Registration Nos. 33-74092
811-8288
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [X]
Pre-Effective Amendment No.
Post-Effective Amendment No. 7 [X]
and
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
Amendment No. 7 [X]
GREAT AMERICAN RESERVE VARIABLE ANNUITY ACCOUNT E
(Exact Name of Registrant)
CONSECO VARIABLE INSURANCE COMPANY
(Name of Depositor)
11825 N. Pennsylvania Street
Carmel, Indiana 46032-4572
(Address of Depositor's Principal Executive Offices)
(317) 817-3700
(Depositor's Telephone Number, including Area Code)
Michael A. Colliflower
Great American Reserve Insurance Company
11825 N. Pennsylvania Street
Carmel, Indiana 46032-4572
(Name and Address of Agent for Service)
It is proposed that this filing will become effective:
[ ] immediately upon filing pursuant to paragraph (b) of Rule 485
[ ] on (date) pursuant to paragraph (b) of Rule 485
[X] 60 days after filing pursuant to paragraph (a) (1) of Rule 485
[ ] on (date) pursuant to paragraph (a)(1) of Rule 485
If appropriate, check the following box:
[ ] this post-effective amendment designates a new effective date for a
previously filed post-effective amendment
Title of Securities Registered:
Individual and Group Deferred Annuity Contracts and Certificates
CONSECO VARIABLE ANNUITY ACCOUNT E
FORM N-4
CROSS REFERENCE SHEET
Pursuant to Rule 495(a)
Under The Securities Act of 1933
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Form N-4
Item No. PART A - Prospectus Caption
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1. Cover Page................................... Cover Page
2. Definitions.................................. Definitions
3. Synopsis or Highlights....................... Summary
4. Condensed Financial Information.............. Condensed Financial Information
5. General Description of Registrant,........... Conseco Variable, The Variable Account, and
Depositor and Portfolio Companies Investment Options
6. Deductions and Expense....................... Charges and Deductions
7. General Description of Variable.............. The Contracts
Annuity Contracts
8. Annuity Period .............................. Annuity Phase
Settlement Provisions
9. Death Benefit................................ Death Benefit on or
After Maturity Date
10. Purchase and Contract Values................. Conseco Variable, The Variable
Account, and Investment Options;
Accumulation Provisions
11. Redemptions.................................. The Contracts
Section B. Settlement Provisions
12. Taxes........................................ Federal Tax Status
13. Legal Proceedings............................ Legal Proceedings
14. Table of Contents of the Statement........... Table of Contents of the Statement
of Additional Information of Additional Information
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Form N-4
Item No.
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PART B - Statement of Additional Information
-----------------------------------
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15. Cover Page................................... Statement of Additional Information
Cover Page
16. Table of Contents............................ Table of Contents
17. General Information and History.............. General Information and History
18. Services..................................... Not Applicable
19. Purchase of Securities....................... Not Applicable
Being Offered
20. Underwriters................................. Distribution
21. Calculation of Performance Data.............. Calculation of Yield Quotations, Calculation of
Total Return Quotations, and Other Performance Data
22. Annuity Payments............................. Annuity Provisions
23. Financial Statements......................... Financial Statements
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PART C
Information required to be included in Part C is set forth under the appropriate
item, so numbered, in Part C of this registration statement.
PART A
CONSECO VARIABLE ANNUITY ACCOUNT E
(formerly Great American Reserve Variable Annuity Account E)
INDIVIDUAL & GROUP VARIABLE DEFERRED ANNUITY CONTRACTS
offered by
CONSECO VARIABLE INSURANCE COMPANY
(formerly Great American Reserve Insurance Company)
Administrative Office:
11815 N. Pennsylvania Street
Carmel, IN 46032
(317)817-3700
This prospectus describes the individual and group flexible purchase payment
variable deferred annuity contracts (Contracts) issued by Conseco Variable
Insurance Company (Conseco Variable). The Contracts are designed for use in
retirement planning.
You can invest your Purchase Payments in one of the Variable Account Investment
Options listed below. Depending on market conditions, you can make or lose money
in any of these Variable Account Investment Options. You can also invest in the
Fixed Account of Conseco Variable.
CONSECO SERIES TRUST
o Balanced Portfolio
o Common Stock Portfolio
o Fixed Income Portfolio
o Government Securities Portfolio
o Money Market Portfolio
THE ALGER AMERICAN FUND
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.
o VP Income & Growth
o VP International
o VP Value
BERGER INSTITUTIONAL PRODUCTS TRUST
o Berger IPT - 100 Fund
o Berger IPT - Growth and Income Fund
o Berger IPT - Small Company Growth Fund
o Berger/BIAM IPT - International Fund
THE DREYFUS SOCIALLY RESPONSIBLE
GROWTH FUND, INC.
DREYFUS STOCK INDEX FUND
DREYFUS VARIABLE INVESTMENT FUND
o Disciplined Stock Portfolio
o International Value Portfolio
FEDERATED INSURANCE SERIES
o Federated High Income Bond Fund II
o Federated International Equity Fund II
o Federated Utility Fund II
INVESCO VARIABLE INVESTMENT FUNDS, INC.
o INVESCO VIF-High Yield Portfolio
o INVESCO VIF-Industrial Income Portfolio
JANUS ASPEN SERIES
o Aggressive Growth Portfolio
o Growth Portfolio
o Worldwide Growth Portfolio
LAZARD RETIREMENT SERIES, INC.
o Lazard Retirement Equity Portfolio
o Lazard Retirement Small Cap Portfolio
LORD ABBETT SERIES FUND, INC.
o Growth and Income Portfolio
MITCHELL HUTCHINS SERIES TRUST
o Growth and Income Portfolio
NEUBERGER & BERMAN ADVISERS MANAGEMENT TRUST
o Limited Maturity Bond Portfolio
o Partners Portfolio
STRONG OPPORTUNITY FUND II, INC.
o Opportunity Fund II
STRONG VARIABLE INSURANCE FUNDS, INC.
o Growth Fund II
VAN ECK WORLDWIDE INSURANCE TRUST
o Worldwide Bond Fund
o Worldwide Emerging Markets Fund
o Worldwide Hard Assets Fund
o Worldwide Real Estate Fund
Please read this prospectus carefully before investing and keep it on file for
future reference. It contains important information about the individual and
group fixed and variable annuity contracts issued by Conseco Variable.
To learn more about the Contract, you can obtain a copy of the Statement of
Additional Information (SAI) dated May 1, 1999. 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 or write to us
at the address or telephone number given above.
The Contracts:
* are not bank deposits
* are not federally insured
* are not endorsed by any bank or government agency
* are not guaranteed and may be subject to loss of principal
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.
May 1, 1999
Table of Contents
Page
DEFINITIONS.............................
SUMMARY.................................
FEE TABLE...............................
CONSECO VARIABLE, THE VARIABLE ACCOUNT
INVESTMENT OPTIONS.....................
Conseco Variable.....................
The Variable Account.................
Investment Options...................
Voting Rights.....................
THE CONTRACTS...........................
ACCUMULATION PROVISIONS.................
Purchase Payments....................
Allocation of Purchase Payments......
Accumulation Units ..................
Transfers............................
Dollar Cost Averaging................
Rebalancing..........................
Sweeps...............................
Withdrawals..........................
Systematic Withdrawal Plan...........
Loans................................
CHARGES AND DEDUCTIONS..................
Withdrawal Charge....................
Administrative Charges...............
Mortality and Expense Risk Charge....
Reduction or Elimination of
Contract Charges....................
Premium Taxes........................
Fund Expenses........................
Other Charges........................
DEATH BENEFIT BEFORE MATURITY DATE......
OPTIONS WHEN YOU TERMINATE YOUR
PARTICIPATION IN THE PLAN (FOR GROUP
CONTRACTS ONLY).......................
RESTRICTIONS UNDER OPTIONAL RETIREMENT
PROGRAMS..............................
RESTRICTIONS UNDER SECTION 403(b).......
THE ANNUITY PHASE - SETTLEMENT PROVISIONS.
Annuity Options......................
Proceeds Applied to an Annuity
Option..............................
Transfers After Maturity Date........
Death Benefit........................
OTHER CONTRACT PROVISIONS...............
10 Day Right to Review...............
Ownership............................
Modification.........................
FEDERAL TAX STATUS...................
Annuity Contracts in General.........
Qualified and Non-Qualified Contracts
Withdrawals - Non-Qualified
Contracts...........................
Withdrawals - Qualified Contracts....
Withdrawals - Tax-Sheltered
Annuities...........................
Diversification......................
Investor Control.....................
GENERAL MATTERS.........................
Performance Information..............
Year 2000............................
Distribution of Contracts............
Legal Proceedings....................
TABLE OF CONTENTS OF THE SAI............
APPENDIX................................
DEFINITIONS
Accumulation Unit: An accounting unit of measure we use to calculate the value
of your Contract before the Maturity Date.
Annuitant: The person upon whose life the Contract is issued.
Annuity Payments: A series of income payments under an annuity option.
Contract Owner: The person(s) (including Co-Owners) or entity entitled to
ownership rights under the Contract. The Contract Owner is also referred to as
"you" in this prospectus.
Contract Value: The total value of your Individual Account values held under the
Contract in each Investment Option of the Variable Account plus the Fixed
Account.
Contract Year: A period of 12 months beginning with the effective date of your
Contract.
Code: Internal Revenue Code of 1986, as amended.
Fixed Account: The general account of Conseco Variable. You may choose to
allocate Purchase Payments and Contract Value to the Fixed Account. It provides
guaranteed values and periodically adjusted interest rates.
Fund: The underlying mutual funds (or portfolios of a mutual fund) which the
sub-accounts of the Variable Account invest in.
Individual Account: The record we establish to represent your interest in an
Investment Option before the Maturity Date.
Investment Options: The investment choices available to Contract Owners.
Maturity Date: The date on which annuity payments begin.
Plan: A voluntary program for an employer that qualifies for special tax
treatment.
Purchase Payments: The money you invest in the Contract.
Valuation Period: The period of time from the end of one business day of the New
York Stock Exchange to the end of the next business day.
Variable Account: The separate account we established known as Conseco Variable
Annuity Account E. Prior to May 1, 1999, it was known as Great American Reserve
Variable Annuity Account E. The Variable Account is divided into sub-accounts.
SUMMARY
The Contracts: The Contracts described in this prospectus are tax deferred
individual and group flexible purchase payment variable annuity contracts. The
Contracts also offer you a Fixed Account Option. The Contracts provide for the
accumulation of Contract Values and the payment of annuity benefits on a
variable and/or fixed basis. In general, this Prospectus describes only the
variable portion of the Contracts.
Retirement Plans: The Contracts may be issued pursuant to either non-qualified
retirement plans or plans qualifying for special income tax treatment under the
Code. Examples of the plans qualifying for special tax treatment are: individual
retirement annuities (IRAs), pension and profit sharing plans, tax- sheltered
annuities (TSAs), and state and local government deferred compensation plans.
See "Federal Tax Status."
Purchase Payments: The Contracts permit you to make Purchase Payments on a
flexible basis. This means that you can make payments at any time you like
before the Maturity Date. For TSAs, the minimum initial Purchase Payment and the
amount of each subsequent Purchase Payment is $50 per month. For IRAs, the
minimum initial Purchase Payment is $2,000 and the minimum amount of each
additional Purchase Payment is $50. For non-qualified Contracts, the minimum
initial Purchase Payment is $5,000 and the minimum amount of each additional
Purchase Payment is $2,000 (or $200 each month). If your Purchase Payment is
more than $500,000, it requires our prior approval.
Investment Options: You can allocate your Purchase Payment to the Fixed Account
of Conseco Variable or the following Variable Account Investment Options:
CONSECO SERIES TRUST
o Balanced Portfolio (formerly known as Asset Allocation Portfolio)
o Common Stock Portfolio
o Fixed Income Portfolio (formerly known as Corporate Bond Portfolio)
o Government Securities Portfolio
o Money Market Portfolio
THE ALGER AMERICAN FUND
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.
o VP Income & Growth
o VP International
o VP Value
BERGER INSTITUTIONAL PRODUCTS TRUST
o Berger IPT - 100 Fund
o Berger IPT - Growth and Income Fund
o Berger IPT - Small Company Growth Fund
o Berger/BIAM IPT - International Fund
THE DREYFUS SOCIALLY RESPONSIBLE
GROWTH FUND, INC.
DREYFUS STOCK INDEX FUND
DREYFUS VARIABLE INVESTMENT FUND
o Disciplined Stock Portfolio
o International Value Portfolio
FEDERATED INSURANCE SERIES
o Federated High Income Bond Fund II
o Federated International Equity Fund II
o Federated Utility Fund II
INVESCO VARIABLE INVESTMENT FUNDS, INC.
o INVESCO VIF-High Yield Portfolio
o INVESCO VIF-Industrial Income Portfolio
JANUS ASPEN SERIES
o Aggressive Growth Portfolio
o Growth Portfolio
o Worldwide Growth Portfolio
LAZARD RETIREMENT SERIES, INC.
o Lazard Retirement Equity Portfolio
o Lazard Retirement Small Cap Portfolio
LORD ABBETT SERIES FUND, INC.
o Growth and Income Portfolio
MITCHELL HUTCHINS SERIES TRUST
o Growth and Income Portfolio
NEUBERGER & BERMAN ADVISERS MANAGEMENT TRUST
o Limited Maturity Bond Portfolio
o Partners Portfolio
STRONG OPPORTUNITY FUND II, INC.
o Opportunity Fund II
STRONG VARIABLE INSURANCE FUNDS, INC.
o Growth Fund II
VAN ECK WORLDWIDE INSURANCE TRUST
o Worldwide Bond Fund
o Worldwide Emerging Markets Fund
o Worldwide Hard Assets Fund
o Worldwide Real Estate Fund
The portion of your Contract value allocated to the Variable Account Investment
Options will reflect the investment performance of the Funds you select.
Transfers: Prior to the Maturity Date, you may make transfers among the Variable
Account Investment Options and from the Variable Account Investment Options to
the Fixed Account without charge. Under certain circumstances, you may also
transfer amounts from the Fixed Account to the Variable Account Investment
Options. You may also make transfers under certain programs we offer known as
the dollar cost averaging program, sweep program, and rebalancing. After the
Maturity Date, you may not make transfers from a variable annuity to a fixed
annuity or from a fixed annuity to a variable annuity.
Withdrawals: You may make withdrawals from your Contract before the earlier of
the Maturity Date or the death of the Annuitant. We may impose a withdrawal
charge and an administrative charge when you make a withdrawal. You may also
make withdrawals pursuant to the systematic withdrawal plan. A withdrawal may be
subject to income taxes and tax penalties. In addition, certain restrictions
apply to withdrawals from TSA Contracts.
Loans: Under certain circumstances, you may make loans from your Contract.
Death Benefit: Generally, if the Annuitant or Contract Owner dies before the
Maturity Date, we will pay a death benefit to your beneficiary.
Annuity Payments: We offer a variety of fixed and variable annuity options which
you can select to receive your Annuity Payments. Your Annuity Payments will
begin on the Maturity Date. You can select the Maturity Date, the frequency of
the payments and the annuity option.
Ten-Day Review: If you cancel the Contract within 10 days after receiving it (or
whatever period is required in your state) we will refund your Purchase Payment.
Taxes: Your earnings are not taxed until you take them out. If you take money
out before the Maturity Date, earnings come out first and are taxed as income.
If you are younger than 59 1/2 when you take money out, you may be charged a 10%
federal tax penalty on the earnings. The Contract provides that if the Annuitant
dies before the Maturity Date, we will pay a death benefit to the beneficiary.
Such payments upon the death of the Annuitant who is not the Contract Owner (as
in the case of certain non-qualified Contracts), do not qualify for the death of
Contract Owner exception to the ten percent distribution penalty unless the
beneficiary is 59 1/2 or one of the other exceptions to the penalty applies.
For TSA Contracts, you can only make withdrawals of amounts attributable to
contributions you made pursuant to a salary reduction agreement (as defined in
the Code) when:
(i) you attain age 59 1/2;
(ii) you separate from service;
(iii) you die;
(iv) you become disabled;
(v) made in the case of hardship; or
(vi) made pursuant to a qualified domestic relations order if otherwise
permitted.
Withdrawals for hardship are restricted to a portion of the Contract Owner's
Contract Value which represents contributions made by the Owner and does not
include any investment results.
Payments after the Maturity Date are considered partly a return of your original
investment. That part of each payment is not taxable as income. If your Contract
was purchased under a tax-qualified plan, your payments may be fully taxable.
Charges and Deductions:
* Each year Conseco Variable deducts a $30 Annual Administrative Fee from
your Contract (this charge is waived if your Individual Account value is $25,000
or more).
* Conseco Variable deducts a Mortality and Expense Risk Fee which is equal,
on an annual basis, to 1.25% of the average daily net assets of the Variable
Account. Conseco Variable also deducts an Administrative Charge which is equal,
on an annual basis, to .15% of the average daily net assets of the Variable
Account.
* If you take money out of the Contract, Conseco Variable may assess a
deferred sales load which ranges from 0% to 9%, depending on how long your
Contract has been outstanding.
* You may be assessed a premium tax charge which generally ranges from
0%-3.5%, depending on the state.
* As with other professionally managed investments, there are also investment
charges which currently range from ___% to ___%, on an annual basis, of the
average daily value of the portfolio, depending upon the Variable Account
Investment Option you select.
CONSECO VARIABLE ANNUITY ACCOUNT E FEE TABLE
CONTRACT OWNER TRANSACTION EXPENSES(a)
Sales Charge Imposed on Purchases........................... None
Exchange Fee................................................ None
Surrender Fee............................................... None
Deferred Sales Load (as a percentage of purchase payments)(b)
First and Second Year..................................... 9%
Third Year................................................ 8%
Fourth Year............................................... 7%
Fifth Year................................................ 5%
Sixth Year................................................ 3%
Seventh Year or More...................................... 0%
Annual Administrative Fee(b)..................... $30
VARIABLE ACCOUNT ANNUAL EXPENSES
(as a percentage of average account value)
Mortality and Expense Risk Fees............................. 1.25%
Administrative Charge....................................... 0.15%
-----
Total Annual Expenses of the Variable Account(b).............. 1.40%
====================================================================
(a) Premium taxes are not shown. We will deduct for any premium tax due when
you make a Purchase Payment or from Individual Account values at the
Maturity Date or at such other time based on our sole discretion. The
current range of premium taxes in jurisdictions in which we make the
Contracts available is from 0% to 3.5%.
(b) Conseco may reduce or eliminate the sales, administrative, or other
expenses with certain Contracts in cases when it expects to incur lower
sales and administrative expenses or perform fewer services (see "Reduction
or Elimination of Contract Charges"). We will waive the Annual
Administrative Fee if your Individual Account value is $25,000 or greater.
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Annual Fund Expenses
(as a percentage of the average daily net assets of a portfolio)
TOTAL ANNUAL
OTHER EXPENSES PORTFOLIO
(AFTER EXPENSE EXPENSES
REIMBURSEMENT (AFTER EXPENSE
MANAGEMENT 12b-1 FOR CERTAIN REIMBURSEMENT FOR
FEES FEES PORTFOLIOS) CERTAIN PORTFOLIOS)
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CONSECO SERIES TRUST (1)
Balanced
Portfolio (2) 0.55% -- 0.20% 0.75%
Common Stock
Portfolio (2) 0.60% -- 0.20% 0.80%
Fixed Income
Portfolio 0.50% -- 0.20% 0.70%
Government Securities
Portfolio 0.50% -- 0.20% 0.70%
Money Market
Portfolio (2) 0.25% -- 0.20% 0.45%
THE ALGER AMERICAN FUND
Alger American Growth
Portfolio 0.75% -- 0.04% 0.79%
Alger American
Leveraged AllCap
Portfolio (3) 0.85% -- 0.15% 1.00%
Alger American MidCap
Growth Portfolio 0.80% -- 0.04% 0.84%
Alger American Small
Capitalization
Portfolio 0.85% -- 0.04% 0.89%
AMERICAN CENTURY VARIABLE PORTFOLIOS, INC.
