File Nos. 333-
811-10213
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [X]
Pre-Effective Amendment No. [ ]
Post-Effective Amendment No. [ ]
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [X]
Amendment No. [ ]
(Check appropriate box or boxes.)
CONSECO VARIABLE ANNUITY ACCOUNT I
-------------------------------------------------
(Exact Name of Registrant)
CONSECO VARIABLE INSURANCE COMPANY
----------------------------------------
(Name of Depositor)
11815 N. Pennsylvania Street
Carmel, Indiana 46032-4572
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(Address of Depositor's Principal Executive Offices) (Zip Code)
<PAGE>
Depositor's Telephone Number, including Area Code (317) 817-3700
Name and Address of Agent for Service
Michael A. Colliflower
Conseco Variable Insurance Company
11815 N. Pennsylvania Street
Carmel, Indiana 46032-4572
(317) 817-3700
Copies to:
Lynn K. Stone
Blazzard, Grodd & Hasenauer, P.C.
943 Post Road East
Westport, CT 06880
Approximate Date of Proposed Public Offering:
As soon as practicable after the effective date of this Filing.
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The Registrant hereby amends this Registration Statement on such date or dates
as may be necessary to delay its effective date until the Registrant shall file
a further amendment which specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
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Title of Securities Registered:
Individual Flexible Premium Deferred Annuity Contracts
CROSS REFERENCE SHEET
(required by Rule 495)
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<CAPTION>
ITEM NO. Location
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<S> <C> <C>
PART A
Item 1. Cover Page Cover Page
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Item 2. Definitions Index of Special Terms
Item 3. Synopsis Summary
Item 4. Condensed Financial Information Not Applicable
Item 5. General Description of Registrant,
Depositor, and Portfolio Companies Other Information -
Conseco Variable; The
Separate Account;
Investment Options;
Appendix A
Item 6. Deductions and Expenses Expenses
Item 7. General Description of Variable
Annuity Contracts The Annuity Contract
Item 8. Annuity Period Annuity Payments
(The Annuity Period)
Item 9. Death Benefit Death Benefit
Item 10. Purchases and Contract Value Purchase
Item 11. Redemptions Access to Your Money
Item 12. Taxes Taxes
Item 13. Legal Proceedings None
Item 14. Table of Contents of the Statement
of Additional Information Table of Contents of the
Statement of Additional
Information
</TABLE>
CROSS REFERENCE SHEET
(required by Rule 495)
<TABLE>
<CAPTION>
ITEM NO. LOCATION
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<S> <C> <C>
PART B
Item 15. Cover Page Cover Page
Item 16. Table of Contents Table of Contents
Item 17. General Information and History Company
Item 18. Services Not Applicable
Item 19. Purchase of Securities Being Offered Not Applicable
Item 20. Underwriters Distribution
Item 21. Calculation of Performance Data Calculation of Performance
Information
Item 22. Annuity Payments Annuity Provisions
Item 23. Financial Statements Financial Statements
</TABLE>
PART C
Information required to be included in Part C is set forth under the appropriate
Item so numbered in Part C to this Registration Statement.
PART A
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INDIVIDUAL FLEXIBLE PREMIUM DEFERRED ANNUITY CONTRACT
ISSUED BY
CONSECO VARIABLE ANNUITY ACCOUNT I
AND
CONSECO VARIABLE INSURANCE COMPANY
This prospectus describes the individual flexible premium deferred annuity
contract, fixed and variable accounts (CONTRACT) offered by Conseco Variable
Insurance Company (we, us, our). This contract provides for the accumulation of
contract values and subsequent annuity payments on a fixed basis, a variable
basis or a combination of both.
The annuity Contract has 51 investment options which include a fixed
account and 50 investment portfolios listed below. You can put your money in the
fixed account, one or more investment portfolios or both. Your investments in
the portfolios are not guaranteed. You could lose your money. Money you direct
into the fixed account earns interest at a rate guaranteed by us. In certain
states, your contract may not offer a fixed account option. Currently, you can
invest in up to 25 investment options at the same time.
CONSECO SERIES TRUST
MANAGED BY CONSECO CAPITAL MANAGEMENT, INC.
<PAGE>
o Conseco 20 Focus Portfolio
o Equity Portfolio
o Balanced Portfolio
o High Yield Portfolio
o Fixed Income Portfolio
o Government Securities Portfolio
o Money Market Portfolio
THE ALGER AMERICAN FUND
MANAGED BY FRED ALGER MANAGEMENT, INC.
o Alger American Growth Portfolio
o Alger American Leveraged AllCap Portfolio
o Alger American MidCap Growth Portfolio
o Alger American Small Capitalization Portfolio
AMERICAN CENTURY VARIABLE PORTFOLIOS, INC.
MANAGED BY AMERICAN CENTURY INVESTMENT
MANAGEMENT, INC.
o VP Income & Growth
o VP International
o VP Value
BERGER INSTITUTIONAL PRODUCTS TRUST
MANAGED BY BERGER LLC
o Berger IPT-Growth Fund
o Berger IPT-Growth and Income Fund
o Berger IPT--Small Company Growth Fund
o Berger IPT--New Generation Fund
o Berger/IPT-International Fund
THE DREYFUS SOCIALLY RESPONSIBLE
GROWTH FUND, INC.
MANAGED BY THE DREYFUS CORPORATION
SUB-ADVISER - NCM CAPITAL MANAGEMENT
GROUP, INC.
DREYFUS STOCK INDEX FUND
MANAGED BY THE DREYFUS CORPORATION
INDEX FUND MANAGER - MELLON EQUITY ASSOCIATES
DREYFUS VARIABLE INVESTMENT FUND ("DREYFUS VIF")
MANAGED BY THE DREYFUS CORPORATION
o Disciplined Stock Portfolio
o International Value Portfolio
FEDERATED INSURANCE SERIES
MANAGED BY FEDERATED INVESTMENT MANAGEMENT CO.
o Federated High Income Bond Fund II
o Federated Utility Fund II
MANAGED BY FEDERATED GLOBAL INVESTMENT MANAGEMENT CORP.
o Federated International Equity Fund II
- ------------------------------------------------------------------------------
THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR DISAPPROVED
THESE SECURITIES OR DETERMINED IF THIS PROSPECTUS IS ACCURATE OR COMPLETE. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
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INVESCO VARIABLE INVESTMENT FUNDS, INC.
MANAGED BY INVESCO FUNDS GROUP, INC.
o INVESCO VIF-High Yield Fund
o INVESCO VIF-Equity Income Fund
JANUS ASPEN SERIES
MANAGED BY JANUS CAPITAL CORPORATION
o Aggressive Growth Portfolio
o Growth Portfolio
o Worldwide Growth Portfolio
LAZARD RETIREMENT SERIES, INC.
MANAGED BY LAZARD ASSET MANAGEMENT
o Lazard Retirement Equity Portfolio
o Lazard Retirement Small Cap Portfolio
LORD ABBETT SERIES FUND, INC.
MANAGED BY LORD, ABBETT & CO.
o Growth & Income Portfolio
MITCHELL HUTCHINS SERIES TRUST
MANAGED BY MITCHELL HUTCHINS ASSET MANAGEMENT INC.
o Growth and Income Portfolio
NEUBERGER BERMAN ADVISERS MANAGEMENT TRUST
MANAGED BY NEUBERGER BERMAN MANAGEMENT INC.
o Limited Maturity Bond Portfolio
o Partners Portfolio
PIONEER VARIABLE CONTRACTS TRUST, CLASS II SHARES
MANAGED BY PIONEER INVESTMENT MANAGEMENT, INC.
o Pioneer Fund VCT Portfolio
o Pioneer Equity-Income VCT Portfolio
o Pioneer Europe VCT Portfolio
RYDEX VARIABLE TRUST
MANAGED BY RYDEX GLOBAL ADVISORS
o OTC Fund
o Nova Fund
SELIGMAN PORTFOLIOS, INC.
MANAGED BY J. & W. SELIGMAN & CO. INCORPORATED
o Seligman Communications and Information Portfolio
o Seligman Global Technology Portfolio
STRONG OPPORTUNITY FUND II, INC.
<PAGE>
ADVISED BY STRONG CAPITAL MANAGEMENT, INC.
o Opportunity Fund II
STRONG VARIABLE INSURANCE FUNDS, INC.
ADVISED BY STRONG CAPITAL MANAGEMENT, INC.
o Strong MidCap Growth Fund II
VAN ECK WORLDWIDE INSURANCE TRUST
MANAGED BY VAN ECK ASSOCIATES CORPORATION
o Worldwide Bond Fund
o Worldwide Emerging Markets Fund
o Worldwide Hard Assets Fund
o Worldwide Real Estate Fund
Please read this prospectus before investing. You should keep it for future
reference. It contains important information about the contract.
To learn more about the contract, you can obtain a copy of our Statement of
Additional Information (SAI) dated _______________. The SAI has been filed with
the Securities and Exchange Commission (SEC) and is legally a part of this
prospectus. The SEC has a Web site (http://www.sec.gov) that contains the SAI,
material incorporated by reference, and other information regarding companies
that file electronically with the SEC. The Table of Contents of the SAI is on
page __ of this prospectus. For a free copy of the SAI, call us at (800)
824-2726 or write us at our administrative office: 11815 N. Pennsylvania Street,
Carmel, Indiana 46032-4555.
THE CONTRACTS:
o ARE NOT BANK DEPOSITS
o ARE NOT FEDERALLY INSURED
o ARE NOT ENDORSED BY ANY BANK OR GOVERNMENT AGENCY
o ARE NOT GUARANTEED AND MAY BE SUBJECT TO LOSS OF PRINCIPAL
CONSECO VARIABLE INSURANCE COMPANY
2001 ACCOUNT I
INDIVIDUAL ANNUITY
<PAGE>
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TABLE OF CONTENTS
PAGE
INDEX OF SPECIAL TERMS .....................................................
SUMMARY.....................................................................
FEE TABLE ..................................................................
THE COMPANY ................................................................
THE CONTRACT................................................................
PURCHASE ...................................................................
Purchase Payments ........................................................
Allocation of Purchase Payments ..........................................
Free Look ................................................................
INVESTMENT OPTIONS .........................................................
Investment Portfolios ....................................................
The Fixed Account ........................................................
The General Account ......................................................
Voting Rights ............................................................
Substitution .............................................................
Transfers ................................................................
Dollar Cost Averaging Program ............................................
Rebalancing Program ......................................................
Asset Allocation Program .................................................
Sweep Program ............................................................
EXPENSES ...................................................................
Insurance Charges ........................................................
Contract Maintenance Charge ..............................................
Contingent Deferred Sales Charge .........................................
Reduction or Elimination of the Contingent Deferred Sales Charge .........
Transfer Fee .............................................................
Premium Taxes ............................................................
Income Taxes .............................................................
Investment Portfolio Expenses ............................................
CONTRACT VALUE .............................................................
Accumulation Units .......................................................
ACCESS TO YOUR MONEY .......................................................
Systematic Withdrawal Program ............................................
Suspension of Payments or Transfers ......................................
DEATH BENEFIT ..............................................................
Upon Your Death During the Accumulation Period ...........................
Death Benefit Amount During the Accumulation Period ......................
Payment of Death Benefit During the Accumulation Period ..................
Death of Contract Owner During the Annuity Period ........................
Death of Annuitant .......................................................
<PAGE>
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TABLE OF CONTENTS CONT'D
PAGE
ANNUITY PAYMENTS (THE ANNUITY PERIOD) ......................................
Annuity Payment Amount ...................................................
Annuity Options ..........................................................
TAXES ......................................................................
Annuity Contracts in General .............................................
Qualified and Non-Qualified Contracts ....................................
Withdrawals--Non-Qualified Contracts .....................................
Withdrawals--Qualified Contracts .........................................
Withdrawals--Tax-Sheltered Annuities .....................................
Diversification ..........................................................
Investor Control .........................................................
PERFORMANCE ................................................................
OTHER INFORMATION ..........................................................
The Separate Account .....................................................
Distributor ..............................................................
Ownership ................................................................
Beneficiary ..............................................................
Assignment ...............................................................
Internal Appeals Procedures...............................................
Financial Statements .....................................................
APPENDIX A .................................................................
TABLE OF CONTENTS OF THE STATEMENT OF ADDITIONAL INFORMATION ...............
<PAGE>
CONSECO VARIABLE INSURANCE COMPANY
2001 ACCOUNT I
INDIVIDUAL ANNUITY
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INDEX OF SPECIAL TERMS
We have used some special and technical words or terms in this prospectus
to describe the Contract. Some of these special or technical words need to be
defined or explained. This index tells you where to look for the best
explanation of a special word or term. These words and terms are in italics on
the indicated page.
Page
Accumulation Period ........................................................
Accumulation Unit ..........................................................
Annuitant ..................................................................
Annuity Date ...............................................................
Annuity Options ............................................................
Annuity Payments ...........................................................
Annuity Period .............................................................
Annuity Unit ...............................................................
Beneficiary ................................................................
Contract ...................................................................
Investment Portfolios ......................................................
Joint Owner ................................................................
Non-Qualified ..............................................................
Owner ......................................................................
Purchase Payment ...........................................................
Qualified ..................................................................
Tax-Deferral ...............................................................
<PAGE>
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SUMMARY
The sections in this summary correspond to sections in this prospectus, which
discuss the topics in more detail. Please read the entire prospectus carefully.
THE CONTRACT
The variable annuity contract that we are offering is a contract between
you (the owner) and Conseco Variable Insurance Company (Conseco Variable, we,
us). The contract provides a way for you to invest on a tax-deferred basis in
the sub-accounts (also referred to as investment portfolios) of Conseco Variable
Annuity Account I (Separate Account) and the fixed account. The fixed account
may not be available in your state. The contract is intended to be used to
accumulate money for retirement or other long-term tax-deferred investment
purposes.
The contract offers a guaranteed minimum death benefit option and a
guaranteed minimum income benefit option. These options guarantee minimum death
benefit and annuity payment amounts. There is an additional charge for these
options. These options may not be available in your state.
All deferred annuity contracts, like our contract, have two periods: the
accumulation period and the annuity period. During the accumulation period, any
earnings accumulate on a tax-deferred basis and are taxed as ordinary income
when you make a withdrawal. If you make a withdrawal during the accumulation
period, we may assess a charge of up to 7% of each purchase payment withdrawn.
The annuity period occurs when you begin receiving regular annuity payments from
your contract.
During the annuity period you can choose to receive annuity payments on a
variable basis, on a fixed basis or a combination of both. If you choose
variable payments, the amount of the variable annuity payments will depend upon
the investment performance of the investment portfolios you select for the
annuity period. If you choose fixed payments, the amount of the fixed annuity
payments are constant for the entire annuity period.
FREE LOOK. If you cancel the contract within 10 days after receiving it (or
whatever longer time period is required in your state), we will cancel the
contract without assessing a contingent deferred sales charge. You will receive
whatever your contract is worth on the day we receive your request for
cancellation. This may be more or less than your original payment. We will
return your original payment if required by law.
TAX PENALTY. The earnings in your contract are not taxed until you take
money out of your contract. If you take money out during the accumulation
period, earnings come out first and are taxed as ordinary income. If you are
younger than age 59 1/2 when you take money out, you may be charged a 10%
federal tax penalty on those earnings. Payments during the annuity period are
considered partly a return of your original investment. The part of each payment
that is a return of your investment is not taxable as income.
INQUIRIES. If you need more information, please contact us at:
Conseco Variable Insurance Company
11815 N. Pennsylvania Street
Carmel, Indiana 46032
(800) 824-2726
<PAGE>
CONSECO VARIABLE INSURANCE COMPANY
2001 ACCOUNT I
INDIVIDUAL ANNUITY
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FEE TABLE
The Fee Table shows the various contract expenses you will pay directly or
indirectly. The Fee Table reflects expenses of Separate Account I as well as the
investment portfolios.
OWNER TRANSACTION EXPENSES:
CONTINGENT DEFERRED SALES CHARGE: (as a percentage of Purchase Payments)(See
Note 1 on page __)
NO. OF CONTRACT YEARS FROM CONTINGENT DEFERRED
RECEIPT OF PURCHASE PAYMENT SALES CHARGE PERCENT
------------------------------------------------------------
0-1............................................ 7%
2.............................................. 7%
3.............................................. 6%
4.............................................. 5%
5.............................................. 4%
6.............................................. 3%
7.............................................. 2%
8 and more..................................... 0%
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TRANSFER FEE: (See Note 2 on No charge for one transfer in each 30 day
page __) period during the accumulation period.
Thereafter, we may charge a fee of $25 per
transfer. We will not charge for the two
transfers allowed each contract year during
the annuity period.
CONTRACT MAINTENANCE CHARGE: $30 per contract per year (this charge can be
(See Note 3 on page __) increased up to a maximum of $60 per contract
per year)
SEPARATE ACCOUNT ANNUAL EXPENSES: (See Note 4 on page __)
(as a percentage of average
account value)
INSURANCE CHARGES TOTAL
(COMPRISED OF THE SEPARATE
MORTALITY AND ACCOUNT
EXPENSE RISK ANNUAL
CHARGE AND EXPENSES
ADMINISTRATIVE
CHARGE)
------------------ --------
Standard contract (current charge)........... 1.40% 1.40%
Standard contract (maximum charge)........... 1.65% 1.65%
Contract with guaranteed minimum
death benefit (current charge) ............ 1.70% 1.70%
Contract with guaranteed minimum
death benefit (maximum charge) ............ 2.15% 2.15%
Contract with guaranteed minimum
death benefit and guaranteed
minimum income benefit (current charge) ... 2.00% 2.00%
Contract with guaranteed minimum
death benefit and guaranteed minimum
income benefit (maximum charge) ........... 2.65% 2.65%
<PAGE>
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INVESTMENT PORTFOLIO EXPENSES:
(as a percentage of the average daily net assets of an investment portfolio)
TOTAL ANNUAL
PORTFOLIO
OTHER EXPENSES EXPENSES
(AFTER EXPENSE (AFTER EXPENSE
REIMBURSEMENT, REIMBURSEMENT,
MANAGE- IF ANY, FOR IF ANY, FOR
MENT 12b-1 CERTAIN CERTAIN
FEES FEES PORTFOLIOS) PORTFOLIOS)
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
CONSECO SERIES TRUST (5)
- ------------------------------------------------------------------------------
Conseco 20 Focus Portfolio (6) .... 0.80% -- 0.10% 0.90%
Equity Portfolio .................. 0.75% -- 0.02% 0.77%
Balanced Portfolio ................ 0.75% -- 0.00% 0.75%
High Yield Portfolio (6) .......... 0.80% -- 0.10% 0.90%
Fixed Income Portfolio ............ 0.60% -- 0.07% 0.67%
Government Securities Portfolio ... 0.60% -- 0.06% 0.66%
Money Market Portfolio (7) ........ 0.35% -- 0.05% 0.40%
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THE ALGER AMERICAN FUND
--------------------------------------------------------------------------------
Alger American Growth Portfolio ... 0.75% -- 0.04% 0.79%
Alger American Leveraged
AllCap Portfolio (8) ............ 0.85% -- 0.08% 0.93%
Alger American MidCap
Growth Portfolio ................ 0.80% -- 0.05% 0.85%
Alger American Small
Capitalization Portfolio ........ 0.85% -- 0.05% 0.90%
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AMERICAN CENTURY VARIABLE PORTFOLIOS, INC.
--------------------------------------------------------------------------------
VP Income & Growth(9) ............. 0.70% -- 0.00% 0.70%
VP International (9) .............. 1.34% -- 0.00% 1.34%
VP Value(9) ....................... 1.00% -- 0.00% 1.00%
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BERGER INSTITUTIONAL PRODUCTS TRUST
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Berger IPT-Growth Fund (10) ....... 0.75% -- 0.25% 1.00%
Berger IPT-Growth and
Income Fund (10) ................ 0.75% -- 0.25% 1.00%
Berger IPT-Small Company
Growth Fund (10) ................ 0.85% -- 0.30% 1.15%
Berger IPT-New Generation
Fund (10) ....................... 0.85% -- 0.30% 1.15%
Berger/ IPT -International
Fund (10) ....................... 0.90% -- 0.30% 1.20%
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THE DREYFUS SOCIALLY RESPONSIBLE
GROWTH FUND, INC. 0.75% -- 0.04% 0.79%
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
DREYFUS STOCK INDEX FUND .......... 0.25% -- 0.01% 0.26%
--------------------------------------------------------------------------------
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DREYFUS VARIABLE INVESTMENT FUND
--------------------------------------------------------------------------------
Disciplined
Stock Portfolio ................. 0.75% -- 0.06% 0.81%
International
Value Portfolio ................. 1.00% -- 0.35% 1.35%
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FEDERATED INSURANCE SERIES
--------------------------------------------------------------------------------
Federated High Income
Bond Fund II .................... 0.60% -- 0.19% 0.79%
Federated International
Equity Fund II (11) ............. 0.54% -- 0.71% 1.25%
Federated Utility Fund II ......... 0.75% -- 0.19% 0.94%
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INVESCO VARIABLE INVESTMENT FUNDS, INC.
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INVESCO VIF-High Yield
Fund (12) ....................... 0.60% -- 0.47% 1.07%
INVESCO VIF--Equity Income
Fund (12) ....................... 0.75% -- 0.42% 1.17%
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JANUS ASPEN SERIES
--------------------------------------------------------------------------------
Aggressive Growth Portfolio (13) .. 0.65% -- 0.02% 0.67%
Growth Portfolio (13) ............. 0.65% -- 0.02% 0.67%
Worldwide Growth Portfolio (13) ... 0.65% -- 0.05% 0.70%
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LAZARD RETIREMENT SERIES, INC.
--------------------------------------------------------------------------------
Lazard Retirement Equity
Portfolio (14) .................. 0.75% 0.25% 0.25% 1.25%
Lazard Retirement Small Cap
Portfolio (14) .................. 0.75% 0.25% 0.25% 1.25%
<PAGE>
CONSECO VARIABLE INSURANCE COMPANY
2001 ACCOUNT I
INDIVIDUAL ANNUITY
================================================================================
TOTAL ANNUAL
PORTFOLIO
OTHER EXPENSES EXPENSES
(AFTER EXPENSE (AFTER EXPENSE
REIMBURSEMENT, REIMBURSEMENT,
MANAGE- IF ANY, FOR IF ANY, FOR
MENT 12B-1 CERTAIN CERTAIN
FEES FEES PORTFOLIOS) PORTFOLIOS)
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
LORD ABBETT SERIES FUND, INC.
