<PAGE>
THE GLENBROOK PROVIDER VARIABLE ANNUITY
<TABLE>
<S> <C>
GLENBROOK LIFE AND ANNUITY COMPANY
P.O. BOX 94042
PALATINE, IL 60094 OR
TELEPHONE NUMBER: 1-800-755-5275 PROSPECTUS DATED
MAY 1, 2000
</TABLE>
--------------------------------------------------------------------------------
Glenbrook Life and Annuity Company ("GLENBROOK") is offering the Glenbrook
Provider Variable Annuity, an individual and group flexible premium deferred
variable annuity contract ("CONTRACT"). This prospectus contains information
about the Contract that you should know before investing. Please keep it for
future reference.
The Contract currently offers 22 investment alternatives ("INVESTMENT
ALTERNATIVES"). The investment alternatives include 2 fixed account options
("FIXED ACCOUNT OPTIONS") and 20 variable sub-accounts ("VARIABLE SUB-ACCOUNTS")
of the Glenbrook Life Multi-Manager Variable Account ("VARIABLE ACCOUNT"). Each
Variable Sub-Account invests exclusively in shares of the following mutual funds
("FUNDS"):
- AIM VARIABLE INSURANCE FUNDS
- AMERICAN CENTURY VARIABLE PORTFOLIOS (VP), INC.
- THE DREYFUS SOCIALLY RESPONSIBLE GROWTH FUND, INC.
- DREYFUS STOCK INDEX FUND
- DREYFUS VARIABLE INVESTMENT FUND (VIF)
- FIDELITY VARIABLE INSURANCE PRODUCTS FUND
- MFS VARIABLE INSURANCE TRUST
Each Fund has multiple investment portfolios ("PORTFOLIOS"). Not all of the
Funds and/or Portfolios, however, may be available with your Contract. You
should check with your sales representative for further information on the
availability of Funds and/or Portfolios. Your annuity application will list all
available Portfolios.
WE (Glenbrook) have filed a Statement of Additional Information, dated May 1,
2000, with the Securities and Exchange Commission ("SEC"). It contains more
information about the Contract and is incorporated herein by reference, which
means it is legally a part of this prospectus. Its table of contents appears on
page C-1 of this prospectus. For a free copy, please write or call us at the
address or telephone number above, or go to the SEC's Web site
(http://www.sec.gov). You can find other information and documents about us,
including documents that are legally part of this prospectus, at the SEC's Web
site.
--------------------------------------------------------------------------------
<TABLE>
<C> <S>
THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR
DISAPPROVED THE SECURITIES DESCRIBED IN THIS PROSPECTUS, NOR
HAS IT PASSED ON THE ACCURACY OR THE ADEQUACY OF THIS
PROSPECTUS. ANYONE WHO TELLS YOU OTHERWISE IS COMMITTING A
FEDERAL CRIME.
IMPORTANT THE CONTRACTS MAY BE DISTRIBUTED THROUGH BROKER-DEALERS THAT
NOTICES HAVE RELATIONSHIPS WITH BANKS OR OTHER FINANCIAL
INSTITUTIONS OR BY EMPLOYEES OF SUCH BANKS. HOWEVER, THE
CONTRACTS ARE NOT DEPOSITS, OR OBLIGATIONS OF, OR GUARANTEED
BY SUCH INSTITUTIONS OR ANY FEDERAL REGULATORY AGENCY.
INVESTMENT IN THE CONTRACTS INVOLVES INVESTMENT RISKS,
INCLUDING POSSIBLE LOSS OF PRINCIPAL.
THE CONTRACTS ARE NOT FDIC INSURED.
</TABLE>
- PROSPECTUS
1
<PAGE>
TABLE OF CONTENTS
-------------------------------------------------------------------
<TABLE>
<CAPTION>
PAGE
<S> <C>
-----------------------------------------------------
OVERVIEW
-----------------------------------------------------
Important Terms 3
-----------------------------------------------------
The Contract At A Glance 4
-----------------------------------------------------
How the Contract Works 6
-----------------------------------------------------
Expense Table 7
-----------------------------------------------------
Financial Information 11
-----------------------------------------------------
CONTRACT FEATURES
-----------------------------------------------------
The Contract 12
-----------------------------------------------------
Purchases 13
-----------------------------------------------------
Contract Value 14
-----------------------------------------------------
Investment Alternatives 15
-----------------------------------------------------
The Variable Sub-Accounts 15
-----------------------------------------------------
The Fixed Account Options 16
-----------------------------------------------------
Transfers 18
-----------------------------------------------------
Expenses 20
-----------------------------------------------------
Access To Your Money 22
-----------------------------------------------------
Income Payments 23
-----------------------------------------------------
</TABLE>
<TABLE>
-----------------------------------------------------
<CAPTION>
PAGE
<S> <C>
Death Benefits 24
-----------------------------------------------------
OTHER INFORMATION
-----------------------------------------------------
More Information: 26
-----------------------------------------------------
Glenbrook 26
-----------------------------------------------------
The Variable Account 26
-----------------------------------------------------
The Portfolios 27
-----------------------------------------------------
The Contract 27
-----------------------------------------------------
Qualified Plans 28
-----------------------------------------------------
Legal Matters 28
-----------------------------------------------------
Year 2000 28
-----------------------------------------------------
Taxes 29
-----------------------------------------------------
Annual Reports and Other Documents 32
-----------------------------------------------------
Experts 32
-----------------------------------------------------
Performance Information 33
-----------------------------------------------------
APPENDIX A -- ACCUMULATION UNIT VALUES A-1
-----------------------------------------------------
APPENDIX B -- MARKET VALUE ADJUSTMENT
EXAMPLE B-1
-----------------------------------------------------
STATEMENT OF ADDITIONAL INFORMATION TABLE
OF CONTENTS C-1
-----------------------------------------------------
</TABLE>
2 - PROSPECTUS
<PAGE>
IMPORTANT TERMS
-------------------------------------------------------------------
This prospectus uses a number of important terms that you may not be familiar
with. The index below identifies the page that describes each term. The first
use of each term in this prospectus appears in highlights.
<TABLE>
<CAPTION>
PAGE
<S> <C>
-----------------------------------------------------
Accumulation Phase 6
-----------------------------------------------------
Accumulation Unit 11, 14
-----------------------------------------------------
Accumulation Unit Value 11, 14
-----------------------------------------------------
Annuitant 12
-----------------------------------------------------
Automatic Additions Program 13
-----------------------------------------------------
Automatic Portfolio Rebalancing Program 19
-----------------------------------------------------
Beneficiary 12
-----------------------------------------------------
Cancellation Period 4
-----------------------------------------------------
*Contract 12
-----------------------------------------------------
Contract Anniversary 5
-----------------------------------------------------
Contract Owner ("You") 12
-----------------------------------------------------
Contract Value 14
-----------------------------------------------------
Contract Year 4
-----------------------------------------------------
Death Benefit Anniversary 25
-----------------------------------------------------
Dollar Cost Averaging Program 19
-----------------------------------------------------
Due Proof of Death 24
-----------------------------------------------------
Enhanced Death Benefit Rider 25
-----------------------------------------------------
Fixed Account Options 16
-----------------------------------------------------
Free Withdrawal Amount 20
-----------------------------------------------------
Glenbrook ("We") 26
-----------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PAGE
<S> <C>
-----------------------------------------------------
Guarantee Periods 16
-----------------------------------------------------
Income Plan 23
-----------------------------------------------------
Investment Alternatives 1
-----------------------------------------------------
Issue Date 6
-----------------------------------------------------
Market Value Adjustment 17
-----------------------------------------------------
Payout Phase 6
-----------------------------------------------------
Payout Start Date 23
-----------------------------------------------------
Portfolios 26
-----------------------------------------------------
Qualified Contracts 4
-----------------------------------------------------
SEC 1
-----------------------------------------------------
Settlement Value 24
-----------------------------------------------------
Systematic Withdrawal Program 22
-----------------------------------------------------
Valuation Date 13
-----------------------------------------------------
Variable Account 26
-----------------------------------------------------
Variable Sub-Account 26
-----------------------------------------------------
</TABLE>
* In certain states the Contract is available only as a group Contract. If you
purchase a group Contract, we will issue you a certificate that represents
your ownership and that summarizes the provisions of the group Contract.
References to "Contract" in this prospectus include certificates, unless the
context requires otherwise.
3 - PROSPECTUS
<PAGE>
THE CONTRACT AT A GLANCE
-------------------------------------------------------------------
The following is a snapshot of the Contract. Please read the remainder of this
prospectus for more information.
<TABLE>
<S> <C>
FLEXIBLE PAYMENTS You can purchase a Contract with as little as $3,000 ($2,000
for "QUALIFIED CONTRACTS," which are Contracts issued with
QUALIFIED PLANS). You can add to your Contract as often and
as much as you like, but each payment must be at least $50.
--------------------------------------------------------------------------------------------------------
RIGHT TO CANCEL You may cancel your Contract within 20 days of receipt or
any longer period as your state may require ("CANCELLATION
PERIOD"). Upon cancellation, we will return your purchase
payments adjusted, to the extent federal or state law
permits, to reflect the investment experience of any amounts
allocated to the Variable Account.
--------------------------------------------------------------------------------------------------------
EXPENSES You will bear the following expenses:
- Total Variable Account annual fees equal to 1.35% of
average daily net assets (1.45% if you select the
ENHANCED DEATH BENEFIT RIDER)
- Annual contract maintenance charge of $35 (with certain
exceptions)
- Withdrawal charges ranging from 0% to 6% of purchase
payment withdrawn (with certain exceptions)
- Transfer fee of $10 after 12th transfer in any CONTRACT
YEAR (fee currently waived)
- State premium tax (if your state imposes one)
In addition, each Portfolio pays expenses that you will bear
indirectly if you invest in a Variable Sub-Account.
--------------------------------------------------------------------------------------------------------
INVESTMENT ALTERNATIVES The Contract offers 22 investment alternatives including:
- 2 Fixed Account Options (which credit interest at rates
we guarantee)
- 20 Variable Sub-Accounts investing in Portfolios offering
professional money management by these investment
advisers:
- A I M Advisors, Inc.
- American Century Investment Management, Inc.
- The Dreyfus Corporation
- Fidelity Management & Research Company
- Massachusetts Financial Services
To find out current rates being paid on the Fixed Account
Options or how the Variable Sub-Accounts have performed,
call us at 1-800-755-5275.
--------------------------------------------------------------------------------------------------------
SPECIAL SERVICES For your convenience, we offer these special services:
- AUTOMATIC PORTFOLIO REBALANCING PROGRAM
- AUTOMATIC ADDITIONS PROGRAM
- DOLLAR COST AVERAGING PROGRAM
- SYSTEMATIC WITHDRAWAL PROGRAM
</TABLE>
4 - PROSPECTUS
<PAGE>
<TABLE>
<S> <C>
--------------------------------------------------------------------------------------------------------
INCOME PAYMENTS You can choose fixed income payments, variable income
payments, or a combination of the two. You can receive your
income payments in one of the following ways:
- life income with guaranteed payments
- a "joint and survivor" life income with guaranteed
payments
- guaranteed payments for a specified period (5 to 30
years)
--------------------------------------------------------------------------------------------------------
DEATH BENEFITS If you or the ANNUITANT (if the Contract is owned by a
non-natural person) die before the PAYOUT START DATE, we
will pay the death benefit described in the Contract. We
offer an Enhanced Death Benefit Rider.
--------------------------------------------------------------------------------------------------------
TRANSFERS Before the Payout Start Date, you may transfer your Contract
value ("CONTRACT VALUE") among the investment alternatives,
with certain restrictions. Transfers to a Guarantee Period
of the Fixed Account must be at least $50.
We do not currently impose a fee upon transfers. However, we
reserve the right to charge $10 per transfer after the 12th
transfer in each "Contract Year", which we measure from the
date we issue your contract or a Contract anniversary
("CONTRACT ANNIVERSARY").
--------------------------------------------------------------------------------------------------------
WITHDRAWALS You may withdraw some or all of your Contract Value at
anytime prior to the Payout Start Date. In general, you must
withdraw at least $50 at a time. Full or partial withdrawals
are available under limited circumstances on or after the
Payout Start Date. A 10% federal tax penalty may apply if
you withdraw before you are 59 1/2 years old. A withdrawal
charge and MARKET VALUE ADJUSTMENT also may apply.
</TABLE>
5 - PROSPECTUS
<PAGE>
HOW THE CONTRACT WORKS
-------------------------------------------------------------------
The Contract basically works in two ways.
First, the Contract can help you (we assume you are the CONTRACT OWNER) save for
retirement because you can invest in up to 22 investment alternatives and pay no
federal income taxes on any earnings until you withdraw them. You do this during
what we call the "ACCUMULATION PHASE" of the Contract. The Accumulation Phase
begins on the date we issue your Contract (we call that date the "ISSUE DATE")
and continues until the Payout Start Date, which is the date we apply your money
to provide income payments. During the Accumulation Phase, you may allocate your
purchase payments to any combination of the Variable Sub-Accounts and/or Fixed
Account Options. If you invest in any of the 2 Fixed Account Options, you will
earn a fixed rate of interest that we declare periodically. If you invest in any
of the Variable Sub-Accounts, your investment return will vary up or down
depending on the performance of the corresponding Portfolios.
Second, the Contract can help you plan for retirement because you can use it to
receive retirement income for life and/or for a pre-set number of years, by
selecting one of the income payment options (we call these "INCOME PLANS")
described on page 23. You receive income payments during what we call the
"PAYOUT PHASE" of the Contract, which begins on the Payout Start Date and
continues until we make the last payment required by the Income Plan you select.
During the Payout Phase, if you select a fixed income payment option, we
guarantee the amount of your payments, which will remain fixed. If you select a
variable income payment option, based on one or more of the Variable
Sub-Accounts, the amount of your payments will vary up or down depending on the
performance of the corresponding Portfolios. The amount of money you accumulate
under your Contract during the Accumulation Phase and apply to an Income Plan
will determine the amount of your income payments during the Payout Phase.
The timeline below illustrates how you might use your Contract.
<TABLE>
<CAPTION>
EFFECTIVE ACCUMULATION PHASE PAYOUT PAYOUT
DATE START DATE PHASE
<S> <C> <C> <C> <C>
----------------------------------------------------------------------------------------------------
You buy You save for retirement You elect to You can receive Or you can
a Contract receive income payments receive income
income for a set payments for life
payments or period
receive a
lump sum
payment
</TABLE>
As the Contract owner, you exercise all of the rights and privileges provided by
the Contract. If you die, any surviving Contract owner or, if none, the
BENEFICIARY will exercise the rights and privileges provided by the Contract.
See "THE CONTRACT." In addition, if you die before the Payout Start Date, we
will pay a death benefit to any surviving Contract owner, or if there is none,
to your Beneficiary. See "DEATH BENEFITS."
Please call us at 1-800-755-5275 if you have any question about how the Contract
works.
6 - PROSPECTUS
<PAGE>
EXPENSE TABLE
-------------------------------------------------------------------
The table below lists the expenses that you will bear directly or indirectly
when you buy a Contract. The table and the examples that follow do not reflect
premium taxes that may be imposed by the state where you reside. For more
information about Variable Account expenses, see "Expenses," below. For more
information about Portfolio expenses, please refer to the accompanying
prospectuses for the Funds.
CONTRACT OWNER TRANSACTION EXPENSES
Withdrawal Charge (as a percentage of purchase payments)*
<TABLE>
<CAPTION>
Number of Complete Years Since We Received the Purchase Payment Being Withdrawn: 0 1 2 3 4 5 6+
<S> <C> <C> <C> <C> <C> <C> <C>
------------------------------------------------------------------------------------------------------------
Applicable Charge: 6% 6% 5% 5% 4% 3% 0%
------------------------------------------------------------------------------------------------------------
Annual Contract Maintenance Charge $35.00**
------------------------------------------------------------------------------------------------------------
Transfer Fee $10.00***
------------------------------------------------------------------------------------------------------------
</TABLE>
*Each Contract Year, you may withdraw up to 15% of your aggregate purchase
payments WITHOUT incurring a withdrawal charge.
**We will waive this charge in certain cases. See "Expenses."
***Applies solely to the thirteenth and subsequent transfers within a Contract
Year, excluding transfers due to dollar cost averaging and automatic
portfolio rebalancing. We are currently waiving the transfer fee.
VARIABLE ACCOUNT ANNUAL EXPENSES
(AS A PERCENTAGE OF AVERAGE DAILY NET ASSET VALUE
DEDUCTED FROM EACH VARIABLE SUB-ACCOUNT)
<TABLE>
<S> <C>
Mortality and Expense Risk Charge 1.25%*
----------------------------------------------------------------------
Administrative Expense Charge 0.10%
----------------------------------------------------------------------
Total Variable Account Annual Expenses 1.35%
----------------------------------------------------------------------
</TABLE>
*If you select the Enhanced Death Benefit Rider, the mortality and expense risk
charge is 1.35%.
7 - PROSPECTUS
<PAGE>
PORTFOLIO ANNUAL EXPENSES (After Voluntary Reductions and Reimbursements)
(as a percentage of Portfolio average daily assets)*
<TABLE>
<CAPTION>
Rule Total Portfolio
Management 12b-1 Other Annual
Portfolio Fees Fees Expenses Expenses
<S> <C> <C> <C> <C>
---------------------------------------------------------------------------------------------------------------------------------
AIM V.I. Capital Appreciation Fund 0.62% N/A 0.11% 0.73%
---------------------------------------------------------------------------------------------------------------------------------
AIM V.I. Diversified Income Fund 0.60% N/A 0.23% 0.83%
---------------------------------------------------------------------------------------------------------------------------------
AIM V.I. Global Utilities Fund 0.65% N/A 0.49% 1.14%
---------------------------------------------------------------------------------------------------------------------------------
AIM V.I. Government Securities Fund 0.50% N/A 0.40% 0.90%
---------------------------------------------------------------------------------------------------------------------------------
AIM V.I. Growth Fund 0.63% N/A 0.10% 0.73%
---------------------------------------------------------------------------------------------------------------------------------
AIM V.I. Growth and Income Fund 0.61% N/A 0.16% 0.77%
---------------------------------------------------------------------------------------------------------------------------------
AIM V.I. International Equity Fund 0.75% N/A 0.22% 0.97%
---------------------------------------------------------------------------------------------------------------------------------
AIM V.I. Value Fund 0.61% N/A 0.15% 0.76%
---------------------------------------------------------------------------------------------------------------------------------
American Century VP Balanced (1) 0.90% N/A N/A 0.90%
---------------------------------------------------------------------------------------------------------------------------------
American Century VP International (1) 1.34% N/A N/A 1.34%
---------------------------------------------------------------------------------------------------------------------------------
The Dreyfus Socially Responsible Growth Fund, Inc. 0.75% N/A 0.04% 0.79%
---------------------------------------------------------------------------------------------------------------------------------
Dreyfus Stock Index Fund 0.25% N/A 0.01% 0.26%
---------------------------------------------------------------------------------------------------------------------------------
Dreyfus VIF Growth & Income Portfolio 0.75% N/A 0.04% 0.79%
---------------------------------------------------------------------------------------------------------------------------------
Dreyfus VIF Money Market Portfolio 0.50% N/A 0.08% 0.58%
---------------------------------------------------------------------------------------------------------------------------------
Dreyfus VIF Small Company Stock Portfolio 0.75% N/A 0.22% 0.97%
---------------------------------------------------------------------------------------------------------------------------------
Fidelity VIP Contrafund-TM- Portfolio (2)(3) 0.58% N/A 0.09% 0.67%
---------------------------------------------------------------------------------------------------------------------------------
Fidelity VIP Equity-Income Portfolio (2)(3) 0.48% N/A 0.09% 0.57%
---------------------------------------------------------------------------------------------------------------------------------
Fidelity VIP Growth Portfolio (2)(3) 0.58% N/A 0.08% 0.66%
---------------------------------------------------------------------------------------------------------------------------------
Fidelity VIP High Income Portfolio (2) 0.58% N/A 0.11% 0.69%
---------------------------------------------------------------------------------------------------------------------------------
MFS Emerging Growth Series (4) 0.75% N/A 0.09% 0.84%
---------------------------------------------------------------------------------------------------------------------------------
MFS Limited Maturity Series** (5) 0.55% N/A 0.45% 1.00%
---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
* The figures shown in the table are for the year ended December 31, 1999,
except as otherwise noted.
** Not available to new investors.
(1) The fund has a stepped fee schedule. As a result, the fund's management fee
rate generally decreases as fund assets increase.
(2) Initial Class.
(3) A portion of the brokerage commissions that certain funds pay was used to
reduce fund expenses. In addition, through arrangements with certain funds'
or FMR on behalf of certain funds', custodian, credits realized as a result
of uninvested cash balances were used to reduce a portion of each applicable
fund's expenses. With these reductions, the total operating expenses
presented in the table would have been 0.65% for Contrafund-TM- Portfolio,
0.56% for Equity-Income Portfolio, and 0.65% for Growth Portfolio
(4) Each series has an expense offset arrangement which reduces the series'
custodian fee based upon the amount of cash maintained by the series with
its custodian and dividend disbursing agent. Each series may enter into
other such arrangements and directed brokerage arrangements, which would
also have the effect of reducing the series' expenses. "Other Expenses" do
not take into account these expense reductions, and are therefore higher
than the actual expenses of the series. Had these fee reductions been taken
into account, "Total Portfolio Annual Expenses" would be lower for certain
series and would equal: 0.83% for Emerging Growth Series.
(5) MFS has contractually agreed, subject to reimbursement, to bear expenses for
these series such that each such series' "Other Expenses" (after taking into
account the expense offset arrangement described above), do not exceed the
following percentages of the average daily net assets of the series during
the current fiscal year: 0.45% for Limited Maturity Series. These
contractual fee arrangements will continue until at least May 1, 2001,
unless changed with the consent of the board of trustees which oversees the
series.
8 - PROSPECTUS
<PAGE>
EXAMPLE 1
The example below shows the dollar amount of expenses that you would bear
directly or indirectly if you:
- invested $1,000 in a Variable Sub-Account,
- earned a 5% annual return on your investment,
- surrendered your Contract at the end of each time period, and
- elected the Enhanced Death Benefit Rider.
THE EXAMPLE DOES NOT INCLUDE ANY TAXES OR TAX PENALTIES YOU MAY BE REQUIRED TO
PAY IF YOU SURRENDER YOUR CONTRACT.
<TABLE>
<CAPTION>
Variable Sub-Account 1 Year 3 Years 5 Years 10 Years
<S> <C> <C> <C> <C>
------------------------------------------------------------------------------------------------------------------------------
AIM V.I. Capital Appreciation $74 $1124 $ 147 $260
------------------------------------------------------------------------------------------------------------------------------
AIM V.I. Diversified Income $75 $ 117 $ 152 $270
------------------------------------------------------------------------------------------------------------------------------
AIM V.I. Global Utilities $78 $ 126 $ 168 $302
------------------------------------------------------------------------------------------------------------------------------
AIM V.I. Government Securities $76 $ 119 $ 156 $277
------------------------------------------------------------------------------------------------------------------------------
AIM V.I. Growth $74 $ 114 $ 147 $260
------------------------------------------------------------------------------------------------------------------------------
AIM V.I. Growth and Income $74 $ 115 $ 149 $264
------------------------------------------------------------------------------------------------------------------------------
AIM V.I. International Equity $77 $ 121 $ 159 $285
------------------------------------------------------------------------------------------------------------------------------
AIM V.I. Value $74 $ 114 $ 149 $263
------------------------------------------------------------------------------------------------------------------------------
American Century VP Balanced $76 $ 119 $ 156 $277
------------------------------------------------------------------------------------------------------------------------------
American Century VP International $80 $ 132 $1878 $321
------------------------------------------------------------------------------------------------------------------------------
The Dreyfus Socially Responsible Growth $75 $ 115 $ 150 $266
------------------------------------------------------------------------------------------------------------------------------
Dreyfus Stock Index $69 $ 99 $ 123 $210
------------------------------------------------------------------------------------------------------------------------------
Dreyfus VIF Growth and Income $75 $ 115 $ 150 $266
------------------------------------------------------------------------------------------------------------------------------
Dreyfus VIF Money Market $73 $ 109 $ 139 $244
------------------------------------------------------------------------------------------------------------------------------
Dreyfus VIF Small Company Stock $77 $ 121 $ 159 $285
------------------------------------------------------------------------------------------------------------------------------
Fidelity VIP Contrafund-TM- $73 $ 111 $ 143 $252
------------------------------------------------------------------------------------------------------------------------------
Fidelity VIP Equity-Income $72 $ 108 $ 138 $242
------------------------------------------------------------------------------------------------------------------------------
Fidelity VIP Growth $73 $ 111 $ 143 $252
------------------------------------------------------------------------------------------------------------------------------
Fidelity VIP High Income $74 $ 112 $ 145 $256
------------------------------------------------------------------------------------------------------------------------------
MFS Emerging Growth $75 $ 117 $ 153 $271
------------------------------------------------------------------------------------------------------------------------------
MFS Limited Maturity* $77 $ 122 $ 161 $288
------------------------------------------------------------------------------------------------------------------------------
</TABLE>
*Not available to new investors
9 - PROSPECTUS
<PAGE>
EXAMPLE 2
Same assumptions as Example 1 above, except that you decided not to surrender
your Contract.
