The taxable portion is taxed at ordinary income tax rates. For certain types of Qualified Plans there may be no cost basis in the Contract within the meaning of Section 72 of the Code. Owners, annuitants and beneficiaries under the Contracts should seek competent financial advice about the tax consequences of any distributions. The Company is taxed as a life insurance company under the Code. For federal income tax purposes, the Separate Account is not a separate entity from the Company, and its operations form a part of the Company. DIVERSIFICATION Section 817(h) of the Code imposes certain diversification standards on the underlying assets of variable annuity contracts. The Code provides that a variable annuity contract will not be treated as an annuity contract for any period (and any subsequent period) for which the investments are not, in accordance with regulations prescribed by the United States Treasury Department ("Treasury Department"), adequately diversified. Disqualification of the Contract as an annuity contract would result in the imposition of federal income tax to the Owner with respect to earnings allocable to the Contract prior to the receipt of payments under the Contract. The Code contains a safe harbor provision which provides that annuity contracts such as the Contract meet the diversification requirements if, as of the end of each quarter, the underlying assets meet the diversification standards for a regulated investment company and no more than fifty-five percent (55%) of the total assets consist of cash, cash items, U.S. Government securities and securities of other regulated investment companies. Regulations issued by the Treasury Department ("the Regulations") amplify the diversification requirements for variable contracts set forth in the Code and provide an alternative to the safe harbor provision described above. Under the Regulations, an investment portfolio will be deemed adequately diversified if: (1) no more than 55% of the value of the total assets of the portfolio is represented by any one investment; (2) no more than 70% of the value of the total assets of the portfolio is represented by any two investments; (3) no more than 80% of the value of the total assets of the portfolio is represented by any three investments; and (4) no more than 90% of the value of the total assets of the portfolio is represented by any four investments. The Code provides that, for purposes of determining whether or not the diversification standards imposed on the underlying assets of variable contracts by Section 817(h) of the Code have been met, "each United States government agency or instrumentality shall be treated as a separate issuer." The Company intends that all investment portfolios underlying the Contracts will be managed in such a manner as to comply with these diversification requirements. The Treasury Department has indicated that the diversification Regulations do not provide guidance regarding the circumstances in which Owner control of the investments of the Separate Account will cause the Owner to be treated as the owner of the assets of the Separate Account, thereby resulting in the loss of favorable tax treatment for the Contract. At this time it cannot be determined whether additional guidance will be provided and what standards may be contained in such guidance. The amount of Owner control which may be exercised under the Contract is different in some respects from the situations addressed in published rulings issued by the Internal Revenue Service in which it was held that the policy owner was not the owner of the assets of the separate account. It is unknown whether these differences, such as the Owner's ability to transfer among investment choices or the number and type of investment choices available, would cause the Owner to be considered as the owner of the assets of the Separate Account resulting in the imposition of federal income tax to the Owner with respect to earnings allocable to the Contract prior to receipt of payments under the Contract. In the event any forthcoming guidance or ruling is considered to set forth a new position, such guidance or ruling will generally be applied only prospectively. However, if such ruling or guidance was not considered to set forth a new position, it may be applied retroactively resulting in the Owners being retroactively determined to be the owners of the assets of the Separate Account. Due to the uncertainty in this area, the Company reserves the right to modify the Contract in an attempt to maintain favorable tax treatment. MULTIPLE CONTRACTS The Code provides that multiple non-qualified annuity contracts which are issued within a calendar year to the same contract owner by one company or its affiliates are treated as one annuity contract for purposes of determining the tax consequences of any distribution. Such treatment may result in adverse tax consequences including more rapid taxation of the distributed amounts from such combination of contracts. For purposes of this rule, contracts received in a Section 1035 exchange will be considered issued in the year of the exchange. Owners should consult a tax adviser prior to purchasing more than one non-qualified annuity contract in any calendar year. PARTIAL 1035 EXCHANGES Section 1035 of the Code provides that an annuity contract may be exchanged in a tax-free transaction for another annuity contract. In 1998 in CONWAY VS. COMMISSIONER, the Tax Court held that the direct transfer of a portion of an annuity contract into another annuity contract qualified as a non-taxable exchange. On November 22, 1999, the Internal Revenue Service filed an Action on Decision which indicated that it acquiesced in the Tax Court decision in CONWAY. However, in its acquiesence with the decision of the Tax Court, the Internal Revenue Service stated that it will challenge transactions where taxpayers enter into a series of partial exchanges and annuitizations as part of a design to avoid application of the 10% premature distribution penalty or other limitations imposed on annuity contracts under the Code. In the absence of further guidance from the Internal Revenue Service it is unclear what specific types of partial exchange designs and transactions will be challenged by the Internal Revenue Service. Due to the uncertainty in this area, owners should consult their own tax advisers prior to entering into a partial exchange of an annuity contract. CONTRACTS OWNED BY OTHER THAN NATURAL PERSONS Under Section 72(u) of the Code, the investment earnings on premiums for the Contracts will be taxed currently to the Owner if the Owner is a non-natural person, e.g., a corporation or certain other entities. Such Contracts generally will not be treated as annuities for federal income tax purposes. However, this treatment is not applied to a Contract held by a trust or other entity as an agent for a natural person nor to Contracts held by Qualified Plans. Purchasers should consult their own tax counsel or other tax adviser before purchasing a Contract to be owned by a non-natural person. TAX TREATMENT OF ASSIGNMENTS An assignment or pledge of a Contract may be a taxable event. You should therefore consult competent tax advisers should you wish to assign or pledge your Contract. If the Contract is issued pursuant to a retirement plan which receives favorable treatment under the provision of Section 408 of the Code, it may not be assigned, pledged or otherwise transferred except as allowed under applicable law. DEATH BENEFITS Any death benefits paid under the Contract are taxable to the beneficiary. The rules governing the taxation of payments from an annuity contract, as discussed above, generally apply to the payment of death benefits and depend on whether the death benefits are paid as a lump sum or as annuity payments. Estate taxes may also apply. INCOME TAX WITHHOLDING All distributions or the portion thereof which is includible in the gross income of the Owner are subject to federal income tax withholding. Generally, amounts are withheld from periodic payments at the same rate as wages and at the rate of 10% from non-periodic payments. However, the Owner, in many cases, may elect not to have taxes withheld or to have withholding done at a different rate. Certain distributions from retirement plans qualified under Section 401 or Section 403(b) of the Code, which are not directly rolled over to another eligible retirement plan or individual retirement account or individual retirement annuity, are subject to a mandatory 20% withholding for federal income tax. The 20% withholding requirement generally does not apply to: a) a series of substantially equal payments made at least annually for the life or life expectancy of the participant or joint and last survivor expectancy of the participant and a designated beneficiary or for a specified period of 10 years or more; or b) distributions which are required minimum distributions; or c) the portion of the distributions not includible in gross income (i.e. returns of after-tax contributions); or d) hardship withdrawals. Participants should consult their own tax counsel or other tax adviser regarding withholding requirements. TAX TREATMENT OF WITHDRAWALS - NON-QUALIFIED CONTRACTS Section 72 of the Code governs treatment of distributions from annuity contracts. It provides that if the Contract Value exceeds the aggregate purchase payments made, any amount withdrawn will be treated as coming first 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 above information does not apply to Qualified Contracts. However, separate tax withdrawal penalties and restrictions may apply to such Qualified Contracts. (See "Tax Treatment of Withdrawals - Qualified Contracts" below.) QUALIFIED PLANS The Contracts are designed to be suitable for use under various types of Qualified Plans. Taxation of participants in each Qualified Plan varies with the type of plan and terms and conditions of each specific plan. Owners, annuitants and beneficiaries are cautioned that benefits under a Qualified Plan may be subject to the terms and conditions of the plan regardless of the terms and conditions of the Contracts issued pursuant to the plan. Some retirement plans are subject to distribution and other requirements that are not incorporated into the Company's administrative procedures. The Company is not bound by the terms and conditions of such plans to the extent such terms conflict with the terms of a Contract, unless the Company specifically consents to be bound. Owners, participants and beneficiaries are responsible for determining that contributions, distributions and other transactions with respect to the Contracts comply with applicable law. A Qualified Contract will not provide any necessary or additional tax deferral if it is used to fund a Qualified Plan that is tax deferred. However, the Contract has features and benefits other than tax deferral that may make it an appropriate investment for a Qualified Plan. Following are general descriptions of the types of Qualified Plans with which the Contracts may be used. Such descriptions are not exhaustive and are for general informational purposes only. The tax rules regarding Qualified Plans are very complex and will have differing applications depending on individual facts and circumstances. Each purchaser should obtain competent tax advice prior to purchasing a Contract issued under a Qualified Plan. Contracts issued pursuant to Qualified Plans include special provisions restricting Contract provisions that may otherwise be available as described herein. Generally, Contracts issued pursuant to Qualified Plans are not transferable except upon surrender or annuitization. Various penalty and excise taxes may apply to contributions or distributions made in violation of applicable limitations. Furthermore, certain withdrawal penalties and restrictions may apply to surrenders from Qualified Contracts. (See "Tax Treatment of Withdrawals - Qualified Contracts" below.) On July 6, 1983, the Supreme Court decided in ARIZONA GOVERNING COMMITTEE V. NORRIS that optional annuity benefits provided under an employer's deferred compensation plan could not, under Title VII of the Civil Rights Act of 1964, vary between men and women. The Contracts sold by the Company in connection with Qualified Plans will utilize annuity tables which do not differentiate on the basis of sex. Such annuity tables will also be available for use in connection with certain non-qualified deferred compensation plans. a. TAX-SHELTERED ANNUITIES Section 403(b) of the Code permits the purchase of "tax-sheltered annuities" by public schools and certain charitable, educational and scientific organizations described in Section 501(c)(3) of the Code. These qualifying employers may make contributions to the Contracts for the benefit of their employees. Such contributions are not includible in the gross income of the employees until the employees receive distributions from the Contracts. The amount of contributions to the tax-sheltered annuity is limited to certain maximums imposed by the Code. Furthermore, the Code sets forth additional restrictions governing such items as transferability, distributions, nondiscrimination and withdrawals. (See "Tax Treatment of Withdrawals Qualified Contracts" and "Tax-Sheltered Annuities - Withdrawal Limitations" below.) Any employee should obtain competent tax advice as to the tax treatment and suitability of such an investment. b. INDIVIDUAL RETIREMENT ANNUITIES The Contracts offered by the prospectus are designed to be suitable for use as an Individual Retirement Annuity (IRA). Generally, individuals who purchase IRAs are not taxed on increases to the value of the contributions until distribution occurs. Following is a general description of IRAs with which the Contract may be used. The description is not exhaustive and is for general informational purposes only. Section 408(b) of the Code permits eligible individuals to contribute to an individual retirement program known as an IRA. Under applicable limitations, certain amounts may be contributed to an IRA which will be deductible from the individual's taxable income. These IRAs are subject to limitations on eligibility, contributions, transferability and distributions. (See "Tax Treatment of Withdrawals - Qualified Contracts" below.) Under certain conditions, distributions from other IRAs and other Qualified Plans may be rolled over or transferred on a tax-deferred basis into an IRA. Sales of Contracts for use with IRAs are subject to special requirements imposed by the Code, including the requirement that certain informational disclosure be given to persons desiring to establish an IRA. Purchasers of Contracts to be qualified as Individual Retirement Annuities should obtain competent tax advice as to the tax treatment and suitability of such an investment. ROTH IRAS Section 408A of the Code provides that beginning in 1998, individuals may purchase a new type of non-deductible IRA, known as a Roth IRA. Purchase payments for a Roth IRA are limited to a maximum of $2,000 per year and are not deductible from taxable income. Lower maximum limitations apply to individuals with adjusted gross incomes between $95,000 and $110,000 in the case of single taxpayers, between $150,000 and $160,000 in the case of married taxpayers filing joint returns, and between $0 and $10,000 in the case of married taxpayers filing separately. An overall $2,000 annual limitation continues apply to all of a taxpayer's IRA contributions, including Roth IRA and non-Roth IRAs. Qualified distributions from Roth IRAs are free from federal income tax. A qualified distribution requires that an individual has held a Roth IRA for at least five taxable years and, in addition, that the distribution is made: (i) after the individual reaches age 59 1/2, (ii) on the individual's death or disability, or (iii) as a qualified first-time home purchase (subject to a $10,000 lifetime maximum) for the individual, a spouse, child, grandchild, or ancestor. Any distribution which is not a qualified distribution is taxable to the extent of earnings in the distribution. Distributions are treated as made from contributions first and therefore no distributions are taxable until distributions exceed the amount of contributions and conversions to the Roth IRA. The 10% penalty tax and the regular IRA exceptions to the 10% penalty tax apply to taxable distributions from a Roth IRA. Amounts may be rolled over from one Roth IRA to another Roth IRA. Furthermore, an individual may make a rollover contribution from a non-Roth IRA to a Roth IRA, ("conversion deposits") unless the individual has adjusted gross income over $100,000 or the individual is a married taxpayer filing a separate return. The individual must pay tax on any portion of the IRA being rolled over that represents income or a previously deductible IRA contribution. However, for rollovers in 1998, the individual may pay that tax ratably over the four taxable year period beginning with tax year 1998. In addition, distribution of amounts attributable to conversion deposits held for less than 5 taxable years will also be subject to the penalty tax. Purchasers of Contracts intended to be qualified as a Roth IRA should obtain competent tax advice as to the tax treatment and suitability of such an investment. c. PENSION AND PROFIT-SHARING PLANS Sections 401(a) and 401(k) of the Code permit employers, including self-employed individuals, to establish various types of retirement plans for employees. These retirement plans may permit the purchase of the Contracts to provide benefits under the Plan. Contributions to the Plan for the benefit of employees will not be includible in the gross income of the employees until distributed from the Plan. The tax consequences to participants may vary depending upon the particular plan design. However, the Code places limitations and restrictions on all Plans including on such items as: amount of allowable contributions; form, manner and timing of distributions; transferability of benefits; vesting and nonforfeitability of interests; nondiscrimination in eligibility and participation; and the tax treatment of distributions, withdrawals and surrenders. Special considerations apply to plans covering self-employed individuals, including limitations on contributions and benefits for key employees or 5 percent owners. (See "Tax Treatment of Withdrawals - Qualified Contracts" below.) Purchasers of Contracts for use with Pension or Profit Sharing Plans should obtain competent tax advice as to the tax treatment and suitability of such an investment. d. GOVERNMENT AND TAX-EXEMPT ORGANIZATION'S DEFERRED COMPENSATION PLAN UNDER SECTION 457 Under Code provisions, employees and independent contractors performing services for state and local governments and other tax-exempt organizations may participate in Deferred Compensation Plans under Section 457 of the Code. The amounts deferred under a Plan which meets the requirements of Section 457 of the Code are not taxable as income to the participant until paid or otherwise made available to the participant or beneficiary. As a general rule, the maximum amount which can be deferred in any one year is the lesser of $8,000 or 33 1/3 percent of the participant's includible compensation. However, in limited circumstances, the plan may provide for additional catch-up contributions in each of the last three years before normal retirement age. Furthermore, the Code provides additional requirements and restrictions regarding eligibility and distributions. All of the assets and income of a Plan established by a governmental employer after August 20, 1996, must be held in trust for the exclusive benefit of participants and their beneficiaries. For this purpose, custodial accounts and certain annuity contracts are treated as trusts. Plans that were in existence on August 20, 1996 may be amended to satisfy the trust and exclusive benefit requirements any time prior to January 1, 1999, and must be amended not later than that date to continue to receive favorable tax treatment. The requirement of a trust does not apply to amounts under a Plan of a tax exempt (non-governmental) employer. In addition, the requirement of a trust does not apply to amounts under a Plan of a governmental employer if the Plan is not an eligible plan within the meaning of section 457(b) of the Code. In the absence of such a trust, amounts under the plan will be subject to the claims of the employer's general creditors. In general, distributions from a Plan are prohibited under section 457 of the Code unless made after the participating employee: attains age 70 1/2, separates from service, dies, or suffers an unforeseeable financial emergency as defined in the Code. Under present federal tax law, amounts accumulated in a Plan under section 457 of the Code cannot be transferred or rolled over on a tax-deferred basis except for certain transfers to other Plans under section 457. TAX TREATMENT OF WITHDRAWALS - QUALIFIED CONTRACTS In the case of a withdrawal under a Qualified Contract, a ratable portion of the amount received is taxable, generally based on the ratio of the individual's cost basis to the individual's total accrued benefit under the retirement plan. Special tax rules may be available for certain distributions from a Qualified Contract. Section 72(t) of the Code imposes a 10% penalty tax on the taxable portion of any distribution from qualified retirement plans, including Contracts issued and qualified under Code Sections 401 (Pension and Profit-Sharing Plans), 403(b) (Tax-Sheltered Annuities) and 408 and 408A (Individual Retirement Annuities). To the extent amounts are not includible in gross income because they have been rolled over to an IRA or to another eligible Qualified Plan, no tax penalty will be imposed. The tax penalty will not apply to the following distributions: (a) made on or after the date on which the Owner or Annuitant (as applicable) reaches age 59 1/2 (b) following the death or disability of the Owner or Annuitant (as applicable) (for this purpose disability is as defined in Section 72(m) (7) of the Code); (c) after separation from service, distributions that are part of substantially equal periodic payments made not less frequently than annually for the life (or life expectancy) of the Owner or Annuitant (as applicable) or the joint lives (or joint life expectancies) of such Owner or Annuitant (as applicable) and his or her designated Beneficiary; (d) to an Owner or Annuitant (as applicable) who has separated from service after he has attained age 55; (e) made to the Owner or Annuitant (as applicable) to the extent such distributions do not exceed the amount allowable as a deduction under Code Section 213 to the Owner or Annuitant (as applicable) for amounts paid during the taxable year for medical care; (f) made to an alternate payee pursuant to a qualified domestic relations order; (g) made on account of an IRS levy upon the qualified contract; (h) from an Individual Retirement Annuity for the purchase of medical insurance (as described in Section 213(d)(1)(D) of the Code) for the Owner or Annuitant (as applicable) and his or her spouse and dependents if the Owner or Annuitant (as applicable) has received unemployment compensation for at least 12 weeks (this exception will no longer apply after the Owner or Annuitant (as applicable) has been re-employed for at least 60 days); (i) from an Individual Retirement Annuity made to the Owner or Annuitant (as applicable) to the extent such distributions do not exceed the qualified higher education expenses (as defined in Section 72(t)(7) of the Code) of the Owner or Annuitant (as applicable) for the taxable year; and (j) distributions up to $10,000 from an Individual Retirement Annuity made to the Owner or Annuitant (as applicable) which are qualified first-time home buyer distributions (as defined in Section 72(t)(8) of the Code). The exceptions stated in (d) and (f) above do not apply in the case of an Individual Retirement Annuity. The exception stated in (c) above applies to an Individual Retirement Annuity without the requirement that there be a separation from service. With respect to (c) above, if the series of substantially equal periodic payments is modified before the later of your attaining age 59 1/2 or 5 years from the date of the first periodic payment, then the tax for the year of the modification is increased by an amount equal to the tax which would have been imposed (the 10% penalty tax) but for the exception, plus interest for the tax years in which the exception was used. TAX-SHELTERED ANNUITIES - WITHDRAWAL LIMITATIONS The Code limits the withdrawal of amounts attributable to contributions made pursuant to a salary reduction agreement (as defined in Section 403(b)(11) of the Code) to circumstances only when the Owner: (1) attains age 59 1/2; (2) separates from service; (3) dies; (4) becomes disabled (within the meaning of Section 72(m)(7) of the Code); (5) in the case of hardship; or (6) made pursuant to a qualified domestic relations order, if otherwise permissible. However, withdrawals for hardship are restricted to the portion of the Owner's Contract Value which represents contributions made by the Owner and does not include any investment results. The limitations on withdrawals became effective on January 1, 1989 and apply only to salary reduction contributions made after December 31, 1988, to income attributable to such contributions and to income attributable to amounts held as of December 31, 1988. The limitations on withdrawals do not affect rollovers and transfers between certain Qualified Plans. Owners should consult their own tax counsel or other tax adviser regarding any distributions. MANDATORY DISTRIBUTIONS - QUALIFIED PLANS Generally, distributions from a qualified plan must begin no later than April 1st of the calendar year following the later of (a) the year in which the employee attains age 70 1/2 or (b) the calendar year in which the employee retires. The date set forth in (b) does not apply to an Individual Retirement Annuity. There are no mandatory distribution requirements for Roth IRAs prior to death. Required distributions must be over a period not exceeding the life expectancy of the individual or the joint lives or life expectancies of the individual and his or her designated beneficiary. If the required minimum distributions are not made, a 50% penalty tax is imposed as to the amount not distributed. ANNUITY PROVISIONS The Company makes available payment plans on a fixed and variable basis. VARIABLE ANNUITY PAYOUT A variable annuity is an annuity with payments which: (1) are not predetermined as to dollar amount; and (2) will vary in amount with the net investment results of the applicable investment portfolio. Annuity payments also depend upon the age of the annuitant and any joint annuitant and the assumed interest factor utilized. The Annuity Table used will depend upon the annuity option chosen. The dollar amount of annuity payments after the first is determined as follows: 1. The dollar amount of the first variable annuity payment is divided by the value of an annuity unit for each investment portfolio as of the annuity date. This sets the number of annuity units for each monthly payment for the applicable investment portfolio. 