<PAGE>
As filed with the Securities and Exchange Commission on April 1, 1998
File No. 333-00999
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
POST-EFFECTIVE AMENDMENT NO. 3 /X/
AND/OR
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
AMENDMENT NO. 5 /X/
GLENBROOK LIFE MULTI-MANAGER VARIABLE ACCOUNT
(Exact Name of Registrant)
GLENBROOK LIFE AND ANNUITY COMPANY
3100 SANDERS ROAD
NORTHBROOK, ILLINOIS 60062
(Name of Depositor)
MICHAEL J. VELOTTA
VICE PRESIDENT, SECRETARY AND GENERAL COUNSEL
GLENBROOK LIFE AND ANNUITY COMPANY
3100 SANDERS ROAD
NORTHBROOK, ILLINOIS 60062
874/402-2400
(Name and Complete Address of Agent for Service)
Copies to:
RICHARD T. CHOI, ESQUIRE JOHN R. HEDRICK, ESQUIRE
FREEDMAN, LEVY, KROLL, AND SIMONDS ALLSTATE LIFE FINANCIAL SERVICES, INC.
1050 CONNECTICUT AVENUE, N.W. 3100 SANDERS ROAD
WASHINGTON, D.C. 2006-5366 NORTHBROOK, IL 60062
IT IS PROPOSED THAT THIS FILING WILL BECOME EFFECTIVE
(CHECK APPROPRIATE BOX)
/ / immediately upon filing pursuant to paragraph (b) of Rule 485
/X/ on May 1, 1998 pursuant to paragraph (b) of Rule 485
/ / 60 days after filing pursuant to paragraph (a)(i) of Rule 485
/ / 75 days after filing pursuant to paragraph (a)(ii) 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 Being Registered: Units of interest in the Glenbrook Life
Multi-Manager Variable Account under deferred variable annuity contracts.
<PAGE>
CROSS REFERENCE SHEET
PURSUANT TO RULE 495 UNDER THE SECURITIES ACT OF 1933
ITEM OF FORM N-4 LOCATION
- ---------------- --------
PART A
- ------
1. Cover Page Cover Page
2. Definitions Glossary
3. Synopsis Highlights; Summary of Variable
Account Expenses
4. Condensed Financials Condensed Financial Information
(a) Chart Condensed Financial Information
(b) Performance Data Yield and Total Return Disclosure
(c) Location of Financial Statements Financial Statements
5. General Description of Registrant
Depositor and Portfolio Companies
(a) Depositor Glenbrook Life and Annuity Company
(b) Registrant The Variable Account
(c) Portfolio Companies The Funds
(d) Fund Prospectus The Funds
(c) Voting Rights Voting Rights
(f) Administrators Not Applicable
6. Deductions Charges & Other Deductions
(a) General Charges & Other Deductions
(b) Sales Load Withdrawal Charge
(c) Special Purchase Plans Not Applicable
(d) Commissions Distribution of the Contracts
(e) Fund Expenses Fund Expenses
(f) Expenses - Registrant Summary of Variable Account
Expenses; Expenses of the Funds
7. Contracts
(a) Persons with Rights Benefits under the Contract; Payout
Start Date for Income Payments;
Voting Rights, Assignments;
Beneficiary
(b) (i) Allocation of Purchase Payments Allocation of Purchase Payments
(ii) Transfers Transfers among portfolios
(iii) Exchange Not Applicable
(c) Changes Modification
(d) Inquiries Customer Inquiries
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8. Annuity Period Payout Start Date for Income
Payments
(a) Material Factors Amount of Variable Account Income
Payments
(b) Dates Payout Start Date for Income
Payments
(c) Frequency, duration & level Amount of Variable Account Income
Payments
(d) AIR Amount of Variable Account Income
Payments
(e) Minimum Income Plans
(f) Change Options; Transfers Transfers among Portfolios
9. Death Benefit Death Benefit Payable; Death
Benefit Amount; Death Benefit
Payment Provisions
10. Purchases & Contract Value
(a) Purchases Purchase of the Crediting of
Purchase Payments
(b) Valuation Accumulation Units, Accumulation
Unit Value
(c) Daily Calculation Accumulation Units; Accumulation
Unit Value; Allocation of Purchase
Payments
(d) Underwriter Distribution of the Contracts
11 Redemptions
(a) By Owners and Annuitants Withdrawals; Income Plans
(b) Texas ORP Not Applicable
(c) Postponement of Payment Delay of Payment
(d) Lapse Withdrawals
(e) Free Look Highlights
12. Taxes Federal Tax Matters
13. Legal Proceedings Not Applicable
14. SAI Contents SAI Table of Contents
PART B
15. Cover Page Cover Page
16. Table of Contents Table of Contents
17. General Information & History
(a) Depositor's Name Glenbrook Life and Annuity Company
(b) Assets of Sub-account The Variable Account
(c) Control of Depositor Glenbrook Life and Annuity Company
18. Services
(a) Fees & Expenses of Registrant Contract Maintenance Charge
(b) Management Contracts Contract Maintenance Charge;
Distribution of the Contracts
(c) Custodian Safekeeping of the Variable
Account's Assets
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(d) Independent Public Accountant Experts
(e) Assets of Registrant Safekeeping of the Variable Account
Assets
(f) Affiliated Persons Not Applicable
(g) Principal Underwriter Distribution of the Contracts
19. Purchase of Securities Being Offered
(a) Offering Purchase of Contracts
(b) Sales load Distribution of the Contract
20. Underwriters
(a) Principal Underwriter Distribution of the Contracts
(b) Continuous offering Purchase of Contracts
(c) Commissions Distribution of the Contracts
(d) Unaffiliated Underwriters N/A
21. Calculation of Performance Data Performance Data
22. Annuity Payments Income Payments
23. Financial Statements
(a) Financial Statements of Registrant Variable Account Financial
Statements
(b) Financial Statements of Depositor Glenbrook Life and Annuity Company
Financial Statements
<PAGE>
GLENBROOK LIFE MULTI-MANAGER VARIABLE ACCOUNT
OFFERED BY
GLENBROOK LIFE AND ANNUITY COMPANY
POST OFFICE BOX 94042
PALATINE, ILLINOIS 60094-4042
1-(800) 755-5275
INDIVIDUAL AND GROUP FLEXIBLE PREMIUM DEFERRED
VARIABLE ANNUITY CONTRACTS
This prospectus describes the "Glenbrook Provider Variable Annuity," a Flexible
Premium Deferred Variable Annuity Contract ("Contract") designed to aid You in
long-term financial planning and which can be used for retirement planning. The
Contracts are issued by Glenbrook Life and Annuity Company ("Company"), a wholly
owned subsidiary of Allstate Life Insurance Company. Purchase payments for the
Contracts will be allocated to a series of Variable Sub-accounts of the
Glenbrook Life Multi-Manager Variable Account ("Variable Account") and/or to a
Fixed Account option(s) funded through the Company's general account.
The Contracts are issued as individual Contracts or as group Contracts. In
states where the Contracts are available only as group Contracts, a certificate
is issued that summarizes the provisions of the group Contract. In certain
states, certificates are issued under group contracts issued to the Financial
Services Group Insurance Trust, an Illinois Trust. For convenience, this
prospectus refers to both Contracts and certificates as "Contracts."
The Variable Account will invest in shares of one or more managed investment
companies ("Funds") each of which will have multiple investment Portfolios. All
of the Funds which are described in this prospectus may not be available with
your Contract. Presently, the Variable Account will invest in shares of the
following Funds:
- AIM Variable Insurance Funds, Inc. ("AIM Fund")
- American Century Variable Portfolios (VP), Inc. ("American Century
Funds")
- Dean Witter Variable Investment Series (VIS) ("Dean Witter Fund")
- Dreyfus Variable Investment Fund (VIF), The Dreyfus Socially Responsible
Growth Fund, Inc. and Dreyfus Stock Index Fund (collectively the
"Dreyfus Funds")
- Fidelity Variable Insurance Products Fund (VIP) and Fidelity Variable
Insurance Products Fund II (VIPII) (collectively the "Fidelity Funds")
- MFS-Registered Trademark- Variable Insurance Trust ("MFS Fund")
Under the Contracts, the AIM FUND has eight available Portfolios: (1) AIM V.I.
Capital Appreciation Fund (2) AIM V.I. Growth and Income Fund (3) AIM V.I.
Global Utilities Fund (4) AIM V.I. Diversified Income Fund (5) AIM V.I.
Government Securities Fund (6) AIM V.I. Growth Fund (7) AIM V.I. International
Equity Fund and (8) AIM V.I. Value Fund; the AMERICAN CENTURY FUNDS have two
available Portfolios: (1) American Century VP Balanced and (2) American Century
VP International; the DEAN WITTER FUND has four available Portfolios: (1) VIS
Dividend Growth (2) VIS European Growth (3) VIS Quality Income Plus and (4) VIS
Utilities; the DREYFUS FUNDS have five available Portfolios: (1) VIF Growth and
Income (2) VIF Money Market (3) The Dreyfus Socially Responsible Growth Fund,
Inc. (4) VIF Small Company Stock and (5) Dreyfus Stock Index Fund; the FIDELITY
FUNDS have four available Portfolios: (1) VIP II Contrafund (2) VIP Growth (3)
VIP High Income and (4) VIP Equity-Income; and the MFS FUND has two available
Portfolios: (1) MFS Emerging Growth Series and (2) MFS Limited Maturity Series.
The Contract is not available in all states.
At least once each Contract Year, the Company will send the Owner an annual
statement that contains certain information pertinent to the individual Owner's
Contract. The annual statement details values and specific Contract data that
applies to each particular Contract. The annual statement does not contain
financial statements of the Company, although the Company's financial statements
are on page F-1 of this prospectus. Our Company files annual and quarterly
reports and other information with the SEC. You may read and copy any reports,
statements or other information we file at the SEC's public reference room in
Washington, D.C. You can request copies of these documents upon payment of a
duplicating fee, by writing to the SEC. Please call the SEC at 1-800-SEC-0330
for further information on the operation of the public reference rooms. Our SEC
filings are also available to the public on the SEC Internet site
(http://www.sec.gov).
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING IN ANY JURISDICTION IN WHICH
SUCH OFFERING MAY NOT LAWFULLY BE MADE. NO DEALER, SALESMAN, OR OTHER PERSON IS
AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY REPRESENTATIONS IN CONNECTION
WITH THIS OFFERING OTHER THAN THOSE CONTAINED IN THIS
<PAGE>
PROSPECTUS, AND, IF GIVEN OR MADE, SUCH OTHER INFORMATION OR REPRESENTATIONS
MUST NOT BE RELIED UPON.
This prospectus presents information You should know before making a decision to
invest in the Contract and the available Investment Alternatives.
The Contract Value will vary daily as a function of the investment
performance of the Sub-accounts of our Variable Account and any interest
credited to the Fixed Account. The Company does not guarantee any minimum
Contract Value for amounts allocated to the Variable Account. Benefits
provided by this Contract, when based on the Guaranteed Maturity Fixed
Account, are subject to a Market Value Adjustment, the operation of which may
result in upward or downward adjustments in withdrawal benefits, death
benefits, settlement values, transfers to other Sub-accounts, or periodic
income payments.
THE CONTRACTS MAY BE DISTRIBUTED THROUGH BROKER-DEALERS WHICH HAVE RELATIONSHIPS
WITH BANKS OR OTHER FINANCIAL INSTITUTIONS OR BY EMPLOYEES OF SUCH BANKS;
HOWEVER, THE CONTRACTS AND THE INVESTMENTS IN THE FUNDS ARE NOT DEPOSITS, OR
OBLIGATIONS OF, OR GUARANTEED OR ENDORSED BY ANY BANK, AND THE FUNDS' SHARES ARE
NOT FEDERALLY INSURED OR GUARANTEED BY THE U.S. GOVERNMENT, THE FEDERAL DEPOSIT
INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER AGENCY. INVESTMENT
IN THE CONTRACTS INVOLVES INVESTMENT RISKS, INCLUDING THE POSSIBLE LOSS OF
PRINCIPAL.
THESE CONTRACTS ARE NOT FDIC INSURED.
The Company has prepared and filed a Statement of Additional Information dated
May 1, 1998 with the U.S. Securities and Exchange Commission. If You wish to
receive the Statement of Additional Information, You may obtain a free copy by
calling or writing the Company at the address above. For your convenience, an
order form for the Statement of Additional Information may be found on page B-2
of this prospectus. Before ordering, You may wish to review the Table of
Contents of the Statement of Additional Information on page B-1 of this
prospectus. The Statement of Additional Information has been incorporated by
reference into this prospectus.
This Prospectus is valid only when accompanied or preceded by a current
Prospectus for the Funds.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION, NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
PLEASE READ THIS PROSPECTUS CAREFULLY AND RETAIN IT FOR FUTURE REFERENCE
THE DATE OF THIS PROSPECTUS IS MAY 1, 1998.
<PAGE>
TABLE OF CONTENTS
Page
----
Glossary
Highlights
Summary of Variable Account Expenses
Condensed Financial Information
Yield and Total Return Disclosure
Financial Statements
Glenbrook Life and Annuity Company and the Variable Account
Glenbrook Life and Annuity Company.
The Variable Account.
The Funds
Fixed Account Options
Dollar Cost Averaging Fixed Account
Guaranteed Maturity Fixed Account
Example of Interest Crediting During the Guarantee Period
Withdrawals or Transfers
Market Value Adjustment
Purchase of the Contracts
Purchase Payment Limits
Free-Look Period
Crediting of Initial Purchase Payment
Allocation of Purchase Payments
Accumulation Units.
Accumulation Unit Value
Transfers Among Investment Alternatives
Dollar Cost Averaging
Automatic Portfolio Rebalancing
Benefits Under the Contract
Withdrawals
Income Payments
Payout Start Date for Income Payments
Variable Account Income Payments
Fixed Amount Income Payments
Income Plans
Death Benefits
Distribution Upon Death Payment Provisions.
Death Benefit Amount
Charges and Other Deductions
Deductions from Purchase Payments
Withdrawal Charge (Contingent Deferred Sales Charge)
Contract Maintenance Charge
Administrative Expense Charge
Mortality and Expense Risk Charge
Taxes
Transfer Charges
Fund Expenses
General Matters
Owner
Beneficiary
Assignments
Delay of Payments
Modification.
Customer Inquiries
Federal Tax Matters
Introduction.
Taxation of Annuities in General
Tax Deferral
Non-Natural Owners
Diversification Requirements
Ownership Treatment
Delayed Maturity Dates
Taxation of Partial and Full Withdrawals
<PAGE>
Taxation of Annuity Payments
Taxation of Annuity Death Benefits
Penalty Tax on Premature Distributions
Aggregation of Annuity Contracts
Tax Qualified Contracts
Restrictions Under Section 403(b) Plans
Roth Individual Retirement Annuities
Income Tax Withholding.
Distribution of the Contracts
Voting Rights
Selected Financial Data
Management's Discussion and Analysis of
Financial Condition and Results of
Operations
Competition
Employees
Properties.
State and Federal Regulation
Executive Officers and Directors of the Company
Executive Compensation
Legal Proceedings
Experts
Legal Matters
Financial Statements F-1
Appendix A -- Market Value Adjustment A-1
Statement of Additional Information: Table of Contents B-1
Order Form B-2
<PAGE>
GLOSSARY
ACCUMULATION UNIT -- A measure of your ownership interest in a Sub-account of
the Variable Account prior to the Payout Start Date. Analogous, though not
identical, to a share owned in a mutual fund.
ACCUMULATION UNIT VALUE -- The value of each Accumulation Unit which is
calculated each Valuation Date. Each Sub-account of the Variable Account has its
own distinct Accumulation Unit Value. Analogous, though not identical, to the
share price (net asset value) of a mutual fund.
ANNUITANT(S) -- The person or persons whose life determines the latest Payout
Start Date and the amount and duration of any income payments for Income Plan
options other than Guaranteed Payments for a Specified Period. Joint annuitants
are only permitted on or after the Payout Start Date.
BENEFICIARY(IES) -- The person(s) to whom any benefits are due when a death
benefit is payable and there is no surviving Owner.
COMPANY("WE," "US") -- Glenbrook Life and Annuity Company.
CONTRACT -- The Glenbrook Life and Annuity Company Flexible Premium Deferred
Variable Annuity Contract, known as the "Glenbrook Provider Variable Annuity"
that is described in this prospectus.
CONTRACT ANNIVERSARY -- An anniversary of the date that the Contract was issued.
CONTRACT VALUE -- The value of all amounts accumulated under the Contract prior
to the Payout Start Date, equivalent to the Accumulation Units in each Sub-
account of the Variable Account multiplied by the respective Accumulation Unit
Value, plus the value in the Fixed Account options.
CONTRACT YEAR -- A period of 12 months starting with the issue date or any
Contract Anniversary.
DOLLAR COST AVERAGING FIXED ACCOUNT -- Purchase payments may be allocated to the
Dollar Cost Averaging Fixed Account for the purpose of establishing a Dollar
Cost Averaging Program.
GUARANTEED MATURITY FIXED ACCOUNT -- The Guaranteed Maturity Fixed Account is
divided into Sub-accounts. These Sub-accounts are distinguished by Guarantee
Period(s) and the dates the period(s) begin. The Fixed Sub-accounts are
established when purchase payments are allocated to the Guaranteed Maturity
Fixed Account; when previous Sub-accounts expire and new Guarantee Periods are
selected; and when You transfer an amount to the Guaranteed Maturity Fixed
Account. Also known as the "Guaranteed Maturity Account."
GUARANTEE PERIOD -- A period of years for which a specified effective annual
interest rate is guaranteed by the Company.
INCOME PLAN -- One of several ways in which a series of payments are made after
the Payout Start Date. Income payment amounts may vary based on any Sub-account
of the Variable Account and/or may be fixed for the duration of the Income Plan.
INVESTMENT ALTERNATIVES -- The Sub-accounts of the Variable Account and the
Fixed Account options.
MARKET VALUE ADJUSTMENT -- The adjustment made to the money distributed from a
Sub-account of the Guaranteed Maturity Fixed Account, prior to the end of the
Guarantee Period, to reflect the impact of changes in interest rates between the
time the Sub-account of the Guaranteed Maturity Fixed Account was established
and the time of distribution.
NON-QUALIFIED CONTRACTS -- Contracts other than Qualified Contracts.
OWNER(S)("YOU") -- With respect to individual Contracts, the person or persons
designated as the Owner in the Contract. With respect to group Contracts, an
individual participant(s) under the Contract.
PAYOUT START DATE -- The date money is applied to an income plan.
PORTFOLIOS -- The mutual fund Portfolios of the Funds.
QUALIFIED CONTRACTS -- Contracts issued under plans that qualify for special
federal income tax treatment under Sections 401(a), 403(a), 403(b) and 408 of
the Internal Revenue Code.
VALUATION DATE -- Each day that the New York Stock Exchange is open for
business. The Valuation Date does not include such Federal and non-Federal
holidays as are observed by the New York Stock Exchange.
VALUATION PERIOD -- The period between successive Valuation Dates, commencing at
the close of regular trading on the New York Stock Exchange (which is normally
3:00pm Central Time) and ending as of the close of regular trading on the New
York Stock Exchange on the next succeeding Valuation Date.
<PAGE>
VARIABLE ACCOUNT -- Glenbrook Life Multi-Manager Variable Account, a separate
investment account established by the Company to receive and invest purchase
payments paid under the Contracts.
VARIABLE SUB-ACCOUNT -- A portion of the Variable Account invested in shares of
a corresponding Portfolio. The investment performance of each Variable
Sub-account is linked directly to the investment performance of its
corresponding Portfolio.
HIGHLIGHTS
THE CONTRACT
This Contract is designed for long-term financial planning and retirement
planning. Money can be allocated to any combination of Variable Sub-accounts and
Fixed Account options. You have access to your funds either through withdrawals
of Contract Value or through periodic income payments. You bear the entire
investment risk for Contract Values and income payments based upon the Variable
Account, because values will vary depending on the investment performance of the
Portfolio(s) underlying the Variable Sub-accounts You select. See "Accumulation
Unit Value," page __ and "Income Plans," page __. You will also bear the
investment risk of adverse changes in interest rates in the event amounts are
prematurely withdrawn or transferred from Sub-accounts of the Guaranteed
Maturity Fixed Account. See "Guaranteed Maturity Fixed Account," page __.
FREE-LOOK
You may cancel the Contract any time within 20 days after receipt of the
Contract, or longer if required by state law, and receive a full refund of
purchase payments allocated to the Fixed Account options. Purchase payments
allocated to the Variable Account will be returned after an adjustment to
reflect investment gain or loss that occurred from the date of allocation
through the date of cancellation, unless a refund of purchase payments is
required by state or federal law.
HOW TO INVEST
Your first purchase payment must be at least $3,000 (for Qualified Contracts,
$2,000). Subsequent purchase payments must be at least $50. Purchase payments
may also be made pursuant to an Automatic Addition Program. See "Purchase
Payment Limits," page __. At the time of your application, You will allocate
your purchase payment among the Investment Alternatives. The allocation You
specify on the application will be effective immediately. All allocations must
be in whole percents from 0% to 100% (total allocation equals 100%) or in whole
dollars (total allocation equals entire dollar amount of purchase payment).
Allocations may be changed by notifying the Company in writing. See "Allocation
of Purchase Payments," page __.
INVESTMENT ALTERNATIVES
Presently, the Variable Account invests in shares of the following Funds:
- AIM Variable Insurance Funds, Inc.
- American Century Variable Portfolios (VP), Inc.
- Dean Witter Variable Investment Series (VIS)
- Dreyfus Variable Investment Fund (VIF), The Dreyfus Socially
Responsible Growth Fund, Inc. and Dreyfus Stock Index Fund
- Fidelity Variable Insurance Products Fund (VIP) and Fidelity Variable
Insurance Products Fund II (VIPII)
- MFS-Registered Trademark- Variable Insurance Trust
The AIM FUND has eight available Portfolios: (1) AIM V.I. Capital Appreciation
Fund (2) AIM V.I. Growth and Income Fund (3) AIM V.I. Global Utilities Fund (4)
AIM V.I. Diversified Income Fund (5) AIM V.I. Government Securities Fund (6) AIM
V.I. Growth Fund (7) AIM V.I. International Equity Fund and (8) AIM V.I. Value
Fund; the AMERICAN CENTURY FUNDS have two available Portfolios: (1) American
Century VP Balanced and (2) American Century VP International; the DEAN WITTER
FUND has four available Portfolios: (1) VIS Dividend Growth (2) VIS European
Growth (3) VIS Quality Income Plus and (4) VIS Utilities; the DREYFUS FUNDS have
five available Portfolios: (1) VIF Growth and Income (2) VIF Money Market (3)
The Dreyfus Socially Responsible Growth Fund, Inc. (4) VIF Small Company Stock
and (5) Dreyfus Stock Index Fund; the FIDELITY FUNDS have four available
Portfolios: (1) VIP II Contrafund (2) VIP Growth (3) VIP High Income and (4) VIP
Equity-Income; and the MFS FUND has two available Portfolios: (1) MFS Emerging
Growth Series and (2) MFS Limited Maturity Series.
The assets of each Portfolio are held separately from the other Portfolios and
each has distinct investment objectives and policies which are described in the
accompanying prospectuses for the Funds.
<PAGE>
In addition to the Variable Account, Owners can also allocate all or part of
their purchase payments to the Fixed Account options. See "Fixed Account
Options," on page __.
TRANSFERS AMONG INVESTMENT ALTERNATIVES
Prior to the Payout Start Date, You may transfer amounts among the Investment
Alternatives. The Company reserves the right to assess a $10 charge on each
transfer in excess of 12 per Contract Year. The Company is presently waiving
this charge. Transfers to the Guaranteed Maturity Fixed Account must be at least
$50. Certain Fixed Account transfers may be restricted. See "Transfers Among
Investment Alternatives," page __. You may want to enroll in a Dollar Cost
Averaging Program or an Automatic Portfolio Rebalancing Program. See "Dollar
Cost Averaging," page __, and "Automatic Portfolio Rebalancing," page __.
CHARGES AND DEDUCTIONS
The costs of the Contract include: a contract maintenance charge ($35 annually),
a mortality and expense risk charge (deducted daily, equal on an annual basis to
1.25% of the Contract's daily net assets of the Variable Account and for
Contracts with the optional enhanced death benefit provision, an additional
mortality and expense risk charge of .10% is assessed bringing the total
mortality and expense risk charge to 1.35%) and an administrative expense charge
(deducted daily, equal on an annual basis to .10% of the Contract's daily net
assets of the Variable Account). The Company reserves the right to assess a
transfer charge ($10 on each transfer in excess of twelve per Contract Year).
Additional deductions may be made for certain taxes. See "Contract Maintenance
Charge," page __, "Mortality and Expense Risk Charge," page __, "Administrative
Expense Charge," page __, "Transfer Charges," page __, and "Taxes," page __.
WITHDRAWALS
You may withdraw all or part of the Contract Value at any time prior to the
earlier of the death of the Owner (or the Annuitant if the Owner is not a
natural person) or the Payout Start Date. (Each Contract Year, no withdrawal
charges or Market Value Adjustments will be applied to amounts withdrawn up
to 15% of the amount of purchase payments.) Amounts withdrawn in excess of
the 15% may be subject to a withdrawal charge of 0% to 6% depending on how
long purchase payments have been invested in the Contract. Amounts withdrawn
from a Sub-account of the Guaranteed Maturity Fixed Account, in excess of the
15%, except during the 30 day period after the Guarantee Period expires, will
be subject to a Market Value Adjustment. Withdrawals may also be subject to
income tax and a 10% tax penalty. Once the total amount of withdrawals
exceed the total amount of purchase payments, future withdrawals will not be
subject to a withdrawal charge. See "Withdrawals," page __, "Withdrawals or
Transfers," page __, "Taxation of Annuities in General," page __ and
"Withdrawal Charge," page __.
DEATH BENEFIT
The Company will pay a death benefit prior to the Payout Start Date on the death
of any Owner or, if the Owner is not a natural person, the death of the
Annuitant. See "Death Benefit Amount," page __.
INCOME PAYMENTS
You will receive periodic income payments beginning on the Payout Start Date.
You may choose among several Income Plans to fit your needs. Income payments may
be received for a specified period or for life (either single or joint life),
with or without a guaranteed number of payments. You can select income payments
that are fixed, variable or a combination of fixed and variable. See "Income
Payments," page __.
SUMMARY OF VARIABLE ACCOUNT EXPENSES
The following table illustrates all expenses and fees that You will incur. The
expenses and fees set forth in the table are based on charges under the Contract
and on the expenses of the Variable Account and the underlying Funds.
OWNER TRANSACTION EXPENSES (ALL SUB-ACCOUNTS)
Sales Load Imposed on Purchases (as a
percentage of purchase payments).. . . . . . . . . . . . . . . . . . . None
Withdrawal Charge (as a percentage of
purchase payments).. . . . . . . . . . . . . . . . . . . . . . . . . . *
<PAGE>
<TABLE>
<CAPTION>
APPLICABLE
NUMBER OF COMPLETE WITHDRAWAL
YEARS SINCE PURCHASE CHARGE AS
PAYMENT WAS MADE A PERCENTAGE
------------
<S> <C>
0 years. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6%
1 year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6%
2 years. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5%
3 years. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5%
4 years. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4%
5 years. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3%
6 years or more. . . . . . . . . . . . . . . . . . . . . . . . . 0%
Transfer Fee . . . . . . . . . . . . . . . . . . . . . . . . . . **
Contract Maintenance
Charge.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . $35***
</TABLE>
VARIABLE ACCOUNT ANNUAL EXPENSES
(AS A PERCENTAGE OF THE CONTRACT'S AVERAGE NET ASSETS IN THE VARIABLE ACCOUNT)
<TABLE>
<CAPTION>
WITHOUT OPTIONAL WITH OPTIONAL
ENHANCED DEATH ENHANCED DEATH
BENEFIT PROVISION BENEFIT PROVISION
<S> <C> <C>
MORTALITY AND EXPENSE RISK CHARGE. . . . . . . . . . . . . . . . 1.25% 1.35%
ADMINISTRATIVE EXPENSE CHARGE. . . . . . . . . . . . . . . . . . .10% .10%
TOTAL VARIABLE ACCOUNT ANNUAL EXPENSES.. . . . . . . . . . . . . 1.35% 1.45%
</TABLE>
* Each Contract Year up to 15% of the amount of purchase payments may be
withdrawn without a withdrawal charge or a Market Value Adjustment.
** No charges will be imposed on the first 12 transfers in any Contract Year.
The Company reserves the right to assess a $10 charge for each transfer in
excess of 12 in any Contract Year, excluding transfers due to Dollar Cost
Averaging and Automatic Portfolio Rebalancing.
*** The Contract Maintenance Charge will be waived if total purchase payments as
of a Contract Anniversary or upon a full withdrawal equals $50,000 or more or if
all monies are allocated to the Fixed Account options on the Contract
Anniversary.
<PAGE>
PORTFOLIO EXPENSES (NET OF VOLUNTARY REDUCTIONS AND REIMBURSEMENTS)
(AS A PERCENTAGE OF PORTFOLIO ASSETS)
<TABLE>
<CAPTION>
MANAGEMENT OTHER TOTAL FUND
PORTFOLIO FEES EXPENSES ANNUAL EXPENSES
- --------- ---- -------- ---------------
<S> <C> <C> <C>
AIM V.I. Capital Appreciation Fund . . . . . . . . 0.63% 0.05% 0.68%
AIM V.I. Growth and Income Fund. . . . . . . . . . 0.63% 0.06% 0.69%
AIM V.I. Global Utilities Fund(1). . . . . . . . . 0.65% 0.63% 1.28%
AIM V.I. Diversified Income Fund . . . . . . . . . 0.60% 0.20% 0.80%
AIM V.I. Government Securities Fund. . . . . . . . 0.50% 0.37% 0.87%
AIM V.I. Growth Fund . . . . . . . . . . . . . . . 0.65% 0.08% 0.73%
AIM V.I. International Equity Fund . . . . . . . . 0.75% 0.18% 0.93%
AIM V.I. Value Fund. . . . . . . . . . . . . . . . 0.62% 0.08% 0.70%
American Century VP International. . . . . . . . . 1.50% 0.00% 1.50%
American Century VP Balanced . . . . . . . . . . . 1.00% 0.00% 1.00%
VIS Dividend Growth. . . . . . . . . . . . . . . . 0.53%(2) 0.01% 0.54%
VIS European Growth. . . . . . . . . . . . . . . . 1.00% 0.12% 1.11%
VIS Utilities. . . . . . . . . . . . . . . . . . . 0.65%(3) 0.02% 0.67%
VIS Quality Income Plus. . . . . . . . . . . . . . 0.50%(4) 0.03% 0.53%
VIP Growth.. . . . . . . . . . . . . . . . . . . . 0.60% 0.09% 0.69%
VIP High Income. . . . . . . . . . . . . . . . . . 0.59% 0.12% 0.71%(5)
VIP Equity-Income. . . . . . . . . . . . . . . . . 0.50% 0.08% 0.58%
VIP II Contrafund. . . . . . . . . . . . . . . . . 0.60% 0.11% 0.71%(5)
Dreyfus Socially Responsible Growth. . . . . . . . 0.75% 0.07% 0.82%
Dreyfus Stock Index. . . . . . . . . . . . . . . . 0.25% 0.03% 0.28%
VIF Small Company Stock. . . . . . . . . . . . . . 0.75% 0.37% 1.12%
VIF Growth and Income. . . . . . . . . . . . . . . 0.75% 0.05% 0.80%
VIF Money Market . . . . . . . . . . . . . . . . . 0.50% 0.11% 0.61%
MFS Emerging Growth Series(6). . . . . . . . . . . 0.75% 0.12% 0.87%
MFS Limited Maturity Series(6) . . . . . . . . . . 0.55% 0.45% 1.00%
</TABLE>
(1) Management fees reflect current agreements.
(2) The management fee is 0.625% for net assets of up to $500 million. For net
assets which exceed $500 million, but do not exceed $1 billion, the
management fee is 0.50% and for net assets that exceed $1 billion, the
management fee is 0.475%.
(3) This percentage is applicable to Portfolio net assets of up to $500
million. For net assets which exceed $500 million, the management fee is
0.55%.
(4) This percentage is applicable to Portfolio net assets of up to $500
million. For net assets which exceed $500 million, the management fee is
0.45%.
(5) A portion of the brokerage commissions that certain funds pay was used to
reduce fund's expenses. In addition, certain funds have entered into
arrangements with their custodian and transfer agent whereby interest
earned on uninvested cash balances was used to reduce custodian and
transfer agent expenses. Including these reductions, the total operating
expenses presented in the table would have been .67% for VIP Growth
Portfolio and .71% for VIPII Contrafund Portfolio.
(6) The Adviser has agreed to bear expenses for each Portfolio, subject to
reimbursement by each Portfolio, such that each Portfolios' "Other
Expenses" shall not exceed the following percentages of the average daily
net assets of the Portfolios during the current fiscal year: 0.45% for the
Limited Maturity Portfolio and 0.25% for the Emerging Growth Portfolio. See
"Information Concerning Shares of Each Portfolio -- Expenses." Otherwise,
"Other Expenses" and "Total Operating Expenses" for the Limited Maturity
Portfolio would be 5.65% and 6.20% respectively.
<PAGE>
EXAMPLE
You would pay the following cumulative expenses on a $1,000 investment, assuming
a 5% annual return under the following circumstances.