VP Income & Growth 0.70% -- 0.00% 0.70%
VP International 1.50% -- 0.00% 1.50%
VP Value 1.00% -- 0.00% 1.00%
BERGER INSTITUTIONAL PRODUCTS TRUST
Berger IPT--100
Fund (4) 0.00% -- 1.00% 1.00%
Berger IPT--Growth
and Income Fund (4) 0.00% -- 1.00% 1.00%
Berger IPT--Small
Company Growth
Fund (4) 0.00% -- 1.15% 1.15%
Berger/BIAM IPT--
International
Fund (4) 0.00% -- 1.20% 1.20%
THE DREYFUS SOCIALLY
RESPONSIBLE GROWTH
FUND, INC . 0.75% -- 0.07% 0.82%
DREYFUS STOCK INDEX
FUND 0.25% -- 0.03% 0.28%
DREYFUS VARIABLE INVESTMENT FUND
Disciplined Stock
Portfolio 0.75% 0.27% 1.02%
International Value
Portfolio 1.00% 0.42% 1.42%
FEDERATED INSURANCE SERIES
Federated High Income
Bond Fund II (5) 0.51% -- 0.29% 0.80%
Federated International
Equity Fund II (5) 0.02% -- 1.21% 1.23%
Federated Utility
Fund II (5) 0.48% -- 0.37% 0.85%
INVESCO VARIABLE INVESTMENT FUNDS, INC.
INVESCO VIF - High Yield
Portfolio (6) 0.60% -- 0.27% 0.87%
INVESCO VIF -
Industrial Income
Portfolio (6) 0.75% -- 0.20% 0.95%
JANUS ASPEN SERIES
Aggressive Growth
Portfolio (7) 0.73% -- 0.03% 0.76%
Growth Portfolio (7) 0.65% -- 0.05% 0.70%
Worldwide Growth
Portfolio (7) 0.66% -- 0.08% 0.74%
LAZARD RETIREMENT SERIES, INC.
Lazard Retirement Equity
Portfolio (8) 0.75% 0.25% 0.50% 1.50%
Lazard Retirement Small
Cap Portfolio (8) 0.75% 0.25% 0.50% 1.50%
LORD ABBETT SERIES FUND, INC.
Growth and Income
Portfolio (9) 0.50% 0.15% 0.02% 0.67%
MITCHELL HUTCHINS SERIES TRUST
Growth and Income
Portfolio 0.70% -- 0.88% 1.58%
NEUBERGER & BERMAN ADVISERS MANAGEMENT TRUST (10)
Limited Maturity Bond
Portfolio 0.65% -- 0.12% 0.77%
Partners Portfolio 0.80% -- 0.06% 0.86%
STRONG OPPORTUNITY FUND II, INC.
Opportunity Fund II 1.00% -- 0.15% 1.15%
STRONG VARIABLE INSURANCE FUNDS, INC
Growth Fund II (11) 1.00% -- 0.20% 1.20%
VAN ECK WORLDWIDE INSURANCE TRUST (12)
Worldwide Bond Fund 1.00% -- 0.12% 1.12%
Worldwide Emerging
Markets Fund 1.00% -- (0.20%) 0.80%
Worldwide Hard
Assets Fund 1.00% -- 0.17% 1.17%
Worldwide Real
Estate Fund 0.00% -- 1.00% 1.00%
</TABLE>
(1) Conseco Capital Management, Inc., the investment adviser of Conseco Series
Trust, has voluntarily agreed to reimburse all expenses, including
management fees, in excess of the following percentage of the average
annual net assets of each listed Portfolio, as long as such reimbursement
would not result in a Portfolio's inability to qualify as a regulated
investment company under the Code: 0.75% for the Balanced Portfolio; 0.80%
for the Common Stock Portfolio; 0.70% for the Fixed Income Portfolio and
Government Securities Portfolio; and 0.45% for the Money Market Portfolio.
The total percentages in the above table is after reimbursement. In the
absence of expense reimbursement, the total fees and expenses in 1997 would
have totaled: 0.84% for the Asset Allocation Portfolio; 0.80% for the
Common Stock Portfolio; 0.77% for the Corporate Bond Portfolio; 0.92% for
the Government Securities Portfolio; and 0.52% for the Money Market
Portfolio.
(2) Conseco Capital Management, Inc., since January 1, 1993, has voluntarily
waived its management fees in excess of the annual rates set forth in the
table above. Absent such fee waivers, the management fees would be: .65%
for the Asset Allocation Portfolio; .65% for the Common Stock Portfolio;
and .50% for the Money Market Portfolio.
(3) The Alger American Leveraged AllCap Portfolio's "Other Expenses" includes
.04% of interest expense.
(4) The Funds' investment advisers have voluntarily agreed to waive their
advisory fee and have voluntarily reimbursed 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--100
Fund and the Berger IPT--Growth and Income Fund exceed 1.00%, the normal
operating expenses in any fiscal year of the Berger IPT--Small Company
Growth Fund exceed 1.15%, and the normal operating expenses of the
Berger/BIAM IPT International Fund exceed 1.20% of the respective Fund's
average daily net assets. Absent the voluntary waiver and reimbursement,
the Management Fee for the Berger IPT--100 Fund, Berger IPT--Growth and
Income Fund, the Berger IPT--Small Company Growth Fund and the Berger/BIAM
IPT--International Fund would have been .75%, .75%, .90%, and .90%
respectively, and their Total Annual Portfolio Expenses would have been
9.18%, 9.62%, 5.81% and 3.83%, respectively.
(5) In the absence of a voluntary waiver by Federated Advisers, the Funds'
investment adviser, the Management Fee and Total Annual Portfolio Expenses
would have been 0.60% and .89%, respectively, for High Income Bond Fund II
and 0.75% and 1.12%, respectively, for Utility Fund II. Absent a voluntary
waiver of the management fee and the voluntary reimbursement of certain
other operating expenses by Federated Advisers, the Management Fee and
Total Annual Portfolio Expenses for International Equity Fund II would have
been 1.00% and 2.21%, respectively.
(6) Certain expenses are being absorbed voluntarily by the investment adviser
and sub-adviser. Total expenses (after expenses were absorbed but before
any expense offset arrangement) of the INVESCO VIF - High Yield Portfolio
and INVESCO VIF - Industrial Income Portfolio for the year ended December
31, 1997 amounted to 0.83% and 0.91%, respectively, of each Portfolio's
average net assets. In the absence of such voluntary expense limitation,
the total operating expenses of the INVESCO VIF - High Yield Portfolio and
INVESCO VIF - Industrial Income Portfolio for the fiscal period ended
December 31, 1997 would have been 0.94% and 0.97%, respectively, of each
Portfolio's average net assets.
It should be noted that the Portfolio's actual expenses were lower than the
figures shown because the Portfolio's custodian fees and pricing expenses were
reduced under expense offset arrangements. However, as a result of an SEC
requirement for mutual funds to state their total operating expenses without
crediting any such expense offset arrangements, the figures shown above do not
reflect these reductions.
(7) The expense figures shown are net of certain fee waivers or reductions from
Janus Capital Corporation, the investment adviser of the Janus Aspen
Series. Without such waivers or reductions, the total fees and expenses in
1997 would have totaled: 0.78% for Aggressive Growth; 0.78% for Growth; and
0.81% for Worldwide Growth.
(8) Lazard Asset Management, the Fund's investment adviser, has voluntarily
agreed to reimburse all expenses, including management fees, in excess of
1.50% of the average annual net assets of the Portfolio.
(9) The Growth and Income Portfolio of Lord Abbett Series Fund, Inc. has a
12b-1 plan which provides for payments to Lord, Abbett & Co. for remittance
to a life insurance company for certain distribution expenses (see the Fund
Prospectus). The 12b-1 plan provides that such remittances, in the
aggregate, will not exceed .15%, on an annual basis, of the daily net asset
value of shares of the Growth and Income Portfolio. For the year ending
December 31, 1998, the 12b-1 fees are estimated to be .15%. The examples
below for this Portfolio reflect the estimated 12b-1 fees.
(10) Neuberger & Berman Advisers Management Trust is divided into portfolios
(Portfolios), each of which invests all of its net investable assets in a
corresponding series of Advisers Managers Trust. The figures reported under
"Management Fees" include the total of the administration fees paid by the
Portfolio and the management fees paid by its corresponding series.
Similarly, "Other Expenses" includes all other expenses of the Portfolio
and its corresponding series.
(11) Strong Capital Management, Inc., the investment adviser of the Strong
Growth Fund II, has voluntarily agreed to cap the Fund's total operating
expenses at 1.20%. The Adviser has no current intention to, but may in the
future, discontinue or modify any waiver of fees or absorption of expenses
at its discretion with appropriate notification to its shareholders.
(12) All figures are annualized. Expenses of the Worldwide Real Estate Fund,
which commenced operation in June 1997, are being assumed by the Fund's
investment adviser. Without such assumption, Worldwide Real Estate Fund's
Management Fee would be 1.00%, Other Expenses would be 3.88% and Total
Expenses would be 4.88%. Other Expenses of Worldwide Real Estate Fund are
an estimate which assumes $80 million in average daily net assets, and may
be greater or less than those shown. Prior to April 30, 1997, Worldwide
Hard Assets Fund was named Gold and Natural Resources Fund. Other Expenses
of Worldwide Hard Assets Fund are net of soft dollar credits. Without such
credits, Other Expenses would have been 0.18% and Total Expenses would have
been 1.18%. Other Expenses of Worldwide Emerging Markets Fund are net of
the reduction of the Fund's operating fees in connection with a fee
arrangement, based on cash balances left on deposit with the custodian, and
net of the waiver or assumption by the Fund's investment adviser of certain
fees and expenses. Without such fee arrangement and, to a lesser extent,
the waiver/assumption, Other Expenses would have been 0.34% and Total
Expenses would have been 1.34%. The Fund's investment adviser is no longer
waiving or assuming fees and expenses.
EXAMPLES:
You would pay the following expenses on a $1,000 investment, assuming a 5%
annual return on assets:
<TABLE>
<CAPTION>
Example 1 - If you surrender the Contract at the end of the time periods:
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- --------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
CONSECO SERIES TRUST
Balanced Portfolio $108 $141 $163 $255
Common Stock Portfolio 108 142 166 260
Fixed Income Portfolio 107 139 161 250
Government Securities
Portfolio 107 139 161 250
Money Market Portfolio 105 132 148 224
THE ALGER AMERICAN FUND
Alger American Growth
Portfolio 108 142 165 259
Alger American Leveraged
AllCap Portfolio 110 148 176 280
Alger American MidCap
Growth Portfolio 108 143 168 264
Alger American Small
Capitalization Portfolio 109 145 170 269
AMERICAN CENTURY VARIABLE PORTFOLIOS, INC.
VP Income and Growth 107 139 N/A N/A
VP International 115 163 201 328
VP Value 110 148 176 280
BERGER INSTITUTIONAL PRODUCTS TRUST
Berger IPT - 100 Fund 110 148 176 280
Berger IPT - Growth and
Income Fund 110 148 176 280
Berger IPT - Small Company
Growth Fund 112 153 183 295
Berger/BIAM IPT -
International Fund 112 154 186 300
THE DREYFUS SOCIALLY RESPONSIBLE
GROWTH FUND, INC 108 143 167 262
DREYFUS STOCK INDEX FUND 103 126 139 206
DREYFUS VARIABLE INVESTMENT FUND, INC.
Disciplined Stock Portfolio 110 149 N/A N/A
International Value Portfolio 114 161 N/A N/A
FEDERATED INSURANCE SERIES
Federated High Income
Bond Fund II 108 142 166 260
Federated International
Equity Fund II 112 155 187 303
Federated Utility Fund II 109 144 168 265
INVESCO VARIABLE INVESTMENT FUNDS, INC.
INVESCO VIF - High Yield
Portfolio 109 144 N/A N/A
INVESCO VIF - Industrial
Income Portfolio 110 147 N/A N/A
JANUS ASPEN SERIES
Aggressive Growth Portfolio 108 141 164 256
Growth Portfolio 107 139 161 250
Worldwide Growth Portfolio 107 140 163 254
LAZARD RETIREMENT SERIES, INC.
Lazard Retirement Equity
Portfolio 115 163 N/A N/A
Lazard Retirement Small
Cap Portfolio 115 163 N/A N/A
LORD ABBETT SERIES FUND, INC.
Growth and Income Portfolio 107 138 N/A N/A
MITCHELL HUTCHINS SERIES TRUST
Growth and Income Portfolio 116 165 N/A N/A
NEUBERGER & BERMAN ADVISERS
MANAGEMENT TRUST
Limited Maturity Bond
Portfolio 108 141 N/A N/A
Partners Portfolio 109 144 N/A N/A
STRONG OPPORTUNITY FUND II, INC.
Opportunity Fund II 112 153 183 295
STRONG VARIABLE INSURANCE
FUNDS, INC.
Growth Fund II 112 154 186 300
VAN ECK WORLDWIDE INSURANCE TRUST
Worldwide Bond Fund 111 152 182 292
Worldwide Emerging
Markets Fund 108 142 166 260
Worldwide Hard Assets Fund 112 153 184 297
Worldwide Real Estate Fund 110 148 N/A N/A
</TABLE>
EXAMPLE 2-If you elect to annuitize your Contract:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
CONSECO SERIES TRUST
Balanced Portfolio $108 $141 $119 $255
Common Stock Portfolio 108 142 121 260
Fixed Income Portfolio 107 139 116 250
Government Securities
Portfolio 108 139 116 250
Money Market Portfolio 105 132 104 224
THE ALGER AMERICAN FUND
Alger American Growth
Portfolio 108 143 121 259
Alger American Leveraged
AllCap Portfolio 110 148 131 280
Alger American MidCap
Growth Portfolio 108 143 123 264
Alger American Small
Capitalization Portfolio 109 145 126 269
AMERICAN CENTURY VARIABLE
PORTFOLIOS, INC.
VP Income and Growth 107 139 N/A N/A
VP International 115 163 156 328
VP Value 110 148 131 280
BERGER INSTITUTIONAL PRODUCTS
TRUST
Berger IPT - 100 Fund 110 148 131 280
Berger IPT - Growth and
Income Fund 110 148 131 280
Berger IPT - Small Company
Growth Fund 112 153 139 295
Berger/BIAM IPT -
International Fund 112 154 141 300
THE DREYFUS SOCIALLY RESPONSIBLE
GROWTH FUND, INC 108 143 122 262
DREYFUS STOCK INDEX FUND 103 126 95 206
DREYFUS VARIABLE INVESTMENT
FUND, INC.
Disciplined Stock Portfolio 110 148 N/A N/A
International Value
Portfolio 114 161 N/A N/A
FEDERATED INSURANCE SERIES
Federated High Income
Bond Fund II 108 142 121 260
Federated International
Equity Fund II 112 155 143 303
Federated Utility Fund II 100 144 124 263
INVESCO VARIABLE INVESTMENT FUNDS, INC.
INVESCO VIF - High Yield
Portfolio 109 144 N/A N/A
INVESCO VIF - Industrial
Income Portfolio 110 147 N/A N/A
JANUS ASPEN SERIES
Aggressive Growth Portfolio 108 141 119 256
Growth Portfolio 107 139 116 250
Worldwide Growth Portfolio 107 140 118 254
LAZARD RETIREMENT SERIES, INC.
Lazard Retirement Equity
Portfolio 115 163 N/A N/A
Lazard Retirement Small
Cap Portfolio 115 163 N/A N/A
LORD ABBETT SERIES FUND, INC.
Growth and Income Portfolio 107 138 N/A N/A
MITCHELL HUTCHINS SERIES TRUST
Growth and Income Portfolio 116 165 N/A N/A
NEUBERGER & BERMAN ADVISERS
MANAGEMENT TRUST
Limited Maturity Bond
Portfolio 108 141 120 257
Partners Portfolio 109 144 124 266
STRONG OPPORTUNITY FUND II, INC.
Opportunity Fund II 112 153 139 295
STRONG VARIABLE INSURANCE FUNDS,
INC.
Growth Fund II 112 154 141 300
VAN ECK WORLDWIDE INSURANCE TRUST
Worldwide Bond Fund 111 152 137 292
Worldwide Emerging
Markets Fund 108 142 121 260
Worldwide Hard Assets Fund 112 153 140 297
Worldwide Real Estate Fund 110 148 N/A N/A
</TABLE>
EXAMPLE 3-If you do not surrender your Contract at the end of each time
period:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
CONSECO SERIES TRUST
Balanced Portfolio $ 23 $ 69 $119 $255
Common Stock Portfolio 23 71 121 260
Fixed Income Portfolio 22 68 116 250
Government Securities
Portfolio 22 68 116 250
Money Market Portfolio 20 60 104 224
THE ALGER AMERICAN FUND
Alger American Growth
Portfolio 23 71 121 259
Alger American Leveraged
AllCap Portfolio 25 77 131 280
Alger American MidCap
Growth Portfolio 23 72 123 264
Alger American Small
Capitalization Portfolio 24 74 126 269
AMERICAN CENTURY VARIABLE PORTFOLIOS,
INC.
VP Income and Growth 22 68 N/A N/A
VP International 30 92 156 328
VP Value 25 77 131 280
BERGER INSTITUTIONAL PRODUCTS TRUST
Berger IPT - 100 Fund 25 77 131 280
Berger IPT - Growth and
Income Fund 25 77 131 280
Berger IPT - Small Company
Growth Fund 27 81 139 295
Berger/BIAM IPT -
International Fund 27 83 141 300
THE DREYFUS SOCIALLY RESPONSIBLE
GROWTH FUND, INC 23 71 122 262
DREYFUS STOCK INDEX FUND 18 55 95 206
DREYFUS VARIABLE INVESTMENT FUND, INC.
Disciplined Stock Portfolio 25 77 N/A N/A
International Value Portfolio 29 89 N/A N/A
FEDERATED INSURANCE SERIES
Federated High Income Bond
Fund II 23 71 121 260
Federated International
Equity Fund II 27 84 143 303
Federated Utility Fund II 24 72 124 265
INVESCO VARIABLE INVESTMENT
FUNDS, INC.
INVESCO VIF - High Yield
Portfolio 24 73 N/A N/A
INVESCO VIF - Industrial
Income Portfolio 25 75 N/A N/A
JANUS ASPEN SERIES
Aggressive Growth Portfolio 23 70 119 256
Growth Portfolio 22 68 116 250
Worldwide Growth Portfolio 22 69 118 254
LAZARD RETIREMENT SERIES, INC.
Lazard Retirement Equity
Portfolio 30 92 N/A N/A
Lazard Retirement Small
Cap Portfolio 30 92 N/A N/A
LORD ABBETT SERIES FUND, INC.
Growth and Income Portfolio 22 67 N/A N/A
MITCHELL HUTCHINS SERIES TRUST
Growth and Income Portfolio 31 93 N/A N/A
NEUBERGER & BERMAN ADVISERS
MANAGEMENT TRUST
Limited Maturity Bond Portfolio 23 70 120 257
Partners Portfolio 24 73 124 266
STRONG OPPORTUNITY FUND II, INC.
Opportunity Fund II 27 81 139 295
STRONG VARIABLE INSURANCE FUNDS, INC.
