STATEMENT OF ADDITIONAL INFORMATION
INDIVIDUAL AND GROUP FIXED AND VARIABLE DEFERRED
ANNUITY CONTRACTS
issued by
CONSECO VARIABLE ANNUITY ACCOUNT G
(formerly Great American Reserve Variable Annuity Account G)
and
CONSECO VARIABLE INSURANCE COMPANY
(formerly Great American Reserve Insurance Company)
THIS IS NOT A PROSPECTUS. THIS STATEMENT OF ADDITIONAL INFORMATION SHOULD BE
READ IN CONJUNCTION WITH THE PROSPECTUS DATED MAY 1, 1999, FOR THE INDIVIDUAL
AND GROUP FIXED AND VARIABLE DEFERRED ANNUITY CONTRACTS WHICH ARE REFERRED TO
HEREIN.
THE PROSPECTUS CONCISELY SETS FORTH INFORMATION THAT A PROSPECTIVE INVESTOR
OUGHT TO KNOW BEFORE INVESTING. FOR A COPY OF THE PROSPECTUS CALL OR WRITE THE
COMPANY AT ITS ADMINISTRATIVE OFFICE: 11815 N. PENNSYLVANIA STREET, CARMEL,
INDIANA 46032 (317) 817-3700.
THIS STATEMENT OF ADDITIONAL INFORMATION IS DATED MAY 1, 1999.
TABLE OF CONTENTS
PAGE
COMPANY..................................................................... 3
INDEPENDENT ACCOUNTANTS..................................................... 3
LEGAL OPINIONS.............................................................. 3
DISTRIBUTION................................................................ 3
CALCULATION OF PERFORMANCE INFORMATION...................................... 3
FEDERAL TAX STATUS.......................................................... 6
General................................................................... 6
Diversification........................................................... 7
Multiple Contracts........................................................ 8
Contracts Owned by Other than Natural Persons............................. 9
Tax Treatment of Assignments.............................................. 9
Income Tax Withholding.................................................... 9
Tax Treatment of Withdrawals - Non-Qualified Contracts.................... 9
Qualified Plans........................................................... 10
Tax Treatment of Withdrawals - Qualified Contracts........................ 12
Tax-Sheltered Annuities - Withdrawal Limitations.......................... 13
Mandatory Distributions - Qualified Plans................................. 14
ANNUITY PROVISIONS.......................................................... 14
Variable Annuity Payout................................................... 14
Annuity Unit.............................................................. 15
Fixed Annuity Payout...................................................... 15
FINANCIAL STATEMENTS........................................................ 15
COMPANY
Information regarding Conseco Insurance Company ("Company" or "Conseco
Variable") and its ownership is contained in the prospectus. On October 7, 1998,
the Company changed its name from Great American Reserve Insurance Company to
its present name.
INDEPENDENT ACCOUNTANTS
The financial statements of Conseco Variable as of December 31, 1998 and
1997, and for the years ended December 31, 1998, 1997 and 1996 included in the
prospectus, have been audited by PricewaterhouseCoopers LLP, independent
accountants, as set forth in their report appearing therein, and have been so
included in reliance upon the report of such firm given upon their authority as
experts in accounting and auditing.
LEGAL OPINIONS
Blazzard, Grodd & Hasenauer, P.C., Westport, Connecticut has provided
advice on certain matters relating to the federal securities and income tax laws
in connection with the Contracts.
DISTRIBUTOR
Conseco Equity Sales, Inc., an affiliate of the Company, acts as the
distributor. The offering is on a continuous basis.
CALCULATION OF PERFORMANCE INFORMATION
From time to time, we may advertise performance data. Such data will show
the percentage change in the value of an Accumulation Unit based on the
performance of an investment portfolio over a period of time, usually a calendar
year, determined by dividing the increase (decrease) in value for that unit by
the Accumulation Unit value at the beginning of the period.
Any such advertisement will include standardized average annual total
return figures for the time periods indicated in the advertisement. Such total
return figures will reflect the deduction of a 1.15% Mortality and Expense Risk
Charge, a .15% Administrative Charge, the expenses for the underlying investment
portfolio being advertised and any applicable Contract Maintenance Charges.
The hypothetical value of a Contract purchased for the time periods
described in the advertisement will be determined by using the actual
Accumulation Unit values for an initial $1,000 purchase payment, and deducting
any applicable Contract Maintenance Charges to arrive at the ending hypothetical
value. The average annual total return is then determined by computing the fixed
interest rate that a $1,000 purchase payment would have to earn annually,
compounded annually, to grow to the hypothetical value at the end of the time
periods described. The formula used in these calculations is:
P (1 + T)^n = ERV
Where:
P = a hypothetical initial payment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value at the end of the time periods used (or
fractional portion thereof) of a hypothetical $1,000 payment made at the
beginning of the time periods used.
The Company may also advertise performance data which will be calculated in
the same manner as described above but which will not reflect the deduction of
any Contract Maintenance Charge. The deduction of any Contract Maintenance
Charge would reduce any percentage increase or make greater any percentage
decrease.
You should note that the investment results of each investment portfolio
will fluctuate over time, and any presentation of the investment portfolio's
total return for any period should not be considered as a representation of what
an investment may earn or what your total return may be in any future period.
Performance Information
The Contracts are relatively new and therefore do not have a meaningful
investment performance history. However, certain corresponding Portfolios have
been in existence for some time and consequently have investment performance
history. In order to demonstrate how the actual investment experience of the
Portfolios affects Accumulation Unit values, the Company may develop performance
information. The information will be based upon the historical experience of the
Portfolios and will be for the periods shown.
Actual performance will vary and the results which may be shown are not
necessarily representative of future results. Performance for periods ending
after those shown may vary substantially. The performance of the Accumulation
Units will be calculated for a specified period of time assuming an initial
Purchase Payment of $1,000 allocated to each Portfolio and a deduction of all
charges and deductions (see "Expenses" in the Prospectus for more information).
Performance may also be shown without certain charges being included. If the
charges were included in the calculations, the performance would be lower. The
percentage increases are determined by subtracting the initial Purchase Payment
from the ending value and dividing the remainder by the beginning value.
HISTORICAL UNIT VALUES
The Company may also show historical Accumulation Unit values in certain
advertisements containing illustrations. These illustrations will be based on
actual Accumulation Unit values.