--------------------------------------------------------------------------------
Growth & Income Portfolio ......... 0.50% -- 0.37% 0.87%
--------------------------------------------------------------------------------
MITCHELL HUTCHINS SERIES TRUST
--------------------------------------------------------------------------------
Growth and Income Portfolio ....... 0.70% -- 0.53% 1.23%
--------------------------------------------------------------------------------
NEUBERGER BERMAN ADVISERS MANAGEMENT TRUST
--------------------------------------------------------------------------------
Limited Maturity Bond Portfolio ... 0.65% -- 0.11% 0.76%
Partners Portfolio ................ 0.80% -- 0.07% 0.87%
--------------------------------------------------------------------------------
PIONEER VARIABLE CONTRACTS TRUST, CLASS II SHARES
--------------------------------------------------------------------------------
<PAGE>
Pioneer Fund VCT Portfolio (15).... 0.65% 0.25% 0.07% .97%
Pioneer Equity-Income VCT
Portfolio(15).................. 0.65% 0.25% 0.09% .99%
Pioneer Europe VCT Portfolio (15).. 1.00% 0.25% 0.47% 1.72%
--------------------------------------------------------------------------------
RYDEX VARIABLE TRUST
--------------------------------------------------------------------------------
OTC Fund .......................... 0.75% -- 0.80% 1.55%
Nova Fund ......................... 0.75% -- 0.80% 1.55%
--------------------------------------------------------------------------------
SELIGMAN PORTFOLIOS, INC.
--------------------------------------------------------------------------------
Seligman Communications and
Information Portfolio,
Class 2 (16) ................ 0.75% 0.25% 0.11% 1.11%
Seligman Global Technology
Portfolio,
Class 2 (16) .................. 1.00% 0.15% 0.40% 1.55%
--------------------------------------------------------------------------------
STRONG OPPORTUNITY FUND II, INC.
--------------------------------------------------------------------------------
Opportunity Fund II ............... 1.00% -- 0.10% 1.10%
--------------------------------------------------------------------------------
STRONG VARIABLE INSURANCE FUNDS, INC.
--------------------------------------------------------------------------------
Strong Mid Cap Growth
Fund II .................... 1.00% -- 0.17% 1.17%
--------------------------------------------------------------------------------
VAN ECK WORLDWIDE INSURANCE TRUST (17)
--------------------------------------------------------------------------------
Worldwide Bond Fund................ 1.00% -- 0.22% 1.22%
Worldwide Emerging Markets Fund.... 1.00% -- 0.34% 1.34%
Worldwide Hard Assets Fund ........ 1.00% -- 0.26% 1.26%
Worldwide Real Estate Fund ........ 1.00% -- 0.44% 1.44%
EXPLANATION OF FEE TABLE AND EXAMPLES:
1. Each contract year you can make one withdrawal without a contingent
deferred sales charge. The amount of money you can withdraw without a contingent
deferred sales charge is the greater of:
(i) 10% of the value of your contract (on a non-cumulative basis);
(ii) the IRS minimum distribution requirement for your contract if
issued in connection with certain Individual Retirement Annuities;
or
<PAGE>
(iii) the total of your purchase payments that have been in the contract
more than 7 complete years.
2. We will not charge you the transfer fee even if there is more than one
transfer in a 30-day period during the accumulation period if the transfer is
for pre-approved dollar cost averaging or rebalancing programs. We will also not
charge you a transfer fee on transfers made at the end of the free look period.
All reallocations made on the same day count as one transfer.
3. We will not charge the contract maintenance charge if the value of your
contract is $50,000 or more.
<PAGE>
4. The Fee Table and contract refer to Insurance Charges. The Insurance
Charge is equivalent to the aggregate charges that until recently were referred
to as a Mortality and Expense Risk Charge and an Administrative Charge by many
companies issuing variable annuity contracts. Throughout this prospectus we will
refer to this charge as an Insurance Charge.
The Fee Table reflects the current Insurance Charges for your contract. We
reserve the right to increase the Insurance Charge in the future. These maximum
charges are also reflected in the Fee Table.
5. The Adviser, Conseco Capital Management, Inc., and the Administrator,
Conseco Services, LLC, have contractually agreed to waive a portion of their
fees and/or pay a portion of the Portfolio's expenses through 4/30/01 to ensure
that total annual operating expenses do not exceed: 0.90% for Conseco 20 Focus
Portfolio; 0.85% for Equity Portfolio; 0.85% for Balanced Portfolio; 0.90% for
High Yield Portfolio; 0.70% for Fixed Income Portfolio; 0.70% for Government
Securities Portfolio and 0.45% for Money Market Portfolio. The Adviser and
Administrator may recover any money waived under the contract provisions, to the
extent that actual fees and expenses are less than the expense limitation, for a
period of 3 years, after the date of the waiver.
6. Because these Portfolios have not completed a full fiscal year, other
expenses are estimated.
7. Conseco Capital Management, Inc., since May 1, 1993, has waived its
management fees in excess of the annual rates set forth above. Absent such
fee waivers, the management fees for the Money Market Portfolio would be
0.60%.
8. The Alger American Leveraged AllCap Portfolio's "Other Expenses"
includes .01% of interest expense.
9. The fund has a stepped fee schedule. As a result, the fund's management
fee rate generally decreases as the fund's assets increase.
10. The Funds' investment advisers have agreed to waive their advisory fee
and reimburse the Funds for additional expenses to the extent that normal
operating expenses in any fiscal year, including the investment advisory fee but
excluding brokerage commissions, interest, taxes and extraordinary expenses, of
each of the Berger IPT-Growth Fund and the Berger IPT-Growth and Income Fund
exceed 1.00%, the normal operating expenses in any fiscal year of each of the
Berger IPT--Small Company Growth Fund and the Berger IPT-New Generation Fund
exceed 1.15%, and the normal operating expenses of the Berger/IPT-International
Fund exceed 1.20% of the respective Fund's average daily net assets. Absent the
waiver and reimbursement, Other Expenses for the Berger IPT--Growth Fund, the
Berger IPT-New Generation Fund, the Berger IPT-Growth and Income Fund, the
Berger IPT-Small Company Growth Fund and the Berger/ IPT-International Fund
would have been 1.43%, 2.10%, 0.43%, 0.64% and 1.55%, respectively, and their
Total Annual Portfolio Expenses would have been 2.18%, 1.18%, 1.49%, 2.95% and
2.45%, respectively. These waivers/reimbursements may not be terminated or
amended except by a vote of the Fund's Board of Trustees. Expenses shown for the
Berger IPT-New Generation Fund are based on estimates for the Fund's first full
year of operations.
11. Absent a voluntary waiver of the management fee and the voluntary
reimbursement of certain other operating expenses by Federated Global Investment
Management Corp., the Management Fee and Total Annual Portfolio Expenses for
International Equity Fund II would have been 0.75% and 1.46% respectively.
12. The Fund's actual Total Annual Fund Operating Expenses were lower than
the figures shown, because its custodian fees were reduced under an expense
offset arrangement. The expense information in the table has been restated from
the financials to reflect a change in the administrative services fee. Certain
expenses of the Fund were absorbed voluntarily by INVESCO pursuant to a
commitment between the Fund and INVESCO. This commitment may be changed at any
time following consultation with the board of directors. Without such
absorption, but excluding any expense offset arrangements, Other Expenses and
Total Annual Operating Expenses for the fiscal year ended December 31, 1999 were
0.48% and 1.08% respectively of the High Yield Fund's average net assets, and
0.44% and 1.19% respectively of the Equity Income Fund's average net assets.
13. Expenses are based upon expenses for the fiscal year ended December 31,
1999 restated to reflect a reduction in the management fee for Growth,
Aggressive Growth and Worldwide. All expenses are shown without the effect of
expense offset arrangements.
14. Effective May 1, 1999, Lazard Asset Management, the Fund's investment
adviser, has voluntarily agreed to reimburse all expenses through December 31,
2000 to the extent total annual portfolio expenses exceed in any fiscal year
1.25% of the Portfolio's average daily net assets. Absent such an agreement with
the adviser, the total annual portfolio expenses for the year ended December 31,
1999 would have been 5.63% for the Lazard Retirement Equity Portfolio and 7.31%
for the Lazard Retirement Small Cap Portfolio.
15. Expenses for the year ended December 31, 2000 are estimated. With
respect to the Pioneer Europe VCT Portfolio, absent expense offsets, other
expenses are estimated to be .49% for the year ended December 31, 2000.
16. The amount of the Management Fee and Other Expenses are actual expenses
for the fiscal year ended December 31, 1999. Seligman Communications and
Information Portfolio and Seligman Global Technology Portfolio began offering
Class 2 shares charging 12b-1 fees effective May 1, 2000. J. & W. Seligman & Co.
Incorporated ("Seligman") voluntarily agreed to reimburse expenses of Seligman
Global Technology Portfolio, other than the management fee, which exceed .40%.
Without reimbursement, other expenses and total annual portfolio expenses would
have been .41% and 1.56% respectively, for Seligman Global Technology Portfolio.
There is no assurance that Seligman will continue this policy in the future.
17. Van Eck Associates Corporation (the "Adviser") agreed to assume
expenses (excluding interest, foreign taxes and brokerage commissions) exceeding
1.50% of the Worldwide Emerging Markets Fund's average daily net assets for the
period January 1, 1999 to May 12, 1999. For the period May 13, 1999 to December
31, 1999, the Adviser agreed to assume expenses (excluding interest, foreign
taxes and brokerage commissions) exceeding 1.30% of average daily net assets.
For the Worldwide Real Estate Fund, the Adviser agreed to assume expenses
(excluding interest, foreign taxes and brokerage commissions) for the period
January 2, 1999 to February 28, 1999. The Adviser also agreed to assume expenses
exceeding 1.50% of the Worldwide Real Estate Fund's average daily net assets for
the period March 3, 1999 to December 31, 1999. The Worldwide Real Estate Fund
expenses were also reduced by a fee arrangement based on cash balances left on
deposit with the custodian and a directed brokerage arrangement where the Fund
directs certain portfolio trades to a broker that, in turn, pays a portion of
the Fund's expenses.
<PAGE>
================================================================================
EXAMPLES:
The Examples should not be considered a representation of past or future
expenses. Actual expenses may be greater or less than those shown. For purposes
of these examples, the assumed average contract size is $30,000.
The examples in Chart 1 below assume that you do not elect the guaranteed
minimum death benefit or the guaranteed minimum income benefit. The examples in
Chart 2 below assume that you elect the guaranteed minimum death benefit and the
guaranteed minimum income benefit and the maximum insurance charges (as opposed
to the current charges for your Contract) apply.
Premium taxes may apply depending on the state where you live. The
examples do not include any state premium taxes.
You would pay the following expenses on a $1,000 investment, assuming a
hypothetical 5% annual return on assets, and assuming the entire $1,000 is
invested in the option listed:
(a) If you surrender your contract at the end of each time period or if
you annuitize your contract (except if your annuity date is on or
after the 5th contract anniversary and you choose an annuity option
that has a life contingency for a minimum of 5 years);
(b) If you do not surrender your contract.
TIME PERIODS
CHART 1 1 YEAR 3 YEARS
--------------------------------------------------------------------------------
CONSECO SERIES TRUST
Conseco 20 Focus ............................................. (a)$ 87 (a)$127
(b)$ 24 (b)$ 74
Equity ....................................................... (a)$ 86 (a)$123
(b)$ 23 (b)$ 70
Balanced ..................................................... (a)$ 85 (a)$123
(b)$ 23 (b)$ 69
High Yield ................................................... (a)$ 87 (a)$127
(b)$ 24 (b)$ 74
Fixed Income ................................................. (a)$ 85 (a)$120
(b)$ 22 (b)$ 67
Government Securities ........................................ (a)$ 84 (a)$120
(b)$ 22 (b)$ 67
Money Market ................................................. (a)$ 82 (a)$112
(b)$ 19 (b)$ 59
THE ALGER AMERICAN FUND
Alger American Growth ........................................ (a)$ 86 (a)$124
(b)$ 23 (b)$ 71
Alger American Leveraged AllCap .............................. (a)$ 87 (a)$128
(b)$ 24 (b)$ 75
Alger American MidCap Growth ................................. (a)$ 86 (a)$126
(b)$ 24 (b)$ 72
Alger American Small Capitalization .......................... (a)$ 87 (a)$127
(b)$ 24 (b)$ 74
<PAGE>
AMERICAN CENTURY VARIABLE PORTFOLIOS, INC.
VP Income & Growth ........................................... (a)$ 85 (a)$121
(b)$ 22 (b)$ 68
VP International ............................................. (a)$ 91 (a)$141
(b)$ 28 (b)$ 87
VP Value ..................................................... (a)$ 88 (a)$130
(b)$ 25 (b)$ 77
BERGER INSTITUTIONAL PRODUCTS TRUST
Berger IPT-Growth ........................................... (a)$ 88 (a)$130
(b)$ 25 (b)$ 77
Berger IPT-Growth and Income ................................ (a)$ 88 (a)$130
(b)$ 25 (b)$ 77
Berger IPT-Small Company Growth ............................. (a)$ 89 (a)$135
(b)$ 27 (b)$ 81
Berger IPT-New Generation ................................... (a)$ 89 (a)$135
(b)$ 27 (b)$ 81
Berger/ IPT -International ............................... (a)$ 90 (a)$136
(b)$ 27 (b)$ 83
CONSECO VARIABLE INSURANCE COMPANY
2001 ACCOUNT I
INDIVIDUAL ANNUITY
================================================================================
TIME PERIODS
1 YEAR 3 YEARS
- ------------------------------------------------------------------------------
THE DREYFUS SOCIALLY RESPONSIBLE GROWTH FUND, INC. .......... (a)$ 86 (a)$124
(b)$ 23 (b)$ 71
DREYFUS STOCK INDEX FUND .................................... (a)$ 80 (a)$108
(b)$ 18 (b)$ 55
DREYFUS VARIABLE INVESTMENT FUND
Disciplined Stock Portfolio ................................. (a)$ 86 (a)$125
(b)$ 23 (b)$ 71
International Value Portfolio ............................... (a)$ 91 (a)$141
(b)$ 29 (b)$ 87
FEDERATED INSURANCE SERIES
Federated High Income Bond II ............................... (a)$ 86 (a)$124
(b)$ 23 (b)$ 71
Federated International Equity II ........................... (a)$ 90 (a)$138
(b)$ 28 (b)$ 84
Federated Utility II ........................................ (a)$ 87 (a)$129
(b)$ 24 (b)$ 75
INVESCO VARIABLE INVESTMENT FUNDS, INC.
INVESCO VIF--High Yield ..................................... (a)$ 89 (a)$133
(b)$ 26 (b)$ 79
INVESCO VIF--Equity Income .................................. (a)$ 90 (a)$136
(b)$ 27 (b)$ 82
JANUS ASPEN SERIES
Aggressive Growth ........................................... (a)$ 85 (a)$120
(b)$ 22 (b)$ 67
Growth ...................................................... (a)$ 85 (a)$120
(b)$ 22 (b)$ 67
Worldwide Growth ............................................ (a)$ 85 (a)$121
(b)$ 22 (b)$ 68
LAZARD RETIREMENT SERIES, INC.
Lazard Retirement Equity .................................... (a)$ 90 (a)$138
(b)$ 28 (b)$ 84
Lazard Retirement Small Cap ................................. (a)$ 90 (a)$138
(b)$ 28 (b)$ 84
LORD ABBETT SERIES FUND, INC.
Growth & Income ............................................. (a)$ 87 (a)$127
(b)$ 24 (b)$ 73
MITCHELL HUTCHINS SERIES TRUST
Growth and Income ........................................... (a)$ 90 (a)$137
(b)$ 27 (b)$ 84
NEUBERGER BERMAN ADVISERS MANAGEMENT TRUST
Limited Maturity Bond ....................................... (a)$ 85 (a)$123
(b)$ 23 (b)$ 70
Partners .................................................... (a)$ 87 (a)$127
(b)$ 24 (b)$ 73
PIONEER VARIABLE CONTRACTS TRUST, CLASS II SHARES
Pioneer Fund VCT Portfolio................................... (a)$88 (a)$130
(b)$25 (b)$ 76
Pioneer Equity-Income VCT Portfolio.......................... (a)$88 (a)$130
(b)$25 (b)$ 77
Pioneer Europe VCT Portfolio................................. (a)$95 (a)$152
(b)$32 (b)$ 98
RYDEX VARIABLE TRUST
OTC ......................................................... (a)$ 93 (a)$147
(b)$ 31 (b)$ 93
Nova ........................................................ (a)$ 93 (a)$147
(b)$ 31 (b)$ 93
SELIGMAN PORTFOLIOS, INC.
Seligman Communications and Information Portfolio,
Class 2 .................................................. (a)$ 89 (a)$134
(b)$ 26 (b)$ 80
Seligman Global Technology Portfolio,
Class 2.......................... ........................ (a)$ 93 (a)$147
(b)$ 31 (b)$ 93
STRONG OPPORTUNITY FUND II, INC.
Opportunity Fund II ......................................... (a)$ 89 (a)$133
(b)$ 26 (b)$ 80
STRONG VARIABLE INSURANCE FUNDS, INC.
Strong MidCap Growth Fund II ............................... (a)$ 90 (a)$136
(b)$ 27 (b)$ 82
VAN ECK WORLDWIDE INSURANCE TRUST
Worldwide Bond Fund ........................................ (a)$ 90 (a)$137
(b)$ 27 (b)$ 83
Worldwide Emerging Markets Fund ............................ (a)$ 91 (a)$141
(b)$ 28 (b)$ 87
Worldwide Hard Assets Fund.................................. (a)$ 90 (a)$138
(b)$ 28 (b)$ 85
Worldwide Real Estate Fund.................................. (a)$ 92 (a)$144
(b)$ 29 (b)$ 90
<PAGE>
CHART 2
- ------------------------------------------------------------------------------
CONSECO SERIES TRUST
Conseco 20 Focus ........................................... (a)$ 99 (a)$165
(b)$ 37 (b)$111
Equity ..................................................... (a)$ 98 (a)$161
(b)$ 35 (b)$107
Balanced ................................................... (a)$ 98 (a)$160
(b)$ 35 (b)$107
High Yield ................................................. (a)$ 99 (a)$165
. (b)$ 37 (b)$111
Fixed Income ............................................... (a)$ 97 (a)$158
(b)$ 34 (b)$104
Government Securities ...................................... (a)$ 97 (a)$158
(b)$ 34 (b)$104
Money Market ............................................... (a)$ 94 (a)$150
(b)$ 32 (b)$ 96
THE ALGER AMERICAN FUND
Alger American Growth ...................................... (a)$ 98 (a)$161
(b)$ 35 (b)$108
Alger American Leveraged AllCap ............................ (a)$100 (a)$166
(b)$ 37 (b)$112
Alger American MidCap Growth ............................... (a)$ 99 (a)$163
(b)$ 36 (b)$110
Alger American Small Capitalization ........................ (a)$ 99 (a)$165
(b)$ 37 (b)$111
AMERICAN CENTURY VARIABLE PORTFOLIOS, INC.
VP Income & Growth ......................................... (a)$ 97 (a)$159
(b)$ 35 (b)$105
VP International ........................................... (a)$104 (a)$178
(b)$ 41 (b)$124
VP Value ................................................... (a)$100 (a)$168
(b)$ 38 (b)$114
BERGER INSTITUTIONAL PRODUCTS TRUST
Berger IPT--Growth ......................................... (a)$100 (a)$168
(b)$ 38 (b)$114
Berger IPT--Growth and Income .............................. (a)$100 (a)$168
(b)$ 38 (b)$114
Berger IPT--Small Company Growth ........................... (a)$102 (a)$172
(b)$ 39 (b)$118
Berger IPT--New Generation ................................. (a)$102 (a)$172
(b)$ 39 (b)$118
Berger/ IPT-International .................................. (a)$102 (a)$174
(b)$ 40 (b)$120
THE DREYFUS SOCIALLY RESPONSIBLE GROWTH FUND, INC. ......... (a)$ 98 (a)$161
<PAGE>
(b)$ 35 (b)$108
DREYFUS STOCK INDEX FUND ................................... (a)$ 93 (a)$146
(b)$ 30 (b)$ 92
DREYFUS VARIABLE INVESTMENT FUND
Disciplined Stock Portfolio ................................ (a)$ 98 (a)$162
(b)$ 36 (b)$108
International Value Portfolio............................... (a)$104 (a)$178
(b)$ 41 (b)$124
FEDERATED INSURANCE SERIES
Federated High Income Bond II .............................. (a)$ 98 (a)$161
(b)$ 35 (b)$108
Federated International Equity II .......................... (a)$103 (a)$175
(b)$ 40 (b)$121
Federated Utility II ....................................... (a)$100 (a)$166
(b)$ 37 (b)$112
INVESCO VARIABLE INVESTMENT FUNDS, INC.
INVESCO VIF--High Yield .................................... (a)$101 (a)$170
(b)$ 38 (b)$116
INVESCO VIF-Equity Income ................................. (a)$102 (a)$173
(b)$ 39 (b)$119
JANUS ASPEN SERIES
Aggressive Growth .......................................... (a)$ 97 (a)$158
(b)$ 34 (b)$104
Growth ..................................................... (a)$ 97 (a)$158
(b)$ 34 (b)$104
Worldwide Growth ........................................... (a)$ 97 (a)$159
(b)$ 35 (b)$105
LAZARD RETIREMENT SERIES, INC.
Lazard Retirement Equity ................................... (a)$103 (a)$175
(b)$ 40 (b)$121
Lazard Retirement Small Cap ................................ (a)$103 (a)$175
(b)$ 40 (b)$121
LORD ABBETT SERIES FUND, INC.
Growth & Income ............................................ (a)$ 99 (a)$164
(b)$ 36 (b)$110
MITCHELL HUTCHINS SERIES TRUST
Growth and Income .......................................... (a)$103 (a)$174
(b)$ 40 (b)$121
NEUBERGER BERMAN ADVISERS MANAGEMENT TRUST
Limited Maturity Bond ...................................... (a)$ 98 (a)$161
(b)$ 35 (b)$107
Partners ................................................... (a)$ 99 (a)$164
(b)$ 36 (b)$110
PIONEER VARIABLE CONTRACTS TRUST, CLASS II SHARES
Pioneer Fund VCT Portfolio................................... (a)$100 (a)$167
(b)$ 37 (b)$113
Pioneer Equity-Income VCT Portfolio.......................... (a)$100 (a)$167
(b)$ 37 (b)$114
Pioneer Europe VCT Portfolio................................. (a)$108 (a)$189
(b)$ 45 (b)$135
RYDEX VARIABLE TRUST
OTC ........................................................ (a)$106 (a)$184
(b)$ 43 (b)$130
Nova ....................................................... (a)$106 (a)$184
(b)$ 43 (b)$130
SELIGMAN PORTFOLIOS, INC.