Growth Fund II 27 83 141 300
VAN ECK WORLDWIDE INSURANCE TRUST
Worldwide Bond Fund 26 80 137 292
Worldwide Emerging Markets Fund 23 71 121 260
Worldwide Hard Assets Fund 27 82 140 297
Worldwide Real Estate Fund 25 77 N/A N/A
</TABLE>
* Please remember that the examples should not be considered a representation
of past or future expenses. Actual expenses may be greater or less than those
shown. Similarly, the 5% annual rate of return is not an estimate or a guarantee
of future investment performance.
* This Contract is designed for retirement planning. Surrenders prior to the
Maturity Date are not consistent with the long-term purposes of the Contract and
the applicable tax laws.
* The above table reflects estimates of expenses of the Variable Account and
the Funds. The table and examples assume the highest deductions possible under a
Contract, whether or not such deductions actually would be made under such a
Contract.
* Annual maintenance charges have been approximated as a .16% annual asset
charge.
There is Accumulation Unit value history (Condensed Financial Information)
contained in the Appendix.
CONSECO VARIABLE, THE VARIABLE ACCOUNT AND INVESTMENT OPTIONS
CONSECO VARIABLE
Conseco Variable Insurance Company ("Conseco Variable" or the "Company") was
originally organized in 1937. Prior to October 7, 1998, the Company was known as
Great American Reserve Insurance Company. In certain states, we may continue to
use the name Great American Reserve Insurance Company until our name change is
approved in that state. The Company is principally engaged in the life insurance
business in 49 states and the District of Columbia. Conseco Variable is a stock
company organized under the laws of the state of Texas and is an indirect
wholly-owned subsidiary of Conseco, Inc. Conseco, Inc. is a publicly owned
financial services organization headquartered in Carmel, Indiana. Through its
subsidiaries, Conseco, Inc. is one of the nation's leading providers of
supplemental health insurance, retirement annuities and universal life
insurance.
Contract Owner Inquiries:
You should direct any inquiries you have regarding your Individual Account, the
Contracts, or any related matter to the Company's Variable Annuity Department at
the address and telephone number shown under "Administrative Office" on page 1
of this Prospectus.
Financial Statements
The financial statements of Conseco Variable and the Variable Account are
contained in the Statement of Additional Information. You should consider the
financial statements of Conseco Variable only as bearing upon the ability of
Conseco Variable to meet its obligations under the Contracts. Neither the assets
of Conseco Variable nor those of any company in the Conseco group of companies
other than Conseco Variable support these obligations.
THE VARIABLE ACCOUNT
Conseco Variable has established Conseco Variable Annuity Account E (the
Variable Account) to hold the assets that underlie the Contracts. Prior to May
1, 1999, the Variable Account was known as Great American Reserve Variable
Annuity Account E. The Board of Directors of Conseco Variable adopted a
resolution to establish the Variable Account under Texas Insurance law on
November 12, 1993. The Variable Account is registered with the Securities and
Exchange Commission (SEC) as a unit investment trust under the Investment
Company Act of 1940 (the 1940 Act). Registration under the 1940 Act does not
involve the supervision by the SEC of the management or investment policies or
practices of the Variable Account. The Variable Account is regulated by the
Insurance Department of Texas. Regulation by the state, however, does not
involve any supervision of the Variable Account, except to determine compliance
with broad statutory criteria.
The assets of the Variable Account are held in Conseco Variable's name on behalf
of the Variable Account and legally belong to Conseco Variable. However, those
assets that underlie the Contracts, are not available to be used to pay
liabilities arising out of any other business Conseco Variable 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 Conseco Variable may issue.
The Variable Account is divided into sub-accounts. Each sub-account invests in
shares of one of the Funds. We reserve the right to add other sub- accounts,
eliminate existing sub-accounts, combine sub-accounts or transfer assets in one
sub-account to another sub-account established by us or by one of our
affiliates. We will not eliminate any existing sub-accounts or combine
sub-accounts without any required prior approval of the SEC.
INVESTMENT OPTIONS
The Contract offers 40 Variable Account Investment Options which are listed
below. You bear the investment risk for amounts you allocate to the Variable
Account Investment Options. We may make additional Investment Options available
in the future.
Shares of the Funds are also offered in connection with certain variable annuity
contracts and variable life insurance policies of various life insurance
companies which may or may not be affiliated with Conseco. Certain Funds are
also sold directly to qualified plans. The Funds believe that offering their
shares in this manner will not be disadvantageous to you.
Conseco Variable may enter into certain arrangements under which it is
reimbursed by the Funds' advisers, distributors and/or affiliates for the
administrative services which it provides to the Funds.
YOU SHOULD READ THE PROSPECTUSES FOR THESE FUNDS CAREFULLY BEFORE INVESTING.
COPIES OF THESE PROSPECTUSES ARE ATTACHED TO THIS PROSPECTUS. CERTAIN PORTFOLIOS
CONTAINED IN THE FUND PROSPECTUSES MAY NOT BE AVAILABLE WITH YOUR CONTRACT.
CONSECO SERIES TRUST
Conseco Series Trust is a mutual fund with multiple portfolios. Conseco Series
Trust is managed by Conseco Capital Management, Inc. The following portfolios
are available under the Contract:
Balanced Portfolio (formerly known as Asset Allocation Portfolio)
Common Stock Portfolio
Fixed Income Portfolio (formerly known as Corporate Bond Portfolio)
Government Securities Portfolio
Money Market Portfolio
THE ALGER AMERICAN FUND
The Alger American Fund is a mutual fund with multiple portfolios. Fred Alger
Management, Inc. serves as the investment adviser. The following portfolios are
available under the Contract:
Alger American Growth Portfolio
Alger American Leveraged AllCap Portfolio
Alger American MidCap Growth Portfolio
Alger American Small Capitalization Portfolio
AMERICAN CENTURY VARIABLE PORTFOLIOS, INC.
American Century Variable Portfolios, Inc. is a series of funds managed by
American Century Investment Management, Inc. The following portfolios are
available under the Contract:
VP Income & Growth
VP International
VP Value (long-term capital growth with income as a secondary objective)
BERGER INSTITUTIONAL PRODUCTS TRUST
Berger Institutional Products Trust is a mutual fund with multiple portfolios.
Berger Associates, Inc. is the investment adviser to all portfolios except the
Berger/BIAM IPT--International Fund. BBOI Worldwide, LLC is the adviser to the
Berger/BIAM IPT--International Fund. The following portfolios are available
under the Contract:
Berger IPT--100 Fund (long-term capital appreciation)
Berger IPT--Growth and Income Fund
Berger IPT--Small Company Growth Fund
Berger/BIAM IPT--International Fund
THE DREYFUS SOCIALLY RESPONSIBLE GROWTH FUND, INC.
The Dreyfus Socially Responsible Growth Fund, Inc. is managed by The Dreyfus
Corporation. Dreyfus has hired NCM Capital Management Group, Inc. to serve as
sub-investment adviser and to provide day-to-day management of the Fund's
investments.
DREYFUS STOCK INDEX FUND
The Dreyfus Corporation serves as the Fund's manager. Dreyfus has hired its
affiliate, Mellon Equity Associates, to serve as the Fund's index fund manager
and to provide day-to-day management of the Fund's investments.
DREYFUS VARIABLE INVESTMENT FUND
The Dreyfus Variable Investment Fund is a mutual fund with multiple portfolios.
The Dreyfus Corporation serves as the investment adviser. The following
portfolios are available under the Contract:
Disciplined Stock Portfolio (seeks to outperform the total return
performance of the Standard & Poor's 500 Composite Stock Price Index)
International Value Portfolio
FEDERATED INSURANCE SERIES
Federated Insurance Series is a mutual fund with multiple portfolios. Federated
Advisers is the investment adviser. The following portfolios are available under
the Contract:
Federated High Income Bond Fund II
Federated International Equity Fund II
Federated Utility Fund II
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. The following
portfolios are available under the Contract:
INVESCO VIF - High Yield Portfolio
INVESCO VIF - Industrial Income Portfolio (seeks high current income with
capital appreciation as a secondary goal)
JANUS ASPEN SERIES
The Janus Aspen Series is a mutual fund with multiple portfolios which are
advised by Janus Capital Corporation. The following portfolios are available
under the Contract:
Aggressive Growth Portfolio
Growth Portfolio
Worldwide Growth Portfolio
LAZARD RETIREMENT SERIES, INC.
Lazard Retirement Series, Inc. is a mutual fund with multiple portfolios. Lazard
Asset Management, a division of Lazard Freres & Co., LLC, is the investment
manager for each portfolio. The following portfolios are available under the
Contract:
Lazard Retirement Equity Portfolio
Lazard Retirement Small Cap Portfolio
LORD ABBETT SERIES FUND, INC.
Lord Abbett Series Fund, Inc. is a mutual fund managed by Lord, Abbett & Co. The
following portfolio is available under the Contract:
Growth and Income Portfolio
MITCHELL HUTCHINS SERIES TRUST
Mitchell Hutchins Series Trust is a mutual fund with multiple portfolios.
Mitchell Hutchins Asset Management, Inc. provides advisory and administrative
services to the Fund. The following portfolio is available under the Contract:
Growth and Income Portfolio
NEUBERGER & BERMAN ADVISERS MANAGEMENT TRUST
Each portfolio of Neuberger & Berman Advisers Management Trust invests in a
corresponding series of Advisers Managers Trust. All series of Advisers Managers
Trust are managed by Neuberger & Berman Management Incorporated. The following
are available under the Contract:
Limited Maturity Bond Portfolio
Partners Portfolio (capital growth)
STRONG OPPORTUNITY FUND II, INC.
Strong Opportunity Fund II is a mutual fund managed by Strong Capital
Management, Inc. The following portfolio is available under the Contract:
Opportunity Fund II (capital growth)
STRONG VARIABLE INSURANCE FUNDS, INC.
Strong Variable Insurance Funds, Inc. is a mutual fund with multiple series.
Strong Capital Management, Inc. serves as the investment adviser. The following
series is available under the Contract:
Growth Fund II
VAN ECK WORLDWIDE INSURANCE TRUST
Van Eck Worldwide Insurance Trust is a mutual fund with multiple portfolios
which are managed by Van Eck Associates Corporation. The following portfolios
are available under the Contract:
Worldwide Bond Fund
Worldwide Emerging Markets Fund
Worldwide Hard Assets Fund
Worldwide Real Estate Fund
VOTING RIGHTS
Conseco Variable is the legal owner of the Fund shares. However, Conseco
Variable believes that when a Fund solicits proxies in conjunction with a vote
of shareholders, it is required to obtain from you and other owners instructions
as to how to vote those shares. When we receive those instructions, we will vote
all of the shares we own in proportion to those instructions. If we determine
that we are no longer required to comply with the above, we will vote the shares
as we choose without obtaining instructions from you. We have provided a further
discussion of voting rights in the Statement of Additional Information.
Fixed Account
The Fixed Account is not registered with the SEC because of certain exemptive
and exclusionary provisions. Conseco Variable has been advised that the staff of
the SEC has not reviewed the disclosure in this Prospectus relating to the Fixed
Account. The disclosure may, however, be subject to certain generally applicable
provisions of the federal securities laws relating to the accuracy and
completeness of statements made in prospectuses.
Purchase Payments and transfers to the Fixed Account become part of the general
account of Conseco Variable. You can transfer Contract Values between the Fixed
and Variable Accounts, but the transfers are subject to the following:
1. You may transfer Contract Values from the Variable Account to the Fixed
Account once in any 30-day period;
2. You may transfer Contract Values from the Fixed Account to the Variable
Account once in any six-month period subject to a limit of 20% of the Fixed
Account value;
3. You may not make transfers from the Fixed Account once Annuity Payments
begin.
The Administrative Charge and the Mortality and Expense Risk Charge do not apply
to values allocated to the Fixed Account.
If you buy the Contract as a TSA or under certain other qualified plans, the
Contract may contain a provision that allows you to take a loan against the
Contract Value you have allocated to the Fixed Account. Loan provisions are
described in detail in your Contract.
THE CONTRACTS
The Contract, like all deferred annuity contracts, has two phases: the
accumulation phase and the annuity phase. When you are making Purchase Payments
to the Contract, it is called the accumulation phase. During the accumulation
phase, earnings accumulate on a tax deferred basis and are taxed as income when
you make a withdrawal. On the Maturity Date, you will begin receiving Annuity
Payments from your Contract. When you are receiving Annuity Payments from the
Contract, it is called the annuity phase.
ACCUMULATION PROVISIONS
Purchase Payments
You can make Purchase Payments to Conseco Variable at its Administrative Office.
You can make Purchase Payments at any time before the Maturity Date. Conseco
Variable reserves the right to refuse any Purchase Payment. The Purchase Payment
requirements are as follows:
* For TSAs, the minimum initial and subsequent Purchase Payment is $50 per
month.
* For IRAs the minimum initial investment is $2,000 and the minimum amount of
each additional payment is $50.
* For non-qualified Contracts, the minimum initial investment is $5,000 and
the minimum amount of each additional lump sum payment is $2,000 (or $200 per
month).
* If your Purchase Payment would exceed $500,000, the Purchase Payment will
only be accepted with our prior approval.
Conseco Variable must approve each application. When Conseco Variable accepts
your application, it will issue you a Contract and allocate your Purchase
Payment as described below.
We may, at our option and with prior notice, cancel certain Contracts in which
no Purchase Payments have been made, or if the Contract Value is less than $500.
When the Contract is canceled, we will pay you the Contract Value determined as
of the Valuation Period during which the Contract was canceled, less any
outstanding loans, any Withdrawal Charge, and the $30 Annual Administrative Fee.
If your Contract is canceled, there may be adverse tax consequences (see
"Federal Tax Status").
Allocation of Purchase Payments
You may elect to have Purchase Payments accumulate:
(a) on a fully variable basis, which means they are invested in the sub-
accounts of the Variable Account (Variable Account Investment Options);
(b) on a fully fixed basis, which means they are invested in our general
account and receive a periodically adjusted interest rate guaranteed by
Conseco Variable (Fixed Account); or
(c) a combination of both.
You may request to change your allocation of future Purchase Payments 30 days
after either we establish your Individual Account, or 30 days after you have
made a prior change in allocation.
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. 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 within one business day. Our business day closes when the New York
Stock Exchange closes, usually 4:00 P.M. Eastern time.
Accumulation Units
We credit Purchase Payments that you allocate to the sub-accounts with
Accumulation Units. We do this at the end of the Valuation Period when we
receive your Purchase Payment at our Administrative Office. We determine the
number of Accumulation Units credited to your Contract by dividing the Purchase
Payment amount by the value of an Accumulation Unit at the end of that Valuation
Period. We value Accumulation Units for each sub-account separately.
Accumulation Unit Values
Every day we determine the value of an Accumulation Unit for each of the sub-
accounts by multiplying the Accumulation Unit value for the previous Valuation
Period by a factor for the current Valuation Period. The factor is determined
by:
1. dividing the value of a Fund share at the end of the current Valuation
Period (and any charges for taxes) by the value of a Fund share for the previous
Valuation Period; and
2. subtracting the daily amount of the Mortality and Expense Risk Charge
and Administrative Charges.
The value of an Accumulation Unit may go up or down from Valuation Period to
Valuation Period. There is no guarantee that the value of your Individual
Account will equal or exceed the Purchase Payments you have made.
We will tell you at least once each year the number of Accumulation Units which
we credited to your Individual Account, the current Accumulation Unit values and
the value of your Individual Account.
Transfers
Before the Maturity Date, you may make transfers from one sub-account to another
sub-account and/or to the Fixed Account. The Contract allows Conseco Variable to
limit the number of transfers that can be made in a specified time period. You
should be aware that transfer limitations may prevent you from making a transfer
on the date you desire, with the result that your future Contract Value may be
lower than it would have been had the transfer been made on the desired date.
Conseco Variable's interest in applying these limitations is to protect the
interests of both Contract Owners who are not engaging in significant transfer
activity and Contract Owners who are engaging in such activity. Conseco Variable
has determined that the actions of Contract Owners engaging in significant
transfer activity among sub-accounts may cause an adverse effect on the
performance of the underlying Fund for the sub-account involved. The movement of
sub-account values from one sub-account to another may prevent an underlying
Fund from taking advantage of investment opportunities because it must maintain
a liquid position in order to handle withdrawals. Such movement may also cause a
substantial increase in Fund transaction costs which must be indirectly borne by
Contract Owners.
How You Can Make Transfers:
Conseco Variable is not charging a transfer fee. However, we limit transfers to
one every 30 days and to a maximum of 20% of the Fixed Account value per any
six-month period from the Fixed Account. All transfers requested for a Contract
on the same day will be treated as a single transfer in that period.
You can make transfers by written authorization. Written transfer requests may
be made by a person acting for or on your behalf as an attorney-in-fact under a
power-of-attorney if permitted by state law. By authorizing Conseco Variable to
accept telephone transfer instructions, you agree to accept and be bound by the
conditions and procedures established by Conseco Variable from time to time. We
have instituted reasonable procedures to confirm that any instructions
communicated by telephone are genuine. We will record all telephone calls and
will ask the caller to produce your personalized data prior to our initiating
any transfer requests by telephone. Additionally, as with other transactions,
you will receive a written confirmation of your transfer. If reasonable
procedures are employed, neither Conseco Variable nor Conseco Equity Sales, Inc.
will be liable for following telephone instructions which it reasonably believes
to be genuine.
Transfer requests received by Conseco Variable before the close of trading on
the New York Stock Exchange (currently 4:00 p.m. Eastern time) will be initiated
at the close of business that day. If we receive a request later it will be
initiated at the close of the next business day.
Dollar Cost Averaging
Conseco Variable offers a Dollar Cost Averaging (DCA) program which enables you
to transfer values from the Fixed Account or Money Market sub-account to another
Investment Option on a predetermined and systematic basis. The DCA program
allows you to make investments in equal installments over time in an effort to
potentially reduce the risk of market fluctuations. There is no guarantee that
this will happen.
Rebalancing
Rebalancing is a program, which if elected, permits you to pre-authorize
periodic automatic transfers prior to the Maturity Date among the sub-accounts
pursuant to your written instructions. The transfers under this program are made
to maintain a particular percentage allocation among the sub-accounts you
select. Any amount you have in the Fixed Account will not be transferred
pursuant to the rebalancing program. You must have at least $5,000 to have
transfers made pursuant to this program. Transfers must be in whole percentages
in one (1%) percent allocation increments. The maximum number of sub-accounts
you can use for rebalancing is 15. You can request that rebalancing occur
quarterly, semi-annually or annually on a date you select. There is no fee for
participating in the program. Conseco Variable reserves the right to terminate,
modify or suspend the rebalancing program at any time.
Sweeps
Sweeps is a program which provides for the automatic transfer of the earnings
from the Fixed Account into another Investment Option on a periodic and
systematic basis.
Withdrawals
Prior to the earlier of the Maturity Date or the death of the Annuitant, you may
withdraw all or a portion of the Contract Value upon written request complete
with all the necessary information to Conseco Variable's Administrative Office.
For certain qualified Contracts, your withdrawal rights may be restricted and
may require the consent of your spouse as required under the Code.
Total Withdrawals:
If you make a total withdrawal, we will pay the Contract Value as of the date we
receive your request at our Administrative Office, less:
* the $30 Annual Administrative Fee,
* any outstanding loans (plus the pro rata interest accrued) and
* any applicable Withdrawal Charge.
If you make a total withdrawal, we will cancel the Contract.
Partial Withdrawals:
If you make a partial withdrawal, we will pay the amount requested and cancel
that number of Accumulation Units credited to each Investment Option of the
Individual Account necessary to equal the amount you withdraw from each
Investment Option plus any applicable Withdrawal Charge deducted from such
Investment Option. You can make certain withdrawals free of Withdrawal Charges,
see "Charges and Deductions."