In addition, the Company may distribute sales literature which compares the
percentage change in Accumulation Unit values for any of the investment
portfolios against established market indices such as the Standard & Poor's 500
Composite Stock Price Index, the Dow Jones Industrial Average or other
management investment companies which have investment objectives similar to the
investment portfolio being compared. The Standard & Poor's 500 Composite Stock
Price Index is an unmanaged, unweighted average of 500 stocks, the majority of
which are listed on the New York Stock Exchange. The Dow Jones Industrial
Average is an unmanaged, weighted average of thirty blue chip industrial
corporations listed on the New York Stock Exchange. Both the Standard & Poor's
500 Composite Stock Price Index and the Dow Jones Industrial Average assume
quarterly reinvestment of dividends.
REPORTING AGENCIES
The Company may also distribute sales literature which compares the
performance of the Accumulation Unit values of the Contracts with the unit
values of variable annuities issued by other insurance companies. Such
information will be derived from the Lipper Variable Insurance Products
Performance Analysis Service, the VARDS Report or from Morningstar.
The Lipper Variable Insurance Products Performance Analysis Service is
published by Lipper Analytical Services, Inc., a publisher of statistical data
which currently tracks the performance of almost 4,000 investment companies. The
rankings compiled by Lipper may or may not reflect the deduction of asset-based
insurance charges. The Company's sales literature utilizing these rankings will
indicate whether or not such charges have been deducted. Where the charges have
not been deducted, the sales literature will indicate that if the charges had
been deducted, the ranking might have been lower.
The VARDS Report is a monthly variable annuity industry analysis compiled by
Variable Annuity Research & Data Service of Roswell, Georgia and published by
Financial Planning Resources, Inc. The VARDS rankings may or may not reflect the
deduction of asset-based insurance charges. In addition, VARDS prepares risk
adjusted rankings, which consider the effects of market risk on total return
performance. This type of ranking may address the question as to which funds
provide the highest total return with the least amount of risk. Other ranking
services may be used as sources of performance comparison, such as
CDA/Weisenberger.
Morningstar rates a variable annuity against its peers with similar
investment objectives. Morningstar does not rate any variable annuity that has
less than three years of performance data.
FEDERAL TAX STATUS
NOTE: THE FOLLOWING DESCRIPTION IS BASED UPON THE COMPANY'S
UNDERSTANDING OF CURRENT FEDERAL INCOME TAX LAW APPLICABLE TO ANNUITIES IN
GENERAL. THE COMPANY CANNOT PREDICT THE PROBABILITY THAT ANY CHANGES IN SUCH
LAWS WILL BE MADE. PURCHASERS ARE CAUTIONED TO SEEK COMPETENT TAX ADVICE
REGARDING THE POSSIBILITY OF SUCH CHANGES. THE COMPANY DOES NOT GUARANTEE THE
TAX STATUS OF THE CONTRACTS. PURCHASERS BEAR THE COMPLETE RISK THAT THE
CONTRACTS MAY NOT BE TREATED AS "ANNUITY CONTRACTS" UNDER FEDERAL INCOME TAX
LAWS. IT SHOULD BE FURTHER UNDERSTOOD THAT THE FOLLOWING DISCUSSION IS NOT
EXHAUSTIVE AND THAT SPECIAL RULES NOT DESCRIBED HEREIN MAY BE APPLICABLE IN
CERTAIN SITUATIONS. MOREOVER, NO ATTEMPT HAS BEEN MADE TO CONSIDER ANY
APPLICABLE STATE OR OTHER TAX LAWS.
GENERAL
Section 72 of the Internal Revenue Code of 1986, as amended ("Code")
governs taxation of annuities in general. An Owner is not taxed on increases in
the value of a Contract until distribution occurs, either in the form of a lump
sum payment or as annuity payments under the annuity option selected. For a lump
sum payment received as a total withdrawal (total surrender), the recipient is
taxed on the portion of the payment that exceeds the cost basis of the Contract.
For non-qualified Contracts, this cost basis is generally the purchase payments,
while for qualified Contracts there may be no cost basis. The taxable portion of
the lump sum payment is taxed at ordinary income tax rates.
For annuity payments, a portion of each payment in excess of an
exclusion amount is includible in taxable income. The exclusion amount for
payments based on a fixed annuity option is determined by multiplying the
payment by the ratio that the cost basis of the Contract (adjusted for any
period or refund feature) bears to the expected return under the Contract. The
exclusion amount for payments based on a variable annuity option is determined
by dividing the cost basis of the Contract (adjusted for any period certain or
refund guarantee) by the number of years over which the annuity is expected to
be paid. Payments received after the investment in the Contract has been
recovered (i.e. when the total of the excludable amount equals the investment in
the Contract) are fully taxable. The taxable portion is taxed at ordinary income
tax rates. For certain types of Qualified Plans there may be no cost basis in
the Contract within the meaning of Section 72 of the Code.
Owners, annuitants and beneficiaries under the Contracts should seek competent
financial advice about the tax consequences of any distributions.
The Company is taxed as a life insurance company under the Code. For
federal income tax purposes, the Separate Account is not a separate entity from
the Company, and its operations form a part of the Company.
DIVERSIFICATION
Section 817(h) of the Code imposes certain diversification standards on
the underlying assets of variable annuity contracts. The Code provides that a
variable annuity contract will not be treated as an annuity contract for any
period (and any subsequent period) for which the investments are not, in
accordance with regulations prescribed by the United States Treasury Department
("Treasury Department"), adequately diversified. Disqualification of the
Contract as an annuity contract would result in the imposition of federal income
tax to the Owner with respect to earnings allocable to the Contract prior to the
receipt of payments under the Contract. The Code contains a safe harbor
provision which provides that annuity contracts such as the Contract meet the
diversification requirements if, as of the end of each quarter, the underlying
assets meet the diversification standards for a regulated investment company and
no more than fifty-five percent (55%) of the total assets consist of cash, cash
items, U.S. Government securities and securities of other regulated investment
companies.
Regulation issued by the Treasury Department ("the Regulations")
amplify the diversification requirements for variable contracts set forth in the
Code and provide an alternative to the safe harbor provision described above.