2. The fixed number of annuity units for each payment in each investment portfolio is multiplied by the annuity unit value for that investment portfolio for the last valuation period of the month preceding the month for which the payment is due. This result is the dollar amount of the payment for each applicable investment portfolio. The total dollar amount of each variable annuity payment is the sum of all variable annuity payments reduced by the applicable portion of the Contract Maintenance Charge. The calculation of the first annuity payment is made on the annuity date. The Company assesses the insurance charges during both the accumulation phase and the annuity phase. The deduction of the insurance charges will affect the amount of the first and any subsequent annuity payments. In addition, under certain circumstances, the Company may assess a contingent deferred sales charge and/or the contract maintenance charge on the annuity date which would affect the amount of the first annuity payment (see "Expenses" and "Annuity Payments" in the prospectus). ANNUITY UNIT The value of an annuity unit was arbitrarily set initially at $10. The annuity unit value at the end of any subsequent valuation period is determined as follows: 1. The net investment factor for the current valuation period is multiplied by the value of the annuity unit for investment portfolio for the immediately preceding valuation period. 2. The result in (1) is then divided by the assumed investment rate factor which equals 1.00 plus the assumed investment rate for the number of days since the previous valuation period. The owner can choose either a 5% or a 3% assumed investment rate. FIXED ANNUITY PAYOUT A fixed annuity is an annuity with payments which are guaranteed as to dollar amount by the Company and do not vary with the investment experience of the investment portfolios. The dollar amount of each fixed annuity payment is determined in accordance with Annuity Tables contained in the Contract. FINANCIAL STATEMENTS The financial statements of the Company included herein should be considered only as bearing upon the ability of the Company to meet its obligations under the Contracts. 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
CONSECO VARIABLE INSURANCE COMPANY BALANCE SHEET December 31, 1999 and 1998 (Dollars in millions) ASSETS 1999 1998 ---- ---- Investments: Actively managed fixed maturities at fair value (amortized cost: 1999 - $1,491.8; 1998 - $1,520.5)............................................... $1,398.7 $1,524.1 Equity securities at fair value (cost: 1999 - $47.8 million; 1998 - $46.0 million). 49.8 45.7 Mortgage loans..................................................................... 108.0 110.2 Policy loans....................................................................... 75.5 79.6 Other invested assets ............................................................. 50.8 120.3 -------- -------- Total investments............................................................ 1,682.8 1,879.9 Cash and cash equivalents.............................................................. 81.5 48.4 Accrued investment income.............................................................. 35.6 30.5 Cost of policies purchased............................................................. 131.6 98.0 Cost of policies produced.............................................................. 147.6 82.5 Reinsurance receivables................................................................ 26.4 22.2 Goodwill............................................................................... 45.3 46.7 Assets held in separate accounts....................................................... 1,457.0 696.4 Other assets........................................................................... 6.0 7.1 -------- -------- Total assets................................................................. $3,613.8 $2,911.7 ======== ========
(continued on next page) The accompanying notes are an integral part of the financial statements. F-2
CONSECO VARIABLE INSURANCE COMPANY BALANCE SHEET (Continued) December 31, 1999 and 1998 (Dollars in millions, except per share amount) LIABILITIES AND SHAREHOLDER'S EQUITY 1999 1998 ---- ---- Liabilities: Insurance liabilities: Interest-sensitive products..................................................... $1,289.2 $1,365.2 Traditional products............................................................ 242.8 246.2 Claims payable and other policyholder funds..................................... 64.1 62.6 Liabilities related to separate accounts........................................ 1,457.0 696.4 Income tax liabilities............................................................. 33.4 37.5 Investment borrowings.............................................................. 135.1 65.7 Other liabilities.................................................................. 16.5 33.0 -------- -------- Total liabilities.......................................................... 3,238.1 2,506.6 -------- -------- Shareholder's equity: Common stock and additional paid-in capital (par value $4.80 per share, 1,065,000 shares authorized, 1,043,565 shares issued and outstanding).................... 380.8 380.8 Accumulated other comprehensive loss............................................... (28.4) (.8) Retained earnings.................................................................. 23.3 25.1 -------- -------- Total shareholder's equity................................................. 375.7 405.1 -------- -------- Total liabilities and shareholder's equity................................. $3,613.8 $2,911.7 ======== ========
The accompanying notes are an integral part of the financial statements. F-3
CONSECO VARIABLE INSURANCE COMPANY STATEMENT OF OPERATIONS for the years ended December 31, 1999, 1998 and 1997 (Dollars in millions) 1999 1998 1997 ---- ---- ---- Revenues: Insurance policy income.......................................... $ 72.1 $ 73.6 $ 75.7 Net investment income............................................ 297.6 198.0 222.6 Net gains (losses) from sale of investments...................... (10.0) 18.5 13.3 ------ ------ ------ Total revenues............................................. 359.7 290.1 311.6 ------ ------ ------ Benefits and expenses: Insurance policy benefits........................................ 266.8 170.6 191.0 Amortization..................................................... 13.8 33.6 27.1 Other operating costs and expenses............................... 40.3 38.7 32.2 ------ ------ ------ Total benefits and expenses................................ 320.9 242.9 250.3 ------ ------ ------ Income before income taxes................................. 38.8 47.2 61.3 Income tax expense................................................... 13.6 16.6 22.1 ------ ------ ------ Net income................................................. $ 25.2 $ 30.6 $ 39.2 ====== ====== ======
The accompanying notes are an integral part of the financial statements. F-4
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 ----- --------------- ------------- -------- Balance, December 31, 1996................................. $396.9 $380.8 $ (4.6) $ 20.7 Comprehensive income, net of tax: Net income............................................ 39.2 - - 39.2 Change in unrealized appreciation (depreciation) of securities (net of applicable income tax expense of $7.2)........................................... 13.3 - 13.3 - ------ Total comprehensive income........................ 52.5 - - - Dividends on common stock............................... (32.5) - - (32.5) ------ ------ ------ ------ Balance, December 31, 1997................................. 416.9 380.8 8.7 27.4 Comprehensive income, net of tax: Net income............................................ 30.6 - - 30.6 Change in unrealized appreciation (depreciation) of securities (net of applicable income tax benefit of $5.1)........................................... (9.5) - (9.5) - ------ Total comprehensive income........................ 21.1 Dividends on common stock............................... (32.9) - - (32.9) ------ ------ ------ ------ Balance, December 31, 1998................................. 405.1 380.8 (.8) 25.1 Comprehensive loss, net of tax: Net income.............................................. 25.2 - - 25.2 Change in unrealized depreciation of securities (net of applicable income tax benefit of $15.7 million).... (27.6) - (27.6) - ------ Total comprehensive loss.......................... (2.4) Dividends on common stock............................... (27.0) - - (27.0) ------ ------ ------ ------ Balance, December 31, 1999................................. $375.7 $380.8 $(28.4) $ 23.3 ====== ====== ====== ======
The accompanying notes are an integral part of the financial statements. F-5
CONSECO VARIABLE INSURANCE COMPANY STATEMENT OF CASH FLOWS for the years ended December 31, 1999, 1998 and 1997 (Dollars in millions) 1999 1998 1997 ---- ---- ---- Cash flows from operating activities: Net income........................................................ $ 25.2 $ 30.6 $ 39.2 Adjustments to reconcile net income to net cash provided by operating activities: Amortization................................................ 13.8 43.0 27.1 Income taxes................................................ 11.4 (1.2) 6.7 Insurance liabilities....................................... 162.6 120.0 95.2 Accrual and amortization of investment income............... (11.4) 1.6 .3 Deferral of cost of policies produced....................... (62.7) (35.3) (31.8) Net (gains) losses from sale of investments................. 10.0 (18.5) (13.3) Other....................................................... .7 (38.3) (4.6) --------- --------- ------- Net cash provided by operating activities................... 149.6 101.9 118.8 --------- --------- ------- Cash flows from investing activities: Sales of investments.............................................. 904.8 1,185.0 755.2 Maturities and redemptions........................................ 109.0 145.5 150.4 Purchases of investments.......................................... (1,502.0) (1,420.7) (923.5) --------- --------- ------- Net cash used by investing activities....................... (488.2) (90.2) (17.9) --------- --------- ------- Cash flows from financing activities: Deposits to insurance liabilities................................. 654.1 400.4 255.9 Investment borrowings............................................. 69.4 4.7 12.6 Withdrawals from insurance liabilities............................ (324.8) (385.0) (302.2) Dividends paid on common stock.................................... (27.0) (32.9) (32.5) --------- --------- ------- Net cash provided (used) by financing activities............ 371.7 (12.8) (66.2) --------- --------- ------- Net increase (decrease) in cash and cash equivalents........ 33.1 (1.1) 34.7 Cash and cash equivalents, beginning of year......................... 48.4 49.5 14.8 --------- --------- ------- Cash and cash equivalents, end of year............................... $ 81.5 $ 48.4 $ 49.5 ========= ========= =======
The accompanying notes are an integral part of the financial statements. F-6 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 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 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 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:
1999 1998 --------------------------- ------------------------ Carrying Fair Carrying Fair Amount Value Amount Value ------ ----- ------ ----- (Dollars in millions) Financial assets: Actively managed fixed maturities............................ $1,398.7 $1,398.7 $1,524.1 $1,524.1 Equity securities ........................................... 49.8 49.8 45.7 45.7 Mortgage loans............................................... 108.0 102.8 110.2 119.0 Policy loans................................................. 75.5 75.5 79.6 79.6 Other invested assets........................................ 50.8 50.8 120.3 120.3 Cash and cash equivalents.................................... 81.5 81.5 48.4 48.4 Financial liabilities: Insurance liabilities for interest-sensitive products (1).... 1,289.2 1,289.2 1,365.2 1,365.2 Investment borrowings........................................ 135.1 135.1 65.7 65.7 F-10 CONSECO VARIABLE INSURANCE COMPANY Notes to Financial Statements ------------------------------ (1) The estimated fair value of the liabilities for interest-sensitive products was approximately equal to its carrying value at December 31, 1999 and 1998. This was because interest rates credited on the vast majority of account balances approximate current rates paid on similar products and because these rates are not generally guaranteed beyond one year. We are not required to disclose fair values for insurance liabilities, other than those for interest-sensitive products . However, we take into consideration the estimated fair values of all insurance liabilities in our overall management of interest rate risk. We attempt to minimize exposure to changing interest rates by matching investment maturities with amounts due under insurance contracts.
Recently Issued Accounting Standards Statement of Financial Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging Activities" ("SFAS 133"), as amended by Statement of Financial Accounting Standards No. 137, "Deferral of the Effective Date of FASB Statement No. 133" requires all derivative instruments to be recorded on the balance sheet at estimated fair value. Changes in the fair value of derivative instruments are to be recorded each period either in current earnings or other comprehensive income, depending on whether a derivative is designated as part of a hedge transaction and, if it is, on the type of hedge transaction. SFAS 133 is required to be implemented in year 2001. We are currently evaluating the impact of SFAS 133; at present, we do not believe it will have a material effect on our consolidated financial position or results of operations. Because of ongoing changes to implementation guidance, we do not plan on adopting the new standard until the first quarter of 2001. We implemented the Statement of Position 98-1, "Accounting for the Costs of Computer Software Developed or Obtained for Internal Use" ("SOP 98-1") on January 1, 1999. SOP 98-1 defines internal use software and when the costs associated with internal use software should be capitalized. The implementation of SOP 98-1 did not have a material effect on our consolidated financial position or results of operations. 2. INVESTMENTS: At December 31, 1999, the amortized cost and estimated fair value of actively managed fixed maturities and equity securities were as follows:
Gross Gross Estimated Amortized unrealized unrealized fair cost gains losses value ---- ----- ------ ----- (Dollars in millions) Investment grade: Corporate securities................................................ $ 840.6 $2.2 $59.3 $ 783.5 United States Treasury securities and obligations of United States government corporations and agencies................ 15.5 .1 .7 14.9 States and political subdivisions................................... 11.7 - 1.1 10.6 Debt securities issued by foreign governments....................... 12.2 - 1.6 10.6 Mortgage-backed securities ......................................... 482.3 .2 22.7 459.8 Below-investment grade (primarily corporate securities)................ 129.5 2.4 12.6 119.3 -------- ---- ----- -------- Total actively managed fixed maturities........................... $1,491.8 $4.9 $98.0 $1,398.7 ======== ==== ===== ======== Equity securities...................................................... $47.8 $3.9 $1.9 $49.8 ===== ==== ==== =====
F-11 CONSECO VARIABLE INSURANCE COMPANY Notes to Financial Statements ------------------------------ At December 31, 1998, the amortized cost and estimated fair value of actively managed fixed maturities and equity securities were as follows:
Gross Gross Estimated Amortized unrealized unrealized fair cost gains losses value ---- ----- ------ ----- (Dollars in millions) Investment grade: Corporate securities................................................ $ 860.4 $20.7 $15.0 $ 866.1 United States Treasury securities and obligations of United States government corporations and agencies................ 26.9 .8 .2 27.5 States and political subdivisions................................... 17.3 .3 - 17.6 Debt securities issued by foreign governments....................... 11.7 - .8 10.9 Mortgage-backed securities ......................................... 487.4 8.0 1.2 494.2 Below-investment grade (primarily corporate securities)................ 116.8 1.2 10.2 107.8 -------- ----- ----- -------- Total actively managed fixed maturities........................... $1,520.5 $31.0 $27.4 $1,524.1 ======== ===== ===== ======== Equity securities...................................................... $ 46.0 $ .8 $ 1.1 $ 45.7 ======== ===== ===== ========
Accumulated other comprehensive loss included in shareholder's equity as of December 31, 1999 and 1998, is summarized as follows:
1999 1998 ---- ---- (Dollars in millions) Unrealized gains (losses) on investments............................................................. $(90.8) .9 Adjustments to cost of policies purchased and cost of policies produced.............................. 46.3 (2.1) Deferred income tax benefit.......................................................................... 16.1 .4 ------ ----- Accumulated other comprehensive loss.......................................................... $(28.4) $ (.8) ====== =====
The following table sets forth the amortized cost and estimated fair value of actively managed fixed maturities at December 31, 1999, by contractual maturity. Actual maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties. Most of the mortgage-backed securities shown below provide for periodic payments throughout their lives.
Estimated Amortized fair cost value ---- ----- (Dollars in millions) Due in one year or less........................................................................ $ 8.2 $ 8.2 Due after one year through five years.......................................................... 90.8 89.5 Due after five years through ten years......................................................... 279.9 259.6 Due after ten years............................................................................ 628.2 579.4 -------- -------- Subtotal.................................................................................. 1,007.1 936.7 Mortgage-backed securities (a)................................................................. 484.7 462.0 -------- -------- Total actively managed fixed maturities ............................................... $1,491.8 $1,398.7 ======== ======== - -------------------- (a) Includes below-investment grade mortgage-backed securities with an amortized cost and estimated fair value of $2.4 million and $2.2 million, respectively.
F-12 CONSECO VARIABLE INSURANCE COMPANY Notes to Financial Statements ------------------------------ Net investment income consisted of the following:
1999 1998 1997 ---- ---- ---- (Dollars in millions) Actively managed fixed maturity securities........................................... $114.8 $118.4 $133.6 Equity securities.................................................................... 12.2 3.2 1.7 Mortgage loans....................................................................... 9.9 12.1 16.4 Policy loans......................................................................... 4.8 5.1 5.4 Other invested assets................................................................ 3.5 13.3 7.7 Cash and cash equivalents............................................................ 2.1 2.9 3.4 Separate accounts.................................................................... 151.8 44.1 55.7 ------ ------ ------ Gross investment income.......................................................... 299.1 199.1 223.9 Investment expenses.................................................................. 1.5 1.1 1.3 ------ ------ ------ Net investment income......................................................... $297.6 $198.0 $222.6 ====== ====== ======
The Company had no significant fixed maturity investments or mortgage loans that were not accruing investment income in 1999, 1998 and 1997. Investment gains (losses), net of investment expenses, were included in revenue as follows:
1999 1998 1997 ---- ---- ---- (Dollars in millions) Fixed maturities: Gross gains........................................................................ $ 8.6 $ 34.0 $20.6 Gross losses....................................................................... (14.5) (12.4) (5.1) Other than temporary decline in fair value......................................... (1.3) - (.3) ------ ------ ----- Net investment gains (losses) from fixed maturities before expenses........... (7.2) 21.6 15.2 Other.................................................................................. .7 .1 2.2 ------ ------ ----- Net investment gains (losses) before expenses................................. (6.5) 21.7 17.4 Investment expenses.................................................................... 3.5 3.2 4.1 ------ ------ ----- Net investment gains (losses)................................................. $(10.0) $ 18.5 $13.3 ====== ====== =====
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 CONSECO VARIABLE INSURANCE COMPANY Notes to Financial Statements ------------------------------ 3. INSURANCE LIABILITIES: These liabilities consisted of the following:
Interest Withdrawal Mortality rate assumption assumption assumption 1999 1998 ---------- ---------- ---------- ---- ---- (Dollars in millions) 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 ======== ======== - ------------- (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.