Seligman Communications and Information
Portfolio, Class 2 ....................................... (a)$102 (a)$171
(b)$ 39 (b)$117
Seligman Global Technology
Portfolio, Class 2 ....................................... (a)$106 (a)$184
(b)$ 43 (b)$130
STRONG OPPORTUNITY FUND II, INC.
Opportunity Fund II ........................................ (a)$101 (a)$171
(b)$ 39 (b)$117
STRONG VARIABLE INSURANCE FUNDS, INC.
Strong MidCap Growth Fund II ............................... (a)$102 (a)$173
(b)$ 39 (b)$119
VAN ECK WORLDWIDE INSURANCE TRUST
Worldwide Bond Fund ........................................ (a)$103 (a)$174
(b)$ 40 (b)$120
Worldwide Emerging Markets Fund............................. (a)$104 (a)$178
(b)$ 41 (b)$124
Worldwide Hard Assets Fund.................................. (a)$103 (a)$175
(b)$ 40 (b)$121
Worldwide Real Estate Fund.................................. (a)$105 (a)$181
(b)$ 42 (b)$127
THE INSURANCE COMPANY
Conseco Variable Insurance Company (Conseco Variable) was originally
organized in 1937. Prior to October 7, 1998, Conseco Variable Insurance Company
was known as Great American Reserve Insurance Company.
We are principally engaged in the life insurance business in 49 states and
the District of Columbia. We are a stock company organized under the laws of the
state of Texas and are an indirect wholly-owned subsidiary of Conseco, Inc.
Headquartered in Carmel, Indiana, Conseco, Inc. is one of middle America's
leading sources for investment, insurance and lending products. Through its
subsidiaries and a nationwide network of insurance agents and finance dealers,
Conseco, Inc. provides solutions for wealth protection and wealth creation to
more than 13 million customers.
<PAGE>
THE CONTRACT
This prospectus describes the variable annuity contract we are offering. An
annuity is a contract between you (the owner) and our insurance company, where
you make purchase payments and we promise to pay you an income in the form of
periodic annuity payments. Until you decide to begin receiving annuity payments,
your contract is in the ACCUMULATION PERIOD. Once you begin receiving annuity
payments, your contract is in the ANNUITY PERIOD.
The contract benefits from tax deferral. Tax deferral means that you are
not taxed on any earnings or appreciation on the assets in your contract until
you take money out of your contract.
The contract is called a variable annuity because you can choose among the
investment portfolios, and depending upon market conditions, you can make or
lose money in any of these portfolios. If you select the variable annuity
portion of the contract, the amount of money you are able to accumulate in your
contract during the accumulation period depends upon the investment performance
of the investment portfolio(s) you select.
You can choose to receive annuity payments on a variable basis, fixed basis
or a combination of both. If you choose variable payments, the amount of the
annuity payments you receive will depend upon the investment performance of the
investment portfolio(s) you select for the annuity period. If you select to
receive payments on a fixed basis, the payments you receive will remain level
for the period of time selected.
PURCHASE
PURCHASE PAYMENTS
A PURCHASE PAYMENT is the money you give us to buy the contract. The
minimum purchase payment we will accept is $5,000 when the contract is bought as
a non-qualified contract. If you are buying the contract as a qualified
contract, the minimum we will accept is $2,000. The maximum of total purchase
payments is $2,000,000 without our prior approval.
You can make additional purchase payments of $500 or more to a
non-qualified contract and $50 or more to a qualified contract. If you select
the automatic payment check option or electronic funds transfer (EFT), you can
make additional payments of $200 each month for non-qualified contracts and $50
each month for qualified contracts.
<PAGE>
CONSECO VARIABLE INSURANCE COMPANY
2001 ACCOUNT I
INDIVIDUAL ANNUITY
================================================================================
ALLOCATION OF PURCHASE PAYMENTS
You control where your purchase payments are invested. When you purchase a
contract, we will allocate your purchase payment as you direct to the fixed
account (if available), and/or one or more of the investment portfolios you
select. Currently, you can allocate money to as many as 25 investment options
(investment portfolios and fixed account) at any one time. When you make
additional purchase payments, we will allocate them in the same way as your
first purchase payment, unless you tell us otherwise. Allocation percentages
must be in whole numbers.
Once we receive your purchase payment and the necessary information, we
will issue your contract and allocate your first purchase payment within 2
business days. If you do not provide us all of the information needed, we will
contact you to get it. If for some reason we are unable to complete this process
within 5 business days, we will either send back your money or get your
permission to keep it until we get all of the necessary information. If you add
more money to your contract by making additional purchase payments, we will
credit these amounts to your contract as of the business day they are received.
Our business day closes when the New York Stock Exchange closes, usually 4:00
P.M. Eastern time.
FREE LOOK
If you change your mind about owning the contract, you can cancel it within
10 days after receiving it (or whatever longer time period is required in your
state). When you cancel the contract within this time period, we will not assess
a contingent deferred sales charge. On the day we receive your request at our
administrative office, we will return the value of your contract. In some
states, we may be required to refund your purchase payment. If you have
purchased the contract as an IRA, we are required to return your purchase
payment if you decide to cancel your contract within 10 days after receiving it
(or whatever period is required in your state).
INVESTMENT PORTFOLIOS
The contract offers 50 INVESTMENT PORTFOLIOS which are listed below.
Additional investment portfolios may be available in the future.
<PAGE>
You should read the prospectuses for these investment portfolios carefully.
Copies of these prospectuses will be sent to you with your contract. If you
would like a copy of the fund prospectuses, call us at: (800) 557-7043. See
Appendix A which contains a summary of the investment objectives and strategies
for each portfolio.
The investment objectives and policies of certain of the investment
portfolios are similar to the investment objectives and policies of other mutual
funds managed by the same investment advisers . Although the objectives and
policies may be similar, the investment results of the investment portfolios may
be higher or lower than the results of such other mutual funds. The investment
advisers cannot guarantee, and make no representation, that the investment
results of similar funds will be comparable even though the portfolios have the
same investment advisers.
A portfolio's performance may be affected by risks specific to certain
types of investments, such as foreign securities, derivative investments,
non-investment grade debt securities, initial public offerings (IPOs) or
companies with relatively small market capitalizations. IPOs and other
investment techniques may have a magnified performance impact on a portfolio
with a small asset base. A portfolio may not experience similar performance as
its assets grow.
CONSECO SERIES TRUST
Managed by Conseco Capital Management, Inc.
(Conseco Capital Management, Inc. is an affiliate
of Conseco Variable)
Conseco 20 Focus Portfolio
Equity Portfolio
Balanced Portfolio
High Yield Portfolio
Fixed Income Portfolio
Government Securities Portfolio
Money Market Portfolio
<PAGE>
================================================================================
THE ALGER AMERICAN FUND Managed by Fred Alger Management, Inc.
Alger American Growth Portfolio
Alger American Leveraged AllCap Portfolio
Alger American MidCap Growth Portfolio
Alger American Small Capitalization Portfolio
AMERICAN CENTURY VARIABLE PORTFOLIOS, INC.
Managed by American Century Investment Management, Inc.
VP Income & Growth
VP International
VP Value
BERGER INSTITUTIONAL PRODUCTS TRUST
<PAGE>
Managed by Berger LLC (formerly, Berger
Associates, Inc.)
Berger IPT--Growth Fund
Berger IPT--Growth and Income Fund
Berger IPT--Small Company Growth Fund
Berger IPT--New Generation Fund
Berger/IPT --International Fund
THE DREYFUS SOCIALLY RESPONSIBLE GROWTH FUND, INC.
Managed by The Dreyfus Corporation (NCM Capital Management Group, Inc.--
sub-investment adviser)
DREYFUS STOCK INDEX FUND
Managed by The Dreyfus Corporation
(Mellon Equity Associates-index fund manager)
DREYFUS VARIABLE INVESTMENT FUND
Managed by The Dreyfus Corporation
Disciplined Stock Portfolio
International Value Portfolio
FEDERATED INSURANCE SERIES
Managed by Federated Investment Management Company
Federated High Income Bond Fund II
Federated Utility Fund II
Managed by Federated Global Investment Management Corp.
Federated International Equity Fund II
INVESCO VARIABLE INVESTMENT FUNDS, INC.
Managed by INVESCO Funds Group, Inc.
INVESCO VIF--High Yield Fund
INVESCO VIF--Equity Income Fund
JANUS ASPEN SERIES
Managed by Janus Capital Corporation
Aggressive Growth Portfolio
Growth Portfolio
Worldwide Growth Portfolio
LAZARD RETIREMENT SERIES, INC.
Managed by Lazard Asset Management
Lazard Retirement Equity Portfolio
Lazard Retirement Small Cap Portfolio
LORD ABBETT SERIES FUND, INC.
Managed by Lord, Abbett & Co.
Growth & Income Portfolio
MITCHELL HUTCHINS SERIES TRUST
Managed by Mitchell Hutchins Asset Management, Inc.
Growth and Income Portfolio
NEUBERGER BERMAN ADVISERS MANAGEMENT TRUST
Managed by Neuberger Berman Management Inc.
Limited Maturity Bond Portfolio
Partners Portfolio
PIONEER VARIABLE CONTRACTS TRUST, CLASS II SHARES
Managed by Pioneer Investment Management, Inc.
Pioneer Fund VCT Portfolio
Pioneer Equity-Income VCT Portfolio
Pioneer Europe VCT Portfolio
RYDEX VARIABLE TRUST
Managed by Rydex Global Advisors
OTC Fund
Nova Fund
SELIGMAN PORTFOLIOS, INC.
Managed by J. & W. Seligman & Co. Incorporated
Seligman Communications and Information Portfolio, Class 2
Seligman Global Technology Portfolio, Class 2
STRONG OPPORTUNITY FUND II, INC.
Advised by Strong Capital Management, Inc.
Opportunity Fund II
STRONG VARIABLE INSURANCE FUNDS, INC.
Advised by Strong Capital Management, Inc.
Strong Mid Cap Growth Fund II
VAN ECK WORLDWIDE INSURANCE TRUST
Managed by Van Eck Associates Corporation
Worldwide Bond Fund
Worldwide Emerging Markets Fund
Worldwide Hard Assets Fund
Worldwide Real Estate Fund
<PAGE>
Shares of the investment portfolios may be offered in connection with
certain variable annuity contracts and variable life insurance policies of other
life insurance companies which may or may not be affiliated with us. Certain
investment portfolios may also be sold directly to qualified plans. The funds
believe that offering their shares in this manner will not be disadvantageous to
you.
We may enter into certain arrangements under which we are reimbursed by the
investment portfolios' advisers, distributors and/or affiliates for the
administrative services which we provide to the portfolios.
THE FIXED ACCOUNT
You can invest in the fixed account. The fixed account offers an interest
rate that is guaranteed to be no less than 3% annually. If you select the fixed
account, your money will be placed with our other general account assets. The
fixed account option may not be available in your state.
THE GENERAL ACCOUNT
During the annuity period, if you elect a fixed annuity your annuity
payments will be paid out of our general account. We guarantee a specified
interest rate used in determining the payments. If you elect a fixed annuity,
the payments you receive will remain level. Fixed annuity payments from our
general account are only available during the annuity period.
VOTING RIGHTS
We are the legal owner of the investment portfolio shares. However, when an
investment portfolio solicits proxies in conjunction with a vote of its
shareholders, we will send you and other owners written requests for
instructions on how to vote those shares. When we receive those instructions, we
will vote all of the shares we own in proportion to those instructions timely
received. Should we determine that we are no longer required to follow this
voting procedure, we will vote the shares ourselves.
SUBSTITUTION
It may be necessary to discontinue one or more of the investment
portfolios or substitute a new portfolio for one of the investment portfolios
you have selected. We will notify you of our intent to do this. We will obtain
prior approval from the Securities and Exchange Commission before any such
change is made.
TRANSFERS
You can transfer money among the fixed account and the investment
portfolios. Currently, you can allocate money to up to 25 investment options at
any one time.
TRANSFERS DURING THE ACCUMULATION PERIOD. You can transfer money to or from
the fixed account, and to or from any investment portfolio. You have to send us
a written request to make a transfer. The following apply to any transfer during
the accumulation period:
<PAGE>
1. Currently, there are no limits on the number of transfers that can be
made. However, if you make more than one transfer in a 30-day period, a transfer
fee of $25 may be deducted.
2. The minimum amount which you can transfer is $500 or your entire value
in the investment portfolio. This requirement is waived if the transfer is
pursuant to the dollar cost averaging or rebalancing programs, or made at the
end of the Free Look Period.
3. You must leave at least $500 in each investment portfolio you are
transferring from or the fixed account after you make a transfer unless the
entire amount is being transferred.
4. Transfers out of the fixed account are limited to 20% of the value of
your contract in the fixed account every 6 months. This requirement is waived if
the transfer is pursuant to the dollar cost averaging program.
5. Your right to make transfers is subject to modification if we determine,
in our sole opinion, that the exercise of the right by one or more owners is, or
would be, to the disadvantage of other owners. Restrictions may be applied in
any manner reasonably designed to prevent any use of the transfer right which is
considered by us to be to the disadvantage of other owners. A modification could
be applied to transfers to, or from, one or more of the investment portfolios
and could include, but is not limited to:
a. the requirement of a minimum time period between each transfer;
b. not accepting a transfer request from an agent acting under a power of
attorney on behalf of more than one owner; or
c. limiting the dollar amount that may be transferred between investment
portfolios by an owner at any one time.
6. We reserve the right, at any time, and without prior notice to any
party, to terminate, suspend or modify the transfer privilege during the
accumulation period.
<PAGE>
TRANSFERS DURING THE ANNUITY PERIOD. You can only make 2 transfers every
contract year during the annuity period. The 2 transfers are free. The following
rules also apply to any transfer during the annuity period:
1. You may make transfers at least 30 days before the due date of the next
annuity payment for which the transfer will apply.
2. The minimum amount which you can transfer is $500 or your entire value
in an investment portfolio.
3. You must leave at least $500 in each investment portfolio you are
transferring from after a transfer unless the entire amount is being
transferred.
4. No transfers can be made between the general account and the investment
portfolios. You may only make transfers between the investment portfolios.
5. We reserve the right, at any time, and without prior notice to any
party, to terminate, suspend or modify the transfer privilege during the annuity
period.
TELEPHONE/INTERNET TRANSFERS. You can elect to make transfers by telephone.
You may also elect to make transfers over the internet. Internet transfers may
not be available (check with your registered representative). Internet transfers
are subject to our administrative rules and procedures. If you do not want the
ability to make transfers by telephone or through the internet, you should
notify us in writing. You can also authorize someone else to make transfers for
you. If you own the contract with a joint owner, unless we are instructed
otherwise, we will accept instructions from either you or the other owner. We
will use reasonable procedures to confirm that instructions given to us by
telephone are genuine. All telephone calls will be recorded and the caller will
be asked to produce personalized data about the owner before we will make the
telephone transfer. Personalized data will also be required for internet
transfers. We will send you a written confirmation of the transfer. If we fail
to use such procedures we may be liable for any losses due to unauthorized or
fraudulent instructions.
This product is not designed for professional market timing strategies by
third parties. We reserve the right to modify the transfer privileges described
above.
DOLLAR COST AVERAGING PROGRAM
The dollar cost averaging program allows you to systematically transfer a
set amount either monthly, quarterly, semi-annually or annually from the Money
Market Portfolio or the fixed account to any of the other investment
portfolio(s). By allocating amounts on a regular schedule as opposed to
allocating the total amount at one particular time, you may be less susceptible
to the impact of market fluctuations. However, this is not guaranteed.
You must have at least $2,000 in the Money Market Portfolio or the fixed
account in order to participate in the dollar cost averaging program.
<PAGE>
All dollar cost averaging transfers will be made on the first business day
of the month. Dollar cost averaging must be for between 6-60 months. Dollar cost
averaging will end when the value in the Money Market Portfolio or the fixed
account is zero. We will notify you when that happens. You cannot cancel the
dollar cost averaging program once it starts. A transfer request will not
automatically terminate the program.
If you participate in the dollar cost averaging program, the transfers made
under the program are not taken into account in determining any transfer fee.
There is no additional charge for this program. However, we reserve the right to
charge for this program in the future. We reserve the right, at any time and
without prior notice, to terminate, suspend or modify this program.
Dollar cost averaging does not assure a profit and does not protect against
loss in declining markets. Dollar cost averaging involves continuous investment
in the selected investment portfolio(s) regardless of fluctuating price levels
of the investment portfolio(s). You should consider your financial ability to
continue the dollar cost averaging program through periods of fluctuating price
levels.
REBALANCING PROGRAM
Once your money has been allocated among the investment portfolios, the
performance of each portfolio may cause your allocation to shift. If the value
of your contract is at least $5,000, you can direct us to automatically
rebalance your contract to return to your original percentage allocations by
selecting our rebalancing program. The rebalancing program may also be available
through the internet (check with your registered representative regarding
availability). Rebalancing over the internet is subject to our administrative
rules and procedures. You can tell us whether to rebalance quarterly,
semi-annually or annually. We will measure these periods from the date you
selected. You must use whole percentages in 1% increments for rebalancing. There
will be no rebalancing within the fixed account. You can discontinue rebalancing
at any time. You can change your rebalancing requests at any time in writing or
through internet access which we must receive before the next rebalancing date.
If you participate in the rebalancing program, the transfers made under the
program are not taken into account in determining any transfer fee. Currently,
there is no charge for participating in the rebalancing program. We reserve the
right, at any time and without prior notice, to terminate, suspend or modify
this program.
EXAMPLE:
Assume that you want your initial purchase payment split between 2
investment portfolios. You want 40% to be in the Fixed Income Portfolio and 60%
to be in the Growth Portfolio. Over the next 2 1/2 months the bond market does
very well while the stock market performs poorly. At the end of the first
quarter, the Fixed Income Portfolio now represents 50% of your holdings because
of its increase in value. If you had chosen to have your holdings rebalanced
quarterly, on the first day of the next quarter, we would sell some of your
units in the Fixed Income Portfolio to bring its value back to 40% and use the
money to buy more units in the Growth Portfolio to increase those holdings to
60%.
ASSET ALLOCATION PROGRAM
<PAGE>
We understand the importance to you of having advice from a financial
adviser regarding your investments in the contract (asset allocation program).
Certain investment advisers have made arrangements with us to make their
services available to you. Conseco Variable has not made any independent
investigation of these advisers and is not endorsing such programs. You may be
required to enter into an advisory agreement with your investment adviser to
have the fees paid out of your contract during the accumulation phase.
Conseco Variable will, pursuant to an agreement with you, make a partial
withdrawal from the value of your contract to pay for the services of the
investment adviser. If the contract is non-qualified, the withdrawal will be
treated like any other distribution and may be included in gross income for
federal tax purposes. Further, if you are under age 59 1/2, it may be subject to
a tax penalty. If the contract is qualified, the withdrawal for the payment of
fees may not be treated as a taxable distribution if certain conditions are met.
Additionally, any withdrawals for this purpose may be subject to a contingent
deferred sales charge. You should consult a tax adviser regarding the tax
treatment of the payment of investment adviser fees from your contract.
SWEEP PROGRAM
You can elect to transfer (sweep) your earnings from the fixed account to
the investment portfolios on a periodic and systematic basis.
EXPENSES
There are charges and other expenses associated with the contract that
reduce the return on your investment in the contract. These charges and expenses
are:
INSURANCE CHARGES
Each day, we make a deduction for our insurance charges. The insurance
charges do not apply to amounts allocated to the fixed account. The insurance
charges, on an annual basis, are equal to 1.40% of the average daily value of
the contract invested in the investment portfolios if you do not select either
the guaranteed minimum death benefit or the guaranteed minimum income benefit.
We may increase the insurance charges for your contract up to 1.65%.
If, at the time of application, you select the guaranteed minimum death
benefit, the insurance charges for your contract are equal to 1.70% on an annual
basis. We may increase the insurance charges for your contract up to 2.15%.
If, at the time of application, you select the guaranteed minimum death
benefit and the guaranteed minimum income benefit, the insurance charges for
your contract are equal to 2.00% on an annual basis. We may increase the
insurance charges for your contract up to 2.65%.
The insurance charges are for all the insurance benefits, e.g., guarantee
of annuity rates, the death benefit, for certain expenses of the contract, and
for assuming the risk (expense risk) that the current charges will be
insufficient in the future to cover the cost of administering the contract.
These charges are included in part of our calculation of the value of the
accumulation units and the annuity units. If the charges are insufficient, then
we will bear the loss. We do, however, expect to profit from these charges.
<PAGE>
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CONTRACT MAINTENANCE CHARGE
During the accumulation period, every year on the anniversary of the date
when your contract was issued, we deduct $30 (this charge can be increased up to
a maximum of $60 per contract per year) from your contract as a contract
maintenance charge. This charge is for certain administrative expenses
associated with the contract.
We do not deduct the contract maintenance charge if the value of your
contract is $50,000 or more on the contract anniversary. If you make a full
withdrawal on other than a contract anniversary, and the value of your contract
is less than $50,000, we will deduct the full contract maintenance charge at the
time of the full withdrawal. If, when you begin to receive annuity payments, the
annuity date is a different date than your contract anniversary we will deduct
the full contract maintenance charge on the annuity date unless the contract
value on the annuity date is $50,000 or more.
The contract maintenance charge will be deducted first from the fixed
account. If there is insufficient value in the fixed account, the fee will then
be deducted from the investment portfolio with the largest balance.
No contract maintenance charge is deducted during the annuity period.