Under the Regulations, an investment portfolio will be deemed adequately
diversified if: (1) no more than 55% of the value of the total assets of the
portfolio is represented by any one investment; (2) no more than 70% of the
value of the total assets of the portfolio is represented by any two
investments; (3) no more than 80% of the value of the total assets of the
portfolio is represented by any three investments; and (4) no more than 90% of
the value of the total assets of the portfolio is represented by any four
investments.
The Code provides that, for purposes of determining whether or not the
diversification standards imposed on the underlying assets of variable contracts
by Section 817(h) of the Code have been met, "each United States government
agency or instrumentality shall be treated as a separate issuer."
The Company intends that all investment portfolios underlying the
Contracts will be managed in such a manner as to comply with these
diversification requirements.
The Treasury Department has indicated that the diversification
Regulations do not provide guidance regarding the circumstances in which Owner
control of the investments of the Separate Account will cause the Owner to be
treated as the owner of the assets of the Separate Account, thereby resulting in
the loss of favorable tax treatment for the Contract. At this time it cannot be
determined whether additional guidance will be provided and what standards may
be contained in such guidance.
The amount of Owner control which may be exercised under the Contract is
different in some respects from the situations addressed in published rulings
issued by the Internal Revenue Service in which it was held that the policy
owner was not the owner of the assets of the separate account. It is unknown
whether these differences, such as the Owner's ability to transfer among
investment choices or the number and type of investment choices available, would
cause the Owner to be considered as the owner of the assets of the Separate
Account resulting in the imposition of federal income tax to the Owner with
respect to earnings allocable to the Contract prior to receipt of payments under
the Contract.
In the event any forthcoming guidance or ruling is considered to set
forth a new position, such guidance or ruling will generally be applied only
prospectively. However, if such ruling or guidance was not considered to set
forth a new position, it may be applied retroactively resulting in the Owners
being retroactively determined to be the owners of the assets of the Separate
Account.
Due to the uncertainty in this area, the Company reserves the right to
modify the Contract in an attempt to maintain favorable tax treatment.
MULTIPLE CONTRACTS
The Code provides that multiple non-qualified annuity contracts which
are issued within a calendar year to the same contract owner by one company or
its affiliates are treated as one annuity contract for purposes of determining
the tax consequences of any distribution. Such treatment may result in adverse
tax consequences including more rapid taxation of the distributed amounts from
such combination of contracts. For purposes of this rule, contracts received in
a Section 1035 exchange will be considered issued in the year of the exchange.
Owners should consult a tax adviser prior to purchasing more than one
non-qualified annuity contract in any calendar year.
CONTRACTS OWNED BY OTHER THAN NATURAL PERSONS
Under Section 72(u) of the Code, the investment earnings on premiums
for the Contracts will be taxed currently to the Owner if the Owner is a
non-natural person, e.g., a corporation or certain other entities. Such
Contracts generally will not be treated as annuities for federal income tax
purposes. However, this treatment is not applied to a Contract held by a trust
or other entity as an agent for a natural person nor to Contracts held by
Qualified Plans. Purchasers should consult their own tax counsel or other tax
adviser before purchasing a Contract to be owned by a non-natural person.
TAX TREATMENT OF ASSIGNMENTS
An assignment or pledge of a Contract may be a taxable event. You
should therefore consult competent tax advisers should you wish to assign or
pledge your Contracts.
If the Contract is issued pursuant to a retirement plan which receives
favorable treatment under the provision of Sections 403(b) or 408 of the Code,
it may not be assigned, pledged or otherwise transferred except as allowed under
applicable law.
INCOME TAX WITHHOLDING
All distributions or the portion thereof which is includible in the gross
income of the Owner are subject to federal income tax withholding. Generally,
amounts are withheld from periodic payments at the same rate as wages and at the
rate of 10% from non-periodic payments. However, the Owner, in many cases, may
elect not to have taxes withheld or to have withholding done at a different
rate.
Certain distributions from retirement plans qualified under Section 401
or Section 403(b) of the Code, which are not directly rolled over to another
eligible retirement plan or individual retirement account or individual
retirement annuity, are subject to a mandatory 20% withholding for federal
income tax. The 20% withholding requirement generally does not apply to: a) a
series of substantially equal payments made at least annually for the life or
life expectancy of the participant or joint and last survivor expectancy of the
participant and a designated beneficiary or for a specified period of 10 years
or more; or b) distributions which are required minimum distributions; or c) the
portion of the distributions not includible in gross income (i.e. returns of
after-tax contributions); or d) hardship withdrawals. Participants should
consult their own tax counsel or other tax adviser regarding withholding
requirements.
TAX TREATMENT OF WITHDRAWALS - NON-QUALIFIED CONTRACTS
Section 72 of the Code governs treatment of distributions from annuity
contracts. It provides that if the Contract Value exceeds the aggregate purchase
payments made, any amount withdrawn will be treated as coming first from the
earnings and then, only after the income portion is exhausted, as coming from
the principal. Withdrawn earnings are includible in gross income. It further
provides that a ten percent (10%) penalty will apply to the income portion of
any premature distribution. However, the penalty is not imposed on amounts
received: (a) after you reach age 59 1/2; (b) after your death; (c) if you
become totally disabled (for this purpose disability is as defined in Section
72(m)(7) of the Code); (d) in a series of substantially equal periodic payments
made not less frequently than annually for your life (or life expectancy) or for
the joint lives (or joint life expectancies) of you and your Beneficiary; (e)
under an immediate annuity; or (f) which are allocable to purchase payments made
prior to August 14, 1982.
With respect to (d) above, if the series of substantially equal
periodic payments is modified before the later of your attaining age 59 1/2 or 5
years from the date of the first periodic payment, then the tax for the year of
the modification is increased by an amount equal to the tax which would have
been imposed (the 10% penalty tax) but for the exception, plus interest for the
tax years in which the exception was used.
The above information does not apply to Qualified Contracts. However,
separate tax withdrawal penalties and restrictions may apply to such Qualified
Contracts. (See "Tax Treatment of Withdrawals - Qualified Contracts" below.)