4. INCOME TAXES: Income tax liabilities were comprised of the following:
1999 1998 ---- ---- (Dollars in millions) Deferred income tax liabilities (assets): Investments (primarily actively managed fixed maturities).................................. $ 3.6 $ 5.4 Cost of policies purchased and cost of policies produced................................... 75.3 56.7 Insurance liabilities...................................................................... (39.2) (28.2) Unrealized depreciation.................................................................... (16.1) (.4) Other...................................................................................... 10.2 (2.2) ------ ------ Deferred income tax liabilities....................................................... 33.8 31.3 Current income tax liabilities (assets)........................................................ (.4) 6.2 ------ ------ Income tax liabilities................................................................ $ 33.4 $ 37.5 ====== ======
F-14 CONSECO VARIABLE INSURANCE COMPANY Notes to Financial Statements ------------------------------ Income tax expense was as follows:
1999 1998 1997 ---- ---- ---- (Dollars in millions) Current tax provision..................................................................... $ 4.3 $20.8 $16.3 Deferred tax provision (benefit).......................................................... 9.3 (4.2) 5.8 ----- ----- ----- Income tax expense............................................................... $13.6 $16.6 $22.1 ===== ===== =====
A reconciliation of the income tax provisions based on the U.S. statutory corporate tax rate to the provisions reflected in the statement of operations is as follows:
1999 1998 1997 ---- ---- ---- (Dollars in millions) Tax on income before income taxes at statutory rate....................................... 35.0% 35.0% 35.0% State taxes............................................................................... 1.5 1.0 .7 Other..................................................................................... (1.4) (.8) .3 ---- ---- ---- Income tax expense............................................................... 35.1% 35.2% 36.0% ==== ==== ====
5. OTHER DISCLOSURES: Litigation The Company is involved on an ongoing basis in lawsuits related to its operations. Although the ultimate outcome of certain of such matters cannot be predicted, such lawsuits currently pending against the Company are not expected, individually or in the aggregate, to have a material adverse effect on the Company's financial condition, cash flows or results of operations. Guaranty Fund Assessments The balance sheet at December 31, 1999, includes: (i) accruals of $1.6 million, representing our estimate of all known assessments that will be levied against the Company by various state guaranty associations based on premiums written through 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 CONSECO VARIABLE INSURANCE COMPANY Notes to Financial Statements ------------------------------ 6. OTHER OPERATING STATEMENT DATA: Insurance policy income consisted of the following:
1999 1998 1997 ---- ---- ---- (Dollars in millions) Traditional products: Direct premiums collected......................................................... $700.4 $445.8 $309.6 Reinsurance assumed............................................................... 18.7 15.6 14.9 Reinsurance ceded................................................................. (23.1) (21.0) (24.2) ------ ------ ------ Premiums collected, net of reinsurance...................................... 696.0 440.4 300.3 Less premiums on universal life and products without mortality and morbidity risk which are recorded as additions to insurance liabilities ................................ 654.1 400.4 255.9 ------ ------ ------ Premiums on traditional products with mortality or morbidity risk, recorded as insurance policy income...................................... 41.9 40.0 44.4 Fees and surrender charges on interest-sensitive products............................. 30.2 33.6 31.3 ------ ------ ------ Insurance policy income..................................................... $ 72.1 $ 73.6 $ 75.7 ====== ====== ======
The five states with the largest shares of 1999 collected premiums were California (14 percent), Texas (14 percent), Florida (13 percent), Michigan (8.8 percent) and Indiana (5.2 percent). No other state accounted for more than 4 percent of total collected premiums. Changes in the cost of policies purchased were as follows:
1999 1998 1997 ---- ---- ---- (Dollars in millions) Balance, beginning of year............................................................ $ 98.0 $106.4 $143.0 Amortization...................................................................... (4.1) (21.1) (15.4) Amounts related to fair value adjustment of actively managed fixed maturities 37.7 11.8 (21.2) Other ............................................................................ - .9 - ------ ------ ------ Balance, end of year.................................................................. $131.6 $ 98.0 $106.4 ====== ====== ======
Based on current conditions and assumptions as to future events on all policies in force, the Company expects to amortize approximately 9 percent of the December 31, 1999, balance of cost of policies purchased in 2000, 10 percent in 2001, 9 percent in 2002, 7 percent in 2003 and 6 percent in 2004. The discount rates used to determine the amortization of the cost of policies purchased ranged from 3.6 percent to 8.0 percent and averaged 5.8 percent. Changes in the cost of policies produced were as follows:
1999 1998 1997 ---- ---- ---- (Dollars in millions) Balance, beginning of year............................................................ $ 82.5 $ 55.9 $38.2 Additions......................................................................... 62.7 35.3 31.8 Amortization...................................................................... (8.3) (11.0) (10.2) Amounts related to fair value adjustment of actively managed fixed maturities 10.7 2.3 (3.9) ------ ------ ----- Balance, end of year.................................................................. $147.6 $ 82.5 $55.9 ====== ====== =====
F-16 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:
1999 1998 ---- ---- (Dollars in millions) Statutory capital and surplus.................................................. $112.6 $134.0 Asset valuation reserve........................................................ 41.4 30.9 Interest maintenance reserve................................................... 66.7 73.1 ------- ------ Total...................................................................... $220.7 $238.0 ====== ======
Our statutory net income was $14.6 million, $32.7 million and $32.7 million in 1999, 1998 and 1997, respectively. Statutory net income differs from net income presented in our financial statements prepared in accordance with GAAP, primarily because for GAAP reporting we are required to defer and amortize costs that vary with and are primarily related to the production of new business as described in note 1. State insurance laws generally restrict the ability of insurance companies to pay dividends or make other distributions. We may pay dividends to our parent in 2000 of $12.8 million without permission from state regulatory authorities. In 1998, the National Association of Insurance Commissioners adopted codified statutory accounting principles, which are expected to constitute the only source of prescribed statutory accounting practices and are effective in 2001. The changes to statutory accounting practices resulting from the codification are not expected to have a material effect on the statutory capital and surplus or statutory operating earnings data shown above. F-17 PART C OTHER INFORMATION ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS A. FINANCIAL STATEMENTS The financial statements of Conseco Variable Insurance Company (the "Company") are included in Part B hereof. B. EXHIBITS 1. Resolution of Board of Directors of the Company authorizing the establishment of the Separate Account.+ 2. Not Applicable. 3. (i) Form of Principal Underwriters Agreement.++ (ii) Form of Selling Agreement.++ 4. (i) Individual Variable Deferred Annuity Contract.+ (ii) Guaranteed Minimum Death Benefit Rider+ (iii) Guaranteed Minimum Income Benefit Rider+ (iv) Unemployment Benefit Rider+ 5. Application Form. 6. (i) Articles of Incorporation of the Company.* (ii) Articles of Amendment to the Articles of Incorporation of the Company (iii) Amended and Restated By-Laws of the Company 7. Not Applicable. 8. (i) Form of Fund Participation Agreement by and among The Alger American Fund, Great American Reserve Insurance Company and Fred Alger and Company, Incorporated.** (ii) Form of Fund Participation Agreement by and among Great American Reserve Insurance Company, Berger Institutional Products Trust and BBOI Worldwide LLC.** (iii)Form of Fund Participation by and between Great American Reserve Insurance Company, Insurance Management Series and Federated Securities Corp.** (iv) Form of Fund Participation between Great American Reserve Insurance Company, Van Eck Worldwide Insurance Trust and Van Eck Associates Corporation.** (v) Form of Fund Participation Agreement by and between Lord Abbett Series Fund, Inc., Lord, Abbett and Co. and Great American Reserve Insurance Company.** (vi) Form of Fund Participation Agreement by and between American Century Investment Services, Inc. and Great American Reserve Insurance Company.** (vii)Form of Fund Participation Agreement between INVESCO Variable Investment Funds, Inc., INVESCO Funds Group, Inc. and the Company.*** (viii) Form of Fund Participation Agreement between Rydex Variable Trust and the Company. 9. Opinion and Consent of Counsel. 10. Consent of Independent Accountants. 11. Not Applicable. 12. Not Applicable. 13. Not Applicable. 14. Not Applicable. 15. Company Organizational Chart. *Incorporated by reference to Form N-4 (Conseco Variable Annuity Account F - File Nos. 333-40309 and 811-08483) filed electronically on November 14, 1997. **Incorporated by reference to Pre-Effective Amendment No. 1 to Form N-4 (Conseco Variable Annuity Account F - File Nos. 333-40309 and 811-08483) filed electronically on February 3, 1998. ***Incorporated by reference to Conseco Variable Annuity Account G, Form N-4, File Nos. 333-00373 and 811-07501, filed electronically on January 23, 1996. +Incorporated by reference to Form N-4 (Conseco Variable Annuity Account H - File Nos. 333-90737 and 811-09693) filed electronically on November 12, 1999. ++Incorporated by reference to Pre-Effective Amendment No. 1 to Form N-4 (File Nos. 333-90737 and 811-09693) filed electronically on February 4, 2000. ITEM 25. DIRECTORS AND OFFICERS OF THE DEPOSITOR The following are the Executive Officers and Directors of the Company which are engaged directly or indirectly in activities relating to the Registrant or the Contracts offered by the Registrant: Name and Principal Position and Offices Business Address* with Depositor - ------------------- --------------------------------------- Ngaire E. Cuneo Director Stephen C. Hilbert Director and Chairman of the Board Rollin M. Dick Director, Executive Vice President and Chief Financial Officer Thomas J. Kilian Director and President John J. Sabl Director, Executive Vice President, General Counsel and Secretary James S. Adams Senior Vice President, Chief Accounting Officer and Treasurer *The Principal business address for all officers and directors listed above is 11825 N. Pennsylvania Street, Carmel, Indiana 46032. ITEM 26. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH THE DEPOSITOR OR REGISTRANT The Company organizational chart is filed as Exhibit 15 herein. ITEM 27. NUMBER OF CONTRACT OWNERS As of April 13, 2000, there were 36 non-qualified contract owners and 73 qualified contract owners. ITEM 28. INDEMNIFICATION The Bylaws (Article VI) of the Company provide, in part, that: The Corporation shall indemnify any person who was or is a party, or is threatened to be made a party, to any threatened, pending, or completed action, suit or proceeding, whether civil, criminal, administrative, or investigative, by reason of the fact that he is or was a director or officer of the Corporation, or is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise (collectively, "Agent") against expenses (including attorneys' fees), judgments, fines, penalties, court costs and amounts paid in settlement actually and reasonably incurred by him in connection with such action, suit or proceeding if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the Corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe his conduct was unlawful. The termination of any action, suit, or proceeding by judgment, order, settlement (whether with or without court approval), conviction or upon a plea of nolo contendere or its equivalent, shall not, of itself, create a presumption that the Agent did not act in good faith and in a manner which he reasonably believed to be in or not opposed to the best interests of the Corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe that his conduct was unlawful. If several claims, issues or matters are involved, an Agent may be entitled to indemnification as to some matters even though he is not entitled as to other matters. Any director or officer of the Corporation serving in any capacity of another corporation, of which a majority of the shares entitled to vote in the election of its directors is held, directly or indirectly, by the Corporation, shall be deemed to be doing so at the request of the Corporation. Insofar as indemnification for liability arising under the Securities Act of 1933 may be permitted directors and officers or controlling persons of the Company pursuant to the foregoing, or otherwise, the Company has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Company of expenses incurred or paid by a director, officer or controlling person of the Company in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the Company will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue. ITEM 29. PRINCIPAL UNDERWRITERS (a) Conseco Equity Sales, Inc. is the principal underwriter for the following investment companies (other than the Registrant): Conseco Variable Annuity Account C Conseco Variable Annuity Account E Conseco Variable Annuity Account F Conseco Variable Annuity Account G Conseco Fund Group Rydex Advisor Variable Annuity Account BMA Variable Life Account A (b) Conseco Equity Sales, Inc. ("CES") is the principal underwriter for the Contracts. The following persons are the officers and directors of CES. The principal business address for each officer and director of CES is 11815 N. Pennsylvania Street, Carmel, Indiana 46032. Name and Principal Positions and Offices Business Address with Underwriter ------------------------ --------------------------------------- L. Gregory Gloeckner President and Director William P. Kovacs Vice President, General Counsel, Secretary and Director James S. Adams Senior Vice President, Chief Accounting Officer, Treasurer and Director William T. Devanney, Jr. Senior Vice President, Corporate Taxes Christene H. Darnell Vice President, Management Reporting Donald B. Johnston Vice President, Director Mutual Fund Sales & Marketing (c) Not Applicable. ITEM 30. LOCATION OF ACCOUNTS AND RECORDS K. Lowell Short, whose address is 11815 N. Pennsylvania Street, Carmel, IN 46032, maintains physical possession of the accounts, books or documents of the Separate Account required to be maintained by Section 31(a) of the Investment Company Act of 1940 and the rules promulgated thereunder. ITEM 31. MANAGEMENT SERVICES Not Applicable. ITEM 32. UNDERTAKINGS a. Registrant hereby undertakes to file a post-effective amendment to this registration statement as frequently as is necessary to ensure that the audited financial statements in the registration statement are never more than sixteen (16) months old for so long as payment under the variable annuity contracts may be accepted. b. Registrant hereby undertakes to include either (1) as part of any application to purchase a contract offered by the Prospectus, a space that an applicant can check to request a Statement of Additional Information, or (2) a postcard or similar written communication affixed to or included in the Prospectus that the applicant can remove to send for a Statement of Additional Information. c. Registrant hereby undertakes to deliver any Statement of Additional Information and any financial statement required to be made available under this Form promptly upon written or oral request. d. Conseco Variable Insurance Company (the "Company") hereby represents that the fees and charges deducted under the Contracts described in the Prospectus, in the aggregate, are reasonable in relation to the services rendered, the expenses to be incurred and the risks assumed by the Company. e. The Securities and Exchange Commission (the "SEC") issued the American Counsel of Life Insurance an industry wide no-action letter dated November 28, 1988, stating that the SEC would not recommend any enforcement action if registered separate accounts funding tax-sheltered annuity contracts restrict distributions to plan participants in accordance with the requirements of Section 403(b)(11), provided certain conditions and requirements were met. Among these conditions and requirements, any registered separate account relying on the no-action position of the SEC must: (1) Include appropriate disclosure regarding the redemption restrictions imposed by Section 403(b)(11) in each registration statement, including the prospectus, used in connection with the offer of the contract; (2) Include appropriate disclosure regarding the redemption restrictions imposed by Section 403 (b)(11) in any sales literature used in connection with the offer in the contract; (3) Instruct sales representatives who solicit participants to purchase the contract specifically to bring the redemption restrictions imposed by Section 403(b)(11) to the attention of the potential participants; and (4) Obtain from each plan participant who purchases a Section 403(b) annuity contract, prior to or at the time of such purchase, a signed statement acknowledging the participant's understanding of (i) the restrictions on redemption imposed by Section 403(b)(11), and (ii) the investment alternatives available under the employer's Section 403(b) arrangement, to which the participant may elect to transfer his contract value. The Registrant is relying on the no-action letter. Accordingly, the provisions of paragraphs (1) - (4) above have been complied with. SIGNATURES As required by the Securities Act of 1933 and the Investment Company Act of 1940, the Registrant certifies that it meets the requirements of Securities Act Rule 485(b) for effectiveness of this Registration Statement and has caused this Registration Statement to be signed on its behalf, in the City of Carmel, and State of Indiana on this 20th day of April, 2000. CONSECO VARIABLE ANNUITY ACCOUNT H Registrant By: CONSECO VARIABLE INSURANCE COMPANY By: /s/THOMAS J. KILIAN ------------------------------ By: CONSECO VARIABLE INSURANCE COMPANY Depositor By: /s/THOMAS J. KILIAN ------------------------------- As required by the Securities Act of 1933, this Registration Statement has been signed by the following persons in the capacities and on the dates indicated. SIGNATURE TITLE DATE - ------------------------ -------------------------- --------------- /s/NGAIRE E. CUNEO Director 4/20/00 - ------------------------ ----------------- Ngaire E. Cuneo /s/THOMAS J. KILIAN Director 4/20/00 - ------------------------ ----------------- Thomas J. Kilian Director and Chairman of /s/STEPHEN C. HILBERT of the Board (Principal 4/20/00 - ------------------------ Executive Officer) ----------------- Stephen C. Hilbert /s/ROLLIN M. DICK Director, Executive Vice 4/20/00 - ------------------------ President and Chief ----------------- Rollin M. Dick Financial Officer (Principal Financial Officer) /s/JOHN J. SABL Director 4/20/00 - ----------------------- ---------------- John J. Sabl /s/JAMES S. ADAMS Senior Vice President and 4/20/00 - ----------------------- Treasurer (Chief Accounting ---------------- James S. Adams Officer) EXHIBITS TO POST-EFFECTIVE AMENDMENT NO. 1 TO FORM N-4 INDEX TO EXHIBITS EX-99.B6(ii) Articles of Amendment to the Articles of Incorporation of the Company EX-99.B6(iii) Amended and Restated By-Laws of the Company EX-99.B8(viii) Form of Fund Participation Agreement between Rydex Variable Trust and the Company EX-99.B9 Opinion and Consent of Counsel EX-99.B10 Consent of Independent Accountants EX-99.B15 Company Organizational Chart EX-99.B6.(II) 2 ARTICLES OF AMENDMENT TO ARTICLES OF INCORPORATION ARTICLES OF AMENDMENT TO THE ARTICLES OF INCORPORATION OF GREAT AMERICAN RESERVE INSURANCE COMPANY Pursuant to the provisions of Article 4.04 of the Texas Business Corporation Act and Article 3.05 of the Insurance Code of Texas, Great American Reserve Insurance Company (herein after referred to as the "Company") adopts the following Articles of Amendment to its Articles of Incorporation: ARTICLE ONE The following amendment to the Articles of Incorporation was adopted by the sole shareholder of the Company pursuant to a Written Consent dated June 3, 1998: RESOLVED, that Article One of the Articles of Incorporation of the Company be amended to read as follows: "ARTICLE ONE The name of the corporation shall be Conseco Variable Insurance Company." ARTICLE TWO The total number of shares of the Company outstanding at the time of such adoption was one million forty-three thousand five hundred sixty-five (1,043,565) and the number of shares entitled to vote thereon was one million forty-three thousand five hundred sixty-five (1,043,565). ARTICLE THREE The holder of all of the one million forty-three thousand five hundred sixty-five (1,043,565) shares outstanding and entitled to vote on said amendment has signed a consent in writing voting for said amendment. No votes were cast against said amendment. IN WITNESS WHEREOF, the undersigned officer executes these Articles of Amendment to the Articles of Incorporation of Great American Reserve Insurance Company, this 15th day of June 1998. GREAT AMERICAN RESERVE INSURANCE COMPANY Thomas J. Kilian, President Attest: Michael A. Colliflower, Assistant Secretary STATE OF INDIANA ) ) COUNTY OF HAMILTON ) Before me, a Notary Public in and for said County and State personally appeared Thomas J. Kilian, President, and Michael A. Colliflower, Assistant Secretary, of Great American Reserve Insurance Company who acknowledge the execution of the foregoing instrument, and who, having been duly sworn, stated that any representations contained therein are true. Witness my hand and Notarial Seal this 15th day of June, 1998. _____________________, Notary Public Residing in ___________ County, IN Commission Expires ____________ EX-99.B6(III) 3 AMENDED AND RESTATED BY-LAWS - CONSECO VARIABLE Amended and Restated BY-LAWS OF CONSECO VARIABLE INSURANCE COMPANY December 4, 1998