If You terminate your Contract at the end of the applicable time period:
(WITH ENHANCED DEATH BENEFIT PROVISION)
<TABLE>
<CAPTION>
PORTFOLIO 1 YEAR 3 YEARS 5 YEARS 10 YEARS
- --------- ------ ------- ------- --------
<S> <C> <C> <C> <C>
AIM V.I. Capital Appreciation Fund . . . . . . . . $74 $112 $144 $255
AIM V.I. Growth and Income Fund. . . . . . . . . . $74 $112 $145 $256
AIM V.I. Global Utilities Fund . . . . . . . . . . $80 $130 $175 $316
AIM V.I. Diversified Income Fund . . . . . . . . . $75 $116 $151 $267
AIM V.I. Government Securities Fund. . . . . . . . $76 $118 $154 $274
AIM V.I. Growth Fund . . . . . . . . . . . . . . . $74 $114 $147 $260
AIM V.I. International Equity Fund . . . . . . . . $76 $120 $157 $280
AIM V.I. Value Fund. . . . . . . . . . . . . . . . $74 $113 $146 $257
American Century VP International. . . . . . . . . $82 $137 $186 $337
American Century VP Balanced.. . . . . . . . . . . $77 $122 $161 $288
VIS Dividend Growth. . . . . . . . . . . . . . . . $72 $108 $137 $240
VIS European Growth. . . . . . . . . . . . . . . . $78 $126 $167 $300
VIS Utilities. . . . . . . . . . . . . . . . . . . $73 $112 $144 $254
VIS Quality Income Plus. . . . . . . . . . . . . . $72 $107 $137 $239
VIP Growth . . . . . . . . . . . . . . . . . . . . $74 $112 $145 $256
VIP High Income. . . . . . . . . . . . . . . . . . $74 $113 $146 $258
VIP Equity-Income. . . . . . . . . . . . . . . . . $73 $109 $139 $244
VIP II Contrafund. . . . . . . . . . . . . . . . . $74 $113 $146 $258
Dreyfus Socially Responsible Growth. . . . . . . . $75 $116 $152 $269
Dreyfus Stock Index Fund . . . . . . . . . . . . . $69 $100 $124 $212
VIF Small Company Stock. . . . . . . . . . . . . . $78 $126 $167 $300
VIF Growth and Income. . . . . . . . . . . . . . . $75 $116 $151 $267
VIF Money Market . . . . . . . . . . . . . . . . . $73 $110 $141 $247
MFS Emerging Growth Series . . . . . . . . . . . . $76 $119 $156 $277
MFS Limited Maturity Series. . . . . . . . . . . . $77 $122 $161 $288
</TABLE>
(WITHOUT ENHANCED DEATH BENEFIT PROVISION)
<TABLE>
<CAPTION>
PORTFOLIO 1 YEAR 3 YEARS 5 YEARS 10 YEARS
- --------- ------ ------- ------- --------
<S> <C> <C> <C> <C>
AIM V.I. Capital Appreciation Fund . . . . . . . . $73 $109 $139 $244
AIM V.I. Growth and Income Fund. . . . . . . . . . $73 $109 $140 $245
AIM V.I. Global Utilities Fund . . . . . . . . . . $79 $127 $170 $306
AIM V.I. Diversified Income Fund . . . . . . . . . $74 $113 $146 $257
AIM V.I. Government Securities Fund. . . . . . . . $74 $115 $149 $265
AIM V.I. Growth Fund . . . . . . . . . . . . . . . $73 $110 $142 $249
AIM V.I. International Equity Fund . . . . . . . . $75 $117 $152 $270
AIM V.I. Value Fund. . . . . . . . . . . . . . . . $73 $110 $140 $246
American Century VP International. . . . . . . . . $81 $134 $181 $327
American Century VP Balanced.. . . . . . . . . . . $76 $119 $156 $277
VIS Dividend Growth. . . . . . . . . . . . . . . . $71 $105 $132 $229
VIS European Growth. . . . . . . . . . . . . . . . $77 $122 $162 $290
VIS Utilities. . . . . . . . . . . . . . . . . . . $72 $109 $139 $243
VIS Quality Income Plus. . . . . . . . . . . . . . $71 $104 $131 $228
VIP Growth . . . . . . . . . . . . . . . . . . . . $73 $109 $140 $245
VIP High Income. . . . . . . . . . . . . . . . . . $73 $110 $141 $247
VIP Equity-Income. . . . . . . . . . . . . . . . . $72 $106 $134 $234
VIP II Contrafund. . . . . . . . . . . . . . . . . $73 $110 $141 $247
Dreyfus Socially Responsible Growth. . . . . . . . $74 $113 $147 $259
Dreyfus Stock Index Fund . . . . . . . . . . . . . $68 $96 $118 $201
VIF Small Company Stock. . . . . . . . . . . . . . $77 $112 $162 $290
VIF Growth and Income. . . . . . . . . . . . . . . $74 $113 $146 $257
VIF Money Market . . . . . . . . . . . . . . . . . $72 $107 $136 $237
MFS Emerging Growth Series . . . . . . . . . . . . $75 $116 $151 $267
MFS Limited Maturity Series. . . . . . . . . . . . $76 $119 $156 $277
</TABLE>
<PAGE>
If You do not terminate your Contract at the end of the applicable time period:
(WITH ENHANCED DEATH BENEFIT PROVISION)
<TABLE>
<CAPTION>
PORTFOLIO 1 YEAR 3 YEARS 5 YEARS 10 YEARS
- --------- ------ ------- ------- --------
<S> <C> <C> <C> <C>
AIM V.I. Capital Appreciation Fund . . . . . . . . $23 $70 $119 $255
AIM V.I. Growth and Income Fund. . . . . . . . . . $23 $70 $119 $256
AIM V.I. Global Utilities Fund . . . . . . . . . . $29 $88 $150 $316
AIM V.I. Diversified Income Fund . . . . . . . . . $24 $73 $125 $267
AIM V.I. Government Securities Fund. . . . . . . . $25 $75 $129 $274
AIM V.I. Growth Fund . . . . . . . . . . . . . . . $23 $71 $122 $260
AIM V.I. International Equity Fund . . . . . . . . $25 $77 $132 $280
AIM V.I. Value Fund. . . . . . . . . . . . . . . . $23 $70 $120 $257
American Century VP International. . . . . . . . . $31 $95 $161 $337
American Century VP Balanced.. . . . . . . . . . . $26 $79 $135 $288
VIS Dividend Growth. . . . . . . . . . . . . . . . $21 $65 $112 $240
VIS European Growth. . . . . . . . . . . . . . . . $27 $83 $142 $300
VIS Utilities. . . . . . . . . . . . . . . . . . . $22 $69 $118 $254
VIS Quality Income Plus. . . . . . . . . . . . . . $21 $65 $111 $239
VIP Growth . . . . . . . . . . . . . . . . . . . . $23 $70 $119 $256
VIP High Income. . . . . . . . . . . . . . . . . . $23 $70 $121 $258
VIP Equity-Income. . . . . . . . . . . . . . . . . $22 $66 $114 $244
VIP II Contrafund. . . . . . . . . . . . . . . . . $23 $70 $121 $258
Dreyfus Socially Responsible Growth. . . . . . . . $24 $74 $126 $269
Dreyfus Stock Index Fund . . . . . . . . . . . . . $18 $57 $98 $212
VIF Small Company Stock. . . . . . . . . . . . . . $27 $83 $142 $300
VIF Growth and Income. . . . . . . . . . . . . . . $24 $73 $125 $267
VIF Money Market . . . . . . . . . . . . . . . . . $22 $67 $115 $247
MFS Emerging Growth Series . . . . . . . . . . . . $25 $76 $130 $277
MFS Limited Maturity Series. . . . . . . . . . . . $26 $79 $135 $288
</TABLE>
(WITHOUT ENHANCED DEATH BENEFIT PROVISION)
<TABLE>
<CAPTION>
PORTFOLIO 1 YEAR 3 YEARS 5 YEARS 10 YEARS
- --------- ------ ------- ------- --------
<S> <C> <C> <C> <C>
AIM V.I. Capital Appreciation Fund . . . . . . . . $22 $66 $114 $244
AIM V.I. Growth and Income Fund. . . . . . . . . . $22 $67 $114 $245
AIM V.I. Global Utilities Fund . . . . . . . . . . $28 $85 $145 $306
AIM V.I. Diversified Income Fund . . . . . . . . . $23 $70 $120 $257
AIM V.I. Government Securities Fund. . . . . . . . $23 $72 $124 $164
AIM V.I. Growth Fund . . . . . . . . . . . . . . . $22 $68 $116 $249
AIM V.I. International Equity Fund . . . . . . . . $24 $74 $127 $270
AIM V.I. Value Fund. . . . . . . . . . . . . . . . $22 $67 $115 $246
American Century VP International. . . . . . . . . $30 $92 $156 $327
American Century VP Balanced.. . . . . . . . . . . $25 $76 $130 $277
VIS Dividend Growth. . . . . . . . . . . . . . . . $20 $62 $106 $229
VIS European Growth. . . . . . . . . . . . . . . . $26 $80 $136 $290
VIS Utilities. . . . . . . . . . . . . . . . . . . $21 $66 $113 $243
VIS Quality Income Plus. . . . . . . . . . . . . . $20 $62 $106 $228
VIP Growth . . . . . . . . . . . . . . . . . . . . $22 $67 $114 $245
VIP High Income. . . . . . . . . . . . . . . . . . $22 $67 $115 $247
VIP Equity-Income. . . . . . . . . . . . . . . . . $21 $63 $109 $234
VIP II Contrafund. . . . . . . . . . . . . . . . . $22 $67 $115 $247
Dreyfus Socially Responsible Growth. . . . . . . . $23 $71 $121 $259
Dreyfus Stock Index Fund . . . . . . . . . . . . . $17 $54 $93 $201
VIF Small Company Stock. . . . . . . . . . . . . . $26 $80 $136 $290
VIF Growth and Income. . . . . . . . . . . . . . . $23 $70 $120 $257
VIF Money Market . . . . . . . . . . . . . . . . . $21 $64 $110 $237
MFS Emerging Growth Series . . . . . . . . . . . . $24 $73 $125 $267
MFS Limited Maturity Series. . . . . . . . . . . . $25 $76 $130 $277
</TABLE>
THE ABOVE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN. The purpose
of the table is to assist You in understanding the various costs and expenses
that You will bear directly or indirectly. Premium taxes are not reflected in
the example, but may be applicable.
<PAGE>
CONDENSED FINANCIAL INFORMATION
The Variable Account had no material operations for the period ended
December 31, 1997. Accordingly, no financial information for that period is
included herein.
YIELD AND TOTAL RETURN DISCLOSURE
From time to time the Variable Account may advertise the yield and total return
investment performance of one or more Sub-accounts. Yield and standardized total
return advertisements include all charges and expenses attributable to the
Contracts. Including these fees has the effect of decreasing the advertised
performance of a Sub-account, so that a Sub-account's investment performance
will not be directly comparable to that of an ordinary mutual fund.
When a Sub-account advertises its standardized total return it will be
calculated for one year, five years, and ten years or since inception if the
Sub-account has not been in existence for such periods. Total return is measured
by comparing the value of an investment in the Sub-account at the end of the
relevant period to the value of the investment at the beginning of the period.
In addition to the standardized total return, the Sub-account may advertise a
non-standardized total return. This figure may be calculated for one year, five
years, and ten years or other periods. Non-standardized total return is measured
in the same manner as the standardized total return described above, except that
the withdrawal charges under the Contract are not deducted. Therefore, a
non-standardized total return for a Sub-account can be higher than a
standardized total return for a Sub-account.
Certain Sub-accounts may advertise yield in addition to total return. Except in
the case of the Money Market Sub-account, the yield will be computed in the
following manner: the net investment income per unit earned during a recent one
month period is divided by the unit value on the last day of the period, and
then annualized. This figure reflects the recurring charges at the separate
account level.
The Money Market Sub-account may advertise, in addition to the total return,
either yield or the effective yield. The yield in this case refers to the income
generated by an investment in that Sub-account over a seven-day period net of
recurring charges at the separate account level. The income is then annualized
(i.e., the amount of income generated by the investment during that week is
assumed to be generated each week over a 52-week period and is shown as a
percentage of the investment). The effective yield is calculated similarly but
when annualized, the income earned by an investment in the Money Market
Sub-account is assumed to be reinvested at the end of each seven-day period. The
effective yield will be slightly higher than the yield because of the
compounding effect of this assumed reinvestment during a 52-week period.
The Variable Account may also disclose yield and total return for periods prior
to the date that the Variable Account commenced operations. For periods prior to
the date the Variable Account commenced operations, performance information for
the Sub-accounts will be calculated based on the performance of the underlying
Portfolios and the assumption that the Sub-accounts were in existence for the
same periods as those of the underlying Portfolios, with a level of charges
equal to those currently assessed against the Sub-accounts.
Please refer to the Statement of Additional Information for a further
description of the method used to calculate a Sub-account's yield and total
return.
FINANCIAL STATEMENTS
The financial statements of Glenbrook Life and Annuity Company begin on page F-1
of this prospectus. The financial statements of the Variable Account are not
included in the Statement of Additional Information because it had no material
operations for the year ended December 31, 1997.
GLENBROOK LIFE AND ANNUITY COMPANY AND THE VARIABLE ACCOUNT
GLENBROOK LIFE AND ANNUITY COMPANY
The Company is the issuer of the Contract. The Company is a stock life insurance
company which was organized under the laws of the State of Illinois in 1992. The
Company was originally organized under the laws of the State of Indiana in 1965.
From 1965 to 1983 the Company was known as "United Standard Life Assurance
Company" and from 1983 to 1992 the Company was known as "William Penn Life
Assurance Company of America." As of the date of this prospectus, the Company is
licensed to operate in the District of Columbia and all states except New York.
The Company intends to market the Contract in those jurisdictions in which it is
licensed to operate. The Company's home office is located at 3100 Sanders Road,
Northbrook, Illinois 60062.
The Company is a wholly owned subsidiary of Allstate Life Insurance Company
("Allstate Life"), a stock life insurance company incorporated under the laws of
the State of Illinois. Allstate Life is a wholly owned subsidiary of Allstate
Insurance Company ("Allstate"), a stock property-liability insurance company
incorporated under the laws of Illinois. All of the outstanding capital stock of
Allstate is owned by The Allstate Corporation ("Corporation"). On June 30, 1995,
Sears, Roebuck and Co. ("Sears") distributed its 80.3% ownership in the
Corporation to Sears common shareholders through a tax-free dividend.
The Company and Allstate Life entered into a reinsurance agreement, effective
June 5, 1992, under which the Company reinsures substantially all of its
business with Allstate Life. Under the reinsurance agreement, Fixed Account
purchase payments are automatically transferred to Allstate
<PAGE>
Life and become invested with the assets of Allstate Life, and Allstate Life
accepts 100% of the liability under such contracts. However, the obligations of
Allstate Life under the reinsurance agreement are to the Company; the Company
remains the sole obligor under the Contract to the Owners.
THE VARIABLE ACCOUNT
Established on January 15, 1996, the Variable Account is a unit investment trust
registered with the Securities and Exchange Commission under the Investment
Company Act of 1940. However, such registration does not signify that the
Commission supervises the management or investment practices or policies of the
Variable Account. The investment performance of the Variable Account is entirely
independent of both the investment performance of the Company's general account
and the performance of any other separate account.
The Variable Account is divided into 25 Sub-accounts, each of which invests
solely in its corresponding Portfolio. Additional Variable Sub-accounts may be
added at the discretion of the Company. The Company may also eliminate one or
more Sub-accounts if, in its sole discretion, marketing, tax or investment
conditions so warrant.
The assets of the Variable Account are held separately from the other assets of
the Company. They are not chargeable with liabilities incurred in the Company's
other business operations. Accordingly, the income, capital gains and capital
losses, realized or unrealized, incurred on the assets of the Variable Account
are credited to or charged against the assets of the Variable Account, without
regard to the income, capital gains or capital losses arising out of any other
business the Company may conduct. The Company's obligations arising under the
Contracts are general corporate obligations of the Company.
THE FUNDS
The Variable Account will invest in shares of one or more Funds. The Funds are
registered with the Securities and Exchange Commission as open-end, series,
management investment companies. Registration of the Funds does not involve
supervision of their management, investment practices or policies by the
Securities and Exchange Commission. The Funds' Portfolios are designed to
provide investment vehicles for variable insurance contracts of various
insurance companies, in addition to the Variable Account.
The Funds available for investment by the Variable Account as of the date of
this Prospectus are listed below:
I. AIM FUND
- AIM V.I. Capital Appreciation Fund - is a diversified Portfolio which
seeks to provide capital appreciation through investments in common
stocks, with emphasis on medium-sized and smaller emerging growth
companies.
- AIM V.I. Diversified Income Fund - is a diversified Portfolio which
seeks to achieve a high level of current income primarily by investing
in a diversified portfolio of foreign and U.S. government and
corporate debt securities, including lower rated high yield debt
securities (commonly known as "junk bonds"). The risks of investing in
junk bonds are described in the accompanying prospectus for the
Portfolio, which should be read carefully before investing.
- AIM V.I. Global Utilities Fund - is a non-diversified Portfolio which
seeks to achieve a high level of current income and, as a secondary
objective, to achieve capital appreciation, by investing primarily in
common and preferred stocks of public utility companies (either
domestic or foreign).
- AIM V.I. Government Securities Fund - is a diversified Portfolio which
seeks to achieve a high level of current income consistent with
reasonable concern for safety of principal by investing in debt
securities issued, guaranteed or otherwise backed by the U.S.
Government.
- AIM V.I. Growth Fund - is a diversified Portfolio which seeks to
provide growth of capital through investments primarily in common
stocks of leading U.S. companies considered by A I M Advisors, Inc.
("AIM") to have strong earnings momentum.
- AIM V.I. Growth and Income Fund - is a diversified Portfolio which
seeks to provide growth of capital, with current income as a secondary
objective by investing primarily in dividend paying common stocks
which have prospects for both growth of capital and dividend income.
- AIM V.I. International Equity Fund - is a diversified Portfolio which
seeks to provide long-term growth of capital by investing in
international equity securities, the issuers of which are considered
by AIM to have strong earnings momentum.
- AIM V.I. Value Fund - is a diversified Portfolio which seeks to
achieve long-term growth of capital by investing primarily in equity
securities judged by AIM to be undervalued relative to the current or
projected earnings of the companies issuing the securities, or
relative to current market values of assets owned by the companies
issuing the securities or relative to the equity markets generally.
Income is a secondary objective.
<PAGE>
AIM serves as the investment advisor to the AIM Fund. AIM was organized in 1976
and, together with its domestic subsidiaries, manages or advises over 50
investment company portfolios (including the Portfolios listed above)
encompassing a broad range of investment objectives. AIM is a wholly owned
subsidiary of AIM Management Group Inc.
II. AMERICAN CENTURY FUNDS
- AMERICAN CENTURY VP BALANCED -- the investment objective of American
Century VP Balanced is capital growth and current income. It will seek
to achieve its investment objective by maintaining approximately 60%
of the assets of American Century VP Balanced in common stocks that
are considered by management to have better-than-average prospects for
appreciation and the remaining assets in bonds and other fixed income
securities.
- AMERICAN CENTURY VP INTERNATIONAL -- the investment objective of
American Century VP International is Capital Growth. It will seek to
achieve its investment objective by investing primarily in an
internationally diversified portfolio of common stocks that are
considered by management to have prospects for appreciation. The Fund
will invest primarily in securities of issuers located in developed
markets.
American Century Investment Management, Inc. serves as the investment manager of
American Century Variable Portfolios, Inc. Its principal place of business is
American Century Tower, 4500 Main Street, Kansas City, Missouri 64111.
III. DEAN WITTER FUND
- VIS DIVIDEND GROWTH PORTFOLIO -- seeks to provide reasonable current
income and long-term growth of income and capital by investing
primarily in common stock of companies with a record of paying
dividends and the potential for increasing dividends.
- VIS EUROPEAN GROWTH PORTFOLIO -- seeks to maximize the capital
appreciation on its investments by investing primarily in securities
issued by issuers located in Europe.
- VIS QUALITY INCOME PLUS PORTFOLIO -- seeks, as its primary objective,
to earn a high level of current income and, as a secondary objective,
capital appreciation, but only when consistent with its primary
objective, by investing primarily in debt securities issued by the
U.S. Government, its agencies and instrumentalities, including zero
coupon securities, and in fixed-income securities rated A or higher by
Moody's Investors Service, Inc. (Moody's) or Standard & Poor's
Corporation (Standard & Poor's) or non-rated securities of comparable
quality, and by writing covered call and put options against such
securities.
- VIS UTILITIES PORTFOLIO -- seeks to provide current income and
long-term growth of income and capital by investing primarily in
equity and fixed-income securities of companies engaged in the public
utilities industry.
Dean Witter InterCapital Inc. ("InterCapital"), Two World Trade Center, New
York, New York 10048, is the Fund's Investment Manager. InterCapital is a wholly
owned subsidiary of Morgan Stanley Dean Witter & Co. Morgan Grenfell Investment
Services Limited, 20 Finsbury Circus, London, England, is the Sub-Advisor of the
European Growth Portfolio of the Fund.
IV. DREYFUS FUNDS
- VIF GROWTH AND INCOME PORTFOLIO -- seeks to provide long-term capital
growth, current income and growth of income, consistent with
reasonable investment risk.
- VIF MONEY MARKET PORTFOLIO -- seeks to provide as high a level of
current income as is consistent with the preservation of capital and
the maintenance of liquidity.
- THE DREYFUS SOCIALLY RESPONSIBLE GROWTH FUND, INC. -- seeks to provide
capital growth. Current income is a secondary goal. Invests
principally in common stocks, or securities convertible into common
stock, of companies which, in the opinion of the Fund's management,
not only meet traditional investment standards, but also show evidence
that they conduct their business in a manner that contributes to the
enhancement of the quality of life in America.
- VIF SMALL COMPANY STOCK PORTFOLIO -- seeks to provide investment
results that are greater than the total return performance of
publicly-traded common stocks in the aggregate, as represented by the
Russell 2500-TM- Index. Invests primarily in a portfolio of equity
securities of small- to medium-sized domestic issuers, while
attempting to maintain volatility and diversification similar to that
of the Russell 2500-TM- Index.
- DREYFUS STOCK INDEX FUND - seeks to provide investment results that
correspond to the price and yield performance of publicly traded
common stocks in the aggregate, as represented by the Standard &
Poor's 500 Composite Stock Price Index.
An investment in the Dreyfus VIF Money Market Portfolio is neither insured nor
guaranteed by the U.S. Government. There can be no assurance that the Money
Market Portfolio will be able to maintain a stable net asset value of $1.00 per
share.
<PAGE>
The Dreyfus Corporation, 200 Park Avenue, New York, New York 10166, was formed
in 1947 and serves as the Funds' investment manager. The Dreyfus Corporation is
a wholly owned subsidiary of Mellon Bank, N.A., which is a wholly owned
subsidiary of Mellon Bank Corporation. NCM Capital Management Group, Inc., 105
West Main Street, Durham, North Carolina 27701, serves as sub-investment adviser
to The Dreyfus Socially Responsible Growth Fund, Inc. Mellon Equity Associates,
an affiliate of Dreyfus, located at 500 Grant Street, Pittsburgh, PA 15258,
serves as the index fund manager to Dreyfus Stock Index Fund.
V. FIDELITY FUNDS
- VIP II CONTRAFUND -- seeks capital appreciation by investing in
securities of companies whose value Fidelity Management & Research
Company ("FMR") believes is not fully recognized by the public.
- VIP GROWTH -- seeks capital appreciation by investing primarily in
common stocks. The fund may also pursue capital appreciation through
the purchase of bonds and preferred stocks.
- VIP HIGH INCOME -- seeks high current income by investing primarily in
all types of income-producing debt securities, preferred stocks, and
convertible securities.
- VIP EQUITY-INCOME-- seeks reasonable income by investing primarily in
income-producing equity securities. When choosing the Portfolio's
investments, Fidelity Management & Research Company also considers the
potential for capital appreciation. The Portfolio seeks to achieve a
yield that exceeds the yield on the securities comprising that of the
S&P 500.
Fidelity Management & Research Company, 82 Devonshire Street, Boston,
Massachusetts, is the Investment Manager of the Funds.
VI. MFS FUND
- MFS EMERGING GROWTH SERIES -- seeks to provide long-term growth of
capital. Dividend and interest income from portfolio securities, if
any, is incidental to the Portfolio's investment objective of
long-term growth of capital.
- MFS LIMITED MATURITY SERIES -- the primary investment objective is to
provide as high a level of current income as is believed to be
consistent with prudent investment risk. The Portfolio's secondary
objective is to protect shareholders' capital.
MFS manages each Series pursuant to an Investment Advisory Agreement with the
MFS Fund on behalf of each Portfolio. MFS provides the Series with overall
investment advisory and administrative services, as well as general office
facilities.
Shares of the Funds are not deposits or obligations of, or guaranteed or
endorsed by, any bank and the shares are not federally insured by the Federal
Deposit Insurance Corporation, the Federal Reserve Board or any other agency.
All dividends and capital gains distributions from the Portfolios are
automatically reinvested in shares of the distributing Portfolio at their net
asset value.
There is no assurance that the Portfolios will attain their respective stated
objectives. Additional information concerning the investment objectives and
policies of the Portfolios can be found in the current prospectuses for the
Funds accompanying this prospectus.
You will find more complete information about the Portfolios, including the
risks associated with each Portfolio, in the accompanying prospectuses. You
should read the prospectuses for the Portfolios in conjunction with this
prospectus.
THE FUND PROSPECTUSES SHOULD BE READ CAREFULLY BEFORE ANY DECISION IS MADE
CONCERNING THE ALLOCATION OF PURCHASE PAYMENTS TO A PARTICULAR VARIABLE
SUB-ACCOUNT.
FIXED ACCOUNT OPTIONS
DOLLAR COST AVERAGING FIXED ACCOUNT
Purchase payments allocated to the Dollar Cost Averaging Fixed Account become
part of the general account of the Company, which supports insurance and annuity
obligations. The general account consists of the general assets of the Company
other than those in segregated asset accounts.
Instead of You bearing the investment risk, as is the case for amounts in the
Variable Account or in other segregated asset accounts of the Company, we bear
the investment risk for all amounts in the Dollar Cost Averaging Fixed Account.
We have sole discretion to invest the assets of the Dollar Cost Averaging Fixed
Account, subject to applicable law. We guarantee that the amounts allocated to
the Dollar Cost Averaging Fixed Account will be credited interest at a net
effective annual interest rate at least equal to the minimum guaranteed rate
found in the Contract.
<PAGE>
Currently, the amount of interest credited in excess of the guaranteed rate will
vary periodically at the sole discretion of the Company. Any interest held in
the Dollar Cost Averaging Fixed Account does not entitle an Owner to share in
the investment experience of the general account.
Money allocated to the Dollar Cost Averaging Fixed Account earns interest for a
one year period at the current rate in effect at the time of allocation. After
the one year period, a renewal rate will be declared. Subsequent renewal dates
will be every 12 months for each payment. The renewal interest rate will be
guaranteed by us for a full year and will not be less than the minimum
guaranteed rate found in the Contract. We may declare more than one interest
rate for different monies based upon the date of allocation to the Dollar Cost
Averaging Fixed Account. Any interest credited to amounts allocated to the
Dollar Cost Averaging Fixed Account in excess of the guaranteed rate found in
the Contract will be determined at the sole discretion of the Company.
Purchase payments may be allocated to the Dollar Cost Averaging Fixed Account
for the purpose of establishing a Dollar Cost Averaging Program. Each purchase
payment and all its earnings must be transferred out of the Dollar Cost
Averaging Fixed Account via Dollar Cost Averaging within 36 months of the
payment. At the end of 36 months, any remaining payment and associated earnings
will be transferred to the Money Market Sub-account.
Surrenders and withdrawals from the Dollar Cost Averaging Fixed Account may be
delayed for up to six months.
Interests in the Dollar Cost Averaging Fixed Account are not registered with the
Securities and Exchange Commission ("SEC") and the SEC does not review
disclosure related to or supervise the operations of this account.
GUARANTEED MATURITY FIXED ACCOUNT
Purchase payments and transfers allocated to one or more of the Sub-accounts of
the Guaranteed Maturity Fixed Account become part of the general account of the
Company. Each Sub-account offers a separate interest rate Guarantee Period.
Guarantee Periods will be offered at the Company's discretion and may range from
one to ten years. Presently, the Company offers Guarantee Periods of one, three,
five, seven and ten years. The Owner must select the Sub-account(s) to which to
allocate each purchase payment and transfer. No less than $50 may be allocated
to any one Sub-account. The Company reserves the right to limit the number of
additional purchase payments. The Guaranteed Maturity Fixed Account option may
not be available in all states. Please consult with your sales representative
for current information.
Interest is credited daily to each Sub-account at a rate which compounds to the
effective annual interest rate declared for each Sub-account's Guarantee Period
that has been selected.
The following example illustrates how the Sub-account value for a Sub-account of
the Guaranteed Maturity Fixed Account would grow given an assumed purchase
payment, Guarantee Period, and effective annual interest rate:
<PAGE>
EXAMPLE OF INTEREST CREDITING DURING THE GUARANTEE PERIOD:
<TABLE>
<CAPTION>
<S> <C>
Purchase Payment:. . . . . . . . . . . . . . . . . . . . . . . . $10,000.00
Guarantee Period:. . . . . . . . . . . . . . . . . . . . . . . . 5 years
Effective Annual Rate: . . . . . . . . . . . . . . . . . . . . . 4.50%
</TABLE>
END OF CONTRACT YEAR:
<TABLE>
<CAPTION>
YEAR 1 YEAR 2 YEAR 3 YEAR 4 YEAR 5
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Beginning Sub-Account Value $10,000.00
X (1 + Effective Annual Rate) 1.045
-----
$10,450.00
Sub-Account Value at end of Contract $10,450.00
year 1 X (1 + Effective Annual Rate) 1.045
-----
$10,920.25
Sub-Account Value at end of Contract $10,920.25
year 2 X (1 + Effective Annual Rate) 1.045
-----
$11,411.66
Sub-Account Value at end of Contract $11,411.66
year 3 X (1 + Effective Annual Rate) 1.045
-----
$11,925.19
Sub-Account Value at end of Contract $11,925.19
year 4 X (1 + Effective Annual Rate) 1.045
-----
Sub-Account Value at end of Guarantee
Period: $12,461.82
----------
----------
</TABLE>
TOTAL INTEREST CREDITED IN GUARANTEE PERIOD: $2,461.82 ($12,461.82 - 10,000.00)
NOTE: The above illustration assumes no withdrawals of any amount during the
entire five year period. A withdrawal charge and a Market Value Adjustment may
apply to any amount withdrawn in excess of 15% of the amount of purchase
payments. The hypothetical interest rate is for illustrative purposes only and
is not intended to predict future interest rates to be declared under the
Contract.
The Company has no specific formula for determining the rate of interest that it
will declare initially or in the future. Such interest rates will be reflective
of investment returns available at the time of the determination. In addition,
the management of the Company may also consider various other factors in
determining interest rates, including regulatory and tax requirements, sales
commissions and administrative expenses borne by the Company, general economic
trends, and competitive factors. For current interest rate information, please
contact your sales representative or the Company's Customer Support Unit at
1(800)526-4827.
THE MANAGEMENT OF THE COMPANY WILL MAKE THE FINAL DETERMINATION AS TO THE
INTEREST RATES TO BE DECLARED. THE COMPANY CAN NEITHER PREDICT NOR GUARANTEE
FUTURE INTEREST RATES TO BE DECLARED.
At the end of a Guarantee Period, a notice will be mailed to the Owner outlining
the options available at the end of a Guarantee Period. During the 30 day period
after a Guarantee Period expires the Owner may:
- take no action and the Company will automatically renew the
Sub-account value to a Guarantee Period of the same duration to be
established as of the day the previous Guarantee Period expired; or
- notify the Company to apply the Sub-account value to a new Guarantee
Period or periods to be established as of the day the previous
Guarantee Period expired; or
- notify the Company to apply the Sub-account value to any Sub-account
of the Variable Account on the day we receive the notification; or
- receive a portion of the Sub-account value or the entire Sub-account
value through a partial or full withdrawal that is not subject to a
Market Value Adjustment. In this case, the amount withdrawn will be
deemed to have been renewed at the shortest Guarantee Period then
being offered with current interest credited from the date the
Guarantee Period expired.
The Automatic Laddering Program allows the Owner to choose, in advance, one
renewal Guarantee Period for all renewing Sub-accounts. The Owner can select the
Automatic Laddering Program at any time during the accumulation phase, including
on the issue date. The Automatic Laddering Program will continue until the Owner
gives written notice to the Company asking to discontinue the program. The
Company reserves the right to discontinue this Program. For additional
information on the Automatic Laddering Program, please call the Company's
Customer Support Unit at 1(800)526-4827.
<PAGE>
WITHDRAWALS
Withdrawals in excess of the free withdrawal amount and transfers paid from a
Sub-account of the Guaranteed Maturity Fixed Account other than during the 30
day period after a Guarantee Period expires are subject to a Market Value
Adjustment. See "Market Value Adjustment" section below.
The amount received by the Owner under a withdrawal request equals the amount
requested, adjusted by any Market Value Adjustment, less any applicable
withdrawal charge (based upon the amount requested prior to any Market Value
Adjustment), less premium taxes and withholding (if applicable), less any
applicable transfer fee.
MARKET VALUE ADJUSTMENT
The Market Value Adjustment reflects the relationship between (1) the Treasury
Rate for the original Guarantee Period at the time of the request for withdrawal
or transfer, or at the time money is applied to an Income Plan, and (2) the
Treasury Rate for the original Guarantee Period at the time the Sub-account was
established. As such, the Owner bears some investment risk under the Contract.
Treasury Rate means the U.S. Treasury Note Constant Maturity yield for the
preceding week as reported in Federal Reserve Bulletin Release H.15.
It is possible, therefore, that should investment yields increase significantly
from the time the purchase payment was made, the Market Value Adjustment,
withdrawal charge, premium taxes and withholding (if applicable), would reduce
the amount received by the Owner upon full withdrawal of the Contract Value to
an amount that is less than the purchase payment plus interest at the minimum
guaranteed interest rate under the Contract.
Generally, if the Treasury Rate at the time the Sub-account was established is
higher than the applicable current Treasury Rate, then the Market Value
Adjustment will result in a higher amount payable to the Owner or transferred.
Similarly, if the Treasury Rate at the time the Sub-account was established is
lower than the applicable current Treasury Rate (interest rate for a period
equal to the original Guarantee Period), then the Market Value Adjustment will
result in a lower amount payable to the Owner or transferred.
For example, assume the Owner purchases a Contract and selects an initial
Guarantee Period of five years and the five year Treasury Rate for that duration
is 4.50%. Assume that at the end of 3 years, the Owner makes a partial
withdrawal. If, at that later time, the current five year Treasury Rate is
4.20%, then the Market Value Adjustment will be positive, which will result in
an increase in the amount payable to the Owner. Similarly, if the current five
year Treasury Rate is 4.80%, then the Market Value Adjustment will be negative,
which will result in a decrease in the amount payable to the Owner.
The formula for calculating the Market Value Adjustment is set forth in Appendix
A to this prospectus, which also contains additional illustrations of the
application of the Market Value Adjustment.
PURCHASE OF THE CONTRACTS
PURCHASE PAYMENT LIMITS
Your first purchase payment must be at least $3,000 unless the Contract is a
Qualified Contract, in which case the first purchase payment must be at least
$2,000. All subsequent purchase payments must be $50 or more and may be made at
any time prior to the Payout Start Date. We may limit your ability to make
subsequent purchase payments in order to comply with the laws of the state where
this Contract is delivered. Subsequent purchase payments may also be made from
your bank account through Automatic Additions. The minimum purchase payment for
allocation to the Dollar Cost Averaging Fixed Account or any Sub-account of the
Guaranteed Maturity Fixed Account is $50. Please consult with your sales
representative for detailed information about Automatic Additions.
We reserve the right to limit the maximum amount of purchase payments we will
accept.
FREE-LOOK PERIOD
You may cancel the Contract any time within 20 days after receipt of the
Contract, or longer if required by state law, and receive a full refund of
purchase payments allocated to the Fixed Account Options. Purchase payments
allocated to the Variable Account will be returned after an adjustment to
reflect investment gain or loss that occurred from the date of allocation
through the date of cancellation unless a refund of purchase payments is
required by state or federal law.
CREDITING OF PURCHASE PAYMENTS
The initial purchase payment accompanied by a duly completed application will be
credited to the Contract within two business days of receipt by us at our home
office. If an application is not duly completed, we will credit the purchase
payments to the Contract within five business days or return it at that time
unless You specifically consent to us holding the purchase payment until the
application is complete. We reserve the right to reject any application.
Subsequent purchase payments will be credited to the Contract at the close of
the Valuation Period in which the purchase payment is received by the Company at
its home office.
<PAGE>
ALLOCATION OF PURCHASE PAYMENTS
On the application, You instruct us how to allocate the purchase payment among
the Investment Alternatives. Purchase payments may be allocated in whole
percents, from 0% to 100% (total allocation equals 100% of the purchase
payment), or in whole dollar amounts (total allocation equals the purchase
payment), to any Investment Alternative. Unless You notify us in writing
otherwise, subsequent purchase payments are allocated according to the
allocation for the previous purchase payment. Any change in allocation
instructions will be effective at the time we receive the notice in good order.
ACCUMULATION UNITS
Each purchase payment allocated to the Variable Account will be credited to the
Contract as Accumulation Units. For example, if a $10,000 purchase payment is
credited to the Contract when the Accumulation Unit value equals $10, then 1,000
Accumulation Units would be credited to the Contract. The Variable Account, in
turn, purchases shares of the corresponding Portfolio.
ACCUMULATION UNIT VALUE
The Accumulation Units of the various Sub-accounts of the Variable Account are
valued separately. The value of Accumulation Units will change each Valuation
Period according to the investment performance of the shares purchased by each
Variable Sub-account and the deduction of certain expenses and charges.
The value of an Accumulation Unit in a Variable Sub-account for any Valuation
Period equals the value of the Accumulation Unit as of the immediately preceding
Valuation Period, multiplied by the Net Investment Factor for that Sub-account
for the current Valuation Period. The Net Investment Factor for a Valuation
Period is a number representing the change, since the last Valuation Date in the
value of Sub-account assets per Accumulation Unit due to investment income,
realized or unrealized capital gain or loss, deductions for taxes, if any, and
deductions for the mortality and expense risk charge and administrative expense
charge.
TRANSFERS AMONG INVESTMENT ALTERNATIVES
Amounts may be transferred among Investment Alternatives, subject to the
following restrictions. The Company reserves the right to assess a $10 charge on
each transfer in excess of 12 per Contract Year. The Company is presently
waiving this charge. Transfers to or from more than one Investment Alternative
on the same day are treated as one transfer.
Transfers among Investment Alternatives before the Payout Start Date may be made
at any time. After the Payout Start Date, if the Income Plan depends on any
person's life, transfers among Sub-accounts of the Variable Account or from a
variable amount income payment to a fixed amount income payment may be made only
once every six months and may not be made during the first six months following
the Payout Start Date. After the Payout Start Date, if the Income Plan does not
depend on any person's life, transfers among Sub-accounts of the Variable
Account or from a variable amount income payment to a fixed amount income
payment may be made immediately. After the Payout Start Date, transfers from a
fixed amount income payment are not allowed.
Telephone transfer requests will be accepted by the Company if received at
1(800)526-4827 by 3:00 p.m., Central Time. Telephone transfer requests received
at any other telephone number or after 3:00 p.m., Central Time will not be
accepted by the Company. Telephone transfer requests received before 3:00 p.m.,
Central Time are effected at the Sub-account value next computed. In the event
that the New York Stock Exchange ("NYSE") closes early, i.e., before 3:00 p.m.
Central Time, or in the event that the NYSE closes early for a period of time
but then reopens for trading on the same day, telephone transfer requests will
be processed by the Company as of the close of the NYSE on that particular day.
Telephone requests received at any telephone number other than the number that
appears in this paragraph or received after the close of trading on the NYSE
will not be accepted by the Company.
The Company utilizes procedures which the Company believes will provide
reasonable assurance that telephone authorized transfers are genuine. Such
procedures include taping of telephone conversations with persons purporting to
authorize such transfers and requesting identifying information from such
persons. Accordingly, the Company disclaims any liability for losses resulting
from such transfers by reason of their allegedly not having been properly
authorized. However, if the Company does not take reasonable steps to help
ensure that such authorizations are valid, the Company may be liable for such
losses.
The minimum amount that may be transferred into a Sub-account of the Guaranteed
Maturity Fixed Account is $50. No transfers are allowed into the Dollar Cost
Averaging Fixed Account. Any transfer from a Sub-account of the Guaranteed
Maturity Fixed Account at a time other than during the 30 day period after a
Guarantee Period expires will be subject to a Market Value Adjustment.
The Company reserves the right to waive transfer restrictions.
DOLLAR COST AVERAGING
Transfers may be made automatically through Dollar Cost Averaging prior to the
Payout Start Date. Dollar Cost Averaging permits the Owner to transfer a
specified amount every month from the Dollar Cost Averaging Fixed Account or the
Money Market Sub-account, to any Sub-account of the Variable Account. Dollar
Cost Averaging cannot be used to transfer amounts to the Guaranteed Maturity
Fixed Account. There are no
<PAGE>
additional charges imposed upon participants in the Dollar Cost Averaging
program. In addition, such transfers are not assessed a $10 charge and are not
counted towards the 12 free transfers per Contract Year.
The theory of Dollar Cost Averaging is that, if purchases of equal dollar
amounts are made at fluctuating prices, the aggregate average cost per unit will
be less than the average of the unit prices on the same purchase dates. However,
participation in the Dollar Cost Averaging program does not assure You of a
greater profit from your purchases under the program; nor will it prevent or
alleviate losses in a declining market.
AUTOMATIC PORTFOLIO REBALANCING
Transfers may be made automatically through Automatic Portfolio Rebalancing
prior to the Payout Start Date. By electing Automatic Portfolio Rebalancing, all
of the money allocated to Sub-accounts of the Variable Account will be
rebalanced to the desired allocation on a quarterly basis, determined from the
first date that You decide to rebalance. Each quarter, money will be transferred
among Sub-accounts of the Variable Account to achieve the desired allocation.