QUALIFIED PLANS
The Contracts offered by the Prospectus are designed to be suitable for use
under certain types of Qualified plans. Generally, participants in a Qualified
plan are not taxed on increases to the value of the contributions to the plan
until distribution occurs, regardless of whether the plan assets are held under
an annuity contract. Taxation of participants in each Qualified plan varies with
the type of plan and terms and conditions of each specific plan. Owners,
Annuitants and Beneficiaries are cautioned that benefits under a Qualified plan
may be subject to the terms and conditions of the plan regardless of the terms
and conditions of the Contract issued pursuant to the plan. Some retirement
plans are subject to distribution and other requirements that are not
incorporated into the Company's administrative procedures. Owners, participants
and Beneficiaries are responsible for determining whether contributions,
distributions and other transactions with respect to the Contracts comply with
applicable law. The following are general descriptions of the types of Qualified
plans with which the Contracts may be used. Such descriptions are not exhaustive
and are for general informational purposes only. The tax rules regarding
Qualified plans are very complex and will have differing applications depending
on individual facts and circumstances. Each purchaser should obtain competent
tax advice prior to purchasing a Contract issued under a Qualified plan.
Contracts issued pursuant to Qualified plans include special provisions
restricting Contract provisions that may otherwise be available as described in
the Prospectus. Generally, Contracts issued pursuant to Qualified plans are not
transferable except upon surrender or annuitization. Various penalty and excise
taxes may apply to contributions or distributions made in violation of
applicable limitations. Furthermore, certain withdrawal penalties and
restrictions may apply to surrenders from Qualified Contracts. (See "Tax
Treatment of Withdrawals -- Qualified Contracts")
a. TAX-SHELTERED ANNUITIES
Section 403(b) of the Code permits the purchase of "tax-sheltered
annuities" by public schools and certain charitable, educational and
scientific organizations described in Section 501(c)(3) of the Code. These
qualifying employers may make contributions to the Contracts for the
benefit of their employees. Such contributions are not includible in the
gross income of the employees until the employees receive distributions
from the Contracts. The amount of contributions to the tax-sheltered
annuity is limited to certain maximums imposed by the Code. Furthermore,
the Code sets forth additional restrictions governing such items as
transferability, distributions, nondiscrimination and withdrawals. (See
"Tax Treatment of Withdrawals --Qualified Contracts" and "Tax Sheltered
Annuities -- Withdrawal Limitations" below.) Any employee should obtain
competent tax advice as to the tax treatment and suitability of such an
investment.
b. INDIVIDUAL RETIREMENT ANNUITIES
Section 408(b) of the Code permits eligible individuals to contribute
to an individual retirement program known as an "Individual Retirement
Annuity" ("IRA"). Under applicable limitations, certain amounts may be
contributed to an IRA which will be deductible from the individual's
taxable income. These IRAs are subject to limitations on eligibility,
contributions, transferability and distributions. (See "Tax Treatment of
Withdrawals -- Qualified Contracts" below.) Under certain conditions,
distributions from other IRAs and other Qualified Plans may be rolled over
or transferred on a tax-deferred basis into an IRA. Sales of Contracts for
use with IRAs are subject to special requirements imposed by the Code,
including the requirement that certain informational disclosure be given to
persons desiring to establish an IRA. Purchasers of Contracts to be
qualified as Individual Retirement Annuities should obtain competent tax
advice as to the tax treatment and suitability of such an investment.
ROTH IRAS
Section 408A of the Code provides that beginning in 1998, individuals
may purchase a new type of non-deductible IRA, known as a Roth IRA.
Purchase payments for a Roth IRA are limited to a maximum of $2,000 per
year and are not deductible from taxable income. Lower maximum limitations
apply to individuals with adjusted gross incomes between $95,000 and
$110,000 in the case of single taxpayers, between $150,000 and $160,000 in
the case of married taxpayers filing joint returns, and between $0 and
$10,000 in the case of married taxpayers filing separately. An overall
$2,000 annual limitation continues to apply to all of a taxpayer's IRA
contributions, including Roth IRA and non-Roth IRAs.
Qualified distributions from Roth IRAs are free from federal income
tax. A qualified distribution requires that an individual has held a Roth
IRA for at least five taxable years and, in addition, that the distribution
is made: (i) after the individual reaches age 59 1/2, (ii) on the
individual's death or disability, or (iii) as a qualified first-time home
purchase (subject to a $10,000 lifetime maximum) for the individual, a
spouse, child, grandchild, or ancestor. Any distribution which is not a
qualified distribution is taxable to the extent of earnings in the
distribution. Distributions are treated as made from contributions first
and therefore no distributions are taxable until distributions exceed the
amount of contributions and conversions to the Roth IRA. The 10% penalty
tax and the regular IRA exceptions to the 10% penalty tax apply to taxable
distributions from a Roth IRA.
Amounts may be rolled over from one Roth IRA to another Roth IRA.
Furthermore, an individual may make a rollover contribution from a non-Roth IRA
to a Roth IRA ("conversion deposits"), unless the individual has adjusted gross
income over $100,000 or the individual is a married taxpayer filing a separate
return. The individual must pay tax on any portion of the IRA being rolled over
that represents income or a previously deductible IRA contribution. However, for
rollovers in 1998, the individual may pay that tax ratably over the four taxable
year period beginning with tax year 1998. In addition, distribution of amounts
attributable to conversion deposits held for less than 5 taxable years will also
be subject to the penalty tax.
Purchasers of Contracts intended to be qualified as a Roth IRA should
obtain competent tax advice as to the tax treatment and suitability of such an
investment.