TABLE OF CONTENTS Page ARTICLE I. Indentification Section 1. Name................................................................................ 1 Section 2. Registered Office and Registered Agent.............................................. 1 Section 3. Principal Office.................................................................... 1 Section 4. Other Offices....................................................................... 1 Section 5. Seal................................................................................ 1 Section 6. Fiscal Year......................................................................... 1 ARTICLE II. Shareholders. Section 1. Place of Meeting.................................................................... 2 Section 2. Annual Meetings..................................................................... 2 Section 3. Special Meetings.................................................................... 2 Section 4. Notice of Meeting................................................................... 2 Section 5. Waiver of Notice.................................................................... 2 Section 6. Voting at Meetings.................................................................. 3 (a) Voting Rights.................................................................. 3 (b) Record Date.................................................................... 3 (c) Proxies........................................................................ 3 (d) Quorum......................................................................... 4 (e) Adjournments................................................................... 4 Section 7. List of Shareholders................................................................ 4 Section 8. Action by Written Consent........................................................... 5 Section 9. Meeting by Telephone or Similar Communications Equipment............................................................ 5 ARTICLE III. Directors. Section 1. Duties.............................................................................. 6 Section 2. Number of Directors................................................................. 6 Section 3. Election and Term................................................................... 6 Section 4. Resignation......................................................................... 6 Section 5. Vacancies........................................................................... 7 Section 6. Annual Meetings..................................................................... 7 Section 7. Regular Meetings.................................................................... 7 Section 8. Special Meetings.................................................................... 7 Section 9. Notice.............................................................................. 7 Section 10. Waiver of Notice.................................................................... 7 Section 11. Business to be Transacted........................................................... 8 Section 12. Quorum - Adjournment if Quorum is Not Present............................................................................. 8 (i) Page Section 13. Presumption of Assent............................................................... 8 Section 14. Action by Written Consent........................................................... 9 Section 15. Committees.......................................................................... 9 Section 16. Meeting by Telephone or Similar Communication Equipment.............................................................10 ARTICLE IV. Officers. Section 1. Principal Officers..................................................................10 Section 2. Election and Terms..................................................................10 Section 3. Resignation and Removal.............................................................10 Section 4. Vacancies...........................................................................11 Section 5. Powers and Duties of Officers.......................................................11 Section 6. Chairman of the Board...............................................................11 Section 7. President...........................................................................11 Section 8. Vice President......................................................................12 Section 9. Secretary...........................................................................12 Section 10. Treasurer...........................................................................12 Section 11. Assistant Secretaries...............................................................13 Section 12. Assistant Treasurers................................................................13 Section 13. Delegation of Authority.............................................................13 Section 14. Securities of Other Corporation.....................................................14 ARTICLE V. Directors' Services, Limitation of Liability and Reliance on Corporate Records, and Interest of Directors in Contracts. Section 1. Services............................................................................14 Section 2. General Limitation of Liability.....................................................14 Section 3. Reliance on Corporate Records and Other Information...................................................................15 Section 4. Interest of Directors in Contracts..................................................15 ARTICLE VI. Indemnification. Section 1. Indemnification against Underlying Liability...........................................................................16 Section 2. Successful Defense..................................................................17 Section 3. Determination of Conduct............................................................17 Section 4. Payment of Expenses in Advance......................................................18 Section 5. Indemnity Not Exclusive.............................................................18 Section 6. Insurance Indemnification...........................................................18 Section 7. Employee Benefit Plans..............................................................19 Section 8. Application of Indemnification and Advancement of Expenses.............................................................19 Section 9. Indemnification Payments............................................................19 (ii) Page ARTICLE VII. Shares. Section 1. Share Certificates..................................................................20 Section 2. Transfer of Shares..................................................................20 Section 3. Registered Holders..................................................................20 Section 4. Lost, Destroyed and Mutilated Certificates........................................................................21 Section 5. Consideration for Shares............................................................21 Section 6. Payment for Shares..................................................................21 Section 7. Distributions to Shareholders.......................................................22 Section 8. Regulations.........................................................................22 ARTICLE VIII. Corporate Books and Reports. Section 1. Place of Keeping Corporate Books and Records.........................................................................22 Section 2. Place of Keeping Certain Corporate Books and Records...................................................................22 Section 3. Permanent Records...................................................................23 Section 4. Shareholder Records.................................................................23 Section 5. Shareholder Rights of Inspection....................................................23 Section 6. Additional Rights of Inspection.....................................................23 ARTICLE IX. Miscellaneous. Section 1. Notice and Waiver of Notice.........................................................24 Section 2. Depositories........................................................................24 Section 3. Signing of Checks, Notes, etc.......................................................25 Section 4. Gender and Number...................................................................25 Section 5. Laws................................................................................25 Section 6. Headings............................................................................25 ARTICLE X. Amendments..........................................................................25 - --------- ---------- ARTICLE XI. The Texas Business Corporation Act..................................................26 - ---------- ----------------------------------
(iii) BY-LAWS OF CONSECO VARIABLE INSURANCE COMPANY ARTICLE I Identification Section 1. Name. The name of the Corporation is Conseco Variable Insurance Company (hereinafter referred to as the "Corporation"). Section 2. Registered Office and Registered Agent. The Registered Office and Registered Agent of the Corporation is located in Amarillo, Texas and may be changed from time to time by the Board of Directors in the manner provided by law. Section 3. Principal Office. The address of the Principal Office of the Corporation is 11815 North Pennsylvania Street, Carmel, Indiana 46032. The Principal Office of the Corporation shall be the principal executive and administrative offices of the Corporation, and such Principal Office may be changed from time to time by the Board of Directors in the manner provided by law and need not be the same as the Registered Office of the Corporation. Section 4. Other Offices. The Corporation may also have offices at such other places or locations, within or without the State of Texas, as the Board of Directors may determine or the business of the Corporation may require. Section 5. Seal. The Corporation need not use a seal. If one is used, it shall be circular in form and mounted upon a metal die suitable for impressing the same upon paper. About the upper periphery of the seal shall appear the words "Conseco Variable Insurance Company" and about the lower periphery thereof the word "Texas". In the center of the seal shall appear the word "Seal". The seal may be altered by the Board of Directors at its pleasure and may be used by causing it or a facsimile thereof to be impressed, affixed, printed or otherwise reproduced. Section 6. Fiscal Year. The fiscal year of the Corporation shall begin at the beginning of the first day of January in each year and end at the close of the last day of December next succeeding. [PG NUMBER] ARTICLE II Shareholders Section 1. Place of Meeting. All meetings of shareholders of the Corporation shall be held at such place, within or without the State of Texas, as may be determined by the President or Board of Directors and specified in the notices or waivers of notice thereof or proxies to represent shareholders at such meetings. Section 2. Annual Meetings. An annual meeting of shareholders shall be held each year on such date and at such time as may be determined by the President or Board of Directors. The failure to hold an annual meeting at the designated time shall not affect the validity of any corporate action. Any and all business of any nature or character may be transacted, and action may be taken thereon, at any annual meeting, except as otherwise provided by law or by these By-laws. Section 3. Special Meetings. A special meeting of shareholders shall be held: (a) on call of the Board of Directors or the President; or (b) if the holders of at least twenty-five percent (25%) of all the votes entitled to be cast on any issue proposed to be considered at the proposed special meeting sign, date and deliver to the Secretary one (1) or more written demands for the meeting describing the purpose or purposes for which it is to be held. At any special meeting of the shareholders, only business within the purpose or purposes described in the notice of the meeting may be conducted. Section 4. Notice of Meeting. Written or printed notice stating the date, time and place of a meeting and, in case of a special meeting, the purpose or purposes for which the meeting is called, shall be delivered or mailed by the Secretary, or by the officers or persons calling the meeting, to each shareholder of record of the Corporation entitled to vote at the meeting, at such address as appears upon the records of the Corporation, no fewer than ten (10) days nor more than sixty (60) days, before the meeting date. If mailed, such notice shall be effective when mailed if correctly addressed to the shareholder's address shown in the Corporation's current record of shareholders. Section 5. Waiver of Notice. A shareholder may waive any notice required by law, the Articles of Incorporation or these By-laws before or after the date and time stated in the notice. The waiver by the shareholder entitled to the notice must be in writing and be delivered to the Corporation for inclusion in the minutes or filing with the corporate records. A shareholder's attendance at a meeting, in person or by proxy: (a) waives objection to lack of notice or defective notice of the meeting, unless the shareholder at the beginning of the meeting objects to holding the meeting or transacting business at the meeting; and (b) waives objection to consideration of a particular matter at the meeting that is not within the purpose or purposes described in the meeting notice, unless the shareholder objects to considering the matter when it is presented. Section 6. Voting at Meetings. (a) Voting Rights. At each meeting of the shareholders, each outstanding share, regardless of class, is entitled to one (1) vote on each matter voted on at such meeting, except to the extent cumulative voting is allowed by the Articles of Incorporation. Only shares are entitled to vote. (b) Record Date. The record date for purposes of determining shareholders entitled to vote at any meeting shall be ten (10) days prior to the date of such meeting or such different date not more than seventy (70) days prior to such meeting as may be fixed by the Board of Directors. (c) Proxies. (1) A shareholder may vote the shareholder's shares in person or by proxy. (2) A shareholder may appoint a proxy to vote or otherwise act for the shareholder by executing in writing an appointment form, either personally or by the shareholder's attorney-in-fact. For purposes of this Section, a proxy appointed by telegram, telex, telecopy or other document transmitted electronically for or by a shareholder shall be deemed "executed in writing" by the shareholder. (3) An appointment of a proxy is effective when received by the Secretary or other officer or agent authorized to tabulate votes. An appointment is valid for eleven (11) months, unless a longer period is expressly provided in the appointment form. (4) An appointment of a proxy is revocable by the shareholder, unless the appointment form conspicuously states that it is irrevocable and the appointment is coupled with an interest. (d) Quorum. At all meetings of shareholders, a majority of the votes entitled to be cast on a particular matter constitutes a quorum on that matter. If a quorum exists, action on a matter (other than the election of directors) is approved if the votes cast favoring the action exceed the votes cast opposing the action, unless the Articles of Incorporation or law require a greater number of affirmative votes. (e) Adjournments. Any meeting of shareholders, including both annual and special meetings and any adjournments thereof, may be adjourned to a different date, time or place. Notice need not be given of the new date, time or place if the new date, time or place is announced at the meeting before adjournment, even though less than a quorum is present. At any such adjourned meeting at which a quorum is present, in person or by proxy, any business may be transacted which might have been transacted at the meeting as originally notified or called. Section 7. List of Shareholders. (a) After a record date has been fixed for a meeting of shareholders, the Secretary shall prepare or cause to be prepared an alphabetical list of the names of the shareholders of the Corporation who are entitled to vote at such meeting. The list shall show the address of and number of shares held by each shareholder. (b) The shareholders' list must be available for inspection by any shareholder entitled to vote at the meeting, beginning five (5) business days before the date of the meeting for which the list was prepared and continuing through the meeting, at the Corporation's principal office or at a place identified in the meeting notice in the city where the meeting will be held. Subject to the restrictions of applicable law, a shareholder, or the shareholder's agent or attorney authorized in writing, is entitled on written demand to inspect and to copy the list, during regular business hours and at the shareholder's expense, during the period it is available for inspection. (c) The Corporation shall make the shareholders' list available at the meeting, and any shareholder, or the shareholder's agent or attorney authorized in writing, is entitled to inspect the list at any time during the meeting or any adjournment. Section 8. Action by Written Consent. Any action required or permitted to be taken at any meeting of the shareholders may be taken without a meeting if the action is taken by all the shareholders entitled to vote on the action. The action must be evidenced by one or more written consents describing the action taken, signed by all the shareholders entitled to vote on the action, and delivered to the Corporation for inclusion in the minutes or filing with the corporate records. Such action is effective when the last shareholder signs the consent, unless the consent specifies a different prior or subsequent effective date. Such consent shall have the same force and effect as a unanimous vote at a meeting of the shareholders, and may be described as such in any document or instrument. Section 9. Meeting by Telephone or Similar Communications Equipment. Any or all shareholders may participate in and hold a meeting of shareholders by, or through the use of, any means of conference telephone or other similar communications equipment by which all persons participating in the meeting may simultaneously hear each other during the meeting. Participation in a meeting pursuant to this Section shall constitute presence in person at such meeting, except where a person participates in the meeting for the express purposes of: (a) objecting to holding the meeting or transacting business at the meeting on the ground that the meeting is not lawfully called or convened; or (b) objecting to the consideration of a particular matter that is not within the purpose or purposes described in the meeting notice. ARTICLE III Directors Section 1. Duties. The business, property and affairs of the Corporation shall be managed and controlled by the Board of Directors and, subject to such restrictions, if any, as may be imposed by law, the Articles of Incorporation or by these By-laws, the Board of Directors may, and are fully authorized to, do all such lawful acts and things as may be done by the Corporation which are not directed or required to be exercised or done by the shareholders. Directors need not be residents of the State of Texas or shareholders of the Corporation. Section 2. Number of Directors. The Board of Directors shall consist of at least five (5) and not more than fifteen (15) directors. A Board of Directors shall be chosen annually by the shareholders at their annual meeting, except as hereinafter provided. Subject to Article VI of the Articles of Incorporation, the number of directors may be increased or decreased from time to time by amendment to these By-Laws, but no decrease shall have the effect of shortening the term of any incumbent director. A person need not be a shareholder of the Corporation to serve as a Director. The Directors' terms of office shall be for one year, or until their successors are elected and have qualified. Section 3. Election and Term. Except as otherwise provided in Section 5 of this Article, the directors shall be elected each year at the annual meeting of the shareholders, or at any special meeting of the shareholders. Each such director shall hold office, unless he is removed in accordance with the provisions of these By-laws or he resigns or dies or becomes so incapacitated he can no longer perform any of his duties as a director, for the term for which he is elected and until his successor shall have been elected and qualified. Each director shall qualify by accepting his election to office either expressly or by acting as a director. The shareholders or directors may remove any director, with or without cause, and elect a successor at a meeting called expressly for such purpose. Section 4. Resignation. Any director may resign at any time by delivering written notice to the Board of Directors, the President, or the Secretary of the Corporation. A resignation is effective when the notice is delivered unless the notice specifies a later effective date. The acceptance of a resignation shall not be necessary to make it effective, unless expressly so provided in the resignation. Section 5. Vacancies. Vacancies occurring in the membership of the Board of Directors caused by resignation, death or other incapacity, or increase in the number of directors shall be filled by a majority vote of the remaining members of the Board, and each director so elected shall serve until the next meeting of the shareholders, or until a successor shall have been duly elected and qualified. Section 6. Annual Meetings. The Board of Directors shall meet annually, without notice, immediately following, and at the same place as, the annual meeting of the shareholders. Section 7. Regular Meetings. Regular meetings shall be held at such times and places, either within or without the State of Texas, as may be determined by the President or the Board of Directors. Section 8. Special Meetings. Special meetings of the Board of Directors may be called by the President or by two (2) or more members of the Board of Directors, at any place within or without the State of Texas, upon twenty-four (24) hours' notice, specifying the time, place and general purposes of the meeting, given to each director personally, by telephone, telegraph, teletype, or other form of wire or wireless communication; or notice may be given by mail if mailed at least three (3) days before such meeting. Section 9. Notice. The Secretary or an Assistant Secretary shall give notice of each special meeting, and of the date, time and place of the particular meeting, in person or by mail, or by telephone, telegraph, teletype, or other form of wire or wireless communication, and in the event of the absence of the Secretary or an Assistant Secretary or the failure, inability, refusal or omission on the part of the Secretary or an Assistant Secretary so to do, any other officer of the Corporation may give said notice. Section 10. Waiver of Notice. A director may waive any notice required by law, the Articles of Incorporation, or these By-laws before or after the date and time stated in the notice. Except as otherwise provided in this Section, the waiver by the director must be in writing, signed by the director entitled to the notice, and included in the minutes or filed with the corporate records. A director's attendance at or participation in a meeting waives any required notice to the director of the meeting unless the director at the beginning of the meeting (or promptly upon the director's arrival) objects to holding the meeting or transacting business at the meeting and does not thereafter vote for or assent to action taken at the meeting. Section 11. Business to be Transacted. Neither the business to be transacted at, nor the purpose of, any regular or special meeting of the Board of Directors need be specified in the notice or any waiver of notice of such meeting. Any and all business of any nature or character whatsoever may be transacted and action may be taken thereon at any meeting, regular or special, of the Board of Directors. Section 12. Quorum - Adjournment if Quorum is Not Present. A majority of the number of directors fixed by, or in the manner provided in, the Articles of Incorporation or these By-laws shall constitute a quorum for the transaction of any and all business, unless a greater number is required by law or Articles of Incorporation or these By-laws. At any meeting, regular or special, of the Board of Directors, if there be less than a quorum present, a majority of those present, or if only one director be present, then such director, may adjourn the meeting from time to time without notice until the transaction of any and all business submitted or proposed to be submitted to such meeting or any adjournment thereof shall have been completed. In the event of such adjournment, written, telegraphic or telephonic announcement of the time and place at which the meeting will reconvene must be provided to all directors. The act of the majority of the directors present at any meeting of the Board of Directors at which a quorum is present shall constitute the act of the Board of Directors, unless the act of a greater number is required by law or the Articles of Incorporation or these By-laws. Section 13. Presumption of Assent. A director of the Corporation who is present at a meeting of the Board of Directors at which action on any corporate matter is taken shall be presumed to have assented to the action taken unless his dissent or abstention shall be entered in the minutes of the meeting or unless he shall file his written dissent or abstention to such action with the presiding officer of the meeting before the adjournment thereof or to the Secretary of the Corporation immediately after the adjournment of the meeting. Such right to dissent or abstain shall not apply to a director who voted in favor of such action. Section 14. Action by Written Consent. Any action required or permitted to be taken at a meeting of the Board of Directors or any committee thereof may be taken without a meeting if the action is taken by all the members of the Board of Directors or committee, as the case may be. The action must be evidenced by one or more written consents describing the action taken, signed by each director or committee member, and included in the minutes or filed with the corporate records reflecting the action taken. Such action is effective when the last director or committee member signs the consent, unless the consent specifies a different prior or subsequent effective date. Such consent shall have the same force and effect as a unanimous vote at a meeting, and may be described as such in any document or instrument. Section 15. Committees. The Board of Directors, by resolution adopted by a majority of the Board of Directors, may designate from among its members an executive committee and one or more other committees, each of which, to the extent provided in such resolution or in the Articles of Incorporation or in these By-laws of the Corporation, shall have and may exercise such authority of the Board of Directors as shall be expressly delegated by the Board from time to time; except that no such committee shall have the authority of the Board of Directors in reference to (a) amending the Articles of Incorporation; (b) approving a plan of merger even if the plan does not require shareholder approval; (c) authorizing dividends or distributions, except a committee may authorize or approve a reacquisition of shares, if done according to a formula or method prescribed by the Board of Directors; (d) approving or proposing to shareholders action that requires shareholder approval; (e) amending, altering or repealing the By-laws of the Corporation or adopting new By-laws for the Corporation; (f) filling vacancies in the Board of Directors or in any of its committees; or (g) electing or removing officers or members of any such committee. A majority of all the members of any such committee may determine its action and fix the time and place of its meetings, unless the Board of Directors shall otherwise provide. The Board of Directors shall have power at any time to change the number and members of any such committee, to fill vacancies and to discharge any such committee. The designation of such committee and the delegation thereto of authority shall not alone constitute compliance by the Board of Directors, or any member thereof, with the standard of conduct imposed upon it or him by the Texas Business Corporation Act, as the same may, from time to time, be amended. Section 16. Meeting by Telephone or Similar Communication Equipment. Any or all directors may participate in and hold a regular or special meeting of the Board of Directors or any committee thereof by, or through the use of, any means of conference telephone or other similar communications equipment by which all directors participating in the meeting may simultaneously hear each other during the meeting. Participation in a meeting pursuant to this Section shall constitute presence in person at such meeting, except where a director participates in the meeting for the express purpose of objecting to holding the meeting or transacting business at the meeting on the ground that the meeting is not lawfully called or convened. ARTICLE IV Officers Section 1. Principal Officers. The officers of the Corporation shall be chosen by the Board of Directors and shall consist of a Chairman of the Board, a President, a Treasurer and a Secretary. There may also be one or more Vice Presidents and such other officers or assistant officers as the Board shall from time to time create