<TABLE>
<CAPTION>
Variable Sub-Account 1 Year 3 Years 5 Years 10 Years
<S> <C> <C> <C> <C>
------------------------------------------------------------------------------------------------------------------------------
AIM V.I. Capital Appreciation $23 $71 $122 $260
------------------------------------------------------------------------------------------------------------------------------
AIM V.I. Diversified Income $24 $74 $127 $270
------------------------------------------------------------------------------------------------------------------------------
AIM V.I. Global Utilities $27 $84 $143 $302
------------------------------------------------------------------------------------------------------------------------------
AIM V.I. Government Securities $25 $76 $130 $277
------------------------------------------------------------------------------------------------------------------------------
AIM V.I. Growth $23 $71 $122 $260
------------------------------------------------------------------------------------------------------------------------------
AIM V.I. Growth and Income $23 $72 $124 $264
------------------------------------------------------------------------------------------------------------------------------
AIM V.I. International Equity $26 $78 $134 $285
------------------------------------------------------------------------------------------------------------------------------
AIM V.I. Value $23 $72 $123 $263
------------------------------------------------------------------------------------------------------------------------------
American Century VP Balanced $25 $76 $130 $277
------------------------------------------------------------------------------------------------------------------------------
American Century VP International $29 $90 $153 $321
------------------------------------------------------------------------------------------------------------------------------
The Dreyfus Socially Responsible Growth $24 $73 $125 $266
------------------------------------------------------------------------------------------------------------------------------
Dreyfus Stock Index $18 $56 $ 97 $210
------------------------------------------------------------------------------------------------------------------------------
Dreyfus VIF Growth and Income $24 $73 $125 $266
------------------------------------------------------------------------------------------------------------------------------
Dreyfus VIF Money Market $22 $66 $114 $244
------------------------------------------------------------------------------------------------------------------------------
Dreyfus VIF Small Company Stock $26 $78 $134 $285
------------------------------------------------------------------------------------------------------------------------------
Fidelity VIP Contrafund-TM- $22 $69 $117 $252
------------------------------------------------------------------------------------------------------------------------------
Fidelity VIP Equity-Income $21 $66 $113 $242
------------------------------------------------------------------------------------------------------------------------------
Fidelity VIP Growth $22 $69 $117 $252
------------------------------------------------------------------------------------------------------------------------------
Fidelity VIP High Income $23 $70 $119 $256
------------------------------------------------------------------------------------------------------------------------------
MFS Emerging Growth $24 $74 $127 $271
------------------------------------------------------------------------------------------------------------------------------
MFS Limited Maturity* $26 $79 $135 $288
------------------------------------------------------------------------------------------------------------------------------
</TABLE>
*Not available to new investors
PLEASE REMEMBER THAT YOU ARE LOOKING AT EXAMPLES AND NOT A REPRESENTATION OF
PAST OR FUTURE EARNINGS. YOUR ACTUAL EXPENSES MAY BE LOWER OR GREATER THAN THOSE
SHOWN ABOVE. SIMILARLY, YOUR RATE OF RETURN MAY BE LOWER OR GREATER THAN 5%,
WHICH IS NOT GUARANTEED. THE EXAMPLES ASSUME THAT ANY PORTFOLIO EXPENSE WAIVERS
OR REIMBURSEMENT ARRANGEMENTS DESCRIBED IN THE FOOTNOTES TO THE PORTFOLIOS
ANNUAL EXPENSE TABLE ARE IN EFFECT FOR THE PERIODS PRESENTED ABOVE. THE ABOVE
EXAMPLES ASSUME THE ELECTION OF THE ENHANCED DEATH BENEFIT RIDER WITH A
MORTALITY AND EXPENSE RISK CHARGE OF 1.35%. IF THAT RIDER WERE NOT ELECTED, THE
EXPENSE FIGURES SHOWN ABOVE WOULD BE SLIGHTLY LOWER. TO REFLECT THE CONTRACT
MAINTENANCE CHARGE IN THE EXAMPLES, WE ESTIMATED AN EQUIVALENT PERCENTAGE
CHARGE, BASED ON THE CURRENT AVERAGE CONTRACT SIZE OF $47,490.
10 - PROSPECTUS
<PAGE>
FINANCIAL INFORMATION
-------------------------------------------------------------------
To measure the value of your investment in the Variable Sub-Accounts during the
Accumulation Phase, we use a unit of measure we call the "ACCUMULATION UNIT."
Each Variable Sub-Account has a separate value for its Accumulation Units we
call "ACCUMULATION UNIT VALUE." Accumulation Unit Value is analogous to, but not
the same as, the share price of a mutual fund.
Attached as Appendix A to this prospectus are tables showing the Accumulation
Unit Values of each Variable Sub-Account since the date the Contracts were first
offered. To obtain a fuller picture of each Variable Sub-Account's finances,
please refer to the Variable Account's financial statements contained in the
Statement of Additional Information. The financial statements of Glenbrook also
appear in the Statement of Additional Information.
11 - PROSPECTUS
<PAGE>
THE CONTRACT
-------------------------------------------------------------------
CONTRACT OWNER
The Glenbrook Provider Variable Annuity is a contract between you, the Contract
owner, and Glenbrook, a life insurance company. As the Contract owner, you may
exercise all of the rights and privileges provided to you by the Contract. That
means it is up to you to select or change (to the extent permitted):
- the investment alternatives during the Accumulation and Payout Phases,
- the amount and timing of your purchase payments and withdrawals,
- the programs you want to use to invest or withdraw money,
- the income payment plan you want to use to receive retirement income,
- the Annuitant (either yourself or someone else) on whose life the income
payments will be based,
- the Beneficiary or Beneficiaries who will receive the benefits that the
Contract provides when the last surviving Contract owner dies, and
- any other rights that the Contract provides.
If you die, any surviving Contract owner, or , if none, the Beneficiary may
exercise the rights and privileges provided to them by the Contract.
The Contract cannot be jointly owned by both a non-natural person and a natural
person.
You can use the Contract with or without a qualified plan. A qualified plan is a
personal retirement savings plan, such as an IRA or tax-sheltered annuity, that
meets the requirements of the Internal Revenue Code. Qualified plans may limit
or modify your rights and privileges under the Contract. We use the term
"Qualified Contract" to refer to a Contract issued with a qualified plan. See
"Qualified Plans" on page 27.
ANNUITANT
The Annuitant is the individual whose life determines the amount and duration of
income payments (other than under Income Plans with guaranteed payments for a
specified period). You initially designate an Annuitant in your application. You
may change the Annuitant at any time prior to the Payout Start Date (only if the
Contract owner is a natural person). You may designate a joint Annuitant, who is
a second person on whose life income payments depend at the time you select an
Income Plan. We permit joint Annuitants only on or after the Payout Start Date.
If the Annuitant dies prior to the Payout Start Date, the new Annuitant will be:
(i) the youngest Contract owner; otherwise,
(ii) the youngest Beneficiary.
BENEFICIARY
The Beneficiary is the person who may elect to receive the death benefit or
become the new Contract owner if the sole surviving Contract owner dies before
the Payout Start Date. If the sole surviving Contract owner dies after the
Payout Start Date, the Beneficiary will receive any guaranteed income payments
scheduled to continue.
You may name one or more Beneficiaries when you apply for a Contract. You may
change or add Beneficiaries at any time, unless you have designated an
irrevocable Beneficiary. We will provide a change of Beneficiary form to be
signed and filed with us. Any change will be effective at the time you sign the
written notice. Until we receive your written notice to change a Beneficiary, we
are entitled to rely on the most recent Beneficiary information in our files. We
will not be liable as to any payment or settlement made prior to receiving the
written notice. Accordingly, if you wish to change your Beneficiary, you should
deliver your written notice to us promptly.
If you did not name a Beneficiary or, unless otherwise provided in the
Beneficiary designation, if a named Beneficiary is no longer living and there
are no other surviving Beneficiaries, the new Beneficiary will be:
- your spouse or, if he or she is no longer alive,
- your surviving children equally, or if you have no surviving children,
- your estate.
If more than one Beneficiary survives you (or survives the Annuitant, if the
Contract owner is not a natural person) we will divide the death benefit among
your Beneficiaries according to your most recent written instructions. If you
have not given us written instructions, we will pay the death benefit in equal
amounts to the surviving Beneficiaries.
MODIFICATION OF THE CONTRACT
Only a Glenbrook officer may approve a change in or waive any provision of the
Contract. Any change or waiver must be in writing. None of our agents has the
authority to change or waive the provisions of the Contract. We may not change
the terms of the Contract without your consent, except to conform the Contract
to applicable law or changes in the law. If a provision of the Contract is
inconsistent with state law, we will follow state law.
12 - PROSPECTUS
<PAGE>
ASSIGNMENT
We will not honor an assignment of an interest in a Contract as collateral or
security for a loan. However, you may assign periodic income payments under the
Contract prior to the Payout Start Date. No Beneficiary may assign benefits
under the Contract until they are payable to the Beneficiary. We will not be
bound by any assignment until the assignor signs it and files it with us. We are
not responsible for the validity of any 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. An
assignment may also result in taxes or tax penalties. YOU SHOULD CONSULT WITH AN
ATTORNEY BEFORE TRYING TO ASSIGN YOUR CONTRACT.
PURCHASES
-------------------------------------------------------------------
MINIMUM PURCHASE PAYMENTS
Your initial purchase payment must be at least $3,000 ($2,000 for a Qualified
Contract). All subsequent purchase payments must be $50 or more. You may make
purchase payments at any time prior to the Payout Start Date. We reserve the
right to limit the maximum amount of purchase payments we will accept.
AUTOMATIC ADDITIONS PROGRAM
You may make subsequent purchase payments by automatically transferring money
from your bank account. Consult your sales representative for more detailed
information.
ALLOCATION OF PURCHASE PAYMENTS
At the time you apply for a Contract, you must decide how to allocate your
purchase payments among the investment alternatives. The allocation you specify
on your application will be effective immediately. All allocations must be in
whole percents that total 100% or in whole dollars. You can change your
allocations by notifying us in writing.
We will allocate your purchase payments to the investment alternatives according
to your most recent instructions on file with us. Unless you notify us in
writing otherwise, we will allocate subsequent purchase payments according to
the allocation for the previous purchase payment. We will effect any change in
allocation instructions at the time we receive written notice of the change in
good order.
We will credit the initial purchase payment that accompanies your completed
application to your Contract within 2 business days after we receive the payment
at our home office. If your application is incomplete, we will ask you to
complete your application within 5 business days. If you do so, we will credit
your initial purchase payment to your Contract within that 5 business day
period. If you do not, we will return your purchase payment at the end of the
5 business day period unless you expressly allow us to hold it until you
complete the application. We will credit subsequent purchase payments to the
Contract at the close of the business day on which we receive the purchase
payment at our headquarters.
We are open for business each day Monday through Friday that the New York Stock
Exchange is open for business. We also refer to these days as "VALUATION DATES."
Our business day closes when the New York Stock Exchange closes, usually 4 p.m.
Eastern Time (3 p.m. Central Time). If we receive your purchase payment after
4 p.m. Eastern Time on any Valuation Date, we will credit your purchase payment
using the Accumulation Unit Values computed on the next Valuation Date.
RIGHT TO CANCEL
You may cancel the Contract by returning it to us within the Cancellation
Period, which is the 20 day period after you receive the Contract, or a longer
period should your state require it. You may return your Contract by delivering
it or mailing it to us. If you exercise this "RIGHT TO CANCEL," the Contract
terminates and we will pay you the full amount of your purchase payments
allocated to the Fixed Account. We also will return your purchase payments
allocated to the Variable Account adjusted, to the extent federal or state law
permits, to reflect investment gain or loss that occurred from the date of
allocation through the date of cancellation. Some states may require us to
return a greater amount.
In states where we are required to refund purchase payments, we reserve the
right during the Cancellation Period to invest any purchase payments you
allocated to a Variable Sub-Account to the Money Market Variable Sub-Account
available under the Contract. We will notify you if we do so. At the end of the
Cancellation Period, you may then allocate your money to other Variable
Sub-Accounts.
13 - PROSPECTUS
<PAGE>
CONTRACT VALUE
-------------------------------------------------------------------
Your Contract Value at any time during the Accumulation Phase is equal to the
sum of the value of your Accumulation Units in the Variable Sub-Accounts you
have selected, plus the value of your Fixed Account Options.
ACCUMULATION UNITS
To determine the number of Accumulation Units of each Variable Sub-Account to
credit to your Contract, we divide (i) the amount of the purchase payment
Accumulation Units you have allocated to a Variable Sub-Account by (ii) the
Accumulation Unit Value of that Variable Sub-Account next computed after we
receive your payment or transfer. For example, if we receive a $10,000 purchase
payment allocated to a Variable Sub-Account when the Accumulation Unit Value for
the Sub-Account is $10, we would credit 1,000 Accumulation Units of that
Variable Sub-Account to your Contract. Withdrawals and transfers from a Variable
Sub-Account would, of course, reduce the number of Accumulation Units of that
Sub-Account allocated to your Contract.
ACCUMULATION UNIT VALUE
As a general matter, the Accumulation Unit Value for each Variable Sub-Account
will rise or fall to reflect:
- changes in the share price of the Portfolio in which the Variable Sub-Account
invests, and
- the deduction of amounts reflecting the mortality and expense risk charge,
administrative expense charge, and any provision for taxes that have accrued
since we last calculated the Accumulation Unit Value.
We determine contract maintenance charges, withdrawal charges, and transfer fees
(currently waived) separately for each Contract. They do not affect Accumulation
Unit Value. Instead, we obtain payment of those charges and fees by redeeming
Accumulation Units. For details on how we calculate Accumulation Unit Value,
please refer to the Statement of Additional Information.
We determine a separate Accumulation Unit Value for each Variable Sub-Account on
each Valuation Date. We also determine a separate set of Accumulation Unit
Values reflecting the cost of the Enhanced Death Benefit Rider and the Enhanced
Death and Income Benefit Combination Rider described on page 25 below.
YOU SHOULD REFER TO THE PROSPECTUSES FOR THE FUNDS THAT ACCOMPANY THIS
PROSPECTUS FOR A DESCRIPTION OF HOW THE ASSETS OF EACH PORTFOLIO ARE VALUED,
SINCE THAT DETERMINATION DIRECTLY BEARS ON THE ACCUMULATION UNIT VALUE OF THE
CORRESPONDING VARIABLE SUB-ACCOUNT AND, THEREFORE, YOUR CONTRACT VALUE.
14 - PROSPECTUS
<PAGE>
INVESTMENT ALTERNATIVES: THE VARIABLE SUB-ACCOUNTS
-------------------------------------------------------------------
You may allocate your purchase payments to up to 20 Variable Sub-Accounts. Each
Variable Sub-Account invests in the shares of a corresponding Portfolio. Each
Portfolio has its own investment objective(s) and policies. We briefly describe
the Portfolios below.
For more complete information about each Portfolio, including expenses and risks
associated with the Portfolio, please refer to the accompanying prospectuses for
the Funds. You should carefully review the Fund prospectuses before allocating
amounts to the Variable Sub-Accounts.
<TABLE>
PORTFOLIO: EACH PORTFOLIO SEEKS: INVESTMENT ADVISOR:
<S> <C> <C>
AIM VARIABLE INSURANCE FUNDS*
AIM V.I. Capital Appreciation Fund Growth of capital
AIM V.I. Diversified Income Fund A high level of current income
AIM V.I. Global Utilities Fund A high level of current income and
secondarily, growth of capital
AIM V.I. Government Securities Fund A high level of current income
consistent with a reasonable concern
for safety of principal
AIM V.I. Growth Fund Growth of capital A I M
Advisors, Inc.
AIM V.I. Growth and Income Fund Growth of capital with a secondary
objective of current income
AIM V.I. International Equity Fund Long-term growth of capital
AIM V.I. Value Fund Long-term growth of capital and income
as a secondary objective
AMERICAN CENTURY VARIABLE PORTFOLIOS (VP), INC.
American Century VP Balanced Long-term capital growth and current
income
American Century VP International Long-term capital growth American Century
Investment
Management, Inc.
THE DREYFUS SOCIALLY RESPONSIBLE GROWTH FUND, INC.; THE DREYFUS STOCK INDEX FUND; AND THE DREYFUS
VARIABLE INVESTMENT FUND (VIF) (COLLECTIVELY, THE DREYFUS FUNDS)
The Dreyfus Socially Responsible Capital growth and, secondarily,
Growth Fund, Inc. current income
Dreyfus Stock Index Fund To match the total return of the
Standard & Poor's 500 Composite Stock
Price Index
Dreyfus VIF Growth & Income Portfolio Long-term capital growth, current The Dreyfus
income and growth of income, Corporation
consistent with reasonable investment
risk
Dreyfus VIF Money Market Portfolio A high level of current income as is
consistent with the preservation of
capital and the maintenance of
liquidity
Dreyfus VIF Small Company Stock Investment returns (consisting of
Portfolio capital appreciation and income) that
are greater than the total return
performance of stocks represented by
the Russell 2500-TM- Stock Index
("Russell 2500")
FIDELITY VARIABLE INSURANCE PRODUCTS FUND
Fidelity VIP Contrafund-Registered Long-term capital appreciation
Trademark- Portfolio
Fidelity VIP Equity-Income Portfolio Reasonable income
Fidelity VIP Growth Portfolio Capital appreciation
Fidelity VIP High Income Portfolio High level of current income while Fidelity
also considering growth of capital Management &
Research Company
MFS-REGISTERED TRADEMARK- VARIABLE INSURANCE TRUST-SM-
MFS Emerging Growth Series Long-term growth of capital
MFS Limited Maturity Series** Provide as high a level of current Massachusetts
income as is believed to be consistent Financial Services
with prudent investment risk.
Secondary objective is to protect
shareholders' capital.
</TABLE>
* A Portfolio's investment objective may be changed by the Fund's Board of
Trustees without shareholder approval.
** Not available to new investors.
Amounts you allocate to Variable Sub-Accounts may grow in value, decline in
value, or grow less than you expect, depending on the investment performance of
the Portfolios in which those Variable Sub-Accounts invest. You bear the
investment risk that the Portfolios might not meet their investment objectives.
Shares of the Portfolios are not deposits, or obligations of, or guaranteed or
endorsed by any bank and are not insured by the Federal Deposit Insurance
Corporation, the Federal Reserve Board or any other agency.
15 - PROSPECTUS
<PAGE>
VARIABLE INSURANCE TRUST PORTFOLIOS MAY NOT BE MANAGED BY THE SAME PORTFOLIO
MANAGERS WHO MANAGE RETAIL MUTUAL FUNDS WITH SIMILAR NAMES. THESE PORTFOLIOS ARE
LIKELY TO DIFFER FROM RETAIL FUNDS IN ASSETS, CASH FLOW, AND TAX MATTERS.
ACCORDINGLY, THE HOLDINGS AND INVESTMENT RESULTS OF A PORTFOLIO CAN BE EXPECTED
TO BE HIGHER OR LOWER THAN THE INVESTMENT RESULTS OF RETAIL MUTUAL FUNDS.
16 - PROSPECTUS
<PAGE>
INVESTMENT ALTERNATIVES : THE FIXED ACCOUNT OPTIONS
-------------------------------------------------------------------
You may allocate all or a portion of your purchase payments to the Fixed
Account. You may choose from among 2 Fixed Account Options including a dollar
cost averaging option and the option to invest in one or more Guarantee Periods
included in the Guaranteed Maturity Fixed Account. The Fixed Account Options may
not be available in all states. Please consult with your sales representative
for current information. The Fixed Account supports our insurance and annuity
obligations. The Fixed Account consists of our general assets other than those
in segregated asset accounts. We have sole discretion to invest the assets of
the Fixed Account, subject to applicable law. Any money you allocate to a Fixed
Account Option does not entitle you to share in the investment experience of the
Fixed Account.
DOLLAR COST AVERAGING FIXED ACCOUNT OPTIONS
DOLLAR COST AVERAGING FIXED ACCOUNT OPTION. Purchase payments that you allocate
to the DOLLAR COST AVERAGING FIXED ACCOUNT OPTION ("DCA FIXED ACCOUNT OPTION")
will earn interest for a one year period at the current rate in effect at the
time of allocation. We will credit interest daily at a rate that will compound
over the year to the annual interest rate we guaranteed at the time of
allocation. After the one year period, we will declare a renewal rate which we
guarantee for a full year. Subsequent renewal dates will be every twelve months
for each payment or transfer.
We will follow your instructions in transferring amounts monthly from the DCA
Fixed Account Option. However, you may not choose less than 3 or more than 36
monthly installments. Further, you must transfer each purchase payment and all
its earnings out of this Option by means of dollar cost averaging within 36
months of payment. At the end of 36 months, we will transfer the remaining
payment and associated earnings to the Money Market Variable Sub-Account. No
transfers are permitted into the Dollar Cost Averaging Fixed Account.
We bear the investment risk for all amounts allocated to the DCA Fixed Account
Option. That is because we guarantee the current and renewal interest rates we
credit to the amounts you allocate to this Option, which will never be less than
the minimum guaranteed rate in the Contract. Currently, we determine, in our
sole discretion, the amount of interest credited in excess of the guaranteed
rate.
We may declare more than one interest rate for different monies based upon the
date of allocation to the DCA Fixed Account Option. For current interest rate
information, please contact your sales representative or our customer support
unit at 1-800-755-5275.
GUARANTEE PERIODS
Each payment or transfer allocated to a Guarantee Period earns interest at a
specified rate that we guarantee for a period of years. Guarantee Periods may
range from 1 to 10 years. We are currently offering Guarantee Periods of 1, 3,
5, 7, and ten years in length. In the future, we may offer Guarantee Periods of
different lengths or stop offering some Guarantee Periods.
You select the Guarantee Period for each payment or transfer. If you do not
select a Guarantee Period, we will assign the same period(s) you selected for
your most recent purchase payment.
Each payment or transfer allocated to a Guarantee Period must be at least $50.
We reserve the right to limit the number of additional purchase payments that
you may allocate to this Option.
INTEREST RATES. We will tell you what interest rates and Guarantee Periods we
are offering at a particular time. We will not change the interest rate that we
credit to a particular allocation until the end of the relevant Guarantee
Period. We may declare different interest rates for Guarantee Periods of the
same length that begin at different times.
We have no specific formula for determining the rate of interest that we will
declare initially or in the future. We will set those interest rates based on
investment returns available at the time of the determination. In addition, we
may consider various other factors in determining interest rates including
regulatory and tax requirements, our sales commission and administrative
expenses, general economic trends, and competitive factors. WE DETERMINE THE
INTEREST RATES TO BE DECLARED IN OUR SOLE DISCRETION. WE CAN NEITHER PREDICT NOR
GUARANTEE WHAT THOSE RATES WILL BE IN THE FUTURE. For current interest rate
information, please contact your sales representative or Glenbrook at
1-800-755-5275.
17 - PROSPECTUS
<PAGE>
HOW WE CREDIT INTEREST. We will credit interest daily to each amount allocated
to a Guarantee Period at a rate that compounds to the annual interest rate that
we declared at the beginning of the applicable Guarantee Period. The following
example illustrates how a purchase payment allocated to a Guaranteed Period
would grow, given an assumed Guarantee Period and annual interest rate:
<TABLE>
<S> <C>
Purchase Payment............................................ $10,000
Guarantee Period............................................ 5 years
Annual Interest 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 Contract Value...................... $10,000.00
X (1 + Annual Interest Rate) 1.045
----------
$10,450.00
Contract Value at end of Contract Year $10,450.00
X (1 + Annual Interest Rate) 1.045
----------
$10,920.25
Contract Value at end of Contract Year $10,920.25
X (1 + Annual Interest Rate) 1.045
----------
$11,411.66
Contract Value at end of Contract Year $11,411.66
X (1 + Annual Interest Rate) 1.045
----------
$11,925.19
Contract Value at end of Contract Year $11,925.19
X (1 + Annual Interest Rate) 1.045
----------
$12,461.82
</TABLE>
TOTAL INTEREST CREDITED DURING GUARANTEE PERIOD = $2,461.82 ($12,461.82-$10,000)
This example assumes no withdrawals during the entire 5 year Guarantee Period.
If you were to make a withdrawal, you may be required to pay a withdrawal
charge. In addition, the amount withdrawn may be increased or decreased by a
Market Value Adjustment that reflects changes in interest rates since the time
you invested the amount withdrawn. The hypothetical interest rate is for
illustrative purposes only and is not intended to predict future interest rates
to be declared under the Contract. Actual interest rates declared for any given
Guarantee Period may be more or less than shown above.
RENEWALS. Prior to the end of each Guarantee Period, we will mail you a notice
asking you what to do with your money, including the accrued interest. During
the 30- day period after the end of the Guarantee Period, you may:
1) take no action. We will automatically apply your money to a new
Guarantee Period of the same length as the expiring Guarantee Period.
The new Guarantee Period will begin on the day the previous Guarantee
Period ends. The new interest rate will be our then current declared
rate for a Guarantee Period of that length; or
2) instruct us to apply your money to one or more new Guarantee Periods of
your choice. The new Guarantee Period(s) will begin on the day the
previous Guarantee Period ends. The new interest rate will be our then
current declared rate for those Guarantee Periods; or
3) instruct us to transfer all or a portion of your money to one or more
Variable Sub-Accounts of the Variable Account. We will effect the
transfer on the day we receive your instructions. We will not adjust the
amount transferred to include a Market Value Adjustment; or
4) withdraw all or a portion of your money. You may be required to pay a
withdrawal charge, but we will not adjust the amount withdrawn to
include a Market Value Adjustment. You may also be required to pay
premium taxes and withholding, if applicable. We will pay interest from
the day the Guarantee Period expired until the date of withdrawal. The
interest will be the rate for the shortest Guarantee Period then being
offered. Amounts not withdrawn will be applied to a new Guarantee Period
of the same length as the previous Guarantee Period. The new
18 - PROSPECTUS
<PAGE>
Guarantee Period will begin on the day the previous Guarantee Period
ends.
MARKET VALUE ADJUSTMENT. All withdrawals and transfers from a Guarantee Period,
other than those taken during the 30 day period after such Guarantee Period
expires, are subject to a Market Value Adjustment. A Market Value Adjustment
also may apply upon payment of a death benefit and when you apply amounts
currently invested in a Guarantee Period to an Income Plan (unless paid or
applied during the 30-day period after such Guarantee Period expires). We also
will not apply a Market Value Adjustment to a withdrawal you make within the
Free Withdrawal Amount as described on page 20.
We apply the Market Value Adjustment to reflect changes in interest rates from
the time you first allocate money to a Guarantee Period to the time you remove
it from that Guarantee Period. We calculate the Market Value Adjustment by
comparing the Treasury Rate for a period equal to the Guarantee Period at its
inception to the Treasury Rate for a period equal to the Guarantee Period when
you remove your money. "Treasury Rate" means the U.S. Treasury Note Constant
Maturity Yield as reported in Federal Reserve Bulletin Release H.15.
The Market Value Adjustment may be positive or negative, depending on changes in
interest rates. As such, you bear the investment risk associated with changes in
interest rates. If interest rates increase significantly, the Market Value
Adjustment and any withdrawal charge, premium taxes, and income tax withholding
(if applicable) could reduce the amount you receive upon full withdrawal from a
Guaranteed Period to an amount that is less than the purchase payment applied to
that period plus interest earned under the Contract.
Generally, if the original Treasury Rate at the time you allocate money to a
Guarantee Period is higher than the applicable current Treasury Rate for a
period equal to the Guarantee Period, then the Market Value Adjustment will
result in a higher amount payable to you, transferred or applied to an Income
Plan. Conversely, if the Treasury Rate at the time you allocate money to a
Guarantee Period is lower than the applicable Treasury Rate for a period equal
to the Guarantee Period, then the Market Value Adjustment will result in a lower
amount payable to you, transferred or applied to an Income Plan.
For example, assume that you purchase a Contract and you select an initial
Guarantee Period of 5 years and the 5 year Treasury Rate for that duration is
4.50%. Assume that at the end of 3 years, you make a partial withdrawal. If, at
that later time, the current 5 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 you. Conversely, if the current 5 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 you.
The formula for calculating Market Value Adjustments is set forth in Appendix B
to this prospectus, which also contains additional examples of the application
of the Market Value Adjustment.