CONTINGENT DEFERRED SALES CHARGE
During the accumulation period, you can make withdrawals from your
contract. A contingent deferred sales charge may be assessed against purchase
payments withdrawn. We keep track of each purchase payment you make. Subject to
the waivers discussed below, if you make a withdrawal and it has been less than
the stated number of years since you made your purchase payment, you will have
to pay a contingent deferred sales charge. The contingent deferred sales charge
compensates us for expenses associated with selling the contract. The charge is
as follows:
NO. OF CONTRACT YEARS CONTINGENT
FROM RECEIPT OF DEFERRED SALES
PURCHASE PAYMENT CHARGE
--------------------------------------
0-1.............................. 7%
2................................ 7%
3................................ 6%
4................................ 5%
5................................ 4%
6................................ 3%
7................................ 2%
8 and more....................... 0%
Each purchase payment has its own contingent deferred sales charge period.
When you make a withdrawal, the charge is deducted first from purchase payments
(oldest to newest), and then from earnings.
For tax purposes, withdrawals are generally considered to have come from
earnings first.
FREE WITHDRAWALS. Each contract year you can make one withdrawal,
without the contingent deferred sales charge, of an amount equal to the
greater of:
o 10% of the value of your contract (on a non-cumulative basis);
o the IRS minimum distribution requirement for this contract if it was issued
as an individual retirement annuity; or
o the total of your purchase payments that have been in the contract for more
than 7 complete years.
<PAGE>
WAIVER OF CONTINGENT DEFERRED SALES CHARGE FOR UNEMPLOYMENT. Once per
contract year, we will allow an additional free withdrawal of up to 10% of your
contract value if:
o your contract has been in force for at least 1 year;
o you provide us with a letter of determination from your state's
Department of Labor indicating that you qualify for and have been
receiving unemployment benefits for at least 60 consecutive days;
o you were employed on a full time basis and working at least 30 hours per
week on the date your contract was issued;
o your employment was involuntarily terminated by your employer; and
<PAGE>
o you certify to us in writing that you are still unemployed when you make
the withdrawal request.
o this benefit may be used by only one person including in the case of
joint owners.
This benefit may not be available in your state.
WAIVER OF CONTINGENT DEFERRED SALES CHARGE FOR NURSING CARE CONFINEMENT.
Once per contract year, we will allow an additional free withdrawal of up to 10%
of your contract value if:
o you are confined in a qualified nursing care center (as defined
in the rider to the contract) for 90 consecutive days;
o confinement begins after the first contract year;
o confinement is prescribed by a qualified physician and is
medically necessary;
o request for this benefit is made during confinement or within
60 days after confinement ends; and
o we receive proof of confinement.
This benefit may be used by only one person including in the case of joint
owners. If the contract is continued by a spousal beneficiary, this benefit will
not be available if used by the previous owner.
This benefit may not be available in your state.
WAIVER OF CONTINGENT DEFERRED SALES CHARGE FOR TERMINAL ILLNESS.
You may take one free withdrawal of up to 100% of your contract value after
a qualified physician (as defined in the rider to the contract) provides notice
that the owner has a terminal illness (which is expected to result in death
within 12 months from the notice).
o To qualify, the diagnosis and notice must occur after the first contract
year ends.
o NOTE: This benefit is not available if you have a terminal illness on
the date the contract is issued. All other limitations under the
contract apply.
o This benefit may only be used one time including in the case of joint
owners. If the contract is continued by a spousal beneficiary, this
benefit will not be available if used by the previous owner.
This benefit may not be available in your state.
<PAGE>
With respect to the unemployment, nursing care confinement and terminal illness
waiver of contingent deferred sales charge benefits, if the contract is owned by
joint owners, these benefits apply to either owner. If the contract is owned by
a non-natural person, then these benefits apply to the annuitant.
REDUCTION OR ELIMINATION OF THE CONTINGENT DEFERRED SALES CHARGE
We may reduce or eliminate the amount of the contingent deferred sales
charge when the contract is sold under circumstances which reduce our sales
expenses. Some examples are: if there is a large group of individuals that will
be purchasing the contract or a prospective purchaser already had a relationship
with us. We will not deduct a contingent deferred sales charge when a contract
is issued to an officer, director or employee of our company or any of our
affiliates. Any circumstances resulting in the reduction or elimination of the
contingent deferred sales charge requires our prior approval. In no event will
reduction or elimination of the contingent deferred sales charge be permitted
where it would be unfairly discriminatory to any person.
TRANSFER FEE
You can make one free transfer every 30 days during the accumulation
period. If you make more than one transfer in a 30-day period, you may be
charged a transfer fee of $25 per transfer. The two transfers permitted each
year during the annuity period are free.
<PAGE>
The transfer fee is deducted from the investment option that you transfer
your funds from. If you transfer your entire interest from an investment option,
the transfer fee is deducted from the amount transferred. If there are multiple
investment options from which you transfer funds, the transfer fee will be
deducted first from the fixed account, and then from the investment portfolio
with the largest balance that is involved in the transfer.
Transfers made at the end of the Free Look Period by us are not counted in
determining the transfer fee. If the transfer is part of the dollar cost
averaging or rebalancing program it will not count in determining the transfer
fee. All reallocations made on the same date count as one transfer.
PREMIUM TAXES
Some states and other governmental entities (e.g., municipalities) charge
premium taxes or similar taxes. We are responsible for the payment of these
taxes and will make a deduction from the value of the contract for them. These
taxes are due either when the contract is issued or when annuity payments begin.
It is our current practice to deduct these taxes when either annuity payments
begin, a death benefit is paid or upon partial or full surrender of the
contract. We may in the future discontinue this practice and assess the charge
when the tax is due. Premium taxes currently range from 0% to 3.5%, depending on
the jurisdiction.
INCOME TAXES
We will deduct from the contract any income taxes which we incur because of
the contract. At the present time, we are not making any such deductions.
INVESTMENT PORTFOLIO EXPENSES
There are deductions from and expenses paid out of the assets of the
various investment portfolios, which are described in the fund prospectuses.
CONTRACT VALUE
Your contract value is the sum of your interest in the various investment
portfolios and the fixed account. Your interest in the investment portfolio(s)
will vary depending upon the investment performance of the portfolios you
choose. In order to keep track of your contract value in an investment
portfolio, we use a unit of measure called an ACCUMULATION UNIT. During the
annuity period of your contract we call the unit an ANNUITY UNIT. The value of
your contract is affected by the investment performance of the portfolios, the
expenses of the portfolios and the deduction of charges under the contract.
ACCUMULATION UNITS
Initially, the accumulation unit value for each account was arbitrarily
set. Every business day, we determine the value of an accumulation unit for each
of the investment portfolios by multiplying the accumulation unit value for the
previous business day by a factor for the current business day. The factor is
determined by:
1. dividing the value of an investment portfolio share at the end of the
current business day (and any charges for taxes) by the value of an
investment portfolio share for the previous business day; and
2. subtracting the daily amount of the insurance charges.
The value of an accumulation unit may go up or down from business day to
business day.
When you make a purchase payment, we credit your contract with accumulation
units. The number of accumulation units credited is determined by dividing the
amount of the purchase payment allocated to an investment portfolio by the value
of the accumulation unit for that investment portfolio. When you make a
withdrawal, we deduct accumulation units from your contract representing the
withdrawal. We also deduct accumulation units when we deduct certain charges
under the contract.
We calculate the value of an accumulation unit for each investment
portfolio after the New York Stock Exchange closes each day and then credit your
contract.
================================================================================
EXAMPLE:
On Wednesday, we receive an additional purchase payment of $4,000 from you.
You have told us you want this to go to the Equity Portfolio. When the New York
Stock Exchange closes on that Wednesday, we determine that the value of an
accumulation unit for the Equity Portfolio is $12.25. We then divide $4,000 by
$12.25 and credit your contract on Wednesday night with 326.53 accumulation
units for the Equity Portfolio.
ACCESS TO YOUR MONEY
You can have access to the money in your contract:
o by making a withdrawal (either a partial or a complete withdrawal);
o by electing to receive annuity payments; or
o when a death benefit is paid to your beneficiary.
In general, withdrawals can only be made during the accumulation period.
When you make a complete withdrawal, you will receive the value of the
contract on the day you made the withdrawal, (i) less any applicable contingent
deferred sales charge; (ii) less any contract maintenance charge; and (iii) less
any applicable premium tax. This amount is the contract withdrawal value.
You must tell us which account (investment portfolio(s), and/or the fixed
account) you want the partial withdrawal to come from. Under most circumstances,
the amount of any partial withdrawal from any investment portfolio, or the fixed
account must be at least $500. We require that after a partial withdrawal is
made, that at least $500 is left in at least one investment portfolio. If you do
not have at least $500 in one investment portfolio, we reserve the right to
terminate the contract and pay you the contract withdrawal value.
Once we receive your written request for a withdrawal from an investment
portfolio we will pay the amount of any withdrawal within 7 days.
INCOME TAXES, TAX PENALTIES AND CERTAIN RESTRICTIONS MAY APPLY TO ANY WITHDRAWAL
YOU MAKE.
SYSTEMATIC WITHDRAWAL PROGRAM
<PAGE>
The systematic withdrawal program allows you to receive automatic payments
either monthly, quarterly, semi-annually or annually. You must have at least
$5,000 in your contract to start the program. You can instruct us to withdraw a
specific amount which can be a percentage of the value of your contract or a
dollar amount. All systematic withdrawals will be withdrawn from the fixed
account and the investment portfolios on a pro-rata basis, unless you instruct
us otherwise. The systematic withdrawal program will end any time you designate
or when the contract value is exhausted, whichever occurs first. If you make a
partial withdrawal outside the program and the value of your contract is less
than $5,000 the program will automatically terminate. We do not have any charge
for this program, however, the withdrawals may be subject to a contingent
deferred sales charge.
INCOME TAXES, TAX PENALTIES AND CERTAIN RESTRICTIONS (UNDER 403(B) CONTRACTS,
SEE "TAXES--WITHDRAWALS--TAX-SHELTERED ANNUITIES") MAY APPLY TO SYSTEMATIC
WITHDRAWALS.
SUSPENSION OF PAYMENTS OR TRANSFERS
We may be required to suspend or postpone payments for withdrawals or
transfers for any period when:
1. the New York Stock Exchange is closed (other than customary weekend and
holiday closings);
2. trading on the New York Stock Exchange is restricted;
3. an emergency exists as a result of which disposal of shares of the
investment portfolios is not reasonably practicable or we cannot reasonably
value the shares of the investment portfolios;
4. during any other period when the SEC, by order, so permits for the
protection of owners.
We have reserved the right to defer payment for a withdrawal or transfer
from the fixed account for the period permitted by law but not for more than six
months.
DEATH BENEFIT
UPON YOUR DEATH DURING THE ACCUMULATION PERIOD
If you, or your joint owner, die before annuity payments begin, we will pay
a death benefit to your beneficiary. If you have a joint owner, the surviving
joint owner will be treated as the primary beneficiary. Any other beneficiary
designation on record at the time of death will be treated as a contingent
beneficiary.
DEATH BENEFIT AMOUNT DURING THE ACCUMULATION PERIOD
If death occurs prior to age 80, the amount of the death benefit will be
the greater of:
(1) the value of your contract as of the business day we receive proof of
death and a payment election; or
(2) the total purchase payments you have made, less any partial withdrawals
and contingent deferred sales charges.
If you are age 80 or over, the death benefit will be equal to the value of
your contract as of the business day we receive proof of death and a payment
election.
OPTIONAL GUARANTEED MINIMUM DEATH BENEFIT. For an extra charge, at the time
you purchase the contract, you can choose the optional guaranteed minimum death
benefit. Under this option, if you die before age 80, the death benefit will be
the greater of:
(1) the total purchase payments you have made, less all partial
withdrawals, contingent deferred sales charges and any applicable premium taxes;
<PAGE>
(2) the value of your contract as of the business day we receive proof of
death and a payment election; or
(3) the largest contract value on any contract anniversary before the owner
or joint owner's death, less any adjusted partial withdrawals, and limited to no
more than twice the amount of purchase payments paid less any adjusted partial
withdrawals.
Adjusted partial withdrawal means:
o the amount of the partial withdrawal (including the applicable
contingent deferred sales charges and premium taxes); multiplied by
o the amount of the death benefit just before the partial withdrawal;
divided by
o the value of your contract just before the partial withdrawal.
If death occurs at age 80 or later, the death benefit will be the greater
of: (1) the contract value as of the business day we receive proof of death and
a payment election; or (2) the death benefit as of the last contract anniversary
before your 80th birthday, less any adjusted partial withdrawals.
If joint owners are named, the death benefit is determined based on the age
of the oldest owner and is payable on the first death. If the owner is a
non-natural person, the death of an annuitant will be treated as the death of
the owner.
THIS BENEFIT MAY NOT BE AVAILABLE IN YOUR STATE.
The value of your contract for purposes of calculating any death benefit
amount will be determined as of the business day we receive due proof of death
and an election for the payment method (see below). After the death benefit
amount is calculated, it will remain in the investment portfolios and/or the
fixed account until distribution begins. Until we distribute the death benefit
amount, the death benefit amount in the investment portfolios will be subject to
investment risk which is borne by the beneficiary.
PAYMENT OF THE DEATH BENEFIT DURING THE ACCUMULATION PERIOD
Unless already selected by you, a beneficiary must elect the death benefit
to be paid under one of the options described below in the event of the death of
the owner or a joint owner during the accumulation period.
OPTION 1--lump sum payment of the death benefit; or
OPTION 2--the payment of the entire death benefit within 5 years of the
date of death of the owner or any joint owner; or
OPTION 3--payment of the death benefit under an annuity option over the
lifetime of the beneficiary, or over a period not extending beyond the life
expectancy of the beneficiary, with distribution beginning within 1 year of the
date of your death or of any joint owner.
<PAGE>
Any portion of the death benefit not applied under Option 3 within 1 year
of the date of your death, or that of a joint owner, must be distributed within
5 years of the date of death.
Unless you have previously designated one of the payment options above, a
beneficiary who is a spouse of the owner may elect to:
o continue the contract in his or her own name at the then current
contract value;
o elect a lump sum payment of the death benefit; or
o apply the death benefit to an annuity option.
<PAGE>
If a lump sum payment is requested, the amount will be paid within 7 days,
unless the suspension of payments provision is in effect. Payment to the
beneficiary, in any other form than a lump sum, may only be elected during the
60 day period beginning with the date of receipt by us of proof of death.
DEATH OF CONTRACT OWNER DURING THE ANNUITY PERIOD
If you or a joint owner, who is not the annuitant, dies during the annuity
period, any remaining payments under the annuity option elected will continue to
be made at least as rapidly as under the method of distribution in effect at the
time of the owner's or joint owner's death. Upon the owner's death during the
annuity period, the beneficiary becomes the owner. Upon the death of any joint
owner during the annuity period, the surviving owner, if any, will be treated as
the primary beneficiary. Any other beneficiary designation on record at the time
of death will be treated as a contingent beneficiary.
DEATH OF ANNUITANT
If the annuitant, who is not an owner or joint owner, dies during the
accumulation period, you will automatically become the annuitant. You may
designate a new annuitant subject to our approval. If the owner is a non-natural
person (for example, a corporation), then the death of the annuitant will be
treated as the death of the owner, and a new annuitant may not be named.
Upon the death of the annuitant during the annuity period, the death
benefit, if any, will be as provided for in the annuity option selected. The
death benefit will be paid at least as rapidly as under the method of
distribution in effect at the annuitant's death.
ANNUITY PAYMENTS
(THE ANNUITY PERIOD)
Under the contract you can receive regular income payments. We call these
payments ANNUITY PAYMENTS. You can choose the date on which those payments
begin. We call that date the ANNUITY DATE. Your annuity date cannot be any
earlier than 90 days after we issue the contract. Annuity payments must begin by
the earlier of the annuitant's 90th birthday or the maximum date allowed by law.
To receive the guaranteed minimum income benefit, there are certain annuity date
requirements (see below). The ANNUITANT is the person whose life we look to when
we determine annuity payments. You can change the annuity date at any time prior
to 30 days of the existing annuity date by providing us with a written request.
You can also choose among income plans. We call those ANNUITY OPTIONS. You
can elect an annuity option by providing us with a written request. You can
change the annuity option any time before 30 days of the existing annuity date.
If you do not choose an annuity option, we will assume that you selected Option
2 which provides a life annuity with 10 years of guaranteed payments.
During the annuity period, you can choose to have payments come from the
investment portfolios, the fixed account or both. If you do not tell us
otherwise, your annuity payments will be based on the investment allocations in
the investment portfolios and fixed account that were in place on the annuity
date.
ANNUITY PAYMENT AMOUNT
If you choose to have any portion of your annuity payments come from the
investment portfolio(s), the dollar amount of your payment will depend upon 3
things:
1) The value of your contract in the investment portfolio(s) on the annuity
date;
2) The 3% or 5% (as you selected) assumed investment rate used in the
annuity table for the contract; and
3) The performance of the investment portfolio(s) you selected.
You can choose either a 3% or a 5% assumed investment rate. If the actual
performance exceeds the 3% or 5% (as you selected) assumed investment rate, your
annuity payments will increase. Similarly, if the actual rate is less than 3% or
5% (as you selected) your annuity payments will decrease.
On the annuity date, the value of your contract, less any premium tax, less
any contingent deferred sales charge, and less any contract maintenance charge
will be applied under the annuity option you selected. If you select an annuity
date that is on or after the 5th contract anniversary, and you choose an annuity
option that has a life contingency for a minimum of 5 years, we will apply the
value of your contract, less any premium tax and less any contract maintenance
charge to the annuity option you elect.
Annuity payments are made monthly unless you have less than $5,000 to apply
toward a payment. In that case, we may make a single lump sum payment to you
instead of annuity payments. Likewise, if your annuity payments would be less
than $50 a month, we have the right to change the frequency of payments so that
your annuity payments are at least $50.
OPTIONAL GUARANTEED MINIMUM INCOME BENEFIT. For an extra charge, you can
elect the guaranteed minimum income benefit. YOU MAY NOT SELECT THIS BENEFIT
UNLESS YOU ALSO SELECT THE OPTIONAL GUARANTEED MINIMUM DEATH BENEFIT.
Under the guaranteed minimum income benefit, a guaranteed minimum income
benefit base will be applied to your annuity option to provide annuity payments.
Prior to your 80th birthday, this amount is equal to:
1) the largest contract value on any contract anniversary; less
2) any adjusted partial withdrawals.
This amount is limited to no more than twice the amount of purchase
payments made less any adjusted partial withdrawals.
Adjusted partial withdrawal is equal to the partial withdrawal amount,
including the contingent deferred sales charge and any applicable premium taxes;
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multiplied by the amount of the guaranteed minimum income benefit base just
before the partial withdrawal; divided by the value of your contract just before
the partial withdrawal.
The guaranteed minimum income benefit base after your 80th birthday is
equal to the greater of (1) the value of your contract, less any premium tax,
less any contingent deferred sales charge, and less any contract maintenance
charge; or (2) the guaranteed minimum income benefit base as of the last
contract anniversary before your 80th birthday less any adjusted partial
withdrawals.
If you elect this benefit, the following limitations will apply:
o You must choose either annuity option 2 or 4, unless otherwise agreed to
by us. If you do not choose an annuity option, Annuity Option 2. Life
Income With Period Certain, will be applied.
o If you are age 50 or over on the date we issue the contract, the annuity
date must be on or after the later of your 65th birthday, or the 7th
contract anniversary.
o If you are under age 50 on the date we issue your contract, the annuity
date must be on or after the 15th contract anniversary.
o The annuity date selected must occur within 30 days following a contract
anniversary.
o If there are joint owners, the age of the oldest owner will be used to
determine the guaranteed minimum income benefit. If the contract is
owned by a non-natural person, then owner will mean the annuitant for
purposes of this benefit.
On the annuity date, the initial income benefit will not be less than the
guaranteed minimum income benefit base applied to the guaranteed annuity payment
factors under the annuity option elected.
THIS BENEFIT MAY NOT BE AVAILABLE IN YOUR STATE.
ANNUITY OPTIONS
You can choose one of the following annuity options or any other annuity
option which is acceptable to us. After annuity payments begin, you cannot
change the annuity option.
OPTION 1. INCOME FOR A SPECIFIED PERIOD. We will pay income for a specific
number of years in equal installments. However, you may elect to receive a
single lump sum payment which will be equal to the present value of the
remaining payments (as of the date of proof of death) discounted at the assumed
investment rate for a variable annuity payout option.
OPTION 2. LIFE INCOME WITH PERIOD CERTAIN. We will make monthly annuity
payments so long as the annuitant is alive and then for a specified period
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certain. If an annuitant, who is not the owner, dies before we have made all of
the payments, we will continue to make the payments for the remainder of the
guaranteed period to you. If you do not want to receive payments after the
annuitant's death, you can request a single lump sum payment which will be equal
to the present value of the remaining payments (as of the date of proof of
death) discounted at the assumed investment rate for a variable annuity payout
option.
OPTION 3. INCOME OF SPECIFIED AMOUNT. We will pay income of a specified
amount until the principal and interest are exhausted. However, you may elect to
receive a single lump sum payment which will be equal to the present value of
the remaining payments (as of the date of proof of death) discounted at the
assumed investment rate for a variable annuity payout option.
OPTION 4. JOINT AND SURVIVOR ANNUITY. We will make monthly annuity payments
so long as the annuitant and a joint annuitant are both alive. The annuitant
must be at least 50 years old, and the joint annuitant must be at least 45 years
old at the time of the first monthly payment.
TAXES
NOTE: WE HAVE PREPARED THE FOLLOWING INFORMATION ON TAXES AS A GENERAL
DISCUSSION OF THE SUBJECT. IT IS NOT INTENDED AS TAX ADVICE TO ANY INDIVIDUAL.
YOU SHOULD CONSULT YOUR OWN TAX ADVISER ABOUT YOUR OWN CIRCUMSTANCES. WE HAVE
INCLUDED AN ADDITIONAL DISCUSSION REGARDING TAXES IN THE STATEMENT OF ADDITIONAL
INFORMATION.
ANNUITY CONTRACTS IN GENERAL
Annuity contracts are a means of setting aside money for future needs,
usually retirement. Congress recognized how important saving for retirement was
and provided special rules in the Internal Revenue Code (Code) for annuities.
Simply stated, these rules provide that you will not be taxed on the
earnings on the money held in your annuity contract until you take the money
out. This is referred to as TAX-DEFERRAL. There are different rules as to how
you will be taxed depending on how you take the money out and the type of
contract -- qualified or non-qualified (see following sections).