and so elect. Any two (2) or more offices may be held by the same person. Section 2. Election and Terms. Each officer shall be elected by the Board of Directors at the annual meeting thereof and shall hold office until the next annual meeting of the Board or until his or her successor shall have been elected and qualified or until his or her death, resignation or removal. The election of an officer shall not of itself create contract rights. Section 3. Resignation and Removal. An officer may resign at any time by delivering notice to the Board of Directors, its President or the Secretary of the Corporation. A resignation is effective when the notice is delivered unless the notice specifies a later effective date. If an officer's resignation is made effective at a later date and the Corporation accepts the future effective date, the Board of Directors may fill the pending vacancy before the effective date, if the Board of Directors provides that the successor does not take office until the effective date. The acceptance of a resignation shall not be necessary to make it effective, unless expressly provided in the resignation. An officer's resignation does not affect the Corporation's contract rights, if any, with the officer. Any officer may be removed at any time, with or without cause, by vote of a majority of the whole Board. Such removal shall not affect the contract rights, if any, of the officer so removed. Section 4. Vacancies. Whenever any vacancy shall occur in any office by death, resignation, increase in the number of officers of the Corporation, or otherwise, the same shall be filled by the Board of Directors, and the officer so elected shall hold office until the next annual meeting of the Board or until his or her successor shall have been elected and qualified. Section 5. Powers and Duties of Officers. The officers so chosen shall perform the duties and exercise the powers expressly conferred or provided for in these By-laws, as well as the usual duties and powers incident to such office, respectively, and such other duties and powers as may be assigned to them by the Board of Directors or by the President. Section 6. Chairman of the Board. The Chairman of the Board shall be the Chief Executive Officer of the Corporation and shall have general charge of, and supervision and authority over, all of the affairs and business of the Corporation. He shall have general supervision of and direct all officers, agents and employees of the Corporation; shall see that all orders and resolutions of the Board are carried into effect; and in general, shall exercise all powers and perform all duties incident to his office and such other powers and duties as may from time to time be assigned to him by the Board. Section 7. President. The President shall have the authority to sign, with the Secretary or an Assistant Secretary, any and all certificates for shares of the capital stock of the Corporation, and shall have the authority to sign singly deeds, bonds, mortgages, contracts, or other instruments to which the Corporation is a party (except in cases where the signing and execution thereof shall be expressly delegated by the Board or by these By-laws, or by law to some other officer or agent of the Corporation); and, in the absence, disability or refusal to act of the Chairman of the Board, shall preside at meetings of the shareholders and of the Board of Directors and shall possess all of the powers and perform all of the duties of the Chairman of the Board. He shall also serve the Corporation in such other capacities and perform such other duties and have such additional authority and powers as are incident to his office or as may be defined in these By-laws or delegated to him from time to time by the Board of Directors or by the Chairman of the Board. Section 8. Vice Presidents. The Vice Presidents shall assist the President and shall perform such duties as may be assigned to them by the Board of Directors or the President. Unless otherwise provided by the Board, in the absence or disability of the President, the Vice President (or, if there be more than one, the Vice President first named as such by the Board of Directors at its most recent meeting at which Vice Presidents were elected) shall execute the powers and perform the duties of the President. Any action taken by a Vice President in the performance of the duties of the President shall be conclusive evidence of the absence or inability to act of the President at the time such action was taken. Section 9. Secretary. The Secretary (a) shall keep the minutes of all meetings of the Board of Directors and the minutes of all meetings of the shareholders in books provided for that purpose; (b) shall attend to the giving and serving of all notices; (c) when required, may sign with the President or a Vice President in the name of the Corporation, and may attest the signature of any other officers of the Corporation to all contracts, conveyances, transfers, assignments, encumbrances, authorizations and all other instruments, documents and papers, of any and every description whatsoever, of or executed for or on behalf of the Corporation and affix the seal of the Corporation thereto; (d) may sign with the President or a Vice President all certificates for shares of the capital stock of the Corporation and affix the corporate seal of the Corporation thereto; (e) shall have charge of and maintain and keep or supervise and control the maintenance and keeping of the stock certificate books, transfer books and stock ledgers and such other books and papers as the Board of Directors may authorize, direct or provide for, all of which shall at all reasonable times be open to the inspection of any director, upon request, at the office of the Corporation during business hours; (f) shall, in general, perform all the duties incident to the office of Secretary; and (g) shall have such other powers and duties as may be conferred upon or assigned to him by the Board of Directors. Section 10. Treasurer. The Treasurer shall have custody of all the funds and securities of the Corporation which come into his hands. When necessary or proper, he may endorse on behalf of the Corporation, for collection, checks, notes and other obligations, and shall deposit the same to the credit of the Corporation in such banks or depositories as shall be selected or designated by or in the manner prescribed by the Board of Directors. He may sign all receipts and vouchers for payments made to the Corporation, either alone or jointly with such officer as may be designated by the Board of Directors. Whenever required by the Board of Directors, he shall render a statement of his cash account. He shall enter or cause to be entered, punctually and regularly, on the books of the Corporation, to be kept by him or under his supervision or direction for that purpose, full and accurate accounts of all moneys received and paid out by, for or on account of the Corporation. He shall at all reasonable times exhibit his books and accounts and other financial records to any director of the Corporation during business hours. He shall have such other powers and duties as may be conferred upon or assigned to him by the Board of Directors. The Treasurer shall perform all acts incident to the position of Treasurer, subject always to the control of the Board of Directors. He shall, if required by the Board of Directors, give such bond for the faithful discharge of his duties in such form and amount as the Board of Directors may require. Section 11. Assistant Secretaries. The Assistant Secretaries shall assist the Secretary in the performance of his or her duties. In the absence of the Secretary, any Assistant Secretary shall exercise the powers and perform the duties of the Secretary. The Assistant Secretaries shall exercise such other powers and perform such other duties as may from time to time be assigned to them by the Board, the President, or the Secretary. Section 12. Assistant Treasurers. The Assistant Treasurers shall assist the Treasurer in the performance of his or her duties. Any Assistant Treasurer shall, in the absence or disability of the Treasurer, exercise the powers and perform the duties of the Treasurer. The Assistant Treasurers shall exercise such other duties as may from time to time be assigned to them by the Board, the President, or the Treasurer. Section 13. Delegation of Authority. In case of the absence of any officer of the Corporation, or for any reason that the Board may deem sufficient, a majority of the entire Board may transfer or delegate the powers or duties of any officer to any other officer or officers for such length of time as the Board may determine. Section 14. Securities of Other Corporations. The President or any Vice President or Secretary or Treasurer of the Corporation shall have power and authority to transfer, endorse for transfer, vote, consent or take any other action with respect to any securities of another issuer which may be held or owned by the Corporation and to make, execute and deliver any waiver, proxy or consent with respect to any such securities. ARTICLE V Directors' Services, Limitation of Liability and Reliance on Corporate Records, and Interest of Directors in Contracts Section 1. Services. No director of this Corporation who is not an officer or employee of this Corporation shall be required to devote his time or any particular portion of his time or render services or any particular services exclusively to this Corporation. Every director of this Corporation shall be entirely free to engage, participate and invest in any and all such businesses, enterprises and activities, either similar or dissimilar to the business, enterprise and activities of this Corporation, without breach of duty to this Corporation or to its shareholders and without accountability or liability to this Corporation or to its shareholders. Every director of this Corporation shall be entirely free to act for, serve and represent any other corporation, any entity or any person, in any capacity, and be or become a director or officer, or both, of any other corporation or any entity, irrespective of whether or not the business, purposes, enterprises and activities, or any of them thereof, be similar or dissimilar to the business, purposes, enterprises and activities, or any of them, of this Corporation, without breach of duty to this Corporation or to its shareholders and without accountability or liability of any character or description to this Corporation or to its shareholders. Section 2. General Limitation of Liability. A director shall, based on facts then known to the director, discharge the duties as a director, including the director's duties as a member of a committee, in good faith, with the care an ordinarily prudent person in a like position would exercise under similar circumstances, and in a manner the director reasonably believes to be in the best interests of the Corporation. A director is not liable to the Corporation for any action taken as a director, or any failure to take any action, unless: (a) the director has breached or failed to perform the duties of the director's office in accordance with the standard of care set forth above; and (b) the breach or failure to perform constitutes willful misconduct or recklessness. Section 3. Reliance on Corporate Records and Other Information. Any person acting as a director of the Corporation shall be fully protected, and shall be deemed to have complied with the standard of care set forth in Section 2 of this Article, in relying in good faith upon any information, opinions, reports or statements, including financial statements and other financial data, if prepared or presented by (a) one or more officers or employees of the Corporation whom such person reasonably believes to be reliable and competent in the matters presented; (b) legal counsel, public accountants, or other persons as to matters such person reasonably believes are within the person's professional or expert competence; or (c) a committee of the Board of Directors of which such person is not a member, if such person reasonably believes the committee merits confidence; provided, however, that such person shall not be considered to be acting in good faith if such person has knowledge concerning the matter in question that would cause such reliance to be unwarranted. Section 4. Interest of Directors in Contracts. Any contract or other transaction between the Corporation and (a) any director, or (b) any corporation, unincorporated association, business trust, estate, partnership, trust, joint venture, individual or other legal entity (1) in which any director has a material financial interest or is a general partner, or (2) of which any director is a director, officer, or trustee, shall be valid for all purposes, if the material facts of the contract or transaction and the director's interest were disclosed or known to the Board of Directors, a committee of the Board of Directors with authority to act thereon, or the shareholders entitled to vote thereon, and the Board of Directors, such committee or such shareholders authorized, approved or ratified the contract or transaction. Such a contract or transaction is authorized, approved or ratified: (i) by the Board of Directors or such committee, if it receives the affirmative vote of a majority of the directors who have no interest in the contract or transaction, notwithstanding the fact that such majority may not constitute a quorum or a majority of the directors present at the meeting, and notwithstanding the presence or vote of any director who does have such an interest; provided, however, that no such contract or transaction may be authorized, approved or ratified by a single director; and (ii) by such shareholders, if it receives the vote of a majority of the shares entitled to be counted, in which vote shares owned by or voted under the control of any director who, or of any corporation, unincorporated association, business trust, estate, partnership, trust, joint venture, individual or other legal entity that, has an interest in the contract or transaction may be counted; provided, however, that a majority of such shares, whether or not present, shall constitute a quorum for the purpose of authorizing, approving or ratifying such a contract or transaction. This Section shall not be construed to require authorization, ratification or approval by the shareholder of any such contract or transaction, or to invalidate any such contract or transaction that is fair to the Corporation or would otherwise be valid under the common and statutory law applicable thereto. ARTICLE VI Indemnification Section 1. Indemnification Against Underlying Liability. The Corporation shall indemnify any person who was or is a party, or is threatened to be made a party, to any threatened, pending, or completed action, suit or proceeding, whether civil, criminal, administrative, or investigative, by reason of the fact that he is or was a director or officer of the Corporation, or is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise (collectively, "Agent") against expenses (including attorneys' fees), judgments, fines, penalties, court costs and amounts paid in settlement actually and reasonably incurred by him in connection with such action, suit or proceeding if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the Corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe his conduct was unlawful. The termination of any action, suit, or proceeding by judgment, order, settlement (whether with or without court approval), conviction or upon a plea of nolo contendere or its equivalent, shall not, of itself, create a presumption that the Agent did not act in good faith and in a manner which he reasonably believed to be in or not opposed to the best interests of the Corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe that his conduct was unlawful. If several claims, issues or matters are involved, an Agent may be entitled to indemnification as to some matters even though he is not entitled as to other matters. Any director or officer of the Corporation serving in any capacity of another corporation, of which a majority of the shares entitled to vote in the election of its directors is held, directly or indirectly, by the Corporation, shall be deemed to be doing so at the request of the Corporation. Section 2. Successful Defense. To the extent that an Agent of the Corporation has been successful on the merits or otherwise in defense of any action, suit or proceeding referred to in Section 1 of this Article, or in defense of any claim, issue or matter therein, he shall be indemnified against expenses (including attorneys' fees) actually and reasonably incurred by him in connection therewith. Section 3. Determination of Conduct. Subject to any rights under any contract between the Corporation and any Agent, any indemnification against underlying liability provided for in Section 1 of this Article (unless ordered by a court) shall be made by the Corporation only as authorized in the specific case upon a determination that indemnification of the Agent is proper in the circumstances because he has met the applicable standard of conduct set forth in said Section. Such determination shall be made (a) by the Board of Directors by a majority vote of a quorum consisting of directors not at the time parties to the proceeding; (b) if such an independent quorum is not obtainable, by majority vote of a committee duly designated by the full Board of Directors (in which designation directors who are parties may participate), consisting solely of one or more directors not at the time parties to the proceeding; (c) by special legal counsel (1) selected by the independent quorum of the Board of Directors (or the independent committee thereof if no such quorum can be obtained), or (2) if no such independent quorum or committee thereof can be obtained, selected by majority vote of the full Board of Directors (in which selection directors who are parties may participate); or (d) by the shareholders, but shares owned by or voted under the control of directors who are at the time parties to the proceeding may not be voted on the determination. Notwithstanding the foregoing, an Agent shall be able to contest any determination that the Agent has not met the applicable standard of conduct by petitioning a court of appropriate jurisdiction. Section 4. Payment of Expenses in Advance. Expenses incurred in defending or settling a civil, criminal, administrative or investigative action, suit or proceeding by an Agent who may be entitled to indemnification pursuant to Section 1 of this Article shall be paid by the Corporation in advance of the final disposition of such action, suit or proceeding upon receipt of a written affirmation by the Agent of his good faith belief that he has met the applicable standard of conduct set forth in Section 1 of this Article and a written undertaking by or on behalf of the Agent to repay such amount if it is ultimately determined that he is not entitled to be indemnified by the Corporation as authorized in this Article. Notwithstanding the foregoing, such expenses shall not be advanced if the Corporation conducts the determination of conduct procedure referred to in Section 3 of this Article and it is determined from the facts then known that the Agent will be precluded from indemnification against underlying liability because he has failed to meet the applicable standard of conduct set forth in Section 1 of this Article. The full Board of Directors (including directors who are parties) may authorize the Corporation to implement the determination of conduct procedure, but such procedure is not required for the advancement of expenses. The full Board of Directors (including directors who are parties) may authorize the Corporation to assume the Agent's defense where appropriate, rather than to advance expenses for such defense. Section 5. Indemnity Not Exclusive. The indemnification against underlying liability, and advancement of expenses provided by, or granted pursuant to, this Article shall not be deemed exclusive of, and shall be subject to, any other rights to which those seeking indemnification or advancement of expenses may be entitled under any By-law, agreement, vote of shareholders or disinterested directors or otherwise, both as to action in his official capacity and as to action in another capacity while holding such office. Section 6. Insurance Indemnification. The Corporation shall have the power to purchase and maintain insurance on behalf of any person who is or was an Agent of the Corporation, or is or was serving at the request of the Corporation as an Agent against any liability asserted against him and incurred by him in any such capacity, or arising out of his status as such, whether or not the Corporation would have the power to indemnify him against such liability under the provisions of this Article. Section 7. Employee Benefit Plans. For purposes of this Article, references to "other enterprises" shall include employee benefit plans; references to "fines" shall include any excise taxes assessed on a person with respect to any employee benefit plan; and references to "serving at the request of the Corporation" shall include any service as a director, officer, employee or agent of the Corporation which imposes duties on, or involves services by, such director, officer, employee or agent with respect to an employee benefit plan, its participants or beneficiaries. A person who acted in good faith and in a manner he reasonably believed to be in the interest of the participants and beneficiaries of an employee benefit plan shall be deemed to have acted in a manner "not opposed to the best interests of the Corporation" as referred to in this Article. Section 8. Application of Indemnification and Advancement of Expenses. The indemnification and advancement of expenses provided by, or granted pursuant to, this Article shall, unless otherwise provided when authorized or ratified, be applicable to claims, actions, suits or proceedings made or commenced after the adoption thereof, whether arising from acts or omissions to act during, before or after the adoption hereof, and shall continue as to a person who has ceased to be a director, officer, employee or agent and shall inure to the benefit of the heirs, executors and administrators of such a person. The right of any person to indemnification and advancement of expenses shall vest at the time of occurrence or performance of any event, act or omission giving rise to any action, suit or proceeding of the nature referred to in Section 1 of this Article and, once vested, shall not later be impaired as a result of any amendment, repeal, alteration or other modification of any or all of these provisions. Section 9. Indemnification Payments. Any payments made to any indemnified party under this Article or under any other right to indemnification shall be deemed to be an ordinary and necessary business expense of the Corporation, and payment thereof shall not subject any person responsible for the payment, or the Board of Directors, to any action for corporate waste or to any similar action. Such payments shall be reported to the shareholders of the Corporation before or with the notice of the next shareholders' meeting. ARTICLE VII Shares Section 1. Share Certificates. The certificate for shares of the Corporation shall be in such form as shall be approved by the Board of Directors. Each share certificate shall state on its face the name and state of organization of the Corporation, the name of the person to whom the certificate is issued, and the number and class of shares the certificate represents. Share certificates shall be consecutively numbered and shall be entered in the books of the Corporation as they are issued. Every certificate for shares of the Corporation shall be signed (either manually or in facsimile) by, or in the name of, the Corporation by the Chairman of the Board, President or a Vice President and either the Secretary or an Assistant Secretary of the Corporation, with the seal of the Corporation, if any, or a facsimile thereof impressed or printed thereon. If the person who signed (either manually or in facsimile) a share certificate no longer holds office when the certificate is issued, the certificate is nevertheless valid. Section 2. Transfer of Shares. Except as otherwise provided by law, transfers of shares of the capital stock of the Corporation, whether part paid or fully paid, shall be made only on the books of the Corporation by the owner thereof in person or by duly authorized attorney, on payment of all taxes thereon and surrender for cancellation of the certificate or certificates for such shares (except as hereinafter provided in the case of loss, destruction or mutilation of certificate) properly endorsed by the holder thereof or accompanied by the proper evidence of succession, assignment or authority to transfer, and delivered to the Secretary or an Assistant Secretary. Section 3. Registered Holders. The Corporation shall be entitled to treat the person in whose name any share of stock or any warrant, right or option is registered as the owner thereof for all purposes and shall not be bound to recognize any equitable or other claim to, or interest in, such share, warrant, right or option on the part of any other person, whether or not the Corporation shall have notice thereof, save as may be expressly provided otherwise by the laws of the State of Texas, the Articles of Incorporation of the Corporation or these By-laws. In no event shall any transferee of shares of the Corporation become a shareholder of the Corporation until express notice of the transfer shall have been received by the Corporation. Section 4. Lost, Destroyed and Mutilated Certificates. The holder of any share certificate of the Corporation shall immediately notify the Corporation of any loss, destruction or mutilation of the certificate, and the Board may, in its discretion, cause to be issued to such holder of shares a new certificate or certificates of shares of capital stock, upon the surrender of the mutilated certificate, or, in case of loss or destruction, upon the furnishing of an affidavit or satisfactory proof of such loss or destruction. The Board may, in its discretion, require the owner of the lost or destroyed certificate or such owner's legal representative to give the Corporation a bond in such sum and in such form, and with such surety or sureties as it may direct, to indemnify the Corporation, its