INVESTMENT ALTERNATIVES: TRANSFERS
-------------------------------------------------------------------
TRANSFERS DURING THE ACCUMULATION PHASE
During the Accumulation Phase, you may transfer Contract Value among the
investment alternatives. You may request transfers in writing on a form that we
provide or by telephone according to the procedure described below. The minimum
amount that you may transfer into a Guarantee Period is $50. We currently do not
assess, but reserve the right to assess, a $10 charge on each transfer in excess
of 12 per Contract Year. We treat transfers to or from more than one Portfolio
on the same day as one transfer.
We will process transfer requests that we receive before 3:00 p.m. Central Time
on any Valuation Date using the Accumulation Unit Values for that Date. We will
process requests completed after 3:00 p.m. Central Time on any Valuation Date
using the Accumulation Unit Values for the next Valuation Date. The Contract
permits us to defer transfers from the Fixed Account for up to six months from
the date we receive your request. If we decide to postpone transfers for 30 days
or more, we will pay interest as required by applicable law. Any interest would
be payable from the date we receive the transfer request to the date we make the
transfer.
If you transfer an amount from a Guarantee Period other than during the 30 day
period after such Guarantee Period expires, we will increase or decrease the
amount by a Market Value Adjustment.
We reserve the right to waive any transfer restrictions.
19 - PROSPECTUS
<PAGE>
TRANSFERS DURING THE PAYOUT PHASE
During the Payout Phase, you may make transfers among the Variable Sub-Accounts
so as to change the relative weighting of the Variable Sub-Accounts on which
your variable income payments will be based. In addition, you will have a
limited ability to make transfers from the Variable Sub-Accounts to increase the
proportion of your income payments consisting of fixed income payments. You may
not, however, convert any portion of your right to receive fixed income payments
into variable income payments.
If you choose an Income Plan that depends on any person's life, you may not make
any transfers for the first 6 months after the Payout Start Date. Thereafter,
you may make transfers among the Variable Sub-Accounts or make transfers from
the Variable Sub-Accounts to increase the proportion of your income payments
consisting of fixed income payments. Your transfers must be at least 6 months
apart.
TELEPHONE TRANSFERS
You may make transfers by telephone by calling 1-800-755-5275 if you first send
us a completed authorization form. The cut off time for telephone transfer
requests is 3:00 p.m. Central time. In the event that the New York Stock
Exchange closes early, i.e., before 3:00 p.m. Central Time, or in the event that
the Exchange closes early for a period of time but then reopens for trading on
the same day, we will process telephone transfer requests as of the close of the
Exchange on that particular day. We will not accept 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 Exchange.
We may suspend, modify or terminate the telephone transfer privilege at any time
without notice.
We use procedures that we believe provide reasonable assurance that the
telephone transfers are genuine. For example, we tape telephone conversations
with persons purporting to authorize transfers and request identifying
information. Accordingly, we disclaim any liability for losses resulting from
allegedly unauthorized telephone transfers. However, if we do not take
reasonable steps to help ensure that a telephone authorization is valid, we may
be liable for such losses.
DOLLAR COST AVERAGING PROGRAM
Through our Dollar Cost Averaging Program, you may automatically transfer a
fixed dollar amount every month during the Accumulation Phase from the Dollar
Cost Averaging Fixed Account, to any Variable Sub-Account. You may not use the
Dollar Cost Averaging Program to transfer amounts to the Guarantee Periods.
We will not charge a transfer fee for transfers made under this Program, nor
will such transfer count against the 12 transfers you can make each Contract
Year without paying a transfer fee.
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 this Program does not assure you of a greater profit from your
purchases under the Program nor will it prevent or necessarily reduce losses in
a declining market. Call or write us for instructions on how to enroll.
AUTOMATIC PORTFOLIO REBALANCING PROGRAM
Once you have allocated your money among the Variable Sub-Accounts, the
performance of each Sub-Account may cause a shift in the percentage you
allocated to each Sub- Account. If you select our Automatic Portfolio
Rebalancing Program, we will automatically rebalance the Contract Value in each
Variable Sub-Account and return it to the desired percentage allocations. We
will not include money you allocate to the Fixed Account Options in the
Automatic Portfolio Rebalancing Program.
We will rebalance your account each quarter according to your instructions. We
will transfer amounts among the Variable Sub-Accounts to achieve the percentage
allocations you specify. You can change your allocations at any time by
contacting us in writing or by telephone. The new allocation will be effective
with the first rebalancing that occurs after we receive your request. We are not
responsible for rebalancing that occurs prior to receipt of your request.
Example:
Assume that you want your initial purchase payment split among two Variable
Sub-Accounts. You want 40% to be in the AIM V.I. Value Variable Sub-Account
and 60% to be in the AIM V.I. Growth Variable Sub-Account. Over the next 2
months the bond market does very well while the stock market performs
poorly. At the end of the first quarter, the AIM V.I. Value Variable Sub-
Account now represents 50% of your holdings because of its increase in
value. If you choose to have your holdings rebalanced quarterly, on the
first day of the next quarter, we would sell some of your units in the AIM
V.I. Value Variable Sub-Account and use the money to buy more units in the
AIM V.I. Growth Variable Sub-Account so that the percentage allocations
would again be 40% and 60% respectively.
The Automatic Portfolio Rebalancing Program is available only during the
Accumulation Phase. The transfers made under the Program do not count towards
the 12
20 - PROSPECTUS
<PAGE>
transfers you can make without paying a transfer fee. Portfolio rebalancing is
consistent with maintaining your allocation of investments among market
segments, although it is accomplished by reducing your Contract Value allocated
to the better performing segments.
EXPENSES
-------------------------------------------------------------------
As a Contract owner, you will bear, directly or indirectly, the charges and
expenses described below.
CONTRACT MAINTENANCE CHARGE
During the Accumulation Phase, on each Contract Anniversary, we will deduct a
$35 contract maintenance charge from your Contract Value invested in each
Variable Sub-Account in proportion to the amount invested. If you surrender your
Contract, we will deduct the contract maintenance charge pro rated for the part
of the Contract Year elapsed, unless your Contract qualifies for a waiver,
described below.
The charge is to compensate us for the cost of administering the Contracts and
the Variable Account. Maintenance costs include expenses we incur collecting
purchase payments; keeping records; processing death claims, cash withdrawals,
and policy changes; proxy statements; calculating Accumulation Unit Values and
income payments; and issuing reports to Contract owners and regulatory agencies.
We cannot increase the charge. However, we will waive this charge if, as of the
Contract Anniversary or upon full surrender:
- total purchase payments equal $50,000 or more, or
- all money is allocated to the Fixed Account.
In addition, we will waive the contract maintenance charge if total purchase
payments are $50,000 or more as of the Payout Start Date.
MORTALITY AND EXPENSE RISK CHARGE
We deduct a mortality and expense risk charge daily at an annual rate of 1.25%
of the average daily net assets you have invested in the Variable Sub-Accounts
(1.35% if you select the Enhanced Death Benefit Rider). The mortality and
expense risk charge is for all the insurance benefits available with your
Contract (including our guarantee of annuity rates and the death benefits), for
certain expenses of the Contract, and for assuming the risk (expense risk) that
the current charges will be sufficient in the future to cover the cost of
administering the Contract. If the charges under the Contract are not
sufficient, then we will bear the loss. We charge an additional amount for the
Enhanced Death Benefit Rider to compensate us for the additional risk that we
accept by providing these options.
We guarantee that we will not raise the mortality and expense risk charge. We
assess the mortality and expense risk charge during both the Accumulation Phase
and the Payout Phase.
ADMINISTRATIVE EXPENSE CHARGE
We deduct an administrative expense charge daily at an annual rate of 0.10% of
the average daily net assets you have invested in the Variable Sub-Accounts. We
intend this charge to cover actual administrative expenses that 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 attributed to that Contract. We
assess this charge each day during the Accumulation Phase and the Payout Phase.
We guarantee that we will not raise this charge.
TRANSFER FEE
We do not currently impose a fee upon transfers among the investment
alternatives. However, we reserve the right to charge $10 per transfer after the
12th transfer in each Contract Year. We will NOT charge a transfer fee on
transfers that are part of a Dollar Cost Averaging or Automatic Portfolio
Rebalancing Program.
WITHDRAWAL CHARGE
We may assess a withdrawal charge of up to 6% of the purchase payment(s) you
withdraw. The charge declines to 0% over a 6 year period that begins on the day
we receive your payment. A schedule showing how the charge declines is shown on
page 7. During each Contract Year, you can withdraw up to 15% of the aggregate
amount of your purchase payments without paying the charge. Unused portions of
this "FREE WITHDRAWAL AMOUNT" are NOT carried forward to future Contract Years.
We will deduct withdrawal charges, if applicable, from the amount paid.
For purposes of calculating the withdrawal charge, we will treat withdrawals as
coming from the oldest purchase payments first. However, for federal income tax
purposes, please note that withdrawals are considered to have come first from
earnings, which means you pay taxes on the earnings portion of your withdrawal.
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We do not apply a withdrawal charge in the following situations:
- on the Payout Start Date (a withdrawal charge may apply if you terminate
income payments to be received for a specified period);
- on the death of the Contract owner (Annuitant if Contract owner is not a
natural person);
- withdrawals taken to satisfy IRS minimum distribution rules for the Contract;
or
- withdrawals that qualify for one of the waivers as described below.
We use the amounts obtained from the withdrawal charge to pay sales commissions
and other promotional or distribution expenses associated with marketing the
Contracts. To the extent that the withdrawal charge does not cover all sales
commissions and other promotional or distribution expenses, we may use any of
our corporate assets, including potential profit which may arise from the
mortality and expense risk charge or any other charges or fee described above,
to make up any difference.
Withdrawals also may be subject to tax penalties, income tax and a Market Value
Adjustment. You should consult your own tax counsel or other tax advisers
regarding any withdrawals.
CONFINEMENT WAIVER. We will waive the withdrawal charge and any Market Value
Adjustment on all withdrawals taken prior to the Payout Start Date under your
Contract if the following conditions are satisfied:
1. you or the Annuitant (if the Contract owner is not a natural person) are
confined to a long term care facility or a hospital for at least 90 consecutive
days. You or the Annuitant must enter the long term care facility or hospital at
least 30 days after the Issue Date;
2. you request the withdrawal and provide written proof of the stay no later
than 90 days following the end of your or the Annuitant's stay at the long term
care facility or hospital; and
3. a physician must have prescribed the stay and the stay must be medically
necessary (as defined in the Contract).
You may not claim this benefit if you, the Annuitant, or a member of your or the
Annuitant's immediate family, is the physician prescribing your or the
Annuitant's stay in a long term care facility.
TERMINAL ILLNESS WAIVER. We will waive the withdrawal charge and any Market
Value Adjustment on all withdrawals taken prior to the Payout Start Date under
your Contract if:
1. you or the Annuitant (if the Contract owner is not a natural person) are
first diagnosed with a terminal illness at least 30 days after the Issue Date;
and
2. you claim this benefit and deliver adequate proof of diagnosis to us.
Please refer to your Contract for more detailed information about the terms and
conditions of these waivers.
The laws of your state may limit the availability of these waivers and may also
change certain terms and/or benefits available under the waivers. You should
consult your Contract for further details on these variations. Also, even if you
do not need to pay our withdrawal charge or a Market Value Adjustment because of
these waivers, you still may be required to pay taxes or tax penalties on the
amount withdrawn. You should consult your tax adviser to determine the effect of
a withdrawal on your taxes.
PREMIUM TAXES
Some states and other governmental entities (e.g., municipalities) charge
premium taxes or similar taxes. We are responsible for paying these taxes and
will deduct them from your Contract Value. Some of these taxes are due when the
Contract is issued, others are due when income payments begin or upon surrender.
Our current practice is not to charge anyone for these taxes until income
payments begin or when a total withdrawal occurs, including payment upon death.
At our discretion, we may discontinue this practice and deduct premium taxes
from the purchase payments. Premium taxes generally range from 0% to 4%,
depending on the state.
At the Payout Start Date, if applicable, we deduct the charge for premium taxes
from each investment alternative in the proportion that the Contract owner's
value in the investment alternative bears to the total Contract Value.
DEDUCTION FOR SEPARATE ACCOUNT INCOME TAXES
We are not currently making a provision for taxes. In the future, however, we
may make a provision for taxes if we determine, in our sole discretion, that we
will incur a tax as a result of the operation of the Variable Account. We will
deduct for any taxes we incur as a result of the operation of the Variable
Account, whether or not we previously made a provision for taxes and whether or
not it was sufficient. Our status under the Internal Revenue Code is briefly
described in the Statement of Additional Information.
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OTHER EXPENSES
Each Portfolio deducts advisory fees and other expenses from its assets. You
indirectly bear the charges and expenses of the Portfolios whose shares are held
by the Variable Sub-Accounts. These fees and expenses are described in the
accompanying prospectuses for the Funds. For a summary of current estimates of
those charges and expenses, see page 8 above. We may receive compensation from
the investment advisers or administrators of the Portfolios in connection with
the administrative services we provide to the Portfolios.
ACCESS TO YOUR MONEY
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You can withdraw some or all of your Contract Value at any time prior to the
Payout Start Date. The amount payable upon withdrawal is the Contract Value or a
portion therefore, next computed after we receive the request for a withdrawal
at our headquarters, adjusted by any Market Value Adjustment, less any
withdrawal charges, contract maintenance charges, income tax withholding,
penalty tax, and any premium taxes. We will pay withdrawals from the Variable
Account within 7 days of receipt of the request, subject to postponement in
certain circumstances.
You can withdraw money from the Variable Account or the Fixed Account Options.
To complete a partial withdrawal from the Variable Account, we will cancel
Accumulation Units in an amount equal to the withdrawal and any applicable
withdrawal charge and premium taxes.
You must name the investment alternative from which you are taking the
withdrawal. If none is named, then the withdrawal request is incomplete and
cannot be honored.
In general, you must withdraw at least $50 at a time. You also may withdraw a
lesser amount if you are withdrawing your entire interest in a Variable Sub-
Account.
If you request a total withdrawal, we may require you to return your Contract to
us.
POSTPONEMENT OF PAYMENTS
We may postpone the payment of any amounts due from the Variable Account under
the Contract if:
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 SEC; or
3. The SEC permits delay for your protection.
In addition, we may delay payments or transfers from the Fixed Account Options
for up to 6 months (or shorter period if required by law). If we delay payment
for 30 days or more, we will pay interest as required by law.
SYSTEMATIC WITHDRAWAL PROGRAM
You may choose to receive systematic withdrawal payments on a monthly,
quarterly, semi-annual, or annual basis at any time prior to the Payout Start
Date. The minimum amount of each systematic withdrawal is $50. At our
discretion, systematic withdrawals may not be offered in conjunction with the
Dollar Cost Averaging Program or Automatic Portfolio Rebalancing Program.
Depending on fluctuations in the value of the Variable Sub-Accounts and the
value of the Fixed Account Options, systematic withdrawals may reduce or even
exhaust the Contract Value. Income taxes may apply to systematic withdrawals.
Please consult your tax advisor before taking any withdrawal.
We will make systematic withdrawal payments to you or your designated payee. At
our discretion, we may modify or suspend the Systematic Withdrawal Program and
charge a processing fee for the service. If we modify or suspend the Systematic
Withdrawal Program, existing systematic withdrawal payments will not be
affected.
MINIMUM CONTRACT VALUE
If your request for a partial withdrawal will reduce your Contract Value to less
than $2,000, we may treat it as a request to withdraw your entire Contract
Value. Your Contract will terminate if you withdraw all of your Contract Value.
We will, however, ask you to confirm your withdrawal request before terminating
your Contract. If we terminate your Contract, we will distribute to you its
Contract Value, adjusted by any applicable Market Value Adjustment, less
withdrawal and other charges and taxes.
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INCOME PAYMENTS
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PAYOUT START DATE
You select the Payout Start Date in your application. The Payout Start Date is
the day that we apply your money to an Income Plan. The Payout Start Date must
be:
- at least 30 days after the Issue Date; and
- no later than the day the Annuitant reaches age 90, or the 10th Contract
Anniversary, if later.
You may change the Payout Start Date at any time by notifying us in writing of
the change at least 30 days before the scheduled Payout Start Date. Absent a
change, we will use the Payout Start Date stated in your Contract.
INCOME PLANS
An Income Plan is a series of scheduled payments to you or someone you
designate. You may choose and change your choice of Income Plan until 30 days
before the Payout Start Date. If you do not select an Income Plan, we will make
income payments in accordance with Income Plan 1 with guaranteed payments for 10
years.
Three Income Plans are available under the Contract. Each is available to
provide:
- fixed income payments;
- variable income payments; or
- a combination of the two.
The three Income Plans are:
INCOME PLAN 1 -- LIFE INCOME WITH GUARANTEED PAYMENTS. Under this plan, we make
periodic income payments for at least as long as the Annuitant lives. If the
Annuitant dies before we have made all of the guaranteed income payments, we
will continue to pay the remainder of the guaranteed income payments as required
by the Contract.
INCOME PLAN 2 -- JOINT AND SURVIVOR LIFE INCOME WITH GUARANTEED PAYMENTS. Under
this plan, we make periodic income payments for at least as long as either the
Annuitant or the joint Annuitant is alive. If both the Annuitant and the joint
Annuitant die before we have made all of the guaranteed income payments, we will
continue to pay the remainder of the guaranteed income payments as required by
the Contract.
INCOME PLAN 3 -- GUARANTEED PAYMENTS FOR A SPECIFIED PERIOD (5 YEARS TO 30
YEARS). Under this plan, we make periodic income payments for the period you
have chosen. These payments do not depend on the Annuitant's life. You may elect
to receive guaranteed payments for periods ranging from 5 to 30 years. We will
deduct the mortality and expense risk charge from the Variable Sub-Account
assets that support variable income payments even though we may not bear any
mortality risk.
The length of any guaranteed payment period under your selected Income Plan
generally will affect the dollar amounts of each income payment. As a general
rule, longer guarantee periods result in lower income payments, all other things
being equal. For example, if you choose an Income Plan with payments that depend
on the life of the Annuitant but with no minimum specified period for guaranteed
payments, the income payments generally will be greater than the income payments
made under the same Income Plan with a minimum specified period for guaranteed
payments.
If you choose Income Plan 1 or 2, or, if available, another Income Plan with
payments that continue for the life of the Annuitant or joint Annuitant, we may
require proof of age and sex of the Annuitant or joint Annuitant before starting
income payments, and proof that the Annuitant or joint Annuitant are alive
before we make each payment. Please note that under such Income Plans, if you
elect to take no minimum guaranteed payments, it is possible that the payee
could receive only 1 income payment if the Annuitant and any joint Annuitant
both die before the second income payment, or only 2 income payments if they die
before the third income payment, and so on.
Generally, you may not make withdrawals after the Payout Start Date. One
exception to this rule applies if you are receiving variable income payments
that do not depend on the life of the Annuitant (such as under Income Plan 3).
In that case you may terminate all or part of the Variable Account portion of
the income payments at any time and receive a lump sum equal to the present
value of the remaining variable payments associated with the amount withdrawn.
The minimum amount you may withdraw under this feature is $1,000. A withdrawal
charge may apply.
We also deduct applicable premium taxes from the Contract Value at the Payout
Start Date.
We may make other Income Plans available.
You must apply at least the Contract Value in the Fixed Account on the Payout
Start Date to fixed income payments. If you wish to apply any portion of your
Fixed Account balance to provide variable income payments, you should plan ahead
and transfer that amount to the Variable Sub-Accounts prior to the Payout Start
Date. If you do not tell us how to allocate your Contract Value among fixed and
variable income payments, we will apply your Contract Value in the
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Variable Account to variable income payments and your Contract Value in the
Fixed Account to fixed income payments.
We will apply your Contract Value, adjusted by any Market Value Adjustment, less
applicable taxes to your Income Plan on the Payout Start Date. If the amount
available to apply under an Income Plan is less than $2,000, or not enough to
provide an initial payment of at least $20, and state law permits, we may:
- pay you the Contract Value, adjusted by any applicable Market Value Adjustment
and less any applicable taxes, in a lump sum instead of the periodic payments
you have chosen; or
- reduce the frequency of your payments so that each payment will be at least
$20.
VARIABLE INCOME PAYMENTS
The amount of your variable income payments depends upon the investment results
of the Variable Sub-Accounts you select, the premium taxes you pay, the age and
sex of the Annuitant, and the Income Plan you choose. We guarantee that the
payments will not be affected by (a) actual mortality experience and (b) the
amount of our administration expenses.
We cannot predict the total amount of your variable income payments. Your
variable income payments may be more or less than your total purchase payments
because (a) variable income payments vary with the investment results of the
underlying Portfolios; and (b) the Annuitant could live longer or shorter than
we expect based on the tables we use.
In calculating the amount of the periodic payments in the annuity tables in the
Contract, we assumed an annual investment rate of 3%. If the actual net
investment return of the Variable Sub-Accounts you choose is less than this
assumed investment rate, then the dollar amount of your variable income payments
will decrease. The dollar amount of your variable income payments will increase,
however, if the actual net investment return exceeds the assumed investment
rate. The dollar amount of the variable income payments stays level if the net
investment return equals the assumed investment rate. Please refer to the
Statement of Additional Information for more detailed information as to how we
determine variable income payments.
FIXED INCOME PAYMENTS
We guarantee income payment amounts derived from any Fixed Account Option for
the duration of the Income Plan. We calculate the fixed income payments by:
1. adjusting the portion of the Contract Value in any Fixed Account Option on
the Payout Start Date by any applicable Market Value Adjustment;
2. deducting any applicable premium tax; and
3. applying the resulting amount to the greater of (a) the appropriate value
from the income payment table in your Contract or (b) such other value as we are
offering at that time.
We may defer making fixed income payments for a period of up to 6 months or any
shorter time state law may require. If we defer payments for 30 days or more, we
will pay interest as required by law from the date we receive the withdrawal
request to the date we make payment.
CERTAIN EMPLOYEE BENEFIT PLANS
The Contracts offered by this prospectus contain income payment tables that
provide for different payments to men and women of the same age, except in
states that require unisex tables. We reserve the right to use income payment
tables that do not distinguish on the basis of sex to the extent permitted by
applicable law. In certain employment related situations, employers are required
by law to use the same income payment tables for men and women. Accordingly, if
the Contract is to be used in connection with an employment-related retirement
or benefit plan and we do not offer unisex annuity tables in your state, you
should consult with legal counsel as to whether the purchase of a Contract is
appropriate.
DEATH BENEFITS
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We will pay a death benefit prior to the Payout Start Date on:
1. the death of any Contract owner or,
2. the death of the Annuitant, if the Contract is owned by a non-natural person.
We will pay the death benefit to the new Contract owner as determined
immediately after the death. The
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new Contract owner would be a surviving Contract owner or, if none, the
Beneficiaries. In the case of the death of the Annuitant, we will pay the death
benefit to the current Contract owner.
A claim for a distribution on death must include DUE PROOF OF DEATH. We will
accept the following documentation as "Due Proof of Death":
- a certified copy of a death certificate,
- a certified copy of a decree of a court of competent jurisdiction as to the
funding of death, or
- any other proof acceptable to us.
DEATH BENEFIT AMOUNT
Prior to the Payout Start Date, the death benefit is equal to the greatest of:
1. the Contract Value as of the date we determine the value of the death
benefit, or
2. the SETTLEMENT VALUE (that is, the amount payable on a full withdrawal of
Contract Value) on the date we determine the value of the death benefit, or
3. the Contract Value on each DEATH BENEFIT ANNIVERSARY prior to the date we
determine the death benefit, increased by purchase payments made since that
Death Benefit Anniversary and reduced by an adjustment for any partial
withdrawals since that Death Benefit Anniversary. 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 3
Death Benefit Anniversaries.
The withdrawal adjustment is equal to (a) divided by (b), with the result
multiplied by (c), where:
(a) is the withdrawal amount;
(b) is the Contract Value immediately prior to the withdrawal; and
(c) is the Contract value on the Death Benefit Anniversary adjusted by any
prior purchase payments or withdrawals made since that Anniversary.
We will determine the value of the death benefit as of the end of the Valuation
Date on which we receive a complete request for payment of the death benefit. If
we receive a request after 3 p.m. Central Time on a Valuation Date, we will
process the request as of the end of the following Valuation Date.
ENHANCED DEATH BENEFIT RIDER
For Contracts with the Enhanced Death Benefit Rider, the death benefit will be
the greatest of (1) through (3) above, or (4) the value of the Enhanced Death
Benefit Rider, which is the greatest of the ANNIVERSARY VALUES as of the date we
determine the death benefit. An "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. The adjustment is equal to (a) divided by (b), and the result
multiplied by (c) where:
(a) is the withdrawal amount,
(b) is the Contract Value immediately prior to the withdrawal, and
(c) is the Contract Value on that Contract Anniversary adjusted by any prior
purchase payments and withdrawals since that Contract Anniversary.
We will calculate Anniversary Values for each Contract Anniversary prior to the
oldest Contract owner's or the Annuitant's, if the Contract owner is not a
natural person, 80th birthday. The Enhanced Death Benefit Rider will never be
greater than the maximum death benefit allowed by any state non-forfeiture laws
that govern the Contract.
DEATH BENEFIT PAYMENTS
A death benefit will be paid:
1. if the Contract owner elects to receive the death benefit distributed in a
single payment 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. We are currently
waiving the 180 day limit, but we reserve the right to enforce the limitation in
the future.
In any event, the entire value of the Contract must be distributed within 5
years after the date of death unless an Income Plan is elected or a surviving
spouse continues the Contract in accordance with the provisions described below.
If the Contract owner eligible to receive the distribution upon death is not a
natural person, the Contract owner may elect to receive the distribution upon
death in one or more distributions.
If the Contract owner is a natural person, the Contract owner may elect to
receive the distribution upon death either in one or more distributions or by
periodic payments through an Income Plan. Payments from the Income Plan must
begin within one year of the date of death and must be payable throughout:
- the life of the Contract owner; or
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- a period not to exceed the life expectancy of the Contract owner; or
- the life of the Contract owner with payments guaranteed to a period not to
exceed the life expectancy of the Contract owner.
If the surviving spouse of the deceased Contract owner is the new Contract
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. 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.
MORE INFORMATION
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GLENBROOK
Glenbrook is the issuer of the Contract. Glenbrook is a stock life insurance
company organized under the laws of the State of Arizona in 1998. Previously,
Glenbrook was organized under the laws of the State of Illinois in 1992.
Glenbrook was originally organized under the laws of the State of Indiana in
1965. From 1965 to 1983 Glenbrook was known as "United Standard Life Assurance
Company" and from 1983 to 1992 as "William Penn Life Assurance Company of
America."
