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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

Form 10-K

[ X ] Annual report pursuant to Section
13 or 15(d) of the Securities Exchange Act
of 1934 For the fiscal year ended December
31, 2001 or

[ ] Transition report pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934 [No Fee Required]

For the transition period_____from to_____

Commission file number: 1-08916

CONSECO FINANCE CORP.
Delaware No. 41-1807858
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State of Incorporation IRS Employer Identification No.

1100 Landmark Towers
Saint Paul, Minnesota 55102-1639 (651) 293-3400
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Address of principal executive offices Telephone

Securities registered pursuant to Section 12(b)of the Act:

Name of each exchange
Title of each class on which registered
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10-1/4% Senior Subordinated Notes due 2002 New York Stock Exchange, Inc.

Securities registered pursuant to Section 12(g) of the Act: None

The Registrant meets the conditions set forth in the General Instructions
(I)(1)(a) and (b) on Form 10-K and is therefore filing this form with the
reduced disclosure.

Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports) and (2) has been subject to such
filing requirements for the past 90 days: Yes [ X ] No [ ]

Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ X ]

Aggregate market value of common stock held by nonaffiliates: Effective
July 1, 1998, the Company's common stock is no longer traded on an established
public trading market.

Shares of common stock outstanding as of March 22, 2002: 103

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PART I

ITEM 1. BUSINESS OF CONSECO FINANCE

The Registrant meets the conditions set forth in the General Instructions
(I) (1) (a) and (b) of Form 10-K and is therefore omitting the information
otherwise required by Item 1, except for a brief description of the business
done by the Registrant and its subsidiaries during the most recent fiscal year.

Conseco Finance Corp. ("Conseco Finance", formerly Green Tree Financial
Corporation prior to its name change in November 1999) is a financial services
holding company that originates, securitizes and services manufactured housing,
home equity, home improvement, retail credit and floorplan extension throughout
the United States. As used in this report, the terms "we," "Conseco Finance" or
the "Company" refer to Conseco Finance Corp. and its consolidated subsidiaries.
Conseco Finance became a wholly owned subsidiary of Conseco, Inc. ("Conseco"), a
financial services holding company, on June 30, 1998, as a result of Conseco's
acquisition (the "Merger") of Conseco Finance.

During the last two years, Conseco has taken a number of actions with
respect to the Company, including: (i) the sale, closing or runoff of several
business units (including asset-based lending, vendor leasing, bankcards,
transportation and park construction); (ii) monetization of certain on-balance
sheet financial assets through sales or as collateral for additional borrowings;
and (iii) cost savings and restructuring of ongoing businesses such as the
streamlining of credit origination operations in the manufactured housing and
home equity lending divisions. In addition, we moved a significant number of
jobs to India, where a highly-educated, low-cost, English-speaking labor force
is available. These actions had a significant effect on the Company's operating
results during 2000 and 2001. In early 2002, we announced our decision to reduce
the size of our floorplan lending business.

In March 2002, we completed a tender offer pursuant to which we purchased
$75.8 million par value of our senior subordinated notes due June 2002. The
purchase price was equal to 100 percent of the principal amount of the notes
plus accrued interest. The remaining principal amount outstanding of the senior
subordinated notes after giving effect to the tender offer and other debt
repurchases completed prior to the tender offer is $58.4 million (of which $23.7
million is held by Conseco). Also, during the first quarter of 2002, we
announced the tendering for all our remaining public debt - $167 million due in
September 2002 and $4 million due in April 2003. (Such amounts reflect all 2002
debt repurchases completed prior to announcing the tender offer). Such offer
expires on April 12, 2002. The tender offer price is equal to 100 percent of the
principal amount of the notes plus accrued interest.

The Company was originally incorporated under the laws of the State of
Minnesota in 1975. In 1995, the Company reincorporated under the laws of the
State of Delaware. The Company's principal executive offices are located at 1100
Landmark Towers, 345 Saint Peter Street, Saint Paul, Minnesota 55102-1639, and
our telephone number is (651) 293-3400.

MARKETING AND DISTRIBUTION

Conseco Finance, with nationwide operations and managed finance
receivables of $43.0 billion at December 31, 2001, is one of America's largest
consumer finance companies, with leading market positions in retail home equity
mortgages, home improvement loans, private label credit cards and manufactured
housing credit. Originations to customers in the following states accounted for
at least 5 percent of our 2001 originations: Texas (8.5 percent), California
(8.2 percent), Florida (6.4 percent) and Michigan (5.2 percent). Unless
otherwise noted, references to loans we have made may include purchase by us of
credit contracts between dealers and buyers.

During 2001, 43 percent of our finance products came indirectly from
customers through intermediary channels such as dealers, contractors, retailers
and correspondents. The remaining products were marketed directly to our
customers through our regional offices and service centers. A description of the
primary distribution channels is as follows:

Dealers, Contractors, Retailers and Correspondents. Manufactured housing,
home improvement and home equity receivables are purchased from and originated
by selected dealers and contractors after being underwritten and analyzed via
one of the Company's automated credit scoring systems at one of our regional
service centers. During 2001, these marketing channels accounted for the
following percentages of total loan originations: 93 percent of manufactured
housing, 72 percent of home improvement and 6 percent of home equity.

Regional Service Centers, Retail Satellite Offices and Telemarketing
Center. We market and originate manufactured housing loans through 33 regional
offices and 3 origination and processing centers. We originate home equity loans
through a system of 128 retail satellite offices and 6 regional centers. We also
market private label retail credit products through selected retailers and
process the contracts through Conseco Bank, Inc. ("Conseco Bank"), a Utah
industrial loan company, and through Green Tree Retail Services Bank, Inc.
("Retail Bank"), a South Dakota limited purpose credit card bank, both of which
are subsidiaries of the Company. We also utilize direct mail to originate home
improvement loans and home equity loans. During 2001, these marketing channels
accounted for the following percentages of total loan originations: 7 percent of
manufactured housing, 28 percent of home improvement, 94 percent of home equity
and 100 percent of retail credit contracts.

Our products include the following product lines:

Manufactured Housing. We provide financing for consumer purchases of
manufactured housing. During 2001, we originated $2.5 billion of contracts for
manufactured housing purchases, or 22 percent of our total originations. At
December 31, 2001, our managed receivables included $25.6 billion of contracts
for manufactured housing purchases, or 59 percent of total managed receivables.
A manufactured home is a structure, transportable in one or more sections,
designed to be a dwelling with or without a permanent foundation. Manufactured
housing does not include either modular housing (which typically involves more
sections, greater assembly and a separate means of transporting the sections) or
recreational vehicles.

Through our regional service centers, we purchase manufactured housing
contracts from dealers located throughout the United States. Our regional
service center personnel solicit dealers in their region. If the dealer wishes
to utilize our financing, the dealer completes an application. Upon approval, a
dealer agreement is executed. We also originate manufactured housing installment
loan agreements directly with customers. For the year ended December 31, 2001,
93 percent of our manufactured housing loan originations were purchased from
dealers and 7 percent were originated directly by us.

Our manufactured housing contracts are secured by either the manufactured
home or, in the case of land-and-home contracts, by a lien on the real estate
where the manufactured home is permanently affixed. In 2001, approximately 27
percent of our manufactured housing originations were for land-and-home
contracts. Customers who finance their homes with us are required to make a
minimum down payment of 5 percent. For manufactured housing originations, the
average loan-to-value ratio was approximately 88 percent in 2001.

Customers' credit applications for new manufactured homes are reviewed in
our service centers. If the application meets our guidelines, we generally
purchase the contract after the customer has moved into the manufactured home.
We use a proprietary automated credit scoring system to evaluate manufactured
housing contracts. The scoring system is statistically based, quantifying
information using variables obtained from customer credit applications and
credit reports. We perform monthly audits on samples of new loan originations to
measure adherence to our underwriting policies and procedures.

Mortgage Services. Products within this category include home equity and
home improvement loans. During 2001, we originated $3.0 billion of contracts for
these products, or 27 percent of our total originations. At December 31, 2001,
our managed receivables included $11.9 billion of contracts for home equity and
home improvement loans, or 28 percent of total managed receivables.

We originate home equity loans through 128 retail satellite offices and 6
regional centers, and through a network of correspondent and broker originators
throughout the United States. The retail offices are responsible for
originating, processing and funding the loan transaction. Underwriting of the
application is handled through central locations. Subsequently, loans are
re-underwritten on a test basis by a third party to ensure compliance with our
credit policy. After the loan has closed, the loan documents are forwarded to
our loan servicing center. The servicing center is responsible for handling
customer service and performing document handling, custodial, quality control
and collection functions.

During 2001, approximately 94 percent of our home equity finance loans
were originated directly with the borrower. The remaining finance volume was
originated through a few correspondent lenders. The Company decreased the volume
of loans originated through the correspondent channel in 2000.

Typically, home equity loans are secured by first or second liens. Homes
used for collateral in securing home equity loans may be either residential or
investor owned, one-to-four-family properties having a minimum appraised value
of $25,000. During 2001, approximately 81 percent of the loans originated were
secured by first liens. The average loan to value for loans originated in 2001
was approximately 90 percent. Approximately 97 percent of our home equity loan
originations during 2001 were fixed rate closed-end loans.

We originate the majority of our home improvement loan contracts
indirectly through a network of home improvement contractors located throughout
the United States. We review the financial condition, business experience and
qualifications of all contractors through which we obtain loans.

We finance conventional home improvement contracts generally secured by
first, second or, to a lesser extent, third liens on the improved real estate.
We also finance unsecured conventional home improvement loans (generally from
$2,500 to $15,000).

Typically, an approved contractor submits the customer's credit
application and construction contract to our centralized service center where an
analysis of the creditworthiness of the customer is made using a proprietary
credit scoring system. If it is determined that the application meets our
underwriting guidelines, we typically purchase the contract from the contractor
when the customer verifies satisfactory completion of the work.

We also originate home improvement loans directly with borrowers. After
receiving a mail solicitation, the customer calls our telemarketing center and
our sales representative explains the available financing plans, terms and rates
depending on the customer's needs. The majority of the loans are secured by a
second or third lien on the real estate of the customer. Direct distribution
accounted for approximately 28 percent of the home improvement loan originations
during 2001.

The types of home improvements we finance include exterior renovations
(such as windows, siding and roofing); pools and spas; kitchen and bath
remodeling; and room additions and garages. We may also extend additional credit
beyond the purchase price of the home improvement for the purpose of debt
consolidation.

Private Label Credit Card. During 2001, we originated $3.6 billion of
private label credit card receivables primarily through our bank subsidiaries,
or 32 percent of our total originations. At December 31, 2001, our managed
receivables included $2.7 billion of contracts for credit card loans, or 6
percent of total managed receivables.

We originate private label credit card receivables through contractual
relationships with selected retailer and dealer partners. Our core relationships
are with retailers and dealers of home improvement products, powersports
vehicles (motorcycles, all-terrain-vehicles, snowmobiles and personal
watercraft) and outdoor power equipment.

We perform an initial review on all retailer and dealer partners as well
as periodic monitoring of their financial condition. Credit card applications
are generated primarily through retail and dealer outlets and the internet. We
utilize a proprietary automated credit scoring system to review the credit of
individual customers seeking credit cards. We periodically monitor payment
behavior trends within our credit card portfolio through the use of automated
portfolio management tools. If we make poor credit decisions with respect to our
partners and borrowers, it could have a material adverse effect on our business.

ITEM 2. PROPERTIES.

The Company's headquarters are based in St. Paul, Minnesota in a building
owned by the Company (120,000 square feet of which are occupied by the Company).
We lease additional space in downtown St. Paul (185,000 square feet), which is
used by our mortgage services and private credit card divisions. We own a
building in Rapid City, South Dakota (137,000 square feet), which is used by our
manufactured housing services units. We also lease office space in Rapid City
(75,000 square feet) which is used by our private label credit card and retail
bank servicing units. We also lease buildings in Tempe, Arizona (200,000 square
feet) and Atlanta, Georgia (96,000 square feet) which serve as collection and
service centers. We lease 33 regional manufactured housing division offices and
128 mortgage services branch offices across the United States; the lease terms
generally range from three to five years.

ITEM 3. LEGAL PROCEEDINGS.

Conseco Finance was served with various related lawsuits filed in the
United States District Court for the District of Minnesota. These lawsuits were
generally filed as purported class actions on behalf of persons or entities who
purchased common stock or options to purchase common stock of Conseco Finance
during alleged class periods that generally run from July 1995 to January 1998.
One action (Florida State Board of Admin. v. Green Tree Financial Corp., et. al,
Case No. 98- 1162) was brought not on behalf of a class, but by the Florida
State Board of Administration, which invests and reinvests retirement funds for
the benefit of state employees. In addition to Conseco Finance, certain current
and former officers and directors of Conseco Finance are named as defendants in
one or more of the lawsuits. Conseco Finance and other defendants obtained an
order consolidating the lawsuits seeking class action status into two actions,
one of which pertains to a purported class of common stockholders (In re Green
Tree Financial Corp. Stock Litig., Case No. 97-2666) and the other of which

pertains to a purported class of stock option traders (In re Green Tree
Financial Corp. Options Litig., Case No. 97-2679). Plaintiffs in the lawsuits
assert claims under Sections 10(b) (and Rule 10b-5 promulgated thereunder) and
20(a) of the Securities Exchange Act of 1934. In each case, plaintiffs allege
that Conseco Finance and the other defendants violated federal securities laws
by, among other things, making false and misleading statements about the current
state and future prospects of Conseco Finance (particularly with respect to
prepayment assumptions and performance of certain loan portfolios of Conseco
Finance) which allegedly rendered Conseco Finance's financial statements false
and misleading. On August 24, 1999, the United States District Court for the
District of Minnesota issued an order dismissing with prejudice all claims
alleged in the lawsuits. The plaintiffs subsequently appealed the decision to
the U.S. Court of Appeals for the 8th Circuit. A three judge panel issued an
opinion on October 25, 2001, reversing the United States District Court's
dismissal order and remanding the actions to the United States District Court.
Pretrial discovery is expected to commence in all three lawsuits approximately
in April 2002. The Company believes that the lawsuits are without merit and
intends to continue to defend them vigorously. The ultimate outcome of these
lawsuits cannot be predicted with certainty.

Conseco Finance is a defendant in two arbitration proceedings in South
Carolina (Lackey v. Green Tree Financial Corporation, n/k/a Conseco Finance
Corp. and Bazzle v. Green Tree Financial Corporation, n/k/a Conseco Finance
Corp.) where the arbitrator, over Conseco Finance's objection, allowed the
plaintiffs to pursue purported class action claims in arbitration. The two
purported arbitration classes consist of South Carolina residents who obtained
real estate secured credit from Conseco Finance's Manufactured Housing Division
(Lackey) and Home Improvement Division (Bazzle) in the early and mid 1990s, and
did not receive a South Carolina specific disclosure form relating to selection
of attorneys and insurance agents in connection with the credit transactions.
The arbitrator, in separate awards issued on July 24, 2000, awarded a total of
$26.8 million in penalties and attorneys' fees. The awards were confirmed as
judgments in both Lackey and Bazzle. These cases have been consolidated into one
case which is currently on appeal before the South Carolina Supreme Court. Oral
argument was heard on March 21, 2002. Conseco Finance has posted appellate
bonds, including $20 million of cash, for these cases. Conseco Finance intends
to vigorously challenge the awards and believes that the arbitrator erred by,
among other things, conducting class action arbitrations without the authority
to do so and misapplying South Carolina law when awarding the penalties. The
ultimate outcome of this proceeding cannot be predicted with certainty.

In addition, the Company and its subsidiaries are involved on an ongoing
basis in other lawsuits (including purported class actions) related to their
operations. The ultimate outcome of all of these other legal matters pending
against the Company or its subsidiaries cannot be predicted, and, although such
lawsuits are not expected to individually have a material adverse effect on the
Company, such lawsuits could have, in the aggregate, a material adverse effect
on the Company's consolidated financial condition, cash flows or results of
operations.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

The Registrant meets the conditions set forth in the General Instructions
(I)(1)(a) and (b) of Form 10-K and is therefore omitting the information
otherwise required by Item 4.

PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER
MATTERS.

Effective July 1, 1998, the Company became a wholly owned subsidiary of
Conseco and its common stock is no longer traded on an established public
trading market.

ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA.

The Registrant meets the conditions set forth in the General Instructions
(I)(1)(a) and (b) of Form 10-K and is therefore omitting the information
otherwise required by Item 6.

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF CONSOLIDATED FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.

The Registrant meets the conditions set forth in the General Instructions
(I) (1) (a) and (b) of Form 10-K and is therefore omitting the information
otherwise required by Item 7, except for management's narrative analysis of the
results of operations explaining the reasons for material changes in the amount
of revenue and expense items between 2001, 2000 and 1999.

In this section, we review the consolidated results of operations of
Conseco Finance for the three years ended December 31, 2001, and where
appropriate, provide explanations for material changes in the amount of revenue
and expense items during such periods. Please read this discussion in
conjunction with the accompanying consolidated financial statements and notes.