When you make a partial withdrawal, you must specify the Investment Options from
which the withdrawal is to be made. You may not request an amount from an
Investment Option that exceeds the value of that Investment Option less any
applicable Withdrawal Charge. If you do not specify the Investment Options from
which a partial withdrawal is to be taken, we will take the partial withdrawal
from the Fixed Account until it is exhausted and then from the sub- accounts. If
the partial withdrawal is less than the total value in the Variable Account
Investment Options, the withdrawal will be taken pro rata from all the Variable
Account Investment Options. Any partial withdrawal must be at least $250 or, if
less, the entire balance in the Investment Option. If a partial withdrawal plus
any applicable withdrawal charge would reduce the Contract Value to less than
$500, we reserve the right to treat the partial withdrawal as a total withdrawal
of the Contract Value.
Withdrawals may be subject to income taxes, penalty taxes and certain
restrictions.
Suspension of Payments:
We will pay the amount of any withdrawal from the Variable Account promptly, and
in any event within seven days of receipt of the request. Conseco Variable
reserves the right to defer the right of withdrawal or postpone payments 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 securities held in the
Variable Account is not reasonably practicable or it is not reasonably
practical to determine the value of the Variable Account's net assets; or
(4) the SEC, by order, so permits for the protection of security holders,
provided that applicable rules and regulations of the SEC will govern as to
whether the conditions described in (2) and (3) exist.
Systematic Withdrawal Plan
Conseco Variable offers a Systematic Withdrawal Plan (SWP) which enables you to
pre-authorize periodic withdrawals. You can participate in this program by
sending a written request to our Administrative Office. You can instruct Conseco
Variable to withdraw a level dollar amount from specified Investment Options on
a periodic basis. The total SWP withdrawals in a Contract Year which you are
permitted to make is limited to amounts that can be withdrawn without a
withdrawal charge. This will ensure that no withdrawal charge will ever apply to
a SWP withdrawal (see "Charges and Deductions - Withdrawal Charge"). If you are
participating in this program and you make a withdrawal subject to the
withdrawal charge, the SWP will terminate automatically and may be reinstated
only on or after we receive a written request.
SWP is not available if you participate in the dollar cost averaging program or
if you have Purchase Payments automatically deducted from a bank account on a
periodic basis.
SWP withdrawals may be subject to income taxes, penalty taxes and certain
restrictions.
Loans
Your Contract may contain a loan provision issued in connection with certain
qualified plans. If you own a Contract which contains a loan provision, you may
obtain loans using the Contract as the only security for the loan. Loans are
subject to provisions of the Code and to applicable retirement program rules.
You should consult a tax adviser and retirement plan fiduciary before exercising
loan privileges. Loan provisions are described in detail in your Contract.
The amount of any loan will be deducted from the minimum death benefit. In
addition, a loan, whether or not repaid, will have a permanent effect on the
Contract Value because the investment performance of the Investment Options will
apply only to the unborrowed portion of the Contract Value. The longer the loan
is outstanding, the greater the effect is likely to be. The effect could be
favorable or unfavorable. If the investment performance results are greater than
the rate being credited on amounts held in the loan account while the loan is
outstanding, the Contract Value will not increase as rapidly as it would have if
no loan were outstanding. If the investment performance results are below that
rate, the Contract Value will be higher than it would have been if no loan had
been outstanding.
CHARGES AND DEDUCTIONS
Withdrawal Charge
Conseco Variable does not make a deduction when you make a Purchase Payment for
sales expenses. However, Conseco Variable may assess a Withdrawal Charge against
the Purchase Payments when you withdraw them. The amount of the Withdrawal
Charge, if applicable, will affect the amount we will pay to you.
If you make a withdrawal from the Contract before the Maturity Date, a
Withdrawal Charge (a deferred sales load) may be assessed against Purchase
Payments that have been in the Contract less than six complete Contract Years.
We never assess a charge for Purchase Payments that have been in the Contract
for more than six complete Contract Years. The length of time from when we
receive your Purchase Payment to the time you make a withdrawal will determine
the Withdrawal Charge. For this purpose, we deem Purchase Payments withdrawn in
the order in which we receive them, first from Purchase Payments and then from
other Contract Values. Certain other withdrawals described below under "Free
Withdrawal Amount" are not subject to a withdrawal charge.
The charge is a percentage of the amount you withdraw (not to exceed 8.5% of the
aggregate amount of the Purchase Payments made) and equals:
YEARS SINCE PAYMENT CHARGE PERCENTAGE
- ---------------------------------------------------------------------
1 .............................................. 9%
2 .............................................. 9%
3 .............................................. 8%
4 .............................................. 7%
5 .............................................. 5%
6 .............................................. 3%
7 and thereafter................................ 0%
In addition, the following circumstances further limit or reduce Withdrawal
Charges:
* if you are age 52 or younger when we issue your Contract, we will not
assess a Withdrawal Charge for withdrawals you make after the 15th
Contract Year and later;
* if you are 53 to 56 when we issue your Contract, we will not assess a
Withdrawal Charge for withdrawals you make after you reach age 67 and
later;
* if you are age 57 or older when we issue your Contract, the Withdrawal
Charge we assess for withdrawals you make will be multiplied by a
factor ranging from .9 to 0 for Contract Years 1 - 10 and later,
respectively.
Free Withdrawal Amount: You may make a withdrawal without the Withdrawal Charge
described above (a "free withdrawal") in an amount up to the greater of:
(i) 10% of the Contract Value (as determined on the date we receive your
request to make a withdrawal), or
(ii) the Contract Value divided by the Annuitant's life expectancy based on
the Code, or the amount of any Purchase Payments that have been in the Contract
more than six complete Contract Years.
If you make additional withdrawals in excess of the free withdrawal amount in
any Contract Year during the period when the Withdrawal Charge applies, the
withdrawals will be subject to the appropriate charge as set forth above. From
time to time, we may permit you to pre-authorize partial withdrawals subject to
certain limitations then in effect.
On or after the Maturity Date, we may assess Withdrawal Charges for withdrawals
made under the Fourth and Fifth Annuity Options. We will not assess withdrawal
charges which would otherwise apply:
(i) if the Annuitant dies,
(ii) if you die, or
(iii)if we make payments under an annuity option that begins at least four
years after the effective date of the Contract and is paid under any
life annuity option, or any option with payments for a minimum period
of five years.
If you make a complete withdrawal of the entire amount in your Individual
Account with a certain dollar amount, we will deduct the Withdrawal Charge from
the portion of your Individual Account you withdraw and pay the balance to you.
Example: You request a total withdrawal of $2,000 and the applicable
Withdrawal Charge is 5%. Your Individual Account will be reduced by $2,000
and you will receive $1,880 (i.e., the $2,000 total withdrawal reduced by
the 10% free withdrawal less the 5% Withdrawal Charge and $30 Annual
Administrative Fee).
If you make a partial withdrawal in which you request to receive a specified
amount, the Withdrawal Charge will be calculated on the total amount that must
be withdrawn from your Individual Account in order to provide you with the
amount you requested.
Example: You request to receive $1,000 with a free withdrawal amount
of $200 and the applicable Withdrawal Charge is 5%. Your Individual Account
will be reduced by $1,042.11. In order to make a withdrawal of $1,000, the
amount you withdraw must be greater than the amount you request by the
amount of the Withdrawal Charge. The amount you withdraw is calculated by
dividing (a) the amount you requested ($1,000 less the free withdrawal
amount of $200) by (b) 1.00, minus the applicable deduction rate of 5% (or
.95), which produces $1,042.11 ($842.11 plus the $200 free withdrawal
amount). The value of the Individual Account will be reduced by this
amount.
Administrative Charges
Prior to the Maturity Date, we deduct an Annual Administrative Fee of $30 on
each Contract anniversary from the Individual Account value. We will waive the
Annual Administrative Fee if your Individual Account value is $25,000 or
greater. If you make a complete withdrawal of your Individual Account value
prior to the Maturity Date, Conseco Variable will deduct the Annual
Administrative Fee from the proceeds we pay.
We deduct the Annual Administrative Fee first from amounts accumulated in the
Fixed Account; if no or an insufficient value exists in the Fixed Account, any
balance will then be deducted from the sub-accounts of the Variable Account.
We make a deduction for a daily charge in an amount equal to 0.15%, on an annual
basis, of the value of each sub-account of the Variable Account. This charge
reimburses Conseco Variable for administrative expenses. We will not deduct this
charge from any amount you have allocated to the Fixed Account. The charge will
be deducted pro rata from Contract Value of each sub-account of the Variable
Account.
Conseco Variable has set this administrative fee at a level that will recover no
more than the actual costs it incurs which are associated with administering the
Contracts. Conseco Variable does not expect to recover any amount in excess of
its accumulated administrative expenses from such fees. Even though
administrative expenses may increase, Conseco Variable will not increase the
amount of the administrative fees.
Mortality and Expense Risk Charge
Conseco Variable assumes two risks under the Contract: the mortality risk and
the expense risk. Conseco Variable makes daily deductions from the sub- accounts
of the Variable Account equal, on an annual basis, to 1.25% of the value of your
assets of the Variable Account for the mortality and expense risks it assumes.
The mortality risk is Conseco Variable's promise to continue making annuity
payments, determined in accordance with the annuity tables and other provisions
contained in the Contract, regardless of how long the Annuitant lives and
regardless of how long all Annuitants as a group live. This promise assures that
neither the longevity of an Annuitant nor an improvement in life expectancy
generally will have any adverse effect on the monthly Annuity Payments, and that
Annuitants will not outlive the amounts accumulated to provide such payment.
Conseco Variable also assumes the risk that the Withdrawal Charges and the
administrative fees may be insufficient to cover actual sales and administrative
expenses. If so, the shortfall will be made up from Conseco Variable's general
assets, which may include profits from other sub-account deductions. Conversely,
if the sales deductions and administrative fees exceed the actual sales and
administrative expenses, Conseco Variable may realize a gain. We do not assess
the Mortality and Expense Risk Charge against the Fixed Account.
Reduction or Elimination of Contract Charges
In some cases, Conseco Variable may expect to incur lower sales and
administrative expenses or perform fewer services due to the size of the
Contract, the average Purchase Payment and the use of group enrollment
procedures. Then, Conseco Variable may be able to reduce or eliminate the
contract charges for administrative charges and Withdrawal Charges.
Premium Taxes
We may make a deduction for any premium taxes due from Purchase Payments, other
values on the Maturity Date, or at such other time as we determine. The current
range of premium taxes in jurisdictions where we make the Contracts available is
0% - 3.5%.
Fund Expenses
There are deductions from and expenses paid out of the assets of the Funds,
which are described in the attached Fund prospectuses.
Other Charges
Currently, Conseco Variable does not make a charge against the Variable Account
for its federal income taxes, or provisions for such taxes, that may be as a
result of the Variable Account. Conseco Variable may charge each sub-account of
the Variable Account for its portion of any income tax charged to the
sub-account or its assets. Under present laws, Conseco Variable may incur state
and local taxes (in addition to premium taxes) in several states. At present,
these taxes are not significant. If they increase, however, Conseco Variable may
decide to make charges for such taxes or provisions for such taxes against the
Variable Account. Any such charges against the Variable Account or its
sub-accounts could have an adverse effect on the investment performance of the
sub-accounts.
DEATH BENEFIT BEFORE MATURITY DATE
If an Owner, Co-Owner or the Annuitant dies prior to the Maturity Date, Conseco
Variable will pay the minimum death benefit to the beneficiary. Conseco Variable
will pay the minimum death benefit either as a lump sum or under an annuity
option as explained below.
Generally, the distribution of the minimum death benefit must be made within
five years after the Contract Owner's or Co-Owner's death. If the beneficiary is
an individual, in lieu of distribution within five years of the Owner's death,
distribution may generally be made as an annuity which begins within one year of
the Owner's death and is payable over the life of the beneficiary or over a
period not in excess of the life expectancy of the beneficiary. If the Owner's
spouse is the beneficiary, that spouse may elect to continue the Contract as the
new Owner in lieu of receiving the distribution. In such a case, the
distribution rules which apply when a Contract Owner dies will apply when that
spouse, as the Contract Owner, dies.
In the case of a Contract involving more than one Contract Owner, the death of
any Contract Owner shall cause this section to apply and if the Contract is
owned by a non-individual the death of the Annuitant shall be treated as the
death of the Contract Owner. Additional requirements may apply to qualified
contracts.
The minimum death benefit during the first seven contract years will be equal to
the greater of:
(a) the Contract Value on the date Conseco Variable receives at its
Administrative Office due proof of death, or
(b) the sum of all Purchase Payments made, less any partial withdrawals.
During any subsequent seven-Contract-Year period, the minimum death benefit will
be the greater of:
(a) the Contract Value on the date Conseco Variable receives due proof of
death at its Administrative Office; or
(b) the Contract Value on the last day of the previous seven-Contract-Year
period plus any Purchase Payments made and less any subsequent partial
withdrawals; or
(c) the sum of all Purchase Payments paid, less any partial withdrawals. If
the Annuitant or Contract Owner dies after reaching the age of 80, the death
benefit will be the Contract Value on the date Conseco Variable receives due
proof of death at its Administrative Office. The minimum death benefit will be
reduced by any outstanding loans.
Death benefits generally will be paid within seven days of the date Conseco
Variable receives due proof of death at its Administrative Office, subject to
postponement under the same circumstances that payment or withdrawals may be
postponed (see "Withdrawals").
OPTIONS WHEN YOU TERMINATE YOUR PARTICIPATION IN THE PLAN (FOR GROUP CONTRACTS
ONLY).
If you terminate your participation in a Plan before the Maturity Date, you will
have the following options:
(a) leave the Individual Account in force under the Contract, and the
sub-account will continue to participate in the investment results of the
Investment Option(s) you select. On the Maturity Date, you will begin to receive
Annuity Payments. During the interim, you may elect any of the options described
below. This option will automatically apply, unless you file a written election
of another option.
(b) apply the Individual Account to provide Annuity Payments which begin
immediately.
(c) convert the Individual Account to an individual variable annuity
contract of the type we are then offering.
(d) terminate the Individual Account and receive the Contract Value less
any applicable charges and outstanding loans.
RESTRICTIONS UNDER OPTIONAL RETIREMENT PROGRAMS
If you participate in certain Optional Retirement Programs (ORP), you can
withdraw your interest in a Contract only upon:
(1) termination of employment in all public institutions of higher education as
defined by applicable law,
(2) retirement, or
(3) death.
Accordingly, you (as a participant in ORP) may be required to obtain a
certificate of termination from your employer before you can withdraw your
interest. Certain plans may have additional restrictions on distributions.
RESTRICTIONS UNDER SECTION 403(b) PLANS
If you own the Contract under a TSA-403(b) plan, you can only make withdrawals
of amounts attributable to contributions you made pursuant to a salary reduction
agreement (as defined in Section 403(b)(11) of the Code) under the following
circumstances:
(1) when you attain age 59 1/2,
(2) when you separate from service,
(3) when you die,
(4) when you become 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
permitted.
Withdrawals for hardship are restricted to the portion of your Contract Value
which represents contributions you made 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;
* income attributable to such contributions; and
* income attributable to amounts held as of December 31, 1988.
The limitations on withdrawals do not affect rollovers or transfers between
certain qualified plans. Tax penalties may also apply.
THE ANNUITY PHASE - SETTLEMENT PROVISIONS
You select a Maturity Date and an annuity option. You may select the Maturity
Date at any time, subject to state requirements.
The annuity option may be on a fixed basis (which means that payments come from
the Fixed Account) or a variable basis (which means that payments come from the
sub-accounts of the Variable Account), or a combination of both. If you do
select an Annuity Option, we will make payments under a lifetime annuity with
120 monthly payments guaranteed. Payments will be made based on the allocations
to the Fixed Account and Variable Account on the Maturity Date.
You may elect to change the annuity option or basis of payment (fixed or
variable) with written notice to Conseco Variable at least 30 days before the
Maturity Date. Once Annuity Payments begin, you may not make any changes (except
you may make transfers under certain circumstances).
You cannot elect an annuity option which would result in the first monthly
annuity payment of less than $50 if payments are to be on a fully fixed basis or
variable basis, or less than $50 on each basis if a combination of fixed and
variable annuity payments are elected. If, at any time, Annuity Payments are or
become less than $50 per month, Conseco Variable reserves the right to change
the frequency of payments to an interval which will result in Annuity Payments
of at least $50 each (except that we will make payments at least annually).
Prior to the Maturity Date, you may terminate your Individual Account and
receive its value in a lump sum. Once Annuity Payments begin, you and the
Annuitant cannot terminate the annuity benefit and receive a lump sum settlement
instead.
Annuity Options
You may select one of the following annuity options:
FIRST OPTION - LIFE ANNUITY. Under this option, we will make monthly
payments during the lifetime of the Annuitant. The payments will cease with the
last monthly payment due prior to the death of the Annuitant. Of the first two
options, this option offers the maximum level of monthly payments since there is
no minimum number of payments guaranteed (nor a provision for a death benefit
payable to a beneficiary). It would be possible under this option to receive
only one Annuity Payment if the Annuitant died prior to the due date of the
second Annuity Payment.
SECOND OPTION - LIFE ANNUITY WITH 120, 180 or 240 MONTHLY PAYMENTS
GUARANTEED. Under this option, we will make monthly payments during the lifetime
of the Annuitant with the guarantee that if, at the death of the Annuitant, we
have made payments for less than 120, 180 or 240 months, as elected, we will
continue to make Annuity Payments during the remainder of such period to your
beneficiary. If no beneficiary is designated, Conseco will, in accordance with
the Contract provisions, pay the Annuitant's estate a lump sum equal to the
present value, as of the date of death, of the number of guaranteed annuity
payments remaining after that date, computed on the basis of the assumed net
investment rate used in determining the first monthly payment. Because this
option provides a specified minimum number of Annuity Payments, this option
results in somewhat lower payments per month than the First Option.
THIRD OPTION - INSTALLMENT REFUND LIFE ANNUITY. Under this option, we will
make monthly payments for the installment refund period. This is the time
required for the sum of the payments to equal the amount applied, and thereafter
for the life of the payee.
FOURTH OPTION - PAYMENTS FOR A FIXED PERIOD. Under this option, we will
make monthly payments for the number of years selected. The period may be from 3
through 20. If you elect to receive payments under this option on a variable
basis, payments will vary monthly in accordance with the net investment rate of
the sub-accounts of the Variable Account. If the Annuitant dies before we have
made the specified number of monthly payments, we will pay the remaining
payments to the designated beneficiary in a lump sum payment.
FIFTH OPTION - PAYMENTS OF A FIXED AMOUNT. Under this option, we will make
payments of a designated dollar amount on a monthly, quarterly, semi-annual, or
annual basis until the Individual Account value you applied under this option,
adjusted each Valuation Period to reflect investment experience, is exhausted
within a minimum of three years and a maximum of 20 years. If the Annuitant dies
before the value is exhausted, we will pay the remaining value to the
beneficiary in a lump sum payment. In lieu of a lump sum payment, the
beneficiary may elect an annuity option for distribution of any amount on
deposit at the date of the Annuitant's death which will result in a rate of
payment at least as rapid as the rate of payment during the life of the
Annuitant.
If you elect the Fourth or Fifth Option on a variable basis, at any time during
the payment period you may elect the remaining value be applied to provide a
lifetime annuity under one of the first two options described above, as long as
the distribution will be made at least as rapidly as during the life of the
Annuitant. Since you may elect a lifetime annuity at any time, the annuity rate
and expense risks continue during the payment period. Accordingly, we will
continue to make deductions for these risks from the Individual Account values.