Glenbrook is currently licensed to operate in the District of Columbia and all
states except New York. We intend to offer the Contract in those jurisdictions
in which we are licensed. Our home office is located at 3100 Sanders Road,
Northbrook, Illinois, 60062.
Glenbrook 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, a stock property-liability insurance company incorporated
under the laws of Illinois. All of the outstanding capital stock of Allstate
Insurance Company is owned by The Allstate Corporation.
Glenbrook and Allstate Life entered into a reinsurance agreement effective
June 5, 1992. Under the reinsurance agreement, Allstate Life reinsures
substantially all of Glenbrook's liabilities under its various insurance
contracts. The reinsurance agreement provides us with financial backing from
Allstate Life. However, it does not create a direct contractual relationship
between Allstate Life and you. In other words, the obligations of Allstate Life
under the reinsurance agreement are to Glenbrook; Glenbrook remains the sole
obligor under the Contract to you.
Several independent rating agencies regularly evaluate life insurers'
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 Glenbrook. A.M. Best Company also assigns Glenbrook the rating
of A+-Registered Trademark-because Glenbrook automatically reinsures all net
business with Allstate Life. Standard & Poor's Insurance Rating Services assigns
an AA+ (Very Strong) financial strength rating and Moody's assigns an Aa2
(Excellent) financial strength rating to Glenbrook. Glenbrook shares the same
ratings of its parent, Allstate Life. These ratings do not reflect the
investment performance of the Variable Account. We may from time to time
advertise these ratings in our sales literature.
THE VARIABLE ACCOUNT
Glenbrook established the Glenbrook Life Multi-Manager Variable Account on
January 15, 1996. We have registered the Variable Account with the SEC as a unit
investment trust. The SEC does not supervise the management of the Variable
Account or Glenbrook.
We own the assets of the Variable Account. The Variable Account is a segregated
asset account under Arizona law. That means we account for the Variable
Account's income, gains and losses separately from the results of our other
operations. It also means that only the assets of the Variable Account that are
in excess of the reserves and other Contract liabilities with respect to the
Variable Account are subject to liabilities relating to our other operations.
Our obligations arising under the Contracts are general corporate obligations of
Glenbrook.
The Variable Account consists of multiple Variable Sub-Accounts, Each Variable
Sub-Account invests in a corresponding Portfolio. We may add new Variable
Sub-Accounts or eliminate one or more of them, if we believe marketing, tax, or
investment conditions so
27 - PROSPECTUS
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warrant. We may also add other Variable Sub-Accounts that may be available under
other variable annuity contracts. We do not guarantee the investment performance
of the Variable Account, its Sub-Accounts or the Portfolios. We may use the
Variable Account to fund our other annuity contracts. We will account separately
for each type of annuity contract funded by the Variable Account.
THE PORTFOLIOS
DIVIDENDS AND CAPITAL GAIN DISTRIBUTIONS. We automatically reinvest all
dividends and capital gains distributions from the Portfolios in shares of the
distributing Portfolio at their net asset value.
VOTING PRIVILEGES. As a general matter, you do not have a direct right to vote
the shares of the Portfolios held by the Variable Sub-Accounts to which you have
allocated your Contract Value. Under current law, however, you are entitled to
give us instructions on how to vote those shares on certain matters. Based on
our present view of the law, we will vote the shares of the Portfolios that we
hold directly or indirectly through the Variable Account in accordance with
instructions that we receive from Contract owners entitled to give such
instructions.
As a general rule, before the Payout Start Date, the Contract owner or anyone
with a voting interest is the person entitled to give voting instructions. The
number of shares that a person has a right to instruct will be determined by
dividing the Contract Value allocated to the applicable Variable Sub-Account by
the net asset value per share of the corresponding Portfolio as of the record
date of the meeting. After the Payout Start Date the person receiving income
payments has the voting interest. The payee's number of votes will be determined
by dividing the reserve for such Contract allocated to the applicable Variable
Sub-Account by the net asset value per share of the corresponding Portfolio. The
votes decrease as income payments are made and as the reserves for the Contract
decrease.
We will vote shares attributable to Contracts for which we have not received
instructions, as well as shares attributable to us, in the same proportion as we
vote shares for which we have received instructions, unless we determine that we
may vote such shares in our own discretion. We will apply voting instructions to
abstain on any item to be voted upon on a pro-rata basis to reduce the votes
eligible to be cast.
We reserve the right to vote Portfolio shares as we see fit without regard to
voting instructions to the extent permitted by law. If we disregard voting
instructions, we will include a summary of that action and our reasons for that
action in the next semi-annual financial report we send to you.
CHANGES IN PORTFOLIOS. If the shares of any of the Portfolios are no longer
available for investment by the Variable Account or if, in our judgment, further
investment in such shares is no longer desirable in view of the purposes of the
Contract, we may eliminate that Portfolio and substitute shares of another
eligible investment fund. Any substitution of securities will comply with the
requirements of the Investment Company Act. We also may add new Variable
Sub-Accounts that invest in additional mutual funds. We will notify you in
advance of any change.
CONFLICTS OF INTEREST. Certain of the Portfolios sell their shares to separate
accounts underlying both variable life insurance and variable annuity contracts.
It is conceivable that in the future it may be unfavorable for variable life
insurance separate accounts and variable annuity separate accounts to invest in
the same Portfolio. The boards of directors of these Portfolios monitor for
possible conflicts among separate accounts buying shares of the Portfolios.
Conflicts could develop for a variety of reasons. For example, differences in
treatment under tax and other laws or the failure by a separate account to
comply with such laws could cause a conflict. To eliminate a conflict, a
Portfolio's board of directors may require a separate account to withdraw its
participation in a Portfolio. A Portfolio's net asset value could decrease if it
had to sell investment securities to pay redemption proceeds to a separate
account withdrawing because of a conflict.
THE CONTRACT
DISTRIBUTION. ALFS, Inc.*, located at 3100 Sanders Road, Northbrook, IL
60062-7154, serves as principal underwriter and distributor of the Contracts.
ALFS is a wholly owned subsidiary of Allstate Life Insurance Company. ALFS is a
registered broker dealer under the Securities and Exchange Act of 1934, as
amended ("EXCHANGE ACT"), and is a member of the National Association of
Securities Dealers, Inc.
We will pay commissions to broker-dealers who sell the contracts. Commissions
paid may vary, but we estimate that the total commissions paid on all Contract
sales will not exceed 8% of all purchase payments. These commissions are
intended to cover distribution expenses. Sometimes, we also pay the
broker-dealer a persistency bonus in addition to the standard commissions. A
persistency bonus is not expected to exceed
*Effective May 1, 2000, Allstate Life Financial Services, Inc. was renamed
ALFS, Inc.
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0.25%, on an annual basis, of the Contract Values considered in connection with
the bonus. 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.
Glenbrook does not pay ALFS a commission for distribution of the Contracts. The
underwriting agreement with ALFS provides that we will reimburse ALFS for any
liability to Contract owners arising out of services rendered or Contracts
issued.
ADMINISTRATION. We have primary responsibility for all administration of the
Contracts and the Variable Account. We provide the following administrative
services, among others:
- issuance of the Contracts;
- maintenance of Contract owner records;
- Contract owner services;
- calculation of unit values;
- maintenance of the Variable Account; and
- preparation of Contract owner reports.
We will send you Contract statements and transaction confirmations at least
annually. You should notify us promptly in writing of any address change. You
should read your statements and confirmations carefully and verify their
accuracy. You should contact us promptly if you have a question about a periodic
statement. We will investigate all complaints and make any necessary adjustments
retroactively, but you must notify us of a potential error within a reasonable
time after the date of the questioned statement. If you wait too long, we
reserve the right to make the adjustment as of the date that we receive notice
of the potential error.
We also will provide you with additional periodic and other reports, information
and prospectuses as may be required by federal securities laws.
QUALIFIED PLANS
If you use the Contract with a qualified plan, the plan may impose different or
additional conditions or limitations on withdrawals, waivers of withdrawal
charges, death benefits, Payout Start Dates, income payments, and other Contract
features. In addition, adverse tax consequences may result if qualified plan
limits on distributions and other conditions are not met. Please consult your
qualified plan administrator for more information.
LEGAL MATTERS
Freedman, Levy, Kroll & Simonds, Washington, D.C., has advised Glenbrook on
certain federal securities law matters. All matters of state insurance law
pertaining to the Contracts, including the validity of the Contracts and
Glenbrook's right to issue such Contracts under state insurance law, have been
passed upon by Michael J. Velotta, General Counsel of Glenbrook.
YEAR 2000
Glenbrook is heavily dependent upon complex computer systems for all phases of
its operations, including customer service, and policy and contract
administration. Since many of Glenbrook's older computer software programs
recognize only the last two digits of the year in any date, some software may
have failed to operate properly in or after the year 1999, if the software was
not reprogrammed or replaced ("YEAR 2000 ISSUE"). Glenbrook believes that many
of its counterparties and suppliers also had potential Year 2000 Issues which
could affect Glenbrook. In 1995, Allstate Insurance Company commenced a four
phase plan intended to mitigate and/or prevent the adverse effects of Year 2000
Issues. These strategies included 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 included Glenbrook actively working with its major
external counterparties and suppliers to assess their compliance efforts and
Glenbrook's exposure to them. Because of the accuracy of this plan, and its
timely completion, Glenbrook has experienced no material impacts on its results
of operations, liquidity or financial position due to the Year 2000 issue. Year
2000 costs are expensed as incurred.
29 - PROSPECTUS
<PAGE>
TAXES
-------------------------------------------------------------------
THE FOLLOWING DISCUSSION IS GENERAL AND IS NOT INTENDED AS TAX ADVICE. GLENBROOK
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 your individual circumstances.
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, you are not taxed on increases in the Contract Value
until a distribution occurs. This rule applies only where:
1. the Contract owner is a natural person,
2. the investments of the Variable Account are "adequately diversified"
according to Treasury Department regulations, and
3. Glenbrook is considered the owner of the Variable Account assets for federal
income tax purposes.
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. The income on such contracts
is taxed as ordinary income received or accrued by the owner during the taxable
year. Please see the Statement of Additional Information for a discussion of
several exceptions to the general rule for Contracts owned by non-natural
persons.
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" consistent with standards under Treasury Department
regulations. If the investments in the Variable Account are not adequately
diversified, the Contract will not be treated as an annuity contract for federal
income tax purposes. As a result, the income on the Contract will be taxed as
ordinary income received or accrued by the Contract owner during the taxable
year. Although Glenbrook does not have control over the Portfolios or their
investments, we expect the Portfolios to meet the diversification requirements.
OWNERSHIP TREATMENT. The IRS has stated that you will be considered the owner of
Variable Account assets if you possess 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, the Treasury Department announced
that the regulations do not provide guidance concerning circumstances in which
investor control of separate account investments may cause an investor to be
treated as the owner of the separate account. The Treasury Department also
stated that future guidance would be issued regarding the extent that owners
could direct sub-account investments without being treated as owners of the
underlying assets of the separate account.
Your rights under the Contract are different than those described by the IRS in
rulings in which it found that contract owners were not owners of separate
account assets. For example, you have the choice to allocate premiums and
Contract Values among more investment alternatives. Also, you may be able to
transfer among investment alternatives more frequently than in such rulings.
These differences could result in you being treated as the owner of the Variable
Account. If this occurs, income and gain from the Variable Account assets would
be includible in your gross income. Glenbrook does not know what standards will
be set forth in any regulations or rulings which the Treasury Department may
issue. It is possible that future standards announced by the Treasury Department
could adversely affect the tax treatment of your Contract. We reserve the right
to modify the Contract as necessary to attempt to prevent you from being
considered the federal tax owner of the assets of the Variable Account. However,
we make no guarantee that such modification to the Contract will be successful.
TAXATION OF PARTIAL AND FULL WITHDRAWALS. If you make a partial withdrawal under
a non-Qualified Contract, amounts received are taxable to the extent the
Contract Value, without regard to surrender charges, exceeds the investment in
the Contract. The investment in the Contract is the gross premium paid for the
Contract minus any amounts previously received from the Contract if such amounts
were properly excluded from your gross income. If you make 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, is excluded from your income. If you make 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.
"Non-qualified distributions" from Roth IRAs are treated as made from
contributions first and are included in gross income only to the extent that
distributions exceed contributions. "Qualified distributions" from Roth IRAs are
not included in gross income. "Qualified distributions" are any distributions
made more than 5 taxable years after the taxable year
30 - PROSPECTUS
<PAGE>
of the first contribution to any Roth IRA and which are:
- made on or after the date the individual attains age 59 1/2,
- made to a beneficiary after the Contract owner's death,
- attributable to the Contract owner being disabled, or
- for a first time home purchase (first time home purchases are subject to a
lifetime limit of $10,000).
If you transfer a non-Qualified Contract without full and adequate consideration
to a person other than your spouse (or to a former spouse incident to a
divorce), you will be taxed on the difference between the Contract Value and the
investment in the Contract at the time of transfer. Except for certain Qualified
Contracts, any amount you receive 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.
TAXATION OF ANNUITY PAYMENTS. Generally, the rule for income taxation of annuity
payments received from a non-Qualified Contract provides for the return of your
investment in the Contract in equal tax-free amounts over the payment period.
The balance of each payment received is taxable. For 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. If you elect 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. The annuity payments will be fully taxable
after the total amount of the investment in the Contract is excluded using these
ratios. If you die, and annuity payments cease before the total amount of the
investment in the Contract is recovered, the unrecovered amount will be allowed
as a deduction for your last taxable year.
TAXATION OF ANNUITY DEATH BENEFITS. Death of a Contract owner, or death of the
Annuitant if the Contract is owned by a non-natural person, will cause a
distribution of death benefits from a Contract. Generally, such amounts are
included 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. Please see the Statement of Additional Information
for more detail on distribution at death requirements.
PENALTY TAX ON PREMATURE DISTRIBUTIONS. A 10% penalty tax applies to the taxable
amount of any premature distribution from a non-Qualified Contract. The penalty
tax generally applies to any distribution made prior to the date you attain age
59 1/2. However, no penalty tax is incurred on distributions:
1. made on or after the date the Contract owner attains age 59 1/2;
2. made as a result of the Contract owner's death or disability;
3. made in substantially equal periodic payments over the Contract owner's life
or life expectancy;
4. made under an immediate annuity; or
5. attributable to investment in the Contract before August 14, 1982.
You should consult a competent tax advisor to determine if any other exceptions
to the penalty apply to your situation. Similar exceptions may apply to
distributions from Qualified Contracts.
AGGREGATION OF ANNUITY CONTRACTS. All non-qualified deferred annuity contracts
issued by Glenbrook (or its affiliates) to the same Contract 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
Contracts may be used as investments with certain qualified plans such as:
- Individual Retirement Annuities or Accounts (IRAs) under Section 408 of the
Code;
- Roth IRAs under Section 408A of the Code;
- Simplified Employee Pension Plans under Section 408(k) of the Code;
- Savings Incentive Match Plans for Employees (SIMPLE) Plans under Section
408(p) of the Code;
- Tax Sheltered Annuities under Section 403(b) of the Code;
- Corporate and Self Employed Pension and Profit Sharing Plans; and
- State and Local Government and Tax-Exempt Organization Deferred Compensation
Plans.
The income on qualified plan and IRA investments is tax deferred and variable
annuities held by such plans do not receive any additional tax deferral. You
should
31 - PROSPECTUS
<PAGE>
review the annuity features, including all benefits and expenses, prior to
purchasing a variable annuity in a qualified plan or IRA. Glenbrook reserves the
right to limit the availability of the Contract for use with any of the
Qualified Plans listed below.
In the case of certain 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 Tax Code provides
tax-deferred retirement savings plans for employees of certain non-profit and
educational organizations. Under Section 403(b), any 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:
1. on or after the date the employee
- attains age 59 1/2,
- separates from service,
- dies,
- becomes disabled, or
2. 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 Glenbrook is directed to
transfer some or all of the Contract Value to another 403(b) plan.
INCOME TAX WITHHOLDING
Glenbrook is required to withhold federal income tax at a rate of 20% on all
"eligible rollover distributions" unless you elect to make a "direct rollover"
of such amounts to an IRA or eligible retirement plan. 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, over the life (joint lives) of the participant (and
beneficiary).
Glenbrook may be required to withhold federal and state income taxes on any
distributions from non-Qualified Contracts or Qualified Contracts that are not
eligible rollover distributions, unless you notify us of your election to not
have taxes withheld.
32 - PROSPECTUS
<PAGE>
ANNUAL REPORTS AND OTHER DOCUMENTS
-------------------------------------------------------------------
Glenbrook's annual report on Form 10-K for the year ended December 31, 1999 is
incorporated herein by reference, which means that it is legally a part of this
prospectus.
After the date of this prospectus and before we terminate the offering of the
securities under this prospectus, all documents or reports we file with the SEC
under the Exchange Act of 1934 are also incorporated herein by reference, which
means that they also legally become a part of this prospectus.
Statements in this prospectus, or in documents that we file later with the SEC
and that legally become a part of this prospectus, may change or supersede
statements in other documents that are legally part of this prospectus.
Accordingly, only the statement that is changed or replaced will legally be a
part of this prospectus.
We file our Exchange Act documents and reports, including our annual and
quarterly reports on Form 10-K and Form 10-Q electronically on the SEC's "EDGAR"
system using the identifying number CIK No. 0001007285. The SEC maintains a Web
site that contains reports, proxy and information statements and other
information regarding registrants that file electronically with the SEC. The
address of the site is http:/ /www.sec.gov. You also can view these materials at
the SEC's Public Reference Room at 450 Fifth Street, N.W., Washington, D.C.
20549. For more information on the operations of SEC's Public Reference Room,
call 1-800-SEC-0330.
If you have received a copy of this prospectus, and would like a free copy of
any document incorporated herein by reference (other than exhibits not
specifically incorporated by reference into the text of such documents), please
write or call us at P.O. Box 94042, Palatine, IL 60094 (telephone:
1-800-755-5275).
EXPERTS
The financial statements and the related financial statement schedule
incorporated in this prospectus by reference from Glenbrook's Annual Report on
Form 10-K for the year ended December 31, 1999, have been audited by Deloitte &
Touche LLP, independent auditor, as stated in their report, which is
incorporated herein by reference, and have been so incorporated in reliance upon
the report of such firm given upon their authority as experts in accounting and
auditing.
33 - PROSPECTUS
<PAGE>
PERFORMANCE INFORMATION
-------------------------------------------------------------------
We may advertise the performance of the Variable Sub-Accounts, including yield
and total return information. Total return represents the change, over a
specified period of time, in the value of an investment in a Variable
Sub-Account after reinvesting all income distributions. Yield refers to the
income generated by an investment in a Variable Sub-Account over a specified
period.
All performance advertisements will include, as applicable, standardized yield
and total return figures that reflect the deduction of insurance charges, the
contract maintenance charge, and withdrawal charge. Performance advertisements
also may include total return figures that reflect the deduction of insurance
charges, but not the contract maintenance or withdrawal charges. The deduction
of such charges would reduce the performance shown. In addition, performance
advertisements may include aggregate average, year-by-year, or other types of
total return figures.
Performance information for periods prior to the inception date of the Variable
Sub-Accounts will be based on the historical performance of the corresponding
Portfolios for the periods beginning with the inception dates of the Portfolios
and adjusted to reflect current Contract expenses. You should not interpret
these figures to reflect actual historical performance of the Variable Account.
We may include in advertising and sales materials tax deferred compounding
charts and other hypothetical illustrations that compare currently taxable and
tax deferred investment programs based on selected tax brackets. Our
advertisements also may compare the performance of our Variable Sub-Accounts
with: (a) certain unmanaged market indices, including but not limited to the Dow
Jones Industrial Average, the Standard & Poor's 500, and the Shearson Lehman
Bond Index; and/or (b) other management investment companies with investment
objectives similar to the underlying funds being compared. In addition, our
advertisements may include the performance ranking assigned by various
publications, including the Wall Street Journal, Forbes, Fortune, Money,
Barron's, Business Week, USA Today, and statistical services, including Lipper
Analytical Services Mutual Fund Survey, Lipper Annuity and Closed End Survey,
the Variable Annuity Research Data Survey, and SEI.
34 - PROSPECTUS
<PAGE>
APPENDIX A
-------------------------------------------------------------------
ACCUMULATION UNIT VALUE AND NUMBER
OF ACCUMULATION UNITS OUTSTANDING FOR
EACH VARIABLE SUB-ACCOUNT SINCE CONTRACTS WERE FIRST OFFERED
BASIC POLICY
<TABLE>
<CAPTION>
FOR THE YEARS
BEGINNING
JANUARY 1** AND
ENDING DECEMBER 31
-------------------
1998 1999
-------- --------
<S> <C> <C>
AIM V.I. CAPITAL APPRECIATION SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period.............. $10.000 $30.700
Accumulation Unit Value, End of Period.................... $30.700 $17.628
Number of Units Outstanding, End of Period................ 6,547 7,877
AIM V.I. DIVERSIFIED INCOME SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period.............. $10.000 $10.131
Accumulation Unit Value, End of Period.................... $10.131 $9.802
Number of Units Outstanding, End of Period................ 9,663 13,500
AIM V.I. GLOBAL UTILITIES SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period.............. $10.000 $11.444
Accumulation Unit Value, End of Period.................... $11.444 $15.079
Number of Units Outstanding, End of Period................ 0 0
AIM V.I. GOVERNMENT SECURITIES SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period.............. $10.000 $10.868
Accumulation Unit Value, End of Period.................... $10.868 $10.290
Number of Units Outstanding, End of Period................ 692 719
AIM V.I. GROWTH SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period.............. $10.000 $13.490
Accumulation Unit Value, End of Period.................... $13.490 $17.998
Number of Units Outstanding, End of Period................ 15,902 14,265
AIM V.I. GROWTH AND INCOME SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period.............. $10.000 $12.897
Accumulation Unit Value, End of Period.................... $12.897 $17.081
Number of Units Outstanding, End of Period................ 52,358 21,097
AIM V.I. INTERNATIONAL EQUITY SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period.............. $10.000 $11.445
Accumulation Unit Value, End of Period.................... $11.445 $17.507
Number of Units Outstanding, End of Period................ 1,491 1,207
AIM V.I. VALUE SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period.............. $10.000 $13.299
Accumulation Unit Value, End of Period.................... $13.299 $17.043
Number of Units Outstanding, End of Period................ 34,858 34,854
AMERICAN CENTURY VP BALANCED SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period.............. $10.618 $12.134
Accumulation Unit Value, End of Period.................... $12.134 $13.175
Number of Units Outstanding, End of Period................ 9,621 9,793
AMERICAN CENTURY VP INTERNATIONAL SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period.............. $10.025 $11.752
Accumulation Unit Value, End of Period.................... $11.752 $19.020
Number of Units Outstanding, End of Period................ 344 371
DREYFUS SOCIALLY RESPONSIBLE GROWTH SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period.............. $10.813 $13.286
Accumulation Unit Value, End of Period.................... $13.286 $17.688
Number of Units Outstanding, End of Period................ 4,726 6,933
DREYFUS STOCK INDEX SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period.............. $10.000 $12.830
Accumulation Unit Value, End of Period.................... $12.830 $15.267
Number of Units Outstanding, End of Period................ 39,205 37,405
</TABLE>
A-1
<PAGE>
<TABLE>
<CAPTION>
FOR THE YEARS
BEGINNING
JANUARY 1** AND
ENDING DECEMBER 31
-------------------
1998 1999
-------- --------
<S> <C> <C>
DREYFUS VIF GROWTH AND INCOME SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period.............. $10.602 $11.674
Accumulation Unit Value, End of Period.................... $11.674 $13.636
Number of Units Outstanding, End of Period................ 15,709 13,729
DREYFUS VIF MONEY MARKET SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period.............. $10.198 $10.582
Accumulation Unit Value, End of Period.................... $10.582 $10.936
Number of Units Outstanding, End of Period................ 750 6,351
DREYFUS VIF SMALL COMPANY STOCK SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period.............. $11.161 $10.359
Accumulation Unit Value, End of Period.................... $10.359 $11.303
Number of Units Outstanding, End of Period................ 710 708
FIDELITY VIP CONTRAFUND SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period.............. $11.071 $14.205
Accumulation Unit Value, End of Period.................... $14.205 $17.414
Number of Units Outstanding, End of Period................ 9,350 10,442
FIDELITY VIP EQUITY-INCOME SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period.............. $10.000 $11.270
Accumulation Unit Value, End of Period.................... $11.270 $11.822
Number of Units Outstanding, End of Period................ 40,266 40,268
FIDELITY GROWTH SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period.............. $10.685 $14.713
Accumulation Unit Value, End of Period.................... $14.713 $19.950
Number of Units Outstanding, End of Period................ 6,361 7,516
FIDELITY VIP HIGH INCOME SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period.............. $10.779 $10.180
Accumulation Unit Value, End of Period.................... $10.180 $10.862
Number of Units Outstanding, End of Period................ 5,530 6,101
MFS EMERGING GROWTH SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period.............. $10.999 $14.566
Accumulation Unit Value, End of Period.................... $14.566 $25.395
Number of Units Outstanding, End of Period................ 4,972 6,246
MFS LIMITED MATURITY SUB-ACCOUNT***
Accumulation Unit Value, Beginning of Period.............. $10.269 $10.298
Accumulation Unit Value, End of Period.................... $10.298 $10.780
Number of Units Outstanding, End of Period................ 1,014 995
</TABLE>
A-2
<PAGE>
ACCUMULATION UNIT VALUES AND NUMBER
OF ACCUMULATION UNITS OUTSTANDING FOR
EACH VARIABLE SUB-ACCOUNT SINCE CONTRACTS WERE FIRST OFFERED
BASIC POLICY PLUS ENHANCED DEATH BENEFIT RIDER
<TABLE>
<CAPTION>
FOR THE YEARS
BEGINNING JANUARY 1*
AND ENDING
DECEMBER 31
---------------------
1998 1999
--------- ---------
<S> <C> <C>
AIM V.I. CAPITAL APPRECIATION SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period.............. $10.000 $12.344
Accumulation Unit Value, End of Period.................... $12.344 $17.594
Number of Units Outstanding, End of Period................ 5,197 13,896
AIM V.I. DIVERSIFIED INCOME SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period.............. $10.000 $10.121
Accumulation Unit Value, End of Period.................... $10.121 $9.784
Number of Units Outstanding, End of Period................ 8,931 7,601
AIM V.I. GLOBAL UTILITIES SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period.............. $10.000 $11.433
Accumulation Unit Value, End of Period.................... $11.433 $15.050
Number of Units Outstanding, End of Period................ 0 1,584
AIM V.I. GOVERNMENT SECURITIES SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period.............. $10.000 $10.858
Accumulation Unit Value, End of Period.................... $10.858 $10.270
Number of Units Outstanding, End of Period................ 7,546 39,816
AIM V.I. GROWTH SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period.............. $10.000 $13.477
Accumulation Unit Value, End of Period.................... $13.477 $17.964
Number of Units Outstanding, End of Period................ 15,252 14,638
AIM V.I. GROWTH AND INCOME SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period.............. $10.000 $12.885
Accumulation Unit Value, End of Period.................... $12.885 $17.048
Number of Units Outstanding, End of Period................ 53,358 48,463
AIM V.I. INTERNATIONAL EQUITY SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period.............. $10.000 $11.434
Accumulation Unit Value, End of Period.................... $11.434 $17.474
Number of Units Outstanding, End of Period................ 5,403 4,967
AIM V.I. VALUE SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period.............. $10.000 $13.287
Accumulation Unit Value, End of Period.................... $13.287 $17.011
Number of Units Outstanding, End of Period................ 52,510 64,070
AMERICAN CENTURY VP BALANCED SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period.............. $10.618 $12.116
Accumulation Unit Value, End of Period.................... $12.116 $13.142
Number of Units Outstanding, End of Period................ 7,716 10,484
AMERICAN CENTURY VP INTERNATIONAL SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period.............. $10.025 $11.734
Accumulation Unit Value, End of Period.................... $11.734 $18.972
Number of Units Outstanding, End of Period................ 5,196 5,546
DREYFUS SOCIALLY RESPONSIBLE GROWTH SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period.............. $10.813 $13.265
Accumulation Unit Value, End of Period.................... $13.265 $17.643
Number of Units Outstanding, End of Period................ 4,373 3,528
</TABLE>
* The AIM Variable Sub-Accounts as well as, the Fidelity Equity Income, and
Dreyfus Stock Index Variable Sub-Accounts commenced operations on
January 26, 1998. The other Variable Sub-Accounts commenced operations on
June 17, 1997, but had no material operations for the year ended
December 31, 1997. The Accumulation Unit Values in this table reflect a
mortality and expense risk charge of 1.25% and an administrative expense
charge of 0.10%.