You, as the owner, will not be taxed on increases in the value of your
contract until a distribution occurs -- either as a withdrawal or as annuity
payments. When you make a withdrawal you are taxed on the amount of the
withdrawal that is earnings. For annuity payments, different rules apply. A
portion of each annuity payment is treated as a partial return of your purchase
payments and will not be taxed. The remaining portion of the annuity payment
will be treated as ordinary income. How the annuity payment is divided between
taxable and non-taxable portions depends upon the period over which the annuity
payments are expected to be made. Annuity payments received after you have
received all of your purchase payments are fully includible in income.
When a non-qualified contract is owned by a non-natural person (e.g.,
corporation or certain other entities other than a trust holding the contract as
an agent for a natural person), the contract will generally not be treated as an
annuity for tax purposes.
QUALIFIED AND NON-QUALIFIED CONTRACTS
If you purchase the contract as an individual and not under any pension
plan, specially sponsored program or an Individual Retirement Annuity (IRA),
your contract is referred to as a NON-QUALIFIED CONTRACT.
If you purchase the contract under a pension plan, specially sponsored
program or an IRA, your contract is referred to as a QUALIFIED CONTRACT.
A qualified contract will not provide any necessary or additional tax
deferral if it is used to fund a qualified plan that is tax deferred. However,
the contract has features and benefits other than tax deferral that may make it
an appropriate investment for a qualified plan. You should consult your tax
adviser regarding these features and benefits prior to purchasing a qualified
contract.
WITHDRAWALS--NON-QUALIFIED CONTRACTS
If you make a withdrawal from your contract, the Code generally treats such
a withdrawal as first coming from earnings and then from your purchase payments.
Such withdrawn earnings are includible in income.
The Code also provides that any amount received under an annuity contract
which is included in income may be subject to a penalty. The amount of the
penalty is equal to 10% of the amount that is includible in income. Some
withdrawals will be exempt from the penalty. They include any amounts:
(1) paid on or after you reach age 59 1/2;
(2) paid after you die;
(3) paid if you become totally disabled (as that term is defined in the
Code);
(4) paid in a series of substantially equal payments made annually (or
more frequently) for life or a period not exceeding life expectancy;
(5) paid under an immediate annuity; or
(6) which are allocable to purchase payments made prior to August 14,
1982.
WITHDRAWALS--QUALIFIED CONTRACTS
If you make a withdrawal from your qualified contract, a portion of the
withdrawal is treated as taxable income. This portion depends on the ratio of
pre-tax purchase payments to the after-tax purchase payments in your contract.
If all of your purchase payments were made with pre-tax money then the full
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amount of any withdrawal is includible in taxable income. Special rules may
apply to withdrawals from certain types of qualified contracts.
The Code also provides that any amount received under a qualified contract
which is included in income may be subject to a penalty. The amount of the
penalty is equal to 10% of the amount that is includible in income. Some
withdrawals will be exempt from the penalty. They include any amounts:
(1) paid on or after you reach age 59 1/2;
(2) paid after you die;
(3) paid if you become totally disabled (as that term is defined in the
Code);
(4) paid to you after leaving your employment in a series of substantially
equal periodic payments made annually (or more frequently) under a
lifetime annuity;
(5) paid to you after you have attained age 55 and you have left your
employment;
(6) paid for certain allowable medical expenses (as defined in the Code);
(7) paid pursuant to a qualified domestic relations order;
(8) paid on account of an IRS levy upon the qualified contract;
(9) paid from an IRA for medical insurance (as defined in the Code);
(10) paid from an IRA for qualified higher education expenses; or
(11) paid from an IRA for up to $10,000 for qualified first-time homebuyer
expenses (as defined in the Code).
The exceptions in (5) and (7) above do not apply to IRAs. The exception in
(4) above applies to IRAs but without the requirement of leaving employment.
We have provided a more complete discussion in the Statement of Additional
Information.
WITHDRAWALS--TAX-SHELTERED ANNUITIES
The Code limits the withdrawal of amounts attributable to purchase payments
made by owners under a salary reduction agreement. Withdrawals can only be made
when a contract owner:
(1) reaches age 59 1/2;
(2) leaves his or her job;
(3) dies;
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(4) becomes disabled (as that term is defined in the Code);
(5) in the case of hardship; or
(6) pursuant to a qualified domestic relations order, if otherwise
permitted.
However, in the case of hardship, the owner can only withdraw the purchase
payments and not any earnings. You should consult your own tax adviser about
your own circumstances.
DEATH BENEFITS
Any death benefits paid under the contract are taxable to the beneficiary. The
rules governing the taxation of payments from an annuity contract, as discussed
above, generally apply to the payment of death benefits and depend on whether
the death benefits are paid as a lump sum or annuity payments. Estate taxes may
also apply.
If the death benefit rider is to be used with a qualified contract, such death
benefit may be considered by the Internal Revenue Service as an "incidental
death benefit." The Code imposes limits on the amount of incidental death
benefits allowable for qualified contracts, and if the death benefit selected by
you is considered to exceed such limits, the provisions of such benefit could
result in currently taxable income to the owners of the qualified contracts.
Furthermore, the Code provides that the assets of an IRA may not be invested in
life insurance, but may provide in the case of death during the accumulation
period for a death benefit payment equal to the greater of purchase payments or
contract value. The contract offers a death benefit which may exceed the greater
of purchase payments or contract value. If the death benefit is determined by
the Internal Revenue Service as providing life insurance, the contract may not
qualify as an IRA (including Roth IRAs). You should consult your tax adviser
regarding these features and benefits prior to purchasing a contract.
DIVERSIFICATION
The Code provides that the underlying investments for a variable annuity
must satisfy certain diversification requirements in order to be treated as an
annuity contract. We believe that the investment portfolios are being managed so
as to comply with the requirements.
INVESTOR CONTROL
Neither the Code nor the Internal Revenue Service Regulations issued to
date provide guidance as to the circumstances under which you, because of the
degree of control you exercise over the underlying investments, and not us would
be considered the owner of the shares of the investment portfolios. If you are
considered the owner of the shares, it will result in the loss of the favorable
tax treatment for the contract. It is unknown to what extent under federal tax
law, owners are permitted to select investment portfolios, to make transfers
among the investment portfolios or the number and type of investment portfolios
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owners may select from without being considered the owner of the shares. If any
guidance is provided which is considered a new position, then the guidance would
generally be applied prospectively. However, if such guidance is considered not
to be a new position, it may be applied retroactively. This would mean that you,
as the owner of the contract, could be treated as the owner of the investment
portfolios.
Due to the uncertainty in this area, we reserve the right to modify the
contract as reasonably deemed necessary to maintain favorable tax treatment.
PERFORMANCE
We may periodically advertise performance of the annuity investment in the
various investment portfolios. We will calculate performance by determining the
percentage change in the value of an accumulation unit by dividing the increase
(decrease) for that unit by the value of the accumulation unit at the beginning
of the period. This performance number reflects the deduction of the insurance
charges and the fees and expenses of the investment portfolio. It does not
reflect the deduction of any applicable contract maintenance charge and
contingent deferred sales charge. The deduction of any applicable contract
maintenance charge and contingent deferred sales charge would reduce the
percentage increase or make greater any percentage decrease. Any advertisement
will also include standardized average annual total return figures which reflect
the deduction of the insurance charges, contract maintenance charge, contingent
deferred sales charge and the fees and expenses of the investment portfolio.
For periods starting prior to the date the contracts were first offered,
the performance will be based on the historical performance of the corresponding
portfolios, modified to reflect the charges and expenses of the contract as if
the contract had been in existence during the period stated in the
advertisement. These figures should not be interpreted to reflect actual
historical performance.
We may, from time to time, include in our advertising and sales materials,
tax deferred compounding charts and other hypothetical illustrations, which may
include comparisons of currently taxable and tax deferred investment programs,
based on selected tax brackets.
OTHER INFORMATION
THE SEPARATE ACCOUNT
We established a separate account, Conseco Variable Annuity Account I
(Separate Account), to hold the assets that underlie the contracts. Our Board of
Directors adopted a resolution to establish the Separate Account under Texas
Insurance law on August 23, 2000. The Separate Account is registered with the
SEC as a unit investment trust under the Investment Company Act of 1940.
The assets of the Separate Account are held in our name on behalf of the
Separate Account and legally belong to us. However, those assets that underlie
the contracts, are not chargeable with liabilities arising out of any other
business we may conduct. All the income, gains and losses (realized or
unrealized) resulting from these assets are credited to or charged against the
contracts and not against any other contracts we may issue.
The obligations under the contracts are obligations of Conseco Variable
Insurance Company.
DISTRIBUTOR
Conseco Equity Sales, Inc. (CES), 11815 N. Pennsylvania Street, Carmel,
Indiana 46032, acts as the distributor of the contracts. CES, our affiliate, is
registered as a broker-dealer under the Securities Exchange Act of 1934. CES is
a member of the National Association of Securities Dealers, Inc.
Commissions will be paid to broker-dealers who sell the contracts.
Broker-dealer commissions may cost up to 8.50% of purchase payments and may
include reimbursement of promotional or distribution expenses associated with
the marketing of the contracts. We may, by agreement with the broker-dealer, pay
commissions as a combination of a certain percentage amount at the time of sale
and a trail commission. This combination may result in the broker-dealer
receiving more commission over time than would be the case if it had elected to
receive only a commission at the time of sale. The commission rate paid to the
broker-dealer will depend upon the nature and level of services provided by the
broker-dealer.
OWNERSHIP
OWNER. You, as the OWNER of the contract, have all the rights under the
contract. The owner is as designated at the time the contract is issued, unless
changed. You can change the owner at any time. A change will automatically
revoke any prior owner designation. The change request must be in writing.
JOINT OWNER. The contract can be owned by JOINT OWNERS. Any joint owner
must be the spouse of the other owner (except where not permitted under state
law). Upon the death of either joint owner, the surviving joint owner will be
the primary beneficiary. Any other beneficiary designation at the time the
contract was issued or as may have been later changed will be treated as a
contingent beneficiary unless otherwise indicated in a written notice.
BENEFICIARY
The BENEFICIARY is the person(s) or entity you name to receive any death
benefit. The beneficiary is named at the time the contract is issued. Unless an
irrevocable beneficiary has been named, you can change the beneficiary at any
time before you die.
ASSIGNMENT
You can assign the contract at any time during your lifetime. We will not
be bound by the assignment until we receive the written notice of the
assignment. We will not be liable for any payment or other action we take in
accordance with the contract before we receive notice of the assignment. AN
ASSIGNMENT MAY BE A TAXABLE EVENT.
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If the contract is issued pursuant to a qualified plan, there are
limitations on your ability to assign the contract.
INTERNAL APPEALS PROCEDURES
The following internal appeals procedures apply to any controversy
relating to the Contract. These procedures are available to the owner,
beneficiary or assignee of the contract.
Appeal of Final Decision
o If you wish to appeal from a final decision regarding the contract, you
must send us a written request within sixty (60) days of the date of our
written notice of final decision;
o Your request should contain the reason for the appeal and any supporting
evidence or documentation;
o Within 45 days of receipt of your appeal request, we will inform you of the
outcome of your appeal or whether additional information is requested;
o If additional information is requested, we will inform you of the outcome
of your appeal within 30 days after we receive the requested information.
o If requested information is provided, we will decide your appeal within 60
days of the request based on the information provided.
Dispute Resolution Procedures
o You may attempt to resolve a dispute over a final decision through
mediation and/or arbitration;
o Proceedings will be conducted in accordance with the Insurance Dispute
Resolution Program as administered by the American Arbitration Association;
o If the dispute is submitted to arbitration, the arbitration award may be
entered in a court of law.
These procedures may not be available in your state.
FINANCIAL STATEMENTS
Our financial statements will be included in the Statement of Additional
Information in a subsequent amendment. There are no financial statements for the
Separate Account because the Separate Account commenced operations as of the
date of this prospectus.
APPENDIX A -- PARTICIPATING INVESTMENT PORTFOLIOS
Below is a summary of the investment objectives and strategies of each
investment portfolio available under the contract. THERE CAN BE NO ASSURANCE
THAT THE INVESTMENT OBJECTIVES WILL BE ACHIEVED.
The fund prospectuses contain more complete information including a
description of the investment objectives, policies, restrictions and risks of
each portfolio.
CONSECO SERIES TRUST
Conseco Series Trust is managed by Conseco Capital Management, Inc. (CCM)
which is an affiliate of Conseco Variable. Conseco Series Trust is a mutual fund
with multiple portfolios. The following portfolios are available under the
contract:
CONSECO 20 FOCUS PORTFOLIO
The Conseco 20 Focus Portfolio seeks capital appreciation. Normally, the
Portfolio will invest at least 65% of its assets in common stocks of companies
that the Adviser believes have above-average growth prospects. The Portfolio is
non-diversified and will normally concentrate its investments in a core position
of approximately 20--30 common stocks.
EQUITY PORTFOLIO
The Equity Portfolio seeks to provide a high total return consistent with
preservation of capital and a prudent level of risk. The portfolio will invest
primarily in selected equity securities, including common stocks and other
securities having the investment characteristics of common stocks, such as
convertible securities and warrants.
BALANCED PORTFOLIO
The Balanced Portfolio seeks a high total investment return, consistent
with the preservation of capital and prudent investment risk. Normally, the
portfolio invests approximately 50-65% of its assets in equity securities, and
the remainder in a combination of fixed income securities, or cash equivalents.
HIGH YIELD PORTFOLIO
The High Yield Portfolio seeks to provide a high level of current income
with a secondary objective of capital appreciation. Normally, the adviser
invests at least 65% of the Portfolio's assets in below investment grade
securities (those rated BB+/Ba1 or lower by independent rating agencies).
FIXED INCOME PORTFOLIO
The Fixed Income Portfolio seeks the highest level of income consistent
with preservation of capital. The portfolio invests primarily in investment
grade debt securities.
GOVERNMENT SECURITIES PORTFOLIO
The Government Securities Portfolio seeks safety of capital, liquidity and
current income. The portfolio will invest primarily in securities issued by the
U.S. government or an agency or instrumentality of the U.S. government.
MONEY MARKET PORTFOLIO
The Money Market Portfolio seeks current income consistent with stability
of capital and liquidity. The portfolio may invest in U.S. government
securities, bank obligations, commercial paper obligations, short-term corporate
debt securities and municipal obligations.
THE ALGER AMERICAN FUND
The Alger American Fund is a mutual fund with multiple portfolios. The
manager of the fund is Fred Alger Management, Inc. The following portfolios are
available under the contract:
ALGER AMERICAN GROWTH PORTFOLIO
The Alger American Growth Portfolio seeks long-term capital appreciation.
It focuses on growing companies that generally have broad product lines,
markets, financial resources and depth of management. Under normal
circumstances, the portfolio invests primarily in the equity securities of large
companies.
ALGER AMERICAN LEVERAGED ALLCAP PORTFOLIO
The Alger American Leveraged AllCap Portfolio seeks long-term capital
appreciation. Under normal circumstances, the portfolio invests in the equity
securities of companies of any size which demonstrate promising growth
potential. The portfolio can borrow money in amounts of up to one-third of its
total assets to buy additional securities.
ALGER AMERICAN MIDCAP GROWTH PORTFOLIO
The Alger American MidCap Growth Portfolio seeks long-term capital
appreciation. It focuses on midsize companies with promising growth potential.
Under normal circumstances, the portfolio invests primarily in the equity
securities of companies having a market capitalization within the range of
companies in the S&P MidCap 400 Index.
ALGER AMERICAN SMALL CAPITALIZATION PORTFOLIO
The Alger American Small Capitalization Portfolio seeks long-term capital
appreciation. It focuses on small, fast-growing companies that offer innovative
products, services or technologies to a rapidly expanding marketplace. Under
normal circumstances, the portfolio invests primarily in the equity securities
of companies having a market capitalization within the ranges of the Russell
2000(R) Growth Index or the S&P Small Cap 600(R) Index.
AMERICAN CENTURY VARIABLE PORTFOLIOS, INC.
American Century Variable Portfolios, Inc. is a mutual fund with multiple
portfolios. The fund's investment adviser is American Century Investment
Management, Inc. The following portfolios are available under the contract:
VP INCOME & GROWTH FUND
The VP Income & Growth Fund seeks dividend growth, current income and
capital appreciation by investing in common stocks. The fund's investment
strategy utilizes quantitative management techniques in a two-step process that
draws heavily on computer technology.
VP INTERNATIONAL FUND
The VP International Fund seeks capital growth. The fund managers use a
growth investment strategy developed by American Century to invest in stocks of
companies that they believe will increase in value over time. This strategy
looks for companies with earnings and revenue growth. International investment
involves special risk considerations. These include economic and political
conditions, expected inflation rates and currency fluctuations.
VP VALUE FUND
The VP Value Fund seeks long-term capital growth. Income is a secondary
objective. In selecting stocks for the VP Value Fund, the fund managers look for
stocks of companies that they believe are undervalued at the time of purchase.
BERGER INSTITUTIONAL PRODUCTS TRUST
Berger Institutional Products Trust is a mutual fund with multiple
portfolios. Berger LLC (formerly, Berger Associates, Inc.) is the investment
advisor for the Berger IPT--Growth Fund, the Berger IPT--Growth and Income Fund,
the Berger IPT--Small Company Growth Fund and the Berger IPT--New Generation
Fund and the Berger IPT--International Fund. Berger LLC has delegated daily
management of the Fund to Bank of Ireland Asset Management (U.S.) Limited
(BIAM), as sub-adviser. Berger LLC and IPT International have entered into an
agreement to dissolve BBOI Worldwide LLC. The dissolution of BBOI Worldwide LLC
will have no effect on the investment advisory services provided to the Fund.
Contingent upon shareholder approval, when BBOI Worldwide LLC is dissolved,
Berger LLC will become the Fund's advisor and IPT International will continue to
be responsible for day-to-day management of the Fund's portfolio as sub-advisor.
If approved by shareholders, these advisory changes are expected to take place
in the first half of this year. The following portfolios are available under the
contract:
BERGER IPT-GROWTH FUND
The Berger IPT-Growth Fund aims for long-term capital appreciation. In
pursuing that goal, the fund primarily invests in the common stocks of
established companies with the potential for growth.
BERGER IPT-GROWTH AND INCOME FUND
The Berger IPT-Growth and Income Fund aims for capital appreciation and has
a secondary goal of investing in securities that produce current income for the
portfolio. In pursuing these goals, the fund primarily invests in the securities
of well-established, growing companies.
BERGER IPT-SMALL COMPANY GROWTH FUND
The Berger IPT-Small Company Growth Fund aims for capital appreciation. In
pursuing that goal, the fund primarily invests in the common stocks of small
companies with the potential for rapid earnings growth.
BERGER IPT-NEW GENERATION FUND
The Berger IPT-New Generation Fund seeks capital appreciation. In pursuing
that goal, the Fund primarily invests in the common stocks of companies with
potential for significant earnings growth. Its investment manager seeks
companies it believes to have the potential to change the direction or dynamics
of the industries in which they operate or significantly influence the way
businesses or consumers conduct their affairs.
BERGER/IPT-INTERNATIONAL FUND
The Berger/IPT-International Fund aims for long-term capital appreciation.
In pursuing that goal, the fund primarily invests in a portfolio consisting of
common stocks of well-established foreign companies.
THE DREYFUS SOCIALLY RESPONSIBLE GROWTH FUND, INC.
The Dreyfus Socially Responsible Growth Fund, Inc. is advised by The
Dreyfus Corporation and sub-advised by NCM Capital Management Group, Inc.
The Fund seeks to provide capital growth, with current income as a
secondary goal. To pursue these goals, the fund invests primarily in the common
stock of companies that, in the opinion of the fund's management, meet
traditional investment standards and conduct their business in a manner that
contributes to the enhancement of the quality of life in America.
DREYFUS STOCK INDEX FUND
The Dreyfus Stock Index Fund is advised by The Dreyfus Corporation; Mellon
Equity Associates acts as index fund manager.
The Fund seeks to match the total return of the Standard & Poor's 500
Composite Stock Price Index. To pursue this goal, the fund generally invests in
all 500 stocks in the S&P 500(R) in proportion to their weighting in the index.
DREYFUS VARIABLE INVESTMENT FUND
The Dreyfus Variable Investment Fund ("Dreyfus VIF") is a mutual fund with
multiple portfolios. The investment adviser for the portfolios is The Dreyfus
Corporation. The following portfolios are available under the contract:
DREYFUS VIF-DISCIPLINED STOCK PORTFOLIO
The Disciplined Stock Portfolio seeks investment returns (consisting of
capital appreciation and income) that are greater than the total return
performance of stocks represented by the Standard & Poor's 500 Composite Stock
Price Index. To pursue this goal, the portfolio invests in a blended portfolio
of growth and value stocks chosen through a disciplined investment process.
DREYFUS VIF-INTERNATIONAL VALUE PORTFOLIO
The International Value Portfolio seeks long-term capital growth. To pursue
this goal, the portfolio ordinarily invests most of its assets in equity
securities of foreign issuers which Dreyfus considers to be "value" companies.
To a limited extent, the portfolio may invest in debt securities of foreign
issuers.
FEDERATED INSURANCE SERIES
Federated Insurance Series is a mutual fund with multiple portfolios.
Federated Investment Management Company is the adviser to the Federated High
Income Bond Fund II and the Federated Utility Fund II and Federated Global
Investment Management Corp. is the adviser to the Federated International Equity
Fund II. The following portfolios are available under the contract:
FEDERATED HIGH INCOME BOND FUND II
The Federated High Income Bond Fund II's investment objective is to seek
high current income by investing primarily in a professionally managed,
diversified portfolio of fixed income securities. The fund pursues its
investment objective by investing in a diversified portfolio of high-yield,
lower-rated corporate bonds.
FEDERATED UTILITY FUND II
The Federated Utility Fund II's investment objective is to achieve high
current income and moderate capital appreciation. The fund pursues its
investment objective by investing under normal market conditions, at least 65%
of its assets in equity securities (including convertible securities) of
companies that derive at least 50% of their revenues from the provision of
electricity, gas and telecommunications related services.
FEDERATED INTERNATIONAL EQUITY FUND II
The Federated International Equity Fund II's investment objective is to
obtain a total return on its assets. The fund's total return will consist of two
components: (1) changes in the market value of its portfolio securities (both
realized and unrealized appreciation); and (2) income received from its
portfolio securities.
INVESCO VARIABLE INVESTMENT FUNDS, INC.
INVESCO Variable Investment Funds, Inc. is a mutual fund with multiple
portfolios. INVESCO Funds Group, Inc. is the investment adviser for the Fund.