All statements, trend analyses and other information contained in this
report and elsewhere (such as in filings by the Company with the Securities and
Exchange Commission, press releases, presentations by the Company or its
management or oral statements) relative to markets for the Company's products
and trends in the Company's operations or financial results, as well as other
statements including words such as "anticipate," "believe," "plan," "estimate,"
"expect," "project," "intend," "may," "will," "would," "contemplate,"
"possible," "attempts," "seeks," "should," "could," "goal," "target," "on
track," "comfortable with," "optimistic," and other similar expressions,
constitute forward-looking statements under the Private Securities Litigation
Reform Act of 1995. Forward-looking statements are subject to known and unknown
risks, uncertainties and other factors which may cause actual results,
performance or achievements to be materially different from the future results,
performance or achievements, expressed or implied by the forward-looking
statements. Assumptions and other important factors that could cause our actual
results to differ materially from those anticipated in our forward-looking
statements include, among other things: (i) general economic conditions and
other factors, including prevailing interest rate levels and stock and credit
market performance, which may affect (among other things) the Company's ability
to sell its products, its ability to make loans and access capital resources and
the costs associated therewith, the market value of the Company's investments
and the level of defaults and prepayments of loans made by the Company; (ii) the
Company's ability to achieve anticipated synergies and levels of operational
efficiencies, including from our process excellence initiatives; (iii) customer
response to new products, distribution channels and marketing initiatives; (iv)
performance of our investments; (v) changes in the Federal income tax laws and
regulations which may affect the relative tax advantages of some of the
Company's products; (vi) increasing competition in the finance business; (vii)
regulatory changes or actions, including those relating to regulation of
financial services; (viii) the outcome of the Company's efforts to sell assets
and reduce, refinance or modify indebtedness and the availability and cost of
capital in connection with this process; (ix) actions by rating agencies and the
effects of past or future actions by these agencies on the Company's business;
(x) the ultimate outcome of lawsuits filed against the Company; and (xi) the
risk factors or uncertainties listed from time to time in the filings of the
Company or its parent, Conseco, Inc., with the Securities and Exchange
Commission. Other factors and assumptions not identified above are also relevant
to the forward-looking statements, and if they prove incorrect, could also cause
actual results to differ materially from those projected.

All written or oral forward-looking statements attributable to us are
expressly qualified in their entirety by the foregoing cautionary statement. Our
forward-looking statements speak only as of the date made. We assume no
obligation to update or to publicly announce the results of any revisions to any
of the forward-looking statements to reflect actual results, future events or
developments, changes in assumptions or changes in other factors affecting the
forward-looking statements.

CRITICAL ACCOUNTING POLICIES

The accounting policies described below require management to make
significant estimates and assumptions using information available at the time
the estimates are made. Such estimates and assumptions significantly affect
various reported amounts of assets and liabilities. Management has made
estimates in the past that we believed to be appropriate, but were subsequently
revised to reflect actual experience. If our future experience differs
materially from these estimates and assumptions, our results of operations and
financial condition could be affected. Accordingly, we consider them to be
critical in preparing our consolidated financial statements. A more detailed
description of our accounting policies is included in the notes to our
consolidated financial statements.

Retained Interests in Securitization Trusts

Retained interests in securitization trusts represent the right to
receive certain future cash flows from securitization transactions structured
prior to September 8, 1999. Such cash flows generally are equal to the value of
the principal and interest to be collected on the underlying financial contracts
of each securitization in excess of the sum of the principal and interest to be
paid on the securities sold and contractual servicing fees. These interests
include interests represented by: (i) actively managed fixed maturities of
$528.5 million; and (ii) interest-only securities of $141.7 million. We carry
these retained interests at estimated fair value. We determine fair value by
discounting the projected cash flows over the expected life of the receivables
sold using current estimates of future prepayment, default, loss and interest
rates. We record any unrealized gain or loss determined to be temporary, net of
tax, as a component of shareholder's equity. Declines in value are considered to
be other than temporary when: (i) the fair value of the security is less than
its carrying value; and (ii) the timing and/or amount of cash expected to be
received from the security has changed adversely from the previous valuation
which determined the carrying value of the security. When declines in value
considered to be other than temporary occur, we reduce the amortized cost to
estimated fair value and recognize a loss in the statement of operations. The
assumptions used to determine new values are based on our internal evaluations
and consultation with external advisors having significant experience in valuing
these securities.

The determination of the value of our retained interests requires
significant judgment. The Company has recognized significant impairment charges
when the interest-only securities did not perform as well as anticipated based
on our assumptions and expectations.

Our current valuation of retained interests may prove inaccurate in
future periods. In the securitizations to which these interest-only securities
relate, we have retained certain contingent risks in the form of guarantees of
certain lower rated securities issued to third parties by the securitization
trusts. As of December 31, 2001, the total amount of these guarantees was $1.5
billion. If we have to make more payments on these guarantees than anticipated,
or we experience higher than anticipated rates of loan prepayments, including
those due to foreclosures or charge-offs, or any adverse changes in our other
assumptions used for such valuation (such as interest rates and our loss
mitigation policies), we could be required to recognize additional impairment
charges (including potential payments related to $1.5 billion of guarantees)
which could have a material adverse effect on our financial condition or results
of operations. We consider any estimated payments related to these guarantees in
the projected cash flows used to determine the value of our interest-only
securities.

Finance Receivables

At December 31, 2001, the balance of our finance receivables was $18.0
billion. This value is significantly affected by our assessment of the
collectibility of the receivables, servicing actions and the provision for
credit losses that we establish.

The provision for credit losses charged to expense is based upon an
assessment of current and historical loss experience, loan portfolio trends, the
value of collateral, prevailing economic and business conditions, and other
relevant factors. We reduce the carrying value of finance receivables to net
realizable value at the earlier of: (i) six months of contractual delinquency;
or (ii) when we take possession of the property securing the finance receivable.
Estimates of the provision are revised each period, and changes are recorded in
the period they become known. A significant change in the level of collectible
finance receivables would have a significant adverse effect on our results of
operations and financial position in future periods.

Income Taxes

deferred income tax assets depends upon generating future taxable income during
the periods in which our temporary differences become deductible. We evaluate
the recoverability of our deferred income tax assets by assessing the need for a
valuation allowance on a quarterly basis. If we determine that it is more likely
than not that our deferred income tax assets will not be recovered, a valuation
allowance will be established against some or all of our deferred income tax
assets. This could have a significant effect on our future results of operations
and financial position.

No valuation allowance has been provided on our deferred income tax
assets at December 31, 2001, as we believe it is more likely than not that all
such assets will be realized. We reached this conclusion after considering the
availability of taxable income in prior carryback years, tax planning
strategies, and the likelihood of future taxable income exclusive of reversing
temporary differences. Differences between forecasted and actual future
operating results could adversely impact our ability to realize our deferred
income tax assets.

At December 31, 2001, we did not have any net operating loss
carryforwards. However, if our deferred income tax assets started to reverse
into net operating losses, we would have 20 years to generate future taxable
income and utilize these potential net operating losses before they would begin
to expire under current tax law. In recent years, we have had losses before
income taxes for financial reporting purposes. However, we believe that existing
levels of income from our continuing operations coupled with changes in our
operations that either have taken place or will take place are sufficient to
generate the levels of taxable income needed to utilize our net deferred income
tax assets. Such changes include: (i) various cost saving initiatives; (ii) the
transfer of certain customer service and backroom operations to our India
affiliate; and (iii) restructuring our business to increase profitability such
as streamlining our loan origination operations in the manufactured housing and
home equity divisions.

The following chart reconciles our income (loss) before taxes for
financial statement purposes to our taxable income (loss) for income tax
purposes:

2001 2000 1999
---- ---- ----
(Dollars in millions)

Income (loss) before income taxes,
extraordinary gain (loss), and
cumulative effect of accounting change........... $(165.2) $(742.6) $ 34.0
Adjustments to determine taxable income:
Net investment income ........................... (37.2) 81.0 257.5
Impairment charges .............................. 386.9 515.7 554.3
Gain on sale of finance receivables.............. - - (550.6)
Provision for losses............................. 114.6 99.8 45.4
Special charges.................................. - 211.2 -
Extraordinary gain (loss) on extinguishment
of debt...................................... 9.4 - (3.8)
Cumulative effect of accounting change........... - 70.0 -
Issuance of common shares for stock option
and for employee benefit plans................ - - (9.4)
Other............................................ (129.2) 8.1 142.6
------- ------- -------

Taxable income for income tax purposes........ $ 179.3 $ 243.2 $ 470.0
======= ======= =======

Based on our projections of future financial reporting income and
assuming that our deferred income tax assets and liabilities reverse to the
extent of future projected financial reporting income, we expect to utilize all
of our net deferred income tax assets of $245.3 million over the next three to
four years.

Liabilities for Contingencies

We are involved on an ongoing basis in lawsuits relating to our
operations, including with respect to sales practices, and we and current and
former officers and directors are defendants in pending class action lawsuits
asserting claims under the securities laws and in derivative lawsuits. The
ultimate outcome of these lawsuits cannot be predicted with certainty. We
recognize an estimated loss from these loss contingencies when we believe it is
probable that a loss has been incurred and the amount of the loss can be
reasonably estimated. However, it is difficult to measure the actual loss that
might be incurred related to litigation. The ultimate outcome of these lawsuits
could have a significant impact on our results of operations and financial
position.

Results of operations for the three years ended December 31, 2001:

The following tables and narratives summarize the results of our
operations.

2001 2000 1999
---- ---- ----
(Dollars in millions)

Contract originations:
Manufactured housing......................................................... $ 2,499.5 $ 4,395.8 $ 6,607.3
Mortgage services............................................................ 3,043.7 4,448.3 6,745.8
Retail credit................................................................ 3,585.8 2,582.1 2,036.0
Consumer finance - closed-end................................................ - 544.6 790.7
Floorplan.................................................................... 2,101.5 3,950.4 5,559.1
Discontinued................................................................. 86.8 969.1 3,370.1
--------- --------- ---------

Total...................................................................... $11,317.3 $16,890.3 $25,109.0
========= ========= =========

Sales of finance receivables:
Manufactured housing......................................................... $ 3.6 $ 600.7 $ 5,598.2
Mortgage services............................................................ 833.8 913.1 3,748.4
Floorplan.................................................................... - - 117.7
Retained bonds............................................................... - - (379.7)
Discontinued lines........................................................... 802.3 1,174.9 574.5
--------- --------- ---------

Total...................................................................... $ 1,639.7 $ 2,688.7 $ 9,659.1
========= ========= =========

Managed receivables (average):
Manufactured housing......................................................... $25,979.1 $25,700.4 $22,899.2
Mortgage services............................................................ 12,555.5 13,254.6 10,237.5
Retail credit................................................................ 2,248.0 1,523.0 937.9
Consumer finance - closed-end................................................ 1,735.2 2,173.1 2,121.6
Floorplan................................................................... 1,181.7 2,070.4 2,098.4
Discontinued lines........................................................... 674.7 2,700.3 3,469.2
--------- --------- ---------

Total...................................................................... $44,374.2 $47,421.8 $41,763.8
========= ========= =========

Revenues:
Net investment income:
Finance receivables and other.............................................. $ 2,260.2 $ 1,945.0 $ 647.1
Interest-only securities................................................... 51.5 106.6 185.1
Gain on sale of finance receivables.......................................... 26.9 7.5 550.6
Fee revenue and other income................................................. 345.0 385.7 372.7
---------- ---------- ---------

Total revenues............................................................. 2,683.6 2,444.8 1,755.5
---------- ---------- ---------

Expenses:
Provision for losses......................................................... 563.6 354.2 128.7
Interest expense............................................................. 1,234.4 1,152.4 341.3
Other operating costs and expenses........................................... 642.4 770.8 697.2
---------- ---------- ---------

Total expenses............................................................. 2,440.4 2,277.4 1,167.2
---------- ---------- ---------

Operating income before impairment charges, special charges, income
taxes and extraordinary charge........................................... 243.2 167.4 588.3

Impairment charges.............................................................. 386.9 515.7 554.3
Special charges................................................................. 21.5 394.3 -
---------- ---------- ---------

Income (loss) before income taxes and extraordinary charge................. $ (165.2) $ (742.6) $ 34.0
========== ========== =========

General: We provide financing for manufactured housing, home equity, home
improvements, consumer products and equipment, and provide consumer and
commercial revolving credit. Finance products include both fixed-term and
revolving loans and leases. The Company also markets physical damage and other
credit protection relating to the loans it services.

After September 8, 1999, we no longer structure our securitizations in a
manner that results in recording a sale of the loans. Instead, new
securitization transactions are being structured to include provisions that
entitle the Company to repurchase assets transferred to the special purpose
entity when the aggregate unpaid principal balance reaches a specified level.
Until these assets are repurchased, however, the assets are the property of the
special purpose entity and are not available to satisfy the claims of creditors
of the Company. In addition, our securitization transactions are structured so
that the Company, as servicer for the loans, is able to exercise significant
discretion in making decisions about the serviced portfolio. Pursuant to
Financial Accounting Standards Board Statement No. 140, "Accounting for the
Transfer and Servicing of Financial Assets and Extinguishments of Liabilities"
("SFAS 140"), such securitization transactions are accounted for as secured
borrowings whereby the loans and securitization debt remain on the balance
sheet, rather than as sales.

The change to the structure of our new securitizations has no effect on
the total profit we recognize over the life of each new loan, but it changes the
timing of profit recognition. Under the portfolio method (the accounting method
required for our securitizations which are structured as secured borrowings), we
recognize: (i) earnings over the life of new loans as interest revenues are
generated; (ii) interest expense on the securities which are sold to investors
in the loan securitization trusts; and (iii) provisions for losses. As a result,
our reported earnings from new loans securitized in transactions accounted for
under the portfolio method are lower in the period in which the loans are
securitized (compared to our historical method) and higher in later periods, as
interest spread is earned on the loans.

During the last two years, Conseco has taken a number of actions with
respect to the Company, including: (i) the sale, closing or runoff of several
business units (including asset-based lending, vendor leasing, bankcards,
transportation and park construction); (ii) monetization of certain on-balance
sheet financial assets through sales or as collateral for additional borrowings;
and (iii) cost savings and restructuring of ongoing businesses such as the
streamlining of loan origination operations in the manufactured housing and home
equity lending divisions. These courses of action and the change to the
portfolio method of accounting have caused significant fluctuations in account
balances as further described below. In early 2002, we announced our decision to
reduce the size of our floorplan lending business.

The risks associated with our business become more acute in any economic
slowdown or recession. Periods of economic slowdown or recession may be
accompanied by decreased demand for consumer credit and declining asset values.
In the home equity mortgage and manufactured housing businesses, any material
decline in real estate values reduces the ability of borrowers to use home
equity to support borrowing and increases the loan-to-value ratios of loans
previously made, thereby weakening collateral coverage and increasing the size
of losses in the event of a default. Delinquencies, foreclosures and losses
generally increase during economic slowdowns or recessions. Proposed changes to
the federal bankruptcy laws applicable to individuals would make it more
difficult for borrowers to seek bankruptcy protection, and the prospect of these
changes may encourage certain borrowers to seek bankruptcy protection before the
law changes become effective, thereby increasing delinquencies. For our finance
customers, loss of employment, increases in cost-of-living or other adverse
economic conditions would impair their ability to meet their payment
obligations. Higher industry inventory levels of repossessed manufactured homes
may affect recovery rates and result in future impairment charges and provision
for losses. In addition, in an economic slowdown or recession, our servicing and
litigation costs increase. Any sustained period of increased delinquencies,
foreclosures, losses or increased costs would adversely affect our financial
condition and results of operations.

Loan originations in 2001 were $11.3 billion, down 33 percent from 2000.
Loan originations in 2000 were $16.9 billion, down 33 percent from 1999. The
primary reason for the decrease was our decision to no longer originate certain
lines of business and to manage our growth consistent with our revised business
plan. This strategy allowed us to enhance net interest margins, to reduce the
amount of cash required for new loan originations, and to transfer cash to the
parent company.

Sales of finance receivables have decreased since 1999 as a result of the
change in the structure of our securitizations. The sales of finance receivables
in 2001 and 2000 are further explained below under "Gain on sale of finance
receivables".

Managed receivables include finance receivables recorded on our
consolidated balance sheet and those managed by us but applicable to holders of
asset-backed securities sold in securitizations structured in a manner that
resulted in gain-on- sale revenue. Average managed receivables decreased to
$44.4 billion in 2001, down 6.4 percent from 2000, and increased to $47.4
billion in 2000, up 14 percent over 1999.

Net investment income on finance receivables and other consists of: (i)
interest earned on finance receivables; and (ii) interest income on short-term
and other investments. Such income increased by 16 percent, to $2,260.2 million,
in 2001 and by 201 percent, to $1,945.0 million, in 2000, consistent with the
increases in average on-balance sheet finance receivables following the
September 8, 1999 change in the manner in which we structure our securitizations
as described above. The weighted average yields earned on finance receivables
and other investments were 12.8 percent, 13.0 percent and 11.1 percent during
2001, 2000 and 1999, respectively. As a result of the change in the structure of
our securitizations, future interest earned on finance receivables should
increase as our average on-balance sheet finance receivables increase.