** Not available to new investors.
A-3
<PAGE>
<TABLE>
<CAPTION>
FOR THE YEARS
BEGINNING JANUARY 1*
AND ENDING
DECEMBER 31
---------------------
1998 1999
--------- ---------
<S> <C> <C>
DREYFUS STOCK INDEX SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period.............. $10.000 $12.819
Accumulation Unit Value, End of Period.................... $12.819 $15.237
Number of Units Outstanding, End of Period................ 86,935 80,779
DREYFUS VIF GROWTH AND INCOME SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period.............. $10.602 $11.656
Accumulation Unit Value, End of Period.................... $11.656 $13.601
Number of Units Outstanding, End of Period................ 18,031 18,597
DREYFUS VIF MONEY MARKET SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period.............. $10.198 $10.566
Accumulation Unit Value, End of Period.................... $10.566 $10.909
Number of Units Outstanding, End of Period................ 13,027 40,342
DREYFUS VIF SMALL COMPANY STOCK SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period.............. $11.161 $10.343
Accumulation Unit Value, End of Period.................... $10.343 $11.275
Number of Units Outstanding, End of Period................ 5,753 5,754
FIDELITY VIP CONTRAFUND SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period.............. $11.071 $14.184
Accumulation Unit Value, End of Period.................... $14.184 $17.370
Number of Units Outstanding, End of Period................ 11,838 14,873
FIDELITY VIP EQUITY-INCOME SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period.............. $10.000 $11.259
Accumulation Unit Value, End of Period.................... $11.259 $11.799
Number of Units Outstanding, End of Period................ 76,050 70,192
FIDELITY GROWTH SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period.............. $10.685 $14.691
Accumulation Unit Value, End of Period.................... $14.691 $19.899
Number of Units Outstanding, End of Period................ 8,947 11,241
FIDELITY VIP HIGH INCOME SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period.............. $10.779 $10.164
Accumulation Unit Value, End of Period.................... $10.164 $10.834
Number of Units Outstanding, End of Period................ 28,509 27,471
MFS EMERGING GROWTH SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period.............. $10.999 $14.544
Accumulation Unit Value, End of Period.................... $14.544 $25.331
Number of Units Outstanding, End of Period................ 6,085 10,929
MFS LIMITED MATURITY SUB-ACCOUNT***
Accumulation Unit Value, Beginning of Period.............. $10.269 $10.273
Accumulation Unit Value, End of Period.................... $10.273 $10.753
Number of Units Outstanding, End of Period................ 3,996 5,857
</TABLE>
* The Enhanced Death Benefit Rider has been available since the contracts were
first offered. The Accumulation Unit Values in this table reflect a
mortality and expense risk charge of 1.35% and an administrative expense
charge of 0.10%.
** The inception dates of the Variable Sub-Accounts are listed in the footnote
to the Accumulation Unit Value Table for the Basic Policy above.
*** Not available to new investors.
A-4
<PAGE>
APPENDIX B
MARKET VALUE ADJUSTMENT EXAMPLE
-------------------------------------------------------------------
The Market Value Adjustment is based on the following:
<TABLE>
<C> <C> <S>
I = the Treasury Rate for a maturity equal to the Guarantee
Period for the week preceding the establishment of the
Guarantee Period.
J = the Treasury Rate for a maturity equal to the Guarantee
Period for the week preceding the receipt of the withdrawal,
transfer, death benefit, or income payment request. If a
Note with a maturity of the original Guarantee Period is not
available, a weighted average will be used.
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 Guarantee
Period.
</TABLE>
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 X (I - J) X N
To determine the Market Value Adjustment, we will multiply the Market Value
Adjustment factor by the amount transferred, withdrawn (in excess of the Free
Withdrawal Amount), paid as a death benefit, or applied to an Income Plan, out
of a Guarantee Period at any time other than during the 30 day period after such
Guarantee Period expires.
EXAMPLES OF MARKET VALUE ADJUSTMENT
<TABLE>
<S> <C>
Purchase Payment: $10,000 allocated to a Guarantee Period
Guarantee Period: 5 years
Interest Rate: 4.50%
Full Withdrawal: End of Contract Year 3
</TABLE>
NOTE: These examples assume that premium taxes are not applicable.
EXAMPLE 1: (ASSUMES DECLINING INTEREST RATES)
<TABLE>
<S> <C>
Step 1: Calculate Contract Value at End of Contract
Year 3: 10,000.00 X (1.045)TO THE POWER OF 3 = $11,411.66
Step 2: Calculate the Free Withdrawal Amount: .15 X (10,000.00) = $1,500.00
Step 3: Calculate the Withdrawal Charge: .05 X (10,000.00 - 1,500.00) = $425.00
</TABLE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Step 4: Calculate the Market Value Adjustment: I = 4.50%
J = 4.20%
730 days
N = ------- = 2
365 days
Market Value Adjustment Factor: .9 X (I - J) X N
= .9 X (.045 - .042) X 2 = .0054
Market Value Adjustment = Market Value Adjustment Factor X Amount Subject to
Market Value Adjustment:
= .0054 X (11,411.66 - 1,500) = $53.52
Step 5: Calculate the amount received by Contract
owner as a result of full withdrawal at the end of
Contract Year 3: 11,411.66 - 425.00 + 53.52 = $11,040.18
</TABLE>
B-1
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
EXAMPLE 2: (ASSUMES RISING INTEREST RATES)
Step 1: Calculate Contract Value at End of Contract
Year 3: 10,000.00 X (1.045)TO THE POWER OF 3 = $11,411.66
Step 2: Calculate the Free Withdrawal Amount: .15 X (10,000.00) = $1,500.00
Step 3: Calculate the Withdrawal Charge: .05 X (10,000.00 - 1,500.00) = $425.00
Step 4: Calculate the Market Value Adjustment: I = 4.50%
J = 4.80%
730 days
N = ------- = 2
365 days
Market Value Adjustment Factor: .9 X (I - J) X N
= .9 X (.045 - .048) X (2) = -.0054
Market Value Adjustment = Market Value Adjustment Factor X Amount Subject to
Market Value Adjustment:
= -.0054 X (11,411.66 - 1,500) = -$53.52
Step 5: Calculate the amount received by Contract
owner as a result of full withdrawal at the end of
Contract Year 3: 11,411.66 - 425.00 - 53.52 = $10,933.14
</TABLE>
B-2
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
TABLE OF CONTENTS
-------------------------------------------------------------------
<TABLE>
<CAPTION>
DESCRIPTION PAGE
<S> <C>
-----------------------------------------------------
ADDITIONS, DELETIONS OR SUBSTITUTIONS OF
INVESTMENTS
-----------------------------------------------------
THE CONTRACT
-----------------------------------------------------
Purchases
-----------------------------------------------------
Tax-free Exchanges (1035 Exchanges,
Rollovers and Transfers)
-----------------------------------------------------
PERFORMANCE INFORMATION
-----------------------------------------------------
CALCULATION OF ACCUMULATION UNIT VALUES
-----------------------------------------------------
CALCULATION OF VARIABLE INCOME PAYMENTS
-----------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
DESCRIPTION PAGE
<S> <C>
-----------------------------------------------------
GENERAL MATTERS
-----------------------------------------------------
Incontestability
-----------------------------------------------------
Settlements
-----------------------------------------------------
Safekeeping of the Variable Account's
Assets
-----------------------------------------------------
Premium Taxes
-----------------------------------------------------
Tax Reserves
-----------------------------------------------------
FEDERAL TAX MATTERS
-----------------------------------------------------
QUALIFIED PLANS
-----------------------------------------------------
EXPERTS
-----------------------------------------------------
FINANCIAL STATEMENTS
-----------------------------------------------------
</TABLE>
------------------------------
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING IN ANY JURISDICTION IN WHICH
SUCH OFFERING MAY NOT LAWFULLY BE MADE. WE DO NOT AUTHORIZE ANYONE TO PROVIDE
ANY INFORMATION OR REPRESENTATIONS REGARDING THE OFFERING DESCRIBED IN THIS
PROSPECTUS OTHER THAN AS CONTAINED IN THIS PROSPECTUS.
C-1
<PAGE>
GLG 72-4
<PAGE>
THE GLENBROOK PROVIDER VARIABLE ANNUITY
Glenbrook Life and Annuity Company
P.O. Box 94042
Palatine, IL 60094
Telephone Number: 1-800-755-5275 Prospectus dated May 1, 2000
--------------------------------------------------------------------------------
Glenbrook Life and Annuity Company ("GLENBROOK") is offering the Glenbrook
Provider Variable Annuity, an individual flexible premium deferred variable
annuity contract ("CONTRACT"). This prospectus contains information about the
Contract that you should know before investing. Please keep it for future
reference.
The Contract currently offers 41 "INVESTMENT ALTERNATIVES". The investment
alternatives include 3 fixed account options ("FIXED ACCOUNT OPTIONS") and 38
variable sub-accounts ("VARIABLE SUB-ACCOUNTS") of the Glenbrook Life Multi-
Manager Variable Account ("VARIABLE ACCOUNT"). Each Variable Sub-Account invests
exclusively in shares of one of the portfolios ("PORTFOLIOS") of the following
mutual funds ("FUNDS"):
<TABLE>
<S> <C> <C> <C>
- AIM VARIABLE INSURANCE FUNDS
- FIDELITY VARIABLE INSURANCE PRODUCTS FUNDS
- THE DREYFUS SOCIALLY RESPONSIBLE GROWTH
FUND, INC. - GOLDMAN SACHS VARIABLE INSURANCE TRUST (VIT)
- MFS-REGISTERED TRADEMARK- VARIABLE INSURANCE
TRUST-SM-
- DREYFUS STOCK INDEX FUND
- NEUBERGER BERMAN ADVISERS MANAGEMENT TRUST
- DREYFUS VARIABLE INVESTMENT FUND (VIF)
- THE UNIVERSAL INSTITUTIONAL FUNDS, INC.*
</TABLE>
*Formerly, the Morgan Stanley Dean Witter Universal Funds, Inc.
Not all of the Funds and/or Portfolios, however, may be available with your
Contract. You should check with your representative for further information on
the availability of Funds and/or Portfolios. Your annuity application will list
all available Portfolios.
WE (Glenbrook) have filed a Statement of Additional Information, dated May 1,
2000, with the Securities and Exchange Commission ("SEC"). It contains more
information about the Contract and is incorporated herein by reference, which
means it is legally a part of this prospectus. Its table of contents appears on
page C-1 of this prospectus. For a free copy, please write or call us at the
address or telephone number above, or go to the SEC's Web site
(http://www.sec.gov). You can find other information and documents about us,
including documents that are legally part of this prospectus, at the SEC's Web
site.
--------------------------------------------------------------------------------
<TABLE>
<C> <S>
THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR
DISAPPROVED THE SECURITIES DESCRIBED IN THIS PROSPECTUS, NOR
HAS IT PASSED ON THE ACCURACY OR THE ADEQUACY OF THIS
PROSPECTUS. ANYONE WHO TELLS YOU OTHERWISE IS COMMITTING A
FEDERAL CRIME.
IMPORTANT THE CONTRACTS MAY BE DISTRIBUTED THROUGH BROKER-DEALERS THAT
NOTICES HAVE RELATIONSHIPS WITH BANKS OR OTHER FINANCIAL
INSTITUTIONS OR BY EMPLOYEES OF SUCH BANKS. HOWEVER, THE
CONTRACTS ARE NOT DEPOSITS, OR OBLIGATIONS OF, OR GUARANTEED
BY SUCH INSTITUTIONS OR ANY FEDERAL REGULATORY AGENCY.
INVESTMENT IN THE CONTRACTS INVOLVES INVESTMENT RISKS,
INCLUDING POSSIBLE LOSS OF PRINCIPAL. THE CONTRACTS ARE NOT
FDIC INSURED.
</TABLE>
GLG257-2
1 - PROSPECTUS
<PAGE>
TABLE OF CONTENTS
-------------------------------------------------------------------
<TABLE>
<CAPTION>
Page
<S> <C>
----------------------------------------------------------------------------
OVERVIEW
----------------------------------------------------------------------------
Important Terms 3
----------------------------------------------------------------------------
The Contract At A Glance 4
----------------------------------------------------------------------------
How the Contract Works 6
----------------------------------------------------------------------------
Expense Table 7
----------------------------------------------------------------------------
Financial Information 12
----------------------------------------------------------------------------
CONTRACT FEATURES
----------------------------------------------------------------------------
The Contract 13
----------------------------------------------------------------------------
Purchases 14
----------------------------------------------------------------------------
Contract Value 15
----------------------------------------------------------------------------
Investment Alternatives 16
----------------------------------------------------------------------------
The Variable Sub-Accounts 16
----------------------------------------------------------------------------
The Fixed Account Options 18
----------------------------------------------------------------------------
Transfers 20
----------------------------------------------------------------------------
Expenses 22
----------------------------------------------------------------------------
Access To Your Money 24
----------------------------------------------------------------------------
Income Payments 25
----------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Page
<S> <C>
----------------------------------------------------------------------------
Death Benefits 26
----------------------------------------------------------------------------
OTHER INFORMATION
----------------------------------------------------------------------------
More Information: 29
----------------------------------------------------------------------------
Glenbrook 29
----------------------------------------------------------------------------
The Variable Account 29
----------------------------------------------------------------------------
The Portfolios 29
----------------------------------------------------------------------------
The Contract 30
----------------------------------------------------------------------------
Qualified Plans 31
----------------------------------------------------------------------------
Legal Matters 31
----------------------------------------------------------------------------
Year 2000 31
----------------------------------------------------------------------------
Taxes 31
----------------------------------------------------------------------------
Annual Reports and Other Documents 34
----------------------------------------------------------------------------
Experts 34
----------------------------------------------------------------------------
Performance Information 34
----------------------------------------------------------------------------
APPENDIX A--ACCUMULATION UNIT VALUES A-1
----------------------------------------------------------------------------
APPENDIX B--MARKET VALUE ADJUSTMENT EXAMPLE B-1
----------------------------------------------------------------------------
STATEMENT OF ADDITIONAL INFORMATION TABLE OF CONTENTS C-1
----------------------------------------------------------------------------
</TABLE>
2 - PROSPECTUS
<PAGE>
IMPORTANT TERMS
-------------------------------------------------------------------
THIS PROSPECTUS USES A NUMBER OF IMPORTANT TERMS THAT YOU MAY NOT BE FAMILIAR
WITH. THE INDEX BELOW IDENTIFIES THE PAGE THAT DESCRIBES EACH TERM. THE FIRST
USE OF EACH TERM IN THIS PROSPECTUS APPEARS IN HIGHLIGHTS.
<TABLE>
<CAPTION>
Page
<S> <C>
--------------------------------------------------------------------------------
Accumulation Phase 6
--------------------------------------------------------------------------------
Accumulation Unit 12, 15
--------------------------------------------------------------------------------
Accumulation Unit Value 12, 15
--------------------------------------------------------------------------------
Anniversary Values 27
--------------------------------------------------------------------------------
Annuitant 13
--------------------------------------------------------------------------------
Automatic Additions Plan 14
--------------------------------------------------------------------------------
Automatic Portfolio Rebalancing Program 21
--------------------------------------------------------------------------------
Beneficiary 13
--------------------------------------------------------------------------------
Cancellation Period 4
--------------------------------------------------------------------------------
*Contract 13
--------------------------------------------------------------------------------
Contract Anniversary 5
--------------------------------------------------------------------------------
Contract Owner (You) 13
--------------------------------------------------------------------------------
Contract Value 5, 15
--------------------------------------------------------------------------------
Contract Year 5
--------------------------------------------------------------------------------
Death Benefit Anniversary 27
--------------------------------------------------------------------------------
Dollar Cost Averaging Program 21
--------------------------------------------------------------------------------
Due Proof of Death 26
--------------------------------------------------------------------------------
Enhanced Death Benefit Rider 27
--------------------------------------------------------------------------------
Enhanced Death and Income Benefit Combination Rider 27
--------------------------------------------------------------------------------
</TABLE>
<TABLE>
--------------------------------------------------------------------------------
<CAPTION>
Page
<S> <C>
Fixed Account Options 18
--------------------------------------------------------------------------------
Free Withdrawal Amount 22
--------------------------------------------------------------------------------
Funds 1
--------------------------------------------------------------------------------
Glenbrook ("We") 29
--------------------------------------------------------------------------------
Guarantee Periods 18
--------------------------------------------------------------------------------
Income Plan 25
--------------------------------------------------------------------------------
Investment Alternatives 1, 16-18
--------------------------------------------------------------------------------
Issue Date 6
--------------------------------------------------------------------------------
Market Value Adjustment 19
--------------------------------------------------------------------------------
Payout Phase 6
--------------------------------------------------------------------------------
Payout Start Date 25
--------------------------------------------------------------------------------
Portfolios 1, 16
--------------------------------------------------------------------------------
Qualified Contracts 4
--------------------------------------------------------------------------------
SEC 1
--------------------------------------------------------------------------------
Settlement Value 27
--------------------------------------------------------------------------------
Systematic Withdrawal Program 24
--------------------------------------------------------------------------------
Valuation Date 14
--------------------------------------------------------------------------------
Variable Account 1
--------------------------------------------------------------------------------
Variable Sub-Account 1, 16
--------------------------------------------------------------------------------
</TABLE>
*In certain states the Contract is available only as a group Contract. If you
purchase a group Contract, we will issue you a certificate that represents your
ownership and that summarizes the provisions of the group Contract. References
to "Contract" in this prospectus include certificates, unless the context
requires otherwise.
3 - PROSPECTUS
<PAGE>
THE CONTRACT AT A GLANCE
-------------------------------------------------------------------
THE FOLLOWING IS A SNAPSHOT OF THE CONTRACT. PLEASE READ THE REMAINDER OF THIS
PROSPECTUS FOR MORE INFORMATION.
<TABLE>
<S> <C>
FLEXIBLE PAYMENTS You can purchase a Contract with as little as $3,000 ($2,000
for "QUALIFIED CONTRACTS", which are Contracts issued within
QUALIFIED PLANS). You can add to your Contract as often and
as much as you like, but each payment must be at least $50.
--------------------------------------------------------------------------------------------------------
RIGHT TO CANCEL You may cancel your Contract within 20 days of receipt or
any longer period as your state may require ("CANCELLATION
PERIOD"). Upon cancellation, we will return your purchase
payments adjusted, to the extent federal or state law
permits, to reflect the investment experience of any amounts
allocated to the Variable Account.
--------------------------------------------------------------------------------------------------------
EXPENSES You will bear the following expenses:
- Total Variable Account annual fees equal to 1.15% of
average daily net assets (1.37% if you select the
ENHANCED DEATH BENEFIT RIDER and 1.59% if you select the
ENHANCED DEATH AND INCOME BENEFIT COMBINATION RIDER)
- Annual contract maintenance charge of $35 (with certain
exceptions)
- Withdrawal charges ranging from 0% to 6% of purchase
payment withdrawn (with certain exceptions)
- Transfer fee of $10 after 12th transfer in any Contract
Year (fee currently waived)
- State premium tax (if your state imposes one)
In addition, each Portfolio pays expenses that you will bear
indirectly if you invest in a Variable Sub-Account.
--------------------------------------------------------------------------------------------------------
INVESTMENT ALTERNATIVES The Contract offers 41 investment alternatives including:
- 3 Fixed Account Options (which credit interest at rates
we guarantee)
- 38 Variable Sub-Accounts investing in Portfolios offering
professional money management by these investment
advisers:
- A I M ADVISORS, INC.
- THE DREYFUS CORPORATION
- FIDELITY MANAGEMENT & RESEARCH COMPANY
- GOLDMAN SACHS ASSET MANAGEMENT
- GOLDMAN SACHS ASSET MANAGEMENT INTERNATIONAL
- MASSACHUSETTS FINANCIAL SERVICES
- MILLER ANDERSON & SHERRERD, LLP
- MORGAN STANLEY ASSET MANAGEMENT*
- NEUBERGER BERMAN MANAGEMENT, INC.
TO FIND OUT CURRENT RATES BEING PAID ON THE FIXED ACCOUNT
OPTIONS OR HOW THE VARIABLE SUB-ACCOUNTS HAVE PERFORMED,
CALL US AT 1-800-755-5275.
*On December 1, 1998, Morgan Stanley Asset Management Inc.
changed its name to Morgan Stanley Dean Witter Investment
Management Inc. but continues to do business in certain
instances using the name Morgan Stanley Asset Management.
</TABLE>
4 - PROSPECTUS
<PAGE>
<TABLE>
<S> <C>
--------------------------------------------------------------------------------------------------------
SPECIAL SERVICES For your convenience, we offer these special services:
- AUTOMATIC PORTFOLIO REBALANCING PROGRAM
- AUTOMATIC ADDITIONS PROGRAM
- DOLLAR COST AVERAGING PROGRAM
- SYSTEMATIC WITHDRAWAL PROGRAM
--------------------------------------------------------------------------------------------------------
INCOME PAYMENTS You can choose fixed income payments, variable income
payments, or a combination of the two. You can receive your
income payments in one of the following ways:
- life income with guaranteed payments
- a "joint and survivor" life income with guaranteed
payments
- guaranteed payments for a specified period (5 to 30
years)
--------------------------------------------------------------------------------------------------------
DEATH BENEFITS If you or the ANNUITANT (if the Contract is owned by a
non-natural person) die before the PAYOUT START DATE, we
will pay the death benefit described in the Contract. We
offer an Enhanced Death Benefit Rider and an Enhanced Death
and Income Benefit Combination Rider.
--------------------------------------------------------------------------------------------------------
TRANSFERS Before the Payout Start Date, you may transfer your Contract
value ("CONTRACT VALUE") among the investment alternatives,
with certain restrictions. Transfers to a GUARANTEE PERIOD
of the Fixed Account must be at least $50.
We do not currently impose a fee upon transfers. However, we
reserve the right to charge $10 per transfer after the 12th
transfer in each "Contract Year", which we measure from the
date we issue your Contract or a Contract anniversary
("CONTRACT ANNIVERSARY").
--------------------------------------------------------------------------------------------------------
WITHDRAWALS You may withdraw some or all of your Contract Value at
anytime prior to the Payout Start Date. In general, you must
withdraw at least $50 at a time. Full or partial withdrawals
are available under limited circumstances on or after the
Payout Start Date. A 10% federal tax penalty may apply if
you withdraw before you are 59 1/2 years old. A withdrawal
charge and MARKET VALUE ADJUSTMENT also may apply.
</TABLE>
5 - PROSPECTUS
<PAGE>
HOW THE CONTRACT WORKS
-------------------------------------------------------------------
The Contract basically works in two ways.
First, the Contract can help you (we assume you are the CONTRACT OWNER) save for
retirement because you can invest in up to 41 investment alternatives and pay no
federal income taxes on any earnings until you withdraw them. You do this during
what we call the "ACCUMULATION PHASE" of the Contract. The Accumulation Phase
begins on the date we issue your Contract (we call that date the "ISSUE DATE")
and continues until the Payout Start Date, which is the date we apply your money
to provide income payments. During the Accumulation Phase, you may allocate your
purchase payments to any combination of the Variable Sub-Accounts and/or Fixed
Account Options. If you invest in any of the three Fixed Account Options, you
will earn a fixed rate of interest that we declare periodically. If you invest
in any of the Variable Sub-Accounts, your investment return will vary up or down
depending on the performance of the corresponding Portfolios.
Second, the Contract can help you plan for retirement because you can use it to
receive retirement income for life and/or for a pre-set number of years, by
selecting one of the income payment options (we call these "INCOME PLANS")
described on page 25. You receive income payments during what we call the
"PAYOUT PHASE" of the Contract, which begins on the Payout Start Date and
continues until we make the last payment required by the Income Plan you select.
During the Payout Phase, if you select a fixed income payment option, we
guarantee the amount of your payments, which will remain fixed. If you select a
variable income payment option, based on one or more of the Variable
Sub-Accounts, the amount of your payments will vary up or down depending on the
performance of the corresponding Portfolios. The amount of money you accumulate
under your Contract during the Accumulation Phase and apply to an Income Plan
will determine the amount of your income payments during the Payout Phase.
The timeline below illustrates how you might use your Contract.
<TABLE>
<CAPTION>
ISSUE ACCUMULATION PHASE PAYOUT START PAYOUT PHASE
DATE DATE
<S> <C> <C> <C> <C>
------------------------------------------------------------------------------------------------------------
You buy You save for You elect to receive You can receive Or you can
a Contract retirement income income payments receive income
payments or receive for a set period payments for life
a lump sum payment
</TABLE>
As the Contract owner, you exercise all of the rights and privileges provided by
the Contract. If you die, any surviving Contract owner or, if none, the
BENEFICIARY will exercise the rights and privileges provided by the Contract.
SEE "The Contract." In addition, if you die before the Payout Start Date, we
will pay a death benefit to any surviving Contract owner, or if there is none,
to your Beneficiary. SEE "Death Benefits."