The desired allocation will be the allocation initially selected, unless
subsequently changed. You may change the allocation at any time by giving us
written notice. The new allocation will be effective with the first rebalancing
that occurs after we receive the written request. We are not responsible for
rebalancing that occurs prior to receipt of the written request.
Transfers made through Automatic Portfolio Rebalancing are not assessed a $10
charge and are not counted towards the 12 free transfers per Contract Year.
Any money allocated to the Fixed Account Options will not be included in the
Automatic Portfolio Rebalancing.
BENEFITS UNDER THE CONTRACT
WITHDRAWALS
You may withdraw all or part of the Contract Value at any time prior to the
earlier of the death of the Owner (or the Annuitant if the Owner is not a
natural person) or the Payout Start Date. The amount payable for withdrawal is
the Contract Value next computed after the Company receives the request for a
withdrawal at its home office, adjusted by any applicable Market Value
Adjustment, less any applicable withdrawal charges, contract maintenance
charges, income tax withholding, penalty tax and premium taxes. Withdrawals from
the Variable Account will be paid within seven days of receipt of the request,
subject to postponement in certain circumstances. Surrenders and withdrawals
from the Fixed Account may be delayed for up to six months. See "Delay of
Payments," page __.
Money can be withdrawn from the Variable Account or the Fixed Account. To
complete the partial withdrawal from the Variable Account, the Company will
redeem Accumulation Units in an amount equal to the withdrawal and any
applicable withdrawal charge and premium taxes. The Owner must name the
Investment Alternative from which the withdrawal is to be made. If none is
named, then the withdrawal request is incomplete and cannot be honored.
The minimum partial withdrawal is $50. If the Contract Value after a partial
withdrawal would be less than $2,000, then the Company will treat the request as
one for termination of the Contract and the entire Contract Value, adjusted by
any Market Value Adjustment, less any charges and premium taxes, will be paid
out.
Partial withdrawals may also be taken automatically through Systematic
Withdrawals on a monthly, quarterly, semi-annual or annual basis. Systematic
Withdrawals of $50 or more may be requested at any time prior to the Payout
Start Date. At the Company's discretion, Systematic Withdrawals may not be
offered in conjunction with Dollar Cost Averaging or Automatic Portfolio
Rebalancing.
Partial and full withdrawals may be subject to income tax and a 10% tax penalty,
which is explained in "Federal Tax Matters," on page __.
After the Payout Start Date, withdrawals are only permitted when payments from
the Variable Account are being made that do not involve life contingencies. In
that case, You may terminate the Variable Account portion of the income payments
at any time and receive a lump sum equal to the commuted balance of the
remaining variable payments due, less any applicable withdrawal charge.
INCOME PAYMENTS
PAYOUT START DATE FOR INCOME PAYMENTS
The Payout Start Date is the day that money is applied to an Income Plan. You
may change the Payout Start Date at any time by notifying the Company in writing
of the change at least 30 days before the scheduled Payout Start Date. The
Payout Start Date must be (a) at least one month after the issue date; and (b)
no later than the day the Annuitant reaches age 90, or the 10th anniversary of
the issue date, if later.
<PAGE>
VARIABLE ACCOUNT INCOME PAYMENTS
The amount of Variable Account income payments depends upon the investment
experience of the Sub-accounts selected by the Owner and any premium taxes, the
age and sex of the Annuitant, and the Income Plan chosen. The Company guarantees
that the amount of the income payment will not be affected by (1) actual
mortality experience and (2) the amount of the Company's administration
expenses.
The Contracts offered by this prospectus contain income payment tables that
provide for different benefit payments to men and women of the same age (except
in states which require unisex annuity tables). Nevertheless, in accordance with
the U.S. Supreme Court's decision in ARIZONA GOVERNING COMMITTEE V. NORRIS, in
certain employment-related situations, annuity tables that do not vary on the
basis of sex will be used.
The total income payments received may be more or less than the total purchase
payments made because (a) Variable Account income payments vary with the
investment results of the underlying Portfolios, and (b) Annuitants may not live
as long as, or may live longer than, expected.
The Income Plan option selected will affect the dollar amount of each income
payment. For example, if an Income Plan for a Life Income is chosen, the income
payments will be greater than income payments under an Income Plan for a Life
Income with Guaranteed Payments.
If the actual net investment experience of the Variable Account is less than the
assumed investment rate, then the dollar amount of the income payments will
decrease. The dollar amount of the income payments will stay level if the net
investment experience equals the assumed investment rate and the dollar amount
of the income payments will increase if the net investment experience exceeds
the assumed investment rate. For purposes of the Variable Account income
payments, the assumed investment rate is 3 percent. For more detailed
information as to how Variable Account income payments are determined, see the
Statement of Additional Information.
FIXED AMOUNT INCOME PAYMENTS
Income payment amounts derived from any monies allocated to any Fixed Account
Option are guaranteed for the duration of the Income Plan. The income payment
based upon any fixed amount income payment is calculated by applying the portion
of the Contract Value in any Fixed Account Option on the Payout Start Date,
adjusted by any Market Value Adjustment and less any applicable premium tax, to
the greater of the appropriate value from the income payment table selected or
such other value as we are offering at that time.
INCOME PLANS
The Income Plans include:
INCOME PLAN 1 -- LIFE INCOME WITH GUARANTEED PAYMENTS
The Company will make payments for as long as the Annuitant lives. If the
Annuitant dies before the selected number of guaranteed payments have been
made, the Company will continue to pay the remainder of the guaranteed
payments.
INCOME PLAN 2 -- JOINT AND SURVIVOR LIFE INCOME WITH GUARANTEED PAYMENTS
The Company will make payments for as long as either the Annuitant or Joint
Annuitant, named at the time of Income Plan selection, is living. If both
the Annuitant and the Joint Annuitant die before the selected number of
guaranteed payments have been made, the Company will continue to pay the
remainder of the guaranteed payments.
INCOME PLAN 3 -- GUARANTEED NUMBER OF PAYMENTS
The Company will make payments for a specified number of months beginning
on the Payout Start Date. These payments do not depend on the Annuitant's
life.
The number of months guaranteed may be from 60 to 360. The mortality and expense
risk charge will be deducted from Variable Account assets supporting these
payments even though the Company may not bear any mortality risk. The Owner may
change the Income Plan until 30 days before the Payout Start Date. If an Income
Plan is chosen which depends on the Annuitant or Joint Annuitant's life, proof
of age will be required before income payments begin. Applicable premium taxes
will be assessed.
In the event that an Income Plan is not selected, the Company will make income
payments in accordance with Income Plan 1 with Guaranteed Payments for 120
Months. At the Company's discretion, other Income Plans may be available upon
request. The Company currently uses sex-distinct annuity tables. However, if
legislation is passed by Congress or the states, the Company reserves the right
to use income payment tables which do not distinguish on the basis of sex.
Special rules and limitations may apply to certain qualified contracts.
If the Contract Value to be applied to an Income Plan is less than $2,000, or if
the monthly payments determined under the Income Plan are less than $20, the
Company may pay the Contract Value adjusted by any Market Value Adjustment and
less any applicable taxes, in a lump sum or change the payment frequency to an
interval which results in income payments of at least $20.
<PAGE>
DEATH BENEFITS
DISTRIBUTION UPON DEATH PAYMENT PROVISIONS
A distribution upon death may be paid to the Owner determined immediately after
the death if, prior to the Payout Start Date:
- any Owner dies; or
- the Annuitant dies and the Owner is not a natural person.
If the Owner eligible to receive a distribution upon death is not a natural
person, then the Owner may elect to receive the distribution upon death in one
or more distributions, as long as all distributions are completed within 5 years
of death. Otherwise, if the Owner is a natural person, the Owner may elect to
receive a distribution upon death in one or more distributions or periodic
payments through an Income Plan.
A death benefit will be paid: 1) if the Owner elects to receive the death
benefit in a single payment distributed within 180 days of the date of death;
and 2) if the death benefit is paid as of the day the value of the death benefit
is determined. Otherwise, the settlement value will be paid. The Company is
currently waiving the 180 day limit. The Company reserves the right to enforce
the limitation in the future. The settlement value is the same amount that would
be paid in the event of withdrawal of the Contract Value. The Company will
calculate the settlement value at the end of the Valuation Period coinciding
with the requested distribution date for payment or on the mandatory
distribution date of 5 years after the date of death. In any event, the entire
distribution upon death must be distributed within five years after the date of
death unless a surviving spouse continues the Contract or an Income Plan is
selected in accordance with the following rules:
Payments from the Income Plan must begin within one year of the date of death
and must be payable throughout:
- the life of the Owner; or
- a period not to exceed the life expectancy of the Owner; or
- the life of the Owner with payments guaranteed for a period not to
exceed the life expectancy of the Owner.
If the surviving spouse of the deceased Owner is the new Owner, then the spouse
may elect one of the options listed above or may continue the Contract in the
accumulation phase as if the death had not occurred. The Company will only
permit the Contract to be continued once. If the Contract is continued in the
accumulation phase, the surviving spouse may make a single withdrawal of any
amount within one year of the date of death without incurring a withdrawal
charge. However, any applicable Market Value Adjustment, determined as of the
date of the withdrawal, will apply. If the surviving spouse is under age 59 1/2,
a 10% penalty tax may apply to the withdrawal.
DEATH BENEFIT AMOUNT
Prior to the Payout Start Date, the standard death benefit is equal to the
greatest of:
(a) the Contract Value on the date the Company determines the value of the
death benefit; or
(b) the Settlement Value on the date the Company determines the value of
the death benefit; or
(c) the Contract Value on each Death Benefit Anniversary prior to the date
the Company determines the death benefit adjusted by any purchase payments,
withdrawals* and charges made between such Death Benefit Anniversary and
the date the Company determines the death benefit. A Death Benefit
Anniversary is every seventh Contract Anniversary beginning with the issue
date. For example, the issue date, 7th and 14th Contract Anniversaries are
the first three Death Benefit Anniversaries.
For Contracts with the optional enhanced death benefit provision, the death
benefit will be the greater of (a) through (c) above, or (d) below:
(d) the greatest of the anniversary values as of the date the Company
determines the death benefit. The anniversary value is equal to the
Contract Value on a Contract Anniversary, increased by purchase payments
made since that anniversary and reduced by an adjustment for any partial
withdrawals* since that anniversary. Anniversary values will be calculated
for each Contract Anniversary prior to the earlier of: (i) the date we
determine the death benefit, or (ii) the oldest Owner's or the Annuitant's,
if the Owner is not a natural person, attained age 80.
* The adjustment for withdrawals is equal to the Contract Value on a Death
Benefit Anniversary or Contract Anniversary multiplied by the ratio of the
withdrawal amount to the Contract Value immediately prior to the withdrawal.
The value of the death benefit will be determined at the end of the Valuation
Period during which the Company receives a complete request for payment of the
death benefit, which includes due proof of death.
The Company will not settle any death claim until it receives due proof of
death.
<PAGE>
CHARGES AND OTHER DEDUCTIONS
DEDUCTIONS FROM PURCHASE PAYMENTS
No deductions are made from purchase payments. Therefore, the full amount of
every purchase payment is invested in the Investment Alternative(s).
WITHDRAWAL CHARGE (CONTINGENT DEFERRED SALES CHARGE)
You may withdraw all or part of the Contract Value at any time prior to the
earlier of the death of the Owner (or the Annuitant if the Owner is not a
natural person) or the Payout Start Date.
There are no withdrawal charges on amounts withdrawn up to 15% of the amount of
purchase payments. Amounts withdrawn in excess of this may be subject to a
withdrawal charge. Amounts not subject to a withdrawal charge and not withdrawn
in a Contract Year are not carried over to later Contract Years. Withdrawal
charges, if applicable, will be deducted from the amount paid.
For purposes of calculating the amount of the withdrawal charge, withdrawals are
assumed to come from purchase payments first, beginning with the oldest payment.
Withdrawals made after all purchase payments have been withdrawn, will not be
subject to a withdrawal charge. For partial withdrawals, the Contract Value will
be adjusted to reflect the amount of payment requested by the Owner, any
withdrawal charge, any applicable taxes and any Market Value Adjustment.
Withdrawals in excess of the free withdrawal amount will be subject to a
withdrawal charge as set forth below:
<TABLE>
<CAPTION>
APPLICABLE
COMPLETE YEARS SINCE WITHDRAWAL
PURCHASE PAYMENT WAS MADE CHARGE PERCENTAGE
-----------------
<S> <C>
0 YEARS.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6%
1 YEAR. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6%
2 YEARS.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5%
3 YEARS.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5%
4 YEARS.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4%
5 YEARS.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3%
6 YEARS OR MORE.. . . . . . . . . . . . . . . . . . . . . . . . . . . 0%
</TABLE>
Withdrawal charges will be used to pay sales commissions and other promotional
or distribution expenses associated with the marketing of the Contracts. In
addition, federal and state income tax may be withheld from withdrawal amounts.
Certain terminations may also be subject to a federal tax penalty. See "Federal
Tax Matters," page __.
The Company will waive any withdrawal charge prior to the Payout Start Date if
1) at least 30 days after the Contract Date any Owner (or Annuitant if the Owner
is not a natural person) is first confined to a long term care facility or
hospital for at least 90 consecutive days, confinement is prescribed by a
physician and is medically necessary, and the request for a withdrawal and
adequate written proof of confinement are received by us no later than 120 days
after discharge or 2) any Owner (or Annuitant if the Owner is not a natural
person) is diagnosed with a terminal illness. The withdrawal charge will also be
waived on withdrawals taken to satisfy IRS required minimum distribution rules.
This waiver is permitted only for withdrawals which satisfy distributions
resulting from this Contract. If applicable, such withdrawals will be subject to
a Market Value Adjustment.
CONTRACT MAINTENANCE CHARGE
A contract maintenance charge is deducted annually from the Contract Value to
reimburse the Company for its costs in maintaining each Contract and the
Variable Account. The Company guarantees that the amount of this charge will not
exceed $35 per Contract Year over the life of the Contract. Prior to the Payout
Start Date, this charge will be waived if the total purchase payments are
$50,000 or more on a Contract Anniversary or if all money is allocated to the
Fixed Account on the Contract Anniversary. After the Payout Start Date, this
charge will be waived if total purchase payments are $50,000 or more as of the
Payout Start Date.
Maintenance costs include but are not limited to expenses incurred in billing
and collecting purchase payments; keeping records; processing death claims, cash
withdrawals, and policy changes; proxy statements; calculating Accumulation Unit
and Annuity Unit values; and issuing reports to Owners and regulatory agencies.
The contract maintenance charge will be deducted from the Contract Value
invested in each Sub-account of the variable account on each contract
anniversary prior to the Payout Start Date. The contract maintenance charge will
not be deducted from the Fixed Account Options. The amount deducted for the
contract maintenance charge will be in the same proportion that the Owner's
value in each bears to the Owner's total value in all Sub-accounts of the
Variable Account. After the Payout Start Date, a pro rata share of the annual
contract maintenance charge will be deducted from each income payment. For
example, 1/12 of the $35, or $2.92, will be deducted if there are twelve income
payments during the Contract Year. A pro-rated contract maintenance charge will
be deducted if the Contract is terminated on any date other than a Contract
Anniversary.
<PAGE>
ADMINISTRATIVE EXPENSE CHARGE
The Company will deduct an administrative expense charge which is equal, on an
annual basis, to .10% of the daily net assets the Owner has allocated to the
Sub-accounts of the Variable Account. This charge is designed to cover actual
administrative expenses which exceed the revenues from the contract maintenance
charge. There is no necessary relationship between the amount of administrative
charge imposed on a given Contract and the amount of expenses that may be
attributable to that Contract.
MORTALITY AND EXPENSE RISK CHARGE
The Company will deduct a mortality and expense risk charge which is equal, on
an annual basis, to 1.25% of the daily net assets You have allocated to the
Sub-accounts of the Variable Account. The Company estimates that .80% is
attributable to the assumption of mortality risks and .45% is attributable to
the assumption of expense risks. For Contracts with the optional enhanced death
benefit provision, the mortality and expense risk charge will be deducted daily,
at a rate equal on an annual basis to 1.35% of the daily net assets in the
Variable Account. The assessment of the additional .10% for the enhanced death
benefit is attributed to the assumption of additional mortality risks. The
Company guarantees that the percentage for this charge will not increase over
the life of the Contract.
The mortality risk arises from the Company's guarantee to cover all death
benefits and to make income payments in accordance with the Income Plan selected
and the Income Payment Tables in Your Contract.
The expense risk arises from the possibility that the contract maintenance and
administrative expense charge, both of which are guaranteed not to increase,
will be insufficient to cover actual administrative expenses.
PREMIUM TAXES
The Company will deduct applicable state premium taxes or other similar
policyholder taxes relative to the Contract (collectively referred to as
"premium taxes") either at the Payout Start Date, or when a total withdrawal
occurs. Current premium tax rates range from 0 to 3.5%. The Company reserves the
right to deduct premium taxes from the purchase payments.
At the Payout Start Date, the charge for premium taxes will be deducted from
each Investment Alternative in the proportion that the Owner's value in the
Investment Alternative bears to the total Contract Value.
TRANSFER CHARGES
The Company reserves the right to assess a $10 charge on each transfer in excess
of 12 per Contract Year, excluding transfers through Dollar Cost Averaging and
Automatic Portfolio Rebalancing. The Company is presently waiving this charge.
FUND EXPENSES
Complete descriptions of the expenses and deductions from the Portfolios are
found in the prospectuses for the Funds, which accompany this prospectus.
GENERAL MATTERS
OWNER
The Owner has the sole right to exercise all rights and privileges under the
Contract, except as otherwise provided in the Contract. The Contract cannot be
jointly owned by both a non-natural person and a natural person.
BENEFICIARY
Subject to the terms of any irrevocable Beneficiary designation, the Owner may
change the Beneficiary at any time by notifying the Company in writing. Any
change will be effective at the time it is signed by the Owner, whether or not
the Annuitant is living when the change is received by the Company. The Company
will not, however, be liable as to any payment or settlement made prior to
receiving the written notice.
Unless otherwise provided in the Beneficiary designation, if a Beneficiary
predeceases the Owner and there are no other surviving beneficiaries or if the
Owner does not name a Beneficiary, the new Beneficiary will be: the Owner's
spouse if living; otherwise, the Owner's children, equally, if living;
otherwise, the Owner's estate. Multiple Beneficiaries may be named. Unless
otherwise provided in the Beneficiary designation, if more than one Beneficiary
survives the Owner, the surviving Beneficiaries will share equally in any
amounts due.
ASSIGNMENTS
The Company will not honor an assignment of an interest in a Contract as
collateral or security for a loan. Otherwise, the Owner may assign benefits
under the Contract prior to the Payout Start Date. No Beneficiary may assign
benefits under the Contract until they are due. No assignment will bind the
Company unless it is signed by the Owner and filed with the Company. The Company
is not responsible for the validity of an
<PAGE>
assignment. Federal law prohibits or restricts the assignment of benefits under
many types of retirement plans and the terms of such plans may themselves
contain restrictions on assignments.
DELAY OF PAYMENTS
Payment of any amounts due from the Variable Account under the Contract will
occur within seven days, unless:
1. The New York Stock Exchange is closed for other than usual weekends or
holidays, or trading on the Exchange is otherwise restricted;
2. An emergency exists as defined by the Securities and Exchange Commission;
or
3. The Securities and Exchange Commission permits delay for the protection of
the Owners.
Payments or transfers from the Fixed Account may be delayed for up to 6 months.
If payment or transfer is delayed for 30 days or more, the Company will pay
interest as required by applicable law.
MODIFICATION
The Company may not modify the Contract without the consent of the Owner except
to make the Contract meet the requirements of the Investment Company Act of
1940, or to make the Contract comply with any changes in the Internal Revenue
Code or to make any changes required by the Code or by any other applicable law.
CUSTOMER INQUIRIES
The Owner or any persons interested in the Contract may make inquiries regarding
the Contract by calling or writing your representative or the Company at:
GLENBROOK LIFE AND ANNUITY COMPANY
POST OFFICE BOX 94042
PALATINE, ILLINOIS 60094-4042
1-(800) 526-4827
FEDERAL TAX MATTERS
INTRODUCTION
THE FOLLOWING DISCUSSION IS GENERAL AND IS NOT INTENDED AS TAX ADVICE. THE
COMPANY MAKES NO GUARANTEE REGARDING THE TAX TREATMENT OF ANY CONTRACT OR
TRANSACTION INVOLVING A CONTRACT. Federal, state, local and other tax
consequences of ownership or receipt of distributions under an annuity contract
depend on the individual circumstances of each person. If You are concerned
about any tax consequences with regard to your individual circumstances, You
should consult a competent tax adviser.
TAXATION OF ANNUITIES IN GENERAL
TAX DEFERRAL
Generally, an annuity contract owner is not taxed on increases in the Contract
Value until a distribution occurs. This rule applies only where (1) the owner is
a "natural person," (see "Non-Natural Owners" below for exception) (2) the
investments of the Variable Account are "adequately diversified" in accordance
with Treasury Department Regulations, and (3) the issuing insurance company,
instead of the annuity owner, is considered the owner for federal income tax
purposes of any separate account assets funding the contract.
NON-NATURAL OWNERS
As a general rule, annuity contracts owned by non-natural persons such as
corporations, trusts, or other entities are not treated as annuity contracts for
federal income tax purposes and the income on such contracts is taxed as
ordinary income received or accrued by the owner during the taxable year. There
are several exceptions to the general rule for contracts owned by non-natural
persons which are discussed in the Statement of Additional Information.
DIVERSIFICATION REQUIREMENTS
For a Contract to be treated as an annuity for federal income tax purposes, the
investments in the Variable Account must be "adequately diversified" in
accordance with the standards provided in the Treasury regulations. If the
investments in the Variable Account are not adequately diversified, then the
Contract will not be treated as an annuity contract for federal income tax
purposes and the Owner will be taxed on the excess of the Contract Value over
the investment in the Contract. Although the Company does not have control over
the Portfolios or their investments, the Company expects the Portfolios to meet
the diversification requirements.
<PAGE>
OWNERSHIP TREATMENT
In connection with the issuance of the regulations on the adequate
diversification standards, the Department of the Treasury announced that the
regulations do not provide guidance concerning the extent to which contract
owners may direct their investments among Sub-accounts of a variable account.
The Internal Revenue Service has previously stated in published rulings that a
variable contract owner will be considered the owner of separate account assets
if the owner possesses incidents of ownership in those assets such as the
ability to exercise investment control over the assets. At the time the
diversification regulations were issued, Treasury announced that guidance would
be issued in the future regarding the extent that owners could direct their
investments among Sub-accounts without being treated as owners of the underlying
assets of the Variable Account.
The ownership rights under this contract are similar to, but different in
certain respects from, those described by the Service in rulings in which it was
determined that contract owners were not owners of separate account assets. For
example, the owner of this contract has the choice of more investment options to
which to allocate premiums and contract values, and may be able to transfer
among investment options more frequently than in such rulings. These differences
could result in the contract owner being treated as the owner of the assets of
the Variable Account. In those circumstances, income and gains from the Variable
Account assets would be includible in the Contract Owners' gross income. In
addition, the Company does not know what standards will be set forth in the
regulations or rulings which the Treasury Department has stated it expects to
issue. It is possible that the Treasury's position, when announced, may
adversely affect the tax treatment of existing contracts. The Company,
therefore, reserves the right to modify the Contract as necessary to attempt to
prevent the Owner from being considered the federal tax owner of a pro rata
share of the assets of the Variable Account. However, the Company makes no
guarantee that such modification to the contract will be successful.
DELAYED MATURITY DATE
If the contract's scheduled maturity date is at a time when the annuitant has
reached an advanced age, it is possible that the contract would not be treated
as an annuity. In that event, the income and gains under the contract could be
currently includible in the owner's income.
TAXATION OF PARTIAL AND FULL WITHDRAWALS
In the case of a partial withdrawal under a non-qualified contract, amounts
received are taxable to the extent the contract value, without regard to any
surrender charge, exceeds the investment in the contract. The contract value is
the sum of all account values. No matter which account a withdrawal is made
from, all account values are combined and the total contract value is used to
determine the amount of taxable income. The investment in the contract is the
gross premium or other consideration paid for the contract reduced by any
amounts previously received from the contract to the extent such amounts were
properly excluded from the owner's gross income. There is no definitive guidance
on the proper tax treatment of Market Value Adjustments, and you should contact
a competent tax advisor with respect to the potential tax consequences of Market
Value Adjustments. In the case of a partial withdrawal under a qualified
contract, the portion of the payment that bears the same ratio to the total
payment that the investment in the contract (i.e., nondeductible IRA
contributions, after tax contributions to qualified plans) bears to the contract
value, can be excluded from income. In the case of a full withdrawal under a
non-qualified contract or a qualified contract, the amount received will be
taxable only to the extent it exceeds the investment in the contract. If an
individual transfers an annuity contract without full and adequate consideration
to a person other than the individual's spouse (or to a former spouse incident
to a divorce), the owner will be taxed on the difference between the contract
value and the investment in the contract at the time of transfer. Other than in
the case of certain qualified contracts, any amount received as a loan under a
contract, and any assignment or pledge (or agreement to assign or pledge) of the
contract value is treated as a withdrawal of such amount or portion. The
contract provides a death benefit that in certain circumstances may exceed the
greater of the payments and the contract value. As described elsewhere in the
prospectus, the Company imposes certain charges with respect to the death
benefit. It is possible that some portion of those charges could be treated for
federal tax purposes as a partial withdrawal from the contract.
TAXATION OF ANNUITY PAYMENTS
Generally, the rule for income taxation of payments received from an annuity
contract provides for the return of the owner's investment in the contract in
equal tax-free amounts over the payment period. The balance of each payment
received is taxable. In the case of variable annuity payments, the amount
excluded from taxable income is determined by dividing the investment in the
contract by the total number of expected payments. In the case of fixed annuity
payments, the amount excluded from income is determined by multiplying the
payment by the ratio of the investment in the contract (adjusted for any refund
feature or period certain) to the total expected value of annuity payments for
the term of the contract. Once the total amount of the investment in the
contract is excluded using these ratios, the annuity payments will be fully
taxable. If annuity payments cease because of the death of the annuitant before
the total amount of the investment in the contract is recovered, the unrecovered
amount generally will be allowed as a deduction to the annuitant for his last
taxable year.
TAXATION OF ANNUITY DEATH BENEFITS
Amounts may be distributed from an annuity contract because of the death of an
owner or annuitant. Generally, such amounts are includible in income as follows:
(1) if distributed in a lump sum, the amounts are taxed in the same manner as a
full withdrawal or (2) if distributed under an annuity option, the amounts are
taxed in the same manner as an annuity payment.
PENALTY TAX ON PREMATURE DISTRIBUTIONS
There is a 10% penalty tax on the taxable amount of any premature distribution
from a non-qualified annuity contract. The penalty tax generally applies to any
distribution made prior to the owner attaining age 59 1/2. However, there should
be no penalty tax on distributions to owners (1) made on or after the date the
owner attains age 59 1/2; (2) made as a result of an owner's death or
disability; (3) made in substantially equal
<PAGE>
periodic payments over life or life expectancy; (4) made under an immediate
annuity; or (5) attributable to an investment in the contract before August 14,
1982. Similar rules apply for distributions from qualified contracts. A
competent tax advisor should be consulted to determine if any other exceptions
to the penalty apply to your specific circumstances.
AGGREGATION OF ANNUITY CONTRACTS
All non-qualified deferred annuity contracts issued by the Company (or its
affiliates) to the same owner during any calendar year will be aggregated and
treated as one annuity contract for purposes of determining the taxable amount
of a distribution.
TAX QUALIFIED CONTRACTS
Annuity contracts may be used as investments with certain tax qualified plans
such as: (1) Individual Retirement Annuities under Section 408(b) of the Code;
(2) Roth Individual Retirement Annuities under Section 408 A of the Code; (3)
Simplified Employee Pension Plans under Section 408(k) of the Code; (4) Savings
Incentive Match Plans for Employees (SIMPLE) Plans under Section 408(p) of the
Code; (5) Tax Sheltered Annuities under Section 403(b) of the Code; (7)
Corporate and Self Employed Pension and Profit Sharing Plans; and (8) State and
Local Government and Tax-Exempt Organization Deferred Compensation Plans. In the
case of certain tax qualified plans, the terms of the plans may govern the right
to benefits, regardless of the terms of the contract.
RESTRICTIONS UNDER SECTION 403(b) PLANS
Section 403(b) of the Code provides for tax-deferred retirement savings plans
for employees of certain non-profit and educational organizations. In
accordance with the requirements of Section 403(b), any annuity contract used
for a 403(b) plan must provide that distributions attributable to salary
reduction contributions made after 12/31/88, and all earnings on salary
reduction contributions, may be made only on or after the date the employee
attains age 59 1/2, separates from service, dies, becomes disabled or on
account of hardship (earnings on salary reduction contributions may not be
distributed on the account of hardship). These limitations do not apply to
withdrawals where the Company is directed to transfer some or all of the
contract value to another Section 403(b) plans.
ROTH INDIVIDUAL RETIREMENT ANNUITIES
Section 408A of the Code permits eligible individuals to make nondeductible
contributions to an individual retirement program known as a Roth Individual
Retirement Annuity. Roth Individual Retirement Annuities are subject to
limitations on the amount that can be contributed and on the time when
distributions may commence. "Qualified distributions" from Roth Individual
Retirement Annuities are not includible in gross income. "Qualified
distributions" are any distributions made more than five taxable years after
the taxable year of the first contribution to the Roth Individual Retirement
Annuity, and which are made on or after the date the individual attains age
59 1/2 , made to a beneficiary after the owner's death, attributable to the
owner being disabled or for a first time home purchase (first time home
purchases are subject to a lifetime limit of $10,000). "Nonqualified
distributions" are treated as made from contributions first and are
includible in gross income to the extent such distributions exceed the
contributions made to the Roth Individual Retirement Annuity. The taxable
portion of a "nonqualified distribution" may be subject to the 10% penalty
tax on premature distributions. Subject to certain limitations, a traditional
Individual Retirement Account or Annuity may be converted or "rolled over" to
a Roth Individual Retirement Annuity. The taxable portion of a conversion or
rollover distribution is includible in gross income, but is exempted from the
10% penalty tax on premature distributions.
INCOME TAX WITHHOLDING
The Company is required to withhold federal income tax at a rate of 20% on all
"eligible rollover distributions" unless an individual elects to make a "direct
rollover" of such amounts to another qualified plan or Individual Retirement
Account or Annuity (IRA). Eligible rollover distributions generally include all
distributions from qualified contracts, excluding IRAs, with the exception of
(1) required minimum distributions, or (2) a series of substantially equal
periodic payments made over a period of at least 10 years, or the life (joint
lives) of the participant (and beneficiary). For any distributions from non-
qualified annuity contracts, or distributions from qualified contracts which are
not considered eligible rollover distributions, the Company may be required to
withhold federal and state income taxes unless the recipient elects not to have
taxes withheld and properly notifies the Company of such election.
DISTRIBUTION OF THE CONTRACTS
Allstate Life Financial Services, Inc. ("ALFS"), 3100 Sanders Road, Northbrook
Illinois, a wholly owned subsidiary of Allstate Life, acts as the principal
underwriter of the Contracts. ALFS is registered as a broker-dealer under the
Securities Exchange Act of 1934 and became a member of the National Association
of Securities Dealers, Inc. on June 30, 1993. Contracts are sold by registered
representatives of unaffiliated broker-dealers or bank employees who are
licensed insurance agents appointed by the Company, either individually or
through an incorporated insurance agency and who have entered into a selling
agreement with ALFS and the Company to sell the Contract. In some states,
Contracts may be sold by representatives or employees of banks which may be
acting as broker-dealers without separate registration under the Securities
Exchange Act of 1934, pursuant to legal and regulatory exceptions.
Commissions paid may vary, but in aggregate are not anticipated to exceed 8.00%
of any purchase payment. In addition, under certain circumstances, certain
sellers of the Contracts may be paid persistency bonuses which will take into
account, among other things, the length of time purchase payments have been held
under a Contract, and Contract Values. A persistency bonus is not expected to
exceed 0.25%, on an annual basis, of the Contract Values considered in
connection with the bonus. These commissions are intended to cover distribution
expenses.
<PAGE>
The underwriting agreement with ALFS provides for indemnification of ALFS by the
Company for liability to Owners arising out of services rendered or Contracts
issued.
VOTING RIGHTS
The Owner or anyone with a voting interest in the Sub-account of the Variable
Account may instruct the Company on how to vote at shareholder meetings of the
Fund. The Company will solicit and cast each vote according to the procedures
set up by the Fund and to the extent required by law. Fund shares as to which no
timely instructions are received will be voted in proportion to the voting
instructions which are received with respect to all Contracts participating in
that Sub-account. Voting instructions to abstain on any item to be voted upon
will be applied on a pro-rata basis to reduce the votes eligible to be cast. The
Company reserves the right to vote fund shares in its own right, to the extent
permitted by the Investment Company Act of 1940, its regulations or
interpretations thereof.
Before the Payout Start Date, the Owner holds the voting interest in the
Sub-account of the Variable Account. (The number of votes for the Owner will be
determined by dividing the Contract Value attributable to a Sub-account by the
net asset value per share of the applicable eligible Portfolio.)
After the Payout Start Date, the person receiving income payments has the voting
interest. After the Payout Start Date, the votes decrease as income payments are
made and as the reserves for the Contract decrease. That person's number of
votes will be determined by dividing the reserve for such Contract allocated to
the applicable Sub-account by the net asset value per share of the corresponding
eligible Portfolio.
SELECTED FINANCIAL DATA
The following selected financial data for the Company should be read in
conjunction with the financial statements and notes thereto included in this
prospectus beginning on page F-1.
GLENBROOK LIFE AND ANNUITY COMPANY
SELECTED FINANCIAL DATA
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR-END FINANCIAL DATA 1997 1996 1995 1994 1993
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
For The Years Ended December 31:
Income Before Income Tax Expense. . . . . . .$ 8,764 $ 3,774 $ 4,455 $ 2,017 $ 836
Net Income. . . . . . . . . . . . . . . . . . 5,686 2,435 2,879 1,294 529
As of December 31:
Total Assets. . . . . . . . . . . . . . . . . 3,351,541 2,404,527 1,409,705 750,245 169,361
</TABLE>
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
The following discussion highlights significant factors influencing
results of operations and changes in financial position of Glenbrook Life and
Annuity Company (the "Company"). It should be read in conjunction with the
financial statements and related notes.
The Company, a wholly owned subsidiary of Allstate Life Insurance
Company ("ALIC"), which is wholly owned by Allstate Insurance Company ("AIC"), a
wholly owned subsidiary of The Allstate Corporation, markets life insurance and
annuity products through banks and broker-dealers.
The Company issues flexible premium deferred variable annuity contracts
and variable life policies, the assets and liabilities of which are legally
segregated and reflected as Separate Account assets and liabilities. Separate
Account assets and liabilities are carried at fair value in the statements of
financial position. Certain of the Separate Account investment portfolios were
initially funded with a $10.0 million seed money contribution from the Company
in 1995. During 1997, the Company liquidated its funding in the Separate Account
investment portfolios. Investment income and realized gains and losses of the
Separate Accounts, other than the portion related to the Company's
participation, accrue directly to the contractholders (net of fees) and,
therefore, are not included in the Company's statements of operations.
Results of Operations
- ---------------------
($ in thousands)
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Net investment income $ 5,304 $ 3,774 $ 3,996
======= ======= =======
Realized capital gains and losses, after-tax $ 2,249 $ - $ 298
======= ======= =======
Net income $ 5,686 $ 2,435 $ 2,879
======= ======= =======
Investments $90,474 $50,676 $50,917
======= ======= =======
</TABLE>
The Company and ALIC entered into a reinsurance agreement effective
June 5, 1992. All business issued subsequent to that date is ceded to ALIC. Life
insurance in force prior to that date is ceded to non-affiliated reinsurers. The
Company's results of operations include only investment income and realized
capital gains and losses earned on the assets of the Company that are not
transferred to ALIC under the reinsurance agreement.
Net income increased $3.3 million in 1997 due to realized capital gains
arising primarily from the withdrawal of the seed money from the Separate
Account and the increase in net investment income. The $444 thousand decrease in
net income in 1996 reflects the decrease in net investment income and realized
capital gains.
Pretax net investment income in 1997 increased 40.5%, or $1.5 million,
to $5.3 million compared to $3.8 million in 1996. This higher net investment
income was caused by a significant increase in the level of investments
primarily arising from a $20.0 million capital contribution received from ALIC
in January 1997 and the liquidation of the Company's seed money investment in
the Separate Account, partially offset by an increase in investment expenses.
Net investment income decreased $222 thousand in 1996 due to the impact of the
Company's $10.0 million original investment in the variable funds of the
Separate Account, whose assets are invested predominantly in equity securities.
The dividend yield on the variable funds is significantly below the level of
interest earned on fixed income securities in which the $10.0 million was
invested prior to the fourth quarter of 1995. This decrease in
<PAGE>
income was partially offset by additional investment income earned on the
higher investment balances arising from positive cash flows from operating
activities in 1996.
Realized capital gains after tax of $2.2 million in 1997 were
associated primarily with the withdrawal of the investment in Separate Account
portfolios. Realized capital gains after tax of $298 thousand in 1995 were the
result of sales of investments to fund the Company's participation in the
Separate Accounts.
Financial Position
- ------------------
($ in thousands)
<TABLE>
<CAPTION>
1997 1996
------------ -----------
<S> <C> <C>
Fixed income securities (1) $ 86,243 $ 49,389
Short-term investments 4,231 1,287
------------ -----------
Total investments $ 90,474 $ 50,676
============ ===========
Reinsurance recoverable from ALIC $ 2,637,983 $ 2,060,419
============ ===========
Separate Account assets $ 620,535 $ 272,420
============ ===========
Contractholder funds $ 2,637,983 $ 2,060,419
============ ===========
Separate Account liabilities $ 620,535 $ 260,290
============ ===========
</TABLE>
(1) Fixed income securities are carried at fair value. Amortized
cost for these securities was $81,369 and $46,925 at December
31, 1997 and 1996, respectively.