Net investment income on interest-only securities is the income
recognized on the interest-only securities we retain after we sell finance
receivables. Such income decreased by 52 percent, to $51.5 million, in 2001 and
by 42 percent, to $106.6 million, in 2000. These fluctuations are consistent
with the change in the average balance of interest-only securities. The weighted
average yields earned on interest-only securities were 13.2 percent, 13.4
percent and 14.6 percent during 2001, 2000 and 1999, respectively. As a result
of the change in the structure of our securitizations, our securitizations are
accounted for as secured borrowings and we do not recognize gain-on-sale revenue
or additions to interest-only securities from such transactions. Accordingly,
future investment income accreted on the interest-only security will decrease,
as cash remittances from the prior gain-on-sale securitizations reduce the
interest-only security balances. In addition, the balance of the interest-only
securities was reduced by $533.8 million in 1999, $504.3 million in 2000
(including $70.2 million due to the accounting change described in note 1 to the
accompanying consolidated financial statements) and $264.8 million in 2001 due
to impairment charges. Impairment charges are further explained below.

Gain on sales of finance receivables resulted from various loan sale
transactions in 2001 and 2000. During 2001, we sold $1.6 billion of finance
receivables which included: (i) our $802.3 million vendor services loan
portfolio (which was marked-to-market in the fourth quarter of 2000 and no
additional gain or loss was recognized in 2001); (ii) $568.4 million of
high-loan-to-value mortgage loans; and (iii) $269.0 million of other loans.
These sales resulted in net gains of $26.9 million. The Company entered into a
servicing agreement on the high-loan-to-value mortgage loans sold. Pursuant to
the servicing agreement, the servicing fees payable to the Company are senior to
all other payments of the trust which purchased the loans. The Company also
holds a residual interest in certain other cash flows of the trust. The Company
did not provide any guarantees with respect to the performance of the loans
sold. In 2000, we sold approximately $147.1 million of finance receivables in
whole-loan sales resulting in net gains of $7.5 million. Gain on sales of
finance receivables in 2000 excludes the gain realized on the sale of our
bankcard portfolio which is included in special charges.

During 1999, the Company sold $9.7 billion of finance receivables in
securitizations structured as sales and recognized gains of $550.6 million.
During 2001 and 2000, we recognized no gain on sale related to securitized
transactions.

Fee revenue and other income includes servicing income, commissions
earned on insurance policies written in conjunction with financing transactions
and other income from late fees. Such income decreased by 11 percent, to $345.0
million, in 2001 and increased by 3.5 percent, to $385.7 million, in 2000. The
decrease in 2001 is primarily due to: (i) decreases in commission income as a
result of reduced origination activities; (ii) the termination of sales of
single premium credit life insurance; and (iii) a decrease of $16.7 million
related to fee revenue earned on net assets which were returned to Conseco in
the second quarter of 2000. In addition, as a result of the change in the
structure of our securitizations, we no longer record an asset for servicing
rights at the time of our securitizations, nor do we record servicing fee
revenue; instead, the entire amount of interest income is recorded as investment
income. The amount of servicing income, (which is net of the amortization of
servicing assets and liabilities) was $115.3 million in 2001, $108.2 million in
2000 and $165.3 million in 1999. However, we expect servicing income to decline
in future periods as the managed receivables in these securitizations are paid
down. In 2000, the decrease in servicing income was partially offset by higher
commissions and late fee income.

Provision for losses increased by 59 percent, to $563.6 million, in 2001
and by 175 percent, to $354.2 million, in 2000. These amounts relate to our
on-balance sheet receivables. The increase is principally due to the increase in
loans held on our balance sheet and an increase in delinquencies. In 2001,
on-balance sheet finance receivables increased 9.2 percent to $18.0 billion as
compared to 2000. At December 31, 2001 and 2000, the 60-days-and-over
delinquencies as a percentage of on-balance sheet finance receivables were 2.19
percent and 1.48 percent, respectively. Under the portfolio method, we estimate
an allowance for credit losses based upon our assessment of current and
historical loss experience, loan portfolio trends, the value of collateral,
prevailing economic and business conditions, and other relevant factors.
Increases in our allowance for credit losses are recognized as expense based on
our current assessments of such factors. For loans previously recorded as sales,
the anticipated discounted credit losses over the expected life of the loans
were reflected through a reduction in the gain-on-sale revenue recorded at the
time of securitization.

Our credit losses as a percentage of related loan balances for our
on-balance sheet portfolio have been increasing over the last several quarters
(1.69 percent, 1.96 percent, 2.25 percent, 2.39 percent and 2.50 percent for the
quarters ended December 31, 2000, March 31, 2001, June 30, 2001, September 30,
2001 and December 31, 2001, respectively). We believe such increases reflect:
(i) the natural increase in delinquencies in some of our products as they age
into periods at which we have historically experienced higher delinquencies;
(ii) the increase in retail credit receivables which typically experience higher
credit losses; (iii) economic factors which have resulted in an increase in
defaults; and (iv) a decrease in the recovery rates when repossessed properties
are sold given current industry levels of repossessed assets.

At December 31, 2001, the Company had a total of 24,131 unsold properties
(15,531 of which relate to our off- balance sheet securitizations) in
repossession or foreclosure, compared to 20,110 properties at December 31, 2000.
We reduce the value of repossessed property to our estimate of net realizable
value upon foreclosure. With respect to our managed manufactured housing
portfolio, we liquidated 25,750 units at an average loss severity rate (the
ratio of the loss realized, to the principal balance of the foreclosed loan) of
57 percent in 2001 compared to 23,861 units at an average loss severity rate of
54 percent in 2000. The loss severity rate related to our on-balance sheet
manufactured housing portfolio was 49 percent in 2001, compared to 48 percent in
2000. We believe the higher average severity rate in 2001 related to our
on-balance sheet manufactured housing portfolio is consistent with the aging of
such portfolio. The higher industry levels of repossessed manufactured homes
which we believe exist in the marketplace at December 31, 2001, may adversely
affect recovery rates, specifically wholesale severity, as other lenders
(including lenders who have exited the manufactured home lending business) have
acted to more quickly dispose of repossessed manufactured housing inventory.
Additionally, the higher levels of repossessed inventory that currently exists
in the marketplace may make it more difficult for us to liquidate our inventory
at or near historical recovery rates. In order to maintain recovery levels, we
may decide to hold inventory longer potentially causing our repossessed
inventory level to temporarily grow. We believe that our severity rates are
positively impacted by our use of retail channels to dispose of repossessed
inventory (where the repossessed units are sold through: (i) Company-owned sales
lots; or (ii) our dealer network). We currently liquidate approximately 70
percent of our repossessed units through the retail channel; thus, we rely less
on the wholesale channel (through which recovery rates are typically lower). We
intend to continue to focus on the retail channel in an effort to maximize our
recovery rates.

The Company believes that its historical loss experience has been
favorably affected by various loss mitigation policies. Under one such policy,
the Company works with the defaulting obligor and its dealer network to find a
new buyer who meets our underwriting standards and is willing to assume the
defaulting obligor's loan. Under other loss mitigation policies, the Company may
permit qualifying obligors (obligors who are currently unable to meet the
obligations under their loans, but are expected to be able to meet them in the
future under modified terms) to defer scheduled payments or the Company may
reduce the interest rate on the loan, in an effort to avoid loan defaults.

Due to the prevailing economic conditions in 2001, the Company increased
the use of the aforementioned mitigation policies. Based on past experience, we
believe these policies will reduce the ultimate losses we recognize. If we apply
loss mitigation policies, we generally reflect the customer's delinquency status
as not being past due. Accordingly, the loss mitigation policies favorably
impact our delinquency ratios. We attempt to appropriately reserve for the
effects of these loss mitigation policies when establishing loan loss reserves.
These policies are also considered when we determine the value of our retained
interests in securitization trusts (including interest-only securities). Loss
mitigation policies were applied to 8.8 percent of average managed accounts in
2001 compared to 7.0 percent in 2000. Such loss mitigation policies were applied
to 1.3 percent, 1.5 percent, 2.9 percent and 3.1 percent of average managed
accounts during the first, second, third and fourth quarters of 2001,
respectively.

Interest expense increased by 7.1 percent, to $1,234.4 million, in 2001
and by 238 percent, to $1,152.4 million, in 2000. Such fluctuations were the net
result of: (i) increased borrowings to fund the increased finance receivables;
and (ii) different average borrowing rates. Our average borrowing rate was 7.0
percent, 7.7 percent and 5.8 percent during 2001, 2000 and 1999, respectively.
The decrease in average borrowing rates in 2001 as compared to 2000 is primarily
due to the decrease in the general interest rate environment between periods.

Under the portfolio method, we recognize interest expense on the
securities issued to investors in the securitization trusts. These securities
typically have higher interest rates than our other debt. However, the decrease
in the average borrowing rate in 2001 was favorably impacted by the decrease in
the general interest rate environment. The average borrowing rate during 1999
was favorably impacted by the use of relatively lower rate borrowings from the
parent company to fund finance receivables. (Given the liquidity needs of our
parent, its inability to access lower interest rate borrowings, and bank loan
restrictions, our parent was unable to loan additional amounts to us during most
of 2000 and 2001).

Other operating costs and expenses include the costs associated with
servicing our managed receivables, and non- deferrable costs related to
originating new loans. Such expense decreased by 17 percent, to $642.4 million,
in 2001 and
12

increased by 11.0 percent, to $770.8 million, in 2000. In 2001, we began to
realize the cost savings from the previously announced restructuring of the
Company. In 2000, such costs increased consistent with the prior business plans
for the Company, partially offset by cost savings from our restructuring
activities. Other operating costs and expenses decreased $62.5 million to $345.5
million in the second half of 2000, as compared to the first half of 2000.

Impairment charges represent reductions in the value of our retained
interests in securitization trusts (including interest-only securities and
servicing rights) recognized as a loss in the statement of operations. We carry
interest-only securities at estimated fair value, which is determined by
discounting the projected cash flows over the expected life of the receivables
sold using current prepayment, default, loss and interest rate assumptions. We
consider any potential payments related to the guarantees of certain lower rated
securities issued by the securitization trusts in the projected cash flows used
to determine the value of our interest-only securities. When declines in value
considered to be other than temporary occur, we reduce the amortized cost to
estimated fair value and recognize a loss in the statement of operations. The
assumptions used to determine new values are based on our internal evaluations
and consultation with external advisors having significant experience in valuing
these securities. Under current accounting rules (pursuant to EITF 99-20) which
we adopted effective July 1, 2000, declines in the value of our interest-only
securities are recognized when: (i) the fair value of the security is less than
its carrying value; and (ii) the timing and/or amount of cash expected to be
received from the security has changed adversely from the previous valuation
which determined the carrying value of the security. When both occur, the
security is written down to fair value.

We recognized an impairment charge of $264.8 million in 2001. During
2001, our interest-only securities did not perform as well as anticipated. In
addition, our expectations regarding future economic conditions changed.
Accordingly, we increased our default and severity assumptions related to the
performance of the underlying loans to be consistent with our expectations. We
also recognized a $122.1 million increase in the valuation allowance related to
our servicing rights as a result of the changes in assumptions. Such assumptions
reflect that the service fees are subordinate to other cash flows in certain of
our securitization transactions. We carry our servicing rights at the lower of
carrying value or estimated fair value.

During 2000, actual default and loss trends were worse than our previous
estimates. In light of these trends, management analyzed the assumptions used to
determine the estimated fair value of the interest-only securities and made
changes to the credit loss assumptions and the discount rate used to determine
the value of our securities. These changes also reflected other economic factors
and further methodology enhancements made by the Company. As a result, the
expected future cash flows from interest-only securities changed adversely from
previous estimates. Pursuant to the requirements of EITF 99-20, the effect of
these changes was reflected immediately in earnings as an impairment charge. The
effect of the impairment charge and adjustments to the value of our
interest-only securities and servicing rights totaled $515.7 million ($324.9
million after the income tax benefit) for 2000 (in addition to the cumulative
effect of adopting EITF 99-20 of $70.2 million, or $45.5 million after the
income tax benefit).

In addition, during 1999 and early 2000, the Company reevaluated its
interest-only securities and servicing rights, including the underlying
assumptions, in light of loss experience exceeding previous expectations. The
principal change in the revised assumptions resulting from this process was an
increase in expected future credit losses, relating primarily to reduced
assumptions as to future housing price inflation, recent loss experience and
refinements to the methodology of the valuation process. The effect of this
change was offset somewhat by a revision to the estimation methodology to
incorporate the value associated with the cleanup call rights held by the
Company in securitizations. We recognized a $554.3 million impairment charge
($349.2 million after tax) in 1999 to reduce the book value of the interest-only
securities and servicing rights.

Special charges for 2001 include: (i) the loss related to the sale of
certain finance receivables of $11.2 million; (ii) severance benefits,
litigation reserves and other restructuring charges of $12.8 million; (iii) a
$7.5 million charge related to the decision to discontinue the sale of certain
types of life insurance in conjunction with lending transactions; and (iv) a
$10.0 million benefit due to the reduction in the value of the warrant held by
Lehman Brothers, Inc. and its affiliates (collectively "Lehman") to purchase
five percent of the Company, which was caused by a decrease in the value of the
Company. Special charges recorded in 2000 include: (i) the $103.3 million
reduction in the value of finance receivables identified for sale; (ii) the
$53.0 million loss on the sale of asset-based loans; (iii) $29.5 million of
costs related to closing offices and streamlining businesses; (iv) $35.8 million
related to the abandonment of computer processing systems; (v) $30.3 million of
fees paid to Lehman including a $25.0 million fee paid in conjunction with the
sale of $1.3 billion of finance receivables to Lehman; (vi) the issuance of a
warrant valued at $48.1 million related to the modification of the Lehman master
repurchase financing facilities; (vii) the $51.0 million loss on sale of
transportation loans and vendor services financing business; (viii) a $48.0
million increase in the allowance for loan losses at our bank subsidiary; and
(ix)

$4.7 million of net gains related to the sale of certain lines of business, net
of other items. These charges are described in greater detail in the note to the
accompanying financial statements entitled "Special Charges".

ITEM 8. CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

Index to Consolidated Financial Statements

Page

Report of Independent Accountants......................................................................................16

Consolidated Balance Sheet at December 31, 2001 and 2000...............................................................17

Consolidated Statement of Operations for the years ended
December 31, 2001, 2000 and 1999...................................................................................18

Consolidated Statement of Shareholder's Equity
for the years ended December 31, 2001, 2000 and 1999...............................................................19

Consolidated Statement of Cash Flows for the years ended
December 31, 2001, 2000 and 1999...................................................................................21

Notes to Consolidated Financial Statements.............................................................................22

REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors
and Shareholder of
Conseco Finance Corp.

In our opinion, the accompanying consolidated balance sheet and the
related consolidated statements of operations, shareholder's equity and cash
flows present fairly, in all material respects, the financial position of
Conseco Finance Corp. (formerly Green Tree Financial Corporation prior to its
name change in November 1999) and subsidiaries at December 31, 2001 and 2000,
and the results of their operations and their cash flows for each of the three
years in the period ended December 31, 2001, in conformity with accounting
principles generally accepted in the United States of America. 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 of America, 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 our opinion.

As discussed in note 1 to the consolidated financial statements, the
Company adopted EITF Issue No. 99-20, "Recognition of Interest Income and
Impairment on Purchased and Retained Beneficial Interests in Securitized
Financial Assets" in 2000.

/s/ PricewaterhouseCoopers LLP
----------------------------------
PricewaterhouseCoopers LLP

Minneapolis, Minnesota
March 29, 2002

CONSECO FINANCE CORP. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEET
December 31, 2001 and 2000
(Dollars in millions)

ASSETS

2001 2000
---- ----

Retained interests in securitization trusts:
Actively managed fixed maturities at fair value (amortized cost: 2001 - $704.9;
2000 - $716.8)................................................................... $ 528.5 $ 494.6
Interest-only securities at fair value (amortized cost: 2001 - $131.3; 2000 - $431.2) 141.7 432.9
--------- ---------

Total retained interests in securitization trusts................................ 670.2 927.5
--------- ---------

Cash and cash equivalents............................................................... 394.5 665.5
Cash held in segregated accounts for investors in securitizations....................... 550.2 551.3
Cash held in segregated accounts related to servicing agreements and
securitization transactions......................................................... 994.6 866.7
Finance receivables..................................................................... 3,810.7 3,865.0
Finance receivables - securitized....................................................... 14,198.5 12,622.8
Receivables due from Conseco, Inc....................................................... 358.0 349.9
Income tax assets....................................................................... 267.2 208.6
Goodwill................................................................................ - 28.8
Other assets............................................................................ 984.1 751.9
--------- ---------

Total assets.................................................................. $22,228.0 $20,838.0
========= =========

LIABILITIES AND SHAREHOLDER'S EQUITY

Liabilities:
Investor payables.................................................................... $ 550.2 $ 551.3
Liabilities related to certificates of deposit....................................... 1,790.3 1,873.3
Other liabilities.................................................................... 566.3 583.7
Preferred stock dividends payable to Conseco, Inc.................................... 86.1 18.6
Notes payable:
Related to securitized finance receivables structured as collateralized borrowings. 14,484.5 12,100.6
Master repurchase agreements....................................................... 1,691.8 1,802.4
Credit facility collateralized by retained interests in securitizations............ 507.3 590.0
Due to Conseco, Inc................................................................ 249.5 786.7
Other borrowings................................................................... 352.5 442.2
--------- ---------

Total liabilities............................................................. 20,278.5 18,748.8
--------- ---------

Shareholder's equity:
Preferred stock...................................................................... 750.0 750.0
Common stock and additional paid-in capital.......................................... 1,209.4 1,209.4
Accumulated other comprehensive loss (net of applicable deferred income tax
benefit: 2001 - $63.8; 2000 - $81.6)............................................... (108.6) (139.1)
Retained earnings.................................................................... 98.7 268.9
--------- ---------

Total shareholder's equity.................................................... 1,949.5 2,089.2
--------- ---------

Total liabilities and shareholder's equity.................................... $22,228.0 $20,838.0
========= =========

The accompanying notes are an integral part
of the consolidated financial statements.