The following portfolios are available under the contract:
INVESCO VIF-EQUITY INCOME FUND
The INVESCO VIF-Equity Income Fund's primary goal is high total return
through both growth and current income. The fund invests primarily in dividend-
paying common and preferred stocks. It may also invest in companies that have
not paid regular dividends. The rest of the fund's assets are invested in debt
securities, generally corporate bonds that are rated investment grade or better.
The fund also may invest up to 15% of its assets in lower-grade debt securities
commonly known as "junk bonds", which generally offer higher interest rates, but
are riskier investments than investment-grade securities.
INVESCO VIF-HIGH YIELD FUND
The INVESCO VIF-High Yield Fund seeks to provide a high level of current
income through investments in debt securities. It also seeks to make an
investment grow. The fund invests primarily in bonds and other debt securities,
as well as in preferred stocks. The fund invests primarily in a diversified
portfolio of high yield corporate bonds rated below investment grade, commonly
known as "junk bonds," and preferred stock with medium to lower credit ratings.
JANUS ASPEN SERIES
<PAGE>
Janus Aspen Series is a mutual fund with multiple portfolios. Janus Capital
Corporation is the investment adviser to the fund. The following portfolios are
available under the contract:
AGGRESSIVE GROWTH PORTFOLIO
The Aggressive Growth Portfolio seeks long-term growth of capital. It
pursues its objective by investing primarily in common stocks selected for their
growth potential, and normally invests at least 50% of its equity assets in
medium-sized companies.
GROWTH PORTFOLIO
The Growth Portfolio seeks long-term growth of capital in a manner
consistent with the preservation of capital. It pursues its objective by
investing primarily in common stocks selected for their growth potential.
Although the Portfolio can invest in companies of any size, it generally invests
in larger, more established companies.
WORLDWIDE GROWTH PORTFOLIO
The Worldwide Growth Portfolio seeks long-term growth of capital in a
manner consistent with the preservation of capital. It pursues its objective by
investing primarily in common stocks of companies of any size throughout the
world. The portfolio normally invests in issuers from at least five different
countries, including the United States. The portfolio may at times invest in
fewer than five countries or even a single country.
LAZARD RETIREMENT SERIES, INC.
Lazard Retirement Series, Inc. is a mutual fund with multiple portfolios.
Lazard Asset Management serves as the investment manager of the portfolios. The
investment manager is a division of Lazard Freres & Co. LLC, a New York limited
liability company, which is registered as an investment adviser with the SEC.
The following portfolios are available under the contract:
LAZARD RETIREMENT EQUITY PORTFOLIO
The Lazard Retirement Equity Portfolio seeks long-term capital
appreciation. The portfolio invests primarily in equity securities, principally
common stocks, of relatively large U.S. companies (those whose total market
value is in the range of the S&P 500(R) Index) that the investment manager
believes are undervalued based on their earnings, cash flow or asset values.
LAZARD RETIREMENT SMALL CAP PORTFOLIO
The Lazard Retirement Small Cap Portfolio seeks long-term capital
appreciation. The portfolio invests primarily in equity securities, principally
common stocks, of relatively small U.S. companies in the range of the Russell
2000(R) Index that the investment manager believes are undervalued based on
their earnings, cash flow or asset values.
LORD ABBETT SERIES FUND, INC.
Lord Abbett Series Fund, Inc. is a mutual fund with multiple portfolios.
The fund's investment adviser is Lord, Abbett & Co. The following portfolio is
available under the contract:
GROWTH & INCOME PORTFOLIO
The Growth & Income Portfolio's investment objective is long-term growth of
capital and income without excessive fluctuations in market value.
MITCHELL HUTCHINS SERIES TRUST
Mitchell Hutchins Series Trust is a mutual fund with multiple portfolios.
Mitchell Hutchins Asset Management Inc. is the investment adviser of the fund.
The following portfolio is available under the contract:
GROWTH AND INCOME PORTFOLIO
The Growth and Income Portfolio's investment objective is current income
and capital growth. The portfolio invests primarily in dividend-paying stocks of
companies that its investment adviser believes have potential for rapid earnings
growth.
NEUBERGER BERMAN ADVISERS MANAGEMENT TRUST
Neuberger Berman Advisers Management Trust is a mutual fund with multiple
portfolios. Neuberger Berman Management Inc. is the investment adviser. The
following portfolios are available under the contract:
LIMITED MATURITY BOND PORTFOLIO
The Limited Maturity Bond Portfolio seeks the highest available current
income consistent with liquidity and low risk to principal; total return is a
secondary goal. To pursue these goals, the portfolio invests mainly in
investment-grade bonds and other debt securities from U.S. government and
corporate issuers. These may include mortgage- and asset-backed securities.
PARTNERS PORTFOLIO
The Partners Portfolio seeks growth of capital. To pursue this goal, the
portfolio invests mainly in common stocks of mid- to large-capitalization
companies. The managers look for well-managed companies whose stock prices are
believed to be undervalued.
PIONEER VARIABLE CONTRACTS TRUST, CLASS II SHARES
<PAGE>
Pioneer Variable Contracts Trust is managed by Pioneer Investment
Management, Inc. The Pioneer Variable Contracts Trust is a mutual fund with
multiple portfolios. The following Class II portfolios are available under the
contract:
PIONEER EUROPE VCT PORTFOLIO
The Pioneer Europe VCT Portfolio pursues long-term growth of capital. The
portfolio invests primarily in equity securities of European issuers. For
purposes of the portfolio's investment policies, equity investments include
securities with common stock characteristics such as preferred stocks,
depositary receipts, warrants and debt securities convertible into common stock.
PIONEER EQUITY-INCOME VCT PORTFOLIO
The Pioneer Equity-Income VCT Portfolio pursues current income and
long-term growth of capital from a portfolio consisting primarily of income
producing equity securities of U.S. corporations. Normally, the portfolio
invests at least 80% of its total assets in income producing equity securities
of U.S. companies. The income producing equity securities in which the portfolio
may invest include common stocks, preferred stocks and interests in real estate
investment trusts (REITs). The remainder of the portfolio may be invested in
debt securities, most of which are expected to be convertible into common
stocks.
PIONEER FUND VCT PORTFOLIO
The Pioneer Fund VCT Portfolio pursues reasonable income and capital
growth. The portfolio invests in a broad list of carefully selected, reasonably
priced securities rather than in securities whose prices reflect a premium
resulting from their current market popularity. The portfolio invests the major
portion of its assets in equity securities, primarily of U.S. issuers.
RYDEX VARIABLE TRUST
Rydex Variable Trust is a mutual fund with multiple portfolios which are
managed by Rydex Global Advisors. The following portfolios are available under
the contract:
OTC FUND
The OTC Fund seeks to provide investment results that correspond to a
benchmark for over-the-counter securities. The Fund's current benchmark is the
NASDAQ 100 IndexTM. The Fund invests principally in securities of companies
included in the NASDAQ 100 IndexTM. It also may invest in other instruments
whose performance is expected to correspond to that of the Index, and may engage
in futures and options transactions.
NOVA FUND
The Nova Fund seeks to provide investment returns that correspond to 150%
of the daily performance of the Standard & Poor's 500 Composite Stock Price
Index. Unlike traditional index funds, as its primary investment strategy, the
Fund invests to a significant extent in futures contracts and options on:
securities, futures contracts and stock indexes. On a day-to-day basis, the Fund
holds U.S. government securities to collateralize these futures and options
contracts.
SELIGMAN PORTFOLIOS, INC.
Seligman Portfolios, Inc. is a mutual fund with multiple portfolios which
are managed by J. & W. Seligman & Co. Incorporated. The following portfolios are
available under the contract:
SELIGMAN COMMUNICATIONS AND INFORMATION PORTFOLIO
The Seligman Communications and Information Portfolio seeks capital gain.
The Portfolio invests at least 80% of its net assets, exclusive of government
securities, short-term notes, and cash and cash equivalents, in securities of
companies operating in the communications, information and related industries.
The Portfolio generally invests at least 65% of its total assets in securities
of companies engaged in these industries. The Portfolio may invest in companies
of any size.
SELIGMAN GLOBAL TECHNOLOGY PORTFOLIO
The Seligman Global Technology Portfolio seeks long-term capital
appreciation. The Portfolio generally invests at least 65% of its assets in
equity securities of U.S. and non-U.S. companies with business operations in
technology and technology-related industries. The Portfolio may invest in
companies of any size.
STRONG OPPORTUNITY FUND II, INC.
Strong Opportunity Fund II, Inc. is a mutual fund. Strong Capital
Management, Inc. is the investment advisor for the fund. The following portfolio
is available under the contract:
OPPORTUNITY FUND II
The Opportunity Fund II seeks capital growth. The fund invests primarily in
stocks of medium-capitalization companies that the fund's manager believes are
underpriced, yet have attractive growth prospects.
STRONG VARIABLE INSURANCE FUNDS, INC.
Strong Variable Insurance Funds, Inc. is a mutual fund. Strong Capital
Management, Inc. is the investment advisor for the fund. The following portfolio
is available under the contract:
MID-CAP GROWTH FUND II
The Mid-Cap Growth Fund II seeks capital appreciation. The fund invests at
least 65% of its assets in stocks of medium-capitalization companies that the
fund's managers believe have favorable prospects for accelerating growth of
earnings, cash flow, or asset value.
VAN ECK WORLDWIDE INSURANCE TRUST
Van Eck Worldwide Insurance Trust is a mutual fund with multiple
portfolios. Van Eck Associates Corporation serves as investment adviser to the
funds. The following portfolios are available under the contract:
WORLDWIDE BOND FUND
The Worldwide Bond Fund seeks high total return - income plus capital
appreciation - by investing globally, primarily in a variety of debt securities.
The fund's long-term assets will consist of debt securities rated B or better by
Standard & Poor's or Moody's Investors' Service.
WORLDWIDE EMERGING MARKETS FUND
The Worldwide Emerging Markets Fund seeks long-term capital appreciation by
investing in primarily equity securities in emerging markets around the world.
The fund emphasizes investment in countries that have relatively low gross
national product per capita, as well as the potential for rapid economic growth.
WORLDWIDE HARD ASSETS FUND
The Worldwide Hard Assets Fund seeks long-term capital appreciation by
investing primarily in "hard asset securities." Income is a secondary
consideration.
WORLDWIDE REAL ESTATE FUND
The Worldwide Real Estate Fund seeks to maximize return by investing in
equity securities of domestic and foreign companies that own significant real
estate assets or that principally are engaged in the real estate industry.
================================================================================
TABLE OF CONTENTS OF THE STATEMENT OF
ADDITIONAL INFORMATION
Company
Independent Accountants
Legal Opinions
Distribution
Reduction or Elimination of Contingent Deferred
Sales Charge
Calculation of Performance Information
Federal Tax Status
Annuity Provisions
Financial Statements
<PAGE>
- ------------------------------------------------------------------------------
If you would like a free copy of the Statement of Additional Information
dated ________, 2001 for this Prospectus, please complete this form, detach, and
mail to:
Conseco Variable Insurance Company
Administrative Office
11815 N. Pennsylvania Street
Carmel, Indiana 46032
Gentlemen:
Please send me a free copy of the Statement of Additional Information for the
Conseco Variable Annuity Account I fixed and variable annuity at the following
address:
Name:
----------------------------------------------------
Mailing Address:
-----------------------------------------
---------------------------------------------------------
Sincerely,
-------------------------------------------
(Signature)
- ------------------------------------------------------------------------------
Conseco Variable Insurance Company
11815 N. Pennsylvania Street
Carmel, Indiana 46032
PART B
STATEMENT OF ADDITIONAL INFORMATION
INDIVIDUAL VARIABLE DEFERRED ANNUITY CONTRACTS
ISSUED BY
CONSECO VARIABLE ANNUITY ACCOUNT I
AND
CONSECO VARIABLE INSURANCE COMPANY
THIS IS NOT A PROSPECTUS. THIS STATEMENT OF ADDITIONAL INFORMATION SHOULD BE
READ IN CONJUNCTION WITH THE PROSPECTUS DATED _______, 2001, FOR THE INDIVIDUAL
VARIABLE DEFERRED ANNUITY CONTRACTS WHICH ARE DESCRIBED HEREIN.
THE PROSPECTUS CONCISELY SETS FORTH INFORMATION THAT A PROSPECTIVE INVESTOR
OUGHT TO KNOW BEFORE INVESTING. FOR A COPY OF THE PROSPECTUS CALL US AT (800)
342-6307 OR WRITE US AT OUR ADMINISTRATIVE OFFICE: 11815 N. PENNSYLVANIA STREET,
CARMEL, INDIANA 46032.
THIS STATEMENT OF ADDITIONAL INFORMATION IS DATED ________, 2001.
<TABLE>
<CAPTION>
TABLE OF CONTENTS
Page
<S> <C>
COMPANY .......................................................................................................
INDEPENDENT ACCOUNTANTS..........................................................................................
LEGAL OPINIONS...................................................................................................
DISTRIBUTION.....................................................................................................
Reduction or Elimination of the Contingent Deferred Sales Charge........................................
CALCULATION OF PERFORMANCE INFORMATION...........................................................................
Total Return............................................................................................
Performance Information.................................................................................
Historical Unit Values..................................................................................
Reporting Agencies......................................................................................
FEDERAL TAX STATUS...............................................................................................
General ...............................................................................................
Diversification.........................................................................................
Multiple Contracts......................................................................................
Partial 1035 Exchanges..................................................................................
Contracts Owned by Other than Natural Persons...........................................................
Tax Treatment of Assignments............................................................................
Death Benefits..........................................................................................
Income Tax Withholding..................................................................................
Tax Treatment of Withdrawals - Non-Qualified Contracts..................................................
Qualified Plans.........................................................................................
Roth IRAs...............................................................................................
Tax Treatment of Withdrawals - Qualified Contracts......................................................
Tax-Sheltered Annuities - Withdrawal Limitations........................................................
Mandatory Distributions - Qualified Plans...............................................................
ANNUITY PROVISIONS...............................................................................................
Variable Annuity Payout.................................................................................
Annuity Unit............................................................................................
Fixed Annuity Payout....................................................................................
FINANCIAL STATEMENTS.............................................................................................
</TABLE>
COMPANY
Information regarding Conseco Variable Insurance Company ("Company" or
"Conseco Variable") is contained in the prospectus. On October 7, 1998, the
Company changed its name from Great American Reserve Insurance Company to its
present name.
INDEPENDENT ACCOUNTANTS
The financial statements of Conseco Variable as of December 31, 1999
and 1998, and for the years ended December 31, 1999, 1998 and 1997, which will
be included in this statement of additional information in a subsequent
amendment, have been audited by _______________, independent accountants, as set
forth in their report appearing therein.
LEGAL OPINIONS
______________________________________________ has provided advice on
certain matters relating to the federal securities and income tax laws in
connection with the Contracts described in the prospectus.
DISTRIBUTION
Conseco Equity Sales, Inc., an affiliate of the Company, acts as the
distributor. The offering is on a continuous basis.
REDUCTION OR ELIMINATION OF THE CONTINGENT DEFERRED SALES CHARGE
The amount of the Contingent Deferred Sales Charge on the Contracts may be
reduced or eliminated when sales of the Contracts are made to individuals or to
a group of individuals in a manner that results in savings of sales expenses.
The entitlement to reduction of the Contingent Deferred Sales Charge will be
determined by the Company after examination of all the relevant factors such as:
1. The size and type of group to which sales are to be made will be
considered. Generally, the sales expenses for a larger group are less than for a
smaller group because of the ability to implement large numbers of Contracts
with fewer sales contacts.
<PAGE>
2. The total amount of purchase payments to be received will be
considered. Per Contract sales expenses are likely to be less on larger purchase
payments than on smaller ones.
3. Any prior or existing relationship with the Company will be
considered. Per Contract sales expenses are likely to be less when there is a
prior existing relationship because of the likelihood of implementing the
Contract with fewer sales contacts.
4. There may be other circumstances, of which the Company is not
presently aware, which could result in reduced sales expenses.
If, after consideration of the foregoing factors, the Company
determines that there will be a reduction in sales expenses, the Company may
provide for a reduction or elimination of the Contingent Deferred Sales Charge.
The Contingent Deferred Sales Charge may be eliminated when the
Contracts are issued to an officer, director or employee of the Company or any
of its affiliates. In no event will any reduction or elimination of the
Contingent Deferred Sales Charge be permitted where the reduction or elimination
will be unfairly discriminatory to any person.
CALCULATION OF PERFORMANCE INFORMATION
TOTAL RETURN
From time to time, we may advertise performance data. Such data will
show the percentage change in the value of an Accumulation Unit based on the
performance of an investment portfolio over a period of time, usually a calendar
year, determined by dividing the increase (decrease) in value for that unit by
the Accumulation Unit value at the beginning of the period.
Any such advertisement will include standardized average annual total
return figures for the time periods indicated in the advertisement. Such total
return figures will reflect the deduction of the Insurance Charge and the
expenses for the underlying investment portfolio being advertised and any
applicable Contract Maintenance Charges and Contingent Deferred Sales Charges.
The Company may also advertise performance data which will be
calculated in the same manner as described above but which will not reflect the
deduction of any Contract Maintenance Charge and Contingent Deferred Sales
Charge. The deduction of any Contract Maintenance Charge and Contingent Deferred
Sales Charge would reduce any percentage increase or make greater any percentage
decrease.
The hypothetical value of a Contract purchased for the time periods
described in the advertisement will be determined by using the actual
Accumulation Unit values for an initial $1,000 purchase payment, and deducting
any applicable Contract Maintenance Charges and any applicable Contingent
Deferred Sales Charges to arrive at the ending hypothetical value. The average
annual total return is then determined by computing the fixed interest rate that
<PAGE>
a $1,000 purchase payment would have to earn annually, compounded annually, to
grow to the hypothetical value at the end of the time periods described. The
formula used in these calculations is:
n
P (1 + T) = ERV
Where:
P = a hypothetical initial payment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value at the end of the time
periods used (or fractional portion thereof) of a
hypothetical $1,000 payment made at the beginning of
the time periods used.
You should note that the investment results of each investment
portfolio will fluctuate over time, and any presentation of the investment
portfolio's total return for any period should not be considered as a
representation of what an investment may earn or what your total return may be
in any future period.
PERFORMANCE INFORMATION
The Contracts and the Separate Account are new and therefore do not have an
investment performance history. However, certain corresponding Portfolios have
been in existence for some time and consequently have investment performance
history. In order to demonstrate how the actual investment experience of the
Portfolios affects Accumulation Unit values, the Company has developed
performance information. The information is based upon the historical experience
of the Portfolios and is for the periods shown.
Future performance of the portfolios will vary and the results shown are
not necessarily representative of future results. Performance for periods ending
after those shown may vary substantially from the examples shown. The
performance of the portfolios is calculated for a specified period of time by
assuming an initial purchase payment of $1,000 allocated to the portfolio. The
percentage increases (decreases) are determined by subtracting the initial
purchase payment from the ending value and dividing the remainder by the
beginning value. The performance may also show figures when no withdrawal is
assumed.
The following charts reflect performance information for the periods shown.
The performance information reflects performance commencing from the inception
date of the underlying portfolio (which date may precede the inception date that
the Separate Account first invested in the underlying portfolio). Column A is
average annual total return which reflects the deduction of the insurance
charges, contract maintenance charge, contingent deferred sales charge and the
fees and expenses of the portfolios. Column B reflects the deduction of the
insurance charges and the fees and expenses of the portfolios.
Chart 1 is for the standard contracts; Chart 2 is for contracts with the
guaranteed minimum death benefit; and Chart 3 is for contracts with the
guaranteed minimum death benefit and guaranteed minimum income benefit.
<TABLE>
<CAPTION>
TOTAL RETURN FOR THE PERIODS ENDED __________________:
CHART 1
Column A Column B
Portfolio 1 yr 3 yrs 5 yrs 10 yrs/ 1 yr 3 yrs 5 yrs 10 yrs/
Inception Date since since
inception inception
----------------------------------------------------------------------------------
CONSECO SERIES TRUST
<S> <C> <C> <C> <C> <C> <C> <C>
Balanced Portfolio 07/25/94
Equity Portfolio 07/25/94
Fixed Income Portfolio 07/25/94
Conseco 20 Focus Portfolio _________
<PAGE>
Government Securities Portfolio 07/25/94
High Yield Portfolio ________
Money Market Portfolio 07/25/94
THE ALGER AMERICAN FUND
Alger American Growth Portfolio 12/31/89
Alger American Leveraged AllCap
Portfolio 01/24/95
Alger American MidCap Growth
Portfolio 04/30/93
Alger American Small Capitalization
Portfolio 12/31/89
AMERICAN CENTURY VARIABLE PORTFOLIOS, INC.
VP Income & Growth 02/06/98
VP International 05/02/94
VP Value 05/01/96
<PAGE>
BERGER INSTITUTIONAL PRODUCTS TRUST
Berger IPT-Growth Fund 05/01/96
Berger IPT-Growth and Income Fund 05/01/96
Berger IPT-Small Company Growth Fund 05/01/96
Berger IPT-New Generation Fund ________
Berger/ IPT-International Fund 04/30/97
THE DREYFUS SOCIALLY RESPONSIBLE GROWTH
FUND, INC. 10/07/93
DREYFUS STOCK INDEX FUND 09/29/89
DREYFUS VARIABLE INVESTMENT FUND
Disciplined Stock Portfolio 05/01/96
International Value Portfolio 05/01/96
FEDERATED INSURANCE SERIES
Federated High Income Bond Fund II 03/01/94
Federated Utility Fund II 02/10/94
Federated International Equity Fund II 05/08/95
INVESCO VARIABLE INVESTMENT FUNDS, INC.
INVESCO VIF - High Yield Fund 12/15/93
INVESCO VIF - Equity Income Fund 12/15/93
JANUS ASPEN SERIES
Aggressive Growth Portfolio 09/13/93
Growth Portfolio 09/13/93
Worldwide Growth Portfolio 09/13/93
LAZARD RETIREMENT SERIES, INC.
Lazard Retirement Equity Portfolio 01/30/98
Lazard Retirement Small Cap Portfolio 11/04/97
LORD ABBETT SERIES FUND, INC.