TAX TREATMENT OF WITHDRAWALS -- QUALIFIED CONTRACTS
In the case of a withdrawal under a Qualified Contract, a ratable portion
of the amount received is taxable, generally based on the ratio of (i) the
individual's cost basis to (ii) the individual's total accrued benefit under the
retirement plan. Special tax rules may be available for certain distributions
from a Qualified Contract. Section 72(t) of the Code imposes a 10% penalty tax
on the taxable portion of any distribution from qualified retirement plans,
including Contracts issued and qualified under Code Sections 403(b)
(Tax-Sheltered Annuities) and 408 and 408A (Individual Retirement Annuities). To
the extent amounts are not includible in gross income because they have been
rolled over to an IRA or to another eligible qualified plan, no tax penalty will
be imposed. The tax penalty will not apply to the following distributions: (a)
made on or after the date on which the Owner or Annuitant (as applicable)
reaches age 59 1/2; (b) following the death or disability of the Owner or
Annuitant (as applicable) (for this purpose disability is as defined in Section
72(m)(7) of the Code); (c) after separation from service, distributions that are
part of substantially equal periodic payments made not less frequently than
annually for the life (or life expectancy) of the Owner or Annuitant (as
applicable) or the joint lives (or joint life expectancies) of such Owner or
Annuitant (as applicable) and his or her designated Beneficiary; (d) to an Owner
or Annuitant (as applicable) who has separated from service after he or she has
attained age 55; (e) made to the Owner or Annuitant (as applicable) to the
extent such distributions do not exceed the amount allowable as a deduction
under Code Section 213 to the Owner or Annuitant (as applicable) for amounts
paid during the taxable year for medical care; (f) made to an alternate payee
pursuant to a Qualified Domestic Relations Order; (g) from an Individual
Retirement Annuity for the purchase of medical insurance (as described in
Section 213(d)(1)(D) of the Code) for the Owner or Annuitant (as applicable) and
his or her spouse and dependents if the Owner or Annuitant (as applicable) has
received unemployment compensation for at least 12 weeks (this exception will no
longer apply after the Owner or Annuitant (as applicable) has been re-employed
for at least 60 days); (h) from an Individual Retirement Annuity made to the
Owner or Annuitant (as applicable) to the extent such distributions do not
exceed the qualified higher education expenses (as defined in Section 72(t)(7)
of the Code) of the Owner or Annuitant (as applicable) for the taxable year; and
(i) distributions up to $10,000 from an Individual Retirement Annuity made to
the Owner or Annuitant (as applicable) which are qualified first-time home buyer
distributions (as defined in Section 72(t)(8) of the Code). The exceptions
stated in (d) and (f) above do not apply in the case of an Individual Retirement
Annuity. The exception stated in (c) above applies to an Individual Retirement
Annuity without the requirement that there be a separation from service. With
respect to (c) above, if the series of substantially equal periodic payments is
modified before the later of your attaining age 59 1/2 or 5 years from the date
of the first periodic payment, then the tax for the year of the modification is
increased by an amount equal to the tax which would have been imposed (the 10%
penalty tax) but for the exception, plus interest for the tax years in which the
exception was used.
TAX-SHELTERED ANNUITIES -- WITHDRAWAL LIMITATIONS
The Code limits the withdrawal of amounts attributable to contributions
made pursuant to a salary reduction agreement (as defined in Section 403(b)(11)
of the Code) to circumstances only on or after when the Owner: (1) attains age
59 1/2; (2) separates from service; (3) dies; (4) becomes disabled (within the
meaning of Section 72(m)(7) of the Code); (5) in the case of hardship; or (6)
pursuant to a qualified domestic relations order, if otherwise permissible.
However, withdrawals for hardship are restricted to the portion of the Owner's
Contract Value which represents contributions made by the Owner and does not
include any investment results. The limitations on withdrawals became effective
on January 1, 1989 and apply only to salary reduction contributions made after
December 31, 1988, to income attributable to such contributions and to income
attributable to amounts held as if December 31, 1988. The limitations on
withdrawals do not affect transfers between certain Qualified Plans. Owners
should consult their own tax counsel or other tax adviser regarding any
distributions.
MANDATORY DISTRIBUTIONS - QUALIFIED PLANS
Generally, distributions from a qualified plan must commence no later
than April 1 of the calendar year following the later of: (a) the year in which
the employee attains age 70 1/2, or (b) the calendar year in which the employee
retires. The date set forth in (b) does not apply to an Individual Retirement
Annuity. Required distributions must be over a period not exceeding the life
expectancy of the individual or the joint lives or life expectancies of the
individual and his or her designated beneficiary. If the required minimum
distributions are not made, a 50% penalty tax is imposed as to the amount not
distributed.
ANNUITY PROVISIONS
The Company makes available payment plans on a fixed and variable basis.
VARIABLE ANNUITY PAYOUT
A variable annuity is an annuity with payments which: (1) are not
predetermined as to dollar amount; and (2) will vary in amount with the net
investment results of the applicable Sub-Accounts of the Separate Account.
Annuity payments also depend upon the age of the Annuitant and any Joint
Annuitant and the assumed interest factor utilized. The annuity table used will
depend upon the Annuity Option chosen. The dollar amount of annuity payments
after the first is determined as follows:
1. The dollar amount of the first variable annuity payment is divided by the
value of an Annuity Unit for each applicable Sub-Account as of the annuity date.
This sets the number of Annuity Units for each monthly payment for the
applicable Sub-Account.
2. The fixed number of Annuity Units per payment in each Sub-Account is
multiplied by the Annuity Unit value for that Sub-Account for the last valuation
period of the month preceding the month for which the payment is due. This
result is the dollar amount of the payment for each applicable Sub-Account.
The total dollar amount of each variable annuity payment is the sum of all
Sub-Account variable annuity payments reduced by the applicable portion of the
Contract Maintenance Charge.
ANNUITY UNIT
The value of any Annuity Unit for each Sub-Account of the Separate Account
was arbitrarily set initially at $10.
The Sub-Account Annuity Unit Value at the end of any subsequent valuation
period is determined as follows:
1. The Net Investment Factor for the current valuation period is multiplied
by the value of the Annuity Unit for the Sub-Account for the immediately
preceding valuation period.
2. The result in (1) is then divided by the assumed investment rate factor
which equals 1.00 plus the assumed investment rate for the number of days since
the preceding valuation date. The Owner can choose either a 5% or a 3% assumed
investment rate.
FIXED ANNUITY PAYOUT
A fixed annuity is an annuity with payments which are guaranteed as to dollar
amount by the Company and do not vary with the investment experience of the
Separate Account. The dollar amount of each fixed annuity payment is determined
in accordance with annuity tables contained in your Contract.
FINANCIAL STATEMENTS
The financial statements of the Company included in the Prospectus should be
considered only as bearing upon the ability of the Company to meet its
obligations under the Contracts.