The Company's fixed income securities portfolio consists of
mortgage-backed securities, U.S. government bonds, publicly traded corporate
bonds and tax-exempt municipal bonds. The Company generally holds its fixed
income securities for the long term, but has classified all of these securities
available for sale to allow maximum flexibility in portfolio management.
Investments grew $39.8 million, or 78.5%, during 1997. The increase in
investments is primarily due to the receipt of a $20.0 million capital
contribution from ALIC in January 1997 and liquidation of the seed money from
the Separate Account during 1997. In addition, at December 31, 1997, unrealized
net capital gains on the fixed income securities portfolio were $4.9 million
compared to $2.5 million as of December 31, 1996, primarily attributable to the
increase in the Company's fixed income securities portfolio during 1997.
At the end of 1997, all of the Company's fixed income securities
portfolio is rated investment grade, with a National Association of Insurance
Commissioners ("NAIC") rating of 1 or a Moody's rating of Aaa, Aa or A.
At December 31, 1997 and 1996, $31.9 million and $16.4 million,
respectively, of the fixed income securities portfolio were invested in
mortgage-backed securities ("MBS"). At December 31,
<PAGE>
1997, all of the MBS had underlying collateral that is guaranteed by U.S.
government entities, thus credit risk was minimal.
MBS, however, are subject to interest rate risk as the duration and
ultimate realized yield are affected by the rate of repayment of the underlying
mortgages. The Company attempts to limit interest rate risk by purchasing MBS
whose cost does not significantly exceed par value, and with repayment
protection to provide a more certain cash flow to the Company. At December 31,
1997, the amortized cost of the MBS portfolio was below par value by $417
thousand and over 31% of the MBS portfolio was invested in planned amortization
class bonds. This type of MBS is purchased to provide additional protection
against rising interest rates.
The Company closely monitors its fixed income securities portfolio for
declines in value that are other than temporary. Securities are placed on
non-accrual status when they are in default or when the receipt of interest
payments is in doubt.
The Company's short-term investment portfolio was $4.2 million and $1.3
million at December 31, 1997 and 1996, respectively. The Company invests
available cash balances primarily in taxable short-term securities having a
final maturity date or redemption date of one year or less.
During 1997, contractholder funds and amounts recoverable from ALIC
under the reinsurance agreement increased by $577.6 million. The increases
resulted from sales of the Company's single and flexible premium deferred
annuities, interest credited to contractholders, partially offset by surrenders,
withdrawals and benefits paid. Reinsurance recoverable from ALIC relates to
contract benefit obligations ceded to ALIC.
Separate Account assets increased by $348.1 million and Separate
Account liabilities increased by $360.2 million as compared with December 31,
1996. The increases were primarily attributable to increased sales of flexible
premium deferred variable annuity contracts and the favorable investment
performance of the Separate Account investment portfolios, partially offset by
variable annuity surrenders and withdrawals. Additionally, the Separate Account
asset was reduced by the Company's liquidation of its seed money investment
during 1997.
Market Risk
- -----------
Market risk is the risk that the Company will incur losses due to
adverse changes in market rates and prices. The Company's primary market risk
exposure is to changes in interest rates. Interest rate risk is the risk that
the Company will incur economic losses due to adverse changes in interest rates,
as the Company invests substantial funds in interest-sensitive assets.
One way to quantify this exposure is duration. Duration measures the
sensitivity of the fair value of assets to changes in interest rates. For
example, if interest rates increase 1%, the fair value of an asset with a
duration of 5 years is expected to decrease in value by approximately 5%. At
December 31, 1997, the Company's asset duration was approximately 5.3 years.
To calculate duration, the Company projects asset cash flows, and
discounts them to a net present value basis using a risk-free market rate
adjusted for credit quality, sector attributes, liquidity and other specific
risks. Duration is calculated by revaluing these cash flows at an alternative
level of interest rates, and determining the percentage change in fair value
from the base case. The projections include assumptions (based upon historical
market and Company specific experience) reflecting the impact of changing
interest rates on the prepayment and/or option features of instruments, where
applicable. Such
<PAGE>
assumptions relate primarily to mortgage-backed securities, collateralized
mortgage obligations, and municipal and corporate obligations.
Based upon the information and assumptions the Company uses in its
duration calculation and in effect at December 31, 1997, management estimates
that a 100 basis point immediate, parallel increase in interest rates ("rate
shock") would decrease the net fair value of its total investments by
approximately $4.5 million. The selection of a 100 basis point immediate rate
shock should not be construed as a prediction by the Company's management of
future market events; but rather, to illustrate the potential impact of such an
event.
To the extent that actual results differ from the assumptions utilized,
the Company's duration and rate shock measures could be significantly impacted.
Additionally, the Company's calculation assumes that the current relationship
between short-term and long-term interest rates (the term structure of interest
rates) will remain constant over time. As a result, these calculations may not
fully capture the impact of non-parallel changes in the term structure of
interest rates and/or large changes in interest rates.
In formulating and implementing policies for investing new and existing
funds, AIC, as parent company of ALIC, administers and oversees investment risk
management processes primarily through three oversight bodies: the Boards of
Directors and Investment Committees of its operating subsidiaries, and the
Credit and Risk Management Committee ("CRMC"). The Boards of Directors and
Investment Committees provide executive oversight of investment activities. The
CRMC is a senior management committee consisting of the Chief Investment
Officer, the Investment Risk Manager, and other investment officers who are
responsible for the day-to-day management of market risk. The CRMC meets at
least monthly to provide detailed oversight of investment risk, including market
risk.
AIC has investment guidelines that define the overall framework for
managing market and other investment risks, including the accountabilities and
controls over these activities. In addition, AIC has specific investment
policies for each of its affiliates, including the Company, that delineate the
investment limits and strategies that are appropriate for the Company's
liquidity, surplus, product and regulatory requirements.
Liquidity and Capital Resources
- -------------------------------
In January 1997, a $20.0 million capital contribution that was accrued
at December 31, 1996 was received from ALIC.
Under the terms of reinsurance agreements, premiums and deposits on
universal life policies and investment contracts, excluding those relating to
Separate Accounts, are transferred to ALIC, which maintains the investment
portfolios supporting the Company's products. The Company continues to have
primary liability as a direct insurer for risks reinsured.
The NAIC has a standard for assessing the solvency of insurance
companies, which is referred to as risk-based capital ("RBC"). The requirement
consists of a formula for determining each insurer's RBC and a model law
specifying regulatory actions if an insurer's RBC falls below specified levels.
The RBC formula for life insurance companies establishes capital requirements
relating to insurance,
<PAGE>
business, asset and interest rate risks. At December 31, 1997, RBC for the
Company was significantly above a level that would require regulatory action.
Year 2000
- ---------
The Company is heavily dependent upon complex computer systems for all
phases of its operations, including customer service, and policy and contract
administration. Since many of the Company's older computer software programs
recognize only the last two digits of the year in any date, some software may
fail to operate properly in or after the year 1999, if the software is not
reprogrammed or replaced, ("Year 2000 Issue"). The Company believes that many of
its counterparties and suppliers also have Year 2000 Issues which could affect
the Company. In 1995, AIC commenced a plan intended to mitigate and/or prevent
the adverse effects of Year 2000 Issues. These strategies include normal
development and enhancement of new and existing systems, upgrades to operating
systems already covered by maintenance agreements and modifications to existing
systems to make them Year 2000 compliant. The plan also includes the Company
actively working with its major external counterparties and suppliers to assess
their compliance efforts and the Company's exposure to them. The Company
presently believes that it will resolve the Year 2000 Issue in a timely manner,
and the financial impact will not materially affect its results of operations,
liquidity or financial position. Year 2000 costs are and will be expensed as
incurred.
Pending Accounting Standards
- ----------------------------
In June 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards ("SFAS") No. 130 "Reporting Comprehensive
Income" and SFAS No. 131 "Disclosures About Segments of an Enterprise and
Related Information." SFAS No. 130 requires the presentation of comprehensive
income in the financial statements. Comprehensive income is a measurement of all
changes in equity that result from transactions and other economic events other
than transactions with stockholders. The requirements of this statement will be
adopted effective January 1, 1998.
SFAS No. 131 redefines how segments are determined and requires
additional segment disclosures for both annual and quarterly reporting. Under
this statement, segments are determined using the "management approach" for
financial statement reporting. The management approach is based on the way an
enterprise makes operating decisions and assesses performance of its businesses.
The Company is currently reviewing the requirements of the SFAS and has yet to
determine its impact on its current reporting segments. The requirements of this
statement will be adopted effective December 31, 1998.
In December 1997, the Accounting Standards Executive Committee of the
American Institute of Certified Public Accountants ("AICPA") issued Statement of
Position ("SOP") 97-3, "Accounting by Insurance and Other Enterprises for
Insurance-related Assessments." The SOP provides guidance concerning when to
recognize a liability for insurance-related assessments and how those
liabilities should be measured. Specifically, insurance-related assessments
should be recognized as liabilities when all of the following criteria have been
met: a) an assessment has been imposed or it is probable that an assessment will
be imposed, b) the event obligating an entity to pay an assessment has occurred
and c) the amount of the assessment can be reasonably estimated. The
requirements of this standard will be adopted in 1999 and are not expected to
have a material impact on the results of operations, cash flows or financial
position of the Company. The SOP is expected to be adopted in 1999.
In March 1998, the Accounting Standards Executive Committee of the
AICPA issued SOP 98-1, "Accounting for the Costs of Computer Software Developed
or Obtained for Internal Use." The SOP
<PAGE>
provides guidance on accounting for the costs of computer software developed or
obtained for internal use. Specifically, certain external, payroll and payroll
related costs should be capitalized during the application development state of
a project and depreciated over the computer software's useful life. The Company
currently expenses these costs as incurred and is evaluating the effects of
this SOP on its accounting for internally developed software. The SOP is
expected to be adopted in 1998.
Forward-Looking Statements
- --------------------------
The statements contained in this Management's Discussion and Analysis
that are not historical information are forward-looking statements that are
based on management's estimates, assumptions and projections. The Private
Securities Litigation Reform Act of 1995 provides a safe harbor under The
Securities Act of 1933 and The Securities Exchange Act of 1934 for
forward-looking statements.
<PAGE>
COMPETITION
The Company is engaged in a business that is highly competitive because of the
large number of stock and mutual life insurance companies and other entities
competing in the sale of insurance and annuities. There are approximately 2,000
stock, mutual and other types of insurers in business in the United States.
Several independent rating agencies regularly evaluate life insurer's
claims-paying ability, quality of investments and overall stability. A.M. Best
Company assigns A+ (Superior) to Allstate Life which automatically reinsures all
net business of the Company. A.M. Best Company also assigns the Company the
rating of A+(r) because the Company automatically reinsures all net business
with Allstate Life. Standard & Poor's Insurance Rating Services assigns AA+
(Excellent) to Glenbrook Life's claims-paying ability and Moody's assigns an Aa2
(Excellent) financial strength rating to Glenbrook Life. These ratings do not
relate to the investment performance of the Variable Account.
EMPLOYEES
As of December 31, 1997, the Company had approximately 125 employees at its home
office in Northbrook, Illinois.
PROPERTIES
The Company occupies office space provided by Allstate Insurance Company, in
Northbrook, Illinois. Expenses associated with these offices are allocated on a
direct and indirect basis to the Company.
STATE AND FEDERAL REGULATION
The insurance business of the Company is subject to comprehensive and detailed
regulation and supervision throughout the United States. The laws of the various
jurisdictions establish supervisory agencies with broad administrative powers
with respect to licensing to transact business,
<PAGE>
overseeing trade practices, licensing agents, approving policy forms,
establishing reserve requirements, fixing maximum interest rates on life
insurance policy loans and minimum rates for accumulation of surrender values,
prescribing the form and content of required financial statements and regulating
the type and amounts of investments permitted. Each insurance company is
required to file detailed annual reports with supervisory agencies in each of
the jurisdictions in which it does business and its operations and accounts are
subject to examination by such agencies at regular intervals.
Under insurance guaranty fund law, in most states, insurers doing business
therein can be assessed up to prescribed limits for contract owner losses
incurred as a result of company insolvencies. The amount of any future
assessments on the Company under these laws cannot be reasonably estimated. Most
of these laws do provide, however, that an assessment may be excused or deferred
if it would threaten an insurer's own financial strength.
In addition, several states, including Illinois, regulate affiliated groups of
insurers, such as the Company and its affiliates, under insurance holding
company legislation. Under such laws, intercompany transfers of assets and
dividend payments from insurance subsidiaries may be subject to prior notice or
approval, depending on the size of such transfers and payments in relation to
the financial positions of the companies.
Although the federal government generally does not directly regulate the
business of insurance, federal initiatives often have an impact on the business
in a variety of ways. Current and proposed federal measures which may
significantly affect the insurance business include employee benefit regulation,
controls on medical care costs, removal of barriers preventing banks from
engaging in the securities and insurance business, tax law changes affecting the
taxation of insurance companies, the tax treatment of insurance products and its
impact on the relative desirability of various personal investment vehicles, and
proposed legislation to prohibit the use of gender in determining insurance and
pension rates and benefits.
EXECUTIVE OFFICERS AND DIRECTORS OF THE COMPANY
The directors and executive officers are listed below, together with information
as to their ages, dates of election and principal business occupations during
the last five years (if other than their present business occupations).
LOUIS G. LOWER, II, 52, Chief Executive Officer and Chairman of the Board
(1995)*
Also Director (1986-Present) and Senior Vice President (1995-Present) of
Allstate Insurance Company; Director (1991-Present) of Allstate Life Financial
Services, Inc.; Director (1986-Present) and President (1990-Present) Allstate
Life Insurance Company; Director (1983-Present) and Chairman of the Board
(1990-Present) of Allstate Life Insurance Company of New York; Director
(1990-1997), Chairman of the Board of Directors and Chief Executive Officer
(1995-1997), Chairman of the Board of Directors and President (1990-1995) of
Glenbrook Life Insurance Company; Director and Chairman of the Board
(1995-Present) of Laughlin Group Holdings, Inc.; Director and Chairman of the
Board of Directors and Chief Executive Officer (1989-Present) Lincoln Benefit
Life Company; Director (1986-Present), Chairman of the Board of Directors and
Chief Executive Officer (1995-Present) of Northbrook Life Insurance Company; and
Chairman of the Board of Directors and Chief Executive Officer (1995-Present)
Surety Life Insurance Company.
PETER H. HECKMAN, 52, President, Chief Operating Officer and Director (1996)*
Also Director and Vice President (1988-Present) of Allstate Life Insurance
Company; Director (1990-1996), Vice President (1989-Present), Allstate Life
Insurance Company of New York; Director (1990-1997), President and Chief
Operating Officer (1996-1997), and Vice President (1990-1996), Glenbrook Life
Insurance Company; Director (1995-Present) and Vice Chairman of the Board
(1996-Present) Laughlin Group Holdings, Inc.; Director (1990-Present) and Vice
Chairman of the Board (1996-Present) Lincoln Benefit Life Company; Director
(1988-Present) President and Chief Operating Officer (1996-Present), and was
Vice President (1989-1996), Northbrook Life Insurance Company; and Director
(1995-Present) and Vice Chairman of the Board (1996-Present) Surety Life
Insurance Company.
MICHAEL J. VELOTTA, 52, Vice President, Secretary, General Counsel, and Director
(1992)*
Also Director and Secretary (1993-Present) of Allstate Life Financial Services,
Inc.; Director (1992-Present) Vice President, Secretary and General Counsel
(1993-Present) Allstate Life Insurance Company; Director (1992-Present) Vice
President, Secretary and General Counsel (1993-Present) Allstate Life Insurance
Company of New York; Director (1992-1997) Vice President, Secretary and General
Counsel (1993-1997) Glenbrook Life Insurance Company; Director and Secretary
(1995-Present) Laughlin Group Holdings, Inc.; Director (1992-Present) and
Assistant Secretary (1995-Present) Lincoln Benefit Life Company; Director
(1992-Present) Vice President, Secretary and General Counsel (1993-Present)
Northbrook Life Insurance Company; and Director and Assistant Secretary
(1995-Present) Surety Life Insurance Company.
JOHN R. HUNTER, 43, Director (1996)*
Also Assistant Vice President (1990-Present) Allstate Life Insurance Company;
Assistant Vice President (1996-Present) Allstate Life Insurance Company of New
York; President and Chief Operating Officer (1998-Present) Allstate Life
Financial Services Inc.; Director (1996-1997) Glenbrook Life Insurance Company;
and Director (1994-Present) and Assistant Vice President (1990-Present)
Northbrook Life Insurance Company.
<PAGE>
G. CRAIG WHITEHEAD, 51, Senior Vice President and Director (1995)*
Also Assistant Vice President (1991-Present) Allstate Life Insurance Company;
Director (1994-1997) Assistant Vice President (1991-1997) Glenbrook Life
Insurance Company; Assistant Vice President (1992-Present) Secretary (1995)
Glenbrook Life and Annuity Company; Director (1995-Present) Laughlin Group
Holdings, Inc.
MARLA G. FRIEDMAN, 44, Vice President (1996)*
Also Director (1991-Present) and Vice President (1988-Present) Allstate Life
Insurance Company; Director (1993-1996) Allstate Life Financial Services, Inc.;
Director (1997-Present) and Assistant Vice President (1996-Present) Allstate
Life Insurance Company of New York; Director (1991-1996), President and Chief
Operating Officer (1995-1996) and Vice President (1990-1995) and (1996-1997)
Glenbrook Life Insurance Company; Director and Vice Chairman of the Board
(1995-1996) Laughlin Group Holdings, Inc.; and Director (1989-1996), President
and Chief Operating Officer (1995-1996) and Vice President (1996-Present)
Northbrook Life Insurance Company.
KEVIN R. SLAWIN, 40, Vice President (1996)*
Also Assistant Vice President and Assistant Treasurer (1995-1996) Allstate
Insurance Company; Director (1996-Present) and Assistant Treasurer (1995-1996)
Allstate Life Financial Services, Inc.; Director and Vice President
(1996-Present) and Assistant Treasurer (1995-1996) Allstate Life Insurance
Company; Director and Vice President (1996-Present) and Assistant Treasurer
(1995-1996) Allstate Life Insurance Company of New York; Director and Vice
President (1996-1997) and Assistant Treasurer (1995-1996) Glenbrook Life
Insurance Company; Director (1996-Present) and Assistant Treasurer (1995-1996)
Laughlin Group Holdings, Inc.; Director (1996-Present) Lincoln Benefit Life
Company; Director and Vice President (1996-Present) and Assistant Treasurer
(1995-1996) Northbrook Life Insurance Company; Director (1996-Present) Surety
Life Insurance Company; and Assistant Treasurer and Director (1994-1995) Sears
Roebuck and Co.; and Treasurer and First Vice President (1986-1994) Sears
Mortgage Corporation.
CASEY J. SYLLA, 54, Chief Investment Officer (1995)*
Also Director (1995-Present ) Senior Vice President and Chief Investment Officer
(1995-Present) Allstate Insurance Company; Director (1995-Present) Chief
Investment Officer (1995-Present) Allstate Life Insurance Company; Chief
Investment Officer (1995-Present) Allstate Life Insurance Company of New York;
Chief Investment Officer (1995-1997) Glenbrook Life Insurance Company; and
Director and Chief Investment Officer (1995-Present) Northbrook Life Insurance
Company. Prior to 1995 he was Senior Vice President and Executive
Officer-Investments (1992-1995) of Northwestern Mutual Life Insurance Company.
JAMES P. ZILS, 47, Treasurer (1995)*
Also Vice President and Treasurer (1995-Present) Allstate Insurance Company;
Treasurer (1995-Present) Allstate Life Financial Services, Inc.; Treasurer
(1995-Present) Allstate Life Insurance Company; Treasurer (1995-Present)
Allstate Life Insurance Company of New York; Treasurer (1995-1997) Glenbrook
Life Insurance Company; Treasurer (1995-Present) Laughlin Group Holdings, Inc.;
and Treasurer (1995-Present) Northbrook Life Insurance Company. From 1993 to
1995, he was Vice President of Allstate Life Insurance Company.
* Date elected to current office.
EXECUTIVE COMPENSATION
Executive officers of the Company also serve as officers of Allstate Life and
receive no compensation directly from the Company. Some of the officers also
serve as officers of other companies affiliated with the Company. Allocations
have been made as to each individual's time devoted to his or her duties as an
executive officer of the Company. However, no officer's compensation allocated
to the Company exceeded $100,000 in 1997. The allocated cash compensation of all
officers of the Company as a group for services rendered in all capacities to
the Company during 1997 totaled $214,774.75. Directors of the Company receive no
compensation in addition to their compensation as employees of the Company.
Shares of the Company and Allstate Life are not directly owned by any director
or officer of the Company. The percentage of shares of The Allstate Corporation
beneficially owned by any director, and by all directors and officers of the
Company as a group, does not exceed one percent of the class outstanding.
<PAGE>
SUMMARY COMPENSATION TABLE
(ALLSTATE LIFE INSURANCE COMPANY)
<TABLE>
<CAPTION>
LONG TERM COMPENSATION
----------------------
ANNUAL COMPENSATION AWARDS PAYOUTS
------------------- ------ -------
(a) (b) (c) (d) (e) (f) (g) (h) (i)
Securities
Underlying
Other Annual Restricted Options/ LTIP All Other
Salary Bonus Compensation Stock SARS Payouts Compensation
Name and Principal Position Year ($) ($) $ Award(s) (#) ($) ($)
---- --- --- - -------- --- --- ---
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Louis G. Lower, II.. . . . . . 1997 $453,225 $500,000 $27,768 $280,589 $25,914 $570,068 $8,000(1)
Chief Executive Officer. . . . 1996 $436,800 $246,781 $10,246 $0 $18,258 $0 $5,250(1)
and Chairman of the Board . . 1995 $416,000 $286,650 $17,044 $0 $89,359 $411,122 $5,250(1)
of Directors
</TABLE>
(1) Amount received by Mr. Lower which represents the value allocated to his
account from employer contributions under The Savings and Profit Sharing
Fund of Allstate Employees and prior to 1996, The Profit Sharing Fund and
to its predecessor, The Savings and Profit Sharing Fund of Sears employees.
LEGAL PROCEEDINGS
From time to time the Company is involved in pending and threatened litigation
in the normal course of its business in which claims for monetary damages are
asserted. Management, after consultation with legal counsel, does not anticipate
the ultimate liability arising from such pending or threatened litigation to
have a material effect on the financial condition of the Company.
EXPERTS
The financial statements and financial statement schedule of the Company
included in this prospectus, have been audited by Deloitte & Touche LLP, Two
Prudential Plaza, 180 North Stetson Avenue, Chicago, Illinois, 60601-6779,
independent auditors, as stated in their report appearing herein, and are
included in reliance upon the report of such firm given upon their authority as
experts in accounting and auditing.
LEGAL MATTERS
Freedman, Levy, Kroll & Simonds, of Washington, D.C., has advised the Company on
certain federal securities law matters. All matters of Illinois law pertaining
to the Contracts, including the validity of the Contracts and the Company's
right to issue such Contracts under Illinois insurance law, have been passed
upon by Michael J. Velotta, General Counsel of the Company.
<PAGE>
INDEPENDENT AUDITORS' REPORT
TO THE BOARD OF DIRECTORS AND SHAREHOLDER OF
GLENBROOK LIFE AND ANNUITY COMPANY:
We have audited the accompanying Statements of Financial Position of Glenbrook
Life and Annuity Company (the "Company") as of December 31, 1997 and 1996, and
the related Statements of Operations, Shareholder's Equity and Cash Flows for
each of the three years in the period ended December 31, 1997. Our audits also
included Schedule IV - Reinsurance. These financial statements and financial
statement schedule are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements and
financial statement schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all material
respects, the financial position of the Company as of December 31, 1997 and
1996, and the results of its operations and its cash flows for each of the three
years in the period ended December 31, 1997 in conformity with generally
accepted accounting principles. Also, in our opinion, Schedule IV - Reinsurance,
when considered in relation to the basic financial statements taken as a whole,
presents fairly, in all material respects, the information set forth therein.
/s/ Deloitte & Touche LLP
Chicago, Illinois
February 20, 1998
F-1
<PAGE>
GLENBROOK LIFE AND ANNUITY COMPANY
STATEMENTS OF FINANCIAL POSITION
<TABLE>
<CAPTION>
December 31,
------------
($ in thousands) 1997 1996
---------- ---------
<S> <C> <C>
ASSETS
Investments
Fixed income securities, at fair value
(amortized cost $81,369 and $46,925) $ 86,243 $ 49,389
Short-term 4,231 1,287
--------------- ---------------
Total investments 90,474 50,676
Reinsurance recoverable from Allstate Life Insurance
Company 2,637,983 2,060,419
Net receivable from affiliates - 18,963
Other assets 2,549 2,049
Separate Accounts 620,535 272,420
--------------- ---------------
Total assets $ 3,351,541 $ 2,404,527
=============== ===============
LIABILITIES
Contractholder funds $ 2,637,983 $ 2,060,419
Income taxes payable 609 410
Deferred income taxes 1,772 1,528
Net payable to affiliates 2,698 -
Separate Accounts 620,535 260,290
--------------- ---------------
Total liabilities 3,263,597 2,322,647
=============== ===============
SHAREHOLDER'S EQUITY
Common stock, $500 par value, 4,200 shares
authorized, issued, and outstanding 2,100 2,100
Additional capital paid-in 69,641 69,641
Unrealized net capital gains 3,168 2,790
Retained income 13,035 7,349
--------------- ---------------
Total shareholder's equity 87,944 81,880
--------------- ---------------
Total liabilities and shareholder's equity $ 3,351,541 $ 2,404,527
=============== ===============
</TABLE>
See notes to financial statements.
F-2
<PAGE>
GLENBROOK LIFE AND ANNUITY COMPANY
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Year Ended December 31,
-----------------------
($ in thousands) 1997 1996 1995
---------------- --------------- ----------------
<S> <C> <C> <C>
REVENUES
Net investment income $ 5,304 $ 3,774 $ 3,996
Realized capital gains and losses 3,460 - 459
---------------- --------------- ----------------
INCOME BEFORE INCOME TAX EXPENSE 8,764 3,774 4,455
INCOME TAX EXPENSE 3,078 1,339 1,576
---------------- --------------- ----------------
NET INCOME $ 5,686 $ 2,435 $ 2,879
================ =============== ================
</TABLE>
See notes to financial statements.
F-3
<PAGE>
GLENBROOK LIFE AND ANNUITY COMPANY
STATEMENTS OF SHAREHOLDER'S EQUITY
<TABLE>
<CAPTION>
Year Ended December 31,
-----------------------
($ in thousands) 1997 1996 1995
--------------- --------------- ---------------
<S> <C> <C> <C>
COMMON STOCK $ 2,100 $ 2,100 $ 2,100
--------------- --------------- ---------------
ADDITIONAL CAPITAL PAID-IN
Balance, beginning of year 69,641 49,641 49,641
Capital contributions - 20,000 -
--------------- --------------- ---------------
Balance, end of year 69,641 69,641 49,641
--------------- --------------- ---------------
UNREALIZED NET CAPITAL GAINS
Balance, beginning of year 2,790 3,357 (1,118)
Net change 378 (567) 4,475
--------------- --------------- ---------------
Balance, end of year 3,168 2,790 3,357
--------------- --------------- ---------------
RETAINED INCOME
Balance, beginning of year 7,349 4,914 2,035
Net income 5,686 2,435 2,879
--------------- --------------- ---------------
Balance, end of year 13,035 7,349 4,914
--------------- --------------- ---------------
Total shareholder's equity $ 87,944 $ 81,880 $ 60,012
=============== =============== ===============
</TABLE>
See notes to financial statements.
F-4
<PAGE>
GLENBROOK LIFE AND ANNUITY COMPANY
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Year Ended December 31,
-----------------------
($ in thousands) 1997 1996 1995
------------ ------------ ------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 5,686 $ 2,435 $ 2,879
Adjustments to reconcile net income to net cash
provided by operating activities
Depreciation, amortization and other non-cash
items 29 - -
Realized capital gains and losses (3,460) - (459)
Change in deferred income taxes 41 4 (39)
Changes in other operating assets and liabilities 1,160 (510) 1,217
------------ ------------ ------------
Net cash provided by operating activities 3,456 1,929 3,598
------------ ------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES
Fixed income securities
Proceeds from sales 1,405 - 7,836
Investment collections 14,217 2,891 1,568
Investment purchases (50,115) (5,667) (1,491)
Participation in Separate Accounts 13,981 (232) (10,069)
Change in short-term investments, net (2,944) 815 (1,178)
------------ ------------ ------------
Net cash used in investing activities (23,456) (2,193) (3,334)
------------ ------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES
Capital contribution 20,000 - -
------------ ------------ ------------
Net cash provided by financing activities 20,000 - -
------------ ------------ ------------
NET (DECREASE) INCREASE IN CASH - (264) 264
CASH AT BEGINNING OF YEAR - 264 -
------------ ------------ ------------
CASH AT END OF YEAR $ - $ - $ 264
============ ============ ============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION
Noncash financing activity:
Capital contribution receivable from
Allstate Life Insurance Company $ - $ 20,000 $ -
============ ============ ============
</TABLE>
See notes to financial statements.
F-5
<PAGE>
GLENBROOK LIFE AND ANNUITY COMPANY
NOTES TO FINANCIAL STATEMENTS
($ IN THOUSANDS)
1. GENERAL
BASIS OF PRESENTATION
The accompanying financial statements include the accounts of Glenbrook Life and
Annuity Company (the "Company"), a wholly owned subsidiary of Allstate Life
Insurance Company ("ALIC"), which is wholly owned by Allstate Insurance Company
("AIC"), a wholly owned subsidiary of The Allstate Corporation (the
"Corporation"). On June 30, 1995, Sears, Roebuck and Co. ("Sears") distributed
its 80.3% ownership in the Corporation to Sears common shareholders through a
tax-free dividend (the "Distribution"). These financial statements have been
prepared in conformity with generally accepted accounting principles.
To conform with the 1997 presentation, certain amounts in the prior years'
financial statements and notes have been reclassified.
NATURE OF OPERATIONS
The Company markets life insurance and annuity products in the United States
through banks and broker-dealers. Life insurance includes both
interest-sensitive and variable life insurance products. Annuities include
deferred annuities, such as variable annuities and fixed rate flexible premium
annuities. The Company has entered into exclusive distribution arrangements with
management investment companies to market its variable annuity contracts.
Annuity contracts and life insurance policies issued by the Company are subject
to discretionary withdrawal or surrender by customers, subject to applicable
surrender charges. These policies and contracts are reinsured with ALIC (see
Note 3), which invests premiums and deposits to provide cash flows that will be
used to fund future benefits and expenses. In order to support competitive
crediting rates and limit interest rate risk, ALIC, as the Company's reinsurer,
adheres to a basic philosophy of matching assets with related liabilities while
maintaining adequate liquidity and a prudent and diversified level of credit
risk.
The Company monitors economic and regulatory developments which have the
potential to impact its business. There continues to be new and proposed federal
and state regulation and legislation that would allow banks greater
participation in the securities and insurance businesses, which will present an
increased level of competition for sales of the Company's life and annuity
products. Furthermore, the market for deferred annuities and interest-sensitive
life insurance is enhanced by the tax incentives available under current law.
Any legislative changes which lessen these incentives are likely to negatively
impact the demand for these products.
Although the Company currently benefits from agreements with financial services
entities who market and distribute its products, consolidation within that
industry and specifically, a change in control of those entities with which the
Company partners, could affect the Company's sales.
F-6
<PAGE>
GLENBROOK LIFE AND ANNUITY COMPANY
NOTES TO FINANCIAL STATEMENTS
($ IN THOUSANDS)
Enacted and pending state legislation to permit mutual insurance companies to
convert to a hybrid structure known as a mutual holding company could have a
number of significant effects on the Company by (1) increasing industry
competition through consolidation caused by mergers and acquisitions related to
the new corporate form of business; (2) increasing competition in capital
markets; and (3) reopening stock/mutual company disagreements related to such
issues as taxation disparity between mutual and stock insurance companies.
The Company is authorized to sell life and annuity products in all states except
New York, as well as in the District of Columbia. The Company is also authorized
to sell variable annuities in Puerto Rico. The top geographic locations for
statutory premiums and deposits earned by the Company are Florida, Pennsylvania,
California, Texas and Michigan for the year ended December 31, 1997. No other
jurisdiction accounted for more than 5% of statutory premiums and deposits. All
premiums and contract charges are ceded to ALIC under reinsurance agreements.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
INVESTMENTS
Fixed income securities include bonds and mortgage-backed securities. All fixed
income securities are carried at fair value and may be sold prior to their
contractual maturity ( "available for sale"). The difference between amortized
cost and fair value, net of deferred income taxes, is reflected as a component
of shareholder's equity. Provisions are recognized for declines in the value of
fixed income securities that are other than temporary. Such writedowns are
included in realized capital gains and losses. Short-term investments are
carried at cost which approximates fair value.
Investment income consists primarily of interest, which is recognized on an
accrual basis. Interest income on mortgage-backed securities is determined on
the effective yield method, based on the estimated principal repayments. Accrual
of income is suspended for fixed income securities that are in default or when
the receipt of interest payments is in doubt. Realized capital gains and losses
are determined on a specific identification basis.
REINSURANCE
The Company and ALIC entered into a reinsurance agreement effective June 5,
1992. All business issued subsequent to that date is ceded to ALIC. Life
insurance in force prior to that date is ceded to non-affiliated reinsurers.
Contract charges, credited interest, policy benefits and certain expenses are
ceded to ALIC and reflected net of such cessions in the statements of
operations. The amounts shown in the Company's statements of operations relate
to the investment of those assets of the Company that are not transferred to
ALIC under the reinsurance agreements. Reinsurance recoverable and
contractholder funds are reported separately in the statements of financial
position. The Company continues to have primary liability as the direct insurer
for risks reinsured.
RECOGNITION OF PREMIUM REVENUE AND CONTRACT CHARGES
Revenues on interest-sensitive life insurance policies are comprised of
contract charges and fees, and are recognized when assessed against the
policyholder account balance. Revenues on annuities, which are
considered investment contracts, include contract charges and fees for
contract administration and surrenders. These revenues are recognized
when levied against the contract balance.
F-7
<PAGE>
GLENBROOK LIFE AND ANNUITY COMPANY
NOTES TO FINANCIAL STATEMENTS
($ IN THOUSANDS)
INCOME TAXES
The income tax provision is calculated under the liability method. Deferred tax
assets and liabilities are recorded based on the difference between the
financial statement and tax bases of assets and liabilities at the enacted tax
rates, and reflect the impact of reinsurance agreements. Deferred income taxes
arise primarily from unrealized capital gains and losses on fixed income
securities carried at fair value.
SEPARATE ACCOUNTS
The Company issues flexible premium deferred variable annuity contracts and
single premium variable life policies, the assets and liabilities of which are
legally segregated and reflected in the accompanying statements of financial
position as assets and liabilities of the Separate Accounts (Glenbrook Life and
Annuity Company Variable Annuity Account, Glenbrook Life and Annuity Company
Separate Account A, Glenbrook Life Multi-Manager Variable Account and Glenbrook
Life Variable Life Separate Account A, unit investment trusts registered with
the Securities and Exchange Commission).
Assets of the Separate Accounts, including the Company's ownership interest
("Participation"), are carried at fair value. Unrealized gains and losses on the
Company's Participation, net of deferred income taxes, are shown as a component
of shareholder's equity. Investment income and realized capital gains and losses
arising from the Participation are included in the Company's statements of
operations. The Company liquidated its Participation during 1997, resulting in a
realized capital gain of $3,515. At December 31, 1996, the Participation
amounted to $12,130.
Investment income and realized capital gains and losses of the Separate
Accounts, other than the portion related to the Participation, accrue directly
to the contractholders and, therefore, are not included in the Company's
statements of operations. Revenues to the Company from the Separate Accounts
consist of contract maintenance fees, administrative fees, mortality and expense
risk charges, cost of insurance charges and tax expense charges, all of which
are ceded to ALIC.
CONTRACTHOLDER FUNDS
Contractholder funds arise from the issuance of individual or group policies and
contracts that include an investment component, including most annuities and
universal life policies. Payments received are recorded as interest-bearing
liabilities. Contractholder funds are equal to deposits received and interest
credited to the benefit of the customer less withdrawals, mortality charges and
administrative expenses. During 1997, credited interest rates on contractholder
funds ranged from 3.55% to 7.45% for those contracts with fixed interest rates
and from 3.70% to 7.85% for those with flexible rates.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the amounts reported in the financial statements and accompanying notes.
Actual results could differ from those estimates.
F-8
<PAGE>
GLENBROOK LIFE AND ANNUITY COMPANY
NOTES TO FINANCIAL STATEMENTS
($ IN THOUSANDS)
3. RELATED PARTY TRANSACTIONS
REINSURANCE
Contract charges ceded to ALIC were $11,641, $4,254 and $1,523 in 1997, 1996 and
1995, respectively. Credited interest, policy benefits and expenses ceded to
ALIC amounted to $179,954, $113,703 and $71,905 in 1997, 1996 and 1995,
respectively. Investment income earned on the assets which support
contractholder funds is not included in the Company's financial statements as
those assets are owned and managed by ALIC under the terms of reinsurance
agreements.
BUSINESS OPERATIONS
The Company utilizes services and business facilities owned or leased, and
operated by AIC in conducting its business activities. The Company reimburses
AIC for the operating expenses incurred by AIC on behalf of the Company. The
cost to the Company is determined by various allocation methods and is primarily
related to the level of services provided. Operating expenses, including
compensation and retirement and other benefit programs, allocated to the Company
were $5,959, $759 and $348 in 1997, 1996 and 1995, respectively. Of these costs,
the Company retains investment related expenses. All other costs are ceded to
ALIC under reinsurance agreements.