Growth & Income Portfolio 12/31/89
MITCHELL HUTCHINS SERIES TRUST
Growth and Income Portfolio 02/06/98
<PAGE>
NEUBERGER BERMAN ADVISERS MANAGEMENT TRUST
Limited Maturity Bond Portfolio 12/31/89
Partners Portfolio 03/22/94
PIONEER VARIABLE CONTRACTS TRUST, CLASS II SHARES
Pioneer Fund VCT Portfolio ________
Pioneer Equity-Income VCT Portfolio ________
Pioneer Europe VCT Portfolio ________
RYDEX VARIABLE TRUST
OTC Fund 10/25/96
Nova Fund 10/25/96
SELIGMAN PORTFOLIOS, INC.
Seligman Communications and Information
Portfolio 10/13/94
Seligman Global Technology Portfolio 05/02/96
STRONG OPPORTUNITY FUND II, INC.
Opportunity Fund II 05/08/92
STRONG VARIABLE INSURANCE FUNDS, INC.
Strong MidCap Growth Fund II 12/31/96
VAN ECK WORLDWIDE INSURANCE TRUST
Worldwide Bond Fund 09/01/89
Worldwide Emerging Markets Fund 12/21/95
Worldwide Hard Assets Fund 09/01/89
Worldwide Real Estate Fund 06/23/97
</TABLE>
<TABLE>
<CAPTION>
TOTAL RETURN FOR THE PERIODS ENDED ____________:
CHART 2
Column A Column B
Portfolio 1 yr 3 yrs 5 yrs 10 yrs/ 1 yr 3 yrs
Inception Date since
inception
-------------------------------------------------------------------------------------------------
CONSECO SERIES TRUST
<S> <C> <C> <C> <C> <C> <C> <C>
Balanced Portfolio 07/25/94
Equity Portfolio 07/25/94
Fixed Income Portfolio 07/25/94
Conseco 20 Focus Portfolio
<PAGE>
Government Securities
Portfolio 07/25/94
High Yield Portfolio
Money Market Portfolio 07/25/94
THE ALGER AMERICAN FUND
Alger American Growth
Portfolio 12/31/89
Alger American Leveraged
AllCap Portfolio 01/24/95
Alger American MidCap
Growth Portfolio 04/30/93
Alger American Small Capitalization
Portfolio 12/31/89
AMERICAN CENTURY VARIABLE PORTFOLIOS, INC.
VP Income & Growth 02/06/98
VP International 05/02/94
VP Value 05/01/96
BERGER INSTITUTIONAL PRODUCTS TRUST
Berger IPT-Growth Fund 05/01/96
Berger IPT-Growth and Income Fund 05/01/96
Berger IPT-Small Company Growth Fund 05/01/96
<PAGE>
Berger IPT-New Generation Fund _________
Berger/ IPT-International Fund 04/30/97
THE DREYFUS SOCIALLY RESPONSIBLE GROWTH
FUND, INC. 10/07/93
DREYFUS STOCK INDEX FUND 09/29/89
DREYFUS VARIABLE INVESTMENT FUND
Disciplined Stock Portfolio 05/01/96
<PAGE>
International Value Portfolio 05/01/96
FEDERATED INSURANCE SERIES
Federated High Income Bond Fund II 03/01/94
Federated Utility Fund II 02/10/94
Federated International Equity Fund II 05/08/95
INVESCO VARIABLE INVESTMENT FUNDS, INC.
INVESCO VIF - High Yield Fund 12/15/93
INVESCO VIF - Equity Income Fund 12/15/93
JANUS ASPEN SERIES
Aggressive Growth Portfolio 09/13/93
Growth Portfolio 09/13/93
Worldwide Growth Portfolio 09/13/93
LAZARD RETIREMENT SERIES, INC.
Lazard Retirement Equity Portfolio 01/30/98
Lazard Retirement Small Cap Portfolio 11/04/97
LORD ABBETT SERIES FUND, INC.
Growth & Income Portfolio 12/31/89
MITCHELL HUTCHINS SERIES TRUST
Growth and Income Portfolio 02/06/98
Limited Maturity Bond Portfolio 12/31/89
Partners Portfolio 03/22/94
OTC Fund 10/25/96
Nova Fund 10/25/96
PIONEER VARIABLE CONTRACTS TRUST, CLASS II SHARES
Pioneer Fund VCT Portfolio
Pioneer Equity-Income VCT Portfolio
Pioneer Europe VCT Portfolio
SELIGMAN PORTFOLIOS, INC.
Seligman Communications and Information
Portfolio 10/13/94
Seligman Global Technology Portfolio 05/02/96
STRONG OPPORTUNITY FUND II, INC.
Opportunity Fund II 05/08/92
STRONG VARIABLE INSURANCE FUNDS, INC.
Strong MidCap Growth Fund II 12/31/96
VAN ECK WORLDWIDE INSURANCE TRUST
Worldwide Bond Fund 09/01/89
Worldwide Emerging Markets Fund 12/21/95
Worldwide Hard Assets Fund 09/01/89
Worldwide Real Estate Fund 06/23/97
</TABLE>
5 yrs 10 yrs/
since
inception
---------------
<TABLE>
<CAPTION>
TOTAL RETURN FOR THE PERIODS ENDED ____________:
CHART 3
Column A Column B
Portfolio 1 yr 3 yrs 5 yrs 10 yrs/ 1 yr 3 yrs
Inception Date since
inception
-----------------------------------------------------------------------------
CONSECO SERIES TRUST
<S> <C> <C> <C> <C> <C> <C> <C>
Balanced Portfolio 07/25/94
Conseco 20 Focus Portfolio ________
<PAGE>
Equity Portfolio 07/25/94
Fixed Income Portfolio 07/25/94
Government Securities Portfolio 07/25/94
High Yield Portfolio ________
Money Market Portfolio 07/25/94
THE ALGER AMERICAN FUND
Alger American Growth Portfolio 12/31/89
Alger American Leveraged AllCap
Alger American MidCap Growth
Portfolio 04/30/93
Alger American Small
Capitalization Portfolio 12/31/89
AMERICAN CENTURY VARIABLE
PORTFOLIOS, INC.
VP Income & Growth 02/06/98
VP International 05/02/94
VP Value 05/01/96
BERGER
INSTITUTIONAL PRODUCTS TRUST
Berger IPT-Growth Fund 05/01/96
Berger IPT-Growth and Income Fund 05/01/96
Berger IPT-New Generation Fund _________
Berger IPT-Small Company Growth Fund 05/01/96
Berger/IPT-International Fund 04/30/97
THE DREYFUS SOCIALLY RESPONSIBLE
GROWTH FUND, INC. 10/07/93
DREYFUS STOCK INDEX FUND 09/29/89
DREYFUS VARIABLE INVESTMENT FUND
Disciplined Stock Portfolio 05/01/96
International Value Portfolio 05/01/96
FEDERATED INSURANCE SERIES
Federated High Income Bond Fund II 03/01/94
Federated Utility Fund II 02/10/94
Federated International Equity Fund II 05/08/95
INVESCO VARIABLE INVESTMENT
FUNDS, INC.
INVESCO VIF - High Yield Fund 12/15/93
INVESCO VIF - Equity Income Fund 12/15/93
JANUS ASPEN SERIES
Aggressive Growth Portfolio 09/13/93
Growth Portfolio 09/13/93
Worldwide Growth Portfolio 09/13/93
LAZARD RETIREMENT SERIES, INC.
Lazard Retirement Equity Portfolio 01/30/98
Lazard Retirement Small Cap Portfolio 11/04/97
LORD ABBETT SERIES FUND, INC.
Growth & Income Portfolio 12/31/89
MITCHELL HUTCHINS SERIES TRUST
Growth and Income Portfolio 02/06/98
NEUBERGER BERMAN ADVISERS
MANAGEMENT TRUST
Limited Maturity Bond Portfolio 12/31/89
Partners Portfolio 03/22/94
PIONEER VARIABLE CONTRACTS TRUST,
CLASS II SHARES
Pioneer Fund VCT Portfolio
Pioneer Equity-Income VCT Portfolio
Pioneer Europe VCT Portfolio
RYDEX VARIABLE TRUST
OTC Fund 10/25/96
Nova Fund 10/25/96
SELIGMAN PORTFOLIOS, INC.
Seligman Communications and
Information Portfolio 10/13/94
Seligman Global Technology Portfolio 05/02/96
STRONG OPPORTUNITY FUND II, INC.
Opportunity Fund II 05/08/92
STRONG VARIABLE INSURANCE FUNDS, INC.
Strong MidCap Growth Fund II 12/31/96
VAN ECK WORLDWIDE INSURANCE TRUST
Worldwide Bond Fund 09/01/89
Worldwide Emerging Markets Fund 12/21/95
Worldwide Hard Assets Fund 09/01/89
Worldwide Real Estate Fund 06/23/97
</TABLE>
5 yrs 10 yrs/
since
inception
---------------
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
<PAGE>
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.
<PAGE>
Regulations issued by the Treasury Department ("the Regulations") amplify
the diversification requirements for variable contracts set forth in the Code
and provide an alternative to the safe harbor provision described above. Under
the Regulations, an investment portfolio will be deemed adequately diversified
if: (1) no more than 55% of the value of the total assets of the portfolio is
represented by any one investment; (2) no more than 70% of the value of the
total assets of the portfolio is represented by any two investments; (3) no more
than 80% of the value of the total assets of the portfolio is represented by any
three investments; and (4) no more than 90% of the value of the total assets of
the portfolio is represented by any four investments.
The Code provides that, for purposes of determining whether or not the
diversification standards imposed on the underlying assets of variable contracts
by Section 817(h) of the Code have been met, "each United States government
agency or instrumentality shall be treated as a separate issuer."
The Company intends that all investment portfolios underlying the Contracts
will be managed in such a manner as to comply with these diversification
requirements.
The Treasury Department has indicated that the diversification Regulations
do not provide guidance regarding the circumstances in which Owner control of
the investments of the Separate Account will cause the Owner to be treated as
the owner of the assets of the Separate Account, thereby resulting in the loss
of favorable tax treatment for the Contract. At this time it cannot be
determined whether additional guidance will be provided and what standards may
be contained in such guidance.
The amount of Owner control which may be exercised under the Contract is
different in some respects from the situations addressed in published rulings
issued by the Internal Revenue Service in which it was held that the policy
owner was not the owner of the assets of the separate account. It is unknown
whether these differences, such as the Owner's ability to transfer among
investment choices or the number and type of investment choices available, would
cause the Owner to be considered as the owner of the assets of the Separate
Account resulting in the imposition of federal income tax to the Owner with
respect to earnings allocable to the Contract prior to receipt of payments under
the Contract.
In the event any forthcoming guidance or ruling is considered to set forth
a new position, such guidance or ruling will generally be applied only
prospectively. However, if such ruling or guidance was not considered to set
forth a new position, it may be applied retroactively resulting in the Owners
being retroactively determined to be the owners of the assets of the Separate
Account.
Due to the uncertainty in this area, the Company reserves the right to
modify the Contract in an attempt to maintain favorable tax treatment.
MULTIPLE CONTRACTS
The Code provides that multiple non-qualified annuity contracts which are
<PAGE>
issued within a calendar year to the same contract owner by one company or its
affiliates are treated as one annuity contract for purposes of determining the
tax consequences of any distribution. Such treatment may result in adverse tax
consequences including more rapid taxation of the distributed amounts from such
combination of contracts. For purposes of this rule, contracts received in a
Section 1035 exchange will be considered issued in the year of the exchange.
Owners should consult a tax adviser prior to purchasing more than one
non-qualified annuity contract in any calendar year.
PARTIAL 1035 EXCHANGES
Section 1035 of the Code provides that an annuity contract may be exchanged
in a tax-free transaction for another annuity contract. In 1998 in CONWAY VS.
COMMISSIONER, the Tax Court held that the direct transfer of a portion of an
annuity contract into another annuity contract qualified as a non-taxable
exchange. On November 22, 1999, the Internal Revenue Service filed an Action on
Decision which indicated that it acquiesced in the Tax Court decision in CONWAY.
However, in its acquiescence with the decision of the Tax Court, the Internal
Revenue Service stated that it will challenge transactions where taxpayers enter
into a series of partial exchanges and annuitizations as part of a design to
avoid application of the 10% premature distribution penalty or other limitations
imposed on annuity contracts under the Code. In the absence of further guidance
from the Internal Revenue Service it is unclear what specific types of partial
exchange designs and transactions will be challenged by the Internal Revenue
Service. Due to the uncertainty in this area, owners should consult their own
tax advisers prior to entering into a partial exchange of an annuity contract.
CONTRACTS OWNED BY OTHER THAN NATURAL PERSONS
Under Section 72(u) of the Code, the investment earnings on premiums for
the Contracts will be taxed currently to the Owner if the Owner is a non-natural
person, e.g., a corporation or certain other entities. Such Contracts generally
will not be treated as annuities for federal income tax purposes. However, this
treatment is not applied to a Contract held by a trust or other entity as an
agent for a natural person nor to Contracts held by Qualified Plans. Purchasers
should consult their own tax counsel or other tax adviser before purchasing a
Contract to be owned by a non-natural person.
TAX TREATMENT OF ASSIGNMENTS
An assignment or pledge of a Contract may be a taxable event. You should
therefore consult competent tax advisers should you wish to assign or pledge
your Contract.
If the Contract is issued pursuant to a retirement plan which receives
favorable treatment under the provision of Section 408 of the Code, it may not
be assigned, pledged or otherwise transferred except as allowed under applicable
law.
DEATH BENEFITS
Any death benefits paid under the Contract are taxable to the beneficiary.
The rules governing the taxation of payments from an annuity contract, as
discussed above, generally apply to the payment of death benefits and depend on
whether the death benefits are paid as a lump sum or as annuity payments. Estate
taxes may also apply.
If the death benefit rider is to be used with a qualified contract, such
death benefit may be considered by the Internal Revenue Service as an
"incidental death benefit." The Code imposes limits on the amount of incidental
death benefits allowable for qualified contracts, and if the death benefit
selected by you is considered to exceed such limits, the provisions of such
benefit could result in currently taxable income to the owners of the qualified
contracts. Furthermore, the Code provides that the assets of an IRA may not be
invested in life insurance, but may provide in the case of death during the
accumulation period for a death benefit payment equal to the greater of purchase
payments or contract value. The contract offers a death benefit which may exceed
the greater of purchase payments or contract value. If the death benefit is
determined by the Internal Revenue Service as providing life insurance, the
contract may not qualify as an IRA (including Roth IRAs). You should consult
your tax adviser regarding these features and benefits prior to purchasing a
contract.
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.
<PAGE>
TAX TREATMENT OF WITHDRAWALS - NON-QUALIFIED CONTRACTS
Section 72 of the Code governs treatment of distributions from annuity
contracts. It provides that if the Contract Value exceeds the aggregate purchase
payments made, any amount withdrawn will be treated as coming first from the
principal. Withdrawn earnings are includible in gross income. It further
provides that a ten percent (10%) penalty will apply to the income portion of
any premature distribution. However, the penalty is not imposed on amounts
received: (a) after you reach age 59 1/2; (b) after your death; (c) if you
become totally disabled (for this purpose disability is as defined in Section
72(m)(7) of the Code); (d) in a series of substantially equal periodic payments
made not less frequently than annually for your life (or life expectancy) or for
the joint lives (or joint life expectancies) of you and your Beneficiary; (e)
under an immediate annuity; or (f) which are allocable to purchase payments made
prior to August 14, 1982.
With respect to (d) above, if the series of substantially equal periodic
payments is modified before the later of your attaining age 59 1/2 or 5 years
from the date of the first periodic payment, then the tax for the year of the
modification is increased by an amount equal to the tax which would have been
imposed (the 10% penalty tax) but for the exception, plus interest for the tax
years in which the exception was used.
The above information does not apply to Qualified Contracts. However,
separate tax withdrawal penalties and restrictions may apply to such Qualified
Contracts. (See "Tax Treatment of Withdrawals - Qualified Contracts" below.)
QUALIFIED PLANS
The Contracts are designed to be suitable for use under various types of
Qualified Plans. Taxation of participants in each Qualified Plan varies with the
type of plan and terms and conditions of each specific plan. Owners, annuitants
and beneficiaries are cautioned that benefits under a Qualified Plan may be
subject to the terms and conditions of the plan regardless of the terms and
conditions of the Contracts issued pursuant to the plan. Some retirement plans
are subject to distribution and other requirements that are not incorporated
into the Company's administrative procedures. The Company is not bound by the
terms and conditions of such plans to the extent such terms conflict with the
terms of a Contract, unless the Company specifically consents to be bound.
Owners, participants and beneficiaries are responsible for determining that
contributions, distributions and other transactions with respect to the
Contracts comply with applicable law.
A Qualified Contract will not provide any necessary or additional tax
<PAGE>
deferral if it is used to fund a Qualified Plan that is tax deferred. However,
the Contract has features and benefits other than tax deferral that may make it
an appropriate investment for a Qualified Plan. Following are general
descriptions of the types of Qualified Plans with which the Contracts may be
used. Such descriptions are not exhaustive and are for general informational
purposes only. The tax rules regarding Qualified Plans are very complex and will
have differing applications depending on individual facts and circumstances.
Each purchaser should obtain competent tax advice prior to purchasing a Contract
issued under a Qualified Plan.
Contracts issued pursuant to Qualified Plans include special provisions
restricting Contract provisions that may otherwise be available as described
herein. Generally, Contracts issued pursuant to Qualified Plans are not
transferable except upon surrender or annuitization. Various penalty and excise
taxes may apply to contributions or distributions made in violation of
applicable limitations. Furthermore, certain withdrawal penalties and
restrictions may apply to surrenders from Qualified Contracts. (See "Tax
Treatment of Withdrawals - Qualified Contracts" below.)
On July 6, 1983, the Supreme Court decided in ARIZONA GOVERNING COMMITTEE
V. NORRIS that optional annuity benefits provided under an employer's deferred
compensation plan could not, under Title VII of the Civil Rights Act of 1964,
vary between men and women. The Contracts sold by the Company in connection with
Qualified Plans will utilize annuity tables which do not differentiate on the
basis of sex. Such annuity tables will also be available for use in connection
with certain non-qualified deferred compensation plans.
a. TAX-SHELTERED ANNUITIES
Section 403(b) of the Code permits the purchase of "tax-sheltered annuities" by
public schools and certain charitable, educational and scientific organizations
described in Section 501(c)(3) of the Code. These qualifying employers may make
contributions to the Contracts for the benefit of their employees. Such
contributions are not includible in the gross income of the employees until the
employees receive distributions from the Contracts. The amount of contributions
to the tax-sheltered annuity is limited to certain maximums imposed by the Code.
Furthermore, the Code sets forth additional restrictions governing such items as
transferability, distributions, nondiscrimination and withdrawals. (See "Tax
Treatment of Withdrawals Qualified Contracts" and "Tax-Sheltered Annuities -
Withdrawal Limitations" below.) Any employee should obtain competent tax advice
as to the tax treatment and suitability of such an investment.
b. INDIVIDUAL RETIREMENT ANNUITIES
The Contracts offered by the prospectus are designed to be suitable for use as
an Individual Retirement Annuity (IRA). Generally, individuals who purchase IRAs
are not taxed on increases to the value of the contributions until distribution
occurs. Following is a general description of IRAs with which the Contract may
be used. The description is not exhaustive and is for general informational
purposes only.
Section 408(b) of the Code permits eligible individuals to contribute to an
individual retirement program known as an IRA. Under applicable limitations,
certain amounts may be contributed to an IRA which will be deductible from the
individual's taxable income. These IRAs are subject to limitations on
eligibility, contributions, transferability and distributions. (See "Tax
Treatment of Withdrawals - Qualified Contracts" below.) Under certain
conditions, distributions from other IRAs and other Qualified Plans may be
rolled over or transferred on a tax-deferred basis into an IRA. Sales of
Contracts for use with IRAs are subject to special requirements imposed by the
Code, including the requirement that certain informational disclosure be given
to persons desiring to establish an IRA. Purchasers of Contracts to be qualified
as Individual Retirement Annuities should obtain competent tax advice as to the
tax treatment and suitability of such an investment.
ROTH IRAS
Section 408A of the Code provides that beginning in 1998, individuals may
purchase a new type of non-deductible IRA, known as a Roth IRA. Purchase
payments for a Roth IRA are limited to a maximum of $2,000 per year and are not
deductible from taxable income. Lower maximum limitations apply to individuals
with adjusted gross incomes between $95,000 and $110,000 in the case of single
taxpayers, between $150,000 and $160,000 in the case of married taxpayers filing
joint returns, and between $0 and $10,000 in the case of married taxpayers
filing separately. An overall $2,000 annual limitation continues apply to all of
a taxpayer's IRA contributions, including Roth IRA and non-Roth IRAs.
Qualified distributions from Roth IRAs are free from federal income tax. A
qualified distribution requires that an individual has held a Roth IRA for at
least five taxable years and, in addition, that the distribution is made: (i)
after the individual reaches age 59 1/2, (ii) on the individual's death or
disability, or (iii) as a qualified first-time home purchase (subject to a
$10,000 lifetime maximum) for the individual, a spouse, child, grandchild, or
ancestor. Any distribution which is not a qualified distribution is taxable to
the extent of earnings in the distribution. Distributions are treated as made
from contributions first and therefore no distributions are taxable until
distributions exceed the amount of contributions and conversions to the Roth
IRA. The 10% penalty tax and the regular IRA exceptions to the 10% penalty tax
apply to taxable distributions from a Roth IRA.
Amounts may be rolled over from one Roth IRA to another Roth IRA. Furthermore,
an individual may make a rollover contribution from a non-Roth IRA to a Roth
IRA, ("conversion deposits") unless the individual has adjusted gross income
over $100,000 or the individual is a married taxpayer filing a separate return.
The individual must pay tax on any portion of the IRA being rolled over that
represents income or a previously deductible IRA contribution. However, for
<PAGE>
rollovers in 1998, the individual may pay that tax ratably over the four taxable
year period beginning with tax year 1998. In addition, distribution of amounts
attributable to conversion deposits held for less than 5 taxable years will also
be subject to the penalty tax.