CONSECO FINANCE CORP. AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF OPERATIONS
for the years ended December 31, 2001, 2000 and 1999
(Dollars in millions)

2001 2000 1999
---- ---- ----

Revenues:
Net investment income:
Finance receivables and other..................................... $ 2,260.2 $1,945.0 $ 647.1
Interest-only securities.......................................... 51.5 106.6 185.1
Gain on sale:
Securitization transactions....................................... - - 550.6
Whole-loan sales.................................................. 26.9 7.5 -
Servicing income.................................................... 115.3 108.2 165.3
Fee revenue and other income........................................ 229.7 277.5 207.4
--------- -------- ---------

Total revenues.................................................. 2,683.6 2,444.8 1,755.5
--------- -------- ---------

Expenses:
Provision for losses................................................ 563.6 354.2 128.7
Interest expense.................................................... 1,234.4 1,152.4 341.3
Other operating costs and expenses.................................. 642.4 770.8 697.2
Impairment charges.................................................. 386.9 515.7 554.3
Special charges..................................................... 21.5 394.3 -
--------- -------- ---------

Total expenses.................................................... 2,848.8 3,187.4 1,721.5
--------- -------- ---------

Income (loss) before income taxes, cumulative effect of
accounting change and extraordinary gain (loss) on
extinguishment of debt.......................................... (165.2) (742.6) 34.0

Income tax benefit..................................................... (56.4) (262.8) (16.4)
--------- -------- ---------

Income (loss) before cumulative effect of accounting change
and extraordinary gain (loss) on extinguishment of debt ........ (108.8) (479.8) 50.4

Extraordinary gain (loss) on extinguishment of debt, net of income
taxes........................................................... 6.1 - (2.5)
Cumulative effect of accounting change, net of income taxes............ - (45.5) -
--------- -------- ---------

Net income (loss)................................................. (102.7) (525.3) 47.9

Preferred stock dividends.............................................. 67.5 18.6 -
-------- -------- ---------

Net income (loss) applicable to common stock...................... $ (170.2) $ (543.9) $ 47.9
========= ======== =========

The accompanying notes are an integral part
of the consolidated financial statements.

CONSECO FINANCE CORP. AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF SHAREHOLDER'S EQUITY, continued
for the years ended December 31, 2001, 2000 and 1999
(Dollars in millions)

Common stock Accumulated other
Preferred and additional comprehensive Retained
Total stock paid-in capital income (loss) earnings
----- ----- --------------- ------------- --------

Balance, January 1, 1999......................... $2,292.2 $ - $1,338.3 $ (11.0) $964.9

Comprehensive income (loss), net of tax:
Net income.................................... 47.9 - - - 47.9
Change in minimum pension liability
adjustment (net of applicable income
tax expense of $2.6 million)................ 4.2 - - 4.2 -
Change in unrealized depreciation of
actively managed fixed maturity
investments and interest-only securities
(net of applicable income tax benefit
of $7.6).................................... (12.0) - - (12.0) -
--------

Total comprehensive income.............. 40.1 -

Issuance of common stock...................... 299.4 - 299.4 - -
Tax benefit related to issuance of shares
under stock option plans.................... 3.3 - 3.3 -
Dividends on common stock..................... (200.0) - - - (200.0)
-------- ------ -------- ------- ------

Balance, December 31, 1999....................... 2,435.0 - 1,641.0 (18.8) 812.8

Comprehensive loss, net of tax:
Net loss.................................... (525.3) - - - (525.3)
Change in unrealized depreciation of
actively managed fixed maturity
investments and interest-only securities
(net of applicable income tax expense of
$70.6 million)............................ (120.3) - - (120.3) -
--------

Total comprehensive loss................ (645.6) -

Issuance of preferred stock................... 750.0 750.0 - - -
Repurchase of shares of common stock.......... (126.0) - (126.0) - -
Return of capital............................. (306.3) - (306.3) - -
Dividends on preferred stock.................. (18.6) - - - (18.6)
Other......................................... .7 - .7 - -
-------- ------ -------- ------- ------

Balance, December 31, 2000....................... $2,089.2 $750.0 $1,209.4 $(139.1) $268.9

(continued on following page)

The accompanying notes are an integral part
of the consolidated financial statements.

CONSECO FINANCE CORP. AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF SHAREHOLDER'S EQUITY
for the years ended December 31, 2001, 2000 and 1999
(Dollars in millions)

Common stock Accumulated other
Preferred and additional comprehensive Retained
Total Stock paid-in capital income (loss) earnings
----- ----- --------------- ------------- --------

Balance, December 31, 2000 (carried forward
from prior page).............................. $2,089.2 $750.0 $1,209.4 $(139.1) $268.9

Comprehensive income (loss), net of tax:
Net loss...................................... (102.7) - - - (102.7)
Change in minimum pension liability
adjustment (net of applicable income
tax benefit of $2.3 million)................ (3.9) - - (3.9) -
Change in unrealized depreciation
of actively managed fixed maturity
investments and interest-only
securities (net of applicable income tax
expense of $21.7)........................... 34.4 - - 34.4 -
--------

Total comprehensive loss................ (72.2) -

Dividends on preferred stock.................. (67.5) - - - (67.5)
-------- ------ -------- ------- ------

Balance, December 31, 2001....................... $1,949.5 $750.0 $1,209.4 $(108.6) $ 98.7
======== ====== ======== ======= ======

The accompanying notes are an integral part
of the consolidated financial statements.

CONSECO FINANCE CORP. AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF CASH FLOWS
for the years ended December 31, 2001, 2000 and 1999
(Dollars in millions)

2001 2000 1999
---- ---- ----

Cash flows from operating activities:
Net investment income............................................................... $ 2,141.2 $ 1,994.6 $ 1,009.0
Points and origination fees......................................................... - - 390.0
Fee revenue and other income........................................................ 301.4 401.3 383.1
Interest expense.................................................................... (1,212.3) (1,038.7) (293.5)
Special charges..................................................................... (3.1) (44.8) (20.9)
Other operating costs............................................................... (686.6) (757.0) (655.7)
Taxes............................................................................... (23.9) (72.8) (188.0)
--------- --------- ---------

Net cash provided by operating activities......................................... 516.7 482.6 624.0
--------- --------- ---------

Cash flows from investing activities:
Cash received from the sale of finance receivables, net of expenses................. 867.2 2,501.2 9,516.6
Principal payments received on finance receivables.................................. 8,611.3 8,490.1 7,487.2
Finance receivables originated...................................................... (12,320.3) (18,515.9) (24,650.5)
Sale of vendor services financing business.......................................... 407.2 - -
Other............................................................................... (111.3) (262.3) (120.0)
--------- --------- ---------

Net cash used by investing activities ............................................ (2,545.9) (7,786.9) (7,766.7)
--------- --------- ---------

Cash flows from financing activities:
Cash contributed by parent resulting from asset transfer............................ - - 18.2
Issuance of liabilities related to deposit products................................. 1,872.4 2,168.8 1,128.8
Payments on liabilities related to deposit products................................. (1,961.1) (1,166.0) (288.3)
Issuance of notes payable and commercial paper...................................... 11,755.6 20,452.1 22,220.3
Payments on notes payable and commercial paper...................................... (9,666.9) (13,202.8) (15,321.3)
Change in cash held in restricted accounts for settlement of collateralized
borrowings........................................................................ (241.8) (689.7) (76.8)
Repurchase of shares of common stock................................................ - (126.0) -
Common stock dividends paid ........................................................ - - (200.0)
--------- --------- ---------

Net cash provided by financing activities......................................... 1,758.2 7,436.4 7,480.9
--------- --------- ---------

Net increase (decrease) in cash and cash equivalents.............................. (271.0) 132.1 338.2

Cash and cash equivalents, beginning of year........................................... 665.5 533.4 195.2
--------- --------- ---------

Cash and cash equivalents, end of year................................................. $ 394.5 $ 665.5 $ 533.4
========= ========= =========

The accompanying notes are an integral part
of the consolidated financial statements.

CONSECO FINANCE CORP. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
--------------------------

1. DESCRIPTION OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES:

Description of Business

Conseco Finance Corp. ("we", "Conseco Finance", or the "Company",
formerly Green Tree Financial Corporation prior to its name change in November
1999) is a financial services holding company that originates, securitizes and
services manufactured housing, home equity, home improvement, retail credit and
floorplan loans (references to loans made by the Company include both cash
advances and purchases of obligations). Conseco Finance is a wholly owned
subsidiary of Conseco, Inc. ("Conseco"), a financial services holding company.

During the last two years, Conseco has taken a number of actions with
respect to the Company, including: (i) the sale, closing or runoff of several
business units (including asset-based lending, vendor leasing, bankcards,
transportation and park construction); (ii) monetization of certain on-balance
sheet financial assets through sales or as collateral for additional borrowings;
and (iii) cost savings and restructuring of ongoing businesses such as the
streamlining of loan origination operations in the manufactured housing and home
equity lending divisions. These actions had a significant effect on the
Company's operating results during 2001 and 2000. In early 2002, we announced
our decision to reduce the size of our floorplan lending business.

Basis of Presentation

The following summary explains the significant accounting policies we use
to prepare 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
("FASB"), the American Institute of Certified Public Accountants and the
Securities and Exchange Commission.

Our consolidated financial statements exclude the results of material
transactions between us and our consolidated affiliates, or among our
consolidated affiliates. We reclassified certain amounts in our 2000 and 1999
consolidated financial statements and notes to conform with the 2001
presentation. These reclassifications have no effect on net income (loss) or
shareholder's equity.

Retained Interests in Securitization Trusts

Retained interests in securitization trusts represent the right to
receive certain future cash flows from securitization transactions structured
prior to our September 8, 1999 announcement (see "Revenue Recognition for Sales
of Finance Receivables and Amortization of Servicing Rights" below). Such cash
flows generally are equal to the value of the principal and interest to be
collected on the underlying financial contracts of each securitization in excess
of the sum of the principal and interest to be paid on the securities sold and
contractual servicing fees. These interests include interests represented by:
(i) actively managed fixed maturities of $528.5 million; and (ii) interest-only
securities of $141.7 million. We carry these retained interests at estimated
fair value. We determine fair value by discounting the projected cash flows over
the expected life of the receivables sold using current prepayment, default,
loss and interest rate assumptions. We determine the appropriate discount rate
to value these securities based on our estimates of current market rates of
interest for securities with similar yield, credit quality and maturity
characteristics. The discount rate was 16 percent at December 31, 2001. We
record any unrealized gain or loss determined to be temporary, net of tax, as a
component of shareholder's equity. With the adoption of EITF Issue No. 99- 20,
"Recognition of Interest Income and Impairment on Purchased and Retained
Beneficial Interests in Securitized Financial Assets" ("EITF 99-20") on July 1,
2000, declines in value are considered to be other than temporary when: (i) the
fair value of the security is less than its carrying value; and (ii) the timing
and/or amount of cash expected to be received from the security has changed
adversely from the previous valuation which determined the carrying value of the
security. When declines in value considered to be other than temporary occur, we
reduce the amortized cost to estimated fair value and recognize a loss in the
statement of operations. The assumptions used to determine new values are based
on our internal evaluations and consultation with external advisors having
significant experience in valuing these securities. See note 3 for additional
discussion of gain on sale of receivables and interest-only securities.

CONSECO FINANCE CORP. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
--------------------------

Cash and cash equivalents

Cash and cash equivalents include commercial paper, invested cash and
other investments purchased with original maturities of less than three months.
We carry them at amortized cost, which approximates their estimated fair value.

Finance Receivables

Finance receivables include manufactured housing, home equity, home
improvement, retail credit and floorplan loans. We carry finance receivables at
amortized cost, net of an allowance for credit losses.

We defer fees received and costs incurred when we originate finance
receivables. We amortize deferred fees, costs, discounts and premiums over the
estimated lives of the receivables. We include such deferred fees or costs in
the amortized cost of finance receivables.

We generally stop accruing investment income on finance receivables after
three consecutive months of contractual delinquency.

Finance receivables transferred to securitization trusts in transactions
structured as securitized borrowings are classified as finance receivables -
securitized. These receivables are held as collateral for the notes issued to
investors in the securitization trusts. Finance receivables held by us that have
not been securitized are classified as finance receivables.

Provision for Losses

The provision for credit losses charged to expense is based upon an
assessment of current and historical loss experience, loan portfolio trends,
prevailing economic and business conditions, and other relevant factors. In
management's opinion, the provision is sufficient to maintain the allowance for
credit losses at a level that adequately provides for losses inherent in the
portfolio.

We reduce the carrying value of finance receivables to net realizable
value at the earlier of: (i) six months of contractual delinquency; or (ii) when
we take possession of the property securing the finance receivable.

Goodwill

Goodwill is the excess of the amount we paid to acquire a company over
the fair value of its net assets. We amortized goodwill on the straight-line
basis generally over a 20-year period. The total accumulated amortization of
goodwill was $12.0 million at December 31, 2000. The goodwill balance at
December 31, 2000, of $28.8 million was a portion of the net assets of our
vendor services financing business which was sold in the first quarter of 2001.
The Company has no remaining goodwill as of December 31, 2001. See "Recently
Issued Accounting Standards" below for a discussion of new accounting standards
applicable to goodwill which are effective beginning on January 1, 2002.

Liabilities Related to Certificates of Deposit

These liabilities relate to the certificates of deposits issued by our
bank subsidiaries. The liability and interest expense account are also increased
for the interest which accrues on the deposits. At December 31, 2001 and 2000,
the weighted average interest crediting rate on these deposits was 4.7 percent
and 6.9 percent, 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 and net operating loss carryforwards. 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, a valuation allowance will be
established.

CONSECO FINANCE CORP. AND SUBSIDIARIES
Notes to Consolidated 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 actively managed fixed maturities
interest-only securities, servicing rights, goodwill, liabilities for deposit
products, liabilities related to litigation, liabilities related to guarantees
of securitized debt issued in conjunction with certain sales of finance
receivables, gain on sale of finance receivables, allowance for credit losses on
finance receivables and the reliance on generating adequate future taxable
income to support deferred income tax assets. If our future experience differs
materially from these estimates and assumptions, our financial statements would
be affected.

Revenue Recognition for Sales of Finance Receivables and Amortization of
Servicing Rights

Subsequent to September 8, 1999, we are using the portfolio method (the
accounting method required for securitizations which are now structured as
secured borrowings) to account for securitization transactions. Our
securitizations are now structured in a manner that requires them to be
accounted for under the portfolio method, whereby the loans and securitization
debt remain on our balance sheet pursuant to Financial Accounting Standards
Board Statement No. 140, "Accounting for the Transfer and Servicing of Financial
Assets and Extinguishments of Liabilities" ("SFAS 140").

For securitizations structured prior to September 8, 1999, we accounted
for the transfer of finance receivables as sales. In applying generally accepted
accounting principles to our securitized sales, we recognized a gain,
representing the difference between the proceeds from the sale (net of related
sale costs) and the carrying value of the component of the finance receivable
sold. We determined such carrying value by allocating the carrying value of the
finance receivables between the portion we sold and the interests we retained
(generally interest-only securities, servicing rights and, in some instances,
other securities), based on each portion's relative fair values on the date of
the sale.

During 1999, the Company sold $9.7 billion of finance receivables in
securitizations structured as sales and recognized gains of $550.6 million. The
gains recognized were dependent in part on the previous carrying value of the
finance receivables included in the securitization transactions, allocated
between the assets sold and our retained interests based on their relative fair
value at the date of transfer. To obtain fair values, quoted market prices were
used if available. However, quotes were generally not available for retained
interests, so we estimated the fair values based on the present value of future
expected cash flows using our estimates of the key assumptions - credit losses,
prepayment speeds, forward yield curves, and discount rates commensurate with
the risks involved.

We amortize the servicing rights we retain after the sale of finance
receivables, in proportion to, and over the estimated period of, net servicing
income.

We evaluate servicing rights for impairment on an ongoing basis,
stratified by product type and securitization period. To the extent that the
recorded amount exceeds the fair value for any strata, we establish a valuation
allowance through a charge to earnings. If we determine, upon subsequent
measurement of the fair value of these servicing rights, that the fair value
equals or exceeds the amortized cost, any previously recorded valuation
allowance would be deemed unnecessary and restored to earnings.