Table of Contents
December 31, 1998
================================================================================
Great American Reserve Variable Annuity Account G Page
Statement of Assets and Liabilities as of December 31, 1998................. 2
Statement of Operations for the Period
April 29, 1998, through December 31, 1998.................................. 4
Statement of Changes in Net Assets for the Period
April 29, 1998, through December 31, 1998.................................. 4
Notes to Financial Statements............................................... 5
Report of Independent Accountants............................................7
<PAGE>
GREAT AMERICAN RESERVE VARIABLE ANNUITY ACCOUNT G
Statement of Assets and Liabilities
December 31, 1998
<TABLE>
<CAPTION>
====================================================================================================================================
SHARES COST VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Assets:
Investments in portfolio shares, at net asset value (Note 2):
The Alger American Fund:
Growth Portfolio ........................................................ 1,934.6 $ 87,218 $ 102,961
Leveraged AllCap Portfolio .............................................. 1,393.6 42,191 48,635
MidCap Growth Portfolio ................................................. 967.9 23,792 27,943
Small Capitalization Portfolio .......................................... 210.6 9,230 9,262
American Century Variable Portfolios, Inc.:
Income and Growth Fund .................................................. 11,092.2 69,585 75,205
International Fund ...................................................... 978.9 7,176 7,459
Value Fund .............................................................. 6,462.9 42,683 43,496
Berger Institutional Products Trust:
Growth and Income Fund .................................................. 2,873.7 41,626 47,789
Conseco Series Trust:
Asset Allocation Portfolio .............................................. 13,022.3 174,406 177,990
Common Stock Portfolio .................................................. 1,649.0 33,139 35,594
Corporate Bond Portfolio ................................................ 8,858.5 89,094 88,983
Government Securities Portfolio ......................................... 2,185.9 26,531 26,550
Money Market Portfolio .................................................. 16,893.4 16,893 16,893
Dreyfus Stock Index Fund .................................................. 1,598.1 49,490 51,972
The Dreyfus Socially Responsible Growth Fund, Inc. ........................ 121.3 3,182 3,769
Dreyfus Variable Investment Fund:
Disciplined Stock Portfolio ............................................. 1,084.2 21,451 24,883
International Value Portfolio ........................................... 572.2 7,830 7,695
Federated Insurance Series:
High Income Bond Fund II ................................................ 2,931.5 31,267 32,012
Utility Fund II ......................................................... 1,808.6 24,960 27,617
Invesco Variable Investment Funds, Inc.:
High Yield Portfolio .................................................... 657.3 8,261 7,440
Janus Aspen Series:
Aggressive Growth Portfolio ............................................. 117.4 2,406 3,239
Growth Portfolio ........................................................ 3,925.7 78,858 92,411
Worldwide Growth Portfolio .............................................. 2,692.7 72,466 78,332
Lazard Retirement Series, Inc.:
Equity Portfolio ........................................................ 6,354.5 65,779 70,217
Small Cap Portfolio ..................................................... 786.0 7,255 7,483
Lord Abbett Series Fund, Inc.:
Growth and Income Portfolio ............................................. 2,307.5 47,045 47,648
Neuberger & Berman Advisers Management Trust:
Limited Maturity Bond Portfolio ......................................... 1,710.1 23,518 23,634
Partners Portfolio ...................................................... 1,013.2 18,455 19,179
Strong Variable Insurance Funds, Inc.:
Growth Fund II .......................................................... 557.1 7,425 8,924
Strong Opportunity Fund II, Inc. .......................................... 916.6 18,503 19,909
Van Eck Worldwide Insurance Trust:
Worldwide Bond Fund ..................................................... 1,165.9 14,434 14,318
Worldwide Emerging Markets Fund ......................................... 180.6 1,024 1,286
- ------------------------------------------------------------------------------------------------------------------------------------
Total assets .......................................................... 1,250,728
Liabilities:
Amounts due to Conseco Variable Insurance Company ........................... 1,330
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets (Note 6) ................................................... $1,249,398
====================================================================================================================================
</TABLE>
The accompanying notes are an integral part of these financial statements.
2
<PAGE>
GREAT AMERICAN RESERVE VARIABLE ANNUITY ACCOUNT G
Statement of Assets and Liabilities - Continued
December 31, 1998
<TABLE>
<CAPTION>
====================================================================================================================================
Reported
Units Unit Value Value
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net assets attributable to:
Contract owners' deferred annuity reserves:
The Alger American Fund:
Growth Portfolio .................................................. 5,855.2 $17.565771 $ 102,850
Leveraged AllCap Portfolio ........................................ 2,615.3 18.580433 48,593
MidCap Growth Portfolio ........................................... 1,813.4 15.392143 27,912
Small Capitalization Portfolio .................................... 643.0 14.386676 9,251
American Century Variable Portfolios, Inc.:
Income and Growth Fund ............................................ 6,939.5 10.826435 75,130
International Fund ................................................ 767.4 9.709633 7,451
Value Fund ........................................................ 4,662.7 9.318051 43,447
Berger Institutional Products Trust:
Growth and Income Fund ............................................ 4,268.5 11.183646 47,737
Conseco Series Trust:
Asset Allocation Portfolio ........................................ 13,460.6 13.208721 177,797
Common Stock Portfolio ............................................ 2,408.2 14.764220 35,556
Corporate Bond Portfolio .......................................... 7,920.6 11.222389 88,888
Government Securities Portfolio ................................... 2,361.9 11.230428 26,525
Money Market Portfolio ............................................ 1,582.5 10.659412 16,869
Dreyfus Stock Index Fund ............................................ 4,735.3 10.963876 51,917
The Dreyfus Socially Responsible Growth Fund, Inc. .................. 339.9 11.078197 3,765
Dreyfus Variable Investment Fund:
Disciplined Stock Portfolio ....................................... 2,317.1 10.726492 24,855
International Value Portfolio ..................................... 815.7 9.423371 7,687
Federated Insurance Series:
High Income Bond Fund II .......................................... 3,261.5 9.805723 31,982
Utility Fund II ................................................... 2,529.7 10.906294 27,590
Invesco Variable Investment Funds, Inc.:
High Yield Portfolio .............................................. 653.4 11.374298 7,432
Janus Aspen Series:
Aggressive Growth Portfolio ....................................... 276.7 11.693693 3,236
Growth Portfolio .................................................. 7,982.4 11.564882 92,316
Worldwide Growth Portfolio ........................................ 7,444.2 10.511276 78,248
Lazard Retirement Series, Inc.:
Equity Portfolio .................................................. 6,642.2 10.559753 70,140
Small Cap Portfolio ............................................... 873.3 8.559454 7,475
Lord Abbett Series Fund, Inc.:
Growth and Income Portfolio ....................................... 3,668.3 12.974780 47,596
Neuberger & Berman Advisers Management Trust:
Limited Maturity Bond Portfolio ................................... 2,322.9 10.163534 23,609
Partners Portfolio ................................................ 2,063.4 9.280992 19,150
Strong Variable Insurance Funds, Inc.:
Growth Fund II .................................................... 772.9 11.533441 8,914
Strong Opportunity Fund II, Inc. .................................... 2,083.1 9.546853 19,887
Van Eck Worldwide Insurance Trust:
Worldwide Bond Fund ............................................... 1,318.7 10.850072 14,308
Worldwide Emerging Markets Fund ................................... 245.2 5.238886 1,285
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets ...................................................... $1,249,398
====================================================================================================================================
</TABLE>
The accompanying notes are an integral part of these financial statements.