LAUGHLIN GROUP
Laughlin Group, Inc. ("Laughlin") is an indirect wholly owned subsidiary of
ALIC. Laughlin markets certain of the Company's flexible premium deferred
variable annuity contracts and flexible premium deferred fixed annuity
contracts. Sales commissions paid to Laughlin, for which the related cost was
ceded to ALIC, were $945 and $8,623 during 1997 and 1996, respectively. The
Company had a receivable of $850 from Laughlin at December 31, 1996, which is
included in net receivable from affiliates in the statements of financial
position.
4. INVESTMENTS
FAIR VALUES
The amortized cost, gross unrealized gains and losses, and fair value for fixed
income securities are as follows:
<TABLE>
<CAPTION>
Gross Unrealized
Amortized ---------------- Fair
Cost Gains Losses Value
--------- ----- ------ -----
<S> <C> <C> <C> <C>
At December 31, 1997
U.S. government and agencies $ 24,419 $ 2,961 $ - $ 27,380
Municipal 656 17 - 673
Corporate 25,476 840 - 26,316
Mortgage-backed securities 30,818 1,056 - 31,874
-------- ------- --------- --------
Total fixed income securities $ 81,369 $ 4,874 $ - $ 86,243
======== ======= ========= ========
At December 31, 1996
U.S. government and agencies $ 24,265 $ 1,722 $ (3) $ 25,984
Corporate 6,970 96 (15) 7,051
Mortgage-backed securities 15,690 664 - 16,354
-------- ------- --------- --------
Total fixed income securities $ 46,925 $ 2,482 $ (18) $ 49,389
======== ======= ========= ========
</TABLE>
F-9
<PAGE>
GLENBROOK LIFE AND ANNUITY COMPANY
NOTES TO FINANCIAL STATEMENTS
($ IN THOUSANDS)
SCHEDULED MATURITIES
The scheduled maturities for fixed income securities are as follows at December
31, 1997:
<TABLE>
<CAPTION>
Amortized Fair
Cost Value
--------- -----
<S> <C> <C>
Due in one year or less $ 400 $ 400
Due after one year through five years 3,838 3,877
Due after five years through ten years 33,245 35,102
Due after ten years 13,068 14,990
----------- ------------
50,551 54,369
Mortgage-backed securities 30,818 31,874
----------- ------------
Total $ 81,369 $ 86,243
=========== ============
</TABLE>
Actual maturities may differ from those scheduled as a result of prepayments by
the issuers.
<TABLE>
<CAPTION>
NET INVESTMENT INCOME
Year Ended December 31, 1997 1996 1995
----------------------- ---- ---- ----
<S> <C> <C> <C>
Fixed income securities $ 5,014 $ 3,478 $ 3,850
Short-term investments 231 126 113
Participation in Separate Accounts 161 232 69
-------------- -------------- --------------
Investment income, before expense 5,406 3,836 4,032
Investment expense 102 62 36
-------------- -------------- --------------
Net investment income $ 5,304 $ 3,774 $ 3,996
============== ============== ==============
</TABLE>
REALIZED CAPITAL GAINS AND LOSSES
<TABLE>
<CAPTION>
Year Ended December 31, 1997 1996 1995
----------------------- ---- ---- ----
<S> <C> <C> <C>
Fixed income securities $ (61) $ - $ 459
Short-term investments 6 - -
Participation in Separate Accounts 3,515 - -
------------- ------------- -------------
Realized capital gains and losses 3,460 - 459
Income taxes (1,211) - (161)
------------- ------------- -------------
Realized capital gains and losses,
after tax $ 2,249 $ - $ 298
============= ============= =============
</TABLE>
Excluding calls and prepayments, gross losses of $61 and gross gains of $459
were realized on sales of fixed income securities during 1997 and 1995,
respectively.
F-10
<PAGE>
GLENBROOK LIFE AND ANNUITY COMPANY
NOTES TO FINANCIAL STATEMENTS
($ IN THOUSANDS)
UNREALIZED NET CAPITAL GAINS
Unrealized net capital gains on fixed income securities included in
shareholder's equity at December 31, 1997 are as follows:
<TABLE>
<CAPTION>
Cost/ Unrealized
Amortized Fair Net
Cost Value Gains
--------- ----- -----------
<S> <C> <C> <C>
Fixed income securities $ 81,369 $ 86,243 $ 4,874
Deferred income taxes ======== ======== (1,706)
-------
Unrealized net capital gains $ 3,168
=======
</TABLE>
CHANGE IN UNREALIZED NET CAPITAL GAINS
<TABLE>
<CAPTION>
Year Ended December 31, 1997 1996 1995
- ----------------------- ---- ---- ----
<S> <C> <C> <C>
Fixed income securities $ 2,410 $ (2,239) $ 6,423
Participation in Separate Accounts (1,829) 1,368 461
Deferred income taxes (203) 304 (2,409)
------------- ------------- -------------
Increase (decrease) in unrealized net capital gains $ 378 $ (567) $ 4,475
============= ============== =============
</TABLE>
SECURITIES ON DEPOSIT
At December 31, 1997, fixed income securities with a carrying value of
$10,108 were on deposit with regulatory authorities as required by law.
5. FINANCIAL INSTRUMENTS
In the normal course of business, the Company invests in various financial
assets and incurs various financial liabilities. The fair value estimates of
financial instruments presented below are not necessarily indicative of the
amounts the Company might pay or receive in actual market transactions.
Potential taxes and other transaction costs have not been considered in
estimating fair value. The disclosures that follow do not reflect the fair value
of the Company as a whole since a number of the Company's significant assets
(including reinsurance recoverable) and liabilities (including deferred income
taxes) are not considered financial instruments and are not carried at fair
value. Other assets and liabilities considered financial instruments, such as
accrued investment income, are generally of a short-term nature. It is assumed
that their carrying value approximates fair value.
F-11
<PAGE>
GLENBROOK LIFE AND ANNUITY COMPANY
NOTES TO FINANCIAL STATEMENTS
($ IN THOUSANDS)
FINANCIAL ASSETS
The carrying value and fair value of financial assets at December 31, are as
follows:
<TABLE>
<CAPTION>
1997 1996
---- ----
Carrying Fair Carrying Fair
Value Value Value Value
-------- ----- -------- -----
<S> <C> <C> <C> <C>
Fixed income securities $ 86,243 $ 86,243 $ 49,389 $ 49,389
Short-term investments 4,231 4,231 1,287 1,287
Separate Accounts 620,535 620,535 272,420 272,420
</TABLE>
Fair values for fixed income securities are based on quoted market prices.
Short-term investments are highly liquid investments with maturities of less
than one year whose carrying value approximates fair value.
Separate Accounts assets are carried in the statements of financial position at
fair value.
FINANCIAL LIABILITIES
The carrying value and fair value of financial liabilities at December 31, are
as follows:
<TABLE>
<CAPTION>
1997 1996
---- ----
Carrying Fair Carrying Fair
Value Value Value Value
-------- ----- -------- -----
<S> <C> <C> <C> <C>
Contractholder funds on
investment contracts $ 2,636,331 $ 2,492,095 $ 2,059,642 $ 1,949,329
Separate Accounts 620,535 620,535 260,290 260,290
</TABLE>
The fair value of contractholder funds on investment contracts is based on the
terms of the underlying contracts. Reserves on investment contracts with no
stated maturities (single premium and flexible premium deferred annuities) are
valued at the account balance less surrender charges. The fair value of
immediate annuities and annuities without life contingencies with fixed terms is
estimated using discounted cash flow calculations based on interest rates
currently offered for contracts with similar terms and durations. Separate
Accounts liabilities are carried at the fair value of the underlying assets.
6. INCOME TAXES
For 1996 and 1995, the Company filed a separate federal income tax return. The
Company will join the Corporation and its other eligible domestic subsidiaries
in the filing of a consolidated federal income tax return (the "Allstate Group")
for 1997 and is party to a federal income tax allocation agreement (the "Tax
Sharing Agreement"). Under the Tax Sharing Agreement, the Company paid to or
received from the Corporation the amount, if any, by which the Allstate Group's
federal income tax liability was affected by virtue of inclusion of the Company
in the consolidated federal income tax return. Effectively, this results in the
Company's annual income tax provision being computed, with adjustments, as if
the Company filed a separate return.
F-12
<PAGE>
GLENBROOK LIFE AND ANNUITY COMPANY
NOTES TO FINANCIAL STATEMENTS
($ IN THOUSANDS)
Prior to the Distribution, the Corporation and all of its eligible domestic
subsidiaries, including the Company, joined with Sears and its domestic business
units (the "Sears Group") in the filing of a consolidated federal income tax
return (the "Sears Tax Group") and were parties to a federal income tax
allocation agreement (the "Sears Tax Sharing Agreement"). Under the Sears Tax
Sharing Agreement, the Company, through the Corporation, paid to or received
from the Sears Group the amount, if any, by which the Sears Tax Group's federal
income tax liability was affected by virtue of inclusion of the Company in the
consolidated federal income tax return. Effectively, this resulted in the
Company's annual income tax provision being computed as if the Allstate Group
filed a separate consolidated return, except that items such as net operating
losses, capital losses or similar items, which might not be recognized in a
separate return, were allocated according to the Sears Tax Sharing Agreement.
The Allstate Group and Sears Group have entered into an agreement which governs
their respective rights and obligations with respect to federal income taxes for
all periods prior to the Distribution ("Consolidated Tax Years"). The agreement
provides that all Consolidated Tax Years will continue to be governed by the
Sears Tax Sharing Agreement with respect to the Allstate Group's federal income
tax liability.
The components of the deferred income tax liability at December 31, are as
follows:
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
Unrealized net capital gains on fixed income securities $ 1,706 $ 1,503
Difference in tax bases of investments 66 25
------------- -------------
Total deferred liability $ 1,772 $ 1,528
============= =============
</TABLE>
The components of income tax expense for the year ended December 31, are as
follows:
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Current $ 3,037 $ 1,335 $ 1,615
Deferred 41 4 (39)
------- ------- -------
Total income tax expense $ 3,078 $ 1,339 $ 1,576
======= ======= =======
</TABLE>
The Company paid income taxes of $2,839, $2,446 and $866 in 1997, 1996 and 1995,
respectively.
A reconciliation of the statutory federal income tax rate to the effective
income tax rate on income from operations for the year ended December 31, is as
follows:
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Statutory federal income tax rate 35.0% 35.0% 35.0%
Other .1 .5 .4
---- ---- ----
Effective federal income tax rate 35.1% 35.5% 35.4%
==== ==== ====
</TABLE>
F-13
<PAGE>
GLENBROOK LIFE AND ANNUITY COMPANY
NOTES TO FINANCIAL STATEMENTS
($ in thousands)
7. STATUTORY FINANCIAL INFORMATION
The following tables reconcile net income for the year ended December 31, and
shareholder's equity at December 31, as reported herein in conformity with
generally accepted accounting principles with statutory net income and capital
and surplus, determined in accordance with statutory accounting practices
prescribed or permitted by insurance regulatory authorities:
<TABLE>
<CAPTION>
Net Income
----------
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Balance per generally accepted accounting principles $ 5,686 $ 2,435 $ 2,879
Deferred income taxes 41 4 (39)
Unrealized gain on participation in
Separate Accounts (1,829) 1,368 -
Statutory investment reserves 93 35 (279)
Other (354) (85) 108
----------- ------------ ------------
Balance per statutory accounting practices $ 3,637 $ 3,757 $ 2,669
=========== ============ ============
</TABLE>
<TABLE>
<CAPTION>
Shareholder's Equity
--------------------
1997 1996
---- ----
<S> <C> <C>
Balance per generally accepted accounting principles $ 87,944 $ 81,880
Deferred income taxes 1,772 1,528
Unrealized gain/loss on fixed income securities (4,874) (2,464)
Non-admitted assets (86) (850)
Statutory investment reserves 958 (2,282)
Other (3,114) (2,118)
---------- ------------
Balance per statutory accounting practices $ 82,600 $ 75,694
========== ============
</TABLE>
PERMITTED STATUTORY ACCOUNTING PRACTICES
The Company prepares its statutory financial statements in accordance with
accounting principles and practices prescribed or permitted by the Illinois
Department of Insurance. Prescribed statutory accounting practices include a
variety of publications of the National Association of Insurance Commissioners
("NAIC"), as well as state laws, regulations and general administrative rules.
Permitted statutory accounting practices encompass all accounting practices not
so prescribed. The Company does not follow any permitted statutory accounting
practices that have a material effect on statutory surplus, statutory net income
or risk-based capital.
Final approval of the NAIC's proposed "Comprehensive Guide" on statutory
accounting principles is expected in early 1998. The requirements may be
effective as early as January 1, 1999, and are not expected to have a material
impact on statutory surplus of the Company.
F-14
<PAGE>
GLENBROOK LIFE AND ANNUITY COMPANY
NOTES TO FINANCIAL STATEMENTS
($ in thousands)
DIVIDENDS
The ability of the Company to pay dividends is dependent on business conditions,
income, cash requirements of the Company and other relevant factors. The payment
of shareholder dividends by insurance companies without the prior approval of
the state insurance regulator is limited to formula amounts based on net income
and capital and surplus, determined in accordance with statutory accounting
practices, as well as the timing and amount of dividends paid in the preceding
twelve months. The maximum amount of dividends that the Company can distribute
during 1998 without prior approval of the Illinois Department of Insurance is
$8,050.
F-15
<PAGE>
GLENBROOK LIFE AND ANNUITY COMPANY
SCHEDULE IV--REINSURANCE
($ in thousands)
<TABLE>
<CAPTION>
Gross Net
Year Ended December 31, 1997 amount Ceded amount
- ---------------------------- --------- ------------ --------
<S> <C> <C> <C>
Life insurance in force $ 4,095 $ 4,095 $ -
================== ================== ==================
Premiums and contract charges:
Life and annuities $ 11,641 $ 11,641 $ -
================== ================== ==================
Gross Net
Year Ended December 31, 1996 amount Ceded amount
- ---------------------------- --------- ------------ --------
Life insurance in force $ 2,436 $ 2,436 $ -
================== ================== ==================
Premiums and contract charges:
Life and annuities $ 4,254 $ 4,254 $ -
================== =================== ==================
Gross Net
Year Ended December 31, 1995 amount Ceded amount
- ---------------------------- --------- ------------ --------
Life insurance in force $ 1,250 $ 1,250 $ -
================== ================== ==================
Premiums and contract charges:
Life and annuities $ 6,571 $ 6,571 $ -
================== ================== ==================
</TABLE>
F-16
<PAGE>
APPENDIX A
MARKET VALUE ADJUSTMENT
The Market Value Adjustment is based on the following:
I = the Treasury Rate for a maturity equal to the Sub-account's Guarantee
Period for the week preceding the establishment of the Sub-account.
N = the number of whole and partial years from the date we receive the
withdrawal, transfer, or death benefit request, or from the Payout Start
Date to the end of the Sub-account's Guarantee Period.
J = the Treasury Rate for a maturity equal to the Sub-account's Guarantee
Period for the week preceding the receipt of the withdrawal request,
transfer request, death benefit request, or income payment request. If a
Note with a maturity of the original guarantee period is not available, a
weighted average will be used.
Treasury Rate means the U.S. Treasury Note Constant Maturity yield as reported
in Federal Reserve Bulletin Release H.15.
The Market Value Adjustment factor is determined from the following formula:
.9* (I-J)* N
Any transfer, withdrawal in excess of the free withdrawal amount, death benefit
or amount applied to an Income Plan from a Sub-account of the Guaranteed
Maturity Fixed Account will be multiplied by the Market Value Adjustment factor
to determine the Market Value Adjustment.
ILLUSTRATION
EXAMPLE OF MARKET VALUE ADJUSTMENT
<TABLE>
<S> <C>
Purchase Payment: $10,000
Guarantee Period: 5 years
Interest Rate: 4.50%
Full Withdrawal: End of Contract Year 3
</TABLE>
NOTE: This illustration assumes that premium taxes are not applicable.
EXAMPLE 1: (ASSUMES DECLINING INTEREST RATES)
Step 1: Calculate Account Value at End of Contract Year 3:
3
= 10,000.00 * (1.045) = $11,411.66
Step 2: Calculate the Free Withdrawal Amount:
= .15 * (10,000.00) = $1,500.00
Step 3: Calculate the Withdrawal Charge:
= .05 * (10,000.00 - 1,500.00) = $425.00
Step 4: Calculate the Market Value Adjustment:
I = 4.50%
J = 4.20%
N = 730 days = 2
--------
365 days
Market Value Adjustment Factor: .9 * (I-J) * N
A-1
<PAGE>
= .9 * (.045 - .042) * 2 = .0054
Market Value Adjustment = Factor * Amount Subject to Market Value Adjustment:
= .0054 * (11,411.66 - 1,500) = $53.52
Step 5: Calculate The Amount Received by Customers as a Result of a Full
Withdrawal at the end of Contract Year 3:
= 11,411.66 - 425.00 + 53.52 = $11,040.18
EXAMPLE 2: (ASSUMES RISING INTEREST RATES)
Step 1: Calculate Account Value at End of Contract Year 3:
3
= 10,000.00 * (1.045) = $11,411.66
Step 2: Calculate the Free Withdrawal Amount:
= .15 * (10,000.00) = $1,500.00
Step 3: Calculate the Withdrawal Charge:
= .05 * (10,000.00 - 1,500.00) = $425.00
Step 4: Calculate the Market Value Adjustment:
I = 4.5%
J = 4.8%
N = 730 days = 2
--------
365 days
Market Value Adjustment Factor: .9 * (I-J) * N
= .9 * (.045 - .048) * (2) = -.0054
Market Value Adjustment = Factor * Amount Subject to Market Value Adjustment
= -.0054 * (11,411.66 - 1,500) = -53.52
Step 5: Calculate The Net Withdrawal Value at End of Contract Year 3:
= 11,411.66 - 425.00 - 53.52 = $10,933.14
A-2
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION: TABLE OF CONTENTS
PAGE
----
Additions, Deletions or Substitutions of Investments 3
Reinvestment 3
The Contract 3
Purchase of Contracts 3
Performance Data 3
Tax-free Exchanges (1035 Exchanges, Rollovers and Transfers) 5
Premium Taxes 6
Tax Reserves 6
Income Payments. 6
Calculation of Variable Annuity Unit Values 6
General Matters 6
Incontestability 6
Settlements 6
Safekeeping of the Variable Account's Assets 7
Federal Tax Matters 7
Introduction 7
Taxation of Glenbrook Life and Annuity Company 7
Exceptions to the Non-Natural Owner Rule 7
IRS Required Distribution at Death Rules 7
Qualified Plans 8
Types of Qualified Plans 8
Variable Account Financial Statements 9
B-1
<PAGE>
ORDER FORM
Please send me a copy of the most recent Statement of Additional Information for
the Glenbrook Provider Variable Annuity.
- ------------------------------ ---------------------------------------------
(Date) (Name)
---------------------------------------------
(Street Address)
---------------------------------------------
(City) (State) (Zip Code)
Send to: Glenbrook Life and Annuity Company
Post Office Box 94042
Palatine, Illinois 60094-4042
Attention: Customer Service Unit
B-2
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
GLENBROOK LIFE MULTI-MANAGER VARIABLE ACCOUNT
OFFERED BY
GLENBROOK LIFE AND ANNUITY COMPANY
POST OFFICE BOX 94042
PALATINE, IL 60094-4042
1-(800)755-5275
INDIVIDUAL AND GROUP
FLEXIBLE PREMIUM DEFERRED
VARIABLE ANNUITY CONTRACTS
This Statement of Additional Information supplements the information in the
prospectus for the Individual and Group Flexible Premium Deferred Variable
Annuity Contract offered by Glenbrook Life and Annuity Company ("Company"), a
wholly owned subsidiary of Allstate Life Insurance Company. The Contract is
primarily designed to aid individuals in long-term financial planning and it can
be used for retirement planning regardless of whether the plan qualifies for
special federal income tax treatment. The prospectus may be obtained from
Glenbrook Life and Annuity Company by writing or calling the address or
telephone number listed above.
THIS STATEMENT OF ADDITIONAL INFORMATION
IS NOT A PROSPECTUS AND SHOULD BE READ ONLY
IN CONJUNCTION WITH THE PROSPECTUS
FOR THE CONTRACT
The prospectus, dated May 1, 1998, has been filed with the Securities and
Exchange Commission
DATED MAY 1, 1998
<PAGE>
TABLE OF CONTENTS
PAGE
----
Additions, Deletions or Substitutions of
Investments. . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Reinvestment . . . . . . . . . . . . . . . . . . . . . . . . . . 3
The Contract . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Purchase of Contracts. . . . . . . . . . . . . . . . . . . . . . 3
Performance Data . . . . . . . . . . . . . . . . . . . . . . . . 3
Tax-free Exchanges (1035 Exchanges, Rollovers
and Transfers). . . . . . . . . . . . . . . . . . . . . . . . . . 5
Premium Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . 6
Tax Reserves . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Income Payments. . . . . . . . . . . . . . . . . . . . . . . . . 6
Calculation of Variable Annuity Unit Values. . . . . . . . . . . 6
General Matters. . . . . . . . . . . . . . . . . . . . . . . . . 6
Incontestability . . . . . . . . . . . . . . . . . . . . . . . . 6
Settlements. . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Safekeeping of the Variable Account's Assets . . . . . . . . . . 7
Federal Tax Matters. . . . . . . . . . . . . . . . . . . . . . . 7
Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Taxation of Glenbrook Life and Annuity
Company. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Exceptions to the Non-Natural Owner Rule . . . . . . . . . . . . 7
IRS Required Distribution at Death Rules . . . . . . . . . . . . 7
Qualified Plans. . . . . . . . . . . . . . . . . . . . . . . . . 8
Types of Qualified Plans . . . . . . . . . . . . . . . . . . . . 8
Variable Account Financial Statements. . . . . . . . . . . . . . 9
2
<PAGE>
ADDITIONS, DELETIONS OR SUBSTITUTIONS OF INVESTMENTS
The Company retains the right, subject to any applicable law, to make additions
to, deletions from or substitutions for the Fund shares held by any Sub-account
of the Variable Account. The Company reserves the right to eliminate the shares
of any of the portfolios and to substitute shares of another portfolio of a
Fund, or of another open-end, registered investment company, if the shares of
the Fund are no longer available for investment, or if, in the Company's
judgment, investment in any Fund would become inappropriate in view of the
purposes of the Variable Account. Substitutions of shares attributable to an
Owner's interest in a Sub-account will not be made until the Owner has been
notified of the change, and until the Securities and Exchange Commission has
approved the change, to the extent such notification and approval is required by
the Investment Company Act of 1940. Nothing contained in this Statement of
Additional Information shall prevent the Variable Account from purchasing other
securities for other series or classes of contracts, or from effecting a
conversion between series or classes of contracts on the basis of requests made
by Owners.
The Company may also establish additional Sub-accounts or series of Sub-accounts
of the Variable Account. Each additional Sub-account would purchase shares in a
new portfolio of a Fund or in another mutual fund. New Sub-accounts may be
established when, in the sole discretion of the Company, marketing needs or
investment conditions warrant. Any new Sub-accounts offered in conjunction with
the Contract will be made available to existing Owners on a basis to be
determined by the Company. The Company may also eliminate one or more
Sub-accounts if, in its sole discretion, marketing, tax or investment conditions
so warrant.
In the event of any such substitution or change, the Company may, by appropriate
endorsement, make such changes in the Contract as may be necessary or
appropriate to reflect such substitution or change. If deemed to be in the best
interests of persons having voting rights under the policies, the Variable
Account may be operated as a management company under the Investment Company Act
of 1940 or it may be deregistered under such Act in the event such registration
is no longer required.
REINVESTMENT
All dividends and capital gains distributions from the Funds are automatically
reinvested in shares of the distributing Fund at their net asset value.
THE CONTRACT
PURCHASE OF CONTRACTS
The Contracts are offered to the public through brokers as well as banks
licensed under the federal securities laws and state insurance laws. The
Contracts are distributed through the principal underwriter for the Variable
Account, Allstate Life Financial Services, Inc., an affiliate of Glenbrook Life
and Annuity Company. The offering of the Contracts is continuous and the Company
does not anticipate discontinuing the offering of the Contracts. However, the
Company reserves the right to discontinue the offering of the Contracts.
PERFORMANCE DATA
From time to time the Variable Account may publish advertisements containing
performance data relating to its Sub-accounts. The performance data for the
Sub-accounts (other than for the Money Market Sub-account) will always be
accompanied by total return quotations. Performance figures used by the Variable
Account are based on actual historical performance of its Sub-accounts for
specified periods, and the figures are not intended to indicate future
performance.
STANDARDIZED TOTAL RETURNS
A Sub-account's "average annual total return" represents an annualization of the
Sub-account's total return over a particular period and is computed by finding
the annual percentage rate which, when compounded annually, will accumulate a
hypothetical $1,000 purchase payment to the redeemable value at the end of the
one, five or ten year period, or for a period from the date of commencement of
the Sub-account's operations, if shorter than any of the foregoing. The average
annual total return is obtained by dividing the ending redeemable value, after
deductions for any withdrawal charges or contract maintenance charges imposed on
the Contracts by the Variable Account, by the
3
<PAGE>
initial hypothetical $1,000 purchase payment, taking the "n"th root of the
quotient (where "n" is the number of years in the period) and subtracting 1 from
the result.
The withdrawal charges assessed upon redemption are computed as follows: the
free withdrawal amount is not assessed a withdrawal charge. Withdrawal charges
are charged on the amount of redemption equal to the purchase payment, reduced
by the amount of the free withdrawal amount, if any. The remaining amount of the
redemption, if any, is not assessed a withdrawal charge. The withdrawal charge
schedule specifies rates based on the number of complete years since each
purchase payment was made. The contract maintenance charge ($35 per contract)
used in the total return calculation is normally prorated using the following
method: The total amount of annual Contract fees collected during the year is
divided by the total average net assets of all the Sub-accounts. The resulting
percentage is then multiplied by the ending Contract Value.
As of December 31, 1997, the Sub-accounts had no material operations; therefore,
there are no standardized total returns for the year ended December 31, 1997.
NON-STANDARDIZED TOTAL RETURNS
From time to time, sales literature or advertisements may also quote average
annual total returns that do not reflect the Withdrawal Charge. These are
calculated in exactly the same way as the average annual total returns described
above, except that the ending redeemable value of the hypothetical account for
the period is replaced with an ending value for the period that does not take
into account any charges on amounts surrendered. In addition, the Variable
Account may advertise the total return over different periods of time by means
of aggregate, average, year-by-year or other types of total return figures. Such
calculations would not reflect deductions for withdrawal charges which may be
imposed on the Contracts by the Variable Account which, if reflected, would
reduce the performance quoted. The formula for computing such total return
quotations involves a per unit change calculation. This calculation is based on
the Accumulation Unit value at the end of the defined period divided by the
Accumulation Unit value at the beginning of such period, minus 1. The periods
included in such advertisements are "year-to-date" (prior calendar year end to
the day of the advertisement); "year to most recent quarter" (prior calendar
year end to the end of the most recent quarter); "the prior calendar year";
"'n' most recent Calendar Years"; and "Inception (commencement of the
Sub-account's operation) to date" (day of the advertisement).
As of December 31, 1997, the Sub-accounts had no material operations; therefore,
there are no non-standardized total returns for the year ended December 31,
1997.
HISTORICAL TOTAL RETURNS
The Variable Account may also disclose yield and total return for periods prior
to the date that the Variable Account commenced operations. For periods prior to
the date the Variable Account commenced operations, performance information for
the Sub-accounts will be calculated based on the performance of the underlying
Funds and the assumption that the Sub-accounts were in existence for the same
periods as those of the underlying Funds, with a level of charges equal to those
currently assessed against the Sub-accounts.
The annualized historical total returns for the Sub-accounts as of the year
ended 12/31/97 are presented below:
(WITHOUT ENHANCED DEATH BENEFIT)
<TABLE>
<CAPTION>
SINCE
Sub-Account ONE YEAR FIVE YEAR TEN YEAR INCEPTION (date)
- ----------- -------- --------- -------- ----------------
<S> <C> <C> <C> <C>
AIM V.I. Capital Appreciation Fund 11.98% N/A N/A 17.06% (5/5/93)
AIM V.I. Growth and Income Fund 24.03% N/A N/A 19.49% (5/2/94)
AIM V.I. Global Utilities Fund 20.00% N/A N/A 13.61% (5/2/94)
AIM V.I. Diversified Income Fund 7.92% N/A N/A 6.76% (5/5/93)
AIM V.I. Government Securities Fund 6.71% N/A N/A 3.93% (5/5/93)
AIM V.I. Growth Fund 25.17% N/A N/A 16.62% (5/5/93)
AIM V.I. International Equity Fund 5.50% N/A N/A 11.40% (5/5/93)
AIM V.I. Value Fund 22.03% N/A N/A 18.15% (5/5/93)
American Century VP International 17.04% N/A N/A 9.12% (5/2/94)
American Century VP Balanced 14.25% 9.80% N/A 9.58% (5/1/91)
VIS Dividend Growth 23.92% 17.03% N/A 17.87% (10/25/90)
VIS European Growth 14.53% 22.07% N/A 16.18% (3/1/91)
</TABLE>
4
<PAGE>
cont.
<TABLE>
<CAPTION>
SINCE
Sub-Account ONE YEAR FIVE YEAR TEN YEAR INCEPTION (date)
- ----------- -------- --------- -------- ----------------
<S> <C> <C> <C> <C>
VIS Utilities 25.45% 11.83% N/A 13.10% (10/25/90)
VIS Quality Income Plus 9.62% 6.72% N/A 8.51% (10/25/90)
VIP Growth 21.83% 16.42% 15.62% 14.02% (10/9/86)
VIP High Income 16.09% 12.39% 11.30% 9.65% (9/20/85)
VIP Equity-Income 24.32% 18.12% 14.95% 12.97% (9/29/89)
VIP II Contrafund 22.48% N/A N/A 26.47% (1/3/95)
Dreyfus Socially Responsible Growth 26.48% N/A N/A 19.87% (10/7/93)
Dreyfus Stock Index Fund 31.21% 18.12% N/A 14.32% (9/29/89)
VIF Small Company Stock 20.14% N/A N/A 16.72% (4/30/96)
VIF Growth & Income 16.49% N/A N/A 23.26% (5/2/94)
VIF Money Market 3.52% 3.27% N/A 3.50% (8/31/90)
MFS Emerging Growth Series 21.18% N/A N/A 22.27% (7/24/95)
MFS Limited Maturity Series 4.56% N/A N/A 4.84% (8/14/96)
</TABLE>
(WITH ENHANCED DEATH BENEFIT)
<TABLE>
<CAPTION>
SINCE
Sub-Account ONE YEAR FIVE YEAR TEN YEARS INCEPTION*
- ----------- -------- --------- --------- ----------
<S> <C> <C> <C> <C>
AIM V.I. Capital Appreciation Fund 11.87% N/A N/A 16.95%
AIM V.I. Growth and Income Fund 23.91% N/A N/A 19.37%
AIM V.I. Global Utilities Fund 19.89% N/A N/A 13.49%
AIM V.I. Diversified Income Fund 7.82% N/A N/A 6.66%
AIM V.I. Government Securities Fund 6.60% N/A N/A 3.83%
AIM V.I. Growth Fund 25.04% N/A N/A 16.50%
AIM V.I. International Equity Fund 5.40% N/A N/A 11.29%
AIM V.I. Value Fund 21.91% N/A N/A 18.03%
American Century VP International 16.93% N/A N/A 9.01%
American Century VP Balanced 14.14% 9.69% N/A 9.47%
VIS Dividend Growth 23.80% 16.92% N/A 17.76%
VIS European Growth 14.41% 21.95% N/A 16.06%
VIS Utilities 25.32% 11.72% N/A 12.98%
VIS Quality Income Plus 9.51% 6.61% N/A 8.40%
VIP Growth 21.70% 16.31% 15.50% 13.91%
VIP High Income 15.97% 12.28% 11.19% 9.54%
VIP Equity-Income 24.20% 18.01% 14.84% 12.86%
VIP II Contrafund 22.36% N/A N/A 26.35%
Dreyfus Socially Responsible Growth 26.36% N/A N/A 19.75%
Dreyfus Stock Index Fund 31.08% 18.00% N/A 14.21%
VIF Small Company Stock 22.02% N/A N/A 16.60%
VIF Growth & Income 16.37% N/A N/A 23.14%
VIF Money Market 3.42% 3.16% N/A 3.40%
MFS Emerging Growth Series 21.06% N/A N/A 22.14%
MFS Limited Maturity Series 4.45% N/A N/A 4.73%
</TABLE>
* see corresponding inception dates in performance data without the enhanced
death benefit, immediately above this table.
The Variable Account may also advertise the performance of the Sub-accounts
relative to certain performance rankings and indexes compiled by independent
organizations, such as: (a) Lipper Analytical Services, Inc.; (b) the Standard &
Poor's 500 Composite Stock Price Index ("S & P 500"); (c) A.M. Best Company; (d)
Bank Rate Monitor; and (e) Morningstar.
5
<PAGE>
TAX-FREE EXCHANGES (1035 EXCHANGES, ROLLOVERS AND TRANSFERS)
The Company accepts purchase payments which are the proceeds of a Contract in a
transaction qualifying for a tax-free exchange under Section 1035 of the
Internal Revenue Code. Except as required by federal law in calculating the
basis of the Contract, the Company does not differentiate between Section 1035
purchase payments and non-Section 1035 purchase payments.
The Company also accepts "rollovers" and transfers from Contracts qualifying as
tax-sheltered annuities ("TSAs"), individual retirement annuities or accounts
("IRAs"), or any other Qualified Contract which is eligible to "rollover" into
an IRA. The Company differentiates among Non-Qualified Contracts, TSAs, IRAs and
other Qualified Contracts to the extent necessary to comply with federal tax
laws. For example, the Company restricts the assignment, transfer or pledge of
TSAs and IRAs so the Contracts will continue to qualify for special tax
treatment. An Owner contemplating any such exchange, rollover or transfer of a
Contract should contact a competent tax adviser with respect to the potential
effects of such a transaction.
PREMIUM TAXES
Applicable premium tax rates depend on the Owner's state of residency and the
insurance laws and status of the Company in those states where premium taxes are
incurred. Premium tax rates may be changed by legislation, administrative
interpretations or judicial acts.
TAX RESERVES
The Company does not establish capital gains tax reserves for any Sub-account
nor does it deduct charges for tax reserves because the Company believes that
capital gains attributable to the Variable Account will not be taxable.
6
<PAGE>
However, the Company reserves the right to deduct charges to establish tax
reserves for potential taxes on realized or unrealized capital gains.
INCOME PAYMENTS
CALCULATION OF VARIABLE ANNUITY UNIT VALUES
The amount of the first income payment is calculated by applying the Contract
Value allocated to each Variable Sub-account less any applicable premium tax
charge deducted at this time, to the income payment tables in the Contract. The
first variable annuity income payment is divided by the Sub-account's then
current annuity unit value to determine the number of annuity units upon which
later income payments will be based. Variable annuity income payments after the
first will be equal to the sum of the number of annuity units determined in this
manner for each Sub-account times the then current annuity unit value for each
respective Sub-account.
Annuity units in each variable Sub-account are valued separately and annuity
unit values will depend upon the investment experience of the particular
portfolios in which the Sub-account invests. The value of the annuity unit for
each variable Sub-account at the end of any Valuation Period is calculated by:
(a) multiplying the annuity unit Value at the end of the immediately preceding
Valuation Period by the Sub-account's net investment factor during the period;
and then (b) dividing the product by the sum of 1.0 plus the assumed investment
rate for the period. The assumed investment rate adjusts for the interest rate
assumed in the income payment tables used to determine the dollar amount of the
first variable annuity income payment, and is at an effective annual rate which
is disclosed in the Contract.
The amount of the first income payment paid under an income plan is determined
using the interest rate and mortality table disclosed in the Contract. Due to
judicial or legislative developments regarding the use of tables which do not
differentiate on the basis of sex, different annuity tables may be used.
GENERAL MATTERS
INCONTESTABILITY
The Contract will not be contested after it is issued.
SETTLEMENTS
Due proof of the Owner(s) death (or Annuitant's death if there is a non-natural
Owner) must be received prior to settlement of a death claim.
SAFEKEEPING OF THE VARIABLE ACCOUNT'S ASSETS
The Company holds title to the assets of the Variable Account. The assets are
kept physically segregated and held separate and apart from the Company's
general corporate assets. Records are maintained of all purchases and
redemptions of the Portfolio shares held by each of the variable Sub-accounts.
The Funds do not issue certificates and, therefore, the Company holds the
Account's assets in open account in lieu of stock certificates. See the Funds'
prospectuses for a more complete description of the custodians of the Funds.
FEDERAL TAX MATTERS
INTRODUCTION
THE FOLLOWING DISCUSSION IS GENERAL AND IS NOT INTENDED AS TAX ADVICE. THE
COMPANY MAKES NO GUARANTEE REGARDING THE TAX TREATMENT OF ANY CONTRACT OR
TRANSACTION INVOLVING A CONTRACT. Federal, state, local and other tax
consequences of ownership or receipt of distributions under an annuity contract
depend on the individual circumstances of each person. If you are concerned
about any tax consequences with regard to your individual circumstances, you
should consult a competent tax adviser.
7
<PAGE>
TAXATION OF GLENBROOK LIFE AND ANNUITY COMPANY
The Company is taxed as a life insurance company under Part I of Subchapter L of
the Internal Revenue Code. Since the Variable Account is not an entity separate
from the Company, and its operations form a part of the Company, it will not be
taxed separately as a "Regulated Investment Company" under Subchapter M of the
Code. Investment income and realized capital gains of the Variable Account are
automatically applied to increase reserves under the contract. Under existing
federal income tax law, the Company believes that the Variable Account
investment income and capital gains will not be taxed to the extent that such
income and gains are applied to increase the reserves under the contract.