Fair Values of Financial Instruments

We use the following methods and assumptions to determine the estimated
fair values of financial instruments:

Retained interests in securitization trusts. Such retained interests
include actively managed fixed maturities and interest-only securities.
The actively managed fixed maturities are valued by discounting the
expected future cash flows using a current market rate appropriate for
the yield, credit quality, and the maturity of the investment being
priced. The interest-only securities are valued by discounting the
future expected cash flows over the expected life of the receivables sold
using current estimates of future prepayment, default, loss severity and
interest rates. We consider any potential payments related to the
guarantees of certain lower rated securities issued by the securitization
trusts in the projected cash flows used to determine the value of our
interest-only securities.

Cash and cash equivalents. The carrying amount for these instruments
approximates their estimated fair value.

CONSECO FINANCE CORP. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
--------------------------

Finance receivables. The estimated fair value of finance receivables,
including those that have been securitized, is determined based on
general market transactions which establish values for similar loans.

Liabilities related to certificates of deposit. We estimate the fair
value of these liabilities using discounted cash flow analyses based on
current crediting rates. Since crediting rates are generally not
guaranteed beyond one year, market value approximates carrying value.

Notes payable. For publicly traded debt, we use current market values.
For other notes, we use discounted cash flow analyses based on our
current incremental borrowing rates for similar types of borrowing
arrangements.

Here are the estimated fair values of our financial instruments:

2001 2000
------------------------ ------------------------
Carrying Fair Carrying Fair
Amount Value Amount Value
------ ----- ------ -----
(Dollars in millions)

Financial assets:
Retained assets in securitization trusts:
Actively managed fixed maturities.......................... $ 528.5 $ 528.5 $ 494.6 $ 494.6
Interest-only securities................................... 141.7 141.7 432.9 432.9
--------- --------- --------- ----------

Total retained interests in securitization trusts........ $ 670.2 $ 670.2 $ 927.5 $ 927.5
========= ========= ========= ==========

Cash and cash equivalents.................................... $ 394.5 $ 394.5 $ 665.5 $ 665.5
Finance receivables (including finance
receivables - securitized)................................. 18,009.2 18,376.7 16,487.8 17,108.7

Financial liabilities:
Liabilities related to certificates of deposit............... 1,790.3 1,790.3 1,873.3 1,873.3
Notes payable:
Notes payable.............................................. 2,551.6 2,475.2 2,834.6 2,755.6
Notes payable due to Conseco............................... 249.5 249.5 786.7 786.7
Related to securitized finance receivables structured
as collateralized borrowings............................. 14,484.5 14,774.3 12,100.6 12,323.8

Cumulative Effect of Accounting Change

During the third quarter of 2000, the Emerging Issues Task Force of the
Financial Accounting Standards Board issued EITF 99-20, a new accounting
requirement for the recognition of impairment on interest-only securities and
other retained beneficial interests in securitized financial assets.

Under the prior accounting rule, declines in the value of our
interest-only securities and other retained beneficial interests in securitized
financial assets were recognized in the statement of operations when the present
value of estimated cash flows discounted at a risk-free rate using current
assumptions was less than the carrying value of the interest-only security.

Under the new accounting rule, declines in value are recognized when: (i)
the fair value of the retained beneficial interests are less than their carrying
value; and (ii) the timing and/or amount of cash expected to be received from
the retained beneficial interests have changed adversely from the previous
valuation which determined the carrying value of the retained beneficial
interests. When both occur, the retained beneficial interests are written down
to fair value.

We adopted the new accounting rule on July 1, 2000. The cumulative effect
of the accounting change for periods prior to July 1, 2000 was a charge to the
statement of operations of $45.5 million (net of an income tax benefit of $24.7
million) related to interest-only securities.

CONSECO FINANCE CORP. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
--------------------------

Impairment Charge

During 2001 and 2000, our interest-only securities did not perform as
well as anticipated. In addition, our expectations regarding future economic
conditions changed. Accordingly, we changed various underlying assumptions
(including default, severity, credit loss and discount rate assumptions) related
to the future performance of the underlying loans to be consistent with our
expectations. As a result, the expected future cash flows (including any
potential payments related to the guarantees of certain lower rated securities
issued by the securitization trusts) from interest-only securities changed
adversely from previous estimates. Pursuant to the requirements of EITF 99-20
(described above under "Cumulative Effect of Accounting Change"), the effect of
these changes was reflected immediately in earnings as an impairment charge. In
2001, we recognized an impairment charge of $264.8 million ($171.3 million after
the income tax benefit) related to our interest-only securities. We also
recognized a $122.1 million ($79.1 million after the income tax benefit)
increase in the valuation allowance related to our servicing rights as a result
of the changes in assumptions in 2001. In 2000, the effect of the impairment
charge and adjustments to the value of our interest-only securities and
servicing rights totaled $515.7 million ($324.9 million after the income tax
benefit) in addition to the cumulative effect of adopting EITF 99-20 of $70.2
million ($45.5 million after the income tax benefit).

Recently Issued Accounting Standards

The Financial Accounting Standards Board ("FASB") issued Statement of
Financial Accounting Standards No. 144, "Accounting for the Impairment of
Long-Lived Assets" ("SFAS 144") in August 2001. This standard addresses the
measurement and reporting for impairment of all long-lived assets. It also
broadens the definition of what may be presented as a discontinued operation in
the consolidated statement of operations to include components of a company's
business segments. SFAS 144 requires that long-lived assets currently in use be
written down to fair value when considered impaired. Long-lived assets to be
disposed of are written down to the lower of cost or fair value less the
estimated cost to sell. The Company is required to implement this standard
beginning January 1, 2002. We do not expect that the adoption of this standard
will have a material effect on our financial position or results of operations.

The FASB issued Statement of Financial Accounting Standards No. 141,
"Business Combinations", and No. 142, "Goodwill and Other Intangible Assets" in
June 2001. Under the new rules, intangible assets with an indefinite life will
no longer be amortized in periods subsequent to December 31, 2001, but will be
subject to annual impairment tests (or more frequent under certain
circumstances), effective January 1, 2002. As we currently have no goodwill, the
new rules should not have a material impact on the earnings and financial
position of the Company.

SFAS 141 requires that all business combinations initiated after June 30,
2001 be accounted for using the purchase method, and prospectively prohibits the
use of the pooling-of-interests method. Conseco accounted for its 1998
acquisition of Green Tree Financial Corporation (subsequently renamed "Conseco
Finance") using the pooling-of-interests method. The new rules do not permit us
to change the method of accounting for previous acquisitions accounted for using
the pooling-of-interests method.

The FASB issued SFAS 140, which is a replacement for Statement of
Financial Accounting Standards No. 125, "Accounting for Transfers and Servicing
of Financial Assets and Extinguishments of Liabilities"; and a related
implementation guide in September 2000. SFAS 140 and the implementation guide
have changed the criteria that must be met for securitization transactions to be
recorded under the portfolio method. We did not need to make any significant
changes to our securitization structures to meet the new criteria which are
effective for securitization transactions completed after March 31, 2001. We
first adopted the SFAS 140 requirement for additional disclosures on
securitization in our December 31, 2000, consolidated financial statements.

CONSECO FINANCE CORP. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
--------------------------

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" and Statement of Financial Accounting Standards
No. 138, "Accounting for Certain Derivative Instruments and Certain Hedging
Activities" ("SFAS 138") 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 (loss), depending on whether a derivative is
designated as part of a hedge transaction and, if it is, on the type of hedge
transaction. We adopted SFAS 133 on January 1, 2001. The initial adoption of the
new standard did not have a material impact on the Company's financial position
or results of operations and there was no cumulative effect of an accounting
change related to its adoption.

Warrant for Five Percent of the Common Stock of Conseco Finance

As partial consideration for a financing transaction, we issued a warrant
which permits the holder to purchase 5 percent of the Company at a nominal
price. The holder of the warrant or the Company may cause the warrant and any
stock issued upon its exercise to be purchased for cash at an appraised value in
May 2003. Additionally, until May 2003, the holder has the right (subject to
certain terms and conditions) to convert the warrant into preferred stock of
Conseco (see note 10). Since the warrant permits cash settlement at fair value
at the option of the holder of the warrant, it has been included in other
liabilities and is measured at fair value, with changes in its value reported in
earnings. The estimated fair value of the warrant at December 31, 2001 was $38.1
million. The estimated value was determined based on discounted cash flow and
market multiple valuation techniques. During 2001, we recognized a $10.0 million
benefit as a result of the decreased value of the warrant (which was classified
as a reduction to special charges - see note 7).

2. BUSINESS CONDITIONS AND LIQUIDITY CONSIDERATIONS:

At December 31, 2001, we had $161.9 million par value of senior
subordinated notes due in June 2002 and $186.0 million par value of medium term
notes due in September 2002. We have a recent history of losses. We had net
losses applicable to common stock of $170.2 million and $543.9 million for the
years ended December 31, 2001 and 2000. Our parent, Conseco, also has
significant debt service and other cash requirements and depends on cash flows
from us to meet its liquidity needs.

Our finance operations require cash to originate finance receivables. Our
primary sources of cash are: (i) the collection of receivable balances; (ii)
proceeds from the issuance of debt, certificates of deposit and securitization
and sales of loans; and (iii) cash provided by operations. During 2001 and the
last half of 2000, the finance segment significantly slowed the origination of
finance receivables. This strategy allowed the finance segment to enhance net
interest margins, to reduce the amount of cash required for new loan
originations, and to transfer cash to the parent company.

The liquidity needs of our finance operations could increase in the event
of an extended economic slowdown or recession. Loss of employment, increases in
cost-of-living or other adverse economic conditions could impair the ability of
our customers to meet their payment obligations. Higher industry levels of
repossessed manufactured homes may affect recovery rates and result in decreased
cash flows. In addition, in an economic slowdown or recession, our servicing and
litigation costs would probably increase. Any sustained period of increased
delinquencies, foreclosures, losses or increased costs would have an adverse
effect on our liquidity.

The most significant source of liquidity for our finance operations has
been our ability to finance the receivables we originate in the secondary
markets through loan securitizations. Adverse changes in the securitization
market could impair our ability to originate, purchase and sell loans or other
assets on a favorable or timely basis. Any such impairment could have a material
adverse effect upon our business and results of operations. The securitization
market is sensitive to the credit ratings of Conseco Finance in connection with
our securitization program. A negative change in the credit ratings of Conseco
Finance could have a material adverse effect on our ability to access capital
through the securitization market. Factors considered by the rating agencies in
assigning such ratings include corporate guarantees, payment priority, current
and anticipated credit enhancement levels, quality of the current and expected
servicing, as well as additional factors associated with each distinct asset
type. Market participants' concerns with Conseco Finance's limited financial
flexibility, as reflected by the current senior unsecured ratings, may have an
effect on liquidity in future securitization transactions. In addition, certain
manufactured housing transactions have had ratings actions that have either
lowered the original ratings or placed on credit watch certain debt classes.

CONSECO FINANCE CORP. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
--------------------------

These rating actions could have an effect on Conseco Finance's access to
liquidity in the securitization market in the future. In addition, the
securitization market for many types of assets is relatively undeveloped and may
be more susceptible to market fluctuations or other adverse changes than more
developed capital markets. Although we have alternative sources of funding,
principally warehouse and bank credit facilities as well as loan sales, these
alternatives may not be sufficient for us to continue to originate loans at our
current origination levels.

We have taken a number of actions designed to improve our liquidity and
increase the efficiency of our business operations. These actions include: (i)
the sale, closing or runoff of several business units (including asset-based
lending, vendor leasing, bankcards, transportation and park construction); (ii)
monetization of certain on-balance sheet financial assets through sales or as
collateral for additional borrowings; and (iii) cost savings and restructuring
of ongoing businesses such as the streamlining of credit origination operations
in the manufactured housing and home equity lending divisions. In addition, we
moved a significant number of jobs to India, where a highly-educated, low-cost,
English-speaking labor force is available. These actions had a significant
effect on the Company's operating results during 2000 and 2001. In early 2002,
we announced our decision to reduce the size of our floorplan lending business.
We have identified a number of cash flow generating initiatives, which we expect
to complete during 2002.

In the first quarter of 2002, we entered into various transactions with
Lehman which are described in note 10.

We believe that the cash flows to be generated from operations and other
transactions will be sufficient to allow us to meet our debt obligations in
2002. We have taken a number of actions over the past two years to increase the
efficiency of our operations. However, our results for future periods beyond
2002 are subject to numerous uncertainties. We may not be able to improve or
sustain positive cash flows from operations. Our liquidity could be
significantly affected if improvements do not occur. Failure to generate
sufficient cash flows from operations, asset sales or financing transactions
would have a material adverse effect on our liquidity.

3. FINANCE RECEIVABLES AND RETAINED INTERESTS IN SECURITIZATION TRUSTS:

Subsequent to September 8, 1999, we are using the portfolio method to
account for securitization transactions. Our securitizations are now structured
in a manner that requires them to be accounted for under the portfolio method,
whereby the loans and securitization debt remain on our balance sheet, rather
than as sales, pursuant to SFAS 140.

We classify the finance receivables transferred to the securitization
trusts and held as collateral for the notes issued to investors as "finance
receivables-securitized". The average interest rate on these receivables was
12.5 percent and 12.2 percent at December 31, 2001 and 2000, respectively. We
classify the notes issued to investors in the securitization trusts as "notes
payable related to securitized finance receivables structured as collateralized
borrowings".

CONSECO FINANCE CORP. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
--------------------------

The following table summarizes our finance receivables - securitized by
business line and categorized as either: (i) a part of our continuing lines; or
(ii) a part of the business units we have decided to sell, close or runoff (the
"discontinued lines"):

December 31,
---------------------
2001 2000
---- ----
(Dollars in millions)

Continuing lines:
Manufactured housing............................................................... $ 6,940.4 $ 5,602.1
Mortgage services.................................................................. 5,658.2 5,126.0
Retail credit...................................................................... 878.9 653.8
Consumer finance - closed-end...................................................... 580.8 247.3
Floorplan (a)...................................................................... 436.9 637.0
--------- ---------

14,495.2 12,266.2
Less allowance for credit losses................................................... 296.7 167.9
--------- ---------

Net finance receivables - securitized for continuing lines....................... 14,198.5 12,098.3
--------- ---------

Discontinued lines.................................................................... - 531.0
Less allowance for credit losses................................................... - 6.5
--------- ---------

Net finance receivables - securitized for discontinued lines..................... - 524.5
--------- ---------

Total finance receivables - securitized.......................................... $14,198.5 $12,622.8
========= =========
<FN>
- ------------------
(a) We have recently decided to reduce the size of our floorplan lending business.
</FN>

The following table summarizes our other finance receivables by business
line and categorized as either: (i) a part of our continuing lines; or (ii) a
part of our discontinued lines:

December 31,
---------------------
2001 2000
---- ----
(Dollars in millions)

Continuing lines:
Manufactured housing............................................................... $ 609.3 $ 263.0
Mortgage services.................................................................. 1,128.9 1,373.1
Retail credit...................................................................... 1,811.1 1,110.1
Consumer finance closed-end........................................................ 6.3 575.1
-------- --------

3,555.6 3,321.3
Less allowance for credit losses................................................... 111.6 98.3
-------- --------

Net other finance receivables for continuing lines............................... 3,444.0 3,223.0
-------- --------

Discontinued lines.................................................................... 379.7 676.1
Less allowance for credit losses................................................... 13.0 34.1
-------- --------

Net other finance receivables for discontinued lines............................. 366.7 642.0
-------- --------

Total other finance receivables.................................................. $3,810.7 $3,865.0
======== ========

CONSECO FINANCE CORP. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
--------------------------

The changes in the allowance for credit losses included in finance
receivables were as follows:

2001 2000 1999
---- ---- ----
(Dollars in millions)

Allowance for credit losses, beginning of year.................................. $306.8 $ 88.4 $ 43.0
Additions to the allowance:
Provision for losses......................................................... 563.6 354.2 128.7
Provision for losses related to discontinued lines (included in
special charges - see note 7).............................................. - 45.9 -
Provision for losses related to regulatory changes related to our bank
subsidiary (included in special charges - see note 7)...................... - 48.0 -
Change in allowance due to purchases and sales of certain
finance receivables........................................................ (.1) 24.7 -
Credit losses................................................................... (449.0) (254.4) (83.3)
------ ------ ------

Allowance for credit losses, end of year........................................ $421.3 $306.8 $ 88.4
====== ====== ======

The securitizations structured prior to September 8, 1999, met the
applicable criteria to be accounted for as sales. At the time the loans were
securitized and sold, we recognized a gain and recorded our retained interest
represented by the interest-only security. The interest-only security represents
the right to receive, over the life of the pool of receivables: (i) the excess
of the principal and interest received on the receivables transferred to the
special purpose entity over the principal and interest paid to the holders of
other interests in the securitization; and (ii) contractual servicing fees. In
some of those securitizations, we also retained certain lower-rated securities
that are senior in payment priority to the interest-only securities. Together,
the interest-only securities and the lower-rated securities (classified as
actively managed fixed maturity securities) represent our retained interests in
these securitization trusts. The total value of our retained interests was
$670.2 million and $927.5 million at December 31, 2001 and 2000, respectively.

Retained interests in securitization trusts totaled $670.2 million,
$927.5 million and $1,599.3 million at December 31, 2001, 2000 and 1999,
respectively. At December 31, 2001, 2000 and 1999, such interests were comprised
of: (i) actively managed fixed maturity securities totaling $528.5 million,
$494.6 million and $694.3 million, respectively; and (ii) interest-only
securities totaling $141.7 million, $432.9 million and $905.0 million,
respectively. We consider any estimated payments related to guarantees in
determining the value of our interest-only securities.