3
<PAGE>
GREAT AMERICAN RESERVE VARIABLE ANNUITY ACCOUNT G
Statement of Operations
For the Period April 29, 1998, through December 31, 1998
<TABLE>
<CAPTION>
============================================================================================================================
<S> <C>
Investment income:
Dividends from investments in portfolio shares .......................................................... $ 14,460
Expenses:
Mortality and expense risk fees ......................................................................... 4,243
Administrative fees ..................................................................................... 509
- ----------------------------------------------------------------------------------------------------------------------------
Total expenses ........................................................................................ 4,752
- ----------------------------------------------------------------------------------------------------------------------------
Net investment income ............................................................................... 9,708
- ----------------------------------------------------------------------------------------------------------------------------
Net realized gains (losses) and unrealized appreciation (depreciation) on
investments:
Net realized losses on sales of investments in portfolio shares ......................................... (17,454)
Net change in unrealized appreciation of investments in portfolio shares ................................ 83,555
- ----------------------------------------------------------------------------------------------------------------------------
Net gain on investments in portfolio shares ........................................................... 66,101
- ----------------------------------------------------------------------------------------------------------------------------
Net increase in net assets from operations .......................................................... $ 75,809
============================================================================================================================
</TABLE>
Statement of Changes in Net Assets
For the Period April 29, 1998, through December 31, 1998
<TABLE>
<CAPTION>
============================================================================================================================
<S> <C>
Changes from operations:
Net investment income ................................................................................... $ 9,708
Net realized losses on sales of investments in portfolio shares ......................................... (17,454)
Net change in unrealized appreciation of investments in portfolio shares ................................ 83,555
- ----------------------------------------------------------------------------------------------------------------------------
Net increase in net assets from operations ............................................................ 75,809
- ----------------------------------------------------------------------------------------------------------------------------
Changes from contract owners' transactions:
Net contract purchase payments .......................................................................... 1,205,517
Contract redemptions .................................................................................... (31,928)
- ----------------------------------------------------------------------------------------------------------------------------
Net increase in net assets from contract owners' transactions ......................................... 1,173,589
- ----------------------------------------------------------------------------------------------------------------------------
Net increase in net assets .......................................................................... 1,249,398
- ----------------------------------------------------------------------------------------------------------------------------
Net assets, beginning of period ............................................................................ --
- ----------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (Note 6) .................................................................. $ 1,249,398
============================================================================================================================
</TABLE>
The accompanying notes are an integral part of these financial statements.
4
<PAGE>
GREAT AMERICAN RESERVE VARIABLE ANNUITY ACCOUNT G
Notes to Financial Statements
December 31, 1998
================================================================================
(1) General
Conseco Variable Insurance Company (the "Company") (formerly Great American
Reserve Insurance Company prior to its name change in October 1998) established
two separate accounts within Great American Reserve Variable Annuity Account G
("Account G"). It is anticipated that on May 1, 1999, a filing will be made with
the Securities and Exchange Commission to change the name of Great American
Reserve Variable Account G to Conseco Variable Account G. Both accounts were
established on September 26, 1997, and commenced operations on April 29, 1998.
Account G is a segregated investment account for individual and group variable
annuity contracts which are registered under the Securities Act of 1933. One
account, also named Great American Reserve Variable Annuity Account G ("Variable
Account"), which serves the variable annuity portion of the contract, is
registered under the Investment Company Act of 1940, as amended, as a unit
investment trust. The other account, Conseco Variable Market Value Adjustment
Account ("MVA"), offers investment options which pay fixed rates of interest as
declared by the company for specified periods (one, three and five years) from
the date amounts are allocated to the MVA. The MVA is not registered as an
investment company under the Investment Company Act of 1940. The operations of
Account G are included in the operations of the Company pursuant to the
provisions of the Texas Insurance Code. The Company is an indirect wholly owned
subsidiary of Conseco, Inc., a publicly-held specialized financial services
holding company listed on the New York Stock Exchange.
Besides the three guarantee periods of the MVA option, the following
investment Variable Account options are currently available:
THE ALGER AMERICAN FUND
Growth Portfolio
Leveraged AllCap Portfolio
MidCap Growth Portfolio
Small Capitalization Portfolio
AMERICAN CENTURY VARIABLE PORTFOLIOS, INC.
Income and Growth Fund
International Fund
Value Fund
BERGER INSTITUTIONAL PRODUCTS TRUST
100 Fund
Growth and Income Fund
Small Company Growth Fund
BIAM International Fund
CONSECO SERIES TRUST
Asset Allocation Portfolio
Common Stock Portfolio
Corporate Bond Portfolio
Government Securities Portfolio
Money Market Portfolio
THE DREYFUS SOCIALLY RESPONSIBLE GROWTH FUND, INC.
DREYFUS STOCK INDEX FUND
DREYFUS VARIABLE INVESTMENT FUND
International Value Portfolio
Disciplined Stock Portfolio
FEDERATED INSURANCE SERIES
High Income Bond Fund II
International Equity Fund II
Utility Fund II
INVESCO VARIABLE INVESTMENT FUNDS, INC.
High Yield Portfolio
Industrial Income Portfolio
JANUS ASPEN SERIES
Aggressive Growth Portfolio
Growth Portfolio
Worldwide Growth Portfolio
LAZARD RETIREMENT SERIES, INC.
Equity Portfolio
Small Cap Portfolio
LORD ABBETT SERIES FUND, INC.