transfer agents and registrars, if any, against any claim that may be made against them or any of them with respect to the certificate or certificates alleged to have been lost or destroyed, but the Board may, in its discretion, refuse to issue a new certificate or new certificates, save upon the order of a court having jurisdiction in such matters. Section 5. Consideration for Shares. The Corporation may issue shares for such consideration received or to be received as the Board of Directors determines to be adequate. That determination by the Board of Directors is conclusive insofar as the adequacy of consideration for the issuance of shares relates to whether the shares are validly issued, fully paid and nonassessable. When the Corporation receives the consideration for which the Board of Directors authorized the issuance of shares, the shares issued therefor are fully paid and nonassessable. Section 6. Payment for Shares. The Board of Directors may authorize shares to be issued for consideration consisting of any tangible or intangible property or benefit to the Corporation, including cash, promissory notes, services performed, contracts for services to be performed, or other securities of the Corporation. If shares are authorized to be issued for promissory notes or for promises to render services in the future, the Corporation must report in writing to the shareholders the number of shares authorized to be so issued before or with the notice of the next shareholders' meeting. Section 7. Distributions to Shareholders. The Board of Directors may authorize and the Corporation may make distributions to the shareholders subject to any restrictions set forth in the Articles of Incorporation of the Corporation and any limitations in the Texas Business Corporation Act, as amended. Section 8. Regulations. The Board of Directors shall have power and authority to make all such rules and regulations as they may deem expedient concerning the issue, transfer and registration or the replacement of certificates for shares of the Corporation. ARTICLE VIII Corporate Books and Reports Section 1. Place of Keeping Corporate Books and Records. Except as expressly provided otherwise in this Article, the books of account, records, documents and papers of the Corporation shall be kept at any place or places, within or without the State of Texas, as directed by the Board of Directors. In the absence of a direction, the books of account, records, documents and papers shall be kept at the principal office of the Corporation. Section 2. Place of Keeping Certain Corporate Books and Records. The Corporation shall keep a copy of the following records at its principal office: (1) Its Articles or restated Articles of Incorporation and all amendments to them currently in effect; (2) Its By-laws or restated By-laws and all amendments to them currently in effect; (3) Resolutions adopted by the Board of Directors with respect to one or more classes or series of shares and fixing their relative rights, preferences and limitations, if shares issued pursuant to those resolutions are outstanding; (4) The minutes of all shareholders' meetings and records of all action taken by shareholders without a meeting, for the past three (3) years; (5) All written communications to shareholders generally within the past three (3) years, including financial statements furnished to shareholders; (6) A list of the names and business addresses of its current directors and officers; and (7) The Corporation's most recent annual report. Section 3. Permanent Records. The Corporation shall keep as permanent records minutes of all meetings of its shareholders and Board of Directors, a record of all actions taken by the shareholders or Board of Directors without a meeting, and a record of all actions taken by a committee of the Board of Directors in place of the Board of Directors on behalf of the Corporation. The Corporation shall also maintain appropriate accounting records. Section 4. Shareholder Records. The Corporation shall maintain a record of its shareholders, in a form that permits preparation of a list of the names and addresses of all shareholders, in alphabetical order by class of shares showing the number and class of shares held by each. Section 5. Shareholder Rights of Inspection. The records designated in Section 2 of this Article may be inspected and copied by shareholders of record, during regular business hours at the Corporation's principal office, provided that the shareholder gives the Corporation written notice of the shareholder's demand at least five (5) business days before the date on which the shareholder wishes to inspect and copy. A shareholder's agent or attorney, if authorized in writing, has the same inspection and copying rights as the shareholder represented. The Corporation may impose a reasonable charge, covering the costs of labor and material, for copies of any documents provided to the shareholder. Section 6. Additional Rights of Inspection. Shareholder rights enumerated in Section 5 of this Article may also apply to the following corporate records, provided that the notice requirements of Section 5 are met, the shareholder's demand is made in good faith and for a proper purpose, the shareholder describes with reasonable particularity the shareholder's purpose and the records the shareholder desires to inspect, and the records are directly connected with the shareholder's purpose: excerpts from minutes of any meeting of the Board of Directors, records of any action of a committee of the Board of Directors while acting in place of the Board of Directors on behalf of the Corporation, minutes of any meeting of the shareholders, and records of action taken by the shareholders or Board of Directors without a meeting, to the extent not subject to inspection under Section 5 of this Article, as well as accounting records of the Corporation and the record of shareholders. Such inspection and copying is to be done during regular business hours at a reasonable location specified by the Corporation. The Corporation may impose a reasonable charge, covering the costs of labor and material, for copies of any documents provided to the shareholder. ARTICLE IX Miscellaneous Section 1. Notice and Waiver of Notice. Subject to the specific and express notice requirements set forth in other provisions of these By-laws, the Articles of Incorporation, and the Texas Business Corporation Act, as the same may, from time to time, be amended, notice may be communicated to any shareholder or director in person, by telephone, telegraph, teletype, or other form of wire or wireless communication, or by mail. If the foregoing forms of personal notice are deemed to be impracticable, notice may be communicated in a newspaper of general circulation in the area where published or by radio, television, or other form of public broadcast communication. Subject to Section 4 of ARTICLE II of these By-laws, written notice is effective at the earliest of the following: (a) when received; (b) if correctly addressed to the address listed in the most current records of the Corporation, five days after its mailing, as evidenced by the postmark or private carrier receipt; or (c) if sent by registered or certified United States mail, return receipt requested, on the date shown on the return receipt which is signed by or on behalf of the addressee. Oral notice is effective when communicated. A written waiver of notice, signed by the person or persons entitled to such notice, whether before or after the time stated therein, shall be equivalent to the giving of such notice. Section 2. Depositories. Funds of the Corporation not otherwise employed shall be deposited in such banks or other depositories as the Board of Directors, the President or the Treasurer may select or approve. Section 3. Signing of Checks, Notes, etc. In addition to and cumulative of, but in no way limiting or restricting, any other provision of these By-laws which confers any authority relative thereto, all checks, drafts and other orders for the payment of money out of funds of the Corporation and all notes and other evidence of indebtedness of the Corporation may be signed on behalf of the Corporation, in such manner, and by such officer or person as shall be determined or designated by the Board of Directors; provided, however, that if, when, after and as authorized or provided for by the Board of Directors, the signature of any such officer or person may be a facsimile or engraved or printed, and shall have the same force and effect and bind the Corporation as though such officer or person had signed the same personally; and, in the event of the death, disability, removal or resignation of any such officer or person, if the Board of Directors shall so determine or provide, as though and with the same effect as if such death, disability, removal or resignation had not occurred. Section 4. Gender and Number. Wherever used or appearing in these By-laws, pronouns of the masculine gender shall include the female gender and the neuter gender, and the singular shall include the plural wherever appropriate. Section 5. Laws. Wherever used or appearing in these By-laws, the words "law" or "laws" shall mean and refer to laws of the State of Texas, to the extent only that such are expressly applicable, except where otherwise expressly stated or the context requires that such words not be so limited. Section 6. Headings. The headings of the Certificate and Sections of these By-laws are inserted for convenience of reference only and shall not be deemed to be a part thereof or used in the construction or interpretation thereof. ARTICLE X Amendments These By-laws may, from time to time, be added to, changed, altered, amended or repealed or new By-laws may be made or adopted by a majority vote of the whole Board of Directors at any meeting of the Board of Directors, if the notice or waiver of notice of such meeting shall have stated that the By-laws are to be amended, altered or repealed at such meeting, or if all directors at the time are present at such meeting, have waived notice of such meeting, or have consented to such action in writing. ARTICLE XI The Texas Business Corporation Act The provisions of the Texas Business Corporation Act, as the same may, from time to time, be amended, applicable to any of the matters not herein specifically covered by these By-laws, are hereby incorporated by reference in and made a part of these By-laws. EX-99.B8(VIII) 4 PARTICIPATION AGREEMENT - RYDEX VARIABLE TRUST PARTICIPATION AGREEMENT AMONG RYDEX VARIABLE TRUST, PADCO FINANCIAL SERVICES, INC. AND CONSECO VARIABLE INSURANCE COMPANY DATED AS OF MARCH 24, 2000
TABLE OF CONTENTS Page ARTICLE I. Purchase of Trust Shares...............................................................2 ARTICLE II. Representations and Warranties.........................................................4 ARTICLE III. Prospectuses, Reports to Shareholders and Proxy Statements; Voting.....................6 ARTICLE IV . Sales Material and Information.........................................................7 ARTICLE V. Fees and Expenses......................................................................9 ARTICLE VI. Diversification........................................................................9 ARTICLE VII. Potential Conflicts...................................................................10 ARTICLE VIII. Indemnification.......................................................................11 ARTICLE IX. Applicable Law........................................................................16 ARTICLE X. Termination...........................................................................16 ARTICLE XI. Notices...............................................................................17 ARTICLE XII. Miscellaneous.........................................................................18 SCHEDULE A Separate Accounts and Associated Contracts............................................21 SCHEDULE B Proxy Voting Procedures...............................................................22
THIS AGREEMENT, made and entered into as of the 24th day of March, 2000 by and among CONSECO VARIABLE INSURANCE COMPANY (hereinafter the "Company"), a Texas corporation, on its own behalf and on behalf of each separate account of the Company set forth on Schedule A hereto as may be amended from time to time (each such account hereinafter referred to as the "Account"), RYDEX VARIABLE TRUST (hereinafter the "Trust"), a Delaware business trust, and PADCO FINANCIAL SERVICES, INC. (hereinafter the "Underwriter"), a Maryland corporation. WHEREAS, the Trust engages in business as an open-end management investment company and is available to act as (i) the investment vehicle for separate accounts established by insurance companies for individual and group life insurance policies and individual and group annuity contracts with variable accumulation and/or pay-out provisions (hereinafter referred to individually and/or collectively as "Variable Insurance Products") and (ii) the investment vehicle for certain qualified pension and retirement plans (hereinafter "Qualified Plans"); and WHEREAS, insurance companies desiring to utilize the Trust as an investment vehicle under their Variable Insurance Products enter into participation agreements with the Trust and the Underwriter (the "Participating Insurance Companies"); WHEREAS, beneficial interests in the Trust are divided into several series of interests or shares, each representing the interest in a particular managed portfolio of securities and other assets, any one or more of which may be made available under this Agreement, as may be amended from time to time by mutual agreement of the parties hereto (each such series is hereinafter referred to as a "Fund"); and WHEREAS, the Trust has obtained an order from the Securities and Exchange Commission, dated February 25, 1999 (File No. 812-11344), granting Participating Insurance Companies and Variable Insurance Product separate accounts exemptions from the provisions of Sections 9(a), 13(a), 15(a), and 15(b) of the Investment Company Act of 1940, as amended (hereinafter the "1940 Act"), and Rules 6e-2(b)(15) and 6e-3(T)(b)(15) thereunder, to the extent necessary to permit shares of a Fund to be sold to and held by Variable Insurance Product separate accounts of both affiliated and unaffiliated life insurance companies and Qualified Plans (hereinafter the "Shared Funding Exemptive Order"); and WHEREAS, the Trust is registered as an open-end management investment company under the 1940 Act and its shares are registered under the Securities Act of 1933, as amended (hereinafter the "1933 Act"); and WHEREAS, the Underwriter is registered as a broker/dealer under the Securities Exchange Act of 1934, as amended (hereinafter the "1934 Act"), is a member in good standing of the National Association of Securities Dealers, Inc. (hereinafter "NASD") and serves as principal underwriter of the shares of the Trust; and WHEREAS, the Company has registered or will register certain Variable Insurance Products under the 1933 Act; and WHEREAS, each Account is a duly organized, validly existing segregated asset account, established by resolution or under authority of the Board of Directors of the Company, on the date shown for such Account on Schedule A hereto, to set aside and invest assets attributable to the aforementioned Variable Insurance Products; and WHEREAS, the Company has registered or will register each Account as a unit investment trust under the 1940 Act; and WHEREAS, to the extent permitted by applicable insurance laws and regulations, the Company intends to purchase shares in the Funds on behalf of each Account to fund certain of the aforementioned Variable Insurance Products and the Underwriter is authorized to sell such shares to each such Account at net asset value; NOW, THEREFORE, in consideration of their mutual promises, the Company, the Trust and each Underwriter agree as follows: ARTICLE I. PURCHASE OF TRUST SHARES 1.1. The Trust agrees to make available for purchase by the Company shares of the Trust and shall execute orders placed for each Account on a daily basis at the net asset value next computed after receipt by the Trust or its designee of such order. For purposes of this Section 1.1, the Company shall be the designee of the Trust for receipt of such orders from each Account and receipt by such designee shall constitute receipt by the Trust; provided that the Trust receives the final order by 9:00 a.m. Eastern time on the next following business day. "Business Day" shall mean any day on which the New York Stock Exchange is open for trading and on which the Trust calculates its net asset value pursuant to the rules of the Securities and Exchange Commission. 1.2. The Trust, so long as this Agreement is in effect, agrees to make its shares available indefinitely for purchase at the applicable net asset value per share by the Company and its Accounts on those days on which the Trust calculates its net asset value pursuant to rules of the Securities and Exchange Commission and the Trust shall use reasonable efforts to calculate such net asset value on each day which the New York Stock Exchange is open for trading. Notwithstanding the foregoing, the Board of Trustees of the Trust (hereinafter the "Board") may refuse to permit the Trust to sell shares of any Fund to any person, or suspend or terminate the offering of shares of any Fund if such action is required by law or by regulatory authorities having jurisdiction or is, in the sole discretion of the Board acting in good faith and in light of their fiduciary duties under federal and any applicable state laws, necessary in the best interests of the shareholders of such Fund. 1.3. The Trust agrees that shares of the Trust will be sold only to Participating Insurance Companies and their separate accounts and to certain Qualified Plans all in accordance with the requirement of Section 817(h)(1) of the Internal Revenue Code of 1986, as amended ("Code") and Treasury regulation 1.817-5(f). No shares of any Fund will be sold to the general public. 1.4. The Trust will not make its shares available for purchase by any insurance company or separate account unless an agreement containing provisions substantially the same as in Section 1.3 of Article I, Section 3.5 of Article III, Article VI and Article VII of this Agreement is in effect to govern such sales. 1.5. The Trust agrees to redeem for cash, on the Company's request, any full or fractional shares of a Trust held by the Company, executing such requests on a daily basis at the net asset value next computed after receipt by the Trust or its designee of the request for redemption. Subject to and in accordance with applicable laws, and subject to written consent of the Company, the Trust may redeem shares for assets other than cash. For purposes of this Section 1.5, the Company shall be the designee of the Trust for receipt of requests for redemption from each Account and receipt by such designee shall constitute receipt by the Trust; provided that the Trust receives the final request by 9:00 a.m. Eastern time on the next following Business Day. 1.6. The Company agrees that purchases and redemptions of Fund shares offered by the then current prospectus of the Trust shall be made in accordance with the provisions of such prospectus. The Variable Insurance Products issued by the Company, under which amounts may be invested in the Trust (hereinafter the "Contracts"), are listed on Schedule A attached hereto and incorporated herein by reference, as such Schedule A may be amended from time to time by mutual written agreement of all of the parties hereto. 1.7. The Company shall pay for Trust shares on the next Business Day after an order to purchase Trust shares is made in accordance with the provisions of Section 1.1 hereof. Payment shall be in federal funds transmitted by wire. For purposes of Section 2.9 and 2.10, upon receipt by the Trust of the federal funds so wired, such funds shall cease to be the responsibility of the Company and shall become the responsibility of the Trust. 1.8. Issuance and transfer of the Trust's shares will be by book entry only. Stock certificates will not be issued to the Company or any Account. Shares ordered from the Trust will be recorded in an appropriate title for each Account or the appropriate subaccount of each Account. 1.9. The Trust shall furnish same day notice (by electronic means, wire or telephone, followed by written confirmation) to the Company of any income, dividends or capital gain distributions payable on Fund shares. The Company hereby elects to receive all such income dividends and capital gain distributions as are payable on the Fund shares in additional shares of that Fund. The Company reserves the right to revoke this election and to receive all such income dividends and capital gain distributions in cash. The Trust shall notify the Company of the number of shares so issued as payment of such dividends and distributions. 1.10. The Trust shall make the net asset value per share for each Fund available to the Company on a daily basis as soon as reasonably practical after the net asset value per share is calculated (normally by 6:30 p.m. Eastern time) and shall use its best efforts to make such net asset value per share available by 7:00 p.m. Eastern time. If the Trust provides the Company with materially incorrect share net asset value information, the Company on behalf of the Account, shall be entitled to an adjustment to the number of shares purchased or redeemed to reflect the correct share net asset value. Any material error in the calculation of the net asset value per share, dividend or capital gain information shall be reported promptly upon discovery to the Company. Furthermore, the Underwriter shall be liable for the reasonable administrative costs incurred by the Company in relation to the correction of any material error. Administrative costs shall include allocation of staff time, costs of outside service providers, printing and postage. ARTICLE II. REPRESENTATIONS AND WARRANTIES 2.1. The Company represents and warrants that the Contracts are or will be registered under the 1933 Act; that the Contracts will be issued and sold in compliance in all material respects with all applicable federal and state laws and that the sale of the Contracts shall comply in all material respects with state insurance suitability requirements. The Company further represents and warrants that it is an insurance company duly organized and in good standing under applicable law and that it has legally and validly established each Account prior to any issuance or sale thereof as a segregated asset account under Texas state insurance laws and has registered or, prior to any issuance or sale of the Contracts, will register each Account as a unit investment trust in accordance with the provisions of the 1940 Act to serve as a segregated investment account for the Contracts. 2.2. The Trust represents and warrants that Trust shares sold pursuant to this Agreement shall be registered under the 1933 Act, duly authorized for issuance and sold in compliance with the laws of the State of Delaware and all applicable federal and state securities laws and that the Trust is and shall remain registered under the 1940 Act. The Trust shall amend the registration statement for its shares under the 1933 Act and the 1940 Act from time to time as required in order to effect the continuous offering of its shares. The Trust shall register and qualify the shares for sale in accordance with the laws of the various states, to the extent required by applicable state law. 2.3. The Trust represents that it is currently qualified as a Regulated Investment Company under Subchapter M of the Internal Revenue Code of 1986, as amended (the "Code"), and that it will maintain such qualification (under Subchapter M or any successor or similar provision) and that it will notify the Company immediately upon having a reasonable basis for believing that it has ceased to so qualify or that it might not so qualify in the future. 2.4. The Company represents and warrants that the Contracts are currently treated as life insurance policies or annuity contracts, under applicable provisions of the Code and that it will make every effort to maintain such treatment and that it will notify the Trust immediately upon having a reasonable basis for believing that the Contracts have ceased to be so treated or that they might not be so treated in the future. 2.5. The Trust represents that to the extent that it decides to finance distribution expenses pursuant to Rule 12b-1 under the 1940 Act, it will have a board of trustees, a majority of whom are not interested persons of the Trust, formulate and approve any plan under Rule 12b-1 to finance distribution expenses. 2.6. The Trust represents that the Trust's investment policies, fees and expenses are and shall at all times remain in compliance with the laws of the State of Delaware and the Trust represents that their respective operations are and shall at all times remain in material compliance with the laws of the State of Delaware to the extent required to perform this Agreement. 2.7. The Trust represents that it is lawfully organized and validly existing under the laws of the State of Delaware and that it does and will comply in all material respects with the 1940 Act. 2.8. The Underwriter represents and warrants that it is and shall remain duly registered in all material respects to the extent under all applicable federal and state securities laws and that it will perform its obligations for the Trust in compliance in all material respects with the laws of its state of domicile and any applicable state and federal securities laws. 2.9. The Trust represents and warrants that its directors, officers, employees dealing with the money and/or securities of the Trust are and shall continue to be at all times covered by a blanket fidelity bond or similar coverage for the benefit of the Trust in an amount not less than the minimum coverage as required by Rule 17g-(1) under the 1940 Act or related provisions as may be promulgated from time to time. The aforesaid blanket fidelity bond shall include coverage for larceny and embezzlement and shall be issued by a reputable bonding company. 