We completed various loan sale transactions in 2001 and 2000. During
2001, we sold $1.6 billion of finance receivables which included: (i) our $802.3
million vendor services loan portfolio (which was marked-to-market in the fourth
quarter of 2000 and no additional gain or loss was recognized in 2001); (ii)
$568.4 million of high-loan-to-value mortgage loans; and (iii) $269.0 million of
other loans. These sales resulted in net gains of $26.9 million. The Company
entered into a servicing agreement on the high-loan-to-value mortgage loans
sold. Pursuant to the servicing agreement, the servicing fees payable to the
Company are senior to all other payments of the trust which purchased the loans.
The Company also holds a residual interest in certain other cash flows of the
trust. In the future, the Company will sell this interest, if it can be sold at
a reasonable price. The Company did not provide any guarantees with respect to
the performance of the loans sold. In 2000, we sold approximately $147.1 million
of finance receivables in whole-loan sales resulting in net gains of $7.5
million.

The interest-only securities on our balance sheet represent an allocated
portion of the cost basis of the finance receivables in the securitization
transactions accounted for as sales related to transactions structured prior to
September 8, 1999. Our interest-only securities and other retained interests in
those securitization transactions are subordinate to the interests of other
investors. Their values are subject to credit, prepayment, and interest rate
risk on the securitized finance receivables. We determine the appropriate
discount rate to value these securities based on our estimates of current market
rates of interest for securities with similar yield, credit quality and maturity
characteristics. We include the difference between estimated fair value and the
amortized cost of the interest-only securities (after adjustments for
impairments required to be recognized in earnings) in "accumulated other
comprehensive loss, net of taxes."

CONSECO FINANCE CORP. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
--------------------------

As described in note 1 under the caption entitled "Impairment Charge",
the Company adopted the requirements of EITF 99-20 effective July 1, 2000.
During 2001 and 2000, our interest-only securities did not perform as well as
anticipated. As a result, we changed various underlying assumptions (including
default, severity, credit loss and discount rate assumptions) which are used to
determine the value of the interest-only securities. These changes were made as
a result of: (i) the adverse default and loss trends that were experienced; and
(ii) our expectations regarding future economic conditions. As a result of these
changes, the cash flows from interest-only securities changed adversely from
previous estimates. Pursuant to the requirements of EITF 99-20, the effect of
these changes were reflected immediately in earnings as an impairment charge.
The effect of the impairment charge and adjustments to the value of our
interest-only securities and servicing rights totaled $386.9 million ($250.4
million after the income tax benefit) for 2001 and $515.7 million ($324.9
million after the income tax benefit) for 2000 (in addition to the cumulative
effect of adopting EITF 99-20 of $70.2 million ($45.5 million after the income
tax benefit)).

Increases in the estimated fair value of our interest-only securities
which result from favorable changes in the expected timing and/or amount of cash
flows from our previous valuation estimates are recognized as adjustments to
shareholder's equity, which are recognized as a yield adjustment in income over
the life of the interest-only security. Such favorable changes resulted in
increases in unrealized appreciation of $8.7 million and $12.9 million during
2001 and 2000, respectively.

The following table summarizes certain cash flows received from and paid
to the securitization trusts during 2001 and 2000 (dollars in millions):

2001 2000
------------- --------------

Servicing fees received......................................................... $ 71.7 $ 123.8
Cash flows from interest-only securities, net................................... 14.3 187.6
Cash flows from retained bonds.................................................. 82.8 69.9
Servicing advances paid......................................................... (677.0) (1,056.1)
Repayment of servicing advances................................................. 665.2 1,063.5

We have projected that the adverse loss experience in 2001 will continue
into 2002 and then improve over time. As a result of these assumptions, we
project that payments related to all guarantees issued in conjunction with the
sales of certain finance receivables will exceed the gross cash flows from the
interest-only securities by approximately $90 million in 2002 and $60 million in
2003. We project the gross cash flows from the interest-only securities to
exceed the payments related to guarantees issued in conjunction with the sales
of certain finance receivables by approximately $5 million in 2004 and $15
million in 2005 and by approximately $580 million in all years thereafter. These
projected payments are considered in the projected cash flows we use to value
our interest-only securities. See note 6 for additional information about the
guarantees.

Effective September 30, 2001, we transferred substantially all of our
interest-only securities into a trust. No gain or loss was recognized upon such
transfer. In return, we received a trust security representing an interest in
the trust equal to 85 percent of the estimated future cash flows of the
interest-only securities held in the trust. Lehman Brothers, Inc. and affiliates
(collectively "Lehman") purchased the remaining 15 percent interest. The value
of the interest purchased by Lehman was $55.2 million at December 31, 2001. The
Company continues to be the servicer of the finance receivables underlying the
interest-only securities sold to the trust. Lehman has the ability to sell their
interest back to the trust after a stated period. Until such time, Lehman is
required to maintain a 15 percent interest in the estimated future cash flows of
the trust. By aggregating the interest-only securities into one structure, the
impairment test for these securities will be conducted on a single set of cash
flows representing the Company's 85 percent interest in the trust. Accordingly,
adverse changes in cash flows from one interest-only security may be offset by
positive changes in another. The new structure will not avoid an impairment
charge if sufficient positive cash flows in the aggregate are not available.
Further, increases in cash flows above the adverse cash flows cannot be
recognized in earnings.

CONSECO FINANCE CORP. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
--------------------------

At December 31, 2001, key economic assumptions used to determine the
estimated fair value of our retained interests in securitizations and the
sensitivity of the current fair value of residual cash flows to immediate 10
percent and 20 percent changes in those assumptions are as follows:

Home equity/ Interest
Manufactured home Consumer/ held by
housing improvement equipment others Total
------- ------------ --------- ------ -----
(Dollars in millions)

Carrying amount/fair value of retained interests:

Interest-only securities............................... $ 32.3 $155.8 $ 8.8 ($55.2) $141.7
Servicing assets (liabilities)......................... (22.2) 6.4 (1.9) - (17.7)
Bonds.................................................. 274.8 233.7 20.0 - 528.5
----- ------ ----- -------- ------

Total retained interests........................... $284.9 $395.9 $26.9 ($55.2) $652.5
====== ====== ===== ====== ======

Cumulative principal balance of sold finance
receivables............................................ $17,732.2 $4,947.4 $1,210.1 $23,889.7
Weighted average life in years.............................. 7.0 3.9 2.6 6.2
Weighted average stated customer interest rate
on sold finance receivables............................ 9.8% 12.0% 10.6% 10.3%
Assumptions to determine estimated fair value
and impact of favorable and adverse changes:

Expected prepayment speed as a percentage
of principal balance of sold finance receivables (a)... 7.1% 17.4% 18.8% 9.8%

Impact on fair value of 10 percent favorable change.... $10.9 $15.6 $.8 $27.3

Impact on fair value of 20 percent favorable change.... 20.5 34.8 1.7 57.0

Impact on fair value of 10 percent adverse change...... (5.7) (15.0) (.6) (21.3)

Impact on fair value of 20 percent adverse change...... (12.7) (23.6) (1.2) (37.5)

Expected future nondiscounted credit losses as a
percentage of principal of related finance
receivables (a)........................................ 11.7% 7.4% 6.1% 10.6%

Impact on fair value of 10 percent favorable change.... $131.2 $30.3 $5.5 $167.0

Impact on fair value of 20 percent favorable change.... 230.4 73.2 11.1 314.7

Impact on fair value of 10 percent adverse change...... (122.5) (14.9) (4.1) (141.5)

Impact on fair value of 20 percent adverse change...... (239.5) (29.2) (8.3) (277.0)

Residual cash flow discount rate (annual)................... 16.0% 16.0% 16.0% 16.0%

Impact on fair value of 10 percent favorable change.... $37.6 $28.1 $1.7 $67.4

Impact on fair value of 20 percent favorable change.... 81.7 59.7 3.4 144.8

Impact on fair value of 10 percent adverse change...... (29.6) (24.5) (1.5) (55.6)

Impact on fair value of 20 percent adverse change...... (55.4) (46.2) (3.5) (105.1)

CONSECO FINANCE CORP. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
--------------------------

<FN>
- --------------------
(a) The valuation of interest-only securities is affected not only by the
projected level of prepayments of principal and net credit losses, but
also by the projected timing of such prepayments and net credit losses.
Should such timing differ materially from our projections, it could have
a material effect on the valuation of our interest-only securities.
Additionally, such valuation is determined by discounting cash flows over
the entire expected life of the receivables sold.
</FN>

These sensitivities are hypothetical and should be used with caution. As
the figures indicate, changes in fair value based on a 10 percent variation in
assumptions generally cannot be extrapolated because the relationship of the
change in assumption to the change in fair value may not be linear. Also, in
this table, the effect of a variation in a particular assumption on the fair
value of the retained interest is calculated without changing any other
assumption; in reality, changes in one factor may result in changes in another
(for example, increases in market interest rates may result in lower prepayments
and increased credit losses), which might magnify or counteract the
sensitivities.

The following table summarizes quantitative information about
delinquencies, net credit losses, and components of managed finance receivables:

Principal balance
60 days or more Net credit
Principal balance past due losses
----------------------- --------------------- ------
for the year ended
at December 31, December 31,
---------------------------------------------- -----------------
2001 2000 2001 2000 2001 2000
---- ---- ---- ---- ---- ----
(Dollars in millions)

Type of finance receivables

Manufactured housing...................... $25,575.1 $26,314.4 $610.5 $569.3 $ 555.5 $413.9
Home equity/home improvement.............. 11,851.4 13,307.0 139.9 120.5 244.4 154.6
Consumer.................................. 4,198.8 3,887.4 112.6 76.4 225.5 181.0
Commercial................................ 1,377.0 3,077.1 16.2 35.2 38.3 95.5
--------- --------- ------ ------ -------- ------

Total managed receivables................. 43,002.3 46,585.9 879.2 801.4 1,063.7 845.0

Less finance receivables securitized...... 24,297.3 29,636.0 464.9 536.6 614.7 590.6
--------- --------- ------ ------ -------- ------

Finance receivables held on balance sheet
before allowance for credit losses and
deferred points and other, net......... 18,705.0 16,949.9 $414.3 $264.8 $ 449.0 $254.4
====== ====== ======== ======

Less allowance for credit losses.......... 421.3 306.8

Less deferred points and other, net....... 274.5 155.3
--------- ---------

Finance receivables held on
balance sheet.......................... $18,009.2 $16,487.8
========= =========

CONSECO FINANCE CORP. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
--------------------------

Activity in the interest-only securities account during 2001, 2000 and
1999 is as follows:

2001 2000 1999
---- ---- ----
(Dollars in millions)

Balance, beginning of year........................................................... $ 432.9 $ 905.0 $1,305.4
Additions resulting from securitizations during the year.......................... - - 393.9
Additions resulting from clean-up calls (a)....................................... 45.3 100.3 -
Investment income................................................................. 51.5 106.6 185.1
Cash paid (received):
Gross cash received............................................................. (89.2) (210.8) (442.6)
Guarantee payments related to bonds held by others.............................. 32.7 22.3 -
Guarantee payments related to retained bonds (included in actively managed
fixed maturities)............................................................. 42.2 .9 -
Impairment charge to reduce carrying value........................................ (264.8) (434.1) (533.8)
Sale of securities related to a discontinued line................................. (12.4) - -
Interest purchased by Lehman in conjunction with securitization transaction....... (55.2) - -
Transfer to servicing rights in conjunction with securitization transaction....... (50.0) - -
Cumulative effect of change in accounting principle............................... - (70.2) -
Change in unrealized appreciation (depreciation) charged to shareholder's equity.. 8.7 12.9 (3.0)
------- ------- --------

Balance, end of year................................................................. $ 141.7 $ 432.9 $ 905.0
======= ======= ========
<FN>
- -------------------
(a) During 2001 and 2000, clean-up calls were exercised for certain
securitizations that were previously recognized as sales. The
interest-only securities related to these securitizations had previously
been separately securitized with other interest-only securities in
transactions recognized as sales. The repurchase of the collateral
underlying these securitizations triggered a requirement for the Company
to repurchase a portion of the interest-only securities and to deposit
into the securitization trust additional cash in excess of the collateral
amount.
</FN>

4. INCOME TAXES:

Our income tax expense includes deferred income taxes arising from
temporary differences between the financial reporting and tax bases of assets
and liabilities. These amounts are reflected in the balance of our income tax
assets which totaled $267.2 million at December 31, 2001. In assessing the
realization of our 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 our deferred income tax assets depends upon generating
future taxable income during the periods in which our temporary differences
become deductible. We evaluate the realizability of our deferred income tax
assets by assessing the need for a valuation allowance on a quarterly basis. If
we determine that it is more likely than not that our deferred income tax assets
will not be recovered, a valuation allowance will be established against some or
all of our deferred income tax assets. This could have a significant effect on
our future results of operations and financial position. The components of the
Company's income tax assets and liabilities were as follows:

CONSECO FINANCE CORP. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
--------------------------

2001 2000
---- ----
(Dollars in millions)

Deferred tax assets (liabilities):
Net operating loss carryforwards............................................................. $ - $ 6.3
Deductible timing differences:
Interest-only securities.................................................................. (75.2) 32.2
Unrealized depreciation................................................................... 61.5 81.6
Allowance for loan losses................................................................. 148.2 116.6
Other..................................................................................... 110.8 (33.1)
------ ------

Total deferred tax assets.............................................................. 245.3 203.6
Current income taxes prepaid..................................................................... 21.9 5.0
------ ------

Net income tax assets.................................................................. $267.2 $208.6
====== ======

Income tax expense (benefit) was as follows:

2001 2000 1999
---- ---- ----
(Dollars in millions)

Current tax provision..................................................................... $ 59.5 $ 60.6 $ 169.2
Deferred tax provision (benefit).......................................................... (115.9) (323.4) (185.6)
------- ------- ------

Income tax benefit......................................................... $ (56.4) $(262.8) $(16.4)
======= ======= ======

The income tax benefit differed from that computed at the applicable
federal statutory rate (35 percent) for the following reasons:

2001 2000 1999
---- ---- ----
(Dollars in millions)

Tax expense (benefit) on income (loss) before income taxes at statutory rate................. $(57.8) $(259.9) $ 12.0
Other ...................................................................................... .2 1.6 1.2
Settlement of tax issues related to revenue recognized as gain on sale of
finance receivables....................................................................... - - (30.2)
State taxes, net............................................................................. 1.2 (4.5) .6
------ ------- ------

Income tax benefit.................................................................... $(56.4) $(262.8) $(16.4)
====== ======= ======

At December 31, 2001, we did not have any net operating loss
carryforwards. However, if our deferred income tax assets started to reverse
into net operating losses, we would have 20 years to generate future taxable
income and utilize these potential net operating losses before they would begin
to expire under current tax law. In recent years, we have had losses before
income taxes for financial reporting purposes. However, we believe that existing
levels of income from our continuing operations coupled with changes in our
operations that either have taken place or will take place are sufficient to
generate the levels of taxable income needed to utilize our net deferred income
tax assets. Such changes include: (i) various cost saving initiatives; (ii) the
transfer of certain customer service and backroom operations to our India
subsidiary; and (iii) restructuring our business to increase profitability such
as stream lining our loan origination operations in the manufactured housing and
home equity divisions.

CONSECO FINANCE CORP. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
--------------------------

The following chart reconciles our income (loss) before taxes for
financial statement purposes to our taxable income (loss) for income tax
purposes:

2001 2000 1999
---- ---- ----
(Dollars in millions)

Income (loss) before income taxes,
extraordinary gain (loss), and
cumulative effect of accounting change............. $(165.2) $(742.6) $ 34.0
Adjustments to determine taxable income:
Net investment income............................. (37.2) 81.0 257.5
Impairment charges ................................ 386.9 515.7 554.3
Gain on sale of finance receivables................ - - (550.6)
Provision for losses............................... 114.6 99.8 45.4
Special charges.................................... - 211.2 -
Extraordinary gain (loss) on extinguishment
of debt........................................ 9.4 - (3.8)
Cumulative effect of accounting change............. - 70.0 -
Issuance of common shares for stock option and
for employee benefit plans...................... - - (9.4)
Other.............................................. (129.2) 8.1 142.6
------- ------- -------

Taxable income for income tax purposes.......... $ 179.3 $ 243.2 $ 470.0
======= ======= =======

CONSECO FINANCE CORP. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
--------------------------

5. NOTES PAYABLE:

Notes Payable (excluding notes payable related to securitized finance
receivables structured as collateralized borrowings)

Notes payable (excluding notes payable related to securitized finance
receivables structured as collateralized borrowings) at December 31, 2001 and
2000, were as follows (interest rates as of December 31, 2001):

2001 2000
---- ----
(Dollars in millions)

Master repurchase agreements due on various dates in 2002 and 2003 (2.7%)......... $1,679.0 $1,806.9
Credit facility collateralized by retained interests in securitizations
due 2003 (3.9%)................................................................ 507.3 590.0
10.25% senior subordinated notes due June 2002.................................... 161.9 217.3
Medium term notes due September 2002 and April 2003 (6.54%)....................... 189.7 223.7
Note payable to Conseco (3.4%).................................................... 249.5 786.7
Other............................................................................. 22.5 3.2
-------- --------

Total principal amount....................................................... 2,809.9 3,627.8

Unamortized net discount and deferred fees........................................ (8.8) (6.5)
-------- --------

Total notes payable.......................................................... $2,801.1 $3,621.3
======== ========

Amounts borrowed under master repurchase agreements have decreased due to
repayments using the proceeds received from various asset sales. At March 19,
2002, we had $4.0 billion (of which $2.1 billion is committed) in master
repurchase agreements, commercial paper conduit facilities and other facilities
with various banking and investment banking firms for the purpose of financing
our consumer and commercial finance loan production. These facilities typically
provide financing of a certain percentage of the underlying collateral and are
subject to the availability of eligible collateral and, in some cases, the
willingness of the banking firms to continue to provide financing. Some of these
agreements provide for annual terms which are extended either quarterly or
semi-annually by mutual agreement of the parties for an additional annual term
based upon receipt of updated quarterly financial information. At December 31,
2001, we had borrowed $2.2 billion under these agreements, leaving $1.8 billion
available to borrow (of which approximately $.4 billion is committed). One of
our master repurchase agreements (with a committed capacity of $400.0 million)
expires on May 3, 2002. As of December 31, 2001, we had $66.1 million
outstanding under this facility. We are in the process of negotiating a renewal
of this facility.