PROCEEDS APPLIED TO AN ANNUITY OPTION. You may apply all or part of the Contract
Value to an annuity option. The proceeds that will be applied to the annuity
option will be as follows:
(a) the Contract Value less any outstanding loans, if the annuity option elected
begins at least four years after the effective date of your Contract and is paid
under any life annuity option, or any option with payments for a minimum period
of five years, with no rights of early withdrawal; or
(b) the death benefit if proceeds are payable under death of Annuitant or an
Owner (as applicable); or
(c) the Contract Value less any outstanding loans, Withdrawal Charge and any
administrative fee.
The SAI contains a further discussion of Annuity Provisions including how
annuity unit values are calculated.
TRANSFERS AFTER MATURITY DATE
You can make transfers after the Maturity Date by giving us written notice at
least 30 days before the due date of the first Annuity Payment for which the
change will apply. We will make transfers by converting the number of annuity
units being transferred to the number of annuity units of the sub-account to
which the transfer is made. The next Annuity Payment, if it were made at that
time, would be the same amount that it would have been without the transfer.
After that, Annuity Payments will reflect changes in the value of the new
annuity units.
Conseco Variable reserves the right to limit, upon notice, the maximum number of
transfers you can make to one in any six-month period once Annuity Payments have
begun. In addition, on or after the Maturity Date, you may not make transfers
from a fixed annuity option to a variable annuity option or from a variable
annuity option to a fixed annuity option.
Conseco Variable reserves the right to defer the transfer privilege at any time
that it is unable to purchase or redeem shares of the Funds. Conseco Variable
also reserves the right to modify or terminate the transfer privilege at any
time in accordance with applicable law.
DEATH ON OR AFTER MATURITY DATE
If you selected Annuity Payments based on an annuity option providing payments
for a guaranteed period, and the Annuitant or an Owner dies on or after the
Maturity Date, Conseco Variable will make the remaining guaranteed payments to
the beneficiary. Such payments will be made at least as rapidly as under the
method of distribution being used as of the date of the Annuitant's death. If no
beneficiary is living, Conseco Variable will commute any unpaid guaranteed
payments to a single sum (on the basis of the interest rate used in determining
the payments) and pay that single sum to the Annuitant's estate.
OTHER CONTRACT PROVISIONS
TEN-DAY RIGHT TO REVIEW. The Contract provides a "10-day free look" (in some
states, the period may be longer). This allows you to revoke the Contract by
returning it to either a Conseco Variable representative or to Conseco
Variable's Administrative Office within 10 days (or the period required in your
state) of delivery of the Contract. Conseco Variable deems this period as ending
15 days after it mails a Contract from our Administrative Office. If you return
the Contract under the terms of the free look provision, Conseco Variable will
refund the Purchase Payments you have made.
OWNERSHIP. You, as the Contract Owner, are the person entitled to exercise all
rights under the Contract. Co-Owners may be named in non-qualified Contracts.
Prior to the Maturity Date, the Contract Owner is the person designated in the
application or as subsequently named. On and after the Maturity Date, the
Annuitant is the Contract Owner and after the death of the Annuitant, the
beneficiary is the Contract Owner.
The Contract is either a group contract or an individual contract, depending on
the state where we issued it. The individual contract is issued directly to the
Contract Owner. A group contract is identical to the individual Contract except
that it is issued to a contract holder, for the benefit of the participants in
the group. You are a participant in the group and will receive a certificate
evidencing your ownership. You, as the owner of a certificate, are entitled to
all the rights and privileges of ownership. As used in this Prospectus, the term
Contract refers to your certificate.
Change of Ownership
Non-Qualified Contracts:
In the case of non-qualified Contracts, you may change ownership of the Contract
or you may collaterally assign it at any time during the lifetime of the
Annuitant prior to the Maturity Date, subject to the rights of any irrevocable
beneficiary. Assigning a Contract, or changing the ownership of a Contract may
be a taxable event. Any change of ownership or assignment must be made in
writing. Conseco Variable must approve any change of ownership or assignment.
Any assignment and any change, if approved, will be effective as of the date on
which it is written.
Conseco Variable assumes no liability for any payments made or actions it takes
before a change is approved or assignment is accepted, or responsibility for the
validity of any assignment.
Qualified Contracts:
In the case of qualified Contracts, you generally may not change ownership of
the Contract nor may you transfer it, except by the trustee of an exempt
employee's trust which is part of a retirement plan qualified under Section 401
of the Code. Except as noted, if you own a qualified Contract, you may not sell,
assign, transfer, discount, or pledge (as collateral for a loan or as security
for the performance of an obligation or for any other purpose) the Contract.
MODIFICATION. Conseco Variable may modify the Contract with your approval unless
provided otherwise by the Contract. After the Contract has been in force,
Conseco Variable may modify it except that the Mortality and Expense Risk
Charge, the withdrawal charges and the administrative fees cannot be increased.
A group Contract will be suspended automatically on the effective date of any
modification initiated by Conseco Variable if you fail to accept the
modification. Effective with suspension, no new participants may enter the Plan
but further Purchase Payments may be made on your behalf and on the behalf of
other participants then covered by the Contract.
No modification may affect Annuitants in any manner unless deemed necessary to
achieve the requirements of federal or state statutes or any rule or regulation
of the United States Treasury Department.
FEDERAL TAX STATUS
NOTE: Conseco Variable has 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. Conseco Variable has 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, your Contract
is referred to as a non-qualified Contract.
If you purchase the Contract under a pension plan, specially sponsored program
or an individual retirement annuity, your Contract is referred to as 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.
The Contract provides that upon the death of the Annuitant prior to the Maturity
Date, Conseco Variable will pay the death proceeds to the beneficiary. Such
payments made when the Annuitant, who is not the Contract Owner, dies do not
qualify for the death of the Contract Owner exception (described in (2) above)
and will be subject to the 10% distribution penalty unless the beneficiary is 59
1/2 years old or one of the other exceptions to the penalty applies.
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
the pre-tax Purchase Payments to the after-tax Purchase Payments in your
Contract. If all of your Purchase Payments were made with pre-tax money then the
full amount of any withdrawal is includible in taxable income. Special rules may
apply to withdrawals from certain types of qualified Contracts.
The Code also provides that any amount received under a qualified Contract which
is included in income may be subject to a penalty. The amount of the penalty is
equal to 10% of the amount that is includible in income. This penalty will be
increased to 25% for withdrawals from SIMPLE IRA's within the first two years of
your Contract. 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 Code);
(4) paid to you after leaving your employment in a series of substantially
equal payments made annually (or more frequently) under a lifetime
annuity;
(5) paid to you after you have attained age 55 and 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 from an IRA for medical insurance (as defined in the Code);
(9) paid from an IRA for qualified higher education expenses; or
(10) 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;
(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.
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. Conseco Variable believes that the Investment Options 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 Conseco would
be considered the owner of the shares of the 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 portfolios, to make transfers among the
portfolios or the number and type of portfolios owners may select from without
being considered the owner of the shares. If any guidance is provided which is
considered a new position, then the guidance would generally be applied
prospectively. However, if such guidance is considered not to be a new position,
it may be applied retroactively. This would mean that you, as the owner of the
Contract, could be treated as the owner of the portfolios.
Due to the uncertainty in this area, Conseco Variable reserves the right to
modify the Contract as reasonably deemed necessary to maintain favorable tax
treatment.
GENERAL MATTERS
PERFORMANCE INFORMATION. Conseco Variable may advertise performance information
for the Variable Account Investment Options (sub-accounts) from time to time in
advertisements or sales literature. Performance information reflects only the
performance of a hypothetical investment in the Variable Account Investment
Options during the particular time period on which the calculations are based.
Performance information may consist of yield, effective yield, and average
annual total return quotations reflecting the deduction of all applicable
charges for recent one-year and, when applicable, five- and 10-year periods and,
where less than 10 years, for the period subsequent to the date each sub-account
first became available for investment. We may show additional total return
quotations that do not reflect a Withdrawal Charge deduction. We may show
performance information by means of schedules, charts or graphs. The Statement
of Additional Information contains a description of the methods we use to
determine yield and total return information for the sub-accounts.
YEAR 2000
Many existing computer programs had been designed and developed to use only two
digits to identify a year in the date field. If not corrected, these computer
programs could cause system failures in the year 2000, with possible adverse
effects on Conseco Variable's operations. In 1996, Conseco, Inc. initiated a
comprehensive corporate-wide program designed to ensure that its computer
programs (including those relating to Conseco Variable) function properly in the
year 2000. A number of Conseco, Inc.'s employees (including several officers),
as well as external consultants and contract programmers, are working on various
year-2000 projects.
Conseco, Inc. also has been working with vendors and other external business
relations to help avoid year-2000 problems related to the software or services
they provide to us. Under the program, our application systems, operating
systems, hardware, networks, electronic data interfaces and infrastructure
devices (such as facsimile machines and telephone systems) are being analyzed.
Our year-2000 projects are currently on schedule. The year-2000 projects are
being conducted in three phases:
(i) an audit and assessment phase, designed to identify year-2000 issues;
(ii) a modification phase, designed to correct year-2000 issues; and
(iii)a testing phase, designed to test the modifications after they have
been installed.
We have completed the audit and assessment phase for all critical systems and
the second phase of our program is substantially complete. The testing phase of
our program will be conducted throughout 1999. We have provided for significant
contingency time in order to complete any additional modifications before
December 31, 1999.
The year-2000 issues are being addressed in three ways. For some, work is being
done to complete the previously planned conversions of older systems to the more
modern, year-2000 compliant systems already used in other areas. In other cases,
new, more modern systems are being purchased. In the remaining cases,
modifications are being made to existing systems. We currently estimate that the
total expense of our year-2000 projects are not material to Conseco Variable's
financial position.
The impact of year-2000 issues will depend, not only on the corrective actions
we take, but also on the way in which year-2000 issues are addressed by
governmental agencies, business and other third parties
(i) that provide services, utilities or data to Conseco Variable;
(ii) that receive services or data from Conseco Variable; or
(iii)whose financial condition or operating capability is important to
Conseco Variable.
We are in the process of identifying risks and assessing potential year-2000
risks associated with our external business relationships, including those with
agents, financial institutions and the mutual funds underlying the variable
annuity contracts we issue. These procedures are necessarily limited to matters
over which we are able to reasonably exercise control. We have been informed by
our key financial institutions and utilities that they will be year-2000
compliant in early 1999.
We are also assessing what contingency plans will be needed if any of our
critical systems or those of external business relationships are not year-2000
compliant at year-end 1999. We do not currently anticipate such a situation, but
our consideration of contingency plans will continue to evolve as new
information becomes available.
The failure to correct a material year-2000 problem could result in an
interruption in, or failure of, a number of normal business activities or
operations. Such failures could materially and adversely affect Conseco
Variable's results of operations, liquidity and financial condition. Due to the
general uncertainty inherent in the year-2000 problem, including the uncertainty
of the preparedness of our external business relationships, we are not able to
currently determine whether the consequences of year-2000 failures will have a
material impact on Conseco Variable's results of operations, liquidity and
financial condition. However, we believe our year-2000 compliance efforts will
reduce the likelihood of a material adverse impact.
DISTRIBUTION OF CONTRACTS. Conseco Equity Sales, Inc. (Conseco Equity Sales),
11815 N. Pennsylvania Street, Carmel, IN 46032, an affiliate of Conseco
Variable, is the principal underwriter of the Contracts. Conseco Equity Sales is
a broker-dealer registered under the Securities and Exchange Act of 1934 and a
member of the National Association of Securities Dealers, Inc. Sales of the
Contracts will be made by registered representatives of Conseco Equity Sales and
broker-dealers authorized to sell the Contracts. The registered representatives
will also be licensed insurance representatives of Conseco Variable. See the
Statement of Additional Information for more information.
Commissions will be paid to broker-dealers who sell the Contracts. Broker-
dealers may be paid commissions up to ____% of Purchase Payments and may include
reimbursement of promotional or distribution expenses associated with marketing
the Contracts. The commission rate paid to the broker-dealer will depend upon
the nature and level of services provided by the broker-dealer.
LEGAL PROCEEDINGS. There are no legal proceedings to which the Variable Account
is a party or to which the assets of the Variable Account are subject. Neither
Conseco Variable nor Conseco Equity Sales is involved in any litigation that is
of material importance in relation to their total assets or that relates to the
Variable Account.
TABLE OF CONTENTS OF THE STATEMENT OF ADDITIONAL INFORMATION
- --------------------------------------------------------------------
General Information and History
Independent Accountants
Distribution
Calculation of Yield Quotations
Calculation of Total Return Quotations
Other Performance Data
Federal Tax Status
Annuity Provisions
Financial Statements
- -------------------------------------------------------------------------
If you would like a free copy of the Statement of Additional Information 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
Conseco Variable Annuity Account E at the following address:
Name: _______________________________________________
Mailing Address: ____________________________________
_____________________________________________________
Sincerely,
_____________________________________________________
(Signature)
APPENDIX
==============================================================================
CONDENSED FINANCIAL INFORMATION
The table below provides per unit information about the financial history
of the sub-accounts for the periods indicated.
<TABLE>
<CAPTION>
1998 1997 1996 1995 1994
-----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
CONSECO SERIES TRUST
BALANCED (A)
Accumulation unit value at beginning of period $1.698 $1.342 $1.035 $1.000
Accumulation unit value at end of period $1.973 $1.698 $1.342 $1.035
Percentage change in accumulation unit value 16.21% 26.50% 29.67% 3.52%
Number of accumulation units outstanding at
end of period 5,740,115 2,475,992 461,876 21,037
COMMON STOCK (A)
Accumulation unit value at beginning of period $2.071 $1.449 $1.078 $1.000
Accumulation unit value at end of period $2.424 $2.071 $1.449 $1.078
Percentage change in accumulation unit value 17.04% 42.96% 34.42% 7.79%
Number of accumulation units outstanding at
end of period 7,962,515 3,374,110 1,009,305 41,601
FIXED INCOME (A)
Accumulation unit value at beginning of period $1.207 $1.166 $1.000 $1.000
Accumulation unit value at end of period $1.308 $1.207 $1.166 $1.000
Percentage change in accumulation unit value 8.39% 3.50% 16.61% (0.03)%
Number of accumulation units outstanding at end of
period 4,066,812 1,540,494 350,623 12,553
GOVERNMENT SECURITIES (A)
Accumulation unit value at beginning of period $1.169 $1.154 $0.997 $1.000
Accumulation unit value at end of period $1.248 $1.169 $1.154 $0.997
Percentage change in accumulation unit value 6.76% 1.31% 15.72% (0.26)%
Number of accumulation units outstanding at
end of period 354,897 135,680 30,614 0
MONEY MARKET (A)
Accumulation unit value at beginning of period $1.095 $1.056 $1.014 $1.000
Accumulation unit value at end of period $1.136 $1.095 $1.056 $1.014
Percentage change in accumulation unit value 3.80% 3.67% $4.14% 1.38%
Number of accumulation units outstanding at
end of period 3,116,005 1,144,951 641,747 0
THE ALGER AMERICAN FUND
ALGER AMERICAN GROWTH (C)
Accumulation unit value at beginning of period $1.044 $1.000 N/A N/A
Accumulation unit value at end of period $1.294 $1.044 N/A N/A
Percentage change in accumulation unit value 24.00% 4.35% N/A N/A
Number of accumulation units outstanding at
end of period 742,233 73,227 N/A N/A
ALGER AMERICAN LEVERAGED ALLCAP (B)
Accumulation unit value at beginning of period $1.555 $1.408 $1.000 N/A
Accumulation unit value at end of period $1.836 $1.555 $1.408 N/A
Percentage change in accumulation unit value 18.02% 10.47% 40.79% N/A
Number of accumulation units outstanding at
end of period 1,279,296 832,794 207,147 N/A
ALGER AMERICAN MIDCAP GROWTH (C)
Accumulation unit value at beginning of period $0.987 $1.000 N/A N/A
Accumulation unit value at end of period $1.119 $0.987 N/A N/A
Percentage change in accumulation unit value 13.41% (1.33)% N/A N/A
Number of accumulation units outstanding at
end of period 679,330 42,736 N/A N/A
ALGER AMERICAN SMALL CAPITALIZATION (B)
Accumulation unit value at beginning of period $1.252 $1.21 $1.000 N/A
Accumulation unit value at end of period $1.375 $1.252 $1.219 N/A
Percentage change in accumulation unit value 9.84% 2.72% 21.89% N/A
Number of accumulation units outstanding at
end of period 3,988,448 1,946,993 517,903 N/A
BERGER INSTITUTIONAL PRODUCTS TRUST
BERGER IPT - 100 (C)
Accumulation unit value at beginning of period $1.029 $1.000 N/A N/A
Accumulation unit value at end of period $1.155 $1.029 N/A N/A
Percentage change in accumulation unit value 12.18% 2.93% N/A N/A
Number of accumulation units outstanding at
end of period 627,056 69,521 N/A N/A
</TABLE>
<TABLE>
<CAPTION>
CONDENSED FINANCIAL INFORMATION - Continued
1998 1997 1996 1995 1994
--------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
BERGER INSTITUTIONAL PRODUCTS TRUST - CONTINUED
BERGER IPT - GROWTH AND INCOME (C)
Accumulation unit value at beginning of period $1.104 $1.000 N/A N/A
Accumulation unit value at end of period $1.360 $1.104 N/A N/A
Percentage change in accumulation unit value 23.26% 10.36% N/A N/A
Number of accumulation units outstanding at end of period 802,420 59,956 N/A N/A
BERGER IPT - SMALL COMPANY GROWTH (C)
Accumulation unit value at beginning of period $0.985 $1.000 N/A N/A
Accumulation unit value at end of period $1.178 $0.985 N/A N/A
Percentage change in accumulation unit value 19.64% (1.53)% N/A N/A
Number of accumulation units outstanding at end of period . 187,471 42,982 N/A N/A
BERGER/BIAM IPT - INTERNATIONAL (C)
Accumulation unit value at beginning of period $1.000 N/A N/A N/A
Accumulation unit value at end of period $0.970 N/A N/A N/A
Percentage change in accumulation unit value -3.01% N/A N/A N/A
Number of accumulation units outstanding at end of period 2,029,230 N/A N/A N/A
THE DREYFUS SOCIALLY RESPONSIBLE GROWTH FUND, INC. (B)
Accumulation unit value at beginning of period $1.404 $1.175 $1.000 N/A
Accumulation unit value at end of period $1.778 $1.404 $1.175 N/A
Percentage change in accumulation unit value 26.60% 19.53% 17.49% N/A
Number of accumulation units outstanding at end of period 1,195,614 221,018 21,878 N/A
DREYFUS STOCK INDEX FUND (B)
Accumulation unit value at beginning of period $1.393 $1.158 $1.000 N/A
Accumulation unit value at end of period $1.834 $1.393 $1.158 N/A
Percentage change in accumulation unit value 31.67% 20.31% 15.76% N/A
Number of accumulation units outstanding at end of period 8,884,649 1,862,980 91,752 N/A
FEDERATED INSURANCE SERIES
FEDERATED HIGH INCOME BOND II (B)
Accumulation unit value at beginning of period $1.202 $1.067 $1.000 N/A
Accumulation unit value at end of period $1.349 $1.202 $1.067 N/A
Percentage change in accumulation unit value 12.25% 12.71% 6.66% N/A
Number of accumulation units outstanding at end of period 2,184,739 508,205 26,380 N/A
FEDERATED INTERNATIONAL EQUITY II (B)
Accumulation unit value at beginning of period $1.095 $1.025 $1.000 N/A
Accumulation unit value at end of period $1.888 $1.095 $1.025 N/A
Percentage change in accumulation unit value 8.55% 6.80% 2.51% N/A
Number of accumulation units outstanding at end of period 329,971 93,215 36,798 N/A
FEDERATED UTILITY II (B)
Accumulation unit value at beginning of period $1.234 $1.122 $1.000 N/A
Accumulation unit value at end of period $1.541 $1.234 $1.122 N/A
Percentage change in accumulation unit value 24.88% 10.00% 12.21% N/A
Number of accumulation units outstanding at end of period 675,836 294,882 11,711 N/A
JANUS ASPEN SERIES
AGGRESSIVE GROWTH (B)
Accumulation unit value at beginning of period $1.348 $1.266 $1.000 N/A
Accumulation unit value at end of period $1.498 $1.348 $1.266 N/A
Percentage change in accumulation unit value 11.10% 6.44% 26.64% N/A
Number of accumulation units outstanding at end of period 1,867,131 1,041,050 122,278 N/A
GROWTH (B)
Accumulation unit value at beginning of period $1.364 $1.167 $1.000 N/A
Accumulation unit value at end of period $1.650 $1.364 $1.167 N/A
Percentage change in accumulation unit value 21.00% 16.79% 16.75% N/A
Number of accumulation units outstanding at end of period 5,160,718 1,466,042 138,532 N/A
WORLDWIDE GROWTH (B)
Accumulation unit value at beginning of period $1.541 $1.211 $1.000 N/A
Accumulation unit value at end of period $1.856 $1.541 $1.211 N/A
Percentage change in accumulation unit value 20.46% 27.23% 21.12% N/A
Number of accumulation units outstanding at end of period 8,234,605 2,173,781 155,653 N/A
</TABLE>
<TABLE>
<CAPTION>
==============================================================================================================================
CONDENSED FINANCIAL INFORMATION - Continued
1998 1997 1996 1995 1994
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
THE VAN ECK WORLDWIDE INSURANCE TRUST
WORLDWIDE BOND (B)
Accumulation unit value at beginning of period $1.029 $1.018 $1.000 N/A
Accumulation unit value at end of period $1.039 $1.029 $1.018 N/A
Percentage change in accumulation unit value 0.96% 1.09% 1.82% N/A
Number of accumulation units outstanding at end of period 3,332,067 1,790,259 130,071 N/A
WORLDWIDE EMERGING MARKETS (C)
Accumulation unit value at beginning of period $1.136 $1.000 N/A N/A
Accumulation unit value at end of period. $0.990 $1.136 N/A N/A
Percentage change in accumulation unit value -12.83% 13.59% N/A N/A
Number of accumulation units outstanding at end of period 1,935,325 132,953 N/A N/A
WORLDWIDE HARD ASSETS (B)
Accumulation unit value at beginning of period $1.254 $1.077 $1.000 N/A
Accumulation unit value at end of period $1.216 $1.254 $1.077 N/A
Percentage change in accumulation unit value -3.05% 16.41% 7.72% N/A
Number of accumulation units outstanding at end of period 3,728,758 651,603 68,730 N/A
AMERICAN CENTURY VARIABLE PORTFOLIOS, INC.