Please call us at 1-800-755-5275 if you have any questions about how the
Contract works.
6 - PROSPECTUS
<PAGE>
EXPENSE TABLE
-------------------------------------------------------------------
The table below lists the expenses that you will bear directly or indirectly
when you buy a Contract. The table and the examples that follow do not reflect
premium taxes that may be imposed by the state where you reside. For more
information about Variable Account expenses, see "Expenses," below. For more
information about Portfolio expenses, please refer to the accompanying
prospectuses for the Funds.
CONTRACT OWNER TRANSACTION EXPENSES
Withdrawal Charge (as a percentage of purchase payments)*
<TABLE>
<CAPTION>
Number of Complete Years Since We Received the Purchase Payment Being Withdrawn: 0 1 2 3 4 5 6+
<S> <C> <C> <C> <C> <C> <C> <C>
--------------------------------------------------------------------------------------------------------------------------
Applicable Charge: 6% 6% 5% 5% 4% 3% 0%
--------------------------------------------------------------------------------------------------------------------------
Annual Contract Maintenance Charge $35.00**
--------------------------------------------------------------------------------------------------------------------------
Transfer Fee $10.00***
--------------------------------------------------------------------------------------------------------------------------
</TABLE>
*Each Contract Year, you may withdraw up to 15% of your aggregate purchase
payments without incurring a withdrawal charge.
**We will waive this charge in certain cases. See "Expenses."
***Applies solely to the thirteenth and subsequent transfers within a Contract
Year, excluding transfers due to dollar cost averaging and automatic
portfolio rebalancing. We are currently waiving the transfer fee.
VARIABLE ACCOUNT ANNUAL EXPENSES
(AS A PERCENTAGE OF AVERAGE DAILY NET ASSET VALUE
DEDUCTED FROM EACH VARIABLE SUB-ACCOUNT)
<TABLE>
<S> <C>
Mortality and Expense Risk Charge 1.05%*
----------------------------------------------------------------------
Administrative Expense Charge 0.10%
----------------------------------------------------------------------
Total Variable Account Annual Expenses 1.15%
----------------------------------------------------------------------
</TABLE>
*If you select the Enhanced Death Benefit Rider, the mortality and expense risk
charge is 1.27%. If you select the Enhanced Death and Income Benefit
Combination Rider, the mortality and expense risk charge is 1.49%.
7 - PROSPECTUS
<PAGE>
PORTFOLIO ANNUAL EXPENSES (AFTER VOLUNTARY REDUCTIONS AND REIMBURSEMENTS)
(AS A PERCENTAGE OF PORTFOLIO AVERAGE DAILY NET ASSETS)*
<TABLE>
<CAPTION>
Rule Total Portfolio
Management 12b-1 Other Annual
Portfolio Fees Fees Expenses Expenses
<S> <C> <C> <C> <C>
---------------------------------------------------------------------------------------------------------------------------------
AIM V.I. Balanced Fund (1) 0.65% N/A 0.56% 1.21%
---------------------------------------------------------------------------------------------------------------------------------
AIM V.I. Capital Appreciation Fund 0.62% N/A 0.11% 0.73%
---------------------------------------------------------------------------------------------------------------------------------
AIM V.I. Diversified Income Fund 0.60% N/A 0.23% 0.83%
---------------------------------------------------------------------------------------------------------------------------------
AIM V.I. Global Utilities Fund 0.65% N/A 0.49% 1.14%
---------------------------------------------------------------------------------------------------------------------------------
AIM V.I. Government Securities Fund 0.50% N/A 0.40% 0.90%
---------------------------------------------------------------------------------------------------------------------------------
AIM V.I. Growth Fund 0.63% N/A 0.10% 0.73%
---------------------------------------------------------------------------------------------------------------------------------
AIM V.I. Growth and Income Fund 0.61% N/A 0.16% 0.77%
---------------------------------------------------------------------------------------------------------------------------------
AIM V.I. High Yield (1) 0.35% N/A 0.79% 1.14%
---------------------------------------------------------------------------------------------------------------------------------
AIM V.I. International Equity Fund 0.75% N/A 0.22% 0.97%
---------------------------------------------------------------------------------------------------------------------------------
AIM V.I. Value Fund 0.61% N/A 0.15% 0.76%
---------------------------------------------------------------------------------------------------------------------------------
The Dreyfus Socially Responsible Growth Fund, Inc. 0.75% N/A 0.04% 0.79%
---------------------------------------------------------------------------------------------------------------------------------
Dreyfus Stock Index Fund 0.25% N/A 0.01% 0.26%
---------------------------------------------------------------------------------------------------------------------------------
Dreyfus VIF Growth & Income Portfolio 0.75% N/A 0.04% 0.79%
---------------------------------------------------------------------------------------------------------------------------------
Dreyfus VIF Money Market Portfolio 0.50% N/A 0.08% 0.58%
---------------------------------------------------------------------------------------------------------------------------------
Dreyfus VIF Small Company Stock Portfolio 0.75% N/A 0.22% 0.97%
---------------------------------------------------------------------------------------------------------------------------------
Fidelity VIP Contrafund-Registered Trademark-
Portfolio (2,3) 0.58% N/A 0.09% 0.67%
---------------------------------------------------------------------------------------------------------------------------------
Fidelity VIP Equity-Income Portfolio (2,3) 0.48% N/A 0.09% 0.57%
---------------------------------------------------------------------------------------------------------------------------------
Fidelity VIP Growth Portfolio (2,3) 0.58% N/A 0.08% 0.66%
---------------------------------------------------------------------------------------------------------------------------------
Fidelity VIP High Income Portfolio 0.58% N/A 0.11% 0.69%
---------------------------------------------------------------------------------------------------------------------------------
Goldman Sachs VIT Capital Growth Fund (4,5) 0.75% N/A 0.25% 1.00%
---------------------------------------------------------------------------------------------------------------------------------
Goldman Sachs VIT CORE-SM- Small Cap Equity Fund
(4,5) 0.75% N/A 0.25% 1.00%
---------------------------------------------------------------------------------------------------------------------------------
Goldman Sachs VIT CORE-SM- U.S. Equity Fund (4) 0.70% N/A 0.20% 0.90%
---------------------------------------------------------------------------------------------------------------------------------
Goldman Sachs VIT Global Income Fund (4,5) 0.90% N/A 0.25% 1.15%
---------------------------------------------------------------------------------------------------------------------------------
Goldman Sachs VIT Growth and Income Fund (4,5) 0.75% N/A 0.25% 1.00%
---------------------------------------------------------------------------------------------------------------------------------
Goldman Sachs VIT International Equity Fund (4,5) 1.00% N/A 0.35% 1.35%
---------------------------------------------------------------------------------------------------------------------------------
MFS Emerging Growth Series (6) 0.75% N/A 0.09% 0.84%
---------------------------------------------------------------------------------------------------------------------------------
MFS Growth with Income Series (6) 0.75% N/A 0.13% 0.88%
---------------------------------------------------------------------------------------------------------------------------------
MFS New Discovery Series (6,7) 0.90% N/A 0.17% 1.07%
---------------------------------------------------------------------------------------------------------------------------------
Morgan Stanley UIF Equity Growth (1) 0.29% N/A 0.56% 0.85%
---------------------------------------------------------------------------------------------------------------------------------
Morgan Stanley UIF Fixed Income (1) 0.14% N/A 0.56% 0.70%
---------------------------------------------------------------------------------------------------------------------------------
Morgan Stanley UIF Global Equity (1) 0.47% N/A 0.68% 1.15%
---------------------------------------------------------------------------------------------------------------------------------
Morgan Stanley UIF International Magnum (1) 0.29% N/A 0.87% 1.16%
---------------------------------------------------------------------------------------------------------------------------------
Morgan Stanley UIF Mid Cap Value (1) 0.43% N/A 0.62% 1.05%
---------------------------------------------------------------------------------------------------------------------------------
Morgan Stanley UIF U.S. Real Estate (1) 0.00% N/A 1.10% 1.10%
---------------------------------------------------------------------------------------------------------------------------------
Morgan Stanley UIF Value (1) 0.18% N/A 0.67% 0.85%
---------------------------------------------------------------------------------------------------------------------------------
Neuberger Berman AMT Guardian 0.85% N/A 0.15% 1.00%
---------------------------------------------------------------------------------------------------------------------------------
Neuberger Berman AMT Mid-Cap Growth (1,8) 0.85% N/A 0.15% 1.00%
---------------------------------------------------------------------------------------------------------------------------------
Neuberger Berman AMT Partners 0.80% N/A 0.07% 0.87%
---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
* The figures shown in the table are for the year ended December 31, 1999
(except as otherwise noted).
(1) Absent voluntary reductions and reimbursements for certain Portfolios,
"Management Fees", "Rule 12b-1 Fees", "Other Expenses", and "Total Portfolio
Annual Expenses" as a percent of average net assets of the portfolios would
have been estimated as follows:
8 - PROSPECTUS
<PAGE>
<TABLE>
<CAPTION>
Rule Total Portfolio
Management 12b-1 Other Annual
Portfolio Fees Fees Expenses Expenses
<S> <C> <C> <C> <C>
---------------------------------------------------------------------------------------------------------------------------------
AIM V.I. Balanced Fund 0.75% N/A 0.56% 1.31%
---------------------------------------------------------------------------------------------------------------------------------
AIM V.I. High Yield 0.63% N/A 0.79% 1.42%
---------------------------------------------------------------------------------------------------------------------------------
Morgan Stanley UIF Equity Growth 0.55% N/A 0.56% 1.11%
---------------------------------------------------------------------------------------------------------------------------------
Morgan Stanley UIF Fixed Income 0.40% N/A 0.56% 0.96%
---------------------------------------------------------------------------------------------------------------------------------
Morgan Stanley UIF Global Equity 0.80% N/A 0.68% 1.48%
---------------------------------------------------------------------------------------------------------------------------------
Morgan Stanley UIF International Magnum 0.80% N/A 0.87% 1.67%
---------------------------------------------------------------------------------------------------------------------------------
Morgan Stanley UIF Mid Cap Value 0.75% N/A 0.62% 1.37%
---------------------------------------------------------------------------------------------------------------------------------
Morgan Stanley UIF U.S. Real Estate 0.80% N/A 1.10% 1.90%
---------------------------------------------------------------------------------------------------------------------------------
Morgan Stanley UIF Value 0.55% N/A 0.67% 1.22%
---------------------------------------------------------------------------------------------------------------------------------
Neuberger Berman AMT Mid-Cap Growth 0.85% N/A 0.23% 1.08%
---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
The Portfolio's Advisors may discontinue all or part of these voluntary
reductions and reimbursements at any time.
(2) Initial Class. "Total Annual Portfolio Expenses" reflect offset and other
arrangements that reduce expenses.
(3) A portion of the brokerage commissions that certain funds pay was used to
reduce fund expenses. In addition, through arrangements with certain funds',
or FMR on behalf of certain funds', custodian, credits realized as a result
of uninvested cash balances were used to reduce a portion of each applicable
fund's expenses. Without these reductions, the "Total Portfolio Annual
Expenses" presented in the table would have been 0.65% for
Contrafund-Registered Trademark- Portfolio, 0.56% for Equity-Income
Portfolio, and 0.65% for Growth Portfolio.
(4) The Funds' expenses are based on estimated expenses for the fiscal year
December 31, 2000.
(5) Goldman Sachs Asset Management and Goldman Sachs Asset Management
International, the investment advisors, have voluntarily agreed to reduce or
limit certain other expenses (excluding management fees, taxes, interest,
brokerage fees, litigation, indemnification, and other extraordinary
expenses) to the extent such expenses exceed the percentage stated in the
calculated per annum (above table) as of each fund's respective average
daily net assets. Without the limitations described above, "Other Expenses"
and "Total Portfolio Annual Expenses" would be estimated as follows:
<TABLE>
<CAPTION>
Rule Total Portfolio
Management 12b-1 Other Annual
Portfolio Fees Fees Expenses Expenses
<S> <C> <C> <C> <C>
---------------------------------------------------------------------------------------------------------------------------------
Goldman Sachs VIT Capital Growth Fund 0.75% N/A 0.94% 1.69%
---------------------------------------------------------------------------------------------------------------------------------
Goldman Sachs VIT CORE-SM- Small Cap Equity Fund 0.75% N/A 0.75% 1.50%
---------------------------------------------------------------------------------------------------------------------------------
Goldman Sachs VIT Global Income Fund 0.90% N/A 1.78% 2.68%
---------------------------------------------------------------------------------------------------------------------------------
Goldman Sachs VIT Growth and Income Fund 0.75% N/A 0.47% 1.22%
---------------------------------------------------------------------------------------------------------------------------------
Goldman Sachs VIT International Equity Fund 1.00% N/A 0.77% 1.77%
---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
The Portfolio Advisor may discontinue all or part of these voluntary reductions
at any time.
(6) Each series has an expense offset arrangement which reduces the series'
custodian fee based upon the amount of cash maintained by the series with
its custodian and dividend disbursing agent. Each series may enter into
other such arrangements and directed brokerage arrangements, which would
also have the effect of reducing the series' expenses. "Other Expenses" do
not take into account these expense reductions, and are therefore higher
than the actual expenses of the series. Had these fee reductions been taken
into account, "Total Portfolio Annual Expenses" would be lower for certain
series and would equal: 0.83% for Emerging Growth Series, 0.87% for Growth
with Income Series, and 1.05% for New Discovery Series.
(7) MFS has contractually agreed, subject to reimbursement, to bear expenses for
these series such that each such series' "Other Expenses" (after taking into
account the expense offset arrangement described above), do not exceed the
following percentages of the average daily net assets of the series during
the current fiscal year: 0.15% for New Discovery Series. These contractual
fee arrangements will continue until at least May 1, 2001, unless changed
with the consent of the board of trustees which oversees the series.
(8) The expense reimbursement agreements with respect to the Mid-Cap Growth
Portfolio provide for Neuberger Berman Management, Inc. ("NBMI") to recoup
through December 31, 2004 amounts reimbursed by NBMI under the agreements,
provided such recoupment would not cause the Portfolio to exceed its
respective expense limitation.
9 - PROSPECTUS
<PAGE>
EXAMPLE 1
The example below shows the dollar amount of expenses that you would bear
directly or indirectly if you:
- invested $1,000 in a Variable Sub-Account,
- earned a 5% annual return on your investment,
- surrendered your Contract, or you began receiving income payments for a
specified period of less than 120 months, at the end of each time period, and
- elected the Enhanced Death and Income Benefit Combination Rider.
THE EXAMPLE DOES NOT INCLUDE ANY TAXES OR TAX PENALTIES YOU MAY BE REQUIRED TO
PAY IF YOU SURRENDER YOUR CONTRACT.
<TABLE>
<CAPTION>
Variable Sub-Account 1 Year 3 Years 5 Years 10 Years
<S> <C> <C> <C> <C>
---------------------------------------------------------------------------------------------------------------------------------
AIM V.I. Balanced $80 $133 $179 $322
---------------------------------------------------------------------------------------------------------------------------------
AIM V.I. Capital Appreciation $80 $130 $175 $316
---------------------------------------------------------------------------------------------------------------------------------
AIM V.I. Diversified Income $77 $121 $159 $285
---------------------------------------------------------------------------------------------------------------------------------
AIM V.I. Global Utilities $80 $130 $175 $316
---------------------------------------------------------------------------------------------------------------------------------
AIM V.I. Government Securities $77 $123 $163 $292
---------------------------------------------------------------------------------------------------------------------------------
AIM V.I. Growth $76 $118 $154 $274
---------------------------------------------------------------------------------------------------------------------------------
AIM V.I. Growth and Income $76 $119 $156 $278
---------------------------------------------------------------------------------------------------------------------------------
AIM V.I. High Yield $80 $130 $175 $316
---------------------------------------------------------------------------------------------------------------------------------
AIM V.I. International Equity $78 $125 $167 $299
---------------------------------------------------------------------------------------------------------------------------------
AIM V.I. Value $76 $119 $156 $277
---------------------------------------------------------------------------------------------------------------------------------
The Dreyfus Socially Responsible Growth Fund, Inc. $76 $120 $157 $280
---------------------------------------------------------------------------------------------------------------------------------
Dreyfus Stock Index Fund $71 $103 $130 $225
---------------------------------------------------------------------------------------------------------------------------------
Dreyfus VIF Growth & Income $76 $120 $157 $280
---------------------------------------------------------------------------------------------------------------------------------
Dreyfus VIF Money Market $74 $113 $147 $259
---------------------------------------------------------------------------------------------------------------------------------
Dreyfus VIF Small Company Stock $78 $125 $167 $299
---------------------------------------------------------------------------------------------------------------------------------
Fidelity VIP Contrafund-Registered Trademark- $75 $116 $151 $268
---------------------------------------------------------------------------------------------------------------------------------
Fidelity VIP Equity-Income $74 $113 $146 $258
---------------------------------------------------------------------------------------------------------------------------------
Fidelity VIP Growth $75 $116 $151 $267
---------------------------------------------------------------------------------------------------------------------------------
Fidelity VIP High Income $75 $117 $152 $270
---------------------------------------------------------------------------------------------------------------------------------
Goldman Sachs VIT Capital Growth $78 $126 $168 $302
---------------------------------------------------------------------------------------------------------------------------------
Goldman Sachs VIT CORE-SM- Small Cap Equity $78 $126 $168 $302
---------------------------------------------------------------------------------------------------------------------------------
Goldman Sachs VIT CORE-SM- U.S. Equity $77 $123 $163 $292
---------------------------------------------------------------------------------------------------------------------------------
Goldman Sachs VIT Global Income $80 $131 $176 $317
---------------------------------------------------------------------------------------------------------------------------------
Goldman Sachs VIT Growth and Income $78 $126 $168 $302
---------------------------------------------------------------------------------------------------------------------------------
Goldman Sachs VIT International Equity $82 $137 $186 $336
---------------------------------------------------------------------------------------------------------------------------------
MFS Emerging Growth $77 $121 $160 $286
---------------------------------------------------------------------------------------------------------------------------------
MFS Growth with Income $77 $122 $162 $290
---------------------------------------------------------------------------------------------------------------------------------
MFS New Discovery $79 $128 $172 $309
---------------------------------------------------------------------------------------------------------------------------------
Morgan Stanley UIF Equity Growth $77 $122 $160 $287
---------------------------------------------------------------------------------------------------------------------------------
Morgan Stanley UIF Fixed Income $75 $117 $153 $271
---------------------------------------------------------------------------------------------------------------------------------
Morgan Stanley UIF Global Equity $80 $131 $176 $317
---------------------------------------------------------------------------------------------------------------------------------
Morgan Stanley UIF International Magnum $80 $131 $176 $318
---------------------------------------------------------------------------------------------------------------------------------
Morgan Stanley UIF Mid Cap Value $79 $128 $171 $307
---------------------------------------------------------------------------------------------------------------------------------
Morgan Stanley UIF U.S. Real Estate $79 $129 $173 $312
---------------------------------------------------------------------------------------------------------------------------------
Morgan Stanley UIF Value $77 $122 $160 $287
---------------------------------------------------------------------------------------------------------------------------------
Neuberger Berman AMT Guardian $78 $126 $168 $302
---------------------------------------------------------------------------------------------------------------------------------
Neuberger Berman AMT Mid-Cap Growth $78 $126 $168 $302
---------------------------------------------------------------------------------------------------------------------------------
Neuberger Berman AMT Partners $77 $122 $161 $289
---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
10 - PROSPECTUS
<PAGE>
EXAMPLE 2
Same assumptions as Example 1 above, except that you decided not to surrender
your Contract, or you began receiving income payments for a specified period of
at least 120 months, at the end of each period.
<TABLE>
<CAPTION>
Variable Sub-Account 1 Year 3 Years 5 Years 10 Years
<S> <C> <C> <C> <C>
---------------------------------------------------------------------------------------------------------------------------------
AIM V.I. Balanced $29 $90 $153 $322
---------------------------------------------------------------------------------------------------------------------------------
AIM V.I. Capital Appreciation $25 $75 $129 $274
---------------------------------------------------------------------------------------------------------------------------------
AIM V.I. Diversified Income $26 $78 $134 $285
---------------------------------------------------------------------------------------------------------------------------------
AIM V.I. Global Utilities $29 $88 $150 $316
---------------------------------------------------------------------------------------------------------------------------------
AIM V.I. Government Securities $26 $81 $137 $292
---------------------------------------------------------------------------------------------------------------------------------
AIM V.I. Growth $25 $75 $129 $274
---------------------------------------------------------------------------------------------------------------------------------
AIM V.I. Growth and Income $25 $77 $131 $278
---------------------------------------------------------------------------------------------------------------------------------
AIM V.I. High Yield $29 $88 $150 $316
---------------------------------------------------------------------------------------------------------------------------------
AIM V.I. International Equity $27 $83 $141 $299
---------------------------------------------------------------------------------------------------------------------------------
AIM V.I. Value $25 $76 $130 $277
---------------------------------------------------------------------------------------------------------------------------------
The Dreyfus Socially Responsible Growth Fund, Inc. $25 $77 $132 $280
---------------------------------------------------------------------------------------------------------------------------------
Dreyfus Stock Index Fund $20 $61 $104 $225
---------------------------------------------------------------------------------------------------------------------------------
Dreyfus VIF Growth & Income $25 $77 $132 $280
---------------------------------------------------------------------------------------------------------------------------------
Dreyfus VIF Money Market $23 $71 $121 $259
---------------------------------------------------------------------------------------------------------------------------------
Dreyfus VIF Small Company Stock $27 $83 $141 $299
---------------------------------------------------------------------------------------------------------------------------------
Fidelity VIP Contrafund-Registered Trademark- $24 $74 $126 $268
---------------------------------------------------------------------------------------------------------------------------------
Fidelity VIP Equity-Income $23 $70 $121 $258
---------------------------------------------------------------------------------------------------------------------------------
Fidelity VIP Growth $24 $73 $125 $267
---------------------------------------------------------------------------------------------------------------------------------
Fidelity VIP High Income $24 $74 $127 $270
---------------------------------------------------------------------------------------------------------------------------------
Goldman Sachs VIT Capital Growth $27 $84 $143 $302
---------------------------------------------------------------------------------------------------------------------------------
Goldman Sachs VIT CORE-SM- Small Cap Equity $27 $84 $143 $302
---------------------------------------------------------------------------------------------------------------------------------
Goldman Sachs VIT CORE-SM- U.S. Equity $26 $81 $137 $292
---------------------------------------------------------------------------------------------------------------------------------
Goldman Sachs VIT Global Income $29 $88 $150 $317
---------------------------------------------------------------------------------------------------------------------------------
Goldman Sachs VIT Growth and Income $27 $84 $143 $302
---------------------------------------------------------------------------------------------------------------------------------
Goldman Sachs VIT International Equity $31 $94 $160 $336
---------------------------------------------------------------------------------------------------------------------------------
MFS Emerging Growth $26 $79 $134 $286
---------------------------------------------------------------------------------------------------------------------------------
MFS Growth with Income $26 $80 $136 $290
---------------------------------------------------------------------------------------------------------------------------------
MFS New Discovery $28 $86 $146 $309
---------------------------------------------------------------------------------------------------------------------------------
Morgan Stanley UIF Equity Growth $26 $79 $135 $287
---------------------------------------------------------------------------------------------------------------------------------
Morgan Stanley UIF Fixed Income $24 $74 $127 $271
---------------------------------------------------------------------------------------------------------------------------------
Morgan Stanley UIF Global Equity $29 $88 $150 $317
---------------------------------------------------------------------------------------------------------------------------------
Morgan Stanley UIF International Magnum $29 $89 $151 $318
---------------------------------------------------------------------------------------------------------------------------------
Morgan Stanley UIF Mid Cap Value $28 $85 $145 $307
---------------------------------------------------------------------------------------------------------------------------------
Morgan Stanley UIF U.S. Real Estate $28 $87 $148 $312
---------------------------------------------------------------------------------------------------------------------------------
Morgan Stanley UIF Value $26 $79 $135 $287
---------------------------------------------------------------------------------------------------------------------------------
Neuberger Berman AMT Guardian $27 $84 $143 $302
---------------------------------------------------------------------------------------------------------------------------------
Neuberger Berman AMT Mid-Cap Growth $27 $84 $143 $302
---------------------------------------------------------------------------------------------------------------------------------
Neuberger Berman AMT Partners $26 $80 $136 $289
---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
PLEASE REMEMBER THAT YOU ARE LOOKING AT EXAMPLES AND NOT A REPRESENTATION OF
PAST OR FUTURE EARNINGS. YOUR ACTUAL EXPENSES MAY BE LOWER OR GREATER THAN THOSE
SHOWN ABOVE. SIMILARLY, YOUR RATE OF RETURN MAY BE LOWER OR GREATER THAN 5%,
WHICH IS NOT GUARANTEED. THE EXAMPLES ASSUME THAT ANY PORTFOLIO EXPENSE WAIVERS
OR REIMBURSEMENT ARRANGEMENTS DESCRIBED IN THE FOOTNOTES TO THE PORTFOLIO ANNUAL
EXPENSE TABLE ARE IN EFFECT FOR THE PERIODS PRESENTED. THE ABOVE EXAMPLES ASSUME
THE ELECTION OF THE ENHANCED DEATH AND INCOME BENEFIT COMBINATION RIDER WITH A
MORTALITY AND EXPENSE RISK CHARGE OF 1.49%. IF THAT RIDER WERE NOT ELECTED, THE
EXPENSE FIGURES SHOWN ABOVE WOULD BE SLIGHTLY LOWER. TO REFLECT THE CONTRACT
MAINTENANCE CHARGE IN THE EXAMPLES, WE ESTIMATED AN EQUIVALENT PERCENTAGE
CHARGE, BASED ON THE CURRENT AVERAGE CONTRACT SIZE OF $47,490.
11 - PROSPECTUS
<PAGE>
FINANCIAL INFORMATION
-------------------------------------------------------------------
To measure the value of your investment in the Variable Sub-Accounts during the
Accumulation Phase, we use a unit of measure we call the "ACCUMULATION UNIT."
Each Variable Sub-Account has a separate value for its Accumulation Units we
call "ACCUMULATION UNIT VALUE". Accumulation Unit Value is analogous to, but not
the same as, the share price of a mutual fund.
Attached as Appendix A to this prospectus are tables showing the Accumulation
Unit Values of each Variable Sub-Account since the date the contracts were first
offered. To obtain a fuller picture of each Variable Sub-Account's finances,
please refer to the Variable Account's financial statement contained in the
Statement of Additional Information. The financial statements of Glenbrook also
appear in the Statement of Additional Information.