2.10. The Company represents and warrants that all of its directors, officers, employees dealing with the money and/or securities of the Trust are and shall continue to be covered by a blanket fidelity bond or similar coverage for the benefit of the Company and the Separate Account in an amount not less than the minimum coverage as required by Rule 17g-1 under the 1940 Act or related provisions as may be promulgated from time to time. The aforesaid blanket fidelity bond shall include coverage for larceny and embezzlement and shall be issued by a reputable bonding company. ARTICLE III. PROSPECTUSES, REPORTS TO SHAREHOLDERS AND PROXY STATEMENTS; VOTING 3.1. The Trust or its designee shall provide the Company with as many printed copies of the Trust's current prospectus and statement of additional information as the Company may reasonably request. If requested by the Company, in lieu of providing printed copies the Trust shall provide camera-ready film or computer diskettes containing the Trust's prospectus and statement of additional information, and such other assistance as is reasonably necessary in order for the Company once each year (or more frequently if the prospectus and/or statement of additional information for the Trust is amended during the year) to have the prospectus for the Contracts and the Trust's prospectus printed together in one document, and to have the statement of additional information for the Trust and the statement of additional information for the Contracts printed together in one document. Alternatively, the Company may print the Trust's prospectus and/or its statement of additional information in combination with other trusts or companies' prospectuses and statements of additional information, together with the prospectus and/or statement of additional information for the Contracts. 3.2. Except as provided in this Section 3.2., all expenses of printing and distributing Trust prospectuses and statements of additional information shall be the expense of the Company. For prospectuses and statements of additional information provided by the Company to its existing owners of Contracts in order to update disclosure as required by the 1933 Act and/or the 1940 Act, the cost of printing shall be borne by the Trust. The Trust will provide camera-ready film or computer diskettes in lieu of receiving printed copies of the Trust's prospectus. The Company agrees to provide the Trust or its designee with such information as may be reasonably requested by the Trust to assure that the Trust's expenses do not include the cost of printing any prospectuses or statements of additional information other than those actually distributed to existing owners of the Contracts. In the event there is a combined printing of prospectuses, the expenses of such printing will be apportioned between (a) the Company and (b) the Trust in proportion to the number of pages of the Contract prospectus, other fund prospectuses and the Trust prospectus, taking account of other relevant factors affecting the expense of printing, such as covers, columns, graphs, and charts; the Trust to bear the costs of printing the Trust prospectus portion of such document for distribution to owners of existing Contracts funded by the Trust shares and the Company to bear the expense of printing the portion of such documents relating to the Account; provided, however, the Company shall bear all printing expenses of such combined documents where used for distribution to prospective purchasers or to owners of existing Contracts not funded by Trust shares. 3.3. The Trust's statement of additional information shall be obtainable from the Trust, the Company or such other person as the Trust may designate, as agreed upon by the parties. 3.4. The Trust, at its expense, shall provide the Company with copies of its proxy statements, reports to shareholders, and other communications (except for prospectuses and statements of additional information, which are covered in section 3.1) to shareholders in such quantity as the Company shall reasonably require for distributing to Contract owners. 3.5. If and to the extent required by law the Company shall: (i) solicit voting instructions from Contract owners; (ii) vote the Fund shares in accordance with instructions received from Contract owners; and (iii)vote Fund shares for which no instructions have been received in the same proportion as Trust shares of such Fund for which instructions have been received, so long as and to the extent that the Securities and Exchange Commission continues to interpret the 1940 Act to require pass-through voting privileges for variable contract owners. The Company reserves the right to vote Fund shares held in any Account in its own right, to the extent permitted by law. The Trust and the Company shall follow the procedures, and shall have the corresponding responsibilities, for the handling of proxy and voting instruction solicitations, as set forth in Schedule B attached hereto and incorporated herein by reference. Participating Insurance Companies shall be responsible for ensuring that each of their separate accounts participating in a Fund calculates voting privileges in a manner consistent with the standards set forth on Schedule B, which standards will also be provided to the other Participating Insurance Companies. 3.6. The Trust will comply with all provisions of the 1940 Act requiring voting by shareholders, and in particular the Trust will either provide for annual meetings or comply with Section 16(c) of the 1940 Act (although the Trust is not one of the trusts described in Section 16(c) of that Act) as well as with Sections 16(a) and, if and when applicable, 16(b). Further, the Trust will act in accordance with the Securities and Exchange Commission's interpretation of the requirements of Section 16(a) with respect to periodic elections of directors and with whatever rules the Commission may promulgate with respect thereto. 3.7. The Trust shall use reasonable efforts to provide Trust prospectuses, reports to shareholders, proxy materials and other Trust communications (or camera-ready equivalents) to the Company sufficiently in advance of the Company's mailing dates to enable the Company to complete, at reasonable cost, the printing, assembling and distribution of the communications in accordance with applicable laws and regulations. ARTICLE IV. SALES MATERIAL AND INFORMATION 4.1. The Company shall furnish, or shall cause to be furnished, to the Underwriter, each piece of sales literature or other promotional material in which the Trust or the Underwriter is named, at least five Business Days prior to its use. No such material shall be used if the Trust or its designee reasonably objects to such use within five Business Days after receipt of such material. 4.2. The Company shall not give any information or make any representations or statements on behalf of the Trust or concerning the Trust in connection with the sale of the Contracts other than the information or representations contained in the registration statement or prospectus for the Trust, as such registration statement and prospectus may be amended or supplemented from time to time, or in reports or proxy statements for the Trust, or in sales literature or other promotional material approved by the Trust or its designee, except with the permission of the Trust. 4.3. The Trust or its designee shall furnish, or shall cause to be furnished, to the Company or its designee, each piece of sales literature or other promotional material in which the Company or its separate account(s) or Contracts are named at least five Business Days prior to its use. No such material shall be used if the Company or its designee reasonably objects to such use within five Business Days after receipt of such material. 4.4. The Trust and the Underwriter shall not give any information or make any representations on behalf of the Company or concerning the Company, each Account, or the Contracts, other than the information or representations contained in a registration statement or prospectus for the Contracts, as such registration statement and prospectus may be amended or supplemented from time to time, or in published reports for each Account which are in the public domain or approved by the Company for distribution to Contract owners, or in sales literature or other promotional material approved by the Company or its designee, except with the permission of the Company. 4.5. The Trust will provide to the Company at least one complete copy of all registration statements, prospectuses, statements of additional information, reports, proxy statements, sales literature and other promotional materials, applications for exemptions, requests for no-action letters, and all amendments to any of the above, that relate to the Trust or its shares, contemporaneously with the filing of such document with the Securities and Exchange Commission or other regulatory authorities. 4.6. The Company will provide to the Trust at least one complete copy of all registration statements, prospectuses, statements of additional information, reports, solicitations for voting instructions, sales literature and other promotional materials, applications for exemptions, requests for no action letters, and all amendments to any of the above, that relate to the investment in the Trust under the Contracts, contemporaneously with the filing of such document with the Securities and Exchange Commission or other regulatory authorities. 4.7. For purposes of this Article IV, the phrase "sales literature or other promotional material" includes, but is not limited to, any of the following that refer to the Trust or any affiliate of the Trust: advertisements (such as material published, or designed for use in, a newspaper, magazine, or other periodical, radio, television, telephone or tape recording, videotape display, signs or billboards, motion pictures, or other public media), sales literature (i.e., any written communication distributed or made generally available to customers or the public, including brochures, circulars, research reports, market letters, form letters, seminar texts, reprints or excerpts of any other advertisement, sales literature, or published article), educational or training materials or other communications distributed or made generally available to some or all agents or employees, and registration statements, prospectuses, statements of additional information, shareholder reports, and proxy materials. ARTICLE V. FEES AND EXPENSES 5.1. The Trust shall pay no fee or other compensation to the Company under this Agreement, except that if the Trust or any Fund adopts and implements a plan pursuant to Rule 12b-1 to finance distribution expenses or a shareholder servicing plan to finance investor services, then payments may be made to the Company, or to the underwriter for the Contracts, or to other service providers if and in amounts agreed upon by the parties. 5.2. All expenses incident to performance by the Trust under this Agreement shall be paid by the Trust. The Trust shall see to it that all its shares are registered and authorized for issuance in accordance with applicable federal law and, if and to the extent deemed advisable by the Trust, in accordance with applicable state laws prior to their sale. The Trust shall bear the expenses for the cost of registration and qualification of Fund shares, preparation and filing of the Trust's prospectus and registration statement, proxy materials and reports, setting the prospectus in type, setting in type and printing the proxy materials and reports to shareholders (including the costs of printing a prospectus that constitutes an annual report), distributing the Trust proxy materials to owners of Contracts, the preparation of all statements and notices required by any federal or state law, and all taxes on the issuance or transfer of Fund shares. 5.3. The Company shall bear the expenses of distributing the Trust's prospectus, proxy materials and reports to owners of Contracts issued by the Company, other than the expenses of distributing prospectuses and statements of additional information to existing contract owners. ARTICLE VI. DIVERSIFICATION 6.1. The Trust will at all times invest money from the Contracts in such a manner as to ensure that the Contracts will be treated as variable contracts under the Code and the regulations issued thereunder. Without limiting the scope of the foregoing, the Trust will at all times comply with Section 817(h) of the Code and Treasury Regulation 1.817-5, relating to the diversification requirements for variable annuity, endowment, or life insurance contracts and any amendments or other modifications to such Section or Regulations. In the event of a breach of this Article VI by a Fund, the Trust will take all reasonable steps (a) to notify Company of such breach and (b) to adequately diversify the Fund so as to achieve compliance within the grace period afforded by Regulation 1.817-5. ARTICLE VII. POTENTIAL CONFLICTS 7.1. The Board will monitor the Trust for the existence of any material irreconcilable conflict between the interests of the contract owners of all separate accounts investing in the Trust. An irreconcilable material conflict may arise for a variety of reasons, including: (a) an action by any state insurance regulatory authority; (b) a change in applicable federal or state insurance, tax, or securities laws or regulations, or a public ruling, private letter ruling, no-action or interpretative letter, or any similar action by insurance, tax, or securities regulatory authorities; (c) an administrative or judicial decision in any relevant proceeding; (d) the manner in which the investments of any Fund are being managed; (e) a difference in voting instructions given by Variable Insurance Product owners; or (f) a decision by a Participating Insurance Company to disregard the voting instructions of contract owners. The Board shall promptly inform the Company if it determines that an irreconcilable material conflict exists and the implications thereof. 7.2. The Company will report any potential or existing conflicts of which it is aware to the Board. The Company will assist the Board in carrying out its responsibilities under the Shared Funding Exemptive Order, by providing the Board with all information reasonably necessary for the Board to consider any issues raised. This includes, but is not limited to, an obligation by the Company to inform the Board whenever contract owner voting instructions are disregarded. 7.3. If it is determined by a majority of the Board, or a majority of its disinterested members, that a material irreconcilable conflict exists, the Company and other Participating Insurance Companies shall, at their expense and to the extent reasonably practicable (as determined by a majority of the disinterested directors), take whatever steps are necessary to remedy or eliminate the irreconcilable material conflict, up to and including: (1) withdrawing the assets allocable to some or all of the separate accounts from the Trust or any Fund and reinvesting such assets in a different investment medium, including (but not limited to) another Fund of the Trust, or submitting the question whether such segregation should be implemented to a vote of all affected Contract owners and, as appropriate, segregating the assets of any appropriate group (i.e., annuity contract owners, life insurance policy owners, or variable contract owners of one or more Participating Insurance Companies) that votes in favor of such segregation, or offering to the affected contract owners the option of making such a change; and (2) establishing a new registered management investment company or managed separate account. 7.4. If a material irreconcilable conflict arises because of a decision by the Company to disregard contract owner voting instructions and that decision represents a minority position or would preclude a majority vote, the Company may be required, at the Trust's election, to withdraw the affected Account's investment in the Trust and terminate this Agreement with respect to such Account (at the Company's expense); provided, however that such withdrawal and termination shall be limited to the extent required by the foregoing material irreconcilable conflict as determined by a majority of the disinterested members of the Board. 7.5. If a material irreconcilable conflict arises because a particular state insurance regulator's decision applicable to the Company conflicts with the position of the majority of other state regulators, then the Company will withdraw the affected Account's investment in the Trust and terminate this Agreement with respect to such Account within six months after the Board informs the Company in writing that it has determined that such decision has created an irreconcilable material conflict; provided, however, that such withdrawal and termination shall be limited to the extent required by the foregoing material irreconcilable conflict as determined by a majority of the disinterested members of the Board. Until the end of the foregoing six month period, the Underwriter and Trust shall continue to accept and implement orders by the Company for the purchase (and redemption) of shares of the Trust. 7.6. For purposes of Sections 7.3 through 7.6 of this Agreement, a majority of the disinterested members of the Board shall determine whether any proposed action adequately remedies any irreconcilable material conflict, but in no event will the Trust be required to establish a new funding medium for the Contracts. The Company shall not be required by Section 7.3 to establish a new funding medium for the Contracts if an offer to do so has been declined by vote of a majority of Contract owners materially adversely affected by the irreconcilable material conflict. 7.7. If and to the extent that Rule 6e-2 and Rule 6e-3(T) are amended, or Rule 6e-3 is adopted, to provide exemptive relief from any provision of the 1940 Act or the rules promulgated thereunder with respect to mixed or shared funding (as defined in the Shared Funding Exemptive Order) on terms and conditions materially different from those contained in the Shared Funding Exemptive Order, then (a) the Trust and/or the Participating Insurance Companies, as appropriate, shall take such steps as may be necessary to comply with Rules 6e-2 and 6e-3(T), as amended, and Rule 6e-3, as adopted, to the extent such rules are applicable; and (b) Sections 3.4, 3.5, 7.1, 7.2, 7.3, 7.4, and 7.5 of this Agreement shall continue in effect only to the extent that terms and conditions substantially identical to such Sections are contained in such Rule(s) as so amended or adopted. ARTICLE VIII. INDEMNIFICATION 8.1. Indemnification By The Company 8.1(a) The Company agrees to indemnify and hold harmless the Trust and each member of the Board and each officer and employee of the Trust, the Underwriter and each director, officer and employee of the Underwriter, and each person, if any, who controls the Trust, or the Underwriter within the meaning of Section 15 of the 1933 Act (collectively, an "Indemnified Parties" and individually, "Indemnified Party," for purposes of this Section 8.1) against any and all losses, claims, damages, liabilities (including amounts paid in settlement with the written consent of the Company) or litigation (including legal and other expenses), to which the Indemnified Parties may become subject under any statute, regulation, at common law or otherwise, insofar as such losses, claims, damages, liabilities, or expenses (or actions in respect thereof) or settlements are related to the sale or acquisition of Fund shares or the Contracts and: (i) arise out of or are based upon any untrue statements or alleged untrue statements of any material fact contained in the registration statement or prospectus or statement of additional information for the Contracts or contained in the Contracts or sales literature for the Contracts (or any amendment or supplement to any of the foregoing), or arise out of or are based upon the omission or the alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, provided that this agreement to indemnify shall not apply as to any Indemnified Party if such statement or omission or such alleged statement or omission was made in reliance upon and in conformity with information furnished to the Company by or on behalf of the Trust for use in the registration statement or prospectus or statement of additional information for the Contracts or in the Contracts or sales literature (or any amendment or supplement) or otherwise for use in connection with the sale of the Contracts or Trust shares; or (ii) arise out of or as a result of statements or representations (other than statements or representations contained in the registration statement, prospectus, statement of additional information or sales literature of the Trust not supplied by the Company, or persons under its control and other than statements or representations authorized by the Trust or the Underwriter) or unlawful conduct of the Company or persons under its control, with respect to the sale or distribution of the Contracts or Trust shares; or (iii) arise out of or result from any untrue statement or alleged untrue statement of a material fact contained in a registration statement, prospectus, statement of additional information or sales literature of the Trust or any amendment thereof or supplement thereto or the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading if such a statement or omission was made in reliance upon and in conformity with information furnished to the Trust by or on behalf of the Company; or (iv) arise as a result of any failure by the Company to provide the services and furnish the materials under the terms of this Agreement; or (v) arise out of or result from any material breach of any representation or warranty made by the Company in this Agreement or arise out of or result from any other material breach of this Agreement by the Company, as limited by and in accordance with the provisions of Sections 8.1(b) and 8.1(c) hereof. 8.1(b). The Company shall not be liable under this indemnification provision with respect to any losses, claims, damages, liabilities or litigation incurred or assessed against an Indemnified Party as such may arise from such Indemnified Party's willful misfeasance, bad faith, or gross negligence in the performance of such Indemnified Party's duties or by reason of such Indemnified Party's reckless disregard of obligations or duties under this Agreement. 8.1(c). The Company shall not be liable under this indemnification provision with respect to any claim made against an Indemnified Party unless such Indemnified Party shall have notified the Company in writing within a reasonable time after the summons or other first legal process giving information of the nature of the claim shall have been served upon such Indemnified Party (or after such Indemnified Party shall have received notice of such service on any designated agent), but failure to notify the Company of any such claim shall not relieve the Company from any liability which it may have to the Indemnified Party against whom such action is brought otherwise than on account of this indemnification provision. In case any such action is brought against the Indemnified Parties, the Company shall be entitled to participate, at its own expense, in the defense of such action. The Company also shall be entitled to assume the defense thereof, with counsel satisfactory to the party named in the action. After notice from the Company to such party of the Company's election to assume the defense thereof, the Indemnified Party shall bear the fees and expenses of any additional counsel retained by it, and the Company will not be liable to such party under this Agreement for any legal or other expenses subsequently incurred by such party independently in connection with the defense thereof other than reasonable costs of investigation. 8.1(d). The Indemnified Parties will promptly notify the Company of the commencement of any litigation or proceedings against them in connection with the issuance or sale of the Trust shares or the Contracts or the operation of the Trust. 8.2. Indemnification by the Underwriter 8.2(a). The Underwriter agrees to indemnify and hold harmless the Company and each of its directors, officers and employees and each person, if any, who controls the Company within the meaning of Section 15 of the 1933 Act (collectively, an "Indemnified Parties" and individually, "Indemnified Party," for purposes of this Section 8.2) against any and all losses, claims, damages, liabilities (including amounts paid in settlement with the written consent of the Underwriter) or litigation (including legal and other expenses) to which the Indemnified Parties may become subject under any statute, at common law or otherwise, insofar as such losses, claims, damages, liabilities or expenses (or actions in respect thereof) or settlements are related to the sale or acquisition of shares of a Fund or the Contracts and: (i) arise out of or are based upon any untrue statement or alleged untrue statement of any material fact contained in the registration statement, prospectus, statement of additional information or sales literature of the Trust (or any amendment or supplement to any of the foregoing), or arise out of or are based upon the omission or the alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, provided that this agreement to indemnify shall not apply as to any Indemnified Party if such statement or omission or such alleged statement or omission was made in reliance upon and in conformity with information furnished to the Trust by or on behalf of the Company for use in the registration statement, prospectus, statement of additional information for the Trust or in sales literature (or any amendment or supplement) or otherwise for use in connection with the sale of the Contracts or Fund shares; or (ii) arise out of or as a result of statements or representations (other than statements or representations contained in the registration statement, prospectus, statement of additional information or sales literature for the Contracts not supplied by the Trust or persons under its control and other than statements or representations authorized by the Company) or unlawful conduct of the Trust, Underwriter(s) or Underwriter or persons under their control, with respect to the sale or distribution of the Contracts or Fund shares; or (iii) arise out of or as a result of any untrue statement or alleged untrue statement of a material fact contained in a registration statement, prospectus, statement of additional information or sales literature covering the Contracts, or any amendment thereof or supplement thereto, or the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statement or statements therein not misleading, if such statement or omission was made in reliance upon information furnished to the Company by or on behalf of the Trust; or (iv) arise as a result of any failure by the Trust to provide the services and furnish the materials under the terms of this Agreement, or (v) arise out of or result from any material breach of any representation and/or warranty made by the Trust or Underwriter in this Agreement or arise out of or result from any other material breach of this Agreement by the Underwriter; as limited by and in accordance with the provisions of Sections 8.2(b) and 8.2(c) hereof. 