INTERNATIONAL (D)
Accumulation unit value at beginning of period $1.000 N/A N/A N/A
Accumulation unit value at end of period $1.093 N/A N/A N/A
Percentage change in accumulation unit value 9.30% N/A N/A N/A
Number of accumulation units outstanding at end of period 163,370 N/A N/A N/A
VALUE (D)
Accumulation unit value at beginning of period $1.000 N/A N/A N/A
Accumulation unit value at end of period $1.226 N/A N/A N/A
Percentage change in accumulation unit value 22.60% N/A N/A N/A
Number of accumulation units outstanding at end of period 415,891 N/A N/A N/A
NEUBERGER & BERMAN ADVISERS MANAGEMENT TRUST
LIMITED MATURITY BOND (D)
Accumulation unit value at beginning of period $1.000 N/A N/A N/A
Accumulation unit value at end of period $1.043 N/A N/A N/A
Percentage change in accumulation unit value 4.31% N/A N/A N/A
Number of accumulation units outstanding at end of period 25,089 N/A N/A N/A
PARTNERS (D)
Accumulation unit value at beginning of period $1.000 N/A N/A N/A
Accumulation unit value at end of period $1.240 N/A N/A N/A
Percentage change in accumulation unit value 23.99% N/A N/A N/A
Number of accumulation units outstanding at end of period 1,000,600 N/A N/A N/A
STRONG OPPORTUNITY FUND II, INC.
OPPORTUNITY FUND II (D)
Accumulation unit value at beginning of period $1.000 N/A N/A N/A
Accumulation unit value at end of period $1.230 N/A N/A N/A
Percentage change in accumulation unit value 22.99% N/A N/A N/A
Number of accumulation units outstanding at end of period 248,615 N/A N/A N/A
STRONG VARIABLE INSURANCE FUNDS, INC.
GROWTH II (D)
Accumulation unit value at beginning of period $1.000 N/A N/A N/A
Accumulation unit value at end of period $1.270 N/A N/A N/A
Percentage change in accumulation unit value 27.01% N/A N/A N/A
Number of accumulation units outstanding at end of period 79,815 N/A N/A N/A
DREYFUS VARIABLE INVESTMENT FUND
DISCIPLINED STOCK (E)
Accumulation unit value at beginning of period
Accumulation unit value at end of period
Percentage change in accumulation unit value
Number of accumulation units outstanding at end of period
INTERNATIONAL VALUE (E)
Accumulation unit value at beginning of period
Accumulation unit value at end of period
Percentage change in accumulation unit value
Number of accumulation units outstanding at end of period.
INVESCO VARIABLE INVESTMENT FUNDS, INC.
INVESCO VIF-HIGH YIELD (E)
Accumulation unit value at beginning of period.
Accumulation unit value at end of period
INVESCO VIF-INDUSTRIAL INCOME (E)
Accumulation unit value at beginning of period
Accumulation unit value at end of period
Percentage change in accumulation unit value
Number of accumulation units outstanding at end of period
LAZARD RETIREMENT SERIES, INC.
LAZARD RETIREMENT EQUITY (E)
Accumulation unit value at beginning of period
Accumulation unit value at end of period
Percentage change in accumulation unit value
Number of accumulation units outstanding at end of period
LAZARD RETIREMENT SMALL CAP (E)
Accumulation unit value at beginning of period
Accumulation unit value at end of period
Percentage change in accumulation unit value
Number of accumulation units outstanding at end of period
LORD ABBETT SERIES FUND, INC.
GROWTH AND INCOME (E)
Accumulation unit value at beginning of period
Accumulation unit value at end of period
Percentage change in accumulation unit value
Number of accumulation units outstanding at end of period
MITCHELL HUTCHINGS SERIES TRUST
GROWTH & INCOME (E)
Accumulation unit value at beginning of period
Accumulation unit value at end of period
Percentage change in accumulation unit value
Number of accumulation units outstanding at end of period
================================================================================
</TABLE>
(A) Inception date was July 25, 1994.
(B) Inception date was June 1, 1995.
(C) Inception date was May 1, 1996.
(D) Inception date was May 1, 1997.
(E) Inception date was May 1, 1998
PART B
STATEMENT OF ADDITIONAL INFORMATION
INDIVIDUAL & GROUP VARIABLE DEFERRED ANNUITY CONTRACTS
issued by
CONSECO VARIABLE INSURANCE COMPANY
(formerly Great American Reserve Insurance Company)
and
CONSECO VARIABLE ANNUITY ACCOUNT E (formerly Great American
Reserve Variable Annuity Account E)
11815 N. PENNSYLVANIA ST., CARMEL, IN 46032
(317) 817-3700
MAY 1, 1999
THIS STATEMENT OF ADDITIONAL INFORMATION IS NOT A PROSPECTUS. IT SHOULD BE READ
IN CONJUNCTION WITH THE PROSPECTUS DATED MAY 1, 1999 FOR CONSECO VARIABLE
ANNUITY ACCOUNT E (FORMERLY, GREAT AMERICAN RESERVE VARIABLE ANNUITY ACCOUNT E)
- -- INDIVIDUAL AND GROUP VARIABLE DEFERRED ANNUITY CONTRACTS. YOU CAN OBTAIN A
COPY OF THE PROSPECTUS BY CONTACTING CONSECO VARIABLE INSURANCE COMPANY AT THE
ADDRESS TELEPHONE NUMBER GIVEN ABOVE.
TABLE OF CONTENTS
PAGE
GENERAL INFORMATION AND HISTORY......................................
INDEPENDENT ACCOUNTANTS..............................................
DISTRIBUTION..........................................................
VOTING RIGHTS........................................................
CALCULATION OF YIELD QUOTATIONS.......................................
CALCULATION OF TOTAL RETURN QUOTATIONS................................
OTHER PERFORMANCE DATA................................................
FEDERAL TAX STATUS ...................................................
ANNUITY PROVISIONS ...................................................
FINANCIAL STATEMENTS..................................................
GENERAL INFORMATION AND HISTORY
Conseco Variable Insurance Company (the "Company") is an indirect wholly owned
subsidiary of Conseco, Inc. On or about October 7, 1998, the Company changed its
name from Great American Reserve Insurance Company to its present name. In
certain states, the Company may continue to use the name Great American Reserve
Insurance Company until the name change is approved in that state. Conseco, Inc.
is a publicly owned financial services holding company, the principal operations
of which are in the development, marketing and administration of specialized
annuity and life insurance products. The Company has its principal offices at
11815 N. Pennsylvania Street, Carmel, Indiana 46032. The Variable Account was
established by the Company.
INDEPENDENT ACCOUNTANTS
The financial statements of Conseco Variable Annuity Account E and Conseco
Variable Insurance Company included in the Prospectus and the Statement of
Additional Information have been examined by ___________________, independent
accountants, for the periods indicated in their reports as stated in their
opinion and have been so included in reliance upon such opinion given upon the
authority of that firm as experts in accounting and auditing.
DISTRIBUTION
The Company continuously offers the Contracts through associated persons of the
principal underwriter for the Variable Account, Conseco Equity Sales, Inc.
("CES"). CES is a registered broker-dealer and member of the National
Association of Securities Dealers, Inc. CES is located at 11815 N. Pennsylvania
Street, Carmel, Indiana 46032, and is an affiliate of the Company. For the years
ended December 31, 1998, 1997 and 1996, the Company paid CES total underwriting
commissions of $ ___________, $449,417 and $2,195,600. In addition, certain
Contracts may be sold by life insurance/registered representatives of other
registered broker-dealers.
CES performs the sales functions relating to the Contracts and the Company
provides all administrative services. To cover the sales expenses and
administrative expenses (including such items as salaries, rent, postage,
telephone, travel, legal, actuarial, audit, office equipment and printing), the
Company makes sales and administrative deductions, varying by type of Contract.
See "Charges and Deductions" in the Prospectus.
VOTING RIGHTS
Contract Owners may instruct the Company as to the voting of Fund shares
attributable to their respective interests under the Contracts at meetings of
shareholders of the Funds. Contract Owners entitled to vote will receive proxy
material and a form on which voting instructions may be given. The Company will
vote the shares of each sub-account held by the Variable Account attributable to
the Contracts in accordance with instructions received from Contract Owners.
Shares held in each sub-account for which timely instructions have not been
received from Contract Owners will be voted by the Company for or against any
proposition or the Company will abstain, in the same proportion as shares in
that sub-account for which instructions are received. The Company will vote, or
abstain from voting, any shares that are not attributable to Contract Owners in
the same proportion as all Contract Owners in the Variable Account vote or
abstain. However, if the Company determines that it is permitted to vote such
shares of the Funds in its own right, it may elect to do so, subject to the
then-current interpretation of the 1940 Act and the rules thereunder.
Under certain Contracts, not including contracts issued in connection with
governmental employers' deferred compensation plans described in the Prospectus,
participants and annuitants have the right to instruct the Contract Owner with
respect to the number of votes attributable to their Individual Accounts. Votes
attributable to participants and annuitants who do not instruct the Contract
Owner will be cast by the Contract Owner for or against each proposal to be
voted upon, in the same proportion as votes for which instructions have been
received. Participants and annuitants entitled to instruct the casting of votes
will receive a notice of each meeting of Contract Owners, and proxy solicitation
materials, and a statement of the number of votes attributable to their
participation under the Contract.
The number of shares held in a sub-account deemed attributable to a Contract
Owner's interest under a Contract will be determined on the basis of the value
of the Accumulation Units credited to the Contract Owner's account as of the
record date. On or after the Maturity Date, the number of attributable shares
will be based on the amount of assets held to meet annuity obligations to the
payee under the Contract as of the record date. On or after the Maturity Date,
the number of votes attributable to a Contract will generally decrease since
funds set aside for annuitants will decrease as payments are made.
CALCULATION OF YIELD QUOTATIONS
MONEY MARKET SUB-ACCOUNT
The Money Market Sub-account's standard yield quotations may appear in sales
material and advertising as calculated by the standard method prescribed by
rules of the Securities and Exchange Commission. Under this method, the yield
quotation is based on a seven-day period and computed as follows: The Money
Market Sub-account's daily net investment factor, minus one (1.00) is multiplied
by 365 to produce an annualized yield. The annualized yield of the seven-day
period are then averaged and carried to the nearest one-hundredth of one
percent. This yield reflects investment results less deductions for investment
advisory fees, mortality and expense risk fees and the administrative charge,
but does not include a deduction of any applicable annual administrative fees.
Because of these deductions, the yield for the Money Market Sub-account will be
lower than the yield for the corresponding Fund of the Conseco Series Trust.
The Money Market Sub-account's effective yield may appear in sales material and
advertising for the same seven-day period, determined on a compound basis. The
effective yield is calculated by compounding the unannualized base period return
by adding one to the base period return, raising the sum to a power equal to 365
divided by 7, and subtracting one from the result.
The yield on the Money Market Sub-account will generally fluctuate on a daily
basis. Therefore, the yield for any given past period is not an indication or
representation of future yields or rates of return. The actual yield is affected
by changes in interest rates on money market securities, average Sub-account
maturity, the types and quality of Portfolio securities held by the
corresponding Fund of the Conseco Series Trust and its operating expenses.
OTHER SUB-ACCOUNTS
The Portfolios of the eligible Funds may advertise investment performance
figures, including yield. Each Sub-account's yield will be based upon a stated
30-day period and will be computed by dividing the net investment income per
accumulation unit earned during the period by the maximum offering price per
accumulation unit on the last day of the period, according to the following
formula:
YIELD = 2 ((A - B/CD) + 1)6 - 1)
Where:
A = the net investment income earned during the period by the Portfolio.
B = the expenses accrued for the period (net of reimbursements, if any).
C = the average daily number of accumulation units outstanding during the
period.
D = the maximum offering price per accumulation unit on the last day of the
period.
CALCULATION OF TOTAL RETURN QUOTATIONS
The Company may include certain total return quotations for one or more of the
Portfolios of the eligible Funds in advertising, sales literature or reports to
Contract Owners or prospective purchasers. Such total return quotations will be
expressed as the average annual rate of total return over one-, five-and 10-year
periods ended as of the end of the immediately preceding calendar quarter, and
as the dollar amount of annual total return on a year-to-year, rolling 12-month
basis ended as of the end of the immediately preceding calendar quarter.
Average annual total return quotations are computed according to the following
formula:
n
P (1+T) = ERV
Where:
P = beginning purchase payment of $1,000
T = average annual total return
n = number of years in period
ERV = ending redeemable value of a hypothetical $1,000 purchase payment
made at the beginning of the one-, five-or 10-year period at the end of the
one-, five- or 10-year period (or fractional portion thereof).
AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS ENDED 12/31/98:
Since
Variable Account Sub-Accounts 1 Year Inception
- - ------------------------------------- ------ ---------
CONSECO SERIES TRUST
Balanced Portfolio % (2)
Common Stock Portfolio % (2)
Fixed Income Portfolio % (2)
Government Securities Portfolio % (2)
==============================================================================
THE ALGER AMERICAN FUND
Alger American Growth Portfolio ...... % %(4)
Alger American Leveraged
AllCap Portfolio .................. % %(3)
Alger American MidCap Growth Portfolio % %(4)
Alger American Small Capitalization
Portfolio ......................... % %(3)
American Century Variable
Portfolios, Inc.
VP International ..................... % %(5)
VP Value ............................. % %
VP Income and Growth ................. % %(1)
Berger IPT
Berger IPT - 100 Fund ................ % %(4)
Berger IPT - Growth and Income Fund .. % %(4)
Berger IPT - Small Company Growth Fund % %(4)
Berger/BIAM IPT - International Fund . % %(5)
Neuberger & Berman Advisers
Management Trust
Limited Maturity Bond Portfolio ...... % %(5)
Partners Portfolio ................... % %(5)
Strong Opportunity Fund II, Inc
Opportunity Fund II .................. % %(5)
Strong Variable Insurance
Funds, Inc. .......................
Growth Fund II ....................... % %(5)
The Dreyfus Socially Responsible
Growth Fund, Inc .................. % %(3)
Dreyfus Stock Index Fund ............. % %(3)
Federated Insurance Series
Federated High Income Bond Fund II ... % %(3)
Federated International Equity Fund II % %(3)
Federated Utility Fund II ............ % %(3)
Janus Aspen Series
Aggressive Growth Portfolio .......... % %(3)
Growth Portfolio ..................... % %(3)
Worldwide Growth Portfolio ........... % %(3)
Van Eck Worldwide Insurance
Trust
Worldwide Bond Fund .................. % %(3)
Worldwide Emerging Markets Fund ...... % %(4)
Worldwide Hard Assets Fund ........... % %(3)
Worldwide Real Estate Fund ........... % %(1)
Dreyfus Variable Investment Fund
Disciplined Stock Portfolio ....... % %(1)
International Value Portfolio ..... % %(1)
INVESCO Variable Investment Funds, Inc.
INVESCO VIF - High Yield
Portfolio ....................... % %(1)
INVESCO VIF - Industrial Income
Portfolio ....................... % %(1)
Lazard Retirement Series, Inc.
Lazard Retirement Equity
Portfolio ....................... % %(1)
Lazard Retirement Small Cap
Portfolio ....................... % %(1)
Lord Abbett Series Fund, Inc.
Growth and Income Portfolio ...... % %(1)
Mitchell Hutchins Series Trust
Growth & Income Portfolio ....... % %(1)
- ------------
(1) Since inception (May 1, 1998).
(2) Since inception (July 25, 1994).
(3) Since inception (June 1, 1995).
(4) Since inception (May 1, 1996).
(5) Since inception (May 1, 1997).
OTHER PERFORMANCE DATA
The Company may from time to time also illustrate average annual total returns
in a non-standard format, as appears in the following "Gross Average Annual
Total Returns" table, in conjunction with the standard format described above.
The non-standard format will be identical to the standard format except that the
withdrawal charge percentage will be assumed to be zero.
All non-standard performance data will only be advertised if the standard
performance data for the same period, as well as for the required periods, is
also illustrated.
Performance data for the Variable Account investment options may be compared in
advertisements, sales literature and reports to contract owners, with the
investment returns on various mutual funds, stocks, bonds, certificates of
deposit, tax free bonds, or common stock and bond indices, and other groups of
variable annuity separate accounts or other investment products tracked by
Morningstar, Inc., a widely used independent research firm which ranks mutual
funds and other investment companies by overall performance, investment
objectives, and assets, or tracked by other services, companies, publications,
or persons who rank such investment companies on overall performance or other
criteria.
Reports and promotional literature may also contain other information, including
the effect of tax-deferred compounding on an investment option's performance
returns, or returns in general, which may be illustrated by graphs, charts or
otherwise, and which may include a comparison, at various points in time, of the
return from an investment in a Contract (or returns in general) on a
tax-deferred basis (assuming one or more tax rates) with the return on a taxable
basis.
Reports and promotional literature may also contain the ratings the Company has
received from independent rating agencies. However, the Company does not
guarantee the investment performance of the Variable Account investment options.