During 2001, we repurchased $55.4 million par value of our 10.25% senior
subordinated notes due June 2002 for $51.9 million (resulting in an
extraordinary gain of $2.1 million, net of income taxes of $1.3 million). Also
during 2001, we repurchased $34.0 million par value of our 6.5% medium term
notes due September 2002 for $27.5 million (resulting in an extraordinary gain
of $4.0 million, net of income taxes of $2.5 million).

During 2000, the Company amended an agreement with Lehman related to
certain master repurchase agreements and the collateralized credit facility.
Such amendment significantly reduced the restrictions on intercompany payments
from Conseco Finance to Conseco as required by the previous agreement. In
conjunction with the amendment, Conseco agreed to convert $750 million principal
balance of its intercompany note due from Conseco Finance to $750 million stated
value of Conseco Finance 9% redeemable cumulative preferred stock (the
"intercompany preferred stock"). During 2001, Conseco Finance made payments to
Conseco totaling $537.2 million reducing the intercompany note balance to $249.5
million at December 31, 2001.

Pursuant to the amended agreement, Conseco Finance may make the following
payments to Conseco: (i) interest on the intercompany note; (ii) payments for
products and services provided by Conseco; and (iii) intercompany tax sharing
payments. Conseco Finance may also make the following payments to Conseco
provided the minimum liquidity requirements defined in the amended agreement are
met and the cash payments are applied in the order summarized: (i) unpaid
interest on the intercompany note; (ii) prepayments of principal on the
intercompany note or repayments of any increase to the intercompany

CONSECO FINANCE CORP. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
--------------------------

receivable balance; (iii) dividends on the intercompany preferred stock; (iv)
redemption of the intercompany preferred stock; and (v) common stock dividends.
The liquidity test of the amended agreement requires Conseco Finance to have
minimum levels of liquidity both before and after giving effect to such payments
to Conseco. Liquidity, as defined, includes unrestricted cash and may include up
to $150 million of liquidity available at Conseco Finance's bank subsidiaries
and the aggregate amount available to be drawn under Conseco Finance's credit
facilities (where applicable, based on eligible excess collateral pledged to the
lender multiplied by the appropriate advance rate). The minimum liquidity must
equal or exceed $250 million, plus: (i) 50 percent of cash up to $100 million
generated by Conseco Finance subsequent to September 21, 2000; and (ii) 25
percent of cash generated by Conseco Finance in excess of $100 million, provided
the total minimum cash liquidity shall not exceed $350 million and the cash
generated by Conseco Finance (used in the calculation to increase the minimum)
will exclude operating cash flows and the net proceeds received from certain
asset sales and other events listed in the amended agreement (which are
consistent with the courses of actions we have previously announced).

The amended agreement requires Conseco Finance to maintain various
financial ratios, as defined in the agreement. These ratios include: (i) an
adjusted tangible net worth of at least $1.95 billion (such amount was $2.04
billion at December 31, 2001); (ii) a fixed charge coverage ratio of not less
than 1.0:1.0 for the year ending December 31, 2001, and defined periods
thereafter (such ratio was 1.20:1.0 for the year ended December 31, 2001); (iii)
a ratio of net worth to total managed receivables of not less than 4:100 (such
ratio was 4.49:100 at December 31, 2001); and (iv) a ratio of total
non-warehouse debt less finance receivables and certain other assets, as defined
in the agreement, to net worth of less than 1.0:2.0 (such ratio was .28:2.0 at
December 31, 2001).

In early 2002, Conseco Finance entered into various new financing
arrangements with Lehman which either amend or replace the prior arrangements.
Also, in early 2002, Conseco Finance tendered for all its remaining public debt
(i.e., its medium term notes due September 2002 and April 2003 and its 10.25%
Senior Subordinated Notes due June 2002). Refer to note 10 for further
discussion of such items.

The note payable to Conseco is further described in note 6 under the
caption "Related Party Transactions."

During 1999, we repurchased $50.0 million par value of our 10.25% senior
subordinated notes due 2002 for $53.5 million. We recognized an extraordinary
charge of $2.5 million (net of a $1.5 million tax benefit) as a result of such
repurchases. At both December 31, 2001 and 2000, $23.7 million of the 10.25%
senior subordinated notes were held by Conseco.

The maturities of notes payable (excluding notes payable related to
securitized finance receivables structured as collateralized borrowings) at
December 31, 2001, were as follows (dollars in millions):

Maturity date

2002.......................................................... $1,464.7
2003.......................................................... 1,345.0
2005.......................................................... .2
--------

Total par value at December 31, 2001.................. $2,809.9
========

Notes Payable Related to Securitized Finance Receivables Structured as
Collateralized Borrowings

Notes payable related to securitized finance receivables structured as
collateralized borrowings were $14,484.5 million and $12,100.6 million at
December 31, 2001 and 2000, respectively. The principal and interest on these
notes are paid using the cash flows from the underlying finance receivables
which serve as collateral for the notes. Accordingly, the timing of the
principal payments on these notes is dependent on the payments received on the
underlying finance receivables which back the notes. In some instances, the
Company is required to advance principal and interest payments even though the
payments on the underlying finance receivables which back the notes have not yet
been received. The average interest rate on these notes was 6.4 percent and 7.7
percent at December 31, 2001 and 2000, respectively.

CONSECO FINANCE CORP. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
--------------------------

6. OTHER DISCLOSURES:

Leases

The Company rents office space, equipment and computer software under
noncancellable operating leases. Rental expense was $20.8 million in 2001, $28.2
million in 2000 and $21.8 million in 1999. Future required minimum rental
payments as of December 31, 2001, were as follows (dollars in millions):

2002............................................................ $ 25.1
2003............................................................ 21.1
2004............................................................ 15.0
2005............................................................ 10.1
2006............................................................ 9.2
Thereafter...................................................... 23.4
------

Total....................................................... $103.9
======

Other operating costs and expenses were as follows:

2001 2000 1999
---- ---- ----
(Dollars in millions)

Salaries and wages.................... $347.2 $428.9 $393.6
Cost of servicing..................... 189.2 159.6 98.7
Other................................. 106.0 182.3 204.9
------ ------ ------

Total........................ $642.4 $770.8 $697.2
====== ====== ======

CONSECO FINANCE CORP. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
--------------------------

Pension Plans

The Company has a qualified noncontributory defined benefit pension plan
covering substantially all of its employees over 21 years of age. The plan's
benefits are based on years of service and the employee's compensation. The plan
is funded annually based on the maximum amount that can be deducted for federal
income tax purposes. The assets of the plan are primarily invested in common
stock, corporate bonds and cash equivalents. In addition, the Company maintains
a nonqualified pension plan for certain key employees as designated by the Board
of Directors. The following table sets forth the plan's funded status and
amounts recognized in the Company's statement of financial position at December
31. Amounts related to such benefit plans were as follows:

2001 2000
---- ----
(Dollars in millions)

Benefit obligation, beginning of year.................................. $17.9 $20.6
Interest cost....................................................... 1.1 1.4
Actuarial loss...................................................... .6 1.8
Benefits paid....................................................... (4.8) (5.9)
----- -----

Benefit obligation, end of year........................................ $14.8 $17.9
===== =====

Fair value of plan assets, beginning of year........................... $19.9 $18.8
Actual return on plan assets........................................ (1.4) (.4)
Employer contributions.............................................. .5 6.9
Benefits paid....................................................... (4.8) (5.4)
----- -----

Fair value of plan assets, end of year................................. $14.2 $19.9
===== =====

Funded status.......................................................... (.6) $ 2.0
Unrecognized net actuarial loss........................................ 6.5 4.6
----- -----

Prepaid benefit cost.............................................. $ 5.9 $ 6.6
===== =====

We used the following assumptions to calculate benefit obligations for
our 2001 and 2000 valuations: postretirement discount rate of approximately 6.5
percent; preretirement discount rate of approximately 7.0 percent; and an
expected return on plan assets of approximately 8.5 percent. Beginning in 2000,
as a result of plan amendments, no assumption for compensation increases was
required.

CONSECO FINANCE CORP. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
--------------------------

Components of the cost we recognized related to pension plans are as
follows:

2001 2000 1999
---- ---- ----
(Dollars in millions)

Service cost............................................................. $ - $ - $ 7.3
Interest cost............................................................ 1.1 1.4 3.0
Expected return on plan assets........................................... (1.5) (1.7) (1.4)
Settlement (gain) loss................................................... 1.3 (.3) -
Recognized net actuarial loss............................................ .3 - 1.0
----- ----- -----

Net periodic cost (benefit)......................................... $ 1.2 $ (.6) $ 9.9
===== ====== =====

The Company has qualified defined contribution plans for which
substantially all employees are eligible. Company contributions, which match
certain voluntary employee contributions to the plan, totaled $1.9 million in
2001, $4.3 million in 2000 and $4.7 million in 1999. Matching contributions are
required to be made either in cash or in Conseco common stock.

Related Party Transactions

In 1998, we entered into a $2 billion promissory note with Conseco. The
note bore interest at LIBOR plus a margin of .35 percent and both the principal
and interest were due on demand. On January 1, 2000, the promissory note was
amended and restated to provide for borrowings up to $5 billion and quarterly
interest payments at a rate of LIBOR plus a margin of 1.5 percent. In connection
with the transaction with Lehman (as described in note 7 entitled "Special
Charges"), the Company repaid $450.0 million of this note. In conjunction with
amendments to its warehouse credit facilities, the Company converted $750.0
million principal balance of the promissory note due to Conseco to $750.0
million stated value of 9 percent redeemable cumulative preferred stock and
repaid $544.6 million of this note. Pursuant to the amended agreement with
Lehman, the Company made additional repayments on the promissory note to Conseco
of $129.5 million in 2000 and $537.2 million in 2001. At December 31, 2001, the
outstanding balance under the note was $249.5 million. Interest expense incurred
under the note totaled $26.1 million, $153.9 million and $79.5 million in 2001,
2000 and 1999, respectively.

As discussed in the previous paragraph, the Company converted $750.0
million principal balance of the note payable to Conseco to $750.0 million
stated value of 9% redeemable cumulative preferred stock during 2000. Dividend
payments are made pursuant to the amended agreement with Lehman. Cumulative
unpaid dividends totaled $86.1 million and $18.6 million at December 31, 2001
and 2000, respectively.

On December 31, 1999, Conseco transferred the following assets to the
Company at Conseco's carrying value: (i) fixed maturity investments due from
affiliates of Conseco with a carrying value of $104.6 million; (ii) other
invested assets with a carrying value of $100.5 million; and (iii) two insurance
marketing companies with net assets having a carrying value of $94.3 million.
The carrying value of these assets approximated fair value. Such amounts were
added to the common stock and paid- in capital of the Company. These assets were
returned to Conseco in 2000 concurrently with the Lehman transaction. Such
distribution is reflected as a return of capital in the consolidated statement
of shareholder's equity at the book value of the assets transferred.

In the first quarter of 2000, the Company repurchased shares of its
common stock from Conseco for $126.0 million.

The Company has entered into 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 allocable costs. Total fees incurred by the Company under such
agreements were $21.8 million, $39.7 million and $43.0 million in 2001, 2000 and
1999, respectively.

Litigation

CONSECO FINANCE CORP. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
--------------------------

was brought not on behalf of a class, but by the Florida State Board of
Administration, which invests and reinvests retirement funds for the benefit of
state employees. In addition to Conseco Finance, certain current and former
officers and directors of Conseco Finance are named as defendants in one or more
of the lawsuits. Conseco Finance and other defendants obtained an order
consolidating the lawsuits seeking class action status into two actions, one of
which pertains to a purported class of common stockholders (In re Green Tree
Financial Corp. Stock Litig., Case No. 97-2666) and the other of which pertains
to a purported class of stock option traders (In re Green Tree Financial Corp.
Options Litig., Case No. 97-2679). Plaintiffs in the lawsuits assert claims
under Sections 10(b) (and Rule 10b-5 promulgated thereunder) and 20(a) of the
Securities Exchange Act of 1934. In each case, plaintiffs allege that Conseco
Finance and the other defendants violated federal securities laws by, among
other things, making false and misleading statements about the current state and
future prospects of Conseco Finance (particularly with respect to prepayment
assumptions and performance of certain loan portfolios of Conseco Finance) which
allegedly rendered Conseco Finance's financial statements false and misleading.
On August 24, 1999, the United States District Court for the District of
Minnesota issued an order dismissing with prejudice all claims alleged in the
lawsuits. The plaintiffs subsequently appealed the decision to the U.S. Court of
Appeals for the 8th Circuit. A three judge panel issued an opinion on October
25, 2001, reversing the United States District Court's dismissal order and
remanding the actions to the United States District Court. Pretrial discovery is
expected to commence in all three lawsuits approximately in April 2002. The
Company believes that the lawsuits are without merit and intends to continue to
defend them vigorously. The ultimate outcome of these lawsuits cannot be
predicted with certainty.

Guarantees

In conjunction with certain sales of finance receivables, we have
provided guarantees aggregating approximately $1.5 billion at December 31, 2001.
We consider any potential payments related to these guarantees in the projected
net cash flows used to determine the value of our interest-only securities.
During 2001 and 2000, advances of interest and principal payments related to
such guarantees on bonds held by others totaled $32.7 million and $22.3 million,
respectively.

CONSECO FINANCE CORP. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
--------------------------

7. SPECIAL CHARGES:

2001

The following table summarizes the special charges incurred by the
Company during 2001, which are further described in the paragraphs which follow
(dollars in millions):

Severance benefits, litigation reserves and other restructuring charges................... $ 20.3
Loss related to sale of certain finance receivables....................................... 11.2
Change in value of warrant................................................................ (10.0)
------

Special charges before income tax benefit............................................ $ 21.5
======

Severance benefits, litigation reserves and other restructuring charges

During 2001, Conseco developed plans to change the way it operates. Such
changes are being undertaken in an effort to improve the Company's operations
and profitability. The planned changes included moving a significant number of
jobs to India, where a highly-educated, low-cost, English-speaking labor force
is available. Pursuant to GAAP, the Company is required to recognize the costs
associated with most restructuring activities as the costs are incurred.
However, costs associated with severance benefits are required to be recognized
when the costs are: (i) attributable to employees' services that have already
been rendered; (ii) relate to obligations that accumulate; and (iii) are
probable and can be reasonably estimated. Since the severance costs associated
with our planned activities meet these requirements, we recognized a charge of
$6.2 million in 2001 related to severance benefits and other restructuring
charges. We also recognized charges of: (i) $7.5 million related to our decision
to discontinue the sale of certain types of life insurance in conjunction with
lending transactions; and (ii) $6.6 million related to certain litigation
matters.

Loss related to the sale of certain finance receivables

During 2001, we recognized a loss of $2.2 million on the sale of $11.2
million of finance receivables. Also, during 2001, the purchaser of certain
credit card receivables returned certain receivables pursuant to a return of
accounts provision included in the sales agreement. Such returns and the
associated losses exceeded the amounts we initially anticipated when the
receivables were sold. We recognized a loss of $9.0 million related to the
returned receivables.

Change in value of warrant

As partial consideration for a financing transaction, Conseco has a
warrant which permits the holder to purchase 5 percent of Conseco Finance at a
nominal price. The holder of the warrant or Conseco Finance may cause the
warrant and any stock issued upon its exercise to be purchased for cash at an
appraised value in May 2003. Additionally, until May 2003, the holder has the
right (subject to certain terms and conditions) to convert the warrant into
preferred stock of Conseco (see note 10). Since the warrant permits cash
settlement at fair value at the option of the holder of the warrant, it has been
included in other liabilities and is measured at fair value, with changes in its
value reported in earnings. The estimated fair value of the warrant at December
31, 2001 was $38.1 million. The estimated value was determined based on
discounted cash flow and market multiple valuation techniques. During 2001, we
recognized a $10.0 million benefit as a result of the decreased value of the
warrant (which was classified as a reduction to special charges - see note 1).