8.2(b). The Underwriter shall not be liable under this indemnification provision with respect to any losses, claims, damages, liabilities, or litigation incurred or assessed against an Indemnified Party as such may arise from such Indemnified Party's willful misfeasance, bad faith, or gross negligence in the performance of such Indemnified Party's duties or by reason of such Indemnified Party's reckless disregard of obligations and duties under this Agreement. 8.2(c). The Underwriter shall not be liable under this indemnification provision with respect to any claim made against an Indemnified Party unless such Indemnified Party shall have notified the Underwriter in writing within a reasonable time after the summons or other first legal process giving information of the nature of the claim shall have been served upon such Indemnified Party (or after such Indemnified Party shall have received notice of such service on any designated agent), but failure to notify the Underwriter of any such claim shall not relieve the Underwriter from any liability which it may have to the Indemnified Party against whom such action is brought otherwise than on account of this indemnification provision. In case any such action is brought against the Indemnified Parties, the Underwriter will be entitled to participate, at its own expense, in the defense thereof. The Underwriter also shall be entitled to assume the defense thereof, with counsel satisfactory to the party named in the action. After notice from the Underwriter to such party of the Underwriter's election to assume the defense thereof, the Indemnified Party shall bear the fees and expenses of any additional counsel retained by it, and the Underwriter will not be liable to such party under this Agreement for any legal or other expenses subsequently incurred by such party independently in connection with the defense thereof other than reasonable costs of investigation. 8.2(d). The Company agrees promptly to notify the Underwriter of the commencement of any litigation or proceedings against it or any of its officers or directors in connection with the issuance or sale of the Contracts or the operation of each Account. 8.3. Indemnification by the Trust 8.3(a). The Trust agrees to indemnify and hold harmless the Company, and each of its directors and officers and each person, if any, who controls the Company within the meaning of Section 15 of the 1933 Act (hereinafter collectively, the "Indemnified Parties" and individually, "Indemnified Party," for purposes of this Section 8.3) against any and all losses, claims, damages, liabilities (including amounts paid in settlement with the written consent of the Trust) or litigation (including legal and other expenses) to which the Indemnified Parties may become subject under any statute, at common law or otherwise, insofar as such losses, claims, damages, liabilities or expenses (or actions in respect thereof) or settlements result from the gross negligence, bad faith or willful misconduct of the Board or any member thereof, and are related to the operations of the Trust and: (i) arise as a result of any failure by the Trust to provide the services and furnish the materials under the terms of this Agreement; or (ii) arise out of or result from any material breach of any representation and/or warranty made by the Trust in this Agreement or arise out of or result from any other material breach of this Agreement by the Trust; 8.3(b). The Trust shall not be liable under this indemnification provision with respect to any losses, claims, damages, liabilities or litigation incurred or assessed against an Indemnified Party as may arise from such Indemnified Party's willful misfeasance, bad faith, or gross negligence in the performance of such Indemnified Party's duties or by reason of such Indemnified Party's reckless disregard of obligations and duties under this Agreement. 8.3(c). The Trust shall not be liable under this indemnification provision with respect to any claim made against an Indemnified Party unless such Indemnified Party shall have notified the Trust in writing within a reasonable time after the summons or other first legal process giving information of the nature of the claim shall have been served upon such Indemnified Party (or after such Indemnified Party shall have received notice of such service on any designated agent), but failure to notify the Trust of any such claim shall not relieve the Trust from any liability which it may have to the Indemnified Party against whom such action is brought otherwise than on account of this indemnification provision. In case any such action is brought against the Indemnified Parties, the Trust will be entitled to participate, at its own expense, in the defense thereof. The Trust also shall be entitled to assume the defense thereof, with counsel satisfactory to the party named in the action. After notice from the Trust to such party of the Trust's election to assume the defense thereof, the Indemnified Party shall bear the fees and expenses of any additional counsel retained by it, and the Trust will not be liable to such party under this Agreement for any legal or other expenses subsequently incurred by such party independently in connection with the defense thereof other than reasonable costs of investigation. 8.3(d). The Company agrees promptly to notify the Trust of the commencement of any litigation or proceedings against it or any of its respective officers or directors in connection with this Agreement, the issuance or sale of the Contracts, with respect to the operation of either Account, or the sale or acquisition of shares of the Trust. ARTICLE IX. APPLICABLE LAW 9.1. This Agreement shall be construed and the provisions hereof interpreted under and in accordance with the substantive laws of the State of Delaware. 9.2. This Agreement shall be subject to the provisions of the 1933, 1934 and 1940 Acts, and the rules and regulations and rulings thereunder, including such exemptions from those statutes, rules and regulations as the Securities and Exchange Commission may grant (including, but not limited to, the Shared Funding Exemptive Order) and the terms hereof shall be interpreted and construed in accordance therewith. ARTICLE X. TERMINATION 10.1. This Agreement shall continue in full force and effect until the first to occur of: (a) termination by any party for any reason by one hundred and eighty (180) days advance written notice delivered to the other parties; or (b) termination by the Company by written notice to the Trust and the Underwriter with respect to any Fund based upon the Company's determination that shares of such Fund are not reasonably available to meet the requirements of the Contracts; or (c) termination by the Company by written notice to the Trust and the Underwriter with respect to any Fund in the event any of the Fund's shares are not registered, issued or sold in accordance with applicable state and/or federal law or such law precludes the use of such shares as the underlying investment media of the Contracts issued or to be issued by the Company; or (d) termination by the Company by written notice to the Trust and the Underwriter with respect to any Fund in the event that such Fund ceases to qualify as a Regulated Investment Company under Subchapter M of the Code or under any successor or similar provision, or if the Company reasonably believes that the Trust may fail to so qualify; or (e) termination by the Company by written notice to the Trust and the Underwriter with respect to any Fund in the event that such Fund falls to meet the diversification requirements specified in Article VI hereof; or (f) termination by the Trust by written notice to the Company if the Trust shall determine, in its sole judgment exercised in good faith, that the Company and/or its affiliated companies has suffered a material adverse change in its business, operations, financial condition or prospects since the date of this Agreement or is the subject of material adverse publicity, or (g) termination by the Company by written notice to the Trust and the Underwriter, if the Company shall determine, in its sole judgment exercised in good faith, that either the Trust or the Underwriter has suffered a material adverse change in its business, operations, financial condition or prospects since the date of this Agreement or is the subject of material adverse publicity; or 10.2. Notwithstanding any termination of this Agreement, the Trust shall, at the option of the Company, continue to make available additional shares of the Trust pursuant to the terms and conditions of this Agreement, for all Contracts in effect on the effective date of termination of this Agreement (hereinafter referred to as "Existing, Contracts"). Specifically, without limitation, the owners of the Existing Contracts shall be permitted to direct reallocation of investments in the Trust, redemption of investments in the Trust and investment in the Trust upon the making of additional purchase payments under the Existing Contracts. The parties agree that this Section 10.2 shall not apply to any terminations under Article VII and the effect of such Article VII terminations shall be governed by Article VII of this Agreement. 10.3. The Company shall not redeem Trust shares attributable to the Contracts (as distinct from Trust shares attributable to the Company's assets held in the Account) except (i) as necessary to implement Contract Owner initiated or approved transactions, or (ii) as required by state and/or federal laws or regulations or judicial or other legal precedent of general application (hereinafter referred to as a "Legally Required Redemption") or (iii) as permitted by an order of the Securities and Exchange Commission pursuant to Section 26(b) of the 1940 Act. Upon request, the Company will promptly furnish to the Trust the opinion of counsel for the Company (which counsel shall be reasonably satisfactory to the Trust) to the effect that any redemption pursuant to clause (ii) above is a Legally Required Redemption. Furthermore, except in cases where permitted under the terms of the Contracts, the Company shall not prevent Contract Owners from allocating payments to a Fund that was otherwise available under the Contracts without first giving the Trust 90 days prior written notice of its intention to do so. ARTICLE XI. NOTICES Any notice shall be sufficiently given when sent by registered or certified mail to the other party at the address of such party set forth below or at such other address as such party may from time to time specify in writing to the other party. If to the Trust: Rydex Variable Trust 6116 Executive Boulevard, Suite 400 Rockville, MD 20852 If to Underwriter: PADCO Financial Services, Inc. 6116 Executive Boulevard, Suite 400 Rockville, MD 20852 If to the Company: Conseco Variable Insurance Company 11825 North Pennsylvania Street Carmel, IN 46032 ARTICLE XII. MISCELLANEOUS 12.1. All persons dealing with the Trust must look solely to the property of the Trust for the enforcement of any claims against the Trust as neither the Board, officers, agents or shareholders assume any personal liability for obligations entered into on behalf of the Trust. 12.2. Subject to the requirements of legal process and regulatory authority, each party hereto shall treat as confidential the names and addresses of the owners of the Contracts and all information reasonably identified as confidential in writing by any other party hereto and, except as permitted by this Agreement, shall not disclose, disseminate or utilize such names and addresses and other confidential information until such time as it may come into the public domain without the express written consent of the affected party. 12.3. The captions in this Agreement are included for convenience of reference only and in no way define or delineate any of the provisions hereof or otherwise affect their construction or effect. 12.4. This Agreement may be executed simultaneously in two or more counterparts, each of which taken together shall constitute one and the same instrument. 12.5. If any provision of this Agreement shall be held or made invalid by a court decision, statute, rule or otherwise, the remainder of the Agreement shall not be affected thereby. 12.6. Each party hereto shall cooperate with each other party and all appropriate governmental authorities (including without limitation the Securities and Exchange Commission, the National Association of Securities Dealers and state insurance regulators) and shall permit such authorities reasonable access to its books and records in connection with any investigation or inquiry relating to this Agreement or the transactions contemplated hereby. Notwithstanding the generality of the foregoing, each party hereto further agrees to furnish the California Insurance Commissioner with any information or reports in connection with services provided under this Agreement which such Commissioner may request in order to ascertain whether the insurance operations of the Company are being conducted in a manner consistent with the California Insurance Regulations and any other applicable law or regulations. 12.7. The rights, remedies and obligations contained in this Agreement are cumulative and are in addition to any and all rights, remedies and obligations at law or in equity, which the parties hereto are entitled to under state and federal laws. 12.8. This Agreement or any of the rights and obligations hereunder may not be assigned by any party without the prior written consent of all parties hereto; provided, however, that an Underwriter may assign this Agreement or any rights or obligations hereunder to any affiliate of or company under common control with the Underwriter, if such assignee is duly licensed and registered to perform the obligations of the Underwriter under this Agreement. 12.9. The Company shall furnish, or shall cause to be furnished, to the Trust or its designee copies of the following reports: (a) the Company's annual statement (prepared under statutory accounting principles) and annual report (prepared under generally accepted accounting principles ("GAAP"), if any), as soon as practical and in any event within 90 days after the end of each fiscal year; (b) the Company's quarterly statements (statutory) (and GAAP, if any), as soon as practical and in any event within 45 days after the end of each quarterly period: 12.10. No provision of this Agreement may be amended or modified in any manner except by a written agreement properly authorized and executed by the Company, Trust and Underwriter. 12.11. If this Agreement terminates, the parties agree that Article VII and Sections 12.2 and 12.6 shall remain in effect after termination. 12.12. In the event the Trust intends to terminate the existence of a Fund(s), the Underwriter shall be liable for the payment of all expenses incurred in connection with any fund substitution undertaken by Company as a result of such termination. Such expenses shall include but not be limited to legal, accounting and brokerage costs. IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to be executed in its name and on its behalf by its duly authorized representative and its seal to be hereunder affixed hereto as of the date specified above. CONSECO VARIABLE INSURANCE COMPANY By: ______________________________ RYDEX VARIABLE TRUST By: ______________________________ PADCO FINANCIAL SERVICES, INC. By: ______________________________ CONSECO VARIABLE INSURANCE COMPANY SCHEDULE A SEPARATE ACCOUNTS AND ASSOCIATED CONTRACTS Shares of the Funds of the Trust shall be made available as investments for the following Separate Accounts: Conseco Variable Annuity Account C - (5/1/93) Annuity Contract Form No. 22-4025 Conseco Variable Annuity Account E - (11/12/93) Annuity Contract Form No. 22-4047, 22-4048 Conseco Variable Annuity Account F - (9/26/97) Annuity Contract Form No. 22-4061 Conseco Variable Annuity Account G - (1/18/96) Annuity Contract Form No. 22-4056 Conseco Variable Annuity Account H - (11/1/99) Annuity Contract Form No. CVIC-2000, CVIC-2001 Conseco Variable Life Account A - (tbd) Contract Form No. CVIC-1000 SCHEDULE B PROXY VOTING PROCEDURES The following is a list of procedures and corresponding responsibilities for the handling of proxies and voting instructions relating to the Trust. The defined terms herein shall have the meanings assigned in the Participation Agreement except that the term "Company" shall also include the department or third party assigned by the Company to perform the steps delineated below. 1 The proxy proposals are given to the Company by the Trust as early as possible before the date set by the Trust for the shareholder meeting to enable the Company to consider and prepare for the solicitation of voting instructions from owners of the Contracts and to facilitate the establishment of tabulation procedures. At this time the Trust will inform the Company of the Record, Mailing and Meeting dates. This will be done verbally approximately two months before meeting. 2 Promptly after the Record Date, the Company will perform a "tape run", or other activity, which will generate the names, addresses and number of units which are attributed to each contract owner/policyholder (the "Customer") as of the Record Date. Allowance should be made for account adjustments made after this date that could affect the status of the Customers' accounts as of the Record Date. Note: The number of proxy statements is determined by the activities described in this Step #2. The Company will use its best efforts to call in the number of Customers to the Trust , as soon as possible, but no later than two weeks after the Record Date. 3 The Trust's Annual Report must be sent to each Customer by the Company either before or together with the Customers' receipt of voting, instruction solicitation material. The Trust will provide the last Annual Report to the Company pursuant to the terms of Section 3.3 of the Agreement to which this Schedule relates. 4 The text and format for the Voting Instruction Cards ("Cards" or "Card") is provided to the Company by the Trust. The Company, at its expense, shall produce and personalize the Voting Instruction Cards. The Trust or its affiliate must approve the Card before it is printed. Allow approximately 2-4 business days for printing information on the Cards. Information commonly found on the Cards includes: a name (legal name as found on account registration) b address c Trust or account number d coding to state number of units e individual Card number for use in tracking and verification of votes (already on Cards as printed by the Trust). (This and related steps may occur later in the chronological process due to possible uncertainties relating to the proposals.) 5 During this time, the Trust will develop, produce and pay for the Notice of Proxy and the Proxy Statement (one document). Printed and folded notices and statements will be sent to Company for insertion into envelopes (envelopes and return envelopes are provided and paid for by the Company). Contents of envelope sent to Customers by the Company will include: a Voting Instruction Card(s) b one proxy notice and statement (one document) c return envelope (postage pre-paid by Company) addressed to the Company or its tabulation agent d "urge buckslip" - optional, but recommended. (This is a small, single sheet of paper that requests Customers to vote as quickly as possible and that their vote is important. One copy will be supplied by the Trust.) e cover letter - optional, supplied by Company and reviewed and approved in advance by the Trust 6 The above contents should be received by the Company approximately 3-5 business days before mail date. Individual in charge at Company reviews and approves the contents of the mailing package to ensure correctness and completeness. Copy of this approval sent to the Trust. 7 Package mailed by the Company. * The Trust must allow at least a 15-day solicitation time to the Company as the shareowner. (A 5-week period is recommended.) Solicitation time is calculated as calendar days from (but not including,) the meeting, counting backwards. 8 Collection and tabulation of Cards begins. Tabulation usually takes place in another department or another vendor depending on process used. An often used procedure is to sort Cards on arrival by proposal into vote categories of all yes, no, or mixed replies, and to begin data entry. Note: Postmarks are not generally needed. A need for postmark information would be due to an insurance company's internal procedure and has not been required by the Trust in the past. 9 Signatures on Card checked against legal name on account registration which was printed on the Card. Note: For Example, if the account registration is under "John A. Smith, Trustee," then that is the exact legal name to be printed on the Card and is the signature needed on the Card. 10 If Cards are mutilated, or for any reason are illegible or are not signed properly, they are sent back to Customer with an explanatory letter and a new Card and return envelope. The mutilated or illegible Card is disregarded and considered to be not received for purposes of vote tabulation. Any Cards that have been "kicked out" (e.g. mutilated, illegible) of the procedure are "hand verified," i.e., examined as to why they did not complete the system. Any questions on those Cards are usually remedied individually. 11 There are various control procedures used to ensure proper tabulation of votes and accuracy of that tabulation. The most prevalent is to sort the Cards as they first arrive into categories depending upon their vote; an estimate of how the vote is progressing may then be calculated. If the initial estimates and the actual vote do not coincide, then an internal audit of that vote should occur. This may entail a recount. 12 The actual tabulation of votes is done in units which is then converted to shares. (It is very important that the Trust receives the tabulations stated in terms of a percentage and the number of shares.) The Trust must review and approve tabulation format. 13 Final tabulation in shares is verbally given by the Company to the Trust on the morning of the meeting not later than 10:00 a.m. Eastern time. The Trust may request an earlier deadline if reasonable and if required to calculate the vote in time for the meeting. 14 A Certification of Mailing and Authorization to Vote Shares will be required from the Company as well as an original copy of the final vote. The Trust will provide a standard form for each Certification. 15 The Company will be required to box and archive the Cards received from the Customers. In the event that any vote is challenged or if otherwise necessary for legal, regulatory, or accounting purposes, the Trust will be permitted reasonable access to such Cards. 16 All approvals and "signing-off' may be done orally, but must always be followed up in writing. EX-99.B9 5 OPINION AND CONSENT OF COUNSEL Blazzard, Grodd & Hasenauer, P.C. 943 Post Road East Westport, CT 06880 (203) 226-7866 April 27, 2000 Board of Directors Conseco Variable Insurance Company 11815 N. Pennsylvania Street Carmel, IN 46032-4572 Re: Opinion of Counsel - Conseco Variable Annuity Account H Gentlemen: You have requested our Opinion of Counsel in connection with the filing with the Securities and Exchange Commission of a Post-Effective Amendment to a Registration Statement on Form N-4 for the Individual Fixed and Variable Annuity Contracts (the "Contracts") to be issued by Conseco Variable Insurance Company and its separate account, Conseco Variable Annuity Account H. We have made such examination of the law and have examined such records and documents as in our judgment are necessary or appropriate to enable us to render the opinions expressed below. We are of the following opinions: 1. Conseco Variable Annuity Account H is a Unit Investment Trust as the term is defined in Section 4(2) of the Investment Company Act of 1940 (the "Act"), and is currently registered with the Securities and Exchange Commission, pursuant to Section 8(a) of the "Act". 2. Upon the acceptance of purchase payments made by an Owner pursuant to a Contract issued in accordance with the Prospectus contained in the Registration Statement and upon compliance with applicable law, such an Owner will have a legally-issued, fully-paid, non-assessable contractual interest under such Contract. You may use this opinion letter, or a copy thereof, as an exhibit to the Registration Statement. We consent to the reference to our Firm under the caption "Legal Opinions" contained in the Statement of Additional Information which forms a part of the Registration Statement. Sincerely, BLAZZARD, GRODD & HASENAUER, P.C. By: /S/ LYNN KORMAN STONE __________________________ Lynn Korman Stone EX-99.B10 6 CONSENT OF INDEPENDENT ACCOUNTANTS CONSENT OF INDEPENDENT ACCOUNTANTS We consent to the inclusion in Post-Effective Amendment No. 1 to the Registration Statement of Conseco Variable Annuity Account H (the "Account") on Form N-4 (File Nos. 333-90737 and 811-09693) of our report dated April 13, 2000, on our audits of the financial statements of Conseco Variable Insurance Company. We also consent to the reference to our Firm under the caption "Independent Accountants". /s/ PricewaterhouseCoopers LLP ------------------------------- PricewaterhouseCoopers LLP Indianapolis, Indiana April 25, 2000 EX-99.B15 7 COMPANY ORGANIZATIONAL CHART CONSECO, INC. (Indiana) - (publicly traded) CIHC, Incorporated (Delaware) Bankers National Life Insurance Company (Texas) National Fidelity Life Insurance Company (Missouri) 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) - (98%) 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) 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; Conseco affiliates currently hold in excess of 95% of its shares. -----END PRIVACY-ENHANCED MESSAGE-----