GROSS AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS ENDED 12/31/98:
Since
Variable Account Sub-Accounts 1 Year Inception
- - ------------------------------------- ------ ----------
CONSECO SERIES TRUST
Balanced Portfolio............................ % %(2)
Common Stock Portfolio ....................... % %(2)
Fixed Income Portfolio........................ % %(2)
Government Securities Portfolio .............. % %(2)
THE ALGER AMERICAN FUND
Alger American Growth Portfolio .............. % %(4)
Alger American Leveraged AllCap Portfolio .... % %(3)
Alger American MidCap Growth Portfolio ....... % %(4)
Alger American Small Capitalization
Portfolio ................................. % %(3)
AMERICAN CENTURY VARIABLE
PORTFOLIOS, INC.
VP International ............................. % %(5)
VP Value ..................................... % %(5)
VP Income and Growth ......................... % %(1)
BERGER IPT
Berger IPT - 100 Fund ........................ % %(4)
Berger IPT - Growth and Income Fund .......... % %(4)
Berger IPT - Small Company Growth Fund ....... % %(4)
Berger/BIAM IPT - International Fund ......... % %(5)
NEUBERGER & BERMAN ADVISERS
MANAGEMENT TRUST
Limited Maturity Bond Portfolio .............. % %(5)
Partners Portfolio ........................... % %(5)
STRONG OPPORTUNITY FUND II, INC.
Opportunity Fund II .......................... % %(5)
STRONG VARIABLE INSURANCE
FUNDS, INC.
Growth Fund II ............................... % %(5)
THE DREYFUS SOCIALLY RESPONSIBLE
GROWTH FUND, INC .......................... % %(3)
DREYFUS STOCK INDEX FUND ..................... % %(3)
FEDERATED INSURANCE SERIES
Federated High Income Bond Fund II ........... % %(3)
Federated International Equity Fund II ....... % %(3)
Federated Utility Fund II .................... % %(3)
JANUS ASPEN SERIES
Aggressive Growth Portfolio .................. % %(3)
Growth Portfolio ............................. % %(3)
Worldwide Growth Portfolio ................... % %(3)
VAN ECK WORLDWIDE INSURANCE TRUST
WORLDWIDE BOND FUND .......................... % %(3)
Worldwide Emerging Markets Fund .............. % %(4)
Worldwide Hard Assets Fund ................... % %(3)
Worldwide Real Estate Fund ................... % %(1)
Dreyfus Variable Investment Fund
Disciplined Stock Portfolio ............... % %(1)
International Value Portfolio ............. % %(1)
INVESCO Variable Investment Funds, Inc.
INVESCO VIF - High Yield
Portfolio ............................... % %(1)
INVESCO VIF - Industrial Income
Portfolio ............................... % %(1)
Lazard Retirement Series, Inc.
Lazard Retirement Equity
Portfolio ............................... % %(1)
Lazard Retirement Small Cap
Portfolio ............................... % %(1)
Lord Abbett Series Fund, Inc.
Growth and Income Portfolio ............... % %(1)
Mitchell Hutchins Series Trust
Growth & Income Portfolio ................. % %(1)
- ------------
(1) Since inception (May 1, 1998).
(2) Since inception (July 25, 1994).
(3) Since inception (June 1, 1995).
(4) Since inception (May 1, 1996).
(5) Since inception (May 1,1997).
FEDERAL TAX STATUS
NOTE: THE FOLLOWING DESCRIPTION IS BASED UPON THE COMPANY'S UNDERSTANDING OF
CURRENT FEDERAL INCOME TAX LAW APPLICABLE TO ANNUITIES IN GENERAL. THE COMPANY
CANNOT PREDICT THE PROBABILITY THAT ANY CHANGES IN SUCH LAWS WILL BE MADE.
PURCHASERS ARE CAUTIONED TO SEEK COMPETENT TAX ADVICE REGARDING THE POSSIBILITY
OF SUCH CHANGES. THE COMPANY DOES NOT GUARANTEE THE TAX STATUS OF THE CONTRACTS.
PURCHASERS BEAR THE COMPLETE RISK THAT THE CONTRACTS MAY NOT BE TREATED AS
"ANNUITY CONTRACTS" UNDER FEDERAL INCOME TAX LAWS. IT SHOULD BE FURTHER
UNDERSTOOD THAT THE FOLLOWING DISCUSSION IS NOT EXHAUSTIVE AND THAT SPECIAL
RULES NOT DESCRIBED HEREIN MAY BE APPLICABLE IN CERTAIN SITUATIONS. MOREOVER, NO
ATTEMPT HAS BEEN MADE TO CONSIDER ANY APPLICABLE STATE OR OTHER TAX LAWS.
GENERAL
Section 72 of the Internal Revenue Code of 1986, as amended ("Code") governs
taxation of annuities in general. An Owner is not taxed on increases in the
value of a Contract until distribution occurs, either in the form of a lump sum
payment or as annuity payments under the annuity option selected. For a lump sum
payment received as a total withdrawal (total surrender), the recipient is taxed
on the portion of the payment that exceeds the cost basis of the Contract. For
non-qualified contracts, this cost basis is generally the purchase payments,
while for Qualified Contracts there may be no cost basis. The taxable portion of
the lump sum payment is taxed at ordinary income tax rates.
For annuity payments, a portion of each payment in excess of an exclusion amount
is includible in taxable income. The exclusion amount for payments based on a
fixed annuity option is determined by multiplying the payment by the ratio that
the cost basis of the Contract (adjusted for any period or refund feature) bears
to the expected return under the Contract. The exclusion amount for payments
based on a variable annuity option is determined by dividing the cost basis of
the Contract (adjusted for any period certain or refund guarantee) by the number
of years over which the annuity is expected to be paid. Payments received after
the investment in the Contract has been recovered (i.e. when the total of the
excludable amount equals the investment in the Contract) are fully taxable. The
taxable portion is taxed at ordinary income tax rates. For certain types of
Qualified Plans there may be no cost basis in the Contract within the meaning of
Section 72 of the Code. Owners, annuitants and beneficiaries under the Contracts
should seek competent financial advice about the tax consequences of any
distributions.
The Company is taxed as a life insurance company under the Code. For federal
income tax purposes, the Variable Account is not a separate entity from the
Company, and its operations form a part of the Company.
DIVERSIFICATION
Section 817(h) of the Code imposes certain diversification standards on the
underlying assets of variable annuity contracts. The Code provides that a
variable annuity contract will not be treated as an annuity contract for any
period (and any subsequent period) for which the investments are not, in
accordance with regulations prescribed by the United States Treasury Department
("Treasury Department"), adequately diversified. Disqualification of the
Contract as an annuity contract would result in the imposition of federal income
tax to the Owner with respect to earnings allocable to the Contract prior to the
receipt of payments under the Contract. The Code contains a safe harbor
provision which provides that annuity contracts such as the Contract meet the
diversification requirements if, as of the end of each quarter, the underlying
assets meet the diversification standards for a regulated investment company and
no more than fifty-five percent (55%) of the total assets consist of cash, cash
items, U.S. Government securities and securities of other regulated investment
companies.
Regulations issued by the Treasury Department (the "Regulations") amplify the
diversification requirements for variable contracts set forth in the Code and
provide an alternative to the safe harbor provision described above. Under the
Regulations, an investment portfolio will be deemed adequately diversified if:
(1) no more than 55% of the value of the total assets of the portfolio is
represented by any one investment; (2) no more than 70% of the value of the
total assets of the portfolio is represented by any two investments; (3) no more
than 80% of the value of the total assets of the portfolio is represented by any
three investments; and (4) no more than 90% of the value of the total assets of
the portfolio is represented by any four investments.
The Code provides that, for purposes of determining whether or not the
diversification standards imposed on the underlying assets of variable contracts
by Section 817(h) of the Code have been met, "each United States government
agency or instrumentality shall be treated as a separate issuer."
The Company intends that all variable Investment Options underlying the
Contracts will be managed in such a manner as to comply with these
diversification requirements.
The Treasury Department has indicated that the diversification Regulations do
not provide guidance regarding the circumstances in which Owner control of the
investments of the Variable Account will cause the Owner to be treated as the
owner of the assets of the Variable Account, thereby resulting in the loss of
favorable tax treatment for the Contract. At this time it cannot be determined
whether additional guidance will be provided and what standards may be contained
in such guidance.
The amount of Owner control which may be exercised under the Contract is
different in some respects from the situations addressed in published rulings
issued by the Internal Revenue Service in which it was held that the policy
owner was not the owner of the assets of the separate account. It is unknown
whether these differences, such as the Owner's ability to transfer among
investment choices or the number and type of investment choices available, would
cause the Owner to be considered as the owner of the assets of the Variable
Account resulting in the imposition of federal income tax to the Owner with
respect to earnings allocable to the Contract prior to receipt of payments under
the Contract.
In the event any forthcoming guidance or ruling is considered to set forth a new
position, such guidance or ruling will generally be applied only prospectively.
However, if such ruling or guidance was not considered to set forth a new
position, it may be applied retroactively resulting in the Owners being
retroactively determined to be the owners of the assets of the Variable Account.
Due to the uncertainty in this area, we reserve the right to modify the Contract
in an attempt to maintain favorable tax treatment.
MULTIPLE CONTRACTS
The Code provides that multiple non-qualified annuity contracts which are issued
within a calendar year to the same contract owner by one company or its
affiliates are treated as one annuity contract for purposes of determining the
tax consequences of any distribution. Such treatment may result in adverse tax
consequences including more rapid taxation of the distributed amounts from such
combination of contracts. For purposes of this rule, contracts received in a
Section 1035 exchange will be considered issued in the year of the exchange.
Owners should consult a tax adviser prior to purchasing more than one
non-qualified annuity contract in any calendar year.
CONTRACTS OWNED BY OTHER THAN NATURAL PERSONS
Under Section 72(u) of the Code, the investment earnings on premiums for the
Contracts will be taxed currently to the Owner if the Owner is a non-natural
person, e.g., a corporation or certain other entities. Such Contracts generally
will not be treated as annuities for federal income tax purposes. However, this
treatment is not applied to a Contract held by a trust or other entity as an
agent for a natural person nor to Contracts held by Qualified Plans. Purchasers
should consult their own tax counsel or other tax adviser before purchasing a
Contract to be owned by a non-natural person.
TAX TREATMENT OF ASSIGNMENTS
An assignment or pledge of a Contract may be a taxable event. Owners should
therefore consult competent tax advisers should they wish to assign or pledge
their Contracts.
If the Contract is issued pursuant to a retirement plan which receives favorable
treatment under the provision of Sections 401, 403(b), 408 or 457 of the Code,
it may not be assigned, pledged or otherwise transferred except as allowed under
applicable law.
INCOME TAX WITHHOLDING
All distributions or the portion thereof which is includible in the gross income
of the Owner are subject to federal income tax withholding. Generally, amounts
are withheld from periodic payments at the same rate as wages and at the rate of
10% from non-periodic payments. However, the Owner, in many cases, may elect not
to have taxes withheld or to have withholding done at a different rate.
Certain distributions from retirement plans qualified under Section 401 or
Section 403(b) of the Code, which are not directly rolled over to another
eligible retirement plan or individual retirement account or individual
retirement annuity, are subject to a mandatory 20% withholding for federal
income tax. The 20% withholding requirement generally does not apply to: a) a
series of substantially equal payments made at least annually for the life or
life expectancy of the participant or joint and last survivor expectancy of the
participant and a designated beneficiary or for a specified period of 10 years
or more; or b) distributions which are required minimum distributions; or c) the
portion of the distributions not includible in gross income (i.e. returns of
after-tax contributions) or d) hardship withdrawals. Participants should consult
their own tax counsel or other tax adviser regarding withholding requirements.
TAX TREATMENT OF WITHDRAWALS - NON-QUALIFIED CONTRACTS
Section 72 of the Code governs treatment of distributions from annuity
contracts. It provides that if the Contract Value exceeds the aggregate Purchase
Payments made, any amount withdrawn will be treated as coming first from the
earnings and then, only after the income portion is exhausted, as coming from
the principal. Withdrawn earnings are includible in gross income. It further
provides that a ten percent (10%) penalty will apply to the income portion of
any premature distribution. However, the penalty is not imposed on amounts
received: (a) after you reach age 59 1/2; (b) after your death; (c) if you
become totally disabled (for this purpose disability is as defined in Section
72(m)(7) of the Code); (d) in a series of substantially equal periodic payments
made not less frequently than annually for your life (or life expectancy) or for
the joint lives (or joint life expectancies) of you and your beneficiary;
(e)under an immediate annuity; or (f) which are allocable to Purchase Payments
made prior to August 14, 1982. With respect to (d) above, if the series of
substantially equal periodic payments is modified before the later of your
attaining age 59 1/2 or 5 years from the date of the first periodic payment,
then the tax for the year of the modification is increased by an amount equal to
the tax which would have been imposed (the 10% penalty tax) but for the
exception, plus interest for the tax years in which the exception was used.
The Contract provides that upon the death of the Annuitant prior to the Maturity
Date, the death proceeds will be paid to the beneficiary. Such payments made
upon the death of the Annuitant who is not the Owner of the Contract do not
qualify for the death of Owner exception described above, and will be subject to
the ten (10%) percent distribution penalty unless the beneficiary is 59 1/2
years old or one of the other exceptions to the penalty applies.
The above information does not apply to Qualified Contracts. However, separate
tax withdrawal penalties and restrictions may apply to such Qualified Contracts.
(See "Tax Treatment of Withdrawals - Qualified Contracts" below.)
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. Owners, participants and
beneficiaries are responsible for determining that contributions, distributions
and other transactions with respect to the Contracts comply with applicable law.
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.
SIMPLE IRAs
Section 408(p) of the Code permits certain employers (generally those with less
than 100 employees) to establish a retirement program for employees using
Savings Incentive Match Plan Retirement Annuities ("SIMPLE IRA"). SIMPLE IRA
programs can only be established with the approval of and adoption by the
employer of the Contract Owner of the SIMPLE IRA. Contributions to SIMPLE IRAs
will be made pursuant to a salary reduction agreement in which an Owner would
authorize his/her employer to deduct a certain amount from his/her pay and
contribute it directly to the SIMPLE IRA. The Owner's employer will also make
contributions to the SIMPLE IRA in amounts based upon certain elections of the
employer. The only contributions that can be made to a SIMPLE IRA are salary
reduction contributions and employer contributions as described above, and
rollover contributions from other SIMPLE IRAs. Purchasers of Contracts to be
qualified as SIMPLE IRAs should obtain competent tax advice as to the tax
treatment and suitability of such an investment.
ROTH IRAs
Section 408A of the Code provides that beginning in 1998, individuals may
purchase a new type of non-deductible IRA, known as a Roth IRA. Purchase
payments for a Roth IRA are limited to a maximum of $2,000 per year and are not
deductible from taxable income. Lower maximum limitations apply to individuals
with adjusted gross incomes between $95,000 and $110,000 in the case of single
taxpayers, between $150,000 and $160,000 in the case of married taxpayers filing
joint returns, and between $0 and $10,000 in the case of married taxpayers
filing separately. An overall $2,000 annual limitation continues apply to all of
a taxpayer's IRA contributions, including Roth IRA and non-Roth IRAs.
Qualified distributions from Roth IRAs are free from federal income tax. A
qualified distribution requires that an individual has held a Roth IRA for at
least five taxable years and, in addition, that the distribution is made: (i)
after the individual reaches age 591/2, (ii) on the individual's death or
disability, or (iii) as a qualified first-time home purchase (subject to a
$10,000 lifetime maximum) for the individual, a spouse, child, grandchild, or
ancestor. Any distribution which is not a qualified distribution is taxable to
the extent of earnings in the distribution. Distributions are treated as made
from contributions first and therefore no distributions are taxable until
distributions exceed the amount of contributions and conversions to the Roth
IRA. The 10% penalty tax and the regular IRA exceptions to the 10% penalty tax
apply to taxable distributions from a Roth IRA.
Amounts may be rolled over from one Roth IRA to another Roth IRA. Furthermore,
an individual may make a rollover contribution from a non-Roth IRA to a Roth
IRA, ("conversion deposits") unless the individual has adjusted gross income
over $100,000 or the individual is a married taxpayer filing a separate return.
The individual must pay tax on any portion of the IRA being rolled over that
represents income or a previously deductible IRA contribution. However, for
rollovers in 1998, the individual may pay that tax ratably over the four taxable
year period beginning with tax year 1998. In addition, distribution of amounts
attributable to conversion deposits held for less than 5 taxable years will also
be subject to the penalty tax.
Purchasers of Contracts intended to be qualified as a Roth IRA should obtain
competent tax advice as to the tax treatment and suitability of such an
investment.
c. PENSION AND PROFIT-SHARING PLANS
Sections 401(a) and 401(k) of the Code permit employers 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 Code provisions, employees and independent contractors performing services
for state and local governments and other tax-exempt organizations may
participate in Deferred Compensation Plans. While participants in such Plans may
be permitted to specify the form of investment in which their Plan accounts will
participate, all such investments are owned by the sponsoring employer and are
subject to the claims of its creditors until December 31, 1998, or such earlier
date as may be established by Plan amendment. However, amounts deferred under a
Plan created on or after August 20, 1996 and amounts deferred under any 457 Plan
after December 31, 1998 must be held in trust, custodial account or annuity
contract for the exclusive benefit of Plan participants and their beneficiaries.
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 $7,500 ($8,000
beginning in 1998, as indexed for inflation) or 33 1/3 percent of the
participant's includable compensation. However, in limited circumstances, up to
$15,000 may be deferred in each of the last three years before normal retirement
age. Furthermore, the Code provides additional requirements and restrictions
regarding eligibility and distributions.
TAX TREATMENT OF WITHDRAWALS - QUALIFIED CONTRACTS
In the case of a withdrawal under a Qualified Contract, a ratable portion of the
amount received is taxable, generally based on the ratio of the individual's
cost basis to the individual's total accrued benefit under the retirement plan.
Special tax rules may be available for certain distributions from a Qualified
Contract. Section 72(t) of the Code imposes a 10% penalty tax on the taxable
portion of any distribution from qualified retirement plans, including Contracts
issued and qualified under Code Sections 401 (Pension and Profit-Sharing Plans),
403(b) (Tax-Sheltered Annuities) and 408 and 408A (Individual Retirement
Annuities). This penalty is increased to 25% instead of 10% for SIMPLE IRAs if
distribution occurs within the first two years after the Owner first
participated in the SIMPLE IRA. To the extent amounts are not includible in
gross income because they have been rolled over to an IRA or to another eligible
Qualified Plan, no tax penalty will be imposed. The tax penalty will not apply
to the following distributions: (a) made on or after the date on which the Owner
or Annuitant (as applicable) reaches age 59 1/2; (b) following the death or
disability of the Owner or Annuitant (as applicable) (for this purpose
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)
from an Individual Retirement Annuity for the purchase of medical insurance (as
described in Section 213(d)(1)(D) of the Code) for the Owner or Annuitant (as
applicable) and his or her spouse and dependents if the Owner or Annuitant (as
applicable) has received unemployment compensation for at least 12 weeks (this
exception will no longer apply after the Owner or Annuitant (as applicable) has
been re-employed for at least 60 days); (h) from an Individual Retirement
Annuity made to the Owner or Annuitant (as applicable) to the extent such
distributions do not exceed the qualified higher education expenses (as defined
in Section 72(t)(7) of the Code) of the Owner or Annuitant (as applicable) for
the taxable year; and (i) distributions up to $10,000 from an Individual
Retirement Annuity made to the Owner or Annuitant (as applicable) which are
qualified first-time home buyer distributions (as defined in Section 72(t)(8) of
the Code). The exceptions stated in (d) and (f) above do not apply in the case
of an Individual Retirement Annuity. The exception stated in (c) above applies
to an Individual Retirement Annuity without the requirement that there be a
separation from service. With respect to (c) above, if the series of
substantially equal periodic payments is modified before the later of your
attaining age 59 1/2 or 5 years from the date of the first periodic payment,
then the tax for the year of the modification is increased by an amount equal to
the tax which would have been imposed (the 10% penalty tax) but for the
exception, plus interest for the tax years in which the exception was used.