Accordingly, the Company does not anticipate that it will incur any federal
income tax liability attributable to the Variable Account, and therefore the
Company does not intend to make provisions for any such taxes. If the Company
is taxed on investment income or capital gains of the Variable Account, then the
Company may impose a charge against the Variable Account in order to make
provision for such taxes.
EXCEPTIONS TO THE NON-NATURAL OWNER RULE
There are several exceptions to the general rule that contracts held by a
non-natural owner are not treated as annuity contracts for federal income tax
purposes. Contracts will generally be treated as held by a natural person if
the nominal owner is a trust or other entity which holds the contract as agent
for a natural person. However, this special exception will not apply in the
case of an employer who is the nominal owner of an annuity contract under a
non-qualified deferred compensation arrangement for its employees. Other
exceptions to the non-natural owner rule are: (1) contracts acquired by an
estate of a decedent by reason of the death of the decedent; (2) certain
qualified contracts; (3) contracts purchased by employers upon the termination
of certain qualified plans; (4) certain contracts used in connection with
structured settlement agreements, and (5) contracts purchased with a single
premium when the annuity starting date is no later than a year from purchase of
the annuity and substantially equal periodic payments are made, not less
frequently than annually, during the annuity period.
IRS REQUIRED DISTRIBUTION AT DEATH RULES
In order to be considered an annuity contract for federal income tax purposes,
an annuity contract must provide: (1) if any owner dies on or after the annuity
start date but before the entire interest in the contract has been distributed,
the remaining portion of such interest must be distributed at least as rapidly
as under the method of distribution being used as of the date of the owner's
death; (2) if any owner dies prior to the annuity start date, the entire
interest in the contract will be distributed within five years after the date of
the owner's death. These requirements are satisfied if any portion of the
owner's interest which is payable to (or for the benefit of) a designated
beneficiary is distributed over the life of such beneficiary (or over a period
not extending beyond the life expectancy of the beneficiary) and the
distributions begin within one year of the owner's death. If the owner's
designated beneficiary is the surviving spouse of the owner, the contract may be
continued with the surviving spouse as the new owner. If the owner of the
contract is a non-natural person, then the annuitant will be treated as the
owner for purposes of applying the distribution at death rules. In addition, a
change in the annuitant on a contract owned by a non-natural person will be
treated as the death of the owner.
QUALIFIED PLANS
This annuity contract may be used with several types of qualified plans. The
tax rules applicable to participants in such qualified plans vary according to
the type of plan and the terms and conditions of the plan itself. Adverse tax
consequences may result from excess contributions, premature distributions,
distributions that do not conform to specified commencement and minimum
distribution rules, excess distributions and in other circumstances. Owners and
participants under the plan and annuitants and beneficiaries under the contract
may be subject to the terms and conditions of the plan regardless of the terms
of the contract.
TYPES OF QUALIFIED PLANS
INDIVIDUAL RETIREMENT ANNUITIES
Section 408 of the Code permits eligible individuals to contribute to an
individual retirement program known as an Individual Retirement Annuity (IRA).
Individual Retirement Annuities are subject to limitations on the amount that
can be contributed and on the time when distributions may commence. Certain
distributions from other types of qualified plans may be "rolled over" on a
tax-deferred basis into an Individual Retirement Annuity. An IRA generally may
not provide life insurance, but it may provide a death benefit that equals the
greater of the premiums paid and the contract's cash value. The contract
provides a death benefit that in certain circumstances may exceed the greater
8
<PAGE>
of the payments and the contract value. It is possible that the Death Benefit
could be viewed as violating the prohibition on investment in life insurance
contracts with the result that the Contract would not be viewed as satisfying
the requirements of an IRA.
ROTH INDIVIDUAL RETIREMENT ANNUITIES
Section 408A of the Code permits eligible individuals to make nondeductible
contributions to an individual retirement program known as a Roth Individual
Retirement Annuity. Roth Individual Retirement Annuities are subject to
limitations on the amount that can be contributed and on the time when
distributions may commence. "Qualified distributions" from Roth Individual
Retirement Annuities are not includible in gross income. "Qualified
distributions" are any distributions made more than five taxable years after the
taxable year of the first contribution to the Roth Individual Retirement
Annuity, and which are made on or after the date the individual attains age 59
1/2, made to a beneficiary after the owner's death, attributable to the owner
being disabled or for a first time home purchase (first time home purchases are
subject to a lifetime limit of $10,000). "Nonqualified distributions" are
treated as made from contributions first and are includible in gross income to
the extent such distributions exceed the contributions made to the Roth
Individual Retirement Annuity. The taxable portion of a "nonqualified
distribution" may be subject to the 10% penalty tax on premature distributions.
Subject to certain limitations, a traditional Individual Retirement Account or
Annuity may be converted or "rolled over" to a Roth Individual Retirement
Annuity. The taxable portion of a conversion or rollover distribution is
includible in gross income, but is exempted from the 10% penalty tax on
premature distributions.
SIMPLIFIED EMPLOYEE PENSION PLANS
Section 408(k) of the Code allows employers to establish simplified employee
pension plans for their employees using the employees' individual retirement
annuities if certain criteria are met. Under these plans the employer may,
within specified limits, make deductible contributions on behalf of the
employees to their individual retirement annuities. Employers intending to use
the contract in connection with such plans should seek competent advice. In
particular, employers should consider that an IRA generally may not provide life
insurance, but it may provide a death benefit that equals the greater of the
premiums paid and the contract's cash value. The contract provides a death
benefit that in certain circumstances may exceed the greater of the payments and
the contract value. It is possible that the Death Benefit could be viewed as
violating the prohibition on investment in life insurance contracts with the
result that the Contract would not be viewed as satisfying the requirements of
an IRA.
SAVINGS INCENTIVE MATCH PLANS FOR EMPLOYEES (SIMPLE PLANS)
Sections 408(p) and 401(k) of the Code allow employers with 100 or fewer
employees to establish SIMPLE retirement plans for their employees. SIMPLE
plans may be structured as a SIMPLE retirement account using an employee's IRA
to hold the assets or as a Section 401(k) qualified cash or deferred
arrangement. In general, a SIMPLE plan consists of a salary deferral program
for eligible employees and matching or nonelective contributions made by
employers. Employers intending to use the contract in conjunction with SIMPLE
plans should seek competent tax and legal advice.
TAX SHELTERED ANNUITIES
Section 403(b) of the Code permits public school employees and employees of
certain types of tax-exempt organizations (specified in Section 501(c)(3) of the
Code) to have their employers purchase annuity contracts for them, and subject
to certain limitations, to exclude the purchase payments from the employees'
gross income. An annuity contract used for a Section 403(b) plan must provide
that distributions attributable to salary reduction contributions made after
12/31/88, and all earnings on salary reduction contributions, may be made only
on or after the date the employee attains age 59 1/2, separates from service,
dies, becomes disabled or on the account of hardship (earnings on salary
reduction contributions may not be distributed for hardship). These limitations
do not apply to withdrawals where the Company is directed to transfer some or
all of the contract value to another 403(b) plan.
CORPORATE AND SELF-EMPLOYED PENSION AND PROFIT SHARING PLANS
Sections 401(a) and 403(a) of the Code permit corporate employers to establish
various types of tax favored retirement plans for employees. The Self-Employed
Individuals Retirement Act of 1962, as amended, (commonly referred to as "H.R.
10" or "Keogh") permits self-employed individuals to establish tax favored
retirement plans for themselves and their employees. Such retirement plans may
permit the purchase of annuity contracts in order to provide benefits under the
plans.
9
<PAGE>
STATE AND LOCAL GOVERNMENT AND TAX-EXEMPT ORGANIZATION
DEFERRED COMPENSATION PLANS
Section 457 of the Code permits employees of state and local governments and
tax-exempt organizations to defer a portion of their compensation without paying
current taxes. The employees must be participants in an eligible deferred
compensation plan. To the extent the contracts are used in connection with an
eligible plan, employees are considered general creditors of the employer and
the employer as owner of the contract has the sole right to the proceeds of the
contract. Generally, under the non-natural owner rules, such contracts are not
treated as annuity contracts for federal income tax purposes. Under these
plans, contributions made for the benefit of the employees will not be
includible in the employees' gross income until distributed from the plan.
However, under a 457 plan all the compensation deferred under the plan must
remain solely the property of the employer, subject only to the claims of the
employer's general creditors, until such time as made available to the employee
or a beneficiary.
VARIABLE ACCOUNT FINANCIAL STATEMENTS
The financial statements of the Glenbrook Life Multi-Manager Variable Account
are not included herein because the Variable Account had no material operations
for the year ended December 31, 1997. The financial statements of Glenbrook Life
and Annuity Company begin on Page F-1 of the Prospectus.
10
<PAGE>
PART C
OTHER INFORMATION
24A. FINANCIAL STATEMENTS
PART A: Glenbrook Life and Annuity Company Financial Statements and Financial
Statement Schedules are contained in Part A of this Registration Statement.
PART B: No audited financial statements of Glenbrook Life Multi-Manager Variable
Account are included herein because the Variable Account had no material
operations during the year ended December 31, 1997.
24B. EXHIBITS
The following exhibits:
The following exhibits correspond to those required by paragraph (b) of
Item 24 as to exhibits in Form N-4:
(1) Resolution of the Board of Directors of Glenbrook Life and Annuity
Company authorizing establishment of the Glenbrook Life Multi-Manager
Variable Account*
(2) Not Applicable
(3) Underwriting Agreement**
(4) Specimen Contract**
(5) Application for a Contract**
(6) (a) Certificate of Incorporation of Glenbrook Life and Annuity
Company*** (b) By-laws of Glenbrook Life and Annuity Company***
(7) Reinsurance Agreement***
(8) Participation Agreement**
(9) Opinion and Consent of Michael J. Velotta, Vice President, Secretary
and General Counsel of Glenbrook Life and Annuity Company**
(10) (a) Consent of Accountants
(b) Consent of Attorneys
(11) Not applicable
(12) Not applicable
(13) Computation of Performance Quotations
(14) Not applicable
(15) Powers of Attorney ****
* Previously filed and incorporated by reference with Depositor's Form
N-4 Registration Statement No. 333-00999 dated February 12, 1996.
** Previously filed and incorporated by reference with Depositor's Form
N-4 Registration Statement No. 333-00999 dated August 22, 1996.
*** Previously filed and incorporated by reference, with Depositor's Form
S-1 Registration Statement No. 333-07275 dated June 28, 1996.
**** Previously filed.
<PAGE>
25. DIRECTORS AND OFFICERS OF THE DEPOSITOR
<TABLE>
<CAPTION>
NAME AND PRINCIPAL POSITION AND OFFICE
BUSINESS ADDRESS WITH DEPOSITOR OF THE TRUST
- ---------------- ---------------------------
<S> <C>
Louis G. Lower, II Chairman of the Board and Chief Executive Officer
Michael J. Velotta Vice President, Secretary, General Counsel and
Director
Peter H. Heckman President, Chief Operating Officer and Director
Marla G. Friedman Vice President
Kevin R. Slawin Vice President
James P. Zils Treasurer
Casey J. Sylla Chief Investment Officer
John R. Hunter Director
G. Craig Whitehead Senior Vice President and Director
Sarah R. Donahue Assistant Vice President
Emma M. Kalaidjian Assistant Secretary
Paul N. Kierig Assistant Secretary
Mary J. McGinn Assistant Secretary
Keith A. Hauschildt Assistant Vice President and Controller
Barry S. Paul Assistant Vice President
Robert N. Roeters Assistant Vice President
Nancy M. Bufalino Assistant Treasurer
C. Nelson Strom Assistant Vice President and Corporate Actuary
Patricia W. Wilson Assistant Treasurer
Brenda D. Sneed Assistant Secretary and Assistant General Counsel
Joanne M. Derrig Chief Compliance Officer and Assistant Secretary
</TABLE>
The principal business address of the foregoing officers and directors is 3100
Sanders Road, Northbrook, IL 60062
26. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH DEPOSITOR OR REGISTRANT
See 10-K Commission File #1-11840, The Allstate Corporation.
27. NUMBER OF CONTRACT OWNERS
1 - nonqualified 0 - qualified
28. INDEMNIFICATION
The by-laws of both Glenbrook Life and Annuity Company (Depositor) and Allstate
Life Financial Services, Inc. (Distributor), provide for the indemnification of
its Directors, Officers and Controlling Persons, against expenses, judgments,
fines and amounts paid in settlement as incurred by such person, if such person
acted properly. No indemnification shall be made in respect of any claim, issue
or matter as to which such person shall have been adjudged to be liable for
negligence or misconduct in the performance of a duty to the Company, unless a
court determines such person is entitled to such indemnity.
29a. RELATIONSHIP OF PRINCIPAL UNDERWRITER TO OTHER INVESTMENT COMPANIES
- Glenbrook Life and Annuity Company Separate Account A
- Glenbrook Life and Annuity Company Variable Annuity Account
- Allstate Life of New York Separate Account A
- Glenbrook Life Variable Life Separate Account A
- Glenbrook Life AIM Variable Life Separate Account A
<PAGE>
29b. PRINCIPAL UNDERWRITER
<TABLE>
<CAPTION>
Name and Principal Business Allstate Life Financial
ADDRESS OF EACH SUCH PERSON SERVICES, INC. ("ALFS")
- --------------------------- -----------------------
<S> <C>
Louis G. Lower, II Director
Kevin R. Slawin Director
Michael J. Velotta Director and Secretary
John R. Hunter President and Chief Executive Officer
Diane Bellas Vice President and Controller
Karen C. Gardner Vice President
Andrea J. Schur Vice President
Brent H. Hamann Vice President
James P. Zils Treasurer
John R. Hedrick General Counsel and Assistant Secretary
Lisa A. Burnell Assistant Vice President and Compliance
Officer
Robert N. Roeters Assistant Vice President
Emma M. Kalaidjian Assistant Secretary
Brenda D. Sneed Assistant Secretary
Nancy M. Bufalino Assistant Treasurer
</TABLE>
The principal address of ALFS is 3100 Sanders Road, Northbrook, Illinois
29c. COMPENSATION OF ALLSTATE LIFE FINANCIAL SERVICES, INC.
None
30. LOCATION OF ACCOUNTS AND RECORDS
The Depositor, Glenbrook Life and Annuity Company, is located at 3100 Sanders
Road, Northbrook, Illinois 60062.
The Distributor, Allstate Life Financial Services, Inc., is located at 3100
Sanders Road, Northbrook, Illinois 60062.
Each company maintains those accounts and records required to be maintained
pursuant to Section 31(a) of the Investment Company Act and the rules
promulgated thereunder.
31. MANAGEMENT SERVICES
None
32. UNDERTAKINGS
The undersigned registrant, Glenbrook Life and Annuity Company, hereby
undertakes:
(a) To file, 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; a post-effective amendment to this registration statement
(b) 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 post card or
similar written communication affixed to or included in the prospectus that
the applicant can remove to send for a Statement of Additional Information.
(c) To deliver any Statement of Additional Information and any financial
statements required to be made available under this Form promptly upon
written or oral request.
Insofar as indemnification for liabilities arising under the Securities Act of
1933 ("Act") may be permitted to directors, officers and controlling persons of
Glenbrook Life and Annuity Company ("Registrant"), 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 that the payment by Registrant of expenses incurred or
paid by a director, officer or controlling person of Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, Registrant will, unless in the opinion of its counsel the matter has
been settled by controlling
<PAGE>
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.
33. REPRESENTATION PURSUANT TO SECTION 403(b) OF THE INTERNAL REVENUE CODE
The Company represents that it is relying upon a November 28, 1988 Securities
and Exchange Commission no-action letter issued to the American Council of Life
Insurance ("ACLI") and that the provisions of paragraphs 1-4 of the no-action
letter have been complied with.
34. REPRESENTATION REGARDING CONTRACT EXPENSES
Glenbrook Life and Annuity Company ("Glenbrook Life") represents that the fees
and charges deducted under the Flexible Premium Deferred Variable Annuity
Contract hereby registered by this Registration Statement, in the aggregate, are
reasonable in relation to the services rendered, the expenses expected to be
incurred, and the risks assumed by Glenbrook Life.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 (the "Act") and the
Investment Company Act of 1940, the registrant, Glenbrook Life Multi-Manager
Variable Account, certifies that it meets the requirements of Securities Act
Rule 485(b) for effectiveness of this Registration Statement and has duly caused
this Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, and its seal to be hereunto affixed and attested, all
in the Township of Northfield, State of Illinois, on the 1st day of April, 1998.
GLENBROOK LIFE MULTI-MANAGER VARIABLE ACCOUNT
(REGISTRANT)
BY: GLENBROOK LIFE AND ANNUITY COMPANY
(DEPOSITOR)
(SEAL)
Attest: /S/BRENDA D. SNEED BY: /S/MICHAEL J. VELOTTA
------------------- -------------------------
Brenda D. Sneed Michael J. Velotta
Assistant Secretary Vice President, Secretary and
and Assistant General Counsel
General Counsel
Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940, this Registration Statement has been duly signed below by
the following Directors and Officers of Glenbrook Life and Annuity Company on
the 1st day of April, 1998.
*/LOUIS G. LOWER, II Chairman of the Board of Directors and
- -------------------- Chief Executive Officer
Louis G. Lower, II (Principal Executive Officer)
/S/MICHAEL J. VELOTTA Vice President, Secretary,
- --------------------- General Counsel and Director
Michael J. Velotta
*/PETER H. HECKMAN President, Chief Operating Officer
- -------------------- and Director
Peter H. Heckman
*/JOHN R. HUNTER Director
- --------------------
John R. Hunter
*/KEVIN R. SLAWIN Vice President
- -------------------- (Principal Financial Officer)
Kevin R. Slawin
*/MARLA G. FRIEDMAN Vice President
- --------------------
Marla G. Friedman
*/G. CRAIG WHITEHEAD Senior Vice President and Director
- --------------------
G. Craig Whitehead
*/JAMES P. ZILS Treasurer
- --------------------
James P. Zils
*/CASEY J. SYLLA Chief Investment Officer
- ---------------------
Casey J. Sylla
*/KEITH A. HAUSCHILDT Assistant Vice President and Controller
- --------------------- (Principal Accounting Officer)
Keith A. Hauschildt
*/ By Michael J. Velotta, pursuant to Power of Attorney, previously filed.
<PAGE>
EXHIBIT 10(A)
CONSENT OF ACCOUNTANTS
<PAGE>
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Post-Effective Amendment No. 3 to Registration
Statement No. 333-00999 of Glenbrook Life Multi-Manager Variable Account of
Glenbrook Life and Annuity Company on Form N-4 of our report dated February 20,
1998 relating to the financial statements and financial statement schedule of
Glenbrook Life and Annuity Company, appearing in the Prospectus, which is part
of such Registration Statement, and to the reference to us under the heading
"Experts" in such Prospectus.
/s/ DELOITTE & TOUCHE LLP
Chicago, Illinois
March 30, 1998
<PAGE>
EXHIBIT 10(B)
CONSENT OF ATTORNEYS
<PAGE>
Freedman, Levy, Kroll & Simonds
CONSENT OF
FREEDMAN, LEVY, KROLL & SIMONDS
We hereby consent to the reference to our firm under the caption "Legal
Matters" in the prospectus contained in Post-Effective Amendment No. 3 to the
Form N-4 Registration Statement of Glenbrook Life Multi-Manager Variable Account
(File No. 333-00999).
FREEDMAN, LEVY, KROLL & SIMONDS
Washington, D.C.
March 27, 1998
<PAGE>
<TABLE>
<CAPTION>
<S><C>
Today: 12/31/97 One Year Ago: 12/31/96
One Month Ago: 1/30/98 Three Years Ago: 2/28/95
Three Months Ago: 11/28/97 Five Years Ago: 12/31/92
End of last year: 12/31/97 Ten Years Ago: 12/31/87
AUVS
Today Inception
----- --------- Inception Dates Years since
Dean Witter European Growth 10.527957 10 --------------- -----------
Dean Witter Dividend Growth 10.520501 10 6/17/97 0.539356605
Dean Witter Utilities 11.954547 10 6/17/97 0.539356605
Dean Witter Quality Income Plus 10.687557 10 6/17/97 0.539356605
Fidelity Growth 10.691091 10 6/17/97 0.539356605
Fidelity High Income 10.785169 10 6/17/97 0.539356605
Fidelity Contrafund 11.077417 10 6/17/97 0.539356605
Fidelity Equity Income 10.23298 9.42471 6/17/97 0.539356605
MFS Emerging Growth 11.004751 10 6/17/97 0.539356605
MFS Limited Maturity 10.274381 10 6/17/97 0.539356605
Dreyfus Growth & Income 10.60795 10 6/17/97 0.539356605
Dreyfus Money Market 10.20345 10 6/17/97 0.539356605
Dreyfus Socially Responsible 10.818774 10 6/17/97 0.539356605
Dreyfus Small Company Stock 11.166624 10 6/17/97 0.539356605
Dreyfus Stock Index 10.143691 8.868938 6/17/97 0.539356605
American Century Balanced 10.623648 10 6/17/97 0.539356605
American Century International 10.030048 10 6/17/97 0.539356605
AIM Capital Appreciation 10.497077 10.068481 6/17/97 0.539356605
AIM Diversified Income 9.913024 9.411075 6/17/97 0.539356605
AIM Growth and Income 10.237472 9.599786 6/17/97 0.539356605
AIM Government Securities 9.944374 9.524411 6/17/97 0.539356605
AIM Growth 10.194688 9.379537 6/17/97 0.539356605
AIM International Equity 10.044812 10.393222 6/17/97 0.539356605
AIM Global Utilities 9.95741 8.844059 6/17/97 0.539356605
AIM Value 10.180675 9.671347 6/17/97 0.539356605
6/17/97 0.539356605
<CAPTION>
<S><C>
Average Total
Inception Inception
--------- ---------
Dean Witter European Growth 10.01% 5.28%
Dean Witter Dividend Growth 9.86% 5.21%
Dean Witter Utilities 39.24% 19.55%
Dean Witter Quality Income Plus 13.12% 6.88%
Fidelity Growth 13.19% 6.91%
Fidelity High Income 15.04% 7.85%
Fidelity Contrafund 20.89% 10.77%
Fidelity Equity Income 16.48% 8.58%
MFS Emerging Growth 19.42% 10.05%
MFS Limited Maturity 5.15% 2.74%
Dreyfus Growth & Income 11.56% 6.08%
Dreyfus Money Market 3.80% 2.03%
Dreyfus Socially Responsible 15.71% 8.19%
Dreyfus Small Company Stock 22.70% 11.67%
Dreyfus Stock Index 28.27% 14.37%
American Century Balanced 11.87% 6.24%
American Century International 0.56% 0.30%
AIM Capital Appreciation 8.04% 4.26%
AIM Diversified Income 10.11% 5.33%
AIM Growth and Income 12.66% 6.64%
AIM Government Securities 8.33% 4.41%
AIM Growth 16.71% 8.69%
AIM International Equity -6.13% -3.35%
AIM Global Utilities 24.59% 12.59%
AIM Value 9.98% 5.27%
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S><C>
Today: 12/31/97 One Year Ago: 12/31/96
One Month Ago: 1/30/98 Three Years Ago: 2/28/95
Three Months Ago: 11/28/97 Five Years Ago: 12/31/92
End of last year: 12/31/97 Ten Years Ago: 12/31/87
AUVS
Today One Month Ago Three Months Ago End of last year One Year Ago
----- ------------- ---------------- ---------------- ------------
Dean Witter European Growth 10.522273 10.938358 10.312256 10.522273 9.196745015
Dean Witter Dividend Growth 10.514825 10.536367 10.46093 10.514825 8.493416665
Dean Witter Utilities 11.948109 11.876109 11.272045 11.948109 9.533829838
Dean Witter Quality Income Plus 10.681791 10.794371 10.545167 10.681791 9.753769333
Fidelity Growth 10.685331 10.816477 10.676234 10.685331 8.779736581
Fidelity High Income 10.779356 11.012309 10.674269 10.779356 9.29467958
Fidelity Contrafund 11.071444 11.047181 10.885786 11.071444 9.048583024
Fidelity Equity Income 10.233708 10.196394 10.03185 10.233708 8.239957
MFS Emerging Growth 10.998814 11.264809 11.122384 10.998814 9.085640467
MFS Limited Maturity 10.268838 10.348833 10.244947 10.268838 9.831236639
Dreyfus Growth & Income 10.602233 10.553942 10.387836 10.602233 9.110408633
Dreyfus Money Market 10.197942 10.228695 10.165786 10.197942 9.860593058
Dreyfus Socially Responsible 10.812943 10.890923 10.57835 10.812943 8.557455501
Dreyfus Small Company Stock 11.160589 10.843208 11.06918 11.160589 9.29860304
Dreyfus Stock Index 10.144424 10.242492 9.987128 10.144424 7.739093
American Century Balanced 10.617921 10.618175 10.464089 10.617921 9.302481834
American Century International 10.024638 10.334748 9.700223 10.024638 8.573366258
AIM Capital Appreciation 10.497825 10.282964 10.609752 10.497825 9.383836
AIM Diversified Income 9.913731 10.068688 9.821291 9.913731 9.195027
AIM Growth and Income 10.238197 10.302009 10.205171 10.238197 8.262572
AIM Government Securities 9.945077 10.04507 9.850825 9.945077 9.329361
AIM Growth 10.195413 10.301518 10.131483 10.195413 8.153525
AIM International Equity 10.045526 10.133245 9.964007 10.045526 9.531187
AIM Global Utilities 9.958116 10.044148 9.588923 9.958116 8.306383
AIM Value 10.181402 10.237752 10.128372 10.181402 8.351639
<CAPTION>
<S><C>
Three Years Ago Five Years Ago Ten Years Ago Inception
--------------- -------------- ------------- ---------
Dean Witter European Growth 5.882526844 3.900793273 #VALUE! 3.801213546
Dean Witter Dividend Growth 5.535455525 4.81331907 #VALUE! 3.249522486
Dean Witter Utilities 7.352323572 6.865176964 #VALUE! 4.970894807
Dean Witter Quality Income Plus 8.346269585 7.756645855 #VALUE! 5.982675625
Fidelity Growth 5.933300187 5.020666523 2.529161841 2.476204
Fidelity High Income 7.252520595 6.04186603 3.733049583 3.519972822
Fidelity Contrafund 5.689756151 #VALUE! #VALUE! 5.498964891
Fidelity Equity Income 5.787999 4.472299 2.565836 3.7698
MFS Emerging Growth #VALUE! #VALUE! #VALUE! 6.7520258
MFS Limited Maturity #VALUE! #VALUE! #VALUE! 9.634258607
Dreyfus Growth & Income 5.379916691 #VALUE! #VALUE! 4.942986876
Dreyfus Money Market 9.205134588 8.726776114 #VALUE! 7.981736342
Dreyfus Socially Responsible 5.57379211 #VALUE! #VALUE! 5.041753131
Dreyfus Small Company Stock #VALUE! #VALUE! #VALUE! 8.635483546
Dreyfus Stock Index 5.047544 4.433309 #VALUE! 3.3883
American Century Balanced 7.127464229 6.686701562 #VALUE! 5.807849443
American Century International 6.526568899 #VALUE! #VALUE! 7.306856888
AIM Capital Appreciation 6.288141 #VALUE! #VALUE! 5.063855
AIM Diversified Income 7.470797 #VALUE! #VALUE! 7.343049
AIM Growth and Income 5.525512 #VALUE! #VALUE! 5.349337
AIM Government Securities 8.394536 #VALUE! #VALUE! 8.348211
AIM Growth 5.526613 #VALUE! #VALUE! 5.005754
AIM International Equity 6.734241 #VALUE! #VALUE! 6.104121