Growth and Income Portfolio
MITCHELL HUTCHINS SERIES TRUST
Growth and Income Portfolio
NEUBERGER & BERMAN ADVISERS MANAGEMENT TRUST
Limited Maturity Bond Portfolio
Partners Portfolio
STRONG VARIABLE INSURANCE FUNDS, INC.
Growth Fund II
STRONG OPPORTUNITY FUND II, INC.
VAN ECK WORLDWIDE INSURANCE TRUST
Worldwide Bond Fund
Worldwide Emerging Markets Fund
Worldwide Hard Assets Fund
Worldwide Real Estate Fund
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported increases and decreases in net assets from
operations during the reporting period. Actual results could differ from those
estimates.
(2) Summary of Significant Accounting Policies
INVESTMENT VALUATION, TRANSACTIONS AND INCOME
Investments in portfolio shares are valued using the net asset value of the
respective portfolios at the end of each New York Stock Exchange business day.
Investment share transactions are accounted for on a trade date basis (the date
the order to purchase or redeem shares is executed) and dividend income is
recorded on the ex-dividend date. The cost of investments in portfolio shares
sold is determined on a first-in first-out basis. Account G does not hold any
investments which are restricted as to resale.
Net investment income and net realized gains (losses) and unrealized
appreciation (depreciation) on investments are allocated to the contracts on
each valuation date based on each contract's pro rata share of the assets of
Account G as of the beginning of the valuation date.
5
<PAGE>
GREAT AMERICAN RESERVE VARIABLE ANNUITY ACCOUNT G
Notes to Financial Statements - Continued
December 31, 1998
================================================================================
(2) Summary of Significant Accounting Policies
(Continued)
FEDERAL INCOME TAXES
No provision for federal income taxes has been made in the accompanying
financial statements because the operations of the Contract are included in the
total operations of the Company, which is treated as a life insurance company
for federal income tax purposes under the Internal Revenue Code. Net investment
income and realized gains (losses) are retained in the Contract and are not
taxable until received by the contract owner or beneficiary in the form of
annuity payments or other distributions.
ANNUITY RESERVES
Deferred annuity contract reserves are comprised of net contract purchase
payments less redemptions and benefits. These reserves are adjusted daily for
the net investment income and net realized gains (losses) and unrealized
appreciation (depreciation) on investments.
(3) Purchases and Sales of Investments in
Portfolio Shares
The aggregate cost of purchases of investments in portfolio shares were
$1,908,738 for the period April 29, 1998, through December 31, 1998. The
aggregate proceeds from sales of investments in portfolio shares were $724,111
for the period April 29, 1998, through December 31, 1998.
(4) Deductions and Expenses
Although periodic retirement payments to contract owners vary according to
the investment performance of the portfolios, such payments are not affected by
mortality or expense experience because the Company assumes the mortality and
expense risks under the contracts.
The mortality risk assumed by the Company results from the life annuity
payment option in the contracts in which the Company agrees to make annuity
payments regardless of how long a particular annuitant or other payee lives. The
annuity payments are determined in accordance with annuity purchase rate
provisions established at the time the contracts are issued. Based on the
actuarial determination of expected mortality, the Company is required to fund
any deficiency in the annuity payment reserves from its general account assets.
The expense risk assumed by the Company is the risk that the deductions for
sales and administrative expenses may prove insufficient to cover the actual
sales and administrative expenses. The Company deducts daily from Account G a
fee, which is equal on an annual basis to 1.15 percent of the daily value of the
total investments of Account G, for assuming the mortality and expense risks.
These fees were $4,243 for the period April 29, 1998, through December 31, 1998.
Pursuant to an agreement between Account G and the Company (which may be
terminated by the Company at any time), the Company provides administrative
services to Account G, as well as a minimum death benefit prior to retirement
for the contracts. In addition, the Company deducts units from individual
contracts annually and upon full surrender to cover an administrative fee of
$30, unless the value of the contract is $25,000 or greater. This fee is
recorded as a redemption in the accompanying Statement of Changes of Net Assets.
There were no administrative charges for the period April 29, 1998, through
December 31, 1998. The Company also deducts daily from Account G a fee, which is
equal on an annual basis to 0.15 percent of the daily value of the total
investments of Account G, for administrative expenses. These expenses were $509
for the period April 29, 1998, through December 31, 1998.
The MVA account is subject to a market value adjustment if the amounts are
withdrawn prior to the end of the guarantee period with certain exceptions. The
adjustment can be positive or negative depending on the changes in the U.S.
Treasury rates during the holding period of the MVA contract. There were no
charges for the period April 29, 1998, through December 31, 1998.
(5) Other Transactions With Affiliates
Conseco Equity Sales, Inc., an affiliate of the Company, is the principal
underwriter and performs all variable annuity sales functions on behalf of the
Company through various retail broker/dealers including Conseco Financial
Services, Inc., an affiliate of the Company.
(6) Net Assets
Net assets consisted of the following at December 31, 1998:
================================================================================
Proceeds from the sales of units since organization,
less cost of units redeemed ................................ $ 1,173,589
Undistributed net investment income ........................... 9,708
Undistributed net realized loss on sales of investments ....... (17,454)
Net unrealized appreciation of investments .................... 83,555
- --------------------------------------------------------------------------------
Net assets ............................................. $ 1,249,398
================================================================================
6
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
================================================================================
To The Board of Directors of Conseco Variable
Insurance Company and Contract Owners of
Great American Reserve Variable Annuity
Account G
In our opinion, the accompanying statement of assets and liabilities and
the related statements of operations and of changes in net assets present
fairly, in all material respects, the financial position of the Great American
Reserve Variable Annuity Account G (the "Account") at December 31, 1998, and the
results of its operations and the changes in its net assets from inception
(April 29, 1998) through December 31, 1998, in conformity with generally
accepted accounting principles. These financial statements are the
responsibility of the Account's management; our responsibility is to express an
opinion on these financial statements based on our audit. We conducted our audit
of these financial statements in accordance with generally accepted auditing
standards 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
audit, which included confirmation of portfolio shares owned at December 31,
1998 by correspondence with the custodians, provides a reasonable basis for the
opinion expressed above.
/s/PricewaterhouseCoopers LLP
Indianapolis, Indiana
February 10, 1999>>
7
<PAGE>