TAX-SHELTERED ANNUITIES - WITHDRAWAL LIMITATIONS
The Code limits the withdrawal of amounts attributable to contributions made
pursuant to a salary reduction agreement (as defined in Section 403(b)(11) of
the Code) to circumstances only 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. 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. Required distributions must be over a period not exceeding the life
expectancy of the individual or the joint lives or life expectancies of the
individual and his or her designated beneficiary. If the required minimum
distributions are not made, a 50% penalty tax is imposed as to the amount not
distributed.
ANNUITY PROVISIONS
DETERMINATION OF AMOUNT OF THE FIRST MONTHLY VARIABLE ANNUITY PAYMENT. On or
after the Maturity Date when annuity payments commence, we determine the value
of the Individual Account as the total of the product(s) of:
(a) the value of an Accumulation Unit for each Investment Option at the end of
the Valuation Period immediately before the Valuation Period in which the first
annuity payment is due and
(b) the number of Accumulation Units credited to the Individual Account with
respect to each Investment Option as of the date the annuity is to commence. We
will deduct any applicable premium taxes from the Individual Account value.
We then calculate the amount of the first monthly variable annuity payment by
multiplying the Individual Account Value less any outstanding loans and
applicable charges, which is to be applied to provide variable payments, by the
amount of first monthly payment in accordance with annuity tables contained in
the Contract. The amount of the first monthly payment varies according to the
form of annuity you select, the age of the annuitant (for certain options) and
the assumed net investment rate you select. The standard assumed investment rate
(AIR) is 3%. However, you may select a 5% AIR or such other rate as the Company
may offer prior to the Maturity Date.
The AIR built into the annuity tables affect both the amount of the first
monthly variable annuity payment and the amount by which subsequent payments may
increase or decrease. If you select a 5% rate, rather than the standard 3% rate,
it would produce a higher first payment, but subsequent payments would increase
more slowly in periods when Annuity Unit values are rising and decrease more
rapidly in periods when Annuity Unit values are declining. With either assumed
rate, if the actual net investment rate during any two or more successive months
was equal to the assumed rate, the annuity payments would be level during that
period.
If a greater first monthly payment would result, Conseco will compute the first
monthly payment on the same mortality basis as used in determining the first
payment under immediate annuity contracts being issued for a similar class of
annuitants at the date the first monthly payment is due under the Contract.
VALUE OF AN ANNUITY UNIT. On the Maturity Date, a number of Annuity Units is
established for the Contract Owner for each Investment Option on which variable
annuity payments are to be based. For each Sub-account of the Variable Account,
the number of Annuity Units established is calculated by dividing (i) the amount
of the first monthly variable annuity payment on that basis by (ii) the Annuity
Unit value for that basis for the current Valuation Period. That number of
Annuity Units remains constant and is the basis for calculating the amount of
the second and subsequent annuity payments.
The Annuity Unit value is determined for each Valuation Period, for each
Investment Option, and is equal to the Annuity Unit value for the preceding
Valuation Period multiplied by the product of (i) the net investment factor for
the appropriate sub-account for the immediately preceding Valuation Period and
(ii) a factor to neutralize the assumed net investment rate built into the
annuity tables, for it is replaced by the actual net investment rate in step
(i). The daily factor for a 3 percent assumed net investment rate is .99991902;
for a 5 percent rate, the daily factor is .99986634.
AMOUNTS OF SUBSEQUENT MONTHLY VARIABLE ANNUITY PAYMENTS. The amounts of
subsequent monthly variable annuity payments are determined by multiplying (i)
the number of Annuity Units established for the annuitant for the applicable
sub-account by (ii) the Annuity Unit value for the sub-account. If Annuity units
are established for more than one sub-account, the calculation is made
separately and the results combined to determine the total monthly variable
annuity payment.
1. EXAMPLE OF CALCULATION OF MONTHLY VARIABLE ANNUITY PAYMENTS. The
determination of the amount of the variable annuity payments can be illustrated
by the following hypothetical example. The example assumes that the monthly
payments are based on the investment experience of only one Investment Option.
If payments were based on the investment experience of more than one Investment
Option, the same procedure would be followed to determine the portion of the
monthly payment attributed to each Investment Option.
2. FIRST MONTHLY PAYMENT. Assume that at the Maturity Date there are 40,000
Accumulation Units credited under a particular Individual Account and that the
value of an Accumulation Unit for the second Valuation Period prior to the
Maturity Date was $1.40000000; this produces a total value for the Individual
sub-account of $56,000. Assume also that no premium tax is payable and that the
annuity tables in the Contract provide, for the option elected, a first monthly
variable annuity payment of $5.22 per $1,000 of value applied; the first monthly
payment to the annuitant would thus be 56 multiplied by $5.22, or $292.32.
Assume that the Annuity Unit value for the Valuation Period in which the first
monthly payment was due was $1.30000000. This is divided into the amount of the
first monthly payment to establish the number of Annuity Units for the
participant: $292.32 $1.30000000 produces 224.862 Annuity Units. The value of
this number of Annuity Units will be paid in each subsequent month.
3. SECOND MONTHLY PAYMENT. The current Annuity Unit value is first
calculated. Assume a net investment factor of 1.01000000 for the second
Valuation Period preceding the due date of the second monthly payment. This is
multiplied by .99753980 to neutralize the assumed net investment rate of 3
percent per annum built into the number of Annuity Units determined above (if an
assumed net investment rate of 5 percent had been elected, the neutralization
factor would be .99594241), producing a result of 1.00751520. This is then
multiplied by the Annuity Unit value for the Valuation Period preceding the due
date of the second monthly payment (assume this value to be $1.30000000) to
produce the current Annuity Unit value, $1.30976976.
The second monthly payment is then calculated by multiplying the constant number
of Annuity Units by the current Annuity Unit value: 224.862 times $1.30976976
produces a payment of $294.52.
FINANCIAL STATEMENTS
Audited financial statements of Conseco Variable Annuity Account E and Conseco
Variable Insurance Company as of December 31, 1998 are included herein.
(To be filed by amendment)
PART C
OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS
(a) The financial statements of the Separate Account and Conseco Variable
Insurance Company (the "Company") will be filed by amendment.
(b) Exhibits
(1) -Resolution of the Board of Directors of Great American Reserve
authorizing the establishment of Variable Account dated November
12, 1993.***
(2) -Not Applicable.
(3) -Form of Principal Underwriting Agreement by and among Great
American Reserve, Variable Account and GARCO Equity Sales.***
(4)(a) -- Form of Individual Fixed/Variable Annuity Contract.***
(4)(b) -- Form of Group Fixed/Variable Annuity Contract.***
(5) -Application for Contracts.***
(6) (i)-Articles of Incorporation of Great American Reserve.**
(6) (ii) -Bylaws of Great American Reserve.**
(7) -Not Applicable.
(8) (i)-Form of Fund Participation Agreement by and among the Alger
American Fund, Great American Reserve Insurance Company and Fred
Alger and Company, Incorporated.*
(8) (ii)-Form of Fund Participation Agreement by and among Great
American Reserve Insurance Company, Berger Institutional Products
Trust and BBOI Worldwide LLC.*
(8) (iii)-Form of Fund Participation by and between Great American
Reserve Insurance Company, Insurance Management Series and
Federated Securities Corp.*
(8) (iv)-Form of Fund Participation between Great American Reserve
Insurance Company, Van Eck Worldwide Insurance Trust and Van Eck
Associates Corporation.*
(8) (v)-Form of Fund Participation Agreement by and between Lord
Abbett Series Fund, Inc., Lord, Abbett & Co. and Great American
Reserve Insurance Company.*
(8) (vi)-Form of Fund Participation Agreement between American
Century Investment Services, Inc. and Great American Reserve
Insurance Company.*
(8) (vii)-Form of Fund Participation Agreement between INVESCO
Variable Investment Funds, Inc., INVESCO Funds Group, Inc. and
the Company.**
(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) -- None.
(13) -- Schedule for computation of performance quotations (to be
filed by amendment).
(27) -- Not Applicable
*Incorporated by reference to Pre-Effective Amendment No. 1 to Form N-4,
Great American Reserve Variable Annuity Account F, File Nos. 333-40309/811-08483
filed electronically on February 3, 1998.
**Incorporated by reference to Form N-4, Great American Reserve Variable
Annuity Account G, File Nos. 333-00373/811-07501, filed electronically on
January 23, 1996.
***Incorporated by reference to Post-Effective Amendment No. 6 to Form N-4
(File Nos. 33-74092 and 811-08288) filed electronically on May 15, 1998.
ITEM 25. DIRECTORS AND OFFICERS OF CONSECO VARIABLE
The following table sets forth certain information regarding the executive
officers of the Company who are engaged directly or indirectly in activities
relating to the Variable Account or the Contracts. Their principal business
address is 11825 N. Pennsylvania Street, Carmel, IN 46032.
Name and Principal Position and Offices
Business Address* with Depositor
- ------------------- ---------------------------------------
Ngaire E. Cuneo Director
Stephen C. Hilbert Director and Chairman of the Board
Rollin M. Dick Director, Executive Vice President and
Chief Financial Officer
Thomas J. Kilian Director and President
John J. Sabl Director, Executive Vice President, General
Counsel and Secretary
James S. Adams Senior Vice President and Treasurer
ITEM 26. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT
The following information concerns those companies that may be deemed to be
controlled by or under common control with Registrant (all 100% owned unless
indicated otherwise):
CONSECO, INC. (Indiana) - (publicly traded)
Green Tree Financial Corporation
Washington National Corporation
Washington National Insurance Company
United Presidential Life Insurance Company
CIHC, Incorporated (Delaware)
Bankers National Life Insurance Company (Texas)
National Fidelity Life Insurance Company (Missouri)
Bankers Life Insurance Company of Illinois (Illinois)
Bankers Life & Casualty Company (Illinois)
Certified Life Insurance Company (California)
Jefferson National Life Insurance Company of Texas (Texas)
Conseco Variable Insurance Company (Texas)
Conseco Annuity Assurance Company (Ilinois)
Vulcan Life Insurance Company (Indiana) - (98%)
Conseco Senior Health Insurance Company (Pennsylvania)
United General Life Insurance Company (Texas)
Conseco Life Insurance Company of New York (New York)
Wabash Life Insurance Company (Kentucky)
Conseco Life Insurance Company (Indiana)
Pioneer Financial Services, Inc.
Pioneer Life Insurance Company
Health and Life Insurance Company
Manhattan National Life Insurance Company
Conseco Medical Insurance Company
Conseco Direct Life Insurance Company
Providential Life Insurance Company
Capitol American Financial Corporation (Ohio)
Conseco Health Insurance Company (Arizona)
Frontier National Life Insurance Company (Ohio)
Conseco Capital Management, Inc. (Delaware)
Conseco Equity Sales, Inc. (Texas)
Conseco Financial Services, Inc. (Delaware)
Conseco Marketing, LLC (Indiana)
Conseco Services, LLC (Indiana)
Lincoln American Life Insurance Company (Tennessee)
Marketing Distribution Systems, Consulting Group, Inc. (Delaware)
MDS of New Jersey, Inc. (New Jersey)
Bankmark School of Business, Inc. (Delaware)
Conseco Series Trust (Massachusetts)*
Conseco Fund Group (Massachusetts) (publicly held)**
* The shares of Conseco Series Trust currently are sold to Bankers National
Variable Account B, Great American Reserve Variable Annuity Account C, and
Great American Reserve Variable Annuity Account E, each being segregated
asset accounts established pursuant to Texas law by Bankers National Life
Insurance Company and Conseco Variable Insurance Company, respectively.
** The shares of the Conseco Fund Group are sold to the public; Conseco
affiliates currently hold in excess of 95% of its shares.
ITEM 27. NUMBER OF CONTRACT OWNERS
As of January 31, 1999, there were 10,358 Qualified Contract Owners and
1,928 Non-Qualified Contract Owners.
ITEM 28. INDEMNIFICATION
The Board of Directors of the Company is indemnified by the Company against
claims and liabilities to which such person may become subject by reason of
having been a member of such Board or by reason of any action alleged to have
been taken or omitted by him as such member, and the member shall be indemnified
for all legal and other expenses reasonably incurred by him in connection with
any such claim or liability; however, no indemnification shall be made in
connection with any claim or liability unless such person (i) conducted himself
in good faith, (ii) in the case of conduct in his official capacity as a member
of the Board of Directors, reasonably believed that his conduct was in the best
interests of Variable Account, and, in all other cases reasonably believed that
his conduct was at least not opposed to the best interests of Variable Account,
and (iii) in the case of any criminal proceeding, had no reasonable cause to
believe that his conduct was unlawful.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to members of the Company's Board of Directors,
officers and controlling persons of the Registrant pursuant to the provisions
described under "Indemnification" or otherwise, the Registrant has been advised
that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than payment by the Registrant of expenses incurred or
paid by a member of the Board of Directors, officer or controlling person of the
Registrant in the successful defense of any action, suit or proceeding) is
asserted by such member of the Board of Directors, officer or controlling person
in connection with the securities being registered, the Registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
The Variable Account has no officers or employees. Employees of an
affiliated company who perform administrative services for the Variable Account
are covered by an officers and directors liability policy.
ITEM 29. PRINCIPAL UNDERWRITER
(a) Conseco Equity Sales, Inc. ("Conseco Equity Sales") is the principal
underwriter for the following investment companies (other than Registrant):
Great American Reserve Variable Annuity Account C
Great American Reserve Variable Annuity Account F
Great American Reserve Variable Annuity Account G
Conseco Fund Group
Rydex Advisor Variable Annuity Account
(b) The following table sets forth certain information regarding the officers
and directors of Conseco Equity Sales. Their address is 11815 N.
Pennsylvania Street, Carmel, IN 46032.
NAME AND PRINCIPAL POSITIONS AND OFFICES
BUSINESS ADDRESS WITH CONSECO EQUITY SALES, INC.
- - -------------------- --------------------------------
L. Gregory Gloeckner President and Director
Senior Vice President, Treasurer
James S. Adams and Director
Vice President, Senior Counsel,
William P. Kovacs Secretary, and Director
William T. Devanney, Jr. Senior Vice President, Corporate Taxes
Christene H. Darnell Vice President, Management Reporting
Donald B. Johnston Vice President, National Sales Director
Christine E. Monical Second Vice President and Assistant
General Counsel
<TABLE>
<CAPTION>
NET UNDERWRITING
NAME OF DISCOUNTS AND COMPENSATION ON BROKERAGE
PRINCIPAL UNDERWRITER COMMISSIONS REDEMPTION COMMISSIONS COMPENSATION*
- - --------------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Conseco Equity None None None None
Sales, Inc.
</TABLE>
*Fees paid by the Company for serving as underwriter
ITEM 30. LOCATION OF ACCOUNTS AND RECORDS
The accounts, books, or other documents required to be maintained by the
Registrant pursuant to Section 31(a) of the Investment Company Act of 1940 and
the rules promulgated thereunder are in the possession of Conseco Variable
Insurance Company, 11825 N. Pennsylvania Street, Carmel, Indiana 46032.
ITEM 31. MANAGEMENT SERVICES
Not Applicable.
ITEM 32. UNDERTAKINGS
1. The Registrant hereby undertakes to file a post-effective amendment to
this registration statement as frequently as is necessary to ensure that the
audited financial statements in the registration statement are never more than
16 months old for so long as payments under the variable annuity contracts may
be accepted.
2. The Registrant hereby undertakes to include either (1) as part of any
application to purchase a contract offered by the prospectus, a space that an
applicant can check to request a Statement of Additional Information, or (2) a
postcard or similar written communication affixed to or included in the
prospectus that the applicant can remove to send for a Statement of Additional
Information.
3. The Registrant hereby undertakes to deliver any Statement of Additional
Information and any financial statements required to be made available under
Form N-4 promptly upon written or oral request.
4. The Securities and Exchange Commission (the "SEC") issued the American
Counsel of Life Insurance an industry wide no-action letter dated November 28,
1988, stating that the SEC would not recommend any enforcement action if
registered separate accounts funding tax-sheltered annuity contracts restrict
distributions to plan participants in accordance with the requirements of
Section 403(b)(11), provided certain conditions and requirements were met. Among
these conditions and requirements, any registered separate account relying on
the no-action position of the SEC must:
(1) Include appropriate disclosure regarding the redemption
restrictions imposed by Section 403(b)(11) in each registration statement,
including the prospectus, used in connection with the offer of the
contract;
(2) Include appropriate disclosure regarding the redemption
restrictions imposed by Section 403 (b)(11) in any sales literature used in
connection with the offer in the contract;
(3) Instruct sales representatives who solicit participants to
purchase the contract specifically to bring the redemption restrictions
imposed by Section 403(b)(11) to the attention of the potential
participants; and
(4) Obtain from each plan participant who purchases a Section 403(b)
annuity contract, prior to or at the time of such purchase, a signed
statement acknowledging the participant's understanding of (i) the
restrictions on redemption imposed by Section 403(b)(11), and (ii) the
investment alternatives available under the employer's Section 403(b)
arrangement, to which the participant may elect to transfer his contract
value.
The Registrant is relying on the no-action letter. Accordingly, the
provisions of paragraphs (1) - (4) above have been complied with.
5. The Company represents that the fees and charges deducted under the
Contracts, in the aggregate, are reasonable in relation to the services
rendered, the expenses expected to be incurred, and the risks assumed by the
Company.
SIGNATURES
As required by the Securities Act of 1933 and the Investment Company Act of
1940, as amended, the Registrant certifies that it has caused this Registration
Statement to be signed on its behalf, in the city of Carmel, State of Indiana,
on this 22nd day of February, 1999.
GREAT AMERICAN RESERVE VARIABLE ANNUITY
ACCOUNT E
(Registrant)
By: Conseco Variable Insurance Company
By: /S/ ROLLIN M. DICK
----------------------------------------
Rollin M. Dick, Executive Vice President
CONSECO VARIABLE INSURANCE COMPANY
(Depositor)
By: /S/ ROLLIN M. DICK
------------------------------------------
Rollin M. Dick, Executive Vice President
As required by the Securities Act of 1933, this Registration Statement has
been signed below by the following persons in the capacities and on the dates
indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ---------- ----- ----
<S> <C>
/S/ NGAIRE E. CUNEO Director 2/22/99
- -------------------------- ---------------
Ngaire E. Cuneo
/S/ THOMAS J. KILIAN 2/22/99
- -------------------------- Director ----------------
Thomas J. Kilian
/S/ STEPHEN C. HILBERT Director and Chairman of the Board 2/22/99
- -------------------------- (Principal Executive Officer) ---------------
Stephen C. Hilbert
/S/ ROLLIN M. DICK Director, Executive Vice President 2/22/99
- -------------------------- and Chief Financial Officer (Principal ----------------
Rollin M. Dick Financial Officer)
/S/ JOHN N. SABL Director 2/22/99
- --------------------------- ----------------
John J. Sabl
/S/ JAMES S. ADAMS Senior Vice President and Treasurer 2/22/99
- --------------------------- (Chief Accounting Officer) ----------------
James S. Adams
</TABLE>
INDEX TO EXHIBITS
Exhibit
Number Exhibit
- - ------ -------
(To be filed by Amendment)