AIM Global Utilities 6.209152 #VALUE! #VALUE! 6.261484
AIM Value 5.755221 #VALUE! #VALUE! 4.704075
<CAPTION>
<S><C>
Inception Dates Years since Inception
--------------- ---------------------
Dean Witter European Growth 3/1/91 6.836413415
Dean Witter Dividend Growth 10/25/90 7.184120465
Dean Witter Utilities 10/25/90 7.184120465
Dean Witter Quality Income Plus 10/25/90 7.184120465
Fidelity Growth 10/9/86 11.22792608
Fidelity High Income 9/20/85 12.27926078
Fidelity Contrafund 1/3/95 2.99247091
Fidelity Equity Income 9/29/89 8.254620123
MFS Emerging Growth 7/24/95 2.439425051
MFS Limited Maturity 8/14/96 1.379876797
Dreyfus Growth & Income 5/2/94 3.665982204
Dreyfus Money Market 8/31/90 7.334702259
Dreyfus Socially Responsible 10/7/93 4.232717317
Dreyfus Small Company Stock 4/30/96 1.67008898
Dreyfus Stock Index 9/29/89 8.254620123
American Century Balanced 5/1/91 6.669404517
American Century International 5/2/94 3.665982204
AIM Capital Appreciation 5/5/93 4.657084189
AIM Diversified Income 5/5/93 4.657084189
AIM Growth and Income 5/2/94 3.665982204
AIM Government Securities 5/5/93 4.657084189
AIM Growth 5/5/93 4.657084189
AIM International Equity 5/5/93 4.657084189
AIM Global Utilities 5/2/94 3.665982204
AIM Value 5/5/93 4.657084189
<CAPTION>
<S><C>
Month to Date Three Months to Date Year to Date One Year
------------- -------------------- ------------ --------
Dean Witter European Growth -3.80% 2.04% 0.00% 14.41%
Dean Witter Dividend Growth -0.20% 0.52% 0.00% 23.80%
Dean Witter Utilities 0.61% 6.00% 0.00% 25.32%
Dean Witter Quality Income Plus -1.04% 1.30% 0.00% 9.51%
Fidelity Growth -1.21% 0.09% 0.00% 21.70%
Fidelity High Income -2.12% 0.98% 0.00% 15.97%
Fidelity Contrafund 0.22% 1.71% 0.00% 22.36%
Fidelity Equity Income 0.37% 2.01% 0.00% 24.20%
MFS Emerging Growth -2.36% -1.11% 0.00% 21.06%
MFS Limited Maturity -0.77% 0.23% 0.00% 4.45%
Dreyfus Growth & Income 0.46% 2.06% 0.00% 16.37%
Dreyfus Money Market -0.30% 0.32% 0.00% 3.42%
Dreyfus Socially Responsible -0.72% 2.22% 0.00% 26.36%
Dreyfus Small Company Stock 2.93% 0.83% 0.00% 20.02%
Dreyfus Stock Index -0.96% 1.57% 0.00% 31.08%
American Century Balanced 0.00% 1.47% 0.00% 14.14%
American Century International -3.00% 3.34% 0.00% 16.93%
AIM Capital Appreciation 2.09% -1.05% 0.00% 11.87%
AIM Diversified Income -1.54% 0.94% 0.00% 7.82%
AIM Growth and Income -0.62% 0.32% 0.00% 23.91%
AIM Government Securities -1.00% 0.96% 0.00% 6.60%
AIM Growth -1.03% 0.63% 0.00% 25.04%
AIM International Equity -0.87% 0.82% 0.00% 5.40%
AIM Global Utilities -0.86% 3.85% 0.00% 19.89%
AIM Value -0.55% 0.52% 0.00% 21.91%
<CAPTION>
<S><C>
Three Year Five Year Ten Year Inception
---------- --------- -------- ---------
Dean Witter European Growth 21.39% 21.95% #VALUE! 16.06%
Dean Witter Dividend Growth 23.85% 16.92% #VALUE! 17.76%
Dean Witter Utilities 17.57% 11.72% #VALUE! 12.98%
Dean Witter Quality Income Plus 8.57% 6.61% #VALUE! 8.40%
Fidelity Growth 21.66% 16.31% 15.50% 13.91%
Fidelity High Income 14.12% 12.28% 11.19% 9.54%
Fidelity Contrafund 24.84% #VALUE! #VALUE! 26.35%
Fidelity Equity Income 20.92% 18.01% 14.84% 12.86%
MFS Emerging Growth #VALUE! #VALUE! #VALUE! 22.14%
MFS Limited Maturity #VALUE! #VALUE! #VALUE! 4.73%
Dreyfus Growth & Income 25.37% #VALUE! #VALUE! 23.14%
Dreyfus Money Market 3.47% 3.16% #VALUE! 3.40%
Dreyfus Socially Responsible 24.72% #VALUE! #VALUE! 19.75%
Dreyfus Small Company Stock #VALUE! #VALUE! #VALUE! 16.60%
Dreyfus Stock Index 26.20% 18.00% #VALUE! 14.21%
American Century Balanced 14.21% 9.69% #VALUE! 9.47%
American Century International 15.38% #VALUE! #VALUE! 9.01%
AIM Capital Appreciation 18.63% #VALUE! #VALUE! 16.95%
AIM Diversified Income 9.89% #VALUE! #VALUE! 6.66%
AIM Growth and Income 22.82% #VALUE! #VALUE! 19.37%
AIM Government Securities 5.81% #VALUE! #VALUE! 3.83%
AIM Growth 22.64% #VALUE! #VALUE! 16.50%
AIM International Equity 14.26% #VALUE! #VALUE! 11.29%
AIM Global Utilities 17.05% #VALUE! #VALUE! 13.49%
AIM Value 20.94% #VALUE! #VALUE! 18.03%
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S><C>
1yr ago: 12/31/96
Date: 12/31/97
Dean Witter European Growth
31-Dec-96
TO NO. YEARS 1.000
31-Dec-97 TRANSACTION DATE $ VALUE UNIT VALUE NO. UNITS END VALUE SURRENDER CHARGES
0 INIT DEPOSIT 31-Dec-96 1000.00 9.196745 108.73412
1 FEE 31-Dec-97 0.737333 10.522273 0.07007 0.06
RESULTING VALUE 31-Dec-97 10.522273 108.66405 1143.3928
1.000
FORMULA: 1000*(1+T) 1143.3928
= 1092.392789
T = 9.24% 14.34%
R = 9.24% 14.34%
Dean Witter Dividend Growth
31-Dec-96
TO NO. YEARS 1.000
31-Dec-97
TRANSACTION DATE $ VALUE UNIT VALUE NO. UNITS END VALUE SURRENDER CHARGES
0 INIT DEPOSIT 31-Dec-96 1000.00 8.493417 117.73825
1 FEE 31-Dec-97 0.737333 10.514825 0.07012 0.06
RESULTING VALUE 31-Dec-97 10.514825 117.66813 1237.2597
1.000
FORMULA: 1000*(1+T) 1237.2597
= 1186.259743
T = 18.63% 23.73%
R = 18.63% 23.73%
Dean Witter Utilities
31-Dec-96
TO NO. YEARS 1.000
31-Dec-97 TRANSACTION DATE $ VALUE UNIT VALUE NO. UNITS END VALUE SURRENDER CHARGES
0 INIT DEPOSIT 31-Dec-96 1000.00 9.533830 104.88964
1 FEE 31-Dec-97 0.737333 11.948109 0.06171 0.06
RESULTING VALUE 31-Dec-97 11.948109 104.82793 1252.4955
1.000
FORMULA: 1000*(1+T) 1252.4955
= 1201.495544
T = 20.15% 25.25%
R = 20.15% 25.25%
Dean Witter Quality Income Plus
31-Dec-96
TO NO. YEARS 1.000
31-Dec-97
TRANSACTION DATE $ VALUE UNIT VALUE NO. UNITS END VALUE SURRENDER CHARGES
0 INIT DEPOSIT 31-Dec-96 1000.00 9.753769 102.52447
1 FEE 31-Dec-97 0.737333 10.681791 0.06903 0.06
RESULTING VALUE 31-Dec-97 10.681791 102.45544 1094.4076
1.000
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S><C>
FORMULA: 1000*(1+T) 1094.4076
= 1043.407593
T = 4.34% 9.44%
R = 4.34% 9.44%
Fidelity Growth
31-Dec-96
TO NO. YEARS 1.000
31-Dec-97
TRANSACTION DATE $ VALUE UNIT VALUE NO. UNITS END VALUE SURRENDER CHARGES
0 INIT DEPOSIT 31-Dec-96 1000.00 8.779737 113.89863
1 FEE 31-Dec-97 0.737333 10.685331 0.06900 0.06
RESULTING VALUE 31-Dec-97 10.685331 113.82963 1216.3073
1.000
FORMULA: 1000*(1+T) 1216.3073
= 1165.307267
T = 16.53% 21.63%
R = 16.53% 21.63%
Fidelity High Income
31-Dec-96
TO NO. YEARS 1.000
31-Dec-97
TRANSACTION DATE $ VALUE UNIT VALUE NO. UNITS END VALUE SURRENDER CHARGES
0 INIT DEPOSIT 31-Dec-96 1000.00 9.294680 107.58843
1 FEE 31-Dec-97 0.737333 10.779356 0.06840 0.06
RESULTING VALUE 31-Dec-97 10.779356 107.52003 1158.9967
1.000
FORMULA: 1000*(1+T) 1158.9967
= 1107.996674
T = 10.80% 15.90%
R = 10.80% 15.90%
Fidelity Contrafund
31-Dec-96
TO NO. YEARS 1.000
31-Dec-97
TRANSACTION DATE $ VALUE UNIT VALUE NO. UNITS END VALUE SURRENDER CHARGES
0 INIT DEPOSIT 31-Dec-96 1000.00 9.048583 110.51454
1 FEE 31-Dec-97 0.737333 11.071444 0.06660 0.06
RESULTING VALUE 31-Dec-97 11.071444 110.44794 1222.8182
1.000
FORMULA: 1000*(1+T) 1222.8182
= 1171.818219
T = 17.18% 22.28%
R = 17.18% 22.28%
MFS Emerging Growth
31-Dec-96
TO NO. YEARS 1.000
31-Dec-97 TRANSACTION DATE $ VALUE UNIT VALUE NO. UNITS END VALUE SURRENDER CHARGES
0 INIT DEPOSIT 31-Dec-96 1000.00 9.085640 110.06379
1 FEE 31-Dec-97 0.737333 10.998814 0.06704 0.06
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S><C>
RESULTING VALUE 31-Dec-97 10.998814 109.99675 1209.8338
1.000
FORMULA: 1000*(1+T) 1209.8338
= 1158.833791
T = 15.88% 20.98%
R = 15.88% 20.98%
MFS Limited Maturity
31-Dec-96
TO NO. YEARS 1.000
31-Dec-97
TRANSACTION DATE $ VALUE UNIT VALUE NO. UNITS END VALUE SURRENDER CHARGES
0 INIT DEPOSIT 31-Dec-96 1000.00 9.831237 101.71660
1 FEE 31-Dec-97 0.737333 10.268838 0.07180 0.06
RESULTING VALUE 31-Dec-97 10.268838 101.64480 1043.7740
1.000
FORMULA: 1000*(1+T) 1043.7740
= 992.7739908
T = -0.72% 4.38%
R = -0.72% 4.38%
Dreyfus Growth and Income
31-Dec-96
TO NO. YEARS 1.000
31-Dec-97
TRANSACTION DATE $ VALUE UNIT VALUE NO. UNITS END VALUE SURRENDER CHARGES
0 INIT DEPOSIT 31-Dec-96 1000.00 9.110409 109.76456
1 FEE 31-Dec-97 0.737333 10.602233 0.06955 0.06
RESULTING VALUE 31-Dec-97 10.602233 109.69502 1163.0121
1.000
FORMULA: 1000*(1+T) 1163.0121
= 1112.012113
T = 11.20% 16.30%
R = 11.20% 16.30%
Dreyfus Money Market
31-Dec-96
TO NO. YEARS 1.000
31-Dec-97
TRANSACTION DATE $ VALUE UNIT VALUE NO. UNITS END VALUE SURRENDER CHARGES
0 INIT DEPOSIT 31-Dec-96 1000.00 9.860593 101.41378
1 FEE 31-Dec-97 0.737333 10.197942 0.07230 0.06
RESULTING VALUE 31-Dec-97 10.197942 101.34148 1033.4745
1.000
FORMULA: 1000*(1+T) 1033.4745
= 982.4744974
T = -1.75% 3.35%
R = -1.75% 3.35%
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S><C>
Dreyfus Socially Responsible
31-Dec-96
TO NO. YEARS 1.000
31-Dec-97 TRANSACTION DATE $ VALUE UNIT VALUE NO. UNITS END VALUE SURRENDER CHARGES
0 INIT DEPOSIT 31-Dec-96 1000.00 8.557456 116.85717
1 FEE 31-Dec-97 0.737333 10.812943 0.06819 0.06
RESULTING VALUE 31-Dec-97 10.812943 116.78898 1262.8325
1.000
FORMULA: 1000*(1+T) 1262.8325
= 1211.832544
T = 21.18% 26.28%
R = 21.18% 26.28%
Dreyfus Small Company
31-Dec-96
TO NO. YEARS 1.000
31-Dec-97
TRANSACTION DATE $ VALUE UNIT VALUE NO. UNITS END VALUE SURRENDER CHARGES
0 INIT DEPOSIT 31-Dec-96 1000.00 9.298603 107.54304
1 FEE 31-Dec-97 0.737333 11.160589 0.06607 0.06
RESULTING VALUE 31-Dec-97 11.160589 107.47697 1199.5063
1.000
FORMULA: 1000*(1+T) 1199.5063
= 1148.506289
T = 14.85% 19.95%
R = 14.85% 19.95%
American Century Balanced
31-Dec-96
TO NO. YEARS 1.000
31-Dec-97
TRANSACTION DATE $ VALUE UNIT VALUE NO. UNITS END VALUE SURRENDER CHARGES
0 INIT DEPOSIT 31-Dec-96 1000.00 9.302482 107.49819
1 FEE 31-Dec-97 0.737333 10.617921 0.06944 0.06
RESULTING VALUE 31-Dec-97 10.617921 107.42875 1140.6700
1.000
FORMULA: 1000*(1+T) 1140.6700
= 1089.670002
T = 8.97% 14.07%
R = 8.97% 14.07%
American Century International
31-Dec-96
TO NO. YEARS 1.000
31-Dec-97
TRANSACTION DATE $ VALUE UNIT VALUE NO. UNITS END VALUE SURRENDER CHARGES
0 INIT DEPOSIT 31-Dec-96 1000.00 8.573366 116.64030
1 FEE 31-Dec-97 0.737333 10.024638 0.07355 0.06
RESULTING VALUE 31-Dec-97 10.024638 116.56675 1168.5394
1.000
FORMULA: 1000*(1+T) 1168.5394
= 1117.539436
T = 11.75% 16.85%
R = 11.75% 16.85%
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S><C>
Fidelity Equity Income
31-Dec-96
TO NO. YEARS 1.000
31-Dec-97
TRANSACTION DATE $ VALUE UNIT VALUE NO. UNITS END VALUE SURRENDER CHARGES
0 INIT DEPOSIT 31-Dec-96 1000.00 8.239957 121.35986
1 FEE 31-Dec-97 0.737333 10.233708 0.07205 0.06
RESULTING VALUE 31-Dec-97 10.233708 121.28781 1241.2240
1.000
FORMULA: 1000*(1+T) 1241.2240
= 1190.224002
T = 19.02% 24.12%
R = 19.02% 24.12%
Dreyfus Stock Index
31-Dec-96
TO NO. YEARS 1.000
31-Dec-97 TRANSACTION DATE $ VALUE UNIT VALUE NO. UNITS END VALUE SURRENDER CHARGES
0 INIT DEPOSIT 31-Dec-96 1000.00 7.739093 129.21411
1 FEE 31-Dec-97 0.737333 10.144424 0.07268 0.06
RESULTING VALUE 31-Dec-97 10.144424 129.14142 1310.0654
1.000
FORMULA: 1000*(1+T) 1310.0654
= 1259.065367
T = 25.91% 31.01%
R = 25.91% 31.01%
AIM Capital Appreciation
31-Dec-96
TO NO. YEARS 1.000
31-Dec-97
TRANSACTION DATE $ VALUE UNIT VALUE NO. UNITS END VALUE SURRENDER CHARGES
0 INIT DEPOSIT 31-Dec-96 1000.00 9.383836 106.56623
1 FEE 31-Dec-97 0.737333 10.497825 0.07024 0.06
RESULTING VALUE 31-Dec-97 10.497825 106.49599 1117.9763
1.000
FORMULA: 1000*(1+T) 1117.9763
= 1066.976272
T = 6.70% 11.80%
R = 6.70% 11.80%
AIM Diversified Income
31-Dec-96
TO NO. YEARS 1.000
31-Dec-97
TRANSACTION DATE $ VALUE UNIT VALUE NO. UNITS END VALUE SURRENDER CHARGES
0 INIT DEPOSIT 31-Dec-96 1000.00 9.195027 108.75444
1 FEE 31-Dec-97 0.737333 9.913731 0.07437 0.06
RESULTING VALUE 31-Dec-97 9.913731 108.68006 1077.4249
1.000
FORMULA: 1000*(1+T) 1077.4249
= 1026.424917
T = 2.64% 7.74%
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S><C>
R = 2.64% 7.74%
AIM Growth and Income
31-Dec-96
TO NO. YEARS 1.000
31-Dec-97
TRANSACTION DATE $ VALUE UNIT VALUE NO. UNITS END VALUE SURRENDER CHARGES
0 INIT DEPOSIT 31-Dec-96 1000.00 8.262572 121.02769
1 FEE 31-Dec-97 0.737333 10.238197 0.07202 0.06
RESULTING VALUE 31-Dec-97 10.238197 120.95567 1238.3680
1.000
FORMULA: 1000*(1+T) 1238.3680
= 1187.367996
T = 18.74% 23.84%
R = 18.74% 23.84%
AIM Government Securities
31-Dec-96
TO NO. YEARS 1.000
31-Dec-97
TRANSACTION DATE $ VALUE UNIT VALUE NO. UNITS END VALUE SURRENDER CHARGES
0 INIT DEPOSIT 31-Dec-96 1000.00 9.329361 107.18848
1 FEE 31-Dec-97 0.737333 9.945077 0.07414 0.06
RESULTING VALUE 31-Dec-97 9.945077 107.11434 1065.2603
1.000
FORMULA: 1000*(1+T) 1065.2603
= 1014.260327
T = 1.43% 6.53%
R = 1.43% 6.53%
AIM Growth
31-Dec-96
TO NO. YEARS 1.000
31-Dec-97
TRANSACTION DATE $ VALUE UNIT VALUE NO. UNITS END VALUE SURRENDER CHARGES
0 INIT DEPOSIT 31-Dec-96 1000.00 8.153525 122.64634
1 FEE 31-Dec-97 0.737333 10.195413 0.07232 0.06
RESULTING VALUE 31-Dec-97 10.195413 122.57402 1249.6928
1.000
FORMULA: 1000*(1+T) 1249.6928
= 1198.692757
T = 19.87% 24.97%
R = 19.87% 24.97%
AIM International Equity
31-Dec-96
TO NO. YEARS 1.000
31-Dec-97 TRANSACTION DATE $ VALUE UNIT VALUE NO. UNITS END VALUE SURRENDER CHARGES
0 INIT DEPOSIT 31-Dec-96 1000.00 9.531187 104.91873
1 FEE 31-Dec-97 0.737333 10.045526 0.07340 0.06
RESULTING VALUE 31-Dec-97 10.045526 104.84533 1053.2265
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S><C>
1.000
FORMULA: 1000*(1+T) 1053.2265
= 1002.226459
T = 0.22% 5.32%
R = 0.22% 5.32%
AIM Global Utilities
31-Dec-96
TO NO. YEARS 1.000
31-Dec-97
TRANSACTION DATE $ VALUE UNIT VALUE NO. UNITS END VALUE SURRENDER CHARGES
0 INIT DEPOSIT 31-Dec-96 1000.00 8.306383 120.38934
1 FEE 31-Dec-97 0.737333 9.958116 0.07404 0.06
RESULTING VALUE 31-Dec-97 9.958116 120.31530 1198.1137
1.000
FORMULA: 1000*(1+T) 1198.1137
= 1147.113719
T = 14.71% 19.81%
R = 14.71% 19.81%
AIM Value
31-Dec-96
TO NO. YEARS 1.000
31-Dec-97
TRANSACTION DATE $ VALUE UNIT VALUE NO. UNITS END VALUE SURRENDER CHARGES
0 INIT DEPOSIT 31-Dec-96 1000.00 8.351639 119.73698
1 FEE 31-Dec-97 0.737333 10.181402 0.07242 0.06
RESULTING VALUE 31-Dec-97 10.181402 119.66456 1218.3530
1.000
FORMULA: 1000*(1+T) 1218.3530
= 1167.352955
T = 16.74% 21.84%
R = 16.74% 21.84%
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S><C>
5 yrs ago: 12/31/92
4 years Ago: 2/28/94
3 yrs ago: 2/28/95
2 Years ago: 2/29/96
1 Year Ago: 12/31/96
Date: 12/31/97
Dean Witter European Growth
31-Dec-92
TO NO. YEARS 5.000
31-Dec-97
TRANSACTION DATE $ VALUE UNIT VALUE NO. UNITS END VALUE SURRENDER CHARGES
0INIT DEPOSIT 31-Dec-92 1000.00 3.900793 256.35811
1FEE 28-Feb-94 0.737333 5.623544 0.13112
2FEE 28-Feb-95 0.737333 5.882527 0.12534
3FEE 29-Feb-96 0.737333 7.496021 0.09836
4FEE 31-Dec-96 0.737333 9.196745 0.08017
5FEE 31-Dec-97 0.737333 10.522273 0.07007 0.03
RESULTING VALUE 31-Dec-97 10.522273 255.85304 2692.1556
5.000
FORMULA: 1000*(1+T)= 2692.1556
= 2666.655574
T = 21.67% 21.90%
R = 166.67% 169.22%
Dean Witter Dividend Growth
31-Dec-92
TO NO. YEARS 5.000
31-Dec-97
TRANSACTION DATE $ VALUE UNIT VALUE NO. UNITS END VALUE SURRENDER CHARGES
0INIT DEPOSIT 31-Dec-92 1000.00 4.813319 207.75685
1FEE 28-Feb-94 0.737333 5.388745 0.13683
2FEE 28-Feb-95 0.737333 5.535456 0.13320
3FEE 29-Feb-96 0.737333 7.299912 0.10101
4FEE 31-Dec-96 0.737333 8.493417 0.08681
5FEE 31-Dec-97 0.737333 10.514825 0.07012 0.03
RESULTING VALUE 31-Dec-97 10.514825 207.22888 2178.9754
5.000
FORMULA: 1000*(1+T)= 2178.9754
= 2153.475373
T = 16.58% 16.86%
R = 115.35% 117.90%
Dean Witter Utilities
31-Dec-92
TO NO. YEARS 5.000
31-Dec-97 TRANSACTION DATE $ VALUE UNIT VALUE NO. UNITS END VALUE SURRENDER CHARGES
0INIT DEPOSIT 31-Dec-92 1000.00 6.865177 145.66267
1FEE 28-Feb-94 0.737333 7.482828 0.09854
2FEE 28-Feb-95 0.737333 7.352324 0.10029
3FEE 29-Feb-96 0.737333 8.921630 0.08265
4FEE 31-Dec-96 0.737333 9.533830 0.07734
5FEE 31-Dec-97 0.737333 11.948109 0.06171 0.03
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S><C>
RESULTING VALUE 31-Dec-97 11.948109 145.24215 1735.3691
5.000
FORMULA: 1000*(1+T)= 1735.3691
= 1709.869052
T = 11.32% 11.66%
R = 70.99% 73.54%
Dean Witter Quality Income Plus
31-Dec-92
TO NO. YEARS 5.000
31-Dec-97
TRANSACTION DATE $ VALUE UNIT VALUE NO. UNITS END VALUE SURRENDER CHARGES
0INIT DEPOSIT 31-Dec-92 1000.00 7.756646 128.92170
1FEE 28-Feb-94 0.737333 8.528598 0.08645
2FEE 28-Feb-95 0.737333 8.346270 0.08834
3FEE 29-Feb-96 0.737333 9.434169 0.07816
4FEE 31-Dec-96 0.737333 9.753769 0.07559
5FEE 31-Dec-97 0.737333 10.681791 0.06903 0.03
RESULTING VALUE 31-Dec-97 10.681791 128.52413 1372.8679
5.000
FORMULA: 1000*(1+T)= 1372.8679
= 1347.367888
T = 6.14% 6.54%
R = 34.74% 37.29%
Fidelity Growth
31-Dec-92
TO NO. YEARS 5.000
31-Dec-97 TRANSACTION DATE $ VALUE UNIT VALUE NO. UNITS END VALUE SURRENDER CHARGES
0INIT DEPOSIT 31-Dec-92 1000.00 5.020667 199.17674
1FEE 28-Feb-94 0.737333 5.978893 0.12332
2FEE 28-Feb-95 0.737333 5.933300 0.12427
3FEE 29-Feb-96 0.737333 8.133403 0.09065
4FEE 31-Dec-96 0.737333 8.779737 0.08398
5FEE 31-Dec-97 0.737333 10.685331 0.06900 0.03
RESULTING VALUE 31-Dec-97 10.685331 198.68551 2123.0204
5.000
FORMULA: 1000*(1+T)= 2123.0204
= 2097.520421
T = 15.97% 16.25%
R = 109.75% 112.30%
Fidelity High Income
31-Dec-92
TO NO. YEARS 5.000
31-Dec-97
TRANSACTION DATE $ VALUE UNIT VALUE NO. UNITS END VALUE SURRENDER CHARGES
0INIT DEPOSIT 31-Dec-92 1000.00 6.041866 165.51178
1FEE 28-Feb-94 0.737333 7.382622 0.09987
2FEE 28-Feb-95 0.737333 7.252521 0.10167
3FEE 29-Feb-96 0.737333 8.581420 0.08592
4FEE 31-Dec-96 0.737333 9.294680 0.07933
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S><C>
5FEE 31-Dec-97 0.737333 10.779356 0.06840 0.03
RESULTING VALUE 31-Dec-97 10.779356 165.07659 1779.4193
5.000
FORMULA: 1000*(1+T)= 1779.4193
= 1753.919297
T = 11.89% 12.22%
R = 75.39% 77.94%
Fidelity Contrafund
31-Dec-92
TO NO. YEARS 5.000
31-Dec-97
TRANSACTION DATE $ VALUE UNIT VALUE NO. UNITS END VALUE SURRENDER CHARGES
0INIT DEPOSIT 31-Dec-92 1000.00 #N/A #N/A
1FEE 28-Feb-94 0.737333 #N/A #N/A
2FEE 28-Feb-95 0.737333 5.689756 0.12959
3FEE 29-Feb-96 0.737333 7.637920 0.09654
4FEE 31-Dec-96 0.737333 9.048583 0.08149
5FEE 31-Dec-97 0.737333 11.071444 0.06660 0.03
RESULTING VALUE 31-Dec-97 11.071444 #N/A #N/A
5.000
FORMULA: 1000*(1+T)= #N/A
= #N/A
T = #N/A #N/A
R = #N/A #N/A
MFS Emerging Growth
31-Dec-92
TO NO. YEARS 5.000
31-Dec-97
TRANSACTION DATE $ VALUE UNIT VALUE NO. UNITS END VALUE SURRENDER CHARGES
0INIT DEPOSIT 31-Dec-92 1000.00 #N/A #N/A
1FEE 28-Feb-94 0.737333 #N/A #N/A
2FEE 28-Feb-95 0.737333 #N/A #N/A
3FEE 29-Feb-96 0.737333 8.313144 0.08869
4FEE 31-Dec-96 0.737333 9.085640 0.08115
5FEE 31-Dec-97 0.737333 10.998814 0.06704 0.03
RESULTING VALUE 31-Dec-97 10.998814 #N/A #N/A
5.000
FORMULA: 1000*(1+T)= #N/A
= #N/A
T = #N/A #N/A
R = #N/A #N/A
MFS Limited Maturity
31-Dec-92
TO NO. YEARS 5.000
31-Dec-97
TRANSACTION DATE $ VALUE UNIT VALUE NO. UNITS END VALUE SURRENDER CHARGES
0INIT DEPOSIT 31-Dec-92 1000.00 #N/A #N/A
1FEE 28-Feb-94 0.737333 #N/A #N/A
2FEE 28-Feb-95 0.737333 #N/A #N/A
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S><C>
3FEE 29-Feb-96 0.737333 #N/A #N/A
4FEE 31-Dec-96 0.737333 9.831237 0.07500
5FEE 31-Dec-97 0.737333 10.268838 0.07180 0.03
RESULTING VALUE 31-Dec-97 10.268838 #N/A #N/A
5.000
FORMULA: 1000*(1+T)= #N/A
= #N/A
T = #N/A #N/A
R = #N/A #N/A
Dreyfus Growth and Income
31-Dec-92
TO NO. YEARS 5.000
31-Dec-97 TRANSACTION DATE $ VALUE UNIT VALUE NO. UNITS END VALUE SURRENDER CHARGES
0INIT DEPOSIT 31-Dec-92 1000.00 #N/A #N/A
1FEE 28-Feb-94 0.737333 #N/A #N/A
2FEE 28-Feb-95 0.737333 5.379917 0.13705
3FEE 29-Feb-96 0.737333 8.264056 0.08922
4FEE 31-Dec-96 0.737333 9.110409 0.08093
5FEE 31-Dec-97 0.737333 10.602233 0.06955 0.03
RESULTING VALUE 31-Dec-97 10.602233 #N/A #N/A
5.000
FORMULA: 1000*(1+T)= #N/A
= #N/A
T = #N/A #N/A
R = #N/A #N/A
Dreyfus Money Market
31-Dec-92
TO NO. YEARS 5.000
31-Dec-97
TRANSACTION DATE $ VALUE UNIT VALUE NO. UNITS END VALUE SURRENDER CHARGES
0INIT DEPOSIT 31-Dec-92 1000.00 8.726776 114.58985
1FEE 28-Feb-94 0.737333 8.910450 0.08275
2FEE 28-Feb-95 0.737333 9.205135 0.08010
3FEE 29-Feb-96 0.737333 9.577805 0.07698
4FEE 31-Dec-96 0.737333 9.860593 0.07478
5FEE 31-Dec-97 0.737333 10.197942 0.07230 0.03
RESULTING VALUE 31-Dec-97 10.197942 114.20294 1164.6350
5.000
FORMULA: 1000*(1+T)= 1164.6350
= 1139.134988
T = 2.64% 3.10%
R = 13.91% 16.46%
!!!!
Dreyfus Socially Responsible
31-Dec-92
TO NO. YEARS 5.000
31-Dec-97
TRANSACTION DATE $ VALUE UNIT VALUE NO. UNITS END VALUE SURRENDER CHARGES
0 INIT DEPOSIT 31-Dec-92 1000.00 #N/A #N/A
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S><C>
1 FEE 28-Feb-94 0.737333 5.489204 0.13432
2 FEE 28-Feb-95 0.737333 5.573792 0.13229
3 FEE 29-Feb-96 0.737333 7.635078 0.09657
4 FEE 31-Dec-96 0.737333 8.557456 0.08616
5 FEE 31-Dec-97 0.737333 10.812943 0.06819 0.03
RESULTING VALUE 31-Dec-97 10.812943 #N/A #N/A
5.000
FORMULA: 1000*(1+T)= #N/A
= #N/A
T = #N/A #N/A
R = #N/A #N/A
Dreyfus Small Company
31-Dec-92
TO NO. YEARS 5.000
31-Dec-97
TRANSACTION DATE $ VALUE UNIT VALUE NO. UNITS END VALUE SURRENDER CHARGES
0 INIT DEPOSIT 31-Dec-92 1000.00 #N/A #N/A
1 FEE 28-Feb-94 0.737333 #N/A #N/A
2 FEE 28-Feb-95 0.737333 #N/A #N/A
3 FEE 29-Feb-96 0.737333 #N/A #N/A
4 FEE 31-Dec-96 0.737333 9.298603 0.07930
5 FEE 31-Dec-97 0.737333 11.160589 0.06607 0.03
RESULTING VALUE 31-Dec-97 11.160589 #N/A #N/A
5.000
FORMULA: 1000*(1+T)= #N/A
= #N/A
T = #N/A #N/A
R = #N/A #N/A
American Century Balanced
31-Dec-92
TO NO. YEARS 5.000
31-Dec-97
TRANSACTION DATE $ VALUE UNIT VALUE NO. UNITS END VALUE SURRENDER CHARGES
0 INIT DEPOSIT 31-Dec-92 1000.00 6.686702 149.55057
1 FEE 28-Feb-94 0.737333 7.279056 0.10130
2 FEE 28-Feb-95 0.737333 7.127464 0.10345
3 FEE 29-Feb-96 0.737333 8.584129 0.08589
4 FEE 31-Dec-96 0.737333 9.302482 0.07926
5 FEE 31-Dec-97 0.737333 10.617921 0.06944 0.03
RESULTING VALUE 31-Dec-97 10.617921 149.11122 1583.2512
5.000
FORMULA: 1000*(1+T)= 1583.2512
= 1557.751169
T = 9.27% 9.63%
R = 55.78% 58.33%
American Century International
31-Dec-92
TO NO. YEARS 5.000
31-Dec-97
TRANSACTION DATE $ VALUE UNIT VALUE NO. UNITS END VALUE SURRENDER CHARGES
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S><C>
0 INIT DEPOSIT 31-Dec-92 1000.00 #N/A #N/A
1 FEE 28-Feb-94 0.737333 #N/A #N/A
2 FEE 28-Feb-95 0.737333 6.526569 0.11297
3 FEE 29-Feb-96 0.737333 7.670546 0.09613
4 FEE 31-Dec-96 0.737333 8.573366 0.08600
5 FEE 31-Dec-97 0.737333 10.024638 0.07355 0.03
RESULTING VALUE 31-Dec-97 10.024638 #N/A #N/A
5.000
FORMULA: 1000*(1+T)= #N/A
= #N/A
T = #N/A #N/A
R = #N/A #N/A
Fidelity Equity Income
31-Dec-92
TO NO. YEARS 5.000
31-Dec-97
TRANSACTION DATE $ VALUE UNIT VALUE NO. UNITS END VALUE SURRENDER CHARGES
0 INIT DEPOSIT 31-Dec-92 1000.00 4.472299 223.59865
1 FEE 28-Feb-94 0.737333 5.291405 0.13935
2 FEE 28-Feb-95 0.737333 5.787999 0.12739
3 FEE 29-Feb-96 0.737333 7.535333 0.09785
4 FEE 31-Dec-96 0.737333 8.239957 0.08948
5 FEE 31-Dec-97 0.737333 10.233708 0.07205 0.03
RESULTING VALUE 31-Dec-97 10.233708 223.07253 2282.8591
5.000
FORMULA: 1000*(1+T)= 2282.8591
= 2257.359114
T = 17.68% 17.95%
R = 125.74% 128.29%
Dreyfus Stock Index
31-Dec-92
TO NO. YEARS 5.000
31-Dec-97
TRANSACTION DATE $ VALUE UNIT VALUE NO. UNITS END VALUE SURRENDER CHARGES
0 INIT DEPOSIT 31-Dec-92 1000.00 4.433309 225.56515
1 FEE 28-Feb-94 0.737333 4.791885 0.15387
2 FEE 28-Feb-95 0.737333 5.047544 0.14608
3 FEE 29-Feb-96 0.737333 6.666694 0.11060
4 FEE 31-Dec-96 0.737333 7.739093 0.09527
5 FEE 31-Dec-97 0.737333 10.144424 0.07268 0.03
RESULTING VALUE 31-Dec-97 10.144424 224.98664 2282.3599
5.000
FORMULA: 1000*(1+T)= 2282.3599
= 2256.859889
T = 17.68% 17.94%
R = 125.69% 128.24%
AIM Capital Appreciation
31-Dec-92
TO NO. YEARS 5.000
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S><C>
31-Dec-97 TRANSACTION DATE $ VALUE UNIT VALUE NO. UNITS END VALUE SURRENDER CHARGES
0 INIT DEPOSIT 31-Dec-92 1000.00 #N/A #N/A
1 FEE 28-Feb-94 0.737333 6.420234 0.11485
2 FEE 28-Feb-95 0.737333 6.288141 0.11726
3 FEE 29-Feb-96 0.737333 8.585676 0.08588
4 FEE 31-Dec-96 0.737333 9.383836 0.07857
5 FEE 31-Dec-97 0.737333 10.497825 0.07024 0.03
RESULTING VALUE 31-Dec-97 10.497825 #N/A #N/A
5.000
FORMULA: 1000*(1+T)= #N/A
= #N/A
T = #N/A #N/A
R = #N/A #N/A
AIM Diversified Income
31-Dec-92
TO NO. YEARS 5.000
31-Dec-97
TRANSACTION DATE $ VALUE UNIT VALUE NO. UNITS END VALUE SURRENDER CHARGES
0 INIT DEPOSIT 31-Dec-92 1000.00 #N/A #N/A
1 FEE 28-Feb-94 0.737333 7.672932 0.09610
2 FEE 28-Feb-95 0.737333 7.470797 0.09870
3 FEE 29-Feb-96 0.737333 8.437730 0.08739
4 FEE 31-Dec-96 0.737333 9.195027 0.08019
5 FEE 31-Dec-97 0.737333 9.913731 0.07437 0.03
RESULTING VALUE 31-Dec-97 9.913731 #N/A #N/A
5.000
FORMULA: 1000*(1+T)= #N/A
= #N/A
T = #N/A #N/A
R = #N/A #N/A
AIM Growth and Income
31-Dec-92
TO NO. YEARS 5.000
31-Dec-97 TRANSACTION DATE $ VALUE UNIT VALUE NO. UNITS END VALUE SURRENDER CHARGES
0 INIT DEPOSIT 31-Dec-92 1000.00 #N/A #N/A
1 FEE 28-Feb-94 0.737333 #N/A #N/A
2 FEE 28-Feb-95 0.737333 5.525512 0.13344
3 FEE 29-Feb-96 0.737333 7.275026 0.10135
4 FEE 31-Dec-96 0.737333 8.262572 0.08924
5 FEE 31-Dec-97 0.737333 10.238197 0.07202 0.03
RESULTING VALUE 31-Dec-97 10.238197 #N/A #N/A
5.000
FORMULA: 1000*(1+T)= #N/A
= #N/A
T = #N/A #N/A
R = #N/A #N/A
AIM Government Securities
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S><C>
31-Dec-92
TO NO. YEARS 5.000
31-Dec-97
TRANSACTION DATE $ VALUE UNIT VALUE NO. UNITS END VALUE SURRENDER CHARGES
0 INIT DEPOSIT 31-Dec-92 1000.00 #N/A #N/A
1 FEE 28-Feb-94 0.737333 8.475177 0.08700
2 FEE 28-Feb-95 0.737333 8.394536 0.08783
3 FEE 29-Feb-96 0.737333 9.113630 0.08090
4 FEE 31-Dec-96 0.737333 9.329361 0.07903
5 FEE 31-Dec-97 0.737333 9.945077 0.07414 0.03
RESULTING VALUE 31-Dec-97 9.945077 #N/A #N/A
5.000
FORMULA: 1000*(1+T)= #N/A
= #N/A
T = #N/A #N/A
R = #N/A #N/A
AIM Growth
31-Dec-92
TO NO. YEARS 5.000
31-Dec-97
TRANSACTION DATE $ VALUE UNIT VALUE NO. UNITS END VALUE SURRENDER CHARGES
0 INIT DEPOSIT 31-Dec-92 1000.00 #N/A #N/A
1 FEE 28-Feb-94 0.737333 5.627756 0.13102
2 FEE 28-Feb-95 0.737333 5.526613 0.13342
3 FEE 29-Feb-96 0.737333 7.322639 0.10069
4 FEE 31-Dec-96 0.737333 8.153525 0.09043
5 FEE 31-Dec-97 0.737333 10.195413 0.07232 0.03
RESULTING VALUE 31-Dec-97 10.195413 #N/A #N/A
5.000
FORMULA: 1000*(1+T)= #N/A
= #N/A
T = #N/A #N/A
R = #N/A #N/A
AIM International Equity
31-Dec-92
TO NO. YEARS 5.000
31-Dec-97 TRANSACTION DATE $ VALUE UNIT VALUE NO. UNITS END VALUE SURRENDER CHARGES
0 INIT DEPOSIT 31-Dec-92 1000.00 #N/A #N/A
1 FEE 28-Feb-94 0.737333 7.310881 0.10085
2 FEE 28-Feb-95 0.737333 6.734241 0.10949
3 FEE 29-Feb-96 0.737333 8.412418 0.08765
4 FEE 31-Dec-96 0.737333 9.531187 0.07736
5 FEE 31-Dec-97 0.737333 10.045526 0.07340 0.03
RESULTING VALUE 31-Dec-97 10.045526 #N/A #N/A
5.000
FORMULA: 1000*(1+T)= #N/A
= #N/A
T = #N/A #N/A
R = #N/A #N/A
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S><C>
AIM Global Utilities
31-Dec-92
TO NO. YEARS 5.000
31-Dec-97
TRANSACTION DATE $ VALUE UNIT VALUE NO. UNITS END VALUE SURRENDER CHARGES
0 INIT DEPOSIT 31-Dec-92 1000.00 #N/A #N/A
1 FEE 28-Feb-94 0.737333 #N/A #N/A
2 FEE 28-Feb-95 0.737333 6.209152 0.11875
3 FEE 29-Feb-96 0.737333 7.495698 0.09837
4 FEE 31-Dec-96 0.737333 8.306383 0.08877
5 FEE 31-Dec-97 0.737333 9.958116 0.07404 0.03
RESULTING VALUE 31-Dec-97 9.958116 #N/A #N/A
5.000
FORMULA: 1000*(1+T)= #N/A
= #N/A
T = #N/A #N/A
R = #N/A #N/A
AIM Value
31-Dec-92
TO NO. YEARS 5.000
31-Dec-97
TRANSACTION DATE $ VALUE UNIT VALUE NO. UNITS END VALUE SURRENDER CHARGES
0 INIT DEPOSIT 31-Dec-92 1000.00 #N/A #N/A
1 FEE 28-Feb-94 0.737333 5.682200 0.12976
2 FEE 28-Feb-95 0.737333 5.755221 0.12812
3 FEE 29-Feb-96 0.737333 7.458840 0.09885
4 FEE 31-Dec-96 0.737333 8.351639 0.08829
5 FEE 31-Dec-97 0.737333 10.181402 0.07242 0.03
RESULTING VALUE 31-Dec-97 10.181402 #N/A #N/A
5.000
FORMULA: 1000*(1+T)= #N/A
= #N/A
T = #N/A #N/A
R = #N/A #N/A
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S><C>
Date: 12/31/97
Dean Witter European Growth
01-Mar-91
TO NO. YEARS 6.836
31-Dec-97
TRANSACTION DATE $ VALUE UNIT VALUE NO. UNITS END VALUE SURRENDER CHARGES
0 INIT DEPOSIT 01-Mar-91 1000.00 3.801214 263.07388
1 FEE 01-Mar-92 0.7373334 3.913811 0.18839
2 FEE 01-Mar-93 0.7373334 4.076104 0.18089
3 FEE 01-Mar-94 0.7373334 5.600283 0.13166
4 FEE 01-Mar-95 0.7373334 5.932350 0.12429
5 FEE 01-Mar-96 0.7373334 7.540660 0.09778
6 FEE 01-Mar-97 0.7373334 9.230545 0.07988
7 FEE 31-Dec-97 0.7373334 10.522273 0.07007 0%
RESULTING VALUE 31-Dec-97 10.522273 262.20091 2758.9496
6.836
FORMULA: 1000*(1+T)= 2758.9496
= 2758.949576