CONSECO FINANCE CORP. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
--------------------------
2000

The Company incurred significant special charges during 2000, primarily
related to the restructuring of our debt, restructuring of our finance business
and payments made pursuant to employment contracts. The following table
summarizes the special charges, which are further described in the paragraphs
which follow (dollars in millions):

Lower of cost or market adjustment for finance receivables
identified for sale.................................................... $103.3
Loss on sale of transportation loans and vendor services
financing business..................................................... 51.0
Loss on sale of asset-based loans........................................... 53.0
Costs related to closing offices and streamlining businesses................ 29.5
Abandonment of computer processing systems.................................. 35.8
Transaction fees paid and warrant issued.................................... 78.4
Reserve methodology change at bank subsidiary............................... 48.0
Net gain on sale of certain loans and other items........................... (4.7)
------

Special charges before income tax benefit.......................... $394.3
======

Lower of cost or market adjustment for finance receivables identified for
sale

On July 27, 2000, we announced several courses of action to restructure
our business, including the sale or runoff of the finance receivables of several
business lines. The carrying value of the loans held for sale has been reduced
to the lower of cost or market, consistent with our accounting policy for such
loans. The reduction in value of these loans of $103.3 million (including a
$45.9 million increase to the allowance for credit losses) primarily relates to
transportation finance receivables (primarily loans for the purchase of trucks
and buses). These loans had experienced a significant decrease in value as a
result of the adverse economic effect that increases in oil prices and
competition had on borrowers in the transportation business during 2000.

Loss on sale of transportation loans and vendor service financing
business

During the fourth quarter of 2000, we sold transportation loans with a
carrying value of $566.0 million (after the market adjustment described above)
in whole loan sale transactions. We recognized an additional loss of $30.7
million on the sale. During 2000, we recognized a special charge and reduced
goodwill by $20.3 million, representing the difference between: (i) the carrying
value of the net assets of the vendor services financing business; and (ii) the
anticipated proceeds from the sale of such business, which was completed in the
first quarter of 2001.

Loss on sale of asset-based loans

During the third quarter of 2000, we sold asset-based loans with a
carrying value of $152.2 million in whole loan sale transactions. We recognized
a loss of $53.0 million on these sales.

Costs related to closing offices and streamlining businesses

Our restructuring activities included the closing of several branch
offices and streamlining our businesses. These activities included a reduction
in the work force of approximately 1,700 employees. The Company incurred a
charge of $6.9 million related to severance costs paid to terminated employees
in 2000. The Company also incurred lease termination and direct closing costs of
$12.3 million associated with the branch offices closed in conjunction with the
restructuring activities. In addition, fixed assets and leasehold improvements
of $10.3 million were abandoned when the branch offices were closed.

Abandonment of computer processing systems

We recorded a $35.8 million charge in 2000 to write off the carrying
value of capitalized computer software costs for projects that have been
abandoned in conjunction with our restructuring. These costs are primarily
associated with: (i)

CONSECO FINANCE CORP. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
--------------------------

computer processing systems under development that would
require significant additional expenditures to complete and that are
inconsistent with our current business plan; and (ii) computer systems related
to the lines of business discontinued by the Company and therefore are no longer
required.

Advisory fees and warrant paid and/or issued to Lehman and other
investment banks

In May 2000, we sold approximately $1.3 billion of finance receivables to
Lehman and its affiliates for cash and a right to share in future profits from a
subsequent sale or securitization of the assets sold. We paid a $25.0 million
transaction fee to Lehman in conjunction with the sale, which was included in
special charges. Such loans were sold to Lehman at a value which approximated
net book value, less the fee paid to Lehman.

During the second and third quarters of 2000, we repurchased a
significant portion of the finance receivables sold to Lehman. These finance
receivables were subsequently included in securitization transactions structured
as financings. The cost of the finance receivables purchased from Lehman did not
differ materially from the book value of the loans prior to their sale to
Lehman.

Lehman has also amended its master repurchase financing facilities with
our finance operations to expand the types of assets financed. As partial
consideration for the financing transaction, Lehman received a warrant, with a
nominal exercise price, for five percent of the common stock of Conseco Finance.
The initial $48.1 million estimated value of the warrant was recognized as an
expense during the second quarter of 2000. The estimated fair value of the
warrant did not change materially during 2000.

We also paid Lehman $5.3 million in advisory fees related to the business
and debt restructuring.

Reserve Methodology Change at Bank Subsidiary

During the fourth quarter of 2000, we increased the allowance for credit
losses related to credit card receivables held by our bank subsidiary. We
implemented a more conservative approach pursuant to a recent regulatory
examination, which resulted in this special charge.

Gain on sale of certain loans and other items

During 2000, we sold substantially all of the finance receivables related
to our bankcard (Visa and Mastercard) portfolio. We recognized a gain of $9.7
million on the sale.

During 2000, we recognized $5.0 million of other costs related to the
restructuring of the Company.

CONSECO FINANCE CORP. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
--------------------------

8. CONSOLIDATED STATEMENT OF CASH FLOWS:

The following disclosures supplement our consolidated statement of cash
flows:

2001 2000 1999
---- ---- ----
(Dollars in millions)

Additional non-cash items not reflected in the consolidated statement of cash
flows:
Tax benefit related to the issuance of common stock under employee benefit plans... $ - $ - $ 3.3

The following reconciles net income to net cash provided by operating
activities:

Cash flows from operating activities:
Net income (loss)................................................................... $(102.7) $(525.3) $ 47.9
Adjustments to reconcile net income (loss) to net cash provided by
operating activities:
Gain on sale of finance receivables............................................. (26.9) (7.5) (550.6)
Points and origination fees received............................................ - - 390.0
Interest-only securities investment income...................................... (51.5) (106.6) (185.1)
Cash received from interest-only securities, net................................ 14.3 187.6 442.6
Servicing income................................................................ (115.3) (108.2) (165.3)
Cash received from servicing activities......................................... 71.7 123.8 175.7
Provision for losses............................................................ 563.6 354.2 128.7
Amortization and depreciation................................................... 6.1 24.9 52.3
Income taxes.................................................................... (76.3) (361.0) (205.9)
Accrual and amortization of investment income................................... (58.0) (97.2) (80.7)
Impairment charges.............................................................. 386.9 515.7 554.3
Special charges................................................................. 18.4 349.5 (20.5)
Extraordinary (gain) loss on extinguishment of debt............................. (9.9) - 4.0
Change in accounting principle.................................................. - 70.2 -
Other........................................................................... (103.7) 62.5 36.6
------- ------- -------

Net cash provided by operating activities.................................... $ 516.7 $ 482.6 $ 624.0
======= ======= =======

CONSECO FINANCE CORP. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
--------------------------

9. QUARTERLY FINANCIAL DATA (UNAUDITED):

1st Qtr.(a)(b) 2nd Qtr.(a)(b) 3rd Qtr.(a)(b) 4th Qtr.(b)
-------------- -------------- -------------- -----------
(Dollars in millions)

2001
Revenues...................................... $669.9 $662.4 $681.6 $669.7
Income (loss) before income taxes and
extraordinary gain (loss) .................. 41.8 44.0 (273.2) 22.2
Net income (loss)............................. 25.9 27.4 (178.6) 22.6

2000
Revenues...................................... $530.6 $583.3 $645.8 $685.1
Income (loss) before income taxes and
cumulative effect of accounting change...... 42.9 (43.9) (391.7) (349.9)
Net income (loss)............................. 26.8 (28.5) (296.6) (227.0)
<FN>
- --------------------
(a) Included in the first, second and third quarters of 2001 are impairment
charges of $7.9 million ($5.0 million after tax), $33.8 million ($21.0
million after tax) and $345.2 million ($224.4 million after tax),
respectively. Also included in the first, second, third and fourth
quarters of 2001 are special charges of $13.8 million ($8.7 million after
tax), $2.4 million ($1.5 million after tax), $.5 million ($.3 million
after tax) and $4.8 million ($3.1 million after tax), respectively.

(b) Included in the first, second, third and fourth quarters of 2000 are
impairment charges of $2.5 million ($1.6 million after tax), $9.6 million
($6.0 million after tax), $205.0 million ($129.2 million after tax) and
$298.6 million ($188.1 million after tax), respectively. Also included in
the second, third and fourth quarters of 2000 are special charges of
$63.4 million ($41.2 million after tax), $226.6 million ($147.6 million
after tax) and $104.3 million ($67.7 million after tax), respectively.
</FN>

10. SUBSEQUENT EVENTS:

Modifications to Borrowing Agreements

In the first quarter of 2002, we entered into various transactions with
Lehman and its affiliates pursuant to which Lehman extended the terms of our:
(a) warehouse line from September 2002 to September 2003, (b) borrowings with
respect to approximately $90 million of miscellaneous assets ("Miscellaneous
Borrowings") from January 31, 2002 to June 2003, and (c) residual line from
February 2003 to February 2004 under which financing is being provided on our
interest-only securities, servicing rights and retained interests in other
subordinated securities issued by the securitization trusts. We agreed to an
amortization schedule by which the outstanding balance under the Miscellaneous
Borrowings is required to be repaid by June 2003. We also entered into a revised
agreement governing the movement of cash from Conseco Finance to the parent
company. Conseco Finance and Lehman have agreed to amend the agreement such that
Conseco Finance must maintain liquidity (i.e., cash and available borrowings, as
defined) of at least: (i) $50 million until March 31, 2003; and (ii) $100
million from and after April 1, 2003. However, we no longer must meet a minimum
liquidity requirement of $250 million before making interest, principal,
dividend or redemption payments to the parent company.

CONSECO FINANCE CORP. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
--------------------------

Pursuant to the new arrangements, Lehman may exchange their existing
Warrant to purchase 5% of the common stock of Conseco Finance until May 2003 and
receive in its place 500,000 shares of Series G Convertible Redeemable Preferred
Stock of Conseco (the "Series G Preferred") at a $100 stated value per share,
having the following general terms:

(a) No dividend;
(b) Convertible to Conseco common stock at $10 per share;
(c) Voting rights on an as converted basis;
(d) Mandatorily redeemable by Conseco in January 2012 at the stated value;
(e) Pari passu with Conseco's Series F Common-Linked Convertible Preferred
Stock (the "Series F Preferred") if, and only if, a majority of the
holders of Conseco's Series E Preferred Stock ("Series E Preferred") and
Series F Preferred consent, and otherwise pari passu with the Series E
Preferred and junior to the Series F Preferred; and
(f) The right to cause Conseco to register the Series G Preferred within one
year after electing to surrender the Warrant in exchange for the Series G
Preferred.

Tender Offers to Purchase Outstanding Debt

Market for Repossessed Manufactured Homes

On January 2, 2002, GreenPoint Financial Corp. ("GreenPoint"), a
competitor, announced its intention to cease the origination of loans secured by
manufactured homes. In conjunction with this announcement, GreenPoint indicated
its objective to quickly liquidate its repossessed inventory at below market
prices in the wholesale market. This announcement may have a significant impact
on the wholesale market for manufactured homes through which the Company
generally sells 30 percent of its manufactured housing repossessed inventory. We
believe that our net recovery is maximized through a retail (resale either
through Company owned sales lots or our dealer network) exit strategy. We
generally liquidate approximately 70 percent of our repossessed units through
the retail channel; thus, we are much less reliant on the wholesale channel.

ITEM 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.

None.

PART III

The Registrant meets the conditions set forth in the General Instructions
(I)(1)(a) and (b) of Form 10-K and is therefore omitting the information
otherwise required in Part III.

PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.

(a) 1. Financial Statements. See Index to Consolidated Financial
Statements on page 15 for a list of financial statements included
in this Report.

2. Financial Statement Schedules. All schedules are omitted, either
because they are not applicable, not required, or because the
information they contain is included elsewhere in the
consolidated financial statements or notes.

3. Exhibits. See Exhibit Index immediately preceding the Exhibits
filed with this report.

(b) Reports on Form 8-K - None.

SIGNATURES

Pursuant to the requirements of Section 13 of the Securities Exchange Act
of 1934, the Registrant has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized, this 29th day of March, 2002.

CONSECO FINANCE CORP.

By: /s/ CHARLES H. CREMENS
----------------------------
Charles H. Cremens
President and Chief Executive
Officer (authorized officer and
principal executive officer)

By: /s/ NEAL S. COHEN
----------------------------
Neal S. Cohen
Executive Vice President
and Chief Financial Officer
(authorized officer and
principal financial officer)

Pursuant to the requirements of the Securities Exchange Act of 1934, this
Report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated:

Signature Title (Capacity) Date
- --------- ---------------- ----

/s/ CHARLES H. CREMENS President, Chief Executive March 29, 2002
- ------------------------------ Officer and Director
Charles H. Cremens (Principal Executive Officer)

/s/ NEAL S. COHEN Executive Vice President and March 29, 2002
- ------------------------------ Chief Financial Officer
Neal S. Cohen (Principal Financial Officer)

/s/ JAMES S. ADAMS Senior Vice President and March 29, 2002
- ------------------------------ Chief Accounting Officer
James S. Adams

/s/ GARY C. WENDT Director March 29, 2002
- ------------------------------
Gary C. Wendt

/s/ WILLIAM J. SHEA Director March 29, 2002
- ------------------------------
William J. Shea

/s/ WILLIAM WESP Director March 29, 2002
- ------------------------------
William Wesp

CONSECO FINANCE CORP.
EXHIBIT INDEX

EXHIBIT
NO.
- ------

3(a) Restated Certificate of Incorporation of Conseco Finance Corp. was
filed with the Securities and Exchange Commission as Exhibit 3(a) to
the Company's Report on Form 10-Q for the quarter ended September
30, 2000 and is incorporated herein by reference.

3(b) Merger of Green Tree Financial Corporation, as filed with the
Delaware Secretary of State on June 30, 1995 (incorporated by
reference to the Company's Registration Statement on Form S-1; File
No. 33-60869).

3(c) Restated Bylaws of Conseco Finance Corp. were filed with the
Securities and Exchange Commission as Exhibit 3.4 to the Company's
Registration Statement on Form S-3/A (No. 333-85037) and are
incorporated herein by reference.

3(d) Certificate of Designation of 9% Redeemable Cumulative Preferred
Stock of Conseco Finance Corp. was filed with the Securities and
Exchange Commission as Exhibit 3(d) to the Company's Report on Form
10-Q for the quarter ended September 30, 2000 and is incorporated
herein by reference.

4(a) There have not been filed as exhibits to this Form 10-K certain
long-term debt instruments, none of which relates to authorized
indebtedness that exceeds 10% of the consolidated assets of the
Registrant. The Registrant agrees to furnish the Commission upon its
request a copy of any instrument defining the rights of holders of
long- term debt of the Company and its consolidated subsidiaries.

10(a) Master Repurchase Agreement dated as of September 1, 1995 between
Merrill Lynch Mortgage Capital, Inc. and Green Tree Financial
Corporation (incorporated by reference to the Company's Annual
Report on Form 10-K for the year ended December 31, 1995; File No.
1-08916); as amended by Amendment to the Master Repurchase Agreement
dated June 1, 1997 (incorporated by reference to the Company's
Quarterly Report on Form 10-Q for the quarterly period ended June
30, 1997; File No. 0-11652); as amended by Amendment to the Master
Repurchase Agreement dated February 10, 1998 (incorporated by
reference to the Company's Quarterly Report on Form 10-Q for the
quarterly period ended March 31, 1998, File No. 1-08916).

10(b) Amended and Restated Master Repurchase Agreement dated May 9, 2000
between Lehman Commercial Paper Inc. and Green Tree Finance
Corp.-Five (filed herewith); and Amendment to the Warehouse Debt
Facility, dated as of September 22, 2000, by and among Lehman
Commercial Paper Inc. and Green Tree Finance Corp. - Five (filed
herewith).

10(c) Asset Assignment Agreement dated as of February 13, 1998 between
Green Tree Residual Finance Corp. I and Lehman Commercial Paper,

Inc. (incorporated by reference to the Company's Quarterly Report on
Form 10-Q for the quarterly period ended March 31, 1998; File No.
1-08916); Amendment to the First Residual Facility, dated as of
September 22, 2000, by and among Lehman ALI Inc. and Green Tree
Residual Finance Corp. I (filed herewith).

10(d) Promissory Note dated September 22, 2000 issued by the Company to
CIHC, Incorporated was filed with the Securities and Exchange
Commission as Exhibit 4(c) to the Company's Report on Form 10-Q for
the quarter ended September 30, 2000 and is incorporated herein by
reference.

10(e) Warrant to Purchase Common Stock of Conseco Finance Corp. dated May
11, 2000, by and between Conseco Finance Corp. and Lehman Brothers
Holdings Inc. is incorporated herein by reference to Exhibit 10.45
to the Form 10-Q of Conseco, Inc. for the period ended June 30,
2000.

10(f) Amended and Restated Agreement dated September 22, 2000, by and
among Conseco, Inc., CIHC, Incorporated and Lehman Brothers Holdings
Inc. is incorporated herein by reference to the Exhibit 10.46 to the
Form 10-Q of Conseco, Inc. for the period ended September 30, 2000.

12 Computation of Ratio of Earnings to Fixed Charges (filed herewith).

23 Consent of PricewaterhouseCoopers LLP (filed herewith).