12 - PROSPECTUS
<PAGE>
THE CONTRACT
-------------------------------------------------------------------
CONTRACT OWNER
The Glenbrook Provider Variable Annuity is a contract between you, the Contract
owner, and Glenbrook, a life insurance company. As the Contract owner, you may
exercise all of the rights and privileges provided to you by the Contract. That
means it is up to you to select or change (to the extent permitted):
- the investment alternatives during the Accumulation and Payout Phases,
- the amount and timing of your purchase payments and withdrawals,
- the programs you want to use to invest or withdraw money,
- the income payment plan you want to use to receive retirement income,
- the Annuitant (either yourself or someone else) on whose life the income
payments will be based,
- the Beneficiary or Beneficiaries who will receive the benefits that the
Contract provides when the last surviving contract owner dies, and
- any other rights that the Contract provides.
If you die, any surviving Contract owner, or, if none, the Beneficiary may
exercise the rights and privileges provided to them by the Contract.
The Contract cannot be jointly owned by both a non-natural person and a natural
person.
You can use the Contract with or without a qualified plan. A qualified plan is a
personal retirement savings plan, such as an IRA or tax-sheltered annuity, that
meets the requirements of the Internal Revenue Code. Qualified plans may limit
or modify your rights and privileges under the Contract. We use the term
"Qualified Contract" to refer to a Contract issued within a qualified plan. See
"Qualified Plans" on page 33.
ANNUITANT
The Annuitant is the individual whose life determines the amount and duration of
income payments (other than under Income Plans with guaranteed payments for a
specified period). You initially designate an Annuitant in your application. You
may change the Annuitant at any time prior to the Payout Start Date (only if the
Contract owner is a natural person). You may designate a joint Annuitant, who is
a second person on whose life income payments depend. We permit joint Annuitants
only on or after the Payout Start Date. If the Annuitant dies prior to the
Payout Start Date, the new Annuitant will be:
(i) the youngest Contract owner; otherwise,
(ii) the youngest Beneficiary.
BENEFICIARY
The Beneficiary is the person who may elect to receive the death benefit or
become the new Contract owner if the sole surviving Contract owner dies before
the Payout Start Date. If the sole surviving Contract owner dies after the
Payout Start Date, the Beneficiary will receive any guaranteed income payments
scheduled to continue.
You may name one or more Beneficiaries when you apply for a Contract. You may
change or add Beneficiaries at any time, unless you have designated an
irrevocable Beneficiary. We will provide a change of Beneficiary form to be
signed and filed with us. Any change will be effective at the time you sign the
written notice. Until we receive your written notice to change a Beneficiary, we
are entitled to rely on the most recent Beneficiary information in our files. We
will not be liable as to any payment or settlement made prior to receiving the
written notice. Accordingly, if you wish to change your Beneficiary, you should
deliver your written notice to us promptly.
If you did not name a Beneficiary or, unless otherwise provided in the
Beneficiary designation, if a named Beneficiary is no longer living and there
are no other surviving Beneficiaries, the new Beneficiary will be:
- your spouse or, if he or she is no longer alive,
- your surviving children equally, or if you have no surviving children,
- your estate.
If more than one Beneficiary survives you (or survives the Annuitant, if the
Contract owner is not a natural person) we will divide the death benefit among
your Beneficiaries according to your most recent written instructions. If you
have not given us written instructions, we will pay the death benefit in equal
amounts to the surviving Beneficiaries.
MODIFICATION OF THE CONTRACT
Only a Glenbrook officer may approve a change in or waive any provision of the
Contract. Any change or waiver must be in writing. None of our agents has the
authority to change or waive the provisions of the Contract. We may not change
the terms of the Contract without your consent, except to conform the Contract
to applicable law or changes in the law. If a provision of the Contract is
inconsistent with state law, we will follow state law.
ASSIGNMENT
We will not honor an assignment of an interest in a Contract as collateral or
security for a loan. However, you may assign periodic income payments under the
Contract prior to the Payout Start Date. No Beneficiary may assign benefits
under the Contract until they are payable to the Beneficiary. We will not be
bound by any assignment until the assignor signs
13 - PROSPECTUS
<PAGE>
it and files it with us. We are not responsible for the validity of any
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. An assignment may also result in taxes or
tax penalties. YOU SHOULD CONSULT WITH AN ATTORNEY BEFORE TRYING TO ASSIGN YOUR
CONTRACT.
PURCHASES
-------------------------------------------------------------------
MINIMUM PURCHASE PAYMENTS
Your initial purchase payment must be at least $3,000 ($2,000 for a Qualified
Contract). All subsequent purchase payments must be $50 or more. You may make
purchase payments at any time prior to the Payout Start Date. We reserve the
right to limit the maximum amount of purchase payments we will accept.
AUTOMATIC ADDITIONS PROGRAM
You may make subsequent purchase payments by automatically transferring money
from your bank account. Consult your representative for more detailed
information.
ALLOCATION OF PURCHASE PAYMENTS
At the time you apply for a Contract, you must decide how to allocate your
purchase payments among the investment alternatives. The allocation you specify
on your application will be effective immediately. All allocations must be in
whole percents that total 100% or in whole dollars. You can change your
allocations by notifying us in writing.
We will allocate your purchase payments to the investment alternatives according
to your most recent instructions on file with us. Unless you notify us in
writing otherwise, we will allocate subsequent purchase payments according to
the allocation for the previous purchase payment. We will effect any change in
allocation instructions at the time we receive written notice of the change in
good order.
We will credit the initial purchase payment that accompanies your completed
application to your Contract within 2 business days after we receive the payment
at our home office. If your application is incomplete, we will ask you to
complete your application within 5 business days. If you do so, we will credit
your initial purchase payment to your Contract within that 5 business day
period. If you do not, we will return your purchase payment at the end of the 5
business day period unless you expressly allow us to hold it until you complete
the application. We will credit subsequent purchase payments to the Contract at
the close of the business day on which we receive the purchase payment at our
home office.
We are open for business each day Monday through Friday that the New York Stock
Exchange is open for business. We also refer to these days as "VALUATION DATES."
Our business day closes when the New York Stock Exchange closes, usually 4 p.m.
Eastern Time (3 p.m. Central Time). If we receive your purchase payment after
3 p.m. Central Time on any Valuation Date, we will credit your purchase payment
using the Accumulation Unit Values computed on the next Valuation Date.
RIGHT TO CANCEL
You may cancel the Contract by returning it to us within the Cancellation
Period, which is the 20 day period after you receive the Contract, or a longer
period should your state require it. You may return it by delivering it or
mailing it to us. If you exercise this "RIGHT TO CANCEL," the Contract
terminates and we will pay you the full amount of your purchase payments
allocated to the Fixed Account. We also will return your purchase payments
allocated to the Variable Account adjusted, to the extent federal or state law
permits, to reflect investment gain or loss that occurred from the date of
allocation through the date of cancellation. Some states may require us to
return a greater amount to you.
In states where we are required to refund purchase payments, we reserve the
right during the Cancellation Period to invest any purchase payments you
allocated to a Variable Sub-Account to the Money Market Variable Sub-Account
available under the Contract. We will notify you if we do so. At the end of the
Cancellation Period, you may then allocate your money to other Variable
Sub-Accounts.
14 - PROSPECTUS
<PAGE>
CONTRACT VALUE
-------------------------------------------------------------------
Your Contract Value at any time during the Accumulation Phase is equal to the
sum of the value of your Accumulation Units in the Variable Sub-Accounts you
have selected, plus the value of your investment in the Fixed Account Options.
ACCUMULATION UNITS
To determine the number of Accumulation Units of each Variable Sub-Account to
credit to your Contract, we divide (i) the amount of the purchase payment or
transfer you have allocated to a Variable Sub-Account by (ii) the Accumulation
Unit Value of that Variable Sub-Account next computed after we receive your
payment or transfer. For example, if we receive a $10,000 purchase payment
allocated to a Variable Sub-Account when the Accumulation Unit Value for the
Sub-Account is $10, we would credit 1,000 Accumulation Units of that Variable
Sub-Account to your Contract. Withdrawals and transfers from a Variable
Sub-Account would, of course, reduce the number of Accumulation Units of that
Sub-Account allocated to your Contract.
ACCUMULATION UNIT VALUE
As a general matter, the Accumulation Unit Value for each Variable Sub-Account
will rise or fall to reflect:
- changes in the share price of the Portfolio in which the Variable Sub-Account
invests, and
- the deduction of amounts reflecting the mortality and expense risk charge,
administrative expense charge, and any provision for taxes that have accrued
since we last calculated the Accumulation Unit Value.
We determine contract maintenance charges, withdrawal charges, and transfer fees
(currently waived) separately for each Contract. They do not affect Accumulation
Unit Value. Instead, we obtain payment of those charges and fees by redeeming
Accumulation Units. For details on how we calculate Accumulation Unit Value,
please refer to the Statement of Additional Information.
We determine a separate Accumulation Unit Value for each Variable Sub-Account on
each Valuation Date. We also determine a separate set of Accumulation Unit
Values reflecting the cost of the Enhanced Death Benefit Rider and the Enhanced
Death and Income Benefit Combination Rider described on pages 27-28.
YOU SHOULD REFER TO THE PROSPECTUSES FOR THE FUNDS THAT ACCOMPANY THIS
PROSPECTUS FOR A DESCRIPTION OF HOW THE ASSETS OF EACH PORTFOLIO ARE VALUED,
SINCE THAT DETERMINATION DIRECTLY BEARS ON THE ACCUMULATION UNIT VALUE OF THE
CORRESPONDING VARIABLE SUB-ACCOUNT AND, THEREFORE, YOUR CONTRACT VALUE.
15 - PROSPECTUS
<PAGE>
INVESTMENT ALTERNATIVES: THE VARIABLE SUB-ACCOUNTS
-------------------------------------------------------------------
You may allocate your purchase payments to up to 38 Variable Sub-Accounts. Each
Variable Sub-Account invests in the shares of a corresponding Portfolio. Each
Portfolio has its own investment objective(s) and policies. We briefly describe
the Portfolios below.
For more complete information about each Portfolio, including expenses and risks
associated with the Portfolio, please refer to the accompanying prospectuses for
the Funds. You should carefully review the Fund prospectuses before allocating
amounts to the Variable Sub-Accounts.
<TABLE>
<CAPTION>
Portfolio: Each Portfolio Seeks: Investment Advisor:
<S> <C> <C>
AIM VARIABLE INSURANCE FUNDS*
AIM V.I. Balanced Fund As high a total return as possible, consistent
with preservation of capital
AIM V.I. Capital Appreciation Fund Growth of capital
AIM V.I. Diversified Income Fund A high level of current income
AIM V.I. Global Utilities Fund A high level of current income and secondarily,
growth of capital
A I M Advisors, Inc.
AIM V.I. Government Securities Fund A high level of current income consistent with
a reasonable concern for safety of principal
AIM V.I. Growth Fund Growth of capital
AIM V.I. Growth and Income Fund Growth of capital with a secondary objective of
current income
AIM V.I. High Yield Fund A high level of current income
AIM V.I. International Equity Fund Long-term growth of capital
AIM V.I. Value Fund Long-term growth of capital and income as a
secondary objective
THE DREYFUS SOCIALLY RESPONSIBLE GROWTH FUND, INC.; THE DREYFUS STOCK INDEX FUND; AND THE DREYFUS VARIABLE INVESTMENT FUND
(VIF) (COLLECTIVELY, THE DREYFUS FUNDS)
The Dreyfus Socially Responsible Growth Capital growth and, secondarily, current income
Fund, Inc.
Dreyfus Stock Index Fund To match the total return of the Standard &
Poor's 500 Composite Stock Price Index
Dreyfus VIF Growth & Income Portfolio Long-term capital growth, current income and
growth of income, consistent with reasonable
investment risk
The Dreyfus Corporation
Dreyfus VIF Money Market Portfolio A high level of current income as is consistent
with the preservation of capital and the
maintenance of liquidity
Dreyfus VIF Small Company Stock Portfolio Investment returns (consisting of capital
appreciation and income) that are greater than
the total return performance of stocks
represented by the Russell 2500-TM- Stock Index
("Russell 2500")
FIDELITY VARIABLE INSURANCE PRODUCTS FUND
Fidelity VIP Equity-Income Portfolio Reasonable income
Fidelity VIP Growth Portfolio Capital appreciation
Fidelity Management &
Fidelity VIP High Income Portfolio High level of current income while also Research Company
considering growth of capital
Fidelity VIP Contrafund-Registered Trademark- Long-term capital appreciation
Portfolio
GOLDMAN SACHS VARIABLE INSURANCE TRUST (VIT)
Goldman Sachs VIT Capital Growth Fund Long-term growth of capital
Goldman Sachs VIT CORE-SM- Small Cap Equity Long-term growth of capital
Fund
Goldman Sachs Asset
Goldman Sachs VIT CORE-SM- U.S. Equity Fund Long-term growth of capital and dividend income
Management
Goldman Sachs VIT Global Income Fund A high total return, emphasizing current income
and, to a lesser extent providing opportunities
for capital appreciation
Goldman Sachs VIT Growth and Income Fund Long-term growth of capital and growth of
income
Goldman Sachs VIT International Equity Fund Long-term capital appreciation Goldman Sachs Asset
Management International
</TABLE>
16 - PROSPECTUS
<PAGE>
<TABLE>
<CAPTION>
Portfolio: Each Portfolio Seeks: Investment Advisor:
<S> <C> <C>
MFS-REGISTERED TRADEMARK- VARIABLE INSURANCE TRUST-SM-
MFS Emerging Growth Series Long-term growth of capital Massachusetts Financial
Services
MFS Growth with Income Series Reasonable current income and long-term growth
of capital and income
MFS New Discovery Series Capital appreciation
THE UNIVERSAL INSTITUTIONAL FUNDS, INC.**
Morgan Stanley UIF Equity Growth Long-term capital appreciation Morgan Stanley Asset
Management
Morgan Stanley UIF Fixed Income Above-average total return over a market cycle Miller Anderson & Sherrerd,
of three to five years LLP
Morgan Stanley UIF Global Equity Long-term capital appreciation Morgan Stanley Asset
Management
Morgan Stanley UIF International Magnum Long-term capital appreciation Morgan Stanley Asset
Management
Morgan Stanley UIF Mid Cap Value Above-average total return over a market cycle Miller Anderson & Sherrerd,
of three to five years LLP
Morgan Stanley UIF U.S. Real Estate Above-average current income and long-term Morgan Stanley Asset
capital appreciation Management
Morgan Stanley UIF Value Above-average total return over a market cycle Miller Anderson & Sherrerd,
of three to five years LLP
NEUBERGER BERMAN ADVISERS MANAGEMENT TRUST
Neuberger Berman AMT Guardian Long-term growth of capital; current income is Neuberger Berman Management
a secondary goal Inc.
Neuberger Berman AMT Mid-Cap Growth Growth of capital
Neuberger Berman AMT Partners Growth of capital
</TABLE>
*A portfolio's investment objective may be changed by the Fund's Board of
Trustees without shareholders approval.
**Formerly, the Morgan Stanley Dean Witter Universal Funds, Inc.
VARIABLE INSURANCE TRUST PORTFOLIOS MAY NOT BE MANAGED BY THE SAME PORTFOLIO
MANAGERS WHO MANAGE RETAIL MUTUAL FUNDS WITH SIMILAR NAMES. THESE PORTFOLIOS ARE
LIKELY TO DIFFER FROM RETAIL FUNDS IN ASSETS, CASH FLOW, AND TAX MATTERS.
ACCORDINGLY, THE HOLDINGS AND INVESTMENT RESULTS OF A PORTFOLIO CAN BE EXPECTED
TO BE HIGHER OR LOWER THAN THE INVESTMENT RESULTS OF RETAIL MUTUAL FUNDS.
17 - PROSPECTUS
<PAGE>
INVESTMENT ALTERNATIVES: THE FIXED ACCOUNT OPTIONS
-------------------------------------------------------------------
You may allocate all or a portion of your purchase payments to the Fixed
Account. You may choose from among 3 Fixed Account Options including 2 dollar
cost averaging options and the option to invest in one or more Guarantee Periods
included in the Guaranteed Maturity Fixed Account. The Fixed Account Options may
not be available in all states. Please consult with your representative for
current information. The Fixed Account supports our insurance and annuity
obligations. The Fixed Account consists of our general assets other than those
in segregated asset accounts. We have sole discretion to invest the assets of
the Fixed Account, subject to applicable law. Any money you allocate to a Fixed
Account Option does not entitle you to share in the investment experience of the
Fixed Account.
DOLLAR COST AVERAGING FIXED ACCOUNT OPTIONS
DOLLAR COST AVERAGING FIXED ACCOUNT OPTION. Purchase payments that you allocate
to the DOLLAR COST AVERAGING FIXED ACCOUNT OPTION ("DCA FIXED ACCOUNT OPTION")
will earn interest for a one year period at the current rate in effect at the
time of allocation. We will credit interest daily at a rate that will compound
over the year to the annual interest rate we guaranteed at the time of
allocation. After the one year period, we will declare a renewal rate which we
guarantee for a full year. Subsequent renewal dates will be every twelve months
for each payment or transfer.
We will follow your instructions in transferring amounts monthly from the DCA
Fixed Account Option. However, you may not choose less than 3 or more than 36
monthly installments. Further, you must transfer each purchase payment and all
its earnings out of this Option by means of dollar cost averaging within 36
months of payment. At the end of 36 months, we will transfer the remaining
payment and associated earnings to the Money Market Variable Sub-Account. No
transfers are permitted into the Dollar Cost Averaging Fixed Account.
SHORT TERM DOLLAR COST AVERAGING FIXED ACCOUNT OPTION. You may establish a Short
Term Dollar Cost Averaging Program by allocating purchase payments to THE SHORT
TERM DOLLAR COST AVERAGING FIXED ACCOUNT OPTION ("SHORT TERM DCA FIXED ACCOUNT
OPTION"). We will credit interest to purchase payments you allocate to this
Option for up to one year at the current rate in effect at the time of
allocation.
We will follow your instructions in transferring amounts monthly from the Short
Term DCA Fixed Account Option. However, you may not choose less than 3 or more
than 12 monthly installments. Further, you must transfer each purchase payment
and all its earnings out of this Option by means of dollar cost averaging within
12 months. If you discontinue the Dollar Cost Averaging Program before the end
of the transfer period, we will transfer the remaining balance in this Option to
the Money Market Variable Sub-Account unless you request a different investment
alternative. No transfers are permitted into the Short Term Dollar Cost
Averaging Fixed Account.
We bear the investment risk for all amounts allocated to the DCA Fixed Account
Option and the Short Term DCA Fixed Account Option. That is because we guarantee
the current and renewal interest rates we credit to the amounts you allocate to
either of these Options, which will never be less than the minimum guaranteed
rate in the Contract. Currently, we determine, in our sole discretion, the
amount of interest credited in excess of the guaranteed rate.
We may declare more than one interest rate for different monies based upon the
date of allocation to the DCA Fixed Account Option and the Short Term DCA Fixed
Account Option. For current interest rate information, please contact your
representative or our customer support unit at 1-800-755-5275.
GUARANTEE PERIODS
Each payment or transfer allocated to a Guarantee Period earns interest at a
specified rate that we guarantee for a period of years. Guarantee Periods may
range from 1 to 10 years. We are currently offering Guarantee Periods of 1, 3,
5, 7, and 10 years in length. In the future we may offer Guarantee Periods of
different lengths or stop offering some Guarantee Periods.
You select the Guarantee Period for each payment or transfer. If you do not
select a Guarantee Period, we will assign the same period(s) you selected for
your most recent purchase payment(s).
Each payment or transfer allocated to a Guarantee Period must be at least $50.
We reserve the right to limit the number of additional purchase payments that
you may allocate to this Option.
INTEREST RATES. We will tell you what interest rates and Guarantee Periods we
are offering at a particular time. We will not change the interest rate that we
credit to a particular allocation until the end of the relevant Guarantee
Period. We may declare different interest rates for Guarantee Periods of the
same length that begin at different times.
We have no specific formula for determining the rate of interest that we will
declare initially or in the future. We will set those interest rates based on
investment returns available at the time of the determination. In addition, we
may consider various other factors in determining interest rates including
regulatory and tax requirements, our sales commission and administrative
expenses, general economic trends, and competitive factors. WE DETERMINE THE
INTEREST RATES TO BE DECLARED IN OUR SOLE DISCRETION. WE CAN NEITHER
18 - PROSPECTUS
<PAGE>
PREDICT NOR GUARANTEE WHAT THOSE RATES WILL BE IN THE FUTURE. For current
interest rate information, please contact your representative or Glenbrook at
1-800-755-5275.
HOW WE CREDIT INTEREST. We will credit interest daily to each amount allocated
to a Guarantee Period at a rate that compounds to the annual interest rate that
we declared at the beginning of the applicable Guarantee Period. The following
example illustrates how a purchase payment allocated to a Guaranteed Period
would grow, given an assumed Guarantee Period and annual interest rate:
<TABLE>
<S> <C>
Purchase Payment......................... $10,000
Guarantee Period......................... 5 years
Annual Interest Rate..................... 4.50%
</TABLE>
<TABLE>
<CAPTION>
END OF CONTRACT YEAR
<S> <C> <C> <C> <C> <C>
YEAR 1 YEAR 2 YEAR 3 YEAR 4 YEAR 5
Beginning Contract Value $10,000.00
X (1 + Annual Interest Rate) X 1.045
----------
$10,450.00
Contract Value at end of Contract Year $10,450.00
X (1 + Annual Interest Rate) X 1.045
----------
$10,920.25
Contract Value at end of Contract Year $10,920.25
X (1 + Annual Interest Rate) X 1.045
----------
$11,411.66
Contract Value at end of Contract Year $11,411.66
X (1 + Annual Interest Rate) X 1.045
----------
$11,925.19
Contract Value at end of Contract Year $11,925.19
X (1 + Annual Interest Rate) X 1.045
----------
$12,461.82
Total Interest Credited During Guarantee Period = $2,461.82 ($12,461.82 - $10,000)
</TABLE>
This example assumes no withdrawals during the entire 5 year Guarantee Period.
If you were to make a withdrawal, you may be required to pay a withdrawal
charge. In addition, the amount withdrawn may be increased or decreased by a
Market Value Adjustment that reflects changes in interest rates since the time
you invested the amount withdrawn. The hypothetical interest rate is for
illustrative purposes only and is not intended to predict future interest rates
to be declared under the Contract. Actual interest rates declared for any given
Guarantee Period may be more or less than shown above.
RENEWALS. Prior to the end of each Guarantee Period, we will mail you a notice
asking you what to do with your money, including the accrued interest. During
the 30-day period after the end of the Guarantee Period, you may:
1. Take no action. We will automatically apply your money to a new Guarantee
Period of the same length as the expiring Guarantee Period. The new Guarantee
Period will begin on the day the previous Guarantee Period ends. The new
interest rate will be our then current declared rate for a Guarantee Period of
that length; or
2. Instruct us to apply your money to one or more new Guarantee Periods of your
choice. The new Guarantee Period(s) will begin on the day the previous Guarantee
Period ends. The new interest rate will be our then current declared rate for
those Guarantee Periods; or
3. Instruct us to transfer all or a portion of your money to one or more
Variable Sub-Accounts of the Variable Account. We will effect the transfer on
the day we receive your instructions. We will not adjust the amount transferred
to include a Market Value Adjustment; or
4. Withdraw all or a portion of your money. You may be required to pay a
withdrawal charge, but we will not adjust the amount withdrawn to include a
Market Value Adjustment. You may also be required to pay premium taxes and
income tax withholding, if applicable. We will pay interest from the day the
Guarantee Period expired until the date of withdrawal. The interest will be the
rate for the shortest Guarantee Period then being offered. Amounts not withdrawn
will be applied to a new Guarantee Period of the same length as the previous
Guarantee Period. The new Guarantee Period will begin on the day the previous
Guarantee Period ends.
MARKET VALUE ADJUSTMENT. All withdrawals and transfers from a Guarantee Period,
other than those taken during the 30 day period after such Guarantee Period
expires, are subject to a Market Value Adjustment. A Market Value Adjustment
also may apply upon payment of a death benefit and when you apply amounts
currently invested in a
19 - PROSPECTUS
<PAGE>
Guarantee Period to an Income Plan (unless paid or applied during the 30-day
period after such Guarantee Period expires). We also will not apply a Market
Value Adjustment to a withdrawal you make:
- within the Free Withdrawal Amount as described on page 22,
- that qualify for one of the waivers as described on page 23,
- to satisfy the IRS minimum distribution rules for the Contract, or
- a single withdrawal made by a surviving spouse made within one year after
continuing the Contract.
We apply the Market Value Adjustment to reflect changes in interest rates from
the time you first allocate money to a Guarantee Period to the time you remove
it from that Guarantee Period. We calculate the Market Value Adjustment by
comparing the TREASURY RATE for a period equal to the Guarantee Period at its
inception to the Treasury Rate for a period equal to the Guarantee Period when
you remove your money. "Treasury Rate" means the U.S. Treasury Note Constant
Maturity Yield as reported in Federal Reserve Bulletin Release H.15.
The Market Value Adjustment may be positive or negative, depending on changes in
interest rates. As such, you bear the investment risk associated with changes in
interest rates. If interest rates increase significantly, the Market Value
Adjustment and any withdrawal charge, premium taxes, and income tax withholding
(if applicable) could reduce the amount you receive upon full withdrawal from a
Guaranteed Period to an amount that is less than the purchase payment applied to
that period plus interest earned under the Contract.
Generally, if the original Treasury Rate at the time you allocate money to a
Guarantee Period is higher than the applicable current Treasury Rate for a
period equal to the Guarantee Period, then the Market Value Adjustment will
result in a higher amount payable to you, transferred or applied to an Income
Plan. Conversely, if the Treasury Rate at the time you allocate money to a
Guarantee Period is lower than the applicable Treasury Rate for a period equal
to the Guarantee Period, then the Market Value Adjustment will result in a lower
amount payable to you, transferred or applied to an Income Plan.
For example, assume that you purchase a Contract and you select an initial
Guarantee Period of 5 years and the 5 year Treasury Rate for that duration is
4.50%. Assume that at the end of 3 years, you make a partial withdrawal. If, at
that later time, the current 5 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 you. Conversely, if the current 5 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 you.
The formula for calculating Market Value Adjustments is set forth in Appendix B
to this prospectus, which also contains additional examples of the application
of the Market Value Adjustment.
INVESTMENT ALTERNATIVES: TRANSFERS
-------------------------------------------------------------------
TRANSFERS DURING THE ACCUMULATION PHASE
During the Accumulation Phase, you may transfer Contract Value among the
investment alternatives. You may not transfer Contract Value to either the
Short-Term Dollar Cost Averaging Fixed Account or the Dollar Cost Averaging
Fixed Account Options. You may request transfers in writing on a form that we
provided or by telephone according to the procedure described below. The minimum
amount that you may transfer into a Guarantee Period is $50. We currently do not
assess, but reserve the right to assess, a $10 charge on each transfer in excess
of 12 per Contract Year. All transfers to or from more than one Portfolio on any
given day counts as one transfer.