T = 16.00% 16.00%
R = 175.89% 175.89%
Dean Witter Dividend Growth
25-Oct-90
TO NO. YEARS 7.184
31-Dec-97
TRANSACTION DATE $ VALUE UNIT VALUE NO. UNITS END VALUE SURRENDER CHARGES
0 INIT DEPOSIT 25-Oct-90 1000.00 3.249522 307.73752
1 FEE 25-Oct-91 0.7373334 4.245771 0.17366
2 FEE 25-Oct-92 0.7373334 4.652016 0.15850
3 FEE 25-Oct-93 0.7373334 5.327426 0.13840
4 FEE 25-Oct-94 0.7373334 5.232350 0.14092
5 FEE 25-Oct-95 0.7373334 6.512257 0.11322
6 FEE 25-Oct-96 0.7373334 8.036336 0.09175
7 FEE 25-Oct-97 0.7373334 10.431781 0.07068
8 FEE 31-Dec-97 0.7373334 10.514825 0.07012 0%
RESULTING VALUE 31-Dec-97 10.514825 306.78026 3225.7408
7.184
FORMULA: 1000*(1+T)= 3225.7408
= 3225.740786
T = 17.71% 17.71%
R = 222.57% 222.57%
Dean Witter Utilities
25-Oct-90
TO NO. YEARS 7.184
31-Dec-97 TRANSACTION DATE $ VALUE UNIT VALUE NO. UNITS END VALUE SURRENDER CHARGES
0 INIT DEPOSIT 25-Oct-90 1000.00 4.970895 201.17102
1 FEE 25-Oct-91 0.7373334 5.770678 0.12777
2 FEE 25-Oct-92 0.7373334 6.448344 0.11434
3 FEE 25-Oct-93 0.7373334 8.038895 0.09172
4 FEE 25-Oct-94 0.7373334 7.101673 0.10383
5 FEE 25-Oct-95 0.7373334 8.420380 0.08757
6 FEE 25-Oct-96 0.7373334 9.151434 0.08057
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S><C>
7 FEE 25-Oct-97 0.7373334 10.808071 0.06822
8 FEE 31-Dec-97 0.7373334 11.948109 0.06171 0%
RESULTING VALUE 31-Dec-97 11.948109 200.43529 2394.8227
7.184
FORMULA: 1000*(1+T)= 2394.8227
= 2394.822736
T = 12.93% 12.93%
R = 139.48% 139.48%
Dean Witter Quality Income Plus
25-Oct-90
TO NO. YEARS 7.184
31-Dec-97 TRANSACTION DATE $ VALUE UNIT VALUE NO. UNITS END VALUE SURRENDER CHARGES
0 INIT DEPOSIT 25-Oct-90 1000.00 5.982676 167.14929
1 FEE 25-Oct-91 0.7373334 6.883366 0.10712
2 FEE 25-Oct-92 0.7373334 7.558956 0.09754
3 FEE 25-Oct-93 0.7373334 8.739330 0.08437
4 FEE 25-Oct-94 0.7373334 7.830879 0.09416
5 FEE 25-Oct-95 0.7373334 9.401909 0.07842
6 FEE 25-Oct-96 0.7373334 9.603783 0.07678
7 FEE 25-Oct-97 0.7373334 10.449923 0.07056
8 FEE 31-Dec-97 0.7373334 10.681791 0.06903 0%
RESULTING VALUE 31-Dec-97 10.681791 166.47132 1778.2118
7.184
FORMULA: 1000*(1+T)= 1778.2118
= 1778.211833
T = 8.34% 8.34%
R = 77.82% 77.82%
Fidelity Growth
31-Dec-87
TO NO. YEARS 10.000
31-Dec-97
TRANSACTION DATE $ VALUE UNIT VALUE NO. UNITS END VALUE SURRENDER CHARGES
0 INIT DEPOSIT 31-Dec-87 1000.00 2.529162 395.38790
1 FEE 31-Dec-88 0.7373334 2.881324 0.25590
2 FEE 31-Dec-89 0.7373334 3.734955 0.19741
3 FEE 31-Dec-90 0.7373334 3.248956 0.22694
4 FEE 31-Dec-91 0.7373334 4.659704 0.15824
5 FEE 31-Dec-92 0.7373334 5.020667 0.14686
6 FEE 31-Dec-93 0.7373334 5.906923 0.12483
7 FEE 31-Dec-94 0.7373334 5.820997 0.12667
8 FEE 31-Dec-95 0.7373334 7.766551 0.09494
9 FEE 31-Dec-96 0.7373334 8.779737 0.08398
10 FEE 31-Dec-97 0.7373334 10.685331 0.06900 0
RESULTING VALUE 31-Dec-97 10.685331 393.90313 4208.98536
10
FORMULA: 1000*(1+T)= 4208.98536
= 4208.98536
T = 15.46% 0.1545633
R = 320.90% 3.2089854
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S><C>
Fidelity High Income
31-Dec-87
TO NO. YEARS 10.000
31-Dec-97
TRANSACTION DATE $ VALUE UNIT VALUE NO. UNITS END VALUE SURRENDER CHARGES
0 INIT DEPOSIT 31-Dec-87 1000.00 3.733050 267.87750
1 FEE 31-Dec-88 0.7373334 4.107832 0.17949
2 FEE 31-Dec-89 0.7373334 3.879871 0.19004
3 FEE 31-Dec-90 0.7373334 3.738315 0.19724
4 FEE 31-Dec-91 0.7373334 4.977037 0.14815
5 FEE 31-Dec-92 0.7373334 6.041866 0.12204
6 FEE 31-Dec-93 0.7373334 7.169629 0.10284
7 FEE 31-Dec-94 0.7373334 6.950984 0.10608
8 FEE 31-Dec-95 0.7373334 8.270551 0.08915
9 FEE 31-Dec-96 0.7373334 9.294680 0.07933
10 FEE 31-Dec-97 0.7373334 10.779356 0.06840 0
RESULTING VALUE 31-Dec-97 10.779356 266.59475 2873.71968
10
FORMULA: 1000*(1+T)= 2873.719678
= 2873.71968
T = 11.13% 0.1113336
R = 187.37% 1.8737197
Fidelity Contrafund
03-Jan-95
TO NO. YEARS 2.992
31-Dec-97
TRANSACTION DATE $ VALUE UNIT VALUE NO. UNITS END VALUE SURRENDER CHARGES
0 INIT DEPOSIT 03-Jan-95 1000.00 5.498965 181.85241
1 FEE 03-Jan-96 0.7373334 7.517748 0.09808
2 FEE 03-Jan-97 0.7373334 9.042037 0.08155
3 FEE 03-Jan-98 0.7373334 11.053907 0.06670
4 FEE 31-Dec-97 0.7373334 11.071444 0.06660 5%
RESULTING VALUE 31-Dec-97 11.071444 181.53948 2009.9042
2.992
FORMULA: 1000*(1+T)= 2009.9042
= 1967.404203
T = 25.38% 26.27%
R = 96.74% 100.99%
MFS Emerging Growth
24-Jul-95
TO NO. YEARS 2.439
31-Dec-97 TRANSACTION DATE $ VALUE UNIT VALUE NO. UNITS END VALUE SURRENDER CHARGES
0 INIT DEPOSIT 24-Jul-95 1000.00 6.752026 148.10370
1 FEE 24-Jul-96 0.7373334 8.004940 0.09211
2 FEE 24-Jul-97 0.7373334 10.876888 0.06779
3 FEE 31-Dec-97 0.7373334 10.998814 0.06704 5%
RESULTING VALUE 31-Dec-97 10.998814 147.87676 1626.4690
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S><C>
2.439
FORMULA: 1000*(1+T)= 1626.4690
= 1583.969013
T = 20.75% 22.07%
R = 58.40% 62.65%
MFS Limited Maturity
14-Aug-96
TO NO. YEARS 1.380
31-Dec-97
TRANSACTION DATE $ VALUE UNIT VALUE NO. UNITS END VALUE SURRENDER CHARGES
0 INIT DEPOSIT 14-Aug-96 1000.00 9.634259 103.79626
1 FEE 14-Aug-97 0.7373334 10.103405 0.07298
2 FEE 31-Dec-97 0.7373334 10.268838 0.07180 6%
RESULTING VALUE 31-Dec-97 10.268838 103.65148 1064.3802
1.380
FORMULA: 1000*(1+T)= 1064.3802
= 1013.380227
T = 0.97% 4.63%
R = 1.34% 6.44%
Dreyfus Growth & Income
02-May-94
TO NO. YEARS 3.666
31-Dec-97 TRANSACTION DATE $ VALUE UNIT VALUE NO. UNITS END VALUE SURRENDER CHARGES
0 INIT DEPOSIT 02-May-94 1000.00 4.942987 202.30683
1 FEE 02-May-95 0.7373334 5.956730 0.12378
2 FEE 02-May-96 0.7373334 8.520427 0.08654
3 FEE 02-May-97 0.7373334 9.040437 0.08156
4 FEE 31-Dec-97 0.7373334 10.602233 0.06955 5%
RESULTING VALUE 31-Dec-97 10.602233 201.94541 2141.0722
3.666
FORMULA: 1000*(1+T)= 2141.0722
= 2098.572243
T = 22.41% 23.08%
R = 109.86% 114.11%
Dreyfus Money Market
31-Aug-90
TO NO. YEARS 7.335
31-Dec-97
TRANSACTION DATE $ VALUE UNIT VALUE NO. UNITS END VALUE SURRENDER CHARGES
0 INIT DEPOSIT 31-Aug-90 1000.00 7.981736 125.28602
1 FEE 31-Aug-91 0.7373334 8.387156 0.08791
2 FEE 31-Aug-92 0.7373334 8.662008 0.08512
3 FEE 31-Aug-93 0.7373334 8.832236 0.08348
4 FEE 31-Aug-94 0.7373334 9.027538 0.08168
5 FEE 31-Aug-95 0.7373334 9.399465 0.07844
6 FEE 31-Aug-96 0.7373334 9.744087 0.07567
7 FEE 31-Aug-97 0.7373334 10.073798 0.07319
8 FEE 31-Dec-97 0.7373334 10.197942 0.07230 0%
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S><C>
RESULTING VALUE 31-Dec-97 10.197942 124.64822 1271.1553
7.335
FORMULA: 1000*(1+T)= 1271.1553
= 1271.155321
T = 3.33% 3.33%
R = 27.12% 27.12%
Dreyfus Socially Responsible
07-Oct-93
TO NO. YEARS 4.233
31-Dec-97
TRANSACTION DATE $ VALUE UNIT VALUE NO. UNITS END VALUE SURRENDER CHARGES
0 INIT DEPOSIT 07-Oct-93 1000.00 5.041753 198.34371
1 FEE 07-Oct-94 0.7373334 5.406778 0.13637
2 FEE 07-Oct-95 0.7373334 6.944402 0.10618
3 FEE 07-Oct-96 0.7373334 8.184780 0.09009
4 FEE 07-Oct-97 0.7373334 11.295460 0.06528
5 FEE 31-Dec-97 0.7373334 10.812943 0.06819 4%
RESULTING VALUE 31-Dec-97 10.812943 197.87760 2139.6393
4.233
FORMULA: 1000*(1+T)= 2139.6393
= 2105.639257
T = 19.23% 19.69%
R = 110.56% 113.96%
Dreyfus Small Company 8/31/90
30-Apr-96
TO NO. YEARS 1.670
31-Dec-97
TRANSACTION DATE $ VALUE UNIT VALUE NO. UNITS END VALUE SURRENDER CHARGES
0 INIT DEPOSIT 30-Apr-96 1000.00 8.635484 115.80127
1 FEE 30-Apr-97 0.7373334 8.970262 0.08220
2 FEE 31-Dec-97 0.7373334 11.160589 0.06607 6%
RESULTING VALUE 31-Dec-97 11.160589 115.65301 1290.7557
1.670
FORMULA: 1000*(1+T)= 1290.7557
= 1239.755723
T = 13.73% 16.51%
R = 23.98% 29.08%
American Century Balanced
01-May-91
TO NO. YEARS 6.669
31-Dec-97 TRANSACTION DATE $ VALUE UNIT VALUE NO. UNITS END VALUE SURRENDER CHARGES
0 INIT DEPOSIT 01-May-91 1000.00 5.807849 172.18077
1 FEE 01-May-92 0.7373334 6.540651 0.11273
2 FEE 01-May-93 0.7373334 6.609292 0.11156
3 FEE 01-May-94 0.7373334 7.061204 0.10442
4 FEE 01-May-95 0.7373334 7.412274 0.09947
5 FEE 01-May-96 0.7373334 8.592718 0.08581
6 FEE 01-May-97 0.7373334 9.316036 0.07915
7 FEE 31-Dec-97 0.7373334 10.617921 0.06944 0%
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S><C>
RESULTING VALUE 31-Dec-97 10.617921 171.51819 1821.1666
6.669
FORMULA: 1000*(1+T)= 1821.1666
= 1821.166567
T = 9.40% 9.40%
R = 82.12% 82.12%
American Century International
02-May-94
TO NO. YEARS 3.666
31-Dec-97
TRANSACTION DATE $ VALUE UNIT VALUE NO. UNITS END VALUE SURRENDER CHARGES
0 INIT DEPOSIT 02-May-94 1000.00 7.306857 136.85775
1 FEE 01-May-95 0.7373334 6.942648 0.10620
2 FEE 01-May-96 0.7373334 8.035043 0.09176
3 FEE 01-May-97 0.7373334 9.175122 0.08036
4 FEE 31-Dec-97 0.7373334 10.024638 0.07355 5%
RESULTING VALUE 31-Dec-97 10.024638 136.50587 1368.4219
3.666
FORMULA: 1000*(1+T)= 1368.4219
= 1325.921915
T = 8.00% 8.93%
R = 32.59% 36.84%
Fidelity Equity Income
31-Dec-87
TO NO. YEARS 10.000
31-Dec-97
TRANSACTION DATE $ VALUE UNIT VALUE NO. UNITS END VALUE SURRENDER CHARGES
0 INIT DEPOSIT 31-Dec-87 1000.00 2.565836 389.73652
1 FEE 31-Dec-88 0.7373334 3.103407 0.23759
2 FEE 31-Dec-89 0.7373334 3.589416 0.20542
3 FEE 31-Dec-90 0.7373334 2.996591 0.24606
4 FEE 31-Dec-91 0.7373334 3.882023 0.18994
5 FEE 31-Dec-92 0.7373334 4.472299 0.16487
6 FEE 31-Dec-93 0.7373334 5.214354 0.14140
7 FEE 31-Dec-94 0.7373334 5.502665 0.13400
8 FEE 31-Dec-95 0.7373334 7.327090 0.10063
9 FEE 31-Dec-96 0.7373334 8.239957 0.08948
10 FEE 35795 0.7373334 10.233708 0.0720495 0
RESULTING VALUE 35795 10.23371 388.15509 3972.26587
10
FORMULA: 1000*(1+T)= 3972.265874
= 397226.59%
T = 14.79% 14.79%
R = 297.23% 2.9722659
Dreyfus Stock Index
29-Sep-89
TO NO. YEARS 8.255
31-Dec-97
TRANSACTION DATE $ VALUE UNIT VALUE NO. UNITS END VALUE SURRENDER CHARGES
0 INIT DEPOSIT 29-Sep-89 1000.00 3.388300 295.13325
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S><C>
1 FEE 29-Sep-90 0.7373334 3.028030 0.24350
2 FEE 29-Sep-91 0.7373334 3.964725 0.18597
3 FEE 29-Sep-92 0.7373334 4.200260 0.17554
4 FEE 29-Sep-93 0.7373334 4.734055 0.15575
5 FEE 29-Sep-94 0.7373334 4.876997 0.15119
6 FEE 29-Sep-95 0.7373334 6.075544 0.12136
7 FEE 29-Sep-96 0.7373334 6.804671 0.10836
8 FEE 29-Sep-97 0.7373334 9.703627 0.07599
9 FEE 31-Dec-97 0.7373334 10.144424 0.07268 0%
RESULTING VALUE 31-Dec-97 10.144424 293.84291 2980.8671
8.255
FORMULA: 1000*(1+T)= 2980.8671
= 2980.86705
T = 14.15% 14.15%
R = 198.09% 198.09%
AIM Capital Appreciation
05-May-93
TO NO. YEARS 4.657
31-Dec-97
TRANSACTION DATE $ VALUE UNIT VALUE NO. UNITS END VALUE SURRENDER CHARGES
0 INIT DEPOSIT 05-May-93 1000.00 5.063855 197.47801
1 FEE 05-May-94 0.7373334 5.968841 0.12353
2 FEE 05-May-95 0.7373334 6.651950 0.11084
3 FEE 05-May-96 0.7373334 8.997278 0.08195
4 FEE 05-May-97 0.7373334 9.428621 0.07820
5 FEE 31-Dec-97 0.7373334 10.497825 0.07024 4%
RESULTING VALUE 31-Dec-97 10.497825 197.01324 2068.2106
4.657
RMULA: 1000*(1+T)= 2068.2106
= 2034.21056
T = 16.47% 16.89%
R = 103.42% 106.82%
AIM Diversified Income
05-May-93
TO NO. YEARS 4.657
31-Dec-97
TRANSACTION DATE $ VALUE UNIT VALUE NO. UNITS END VALUE SURRENDER CHARGES
0 INIT DEPOSIT 05-May-93 1000.00 7.343049 136.18321
1 FEE 05-May-94 0.7373334 7.326296 0.10064
2 FEE 05-May-95 0.7373334 7.828933 0.09418
3 FEE 05-May-96 0.7373334 8.365811 0.08814
4 FEE 05-May-97 0.7373334 9.176056 0.08035
5 FEE 31-Dec-97 0.7373334 9.913731 0.07437 4%
RESULTING VALUE 31-Dec-97 9.913731 135.74552 1345.7446
4.657
FORMULA: 1000*(1+T)= 1345.7446
= 1311.74461
T = 6.00% 6.58%
R = 31.17% 34.57%
AIM Growth and Income
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S><C>
02-May-94
TO NO. YEARS 3.666
31-Dec-97 TRANSACTION DATE $ VALUE UNIT VALUE NO. UNITS END VALUE SURRENDER CHARGES
0 INIT DEPOSIT 02-May-94 1000.00 5.349337 186.93905
1 FEE 02-May-95 0.7373334 5.905576 0.12485
2 FEE 02-May-96 0.7373334 7.366603 0.10009
3 FEE 02-May-97 0.7373334 8.747818 0.08429
5 FEE 31-Dec-97 0.7373334 10.238197 0.07202 5%
RESULTING VALUE 31-Dec-97 10.238197 186.55780 1910.0155
3.666
FORMULA: 1000*(1+T)= 1910.0155
= 1867.515545
T = 18.58% 19.31%
R = 86.75% 91.00%
AIM Government Securities
05-May-93
TO NO. YEARS 4.657
31-Dec-97
TRANSACTION DATE $ VALUE UNIT VALUE NO. UNITS END VALUE SURRENDER CHARGES
0 INIT DEPOSIT 05-May-93 1000.00 8.348211 119.78614
1 FEE 05-May-94 0.7373334 8.177614 0.09016
2 FEE 05-May-95 0.7373334 8.646485 0.08528
3 FEE 05-May-96 0.7373334 8.891344 0.08293
4 FEE 05-May-97 0.7373334 9.386618 0.07855
5 FEE 31-Dec-97 0.7373334 9.945077 0.07414 4%
RESULTING VALUE 31-Dec-97 9.945077 119.37508 1187.1944
4.657
FORMULA: 1000*(1+T)= 1187.1944
= 1153.194401
T = 3.11% 3.75%
R = 15.32% 18.72%
AIM Growth
05-May-93
TO NO. YEARS 4.657
31-Dec-97
TRANSACTION DATE $ VALUE UNIT VALUE NO. UNITS END VALUE SURRENDER CHARGES
0 INIT DEPOSIT 05-May-93 1000.00 5.005754 199.77010
1 FEE 05-May-94 0.7373334 5.257245 0.14025
2 FEE 05-May-95 0.7373334 5.874416 0.12552
3 FEE 05-May-96 0.7373334 7.415147 0.09944
4 FEE 05-May-97 0.7373334 8.727253 0.08449
5 FEE 31-Dec-97 0.7373334 10.195413 0.07232 4%
RESULTING VALUE 31-Dec-97 10.195413 199.24810 2031.4166
4.657
FORMULA: 1000*(1+T)= 2031.4166
= 1997.416619
T = 16.02% 16.44%
R = 99.74% 103.14%
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S><C>
AIM International Equity
05-May-93
TO NO. YEARS 4.657
31-Dec-97
TRANSACTION DATE $ VALUE UNIT VALUE NO. UNITS END VALUE SURRENDER CHARGES
0 INIT DEPOSIT 05-May-93 1000.00 6.104121 163.82375
1 FEE 05-May-94 0.7373334 7.075137 0.10421
2 FEE 05-May-95 0.7373334 7.311034 0.10085
3 FEE 05-May-96 0.7373334 8.754938 0.08422
4 FEE 05-May-97 0.7373334 9.663688 0.07630
5 FEE 31-Dec-97 0.7373334 10.045526 0.07340 4%
RESULTING VALUE 31-Dec-97 10.045526 163.38477 1641.2859
4.657
FORMULA: 1000*(1+T)= 1641.2859
= 1607.285921
T = 10.73% 11.23%
R = 60.73% 64.13%
AIM Global Utilities
02-May-94
TO NO. YEARS 3.666
31-Dec-97 TRANSACTION DATE $ VALUE UNIT VALUE NO. UNITS END VALUE SURRENDER CHARGES
0 INIT DEPOSIT 02-May-94 1000.00 6.261484 159.70655
1 FEE 02-May-95 0.7373334 6.350583 0.11610
2 FEE 02-May-96 0.7373334 7.464157 0.09878
3 FEE 02-May-97 0.7373334 8.384787 0.08794
5 FEE 31-Dec-97 0.7373334 9.958116 0.07404 5%
RESULTING VALUE 31-Dec-97 9.958116 159.32968 1586.6234
3.666
FORMULA: 1000*(1+T)= 1586.6234
= 1544.123438
T = 12.58% 13.42%
R = 54.41% 58.66%
AIM Value
05-May-93
TO NO. YEARS 4.657
31-Dec-97
TRANSACTION DATE $ VALUE UNIT VALUE NO. UNITS END VALUE SURRENDER CHARGES
0 INIT DEPOSIT 05-May-93 1000.00 4.704075 212.58164
1 FEE 05-May-94 0.7373334 5.462914 0.13497
2 FEE 05-May-95 0.7373334 6.173921 0.11943
3 FEE 05-May-96 0.7373334 7.435411 0.09917
4 FEE 05-May-97 0.7373334 8.942597 0.08245
5 FEE 31-Dec-97 0.7373334 10.181402 0.07242 4%
RESULTING VALUE 31-Dec-97 10.181402 212.07321 2159.2026
4.657
FORMULA: 1000*(1+T)= 2159.2026
= 2125.202607
T = 17.57% 17.97%
R = 112.52% 115.92%
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S><C>
Date: 12/31/97
Dean Witter European Growth
17-Jun-97
TO NO. YEARS 0.539
31-Dec-97
TRANSACTION DATE $ VALUE UNIT VALUE NO. UNITS END VALUE SURRENDER CHARGES
0 INIT DEPOSIT 17-Jun-97 1000.00 10.000000 100.00000
1 FEE 31-Dec-97 0.737333 10.527957 0.07004 6%
RESULTING VALUE 31-Dec-97 10.527957 99.92996 1052.0584
0.539
FORMULA: 1000*(1+T)= 1052.0584
= 1001.058367
T = 0.20% 9.87%
R = 0.11% 5.21%
Dean Witter Dividend Growth
17-Jun-97
TO NO. YEARS 0.539
31-Dec-97
TRANSACTION DATE $ VALUE UNIT VALUE NO. UNITS END VALUE SURRENDER CHARGES
0 INIT DEPOSIT 17-Jun-97 1000.00 10.000000 100.00000
1 FEE 31-Dec-97 0.737333 10.520501 0.07009 6%
RESULTING VALUE 31-Dec-97 10.520501 99.92991 1051.3128
0.539
FORMULA: 1000*(1+T)= 1051.3128
= 1000.312767
T = 0.06% 9.72%
R = 0.03% 5.13%
Dean Witter Utilities
17-Jun-97
TO NO. YEARS 0.539
31-Dec-97
TRANSACTION DATE $ VALUE UNIT VALUE NO. UNITS END VALUE SURRENDER CHARGES
0 INIT DEPOSIT 17-Jun-97 1000.00 10.000000 100.00000
1 FEE 31-Dec-97 0.737333 11.954547 0.06168 6%
RESULTING VALUE 31-Dec-97 11.954547 99.93832 1194.7174
0.539
FORMULA: 1000*(1+T)= 1194.7174
= 1143.717367
T = 28.27% 39.08%
R = 14.37% 19.47%
Dean Witter Quality Income Plus
17-Jun-97
TO NO. YEARS 0.539
31-Dec-97
TRANSACTION DATE $ VALUE UNIT VALUE NO. UNITS END VALUE SURRENDER CHARGES
0 INIT DEPOSIT 17-Jun-97 1000.00 10.000000 100.00000
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S><C>
1 FEE 31-Dec-97 0.737333 10.687557 0.06899 6%
RESULTING VALUE 31-Dec-97 10.687557 99.93101 1068.0184
0.539
FORMULA: 1000*(1+T)= 1068.0184
= 1017.018367
T = 3.18% 12.98%
R = 1.70% 6.80%
Fidelity Growth
17-Jun-97
TO NO. YEARS 0.539
31-Dec-97
TRANSACTION DATE $ VALUE UNIT VALUE NO. UNITS END VALUE SURRENDER CHARGES
0 INIT DEPOSIT 17-Jun-97 1000.00 10.000000 100.00000
1 FEE 31-Dec-97 0.737333 10.691091 0.06897 6%
RESULTING VALUE 31-Dec-97 10.691091 99.93103 1068.3718
0.539
FORMULA: 1000*(1+T)= 1068.3718
= 1017.371767
T = 3.24% 13.05%
R = 1.74% 6.84%
Fidelity High Income
17-Jun-97
TO NO. YEARS 0.539
31-Dec-97
TRANSACTION DATE $ VALUE UNIT VALUE NO. UNITS END VALUE SURRENDER CHARGES
0 INIT DEPOSIT 17-Jun-97 1000.00 10.000000 100.00000
1 FEE 31-Dec-97 0.737333 10.785169 0.06837 6%
RESULTING VALUE 31-Dec-97 10.785169 99.93163 1077.7796
0.539
FORMULA: 1000*(1+T)= 1077.7796
= 1026.779567
T = 5.02% 14.90%
R = 2.68% 7.78%
Fidelity Contrafund
17-Jun-97
TO NO. YEARS 0.539
31-Dec-97
TRANSACTION DATE $ VALUE UNIT VALUE NO. UNITS END VALUE SURRENDER CHARGES
0 INIT DEPOSIT 17-Jun-97 1000.00 10.000000 100.00000
1 FEE 31-Dec-97 0.737333 11.077417 0.06656 6%
RESULTING VALUE 31-Dec-97 11.077417 99.93344 1107.0044
0.539
FORMULA: 1000*(1+T)= 1107.0044
= 1056.004367
T = 10.63% 20.74%
R = 5.60% 10.70%
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S><C>
MFS Emerging Growth
17-Jun-97
TO NO. YEARS 0.539
31-Dec-97
TRANSACTION DATE $ VALUE UNIT VALUE NO. UNITS END VALUE SURRENDER CHARGES
0 INIT DEPOSIT 17-Jun-97 1000.00 10.000000 100.00000
1 FEE 31-Dec-97 0.737333 11.004751 0.06700 6%
RESULTING VALUE 31-Dec-97 11.004751 99.93300 1099.7378
0.539
FORMULA: 1000*(1+T)= 1099.7378
= 1048.737767
T = 9.22% 19.28%
R = 4.87% 9.97%
MFS Limited Maturity
17-Jun-97
TO NO. YEARS 0.539
31-Dec-97
TRANSACTION DATE $ VALUE UNIT VALUE NO. UNITS END VALUE SURRENDER CHARGES
0 INIT DEPOSIT 17-Jun-97 1000.00 10.000000 100.00000
1 FEE 31-Dec-97 0.737333 10.274381 0.07176 6%
RESULTING VALUE 31-Dec-97 10.274381 99.92824 1026.7008
0.539
FORMULA: 1000*(1+T)= 1026.7008
= 975.7007666
T = -4.46% 5.01%
R = -2.43% 2.67%
Dreyfus Growth & Income
17-Jun-97
TO NO. YEARS 0.539
31-Dec-97
TRANSACTION DATE $ VALUE UNIT VALUE NO. UNITS END VALUE SURRENDER CHARGES
0 INIT DEPOSIT 17-Jun-97 1000.00 10.000000 100.00000
1 FEE 31-Dec-97 0.737333 10.607950 0.06951 6%
RESULTING VALUE 31-Dec-97 10.607950 99.93049 1060.0577
0.539
FORMULA: 1000*(1+T)= 1060.0577
= 1009.057667
T = 1.69% 11.42%
R = 0.91% 6.01%
Dreyfus Money Market
17-Jun-97
TO NO. YEARS 0.539
31-Dec-97
TRANSACTION DATE $ VALUE UNIT VALUE NO. UNITS END VALUE SURRENDER CHARGES
0 INIT DEPOSIT 17-Jun-97 1000.00 10.000000 100.00000
1 FEE 31-Dec-97 0.737333 10.203450 0.07226 6%
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S><C>
RESULTING VALUE 31-Dec-97 10.203450 99.92774 1019.6077
0.539
FORMULA: 1000*(1+T)= 1019.6077
= 968.6076666
T = -5.74% 3.67%
R = -3.14% 1.96%
Dreyfus Socially Responsible
17-Jun-97
TO NO. YEARS 0.539
31-Dec-97
TRANSACTION DATE $ VALUE UNIT VALUE NO. UNITS END VALUE SURRENDER CHARGE
0 INIT DEPOSIT 17-Jun-97 1000.00 10.000000 100.00000
1 FEE 31-Dec-97 0.737333 10.818774 0.06815 6%
RESULTING VALUE 31-Dec-97 10.818774 99.93185 1081.1401
0.539
FORMULA: 1000*(1+T)= 1081.1401
= 1030.140067
T = 5.66% 15.56%
R = 3.01% 8.11%
Dreyfus Small Company
17-Jun-97
TO NO. YEARS 0.539
31-Dec-97
TRANSACTION DATE $ VALUE UNIT VALUE NO. UNITS END VALUE SURRENDER CHARGES
0 INIT DEPOSIT 17-Jun-97 1000.00 10.000000 100.00000
1 FEE 31-Dec-97 0.737333 11.166624 0.06603 6%
RESULTING VALUE 31-Dec-97 11.166624 99.93397 1115.9251
0.539
FORMULA: 1000*(1+T)= 1115.9251
= 1064.925067
T = 12.37% 22.55%
R = 6.49% 11.59%
American Century Balanced
17-Jun-97
TO NO. YEARS 0.539
31-Dec-97
TRANSACTION DATE $ VALUE UNIT VALUE NO. UNITS END VALUE SURRENDER CHARGES
0 INIT DEPOSIT 17-Jun-97 1000.00 10.000000 100.00000
1 FEE 31-Dec-97 0.737333 10.623648 0.06940 6%
RESULTING VALUE 31-Dec-97 10.623648 99.93060 1061.6275
0.539
FORMULA: 1000*(1+T)= 1061.6275
= 1010.627467
T = 1.98% 11.73%
R = 1.06% 6.16%
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S><C>
American Century International
17-Jun-97
TO NO. YEARS 0.539
31-Dec-97
TRANSACTION DATE $ VALUE UNIT VALUE NO. UNITS END VALUE SURRENDER CHARGES
0 INIT DEPOSIT 17-Jun-97 1000.00 10.000000 100.00000
1 FEE 31-Dec-97 0.737333 10.030048 0.07351 6%
RESULTING VALUE 31-Dec-97 10.030048 99.92649 1002.2675
0.539
FORMULA: 1000*(1+T)= 1002.2675
= 951.2674666
T = -8.85% 0.42%
R = -4.87% 0.23%
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S><C>
Today: 12/31/97One Year Ago: 12/31/96
One Month Ago: 1/30/98Three Years Ago: 2/28/95
Three Months Ago: 11/28/97Five Years Ago: 12/31/92
End of last year: 12/31/97Ten Years Ago: 12/31/87
AUVS
Today One Month Ago Three Months Ago End of last year One Year Ago
----- ------------- ---------------- ---------------- ------------
Dean Witter European Growth 10.527957 10.945168 10.316895 10.527957 9.192514
Dean Witter Dividend Growth 10.520501 10.542917 10.465633 10.520501 8.489515
Dean Witter Utilities 11.954547 11.883485 11.277101 11.954547 9.529444
Dean Witter Quality Income Plus 10.687557 10.801083 10.549905 10.687557 9.749282
Fidelity Growth 10.691091 10.823197 10.681027 10.691091 8.7757
Fidelity High Income 10.785169 11.01915 10.679062 10.785169 9.290405
Fidelity Contrafund 11.077417 11.054049 10.890678 11.077417 9.044421
Fidelity Equity Income 10.23298 10.196394 10.030236 10.23298 8.231142
MFS Emerging Growth 11.004751 11.271816 11.127385 11.004751 9.081461
MFS Limited Maturity 10.274381 10.35527 10.249552 10.274381 9.826713
Dreyfus Growth & Income 10.60795 10.560502 10.392501 10.60795 9.106271
Dreyfus Money Market 10.20345 10.235063 10.170356 10.20345 9.856067
Dreyfus Socially Responsible 10.818774 10.818774 10.583104 10.818774 8.553611
Dreyfus Small Company Stock 11.166624 10.849963 11.074162 11.166624 9.294369
Dreyfus Stock Index 10.143691 10.242492 9.985517 10.143691 7.730946
American Century Balanced 10.623648 10.624777 10.468786 10.623648 9.298203
American Century International 10.030048 10.341178 9.704584 10.030048 8.569425
AIM Capital Appreciation 10.497077 10.282964 10.608039 10.497077 9.373796
AIM Diversified Income 9.913024 10.068688 9.819701 9.913024 9.185186
AIM Growth and Income 10.237472 10.302009 10.203528 10.237472 8.25373
AIM Government Securities 9.944374 10.04507 9.84924 9.944374 9.31938
AIM Growth 10.194688 10.301518 10.129849 10.194688 8.144798
AIM International Equity 10.044812 10.133245 9.962399 10.044812 9.520992
AIM Global Utilities 9.95741 10.044148 9.587379 9.95741 8.297504
AIM Value 10.180675 10.237752 10.126738 10.180675 8.34271
<CAPTION>
<S><C>
Three Years Ago Five Years Ago Ten Years Ago Inception
--------------- ----------------------------- ---------
Dean Witter European Growth 5.869031 3.883445 #N/A 3.777366
Dean Witter Dividend Growth 5.522759 4.791915 #N/A 3.228021
Dean Witter Utilities 7.335449 6.834631 #N/A 4.937989
Dean Witter Quality Income Plus 8.327112 7.722133 #N/A 5.94307
Fidelity Growth 5.919686 4.998331 2.505357 2.449884
Fidelity High Income 7.235878 6.014989 3.697914 3.478903
Fidelity Contrafund 5.676703 #N/A #N/A 5.485508
Fidelity Equity Income 5.771197 4.449696 2.540156 3.738572
MFS Emerging Growth #N/A #N/A #N/A 6.73922
MFS Limited Maturity #N/A #N/A #N/A 9.62617
Dreyfus Growth & Income 5.367826 #N/A #N/A 4.927802
Dreyfus Money Market 9.184064 8.688039 #N/A 7.927839
Dreyfus Socially Responsible 5.561247 #N/A #N/A 5.02334
Dreyfus Small Company Stock #N/A #N/A #N/A 8.625823
Dreyfus Stock Index 5.033141 4.411175 #N/A 3.360482
American Century Balanced 7.111107 6.656952 #N/A 5.772372
American Century International 6.511592 #N/A #N/A 7.284056
AIM Capital Appreciation 6.269868 #N/A #N/A 5.039961
AIM Diversified Income 7.449096 #N/A #N/A 7.308409
AIM Growth and Income 5.509464 #N/A #N/A 5.329378
AIM Government Securities 8.370154 #N/A #N/A 8.30884
AIM Growth 5.510561 #N/A #N/A 4.982139
AIM International Equity 6.7147 #N/A #N/A 6.075354
AIM Global Utilities 6.191117 #N/A #N/A 6.238136
AIM Value 5.738517 #N/A #N/A 4.681904
<CAPTION>
<S><C>
Inception Dates Years since Inception
--------------- ---------------------
Dean Witter European Growth 3/1/91 6.836413415
Dean Witter Dividend Growth 10/25/90 7.184120465
Dean Witter Utilities 10/25/90 7.184120465
Dean Witter Quality Income Plus 10/25/90 7.184120465
Fidelity Growth 10/9/86 11.22792608
Fidelity High Income 9/20/85 12.27926078
Fidelity Contrafund 1/3/95 2.99247091
Fidelity Equity Income 9/29/89 8.254620123
MFS Emerging Growth 7/24/95 2.439425051
MFS Limited Maturity 8/14/96 1.379876797
Dreyfus Growth & Income 5/2/94 3.665982204
Dreyfus Money Market 8/31/90 7.334702259
Dreyfus Socially Responsible 10/7/93 4.232717317
Dreyfus Small Company Stock 4/30/96 1.67008898
Dreyfus Stock Index 9/29/89 8.254620123
American Century Balanced 5/1/91 6.669404517
American Century International 5/2/94 3.665982204
AIM Capital Appreciation 5/5/93 4.657084189
AIM Diversified Income 5/5/93 4.657084189
AIM Growth and Income 5/2/94 3.665982204
AIM Government Securities 5/5/93 4.657084189
AIM Growth 5/5/93 4.657084189
AIM International Equity 5/5/93 4.657084189
AIM Global Utilities 5/2/94 3.665982204
AIM Value 5/5/93 4.657084189
</TABLE>
<TABLE>
<CAPTION>
<S><C>
Month to Date Three Months to Date Year to Date One Year Three Year
------------- -------------------- ------------ -------- ----------
Dean Witter European Growth -3.81% 2.05% 0.00% 14.53% 21.50%
Dean Witter Dividend Growth -0.21% 0.52% 0.00% 23.92% 23.96%
Dean Witter Utilities 0.60% 6.01% 0.00% 25.45% 17.68%
Dean Witter Quality Income Plus -1.05% 1.30% 0.00% 9.62% 8.67%
Fidelity Growth -1.22% 0.09% 0.00% 21.83% 21.78%
Fidelity High Income -2.12% 0.99% 0.00% 16.09% 14.23%
Fidelity Contrafund 0.21% 1.71% 0.00% 22.48% 24.96%
Fidelity Equity Income 0.36% 2.02% 0.00% 24.32% 21.04%
MFS Emerging Growth -2.37% -1.10% 0.00% 21.18% #N/A
MFS Limited Maturity -0.78% 0.24% 0.00% 4.56% #N/A
Dreyfus Growth & Income 0.45% 2.07% 0.00% 16.49% 25.49%
Dreyfus Money Market -0.31% 0.33% 0.00% 3.52% 3.57%
Dreyfus Socially Responsible 0.00% 2.23% 0.00% 26.48% 24.83%
Dreyfus Small Company Stock 2.92% 0.83% 0.00% 20.14% #N/A
Dreyfus Stock Index -0.96% 1.58% 0.00% 31.21% 26.31%
American Century Balanced -0.01% 1.48% 0.00% 14.25% 14.32%
American Century International -3.01% 3.35% 0.00% 17.04% 15.49%
AIM Capital Appreciation 2.08% -1.05% 0.00% 11.98% 18.74%
AIM Diversified Income -1.55% 0.95% 0.00% 7.92% 9.99%
AIM Growth and Income -0.63% 0.33% 0.00% 24.03% 22.94%
AIM Government Securities -1.00% 0.97% 0.00% 6.71% 5.91%
AIM Growth -1.04% 0.64% 0.00% 25.17% 22.76%
AIM International Equity -0.87% 0.83% 0.00% 5.50% 14.37%
AIM Global Utilities -0.86% 3.86% 0.00% 20.00% 17.16%
AIM Value -0.56% 0.53% 0.00% 22.03% 21.06%
<CAPTION>
<S><C>
Average Total
Five Year Ten Year Inception Inception
--------- -------- --------- ---------
Dean Witter European Growth 22.07% #N/A 16.18% 178.71%
Dean Witter Dividend Growth 17.03% #N/A 17.87% 225.91%
Dean Witter Utilities 11.83% #N/A 13.10% 142.09%
Dean Witter Quality Income Plus 6.72% #N/A 8.51% 79.83%
Fidelity Growth 16.42% 15.62% 14.02% 336.39%
Fidelity High Income 12.39% 11.30% 9.65% 210.02%
Fidelity Contrafund #N/A #N/A 26.47% 101.94%
Fidelity Equity Income 18.12% 14.95% 12.97% 173.71%
MFS Emerging Growth #N/A #N/A 22.27% 63.29%
MFS Limited Maturity #N/A #N/A 4.84% 6.73%
Dreyfus Growth & Income #N/A #N/A 23.26% 115.27%
Dreyfus Money Market 3.27% #N/A 3.50% 28.70%
Dreyfus Socially Responsible #N/A #N/A 19.87% 115.37%
Dreyfus Small Company Stock #N/A #N/A 16.72% 29.46%
Dreyfus Stock Index 18.12% #N/A 14.32% 201.85%
American Century Balanced 9.80% #N/A 9.58% 84.04%
American Century International #N/A #N/A 9.12% 37.70%
AIM Capital Appreciation #N/A #N/A 17.06% 108.28%
AIM Diversified Income #N/A #N/A 6.76% 35.64%
AIM Growth and Income #N/A #N/A 19.49% 92.10%
AIM Government Securities #N/A #N/A 3.93% 19.68%
AIM Growth #N/A #N/A 16.62% 104.62%
AIM International Equity #N/A #N/A 11.40% 65.34%
AIM Global Utilities #N/A #N/A 13.61% 59.62%
AIM Value #N/A #N/A 18.15% 117.45%
</TABLE>