Purchasers of Contracts intended to be qualified as a Roth IRA should obtain
competent tax advice as to the tax treatment and suitability of such an
investment.
c. PENSION AND PROFIT-SHARING PLANS
Sections 401(a) and 401(k) of the Code permit employers, including self-employed
individuals, to establish various types of retirement plans for employees. These
retirement plans may permit the purchase of the Contracts to provide benefits
under the Plan. Contributions to the Plan for the benefit of employees will not
be includible in the gross income of the employees until distributed from the
Plan. The tax consequences to participants may vary depending upon the
particular plan design. However, the Code places limitations and restrictions on
all Plans including on such items as: amount of allowable contributions; form,
manner and timing of distributions; transferability of benefits; vesting and
nonforfeitability of interests; nondiscrimination in eligibility and
participation; and the tax treatment of distributions, withdrawals and
surrenders. Special considerations apply to plans covering self-employed
individuals, including limitations on contributions and benefits for key
employees or 5 percent owners. (See "Tax Treatment of Withdrawals - Qualified
Contracts" below.) Purchasers of Contracts for use with Pension or Profit
Sharing Plans should obtain competent tax advice as to the tax treatment and
suitability of such an investment.
d. GOVERNMENT AND TAX-EXEMPT ORGANIZATION'S DEFERRED COMPENSATION PLAN UNDER
SECTION 457
Under Code provisions, employees and independent contractors performing services
for state and local governments and other tax-exempt organizations may
participate in Deferred Compensation Plans under Section 457 of the Code. The
amounts deferred under a Plan which meets the requirements of Section 457 of the
Code are not taxable as income to the participant until paid or otherwise made
available to the participant or beneficiary. As a general rule, the maximum
amount which can be deferred in any one year is the lesser of $8,000 or 33 1/3
percent of the participant's includible compensation. However, in limited
circumstances, the plan may provide for additional catch-up contributions in
each of the last three years before normal retirement age. Furthermore, the Code
provides additional requirements and restrictions regarding eligibility and
distributions.
All of the assets and income of a Plan established by a governmental employer
after August 20, 1996, must be held in trust for the exclusive benefit of
participants and their beneficiaries. For this purpose, custodial accounts and
certain annuity contracts are treated as trusts. Plans that were in existence on
August 20, 1996 may be amended to satisfy the trust and exclusive benefit
requirements any time prior to January 1, 1999, and must be amended not later
than that date to continue to receive favorable tax treatment. The requirement
<PAGE>
of a trust does not apply to amounts under a Plan of a tax exempt
(non-governmental) employer. In addition, the requirement of a trust does not
apply to amounts under a Plan of a governmental employer if the Plan is not an
eligible plan within the meaning of section 457(b) of the Code. In the absence
of such a trust, amounts under the plan will be subject to the claims of the
employer's general creditors.
In general, distributions from a Plan are prohibited under section 457 of the
Code unless made after the participating employee:
attains age 70 1/2,
separates from service,
dies, or
suffers an unforeseeable financial emergency as defined in the Code.
Under present federal tax law, amounts accumulated in a Plan under section 457
of the Code cannot be transferred or rolled over on a tax-deferred basis except
for certain transfers to other Plans under section 457.
TAX TREATMENT OF WITHDRAWALS - QUALIFIED CONTRACTS
In the case of a withdrawal under a Qualified Contract, a ratable portion of the
amount received is taxable, generally based on the ratio of the individual's
cost basis to the individual's total accrued benefit under the retirement plan.
Special tax rules may be available for certain distributions from a Qualified
Contract. Section 72(t) of the Code imposes a 10% penalty tax on the taxable
portion of any distribution from qualified retirement plans, including Contracts
issued and qualified under Code Sections 401 (Pension and Profit-Sharing Plans),
403(b) (Tax-Sheltered Annuities) and 408 and 408A (Individual Retirement
Annuities). To the extent amounts are not includible in gross income because
they have been rolled over to an IRA or to another eligible Qualified Plan, no
tax penalty will be imposed. The tax penalty will not apply to the following
distributions: (a) made on or after the date on which the Owner or Annuitant (as
applicable) reaches age 59 1/2 (b) following the death or disability of the
Owner or Annuitant (as applicable) (for this purpose disability is as defined in
Section 72(m) (7) of the Code); (c) after separation from service, distributions
that are part of substantially equal periodic payments made not less frequently
than annually for the life (or life expectancy) of the Owner or Annuitant (as
applicable) or the joint lives (or joint life expectancies) of such Owner or
Annuitant (as applicable) and his or her designated Beneficiary; (d) to an Owner
or Annuitant (as applicable) who has separated from service after he has
attained age 55; (e) made to the Owner or Annuitant (as applicable) to the
extent such distributions do not exceed the amount allowable as a deduction
under Code Section 213 to the Owner or Annuitant (as applicable) for amounts
paid during the taxable year for medical care; (f) made to an alternate payee
pursuant to a qualified domestic relations order; (g) made on account of an IRS
levy upon the qualified contract; (h) from an Individual Retirement Annuity for
the purchase of medical insurance (as described in Section 213(d)(1)(D) of the
Code) for the Owner or Annuitant (as applicable) and his or her spouse and
dependents if the Owner or Annuitant (as applicable) has received unemployment
compensation for at least 12 weeks (this exception will no longer apply after
the Owner or Annuitant (as applicable) has been re-employed for at least 60
days); (i) from an Individual Retirement Annuity made to the Owner or Annuitant
(as applicable) to the extent such distributions do not exceed the qualified
higher education expenses (as defined in Section 72(t)(7) of the Code) of the
Owner or Annuitant (as applicable) for the taxable year; and (j) distributions
<PAGE>
up to $10,000 from an Individual Retirement Annuity made to the Owner or
Annuitant (as applicable) which are qualified first-time home buyer
distributions (as defined in Section 72(t)(8) of the Code). The exceptions
stated in (d) and (f) above do not apply in the case of an Individual Retirement
Annuity. The exception stated in (c) above applies to an Individual Retirement
Annuity without the requirement that there be a separation from service. With
respect to (c) above, if the series of substantially equal periodic payments is
modified before the later of your attaining age 59 1/2 or 5 years from the date
of the first periodic payment, then the tax for the year of the modification is
increased by an amount equal to the tax which would have been imposed (the 10%
penalty tax) but for the exception, plus interest for the tax years in which the
exception was used.
TAX-SHELTERED ANNUITIES - WITHDRAWAL LIMITATIONS
The Code limits the withdrawal of amounts attributable to contributions made
pursuant to a salary reduction agreement (as defined in Section 403(b)(11) of
the Code) to circumstances only when the Owner: (1) attains age 59 1/2; (2)
separates from service; (3) dies; (4) becomes disabled (within the meaning of
Section 72(m)(7) of the Code); (5) in the case of hardship; or (6) made pursuant
to a qualified domestic relations order, if otherwise permissible. However,
withdrawals for hardship are restricted to the portion of the Owner's Contract
Value which represents contributions made by the Owner and does not include any
investment results. The limitations on withdrawals became effective on January
1, 1989 and apply only to salary reduction contributions made after December 31,
1988, to income attributable to such contributions and to income attributable to
amounts held as of December 31, 1988. The limitations on withdrawals do not
affect rollovers and transfers between certain Qualified Plans. Owners should
consult their own tax counsel or other tax adviser regarding any distributions.
MANDATORY DISTRIBUTIONS - QUALIFIED PLANS
Generally, distributions from a qualified plan must begin no later than April
1st of the calendar year following the later of (a) the year in which the
employee attains age 70 1/2 or (b) the calendar year in which the employee
retires. The date set forth in (b) does not apply to an Individual Retirement
Annuity. There are no mandatory distribution requirements for Roth IRAs prior to
death. Required distributions must be over a period not exceeding the life
expectancy of the individual or the joint lives or life expectancies of the
individual and his or her designated beneficiary. If the required minimum
distributions are not made, a 50% penalty tax is imposed as to the amount not
distributed.
ANNUITY PROVISIONS
The Company makes available payment plans on a fixed and variable
basis.
VARIABLE ANNUITY PAYOUT
A variable annuity is an annuity with payments which: (1) are not
predetermined as to dollar amount; and (2) will vary in amount with the net
investment results of the applicable investment portfolio. Annuity payments also
depend upon the age of the annuitant and any joint annuitant and the assumed
interest factor utilized. The Annuity Table used will depend upon the annuity
option chosen. The dollar amount of annuity payments after the first is
determined as follows:
1. The dollar amount of the first variable annuity payment is divided
by the value of an annuity unit for each investment portfolio as of the annuity
date. This sets the number of annuity units for each monthly payment for the
applicable investment portfolio.
2. The fixed number of annuity units for each payment in each
investment portfolio is multiplied by the annuity unit value for that investment
portfolio for the last valuation period of the month preceding the month for
which the payment is due. This result is the dollar amount of the payment for
each applicable investment portfolio.
The total dollar amount of each variable annuity payment is the sum of
all variable annuity payments reduced by the applicable portion of the Contract
Maintenance Charge.
The calculation of the first annuity payment is made on the annuity date. The
Company assesses the insurance charges during both the accumulation phase and
the annuity phase. The deduction of the insurance charges will affect the amount
of the first and any subsequent annuity payments. In addition, under certain
circumstances, the Company may assess a contingent deferred sales charge and/or
the contract maintenance charge on the annuity date which would affect the
amount of the first annuity payment (see "Expenses" and "Annuity Payments" in
the prospectus).
ANNUITY UNIT
The value of an annuity unit was arbitrarily set initially at $10. The
annuity unit value at the end of any subsequent valuation period is determined
as follows:
1. The net investment factor for the current valuation period is
multiplied by the value of the annuity unit for investment portfolio for the
immediately preceding valuation period.
<PAGE>
2. The result in (1) is then divided by the assumed investment rate
factor which equals 1.00 plus the assumed investment rate for the number of days
since the previous valuation period.
The owner can choose either a 5% or a 3% assumed investment rate.
FIXED ANNUITY PAYOUT
A fixed annuity is an annuity with payments which are guaranteed as to
dollar amount by the Company and do not vary with the investment experience of
the investment portfolios. The dollar amount of each fixed annuity payment is
determined in accordance with Annuity Tables contained in the Contract.
FINANCIAL STATEMENTS
The financial statements of the Company should be considered only as
bearing upon the ability of the Company to meet its obligations under the
Contracts. Such financial statements will be filed in a subsequent amendment.
PART C
OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS
A. FINANCIAL STATEMENTS
The financial statements of Conseco Variable Insurance Company (the "Company")
will be filed by subsequent Amendment.
B. EXHIBITS
1. Resolution of Board of Directors of the Company authorizing the
establishment of the Separate Account.
2. Not Applicable.
3. (i) Form of Principal Underwriters Agreement (to be filed by Amendment).
(ii) Form of Selling Agreement (to be filed by Amendment).
4. (i) Individual Variable Deferred Annuity Contract (to be filed by
Amendment).
(ii) Guaranteed Minimum Death Benefit Rider (to be filed by Amendment).
(iii) Guaranteed Minimum Income Benefit Rider (to be filed by Amendment).
(iv) Waiver of Contingent Deferred Sales Charges for Unemployment Rider
(to be filed by Amendment).
(v) Waiver of Contingent Deferred Sales Charges for Nursing Care
Confinement Rider (to be filed by Amendment).
(vi) Waiver of Contingent Deferred Sales Charges for Terminal Illness
Rider (to be filed by Amendment).
(vii) Internal Appeals Procedures Endorsement (to be filed by Amendment).
<PAGE>
5. Application Form (to be filed by Amendment).
6. (i) Articles of Incorporation of the Company.*
(ii) Articles of Amendment to the Articles of Incorporation
of the Company+
(iii) Amended and Restated By-Laws of the Company+
7. Not Applicable.
8. (i) Form of Fund Participation Agreement by and among The Alger American
Fund, Great American Reserve Insurance Company and Fred Alger and
Company, Incorporated.**
(ii) Form of Fund Participation Agreement by and among Great American
Reserve Insurance Company, Berger Institutional Products Trust and
BBOI Worldwide LLC.**
(iii)Form of Fund Participation by and between Great American Reserve
Insurance Company, Insurance Management Series and Federated
Securities Corp.**
(iv) Form of Fund Participation between Great American Reserve Insurance
Company, Van Eck Worldwide Insurance Trust and Van Eck Associates
Corporation.**
(v) Form of Fund Participation Agreement by and between Lord Abbett Series
Fund, Inc., Lord, Abbett and Co. and Great American Reserve Insurance
Company.**
(vi) Form of Fund Participation Agreement by and between American Century
Investment Services, Inc. and Great American Reserve Insurance
Company.**
(vii)Form of Fund Participation Agreement between INVESCO Variable
Investment Funds, Inc., INVESCO Funds Group, Inc. and the Company.***
(viii) Form of Fund Participation Agreement between Rydex Variable Trust and
the Company.+
(ix) Form of Fund Participation Agreement between Pioneer Variable
Contracts Trust and the Company.++
(x) Form of Fund Participation Agreement between Seligman Portfolios, Inc.
and the Company (to be filed by Amendment).
9. Opinion and Consent of Counsel (to be filed by Amendment).
10. Consent of Independent Accountants (to be filed by Amendment).
11. Not Applicable.
12. Not Applicable.
13. Not Applicable.
14. Not Applicable.
15. Company Organizational Chart.+
*Incorporated by reference to Form N-4 (Conseco Variable Annuity Account F -
File Nos. 333-40309 and 811-08483) filed electronically on November 14, 1997.
**Incorporated by reference to Pre-Effective Amendment No. 1 to Form N-4
(Conseco Variable Annuity Account F - File Nos. 333-40309 and 811-08483) filed
electronically on February 3, 1998.
***Incorporated by reference to Conseco Variable Annuity Account G, Form N-4,
File Nos. 333-00373 and 811-07501, filed electronically on January 23, 1996.
+Incorporated by reference to Post-Effective Amendment No. 1 to Form N-4
(Conseco Variable Annuity Account H) (File Nos. 333-90737 and 811-09693) filed
electronically on April 28, 2000.
++Incorporated by reference to Post-Effective Amendment No. 7 to Form N-4
(Conseco Variable Annuity Account F) (File Nos. 333-40309 and 811-08483) filed
electronically on December 29, 2000.
ITEM 25. DIRECTORS AND OFFICERS OF THE DEPOSITOR
The following are the Executive Officers and Directors of the Company which
are engaged directly or indirectly in activities relating to the Registrant or
the Contracts offered by the Registrant:
Name and Principal Position and Offices
Business Address* with Depositor
------------------- ---------------------------------------
Ngaire E. Cuneo Director
John M. Howard Director
David K. Herzog Director, Executive Vice President, General Counsel
and Secretary
Thomas J. Kilian Director and President
James S. Adams Director, Senior Vice President, Chief Accounting
Officer and Treasurer
*The Principal business address for all officers and directors listed above is
11825 N. Pennsylvania Street, Carmel, Indiana 46032.
ITEM 26. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH THE DEPOSITOR OR
REGISTRANT
The Company organizational chart was filed as Exhibit 15 in Post-Effective
Amendment No. 1 to Form N-4 (Conseco Variable Annuity Account H - File Nos.
333-90737 and 811-09693) and is incorporated herein by reference.
ITEM 27. NUMBER OF CONTRACT OWNERS
Not Applicable.
ITEM 28. INDEMNIFICATION
The Bylaws (Article VI) of the Company provide, in part, that: The
Corporation shall indemnify any person who was or is a party, or is threatened
to be made a party, to any threatened, pending, or completed action, suit or
proceeding, whether civil, criminal, administrative, or investigative, by reason
of the fact that he is or was a director or officer of the Corporation, or is or
was serving at the request of the Corporation as a director, officer, employee
or agent of another corporation, partnership, joint venture, trust or other
enterprise (collectively, "Agent") against expenses (including attorneys' fees),
judgments, fines, penalties, court costs and amounts paid in settlement actually
and reasonably incurred by him in connection with such action, suit or
proceeding if he acted in good faith and in a manner he reasonably believed to
be in or not opposed to the best interests of the Corporation, and, with respect
to any criminal action or proceeding, had no reasonable cause to believe his
conduct was unlawful. The termination of any action, suit, or proceeding by
judgment, order, settlement (whether with or without court approval), conviction
or upon a plea of nolo contendere or its equivalent, shall not, of itself,
create a presumption that the Agent did not act in good faith and in a manner
which he reasonably believed to be in or not opposed to the best interests of
the Corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe that his conduct was unlawful. If several claims,
issues or matters are involved, an Agent may be entitled to indemnification as
to some matters even though he is not entitled as to other matters. Any director
or officer of the Corporation serving in any capacity of another corporation, of
which a majority of the shares entitled to vote in the election of its directors
is held, directly or indirectly, by the Corporation, shall be deemed to be doing
so at the request of the Corporation.
<PAGE>
Insofar as indemnification for liability arising under the Securities Act
of 1933 may be permitted directors and officers or controlling persons of the
Company pursuant to the foregoing, or otherwise, the Company has been advised
that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act and, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the Company of expenses incurred or paid
by a director, officer or controlling person of the Company in the successful
defense of any action, suit or proceeding) is asserted by such director, officer
or controlling person in connection with the securities being registered, the
Company will, unless in the opinion of its counsel the matter has been settled
by controlling precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against public policy as
expressed in the Act and will be governed by the final adjudication of such
issue.
ITEM 29. PRINCIPAL UNDERWRITERS
(a) Conseco Equity Sales, Inc. is the principal underwriter for the following
investment companies (other than the Registrant):
Conseco Variable Annuity Account C
Conseco Variable Annuity Account E
Conseco Variable Annuity Account F
Conseco Variable Annuity Account G
Conseco Variable Annuity Account H
Conseco Fund Group
Rydex Advisor Variable Annuity Account
BMA Variable Life Account A
Conseco Variable Account L
(b) Conseco Equity Sales, Inc. ("CES") is the principal underwriter for the
Contracts. The following persons are the officers and directors of CES. The
principal business address for each officer and director of CES is 11815 N.
Pennsylvania Street, Carmel, Indiana 46032.
Name and Principal Positions and Offices
Business Address with Underwriter
------------------------ ---------------------------------------
John M. Howard President and Director
William P. Kovacs Vice President, General Counsel,
Secretary and Director
James S. Adams Senior Vice President, Chief Accounting Officer,
Treasurer and Director
William T. Devanney, Jr. Senior Vice President, Corporate
Taxes
<PAGE>
Donald B. Johnston Vice President, Director Mutual Fund
Sales & Marketing
(c) Not Applicable.
ITEM 30. LOCATION OF ACCOUNTS AND RECORDS
Conseco Variable Insurance Company, whose address is 11815 N. Pennsylvania
Street, Carmel, IN 46032, maintains physical possession of the accounts, books
or documents of the Separate Account required to be maintained by Section 31(a)
of the Investment Company Act of 1940 and the rules promulgated thereunder.
ITEM 31. MANAGEMENT SERVICES
Not Applicable.
ITEM 32. UNDERTAKINGS
a. Registrant hereby undertakes to file a post-effective amendment to this
registration statement as frequently as is necessary to ensure that the audited
financial statements in the registration statement are never more than sixteen
(16) months old for so long as payment under the variable annuity contracts may
be accepted.
b. Registrant hereby undertakes to include either (1) as part of any
application to purchase a contract offered by the Prospectus, a space that an
applicant can check to request a Statement of Additional Information, or (2) a
postcard or similar written communication affixed to or included in the
Prospectus that the applicant can remove to send for a Statement of Additional
Information.
c. Registrant hereby undertakes to deliver any Statement of Additional
Information and any financial statement required to be made available under this
Form promptly upon written or oral request.
d. Conseco Variable Insurance Company (the "Company") hereby represents
that the fees and charges deducted under the Contracts described in the
Prospectus, in the aggregate, are reasonable in relation to the services
rendered, the expenses to be incurred and the risks assumed by the Company.
<PAGE>
e. The Securities and Exchange Commission (the "SEC") issued the American
Council of Life Insurance an industry wide no-action letter dated November 28,
1988, stating that the SEC would not recommend any enforcement action if
registered separate accounts funding tax-sheltered annuity contracts restrict
distributions to plan participants in accordance with the requirements of
Section 403(b)(11), provided certain conditions and requirements were met. Among
these conditions and requirements, any registered separate account relying on
the no-action position of the SEC must:
(1) Include appropriate disclosure regarding the redemption
restrictions imposed by Section 403(b)(11) in each registration statement,
including the prospectus, used in connection with the offer of the
contract;
(2) Include appropriate disclosure regarding the redemption
restrictions imposed by Section 403 (b)(11) in any sales literature used in
connection with the offer in the contract;
(3) Instruct sales representatives who solicit participants to
purchase the contract specifically to bring the redemption restrictions
imposed by Section 403(b)(11) to the attention of the potential
participants; and
(4) Obtain from each plan participant who purchases a Section 403(b)
annuity contract, prior to or at the time of such purchase, a signed
statement acknowledging the participant's understanding of (i) the
restrictions on redemption imposed by Section 403(b)(11), and (ii) the
investment alternatives available under the employer's Section 403(b)
arrangement, to which the participant may elect to transfer his contract
value.
The Registrant is relying on the no-action letter. Accordingly, the
provisions of paragraphs (1) - (4) above have been complied with.
SIGNATURES
As required by the Securities Act of 1933 and the Investment Company Act of
1940, the Registrant certifies that it has caused this Registration Statement to
be signed on its behalf, in the City of Carmel, and State of Indiana on this
12th day of January, 2001.
CONSECO VARIABLE ANNUITY
ACCOUNT I
Registrant
By: CONSECO VARIABLE INSURANCE COMPANY
By: /s/THOMAS J. KILIAN
------------------------------
<PAGE>
By: CONSECO VARIABLE INSURANCE COMPANY
Depositor
By: /s/THOMAS J. KILIAN
-------------------------------
As required by the Securities Act of 1933, this Registration Statement has been
signed by the following persons in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
---------- ----- ----
<S> <C>
/s/NGAIRE E. CUNEO Director 1-12-01
--------------------------------- --------------
Ngaire E. Cuneo
/s/THOMAS J. KILIAN Director and President 1-12-01
-------------------------------- (Principal Executive Officer) --------------
Thomas J. Kilian
/s/JOHN M. HOWARD 1-12-01
------------------------------ Director --------------
John M. Howard
/s/DAVID K. HERZOG 1-12-01
--------------------------------- Director -------------
David K. Herzog
/s/JAMES S. ADAMS Senior Vice President, 1-12-01
--------------------------------- Chief Accounting Officer, Treasurer -------------
James S. Adams and Director (Principal Financial
Officer and Principal Accounting
Officer)
</TABLE>
EXHIBITS TO
FORM N-4
INDEX TO EXHIBITS
EX-99.B1 Resolution of the Board of Directors Authorizing
the Establishment of the Separate Account