We will process transfer requests that we receive before 3:00 p.m. Central Time
on any Valuation Date using the Accumulation Unit Values for that Date. We will
process requests completed after 3:00 p.m. Central Time on any Valuation Date
using the Accumulation Unit Values for the next Valuation Date. The Contract
permits us to defer transfers from the Fixed Account for up to six months from
the date we receive your request. If we decide to postpone transfers for 30 days
or more, we will pay interest as required by applicable law. Any interest would
be payable from the date we receive the transfer request to the date we make the
transfer.
If you transfer an amount from a Guarantee Period other than during the 30 day
period after such Guarantee Period expires, we will increase or decrease the
amount by a Market Value Adjustment.
We reserve the right to waive any transfer restrictions.
20 - PROSPECTUS
<PAGE>
TRANSFERS DURING THE PAYOUT PHASE
During the Payout Phase, you may make transfers among the Variable Sub-Accounts
so as to change the relative weighting of the Variable Sub-Accounts on which
your variable income payments will be based. In addition, you will have a
limited ability to make transfers from the Variable Sub-Accounts to increase the
proportion of your income payments consisting of fixed income payments. You may
not, however, convert any portion of your right to receive fixed income payments
into variable income payments.
If you choose an Income Plan that depends on any person's life, you may not make
any transfers for the first 6 months after the Payout Start Date. Thereafter,
you may make transfers among the Variable Sub-Accounts or make transfers from
the Variable Sub-Accounts to increase the proportion of your income payments
consisting of fixed income payments. Your transfers must be at least 6 months
apart.
TELEPHONE TRANSFERS
You may make transfers by telephone by calling 1-800-755-5275. The cut off time
for telephone transfer requests is 3:00 p.m. Central time. In the event that the
New York Stock Exchange closes early, i.e., before 3:00 p.m. Central Time, or in
the event that the Exchange closes early for a period of time but then reopens
for trading on the same day, we will process telephone transfer requests as of
the close of the Exchange on that particular day. We will not accept 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 Exchange.
We may suspend, modify or terminate the telephone transfer privilege at any time
without notice.
We use procedures that we believe provide reasonable assurance that the
telephone transfers are genuine. For example, we tape telephone conversations
with persons purporting to authorize transfers and request identifying
information. Accordingly, we disclaim any liability for losses resulting from
allegedly unauthorized telephone transfers. However, if we do not take
reasonable steps to help ensure that a telephone authorization is valid, we may
be liable for such losses.
DOLLAR COST AVERAGING PROGRAM
Through our Dollar Cost Averaging Program, you may automatically transfer a
fixed dollar amount every month during the Accumulation Phase from the Short
Term Dollar Cost Averaging Fixed Account or the Dollar Cost Averaging Fixed
Account, to any Variable Sub-Account. You may not use the Dollar Cost Averaging
Program to transfer amounts to the Guarantee Periods.
We will not charge a transfer fee for transfers made under this Program, nor
will such transfer count against the 12 transfers you can make each Contract
Year without paying a transfer fee.
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 this Program does not assure you of a greater profit from your
purchases under the Program nor will it prevent or necessarily reduce losses in
a declining market. Call or write us for instructions on how to enroll.
AUTOMATIC PORTFOLIO REBALANCING PROGRAM
Once you have allocated your money among the Variable Sub-Accounts, the
performance of each Sub-Account may cause a shift in the percentage you
allocated to each Sub-Account. If you select our Automatic Portfolio Rebalancing
Program, we will automatically rebalance the Contract Value in each Variable
Sub-Account and return it to the desired percentage allocations. We will not
include money you allocate to the Fixed Account Options in the Automatic
Portfolio Rebalancing Program.
We will rebalance your account each quarter according to your instructions. We
will transfer amounts among the Variable Sub-Accounts to achieve the percentage
allocations you specify. You can change your allocations at any time by
contacting us in writing or by telephone. The new allocation will be effective
with the first rebalancing that occurs after we receive your request. We are not
responsible for rebalancing that occurs prior to receipt of your request.
Example:
Assume that you want your initial purchase payment split among 2 Variable
Sub-Accounts. You want 40% to be in the Fidelity VIP High Income Variable
Sub-Account and 60% to be in the AIM V.I. Growth Variable Sub-Account. Over
the next 2 months the bond market does very well while the stock market
performs poorly. At the end of the first quarter, the Fidelity VIP High
Income Variable Sub-Account now represents 50% of your holdings because of
its increase in value. If you choose to have your holdings rebalanced
quarterly, on the first day of the next quarter, we would sell some of your
units in the Fidelity VIP High Income Variable Sub-Account and use the money
to buy more units in the AIM V.I. Growth Variable Sub-Account so that the
percentage allocations would again be 40% and 60% respectively.
The Automatic Portfolio Rebalancing Program is available only during the
Accumulation Phase. The transfers made under the Program do not count towards
the 12 transfers you can make without paying a transfer fee, and are not subject
to a transfer fee. Portfolio rebalancing is consistent with maintaining your
allocation of investments among market segments, although it is accomplished by
reducing your Contract Value allocated to the better performing segments.
21 - PROSPECTUS
<PAGE>
EXPENSES
-------------------------------------------------------------------
As a Contract owner, you will bear, directly or indirectly, the charges and
expenses described below.
CONTRACT MAINTENANCE CHARGE
During the Accumulation Phase, on each Contract Anniversary, we will deduct a
$35 contract maintenance charge from your Contract Value invested in each
Variable Sub-Account in proportion to the amount invested. If you surrender your
Contract, we will deduct the contract maintenance charge pro rated for the part
of the Contract Year elapsed, unless your Contract qualifies for a waiver,
described below.
The charge is to compensate us for the cost of administering the Contracts and
the Variable Account. Maintenance costs include expenses we incur collecting
purchase payments; keeping records; processing death claims, cash withdrawals,
and policy changes; proxy statements; calculating Accumulation Unit Values and
income payments; and issuing reports to Contract owners and regulatory agencies.
We cannot increase the charge. However, we will waive this charge if, as of the
Contract Anniversary or upon full surrender:
- total purchase payments equal $50,000 or more, or
- all money is allocated to the Fixed Account.
In addition, we will waive the Contract Maintenance Charge if total purchase
payments are $50,000 or more as of the Payout Start Date.
MORTALITY AND EXPENSE RISK CHARGE
We deduct a mortality and expense risk charge daily at an annual rate of 1.05%
of the average daily net assets you have invested in the Variable Sub-Accounts
(1.27% if you select the Enhanced Death Benefit Rider, and 1.49% if you select
the Enhanced Death and Income Benefit Combination Rider). The mortality and
expense risk charge is for all the insurance benefits available with your
Contract (including our guarantee of annuity rates and the death benefits), for
certain expenses of the Contract, and for assuming the risk (expense risk) that
the current charges will be sufficient in the future to cover the cost of
administering the Contract. If the charges under the Contract are not
sufficient, then we will bear the loss. We charge an additional amount for the
Enhanced Death Benefit Rider and the Enhanced Death and Income Benefit
Combination Rider to compensate us for the additional risk that we accept by
providing these options.
We guarantee that we will not raise the mortality and expense risk charge. We
assess the mortality and expense risk charge during both the Accumulation Phase
and the Payout Phase.
ADMINISTRATIVE EXPENSE CHARGE
We deduct an administrative expense charge daily at an annual rate of 0.10% of
the average daily net assets you have invested in the Variable Sub-Accounts. We
intend this charge to cover actual administrative expenses that 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 attributed to that Contract. We
assess this charge each day during the Accumulation Phase and the Payout Phase.
We guarantee that we will not raise this charge.
TRANSFER FEE
We do not currently impose a fee upon transfers among the investment
alternatives. However, we reserve the right to charge $10 per transfer after the
12th transfer in each Contract Year. We will not charge a transfer fee on
transfers that are part of a Dollar Cost Averaging or Automatic Portfolio
Rebalancing Program.
WITHDRAWAL CHARGE
We may assess a withdrawal charge of up to 6% of the purchase payment(s) you
withdraw. The charge declines to 0% over a 6 year period that begins on the day
we receive your payment. A schedule showing how the charge declines is shown on
page 7. During each Contract Year, you can withdraw up to 15% of the aggregate
amount of your purchase payments without paying the charge. Unused portions of
this "Free Withdrawal Amount" are not carried forward to future Contract Years.
We will deduct withdrawal charges, if applicable, from the amount paid.
For purposes of calculating the withdrawal charge, we will treat withdrawals as
coming from the oldest purchase payments first. However, for federal income tax
purposes, please note that withdrawals are considered to have come first from
earnings, which means you pay taxes on the earnings portion of your withdrawal.
We do not apply a withdrawal charge in the following situations:
- on the Payout Start Date (a withdrawal charge may apply if you terminate
income payments to be received for a specified period;
- withdrawals taken to satisfy IRS minimum distribution rules for the Contract;
or
- withdrawals that qualify for one of the waivers as described below.
22 - PROSPECTUS
<PAGE>
We use the amounts obtained from the withdrawal charge to pay sales commissions
and other promotional or distribution expenses associated with marketing the
Contracts. To the extent that the withdrawal charge does not cover all sales
commissions and other promotional or distribution expenses, we may use any of
our corporate assets, including potential profit which may arise from the
mortality and expense risk charge or any other charges or fee described above,
to make up any difference.
Withdrawals also may be subject to tax penalties or income tax and a Market
Value Adjustment. You should consult your own tax counsel or other tax advisers
regarding any withdrawals.
CONFINEMENT WAIVER. We will waive the withdrawal charge and any Market Value
Adjustment on all withdrawals taken prior to the Payout Start Date under your
Contract if the following conditions are satisfied:
1. You or the Annuitant, if the Contract owner is not a natural person, are
confined to a long term care facility or a hospital for at least 90 consecutive
days. You or the Annuitant must enter the long term care facility or hospital at
least 30 days after the Issue Date;
2. You request the withdrawal and provide written proof of the stay no later
than 90 days following the end of your or the Annuitant's stay at the long term
care facility or hospital; and
3. A physician must have prescribed the stay and the stay must be medically
necessary (as defined in the Contract).
You may not claim this benefit if you, the Annuitant, or a member of your or the
Annuitant's immediate family, is the physician prescribing your or the
Annuitant's stay in a long term care facility.
TERMINAL ILLNESS WAIVER. We will waive the withdrawal charge and any Market
Value Adjustment on all withdrawals taken prior to the Payout Start Date under
your Contract if:
1. you or the Annuitant (if the Contract owner is not a natural person) are
first diagnosed with a terminal illness at least 30 days after the Issue Date;
and
2. you claim this benefit and deliver adequate proof of diagnosis to us.
UNEMPLOYMENT WAIVER. We will waive the withdrawal charge and any Market Value
Adjustment on one partial or a full withdrawal taken prior to the Payout Start
Date under your Contract, if you meet the following requirements:
1. you or the Annuitant, if the Contract owner is not a natural person, become
unemployed at least one year after the Issue Date;
2. you or the Annuitant, if the Contract owner is not a natural person, receive
unemployment compensation as defined in the Contract for at least 30 days as a
result of that unemployment; and
3. you or the Annuitant, if the Contract owner is not a natural person, claim
this benefit within 180 days of your or the Annuitant's initial receipt of
unemployment compensation.
Please refer to your Contract for more detailed information about the terms and
conditions of these waivers.
The laws of your state may limit the availability of these waivers and may also
change certain terms and/or benefits available under the waivers. You should
consult your Contract for further details on these variations. Also, even if you
do not need to pay our withdrawal charge or a Market Value Adjustment because of
these waivers, you still may be required to pay taxes or tax penalties on the
amount withdrawn. You should consult your tax adviser to determine the effect of
a withdrawal on your taxes.
PREMIUM TAXES
Some states and other governmental entities (e.g., municipalities) charge
premium taxes or similar taxes. We are responsible for paying these taxes and
will deduct them from your Contract Value. Some of these taxes are due when the
Contract is issued, others are due when income payments begin or upon surrender.
Our current practice is not to charge anyone for these taxes until income
payments begin or when a total withdrawal occurs, including payment upon death.
At our discretion, we may discontinue this practice and deduct premium taxes
from the purchase payments. Premium taxes generally range from 0% to 4%,
depending on the state.
At the Payout Start Date, if applicable, we deduct the charge for premium taxes
from each investment alternative in the proportion that the Contract owner's
value in the investment alternative bears to the total Contract Value.
DEDUCTION FOR SEPARATE ACCOUNT INCOME TAXES
We are not currently maintaining a provision for taxes. In the future, however,
we may establish a provision for taxes if we determine, in our sole discretion,
that we will incur a tax as a result of the operation of the Variable Account.
We will deduct for any taxes we incur as a result of the operation of the
Variable Account, whether or not we previously made a provision for taxes and
whether or not it was sufficient. Our status under the Internal Revenue Code is
briefly described in the Statement of Additional Information.
OTHER EXPENSES
Each Portfolio deducts advisory fees and other expenses from its assets. You
indirectly bear the charges and expenses of the Portfolios whose shares are held
by the Variable Sub-
23 - PROSPECTUS
<PAGE>
Accounts. These fees and expenses are described in the accompanying prospectuses
for the Funds. For a summary of current estimates of those charges and expenses,
see page 8. We may receive compensation from the investment advisers or
administrators of the Portfolios in connection with the administrative services
we provide to the Portfolios.
ACCESS TO YOUR MONEY
-------------------------------------------------------------------
You can withdraw some or all of your Contract Value at any time prior to the
Payout Start Date.
The amount payable upon withdrawal is the Contract Value (or portion thereof)
next computed after we receive the request for a withdrawal at our home office,
adjusted by any Market Value Adjustment, less any withdrawal charges, contract
maintenance charges, income tax withholding, penalty tax, and any premium taxes.
We will pay withdrawals from the Variable Account within 7 days of receipt of
the request, subject to postponement in certain circumstances.
You can withdraw money from the Variable Account or the Fixed Account Options.
To complete a partial withdrawal from the Variable Account, we will cancel
Accumulation Units in an amount equal to the withdrawal and any applicable
withdrawal charge and premium taxes.
You must name the investment alternative from which you are taking the
withdrawal. If none is named, then the withdrawal request is incomplete and
cannot be honored.
In general, you must withdraw at least $50 at a time. You also may withdraw a
lesser amount if you are withdrawing your entire interest in a Variable
Sub-Account.
If you request a total withdrawal, we may require you to return your Contract to
us.
POSTPONEMENT OF PAYMENTS
We may postpone the payment of any amounts due from the Variable Account under
the Contract if:
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 SEC; or
3. The SEC permits delay for your protection.
In addition, we may delay payments or transfers from the Fixed Account Options
for up to 6 months (or shorter period if required by law). If we delay payment
for 30 days or more, we will pay interest as required by law.
SYSTEMATIC WITHDRAWAL PROGRAM
You may choose to receive systematic withdrawal payments on a monthly,
quarterly, semi-annual, or annual basis at any time prior to the Payout Start
Date. The minimum amount of each systematic withdrawal is $50. At our
discretion, systematic withdrawals may not be offered in conjunction with the
Dollar Cost Averaging Program or Automatic Portfolio Rebalancing Program.
Depending on fluctuations in the value of the Variable Sub-Accounts and the
value of the Fixed Account Options, systematic withdrawals may reduce or even
exhaust the Contract Value. Income taxes may apply to systematic withdrawals.
Please consult your tax advisor before taking any withdrawal.
We will make systematic withdrawal payments to you or your designated payee. At
our discretion, we may modify or suspend the Systematic Withdrawal Program and
charge a processing fee for the service. If we modify or suspend the Systematic
Withdrawal Program, existing systematic withdrawal payments will not be
affected.
MINIMUM CONTRACT VALUE
If your request for a partial withdrawal would reduce your Contract Value to
less than $2,000, we may treat it as a request to withdraw your entire Contract
Value. Your Contract will terminate if you withdraw all of your Contract Value.
We will, however, ask you to confirm your withdrawal request before terminating
your Contract. If we terminate your Contract, we will distribute to you its
Contract Value, adjusted by any applicable Market Value Adjustment, less
withdrawal and other charges and applicable taxes.
24 - PROSPECTUS
<PAGE>
INCOME PAYMENTS
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PAYOUT START DATE
You select the Payout Start Date in your application. The Payout Start Date is
the day that we apply your money to an Income Plan. The Payout Start Date must
be:
- at least 30 days after the Issue Date; and
- no later than the day the Annuitant reaches age 90, or the 10th Contract
Anniversary, if later.
You may change the Payout Start Date at any time by notifying us in writing of
the change at least 30 days before the scheduled Payout Start Date. Absent a
change, we will use the Payout Start Date stated in your Contract.
INCOME PLANS
An Income Plan is a series of scheduled payments to you or someone you
designate. You may choose and change your choice of Income Plan until 30 days
before the Payout Start Date. If you do not select an Income Plan, we will make
income payments in accordance with Income Plan 1 with guaranteed payments for 10
years.
Three Income Plans are available under the Contract. Each is available to
provide:
- fixed income payments;
- variable income payments; or
- a combination of the two.
The three Income Plans are:
INCOME PLAN 1 -- LIFE INCOME WITH GUARANTEED PAYMENTS. Under this plan, we make
periodic income payments for at least as long as the Annuitant lives. If the
Annuitant dies before we have made all of the guaranteed income payments, we
will continue to pay the remainder of the guaranteed income payments as required
by the Contract.
INCOME PLAN 2 -- JOINT AND SURVIVOR LIFE INCOME WITH GUARANTEED PAYMENTS. Under
this plan, we make periodic income payments for at least as long as either the
Annuitant or the joint Annuitant is alive. If both the Annuitant and the joint
Annuitant die before we have made all of the guaranteed income payments, we will
continue to pay the remainder of the guaranteed income payments as required by
the Contract.
INCOME PLAN 3 -- GUARANTEED PAYMENTS FOR A SPECIFIED PERIOD (5 YEARS TO 30
YEARS). Under this plan, we make periodic income payments for the period you
have chosen. These payments do not depend on the Annuitant's life. You may elect
to receive guaranteed payments for periods ranging from 5 to 30 years. Income
payments for less than 120 months may be subject to a withdrawal charge. We will
deduct the mortality and expense risk charge from the Variable Sub-Account
assets that support variable income payments even though we may not bear any
mortality risk.
The length of any guaranteed payment period under your selected Income Plan
generally will affect the dollar amounts of each income payment. As a general
rule, longer guarantee periods result in lower income payments, all other things
being equal. For example, if you choose an Income Plan with payments that depend
on the life of the Annuitant but with no minimum specified period for guaranteed
payments, the income payments generally will be greater than the income payments
made under the same Income Plan with a minimum specified period for guaranteed
payments.
If you choose Income Plan 1 or 2, or, if available, another Income Plan with
payments that continue for the life of the Annuitant or joint Annuitant, we may
require proof of age and sex of the Annuitant or joint Annuitant before starting
income payments, and proof that the Annuitant or joint Annuitant are alive
before we make each payment. Please note that under such Income Plans, if you
elect to take no minimum guaranteed payments, it is possible that the payee
could receive only 1 income payment if the Annuitant and any joint Annuitant
both die before the second income payment, or only 2 income payments if they die
before the third income payment, and so on.
Generally, you may not make withdrawals after the Payout Start Date. One
exception to this rule applies if you are receiving variable income payments
that do not depend on the life of the Annuitant (such as under Income Plan 3).
In that case you may terminate all or part of 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 associated with the amount withdrawn.
The minimum amount you may withdraw under this feature is $1,000. A withdrawal
charge may apply. We deduct applicable premium taxes from the Contract Value at
the Payout Start Date.
We may make other Income Plans available.
If you elected the Enhanced Death and Income Benefit Combination Option, you may
be able to apply an amount greater than your Contract Value to an Income Plan.
You must apply at least the Contract Value in the Fixed Account on the Payout
Start Date to fixed income payments. If you wish to apply any portion of your
Fixed Account balance to provide variable income payments, you should plan ahead
and transfer that amount to the Variable Sub-Accounts prior to the Payout Start
Date. If you do not tell us how to allocate your Contract Value among fixed and
variable income payments, we will apply your Contract Value in the Variable
Account to variable income payments and your Contract Value in the Fixed Account
to fixed income payments.
We will apply your Contract Value, adjusted by any applicable Market Value
Adjustment, less applicable taxes to your Income Plan on the Payout Start Date.
If the amount
25 - PROSPECTUS
<PAGE>
available to apply under an Income Plan is less than $2,000, or not enough to
provide an initial payment of at least $20, and state law permits, we may:
- pay you the Contract Value, adjusted by any applicable Market Value Adjustment
and less any applicable taxes, in a lump sum instead of the periodic payments
you have chosen; or
- reduce the frequency of your payments so that each payment will be at least
$20.
VARIABLE INCOME PAYMENTS
The amount of your variable income payments depends upon the investment results
of the Variable Sub-Accounts you select, the premium taxes you pay, the age and
sex of the Annuitant, and the Income Plan you choose. We guarantee that the
payments will not be affected by (a) actual mortality experience and (b) the
amount of our administration expenses.
We cannot predict the total amount of your variable income payments. Your
variable income payments may be more or less than your total purchase payments
because (a) variable income payments vary with the investment results of the
underlying Portfolios; and (b) the Annuitant could live longer or shorter than
we expect based on the tables we use.
In calculating the amount of the periodic payments in the annuity tables in the
Contract, we assumed an annual investment rate of 3%. If the actual net
investment return of the Variable Sub-Accounts you choose is less than this
assumed investment rate, then the dollar amount of your variable income payments
will decrease. The dollar amount of your variable income payments will increase,
however, if the actual net investment return exceeds the assumed investment
rate. The dollar amount of the variable income payments stays level if the net
investment return equals the assumed investment rate. Please refer to the
Statement of Additional Information for more detailed information as to how we
determine variable income payments.
FIXED INCOME PAYMENTS
We guarantee income payment amounts derived from any Fixed Account Option for
the duration of the Income Plan. We calculate the fixed income payments by:
1. adjusting the portion of the Contract Value in any Fixed Account Option on
the Payout Start Date by any applicable Market Value Adjustment;
2. deducting any applicable premium tax; and
3. applying the resulting amount to the greater of (a) the appropriate value
from the income payment table in your Contract or (b) such other value as we are
offering at that time.
We may defer making fixed income payments for a period of up to 6 months or any
shorter time state law may require. If we defer payments for 30 days or more, we
will pay interest as required by law from the date we receive the withdrawal
request to the date we make payment.
CERTAIN EMPLOYEE BENEFIT PLANS
The Contracts offered by this prospectus contain income payment tables that
provide for different payments to men and women of the same age, except in
states that require unisex tables. We reserve the right to use income payment
tables that do not distinguish on the basis of sex to the extent permitted by
applicable law. In certain employment-related situations, employers are required
by law to use the same income payment tables for men and women. Accordingly, if
the Contract is to be used in connection with an employment-related retirement
or benefit plan and we do not offer unisex annuity tables in your state, you
should consult with legal counsel as to whether the purchase of a Contract is
appropriate.
DEATH BENEFITS
-------------------------------------------------------------------
We will pay a death benefit prior to the Payout Start Date on:
1. the death of any Contract owner or,
2. the death of the Annuitant, if the Contract is owned by a non-natural person.
We will pay the death benefit to the new Contract owner as determined
immediately after the death. The new Contract owner would be a surviving
Contract owner or, if none, the Beneficiary(ies). In the case of the death of
the Annuitant, we will pay the death benefit to the current Contract owner.
A claim for a distribution on death must include DUE PROOF OF DEATH. We will
accept the following documentation as "Due Proof of Death":
- a certified copy of a death certificate,
- a certified copy of a decree of a court of competent jurisdiction as to the
finding of death, or
26 - PROSPECTUS
<PAGE>
- any other proof acceptable to us.
DEATH BENEFIT AMOUNT
Prior to the Payout Start Date, the death benefit is equal to the greatest of:
1. the Contract Value as of the date we determine the value of the death
benefit, or
2. the SETTLEMENT VALUE (that is, the amount payable on a full withdrawal of
Contract Value) on the date we determine the value of the death benefit, or
3. the Contract Value on each DEATH BENEFIT ANNIVERSARY prior to the date we
determine the death benefit, increased by purchase payments made since that
Death Benefit Anniversary and reduced by an adjustment for any partial
withdrawals since that Death Benefit Anniversary. 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 3
Death Benefit Anniversaries.
The withdrawal adjustment is equal to (a) divided by (b), with the result
multiplied by (c), where:
<TABLE>
<S> <C> <C>
(a) = is the withdrawal amount;
(b) = is the Contract Value immediately
prior to the withdrawal; and
(c) = is the Contract value on the Death
Benefit Anniversary adjusted by any
prior purchase payments or withdrawals
made since that Anniversary.
</TABLE>
We will determine the value of the death benefit as of the end of the Valuation
Date on which we receive a complete request for payment of the death benefit. If
we receive a request after 3 p.m. Central Time on a Valuation Date, we will
process the request as of the end of the following Valuation Date.
ENHANCED DEATH BENEFIT RIDER
If the Contract owner is a living individual, the enhanced death benefit applies
only upon the death of the Contract owner. If the Contract owner is not a living
individual, the enhanced death benefit applies only upon the death of the
Annuitant. For Contracts with the Enhanced Death Benefit Rider, the death
benefit will be the greatest of (1) through (3) above, or (4) the enhanced death
benefit. The enhanced death benefit is equal to the greater of the Enhanced
Death Benefit A or Enhanced Death Benefit B. Enhanced Death Benefit B may not be
available in all states.
That enhanced death benefit will never be greater than the maximum death benefit
allowed by any state nonforfeiture laws that govern the Contract.
ENHANCED DEATH BENEFIT A. At issue, Enhanced Death Benefit A is equal to the
initial purchase payment. After issue, Enhanced Death Benefit A is the greatest
of the ANNIVERSARY VALUES as of the date we determine 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. The adjustment is
equal to (a) divided by (b), and the result multiplied by (c) where:
<TABLE>
<S> <C> <C>
(a) = is the withdrawal amount,
(b) = is the Contract Value immediately
prior to the withdrawal, and
(c) = is the Contract Value on that Contract
Anniversary adjusted by any prior
purchase payments and withdrawals
since that Contract Anniversary.
</TABLE>
We will calculate Anniversary Values for each Contract Anniversary prior to the
oldest Contract owner's or the Annuitant's, if the Contract owner is not a
natural person, 80th birthday.
ENHANCED DEATH BENEFIT B. The Enhanced Death Benefit B is equal to total
purchase payments made reduced by a withdrawal adjustment, as defined below.
Each purchase payment and each withdrawal adjustment will accumulate daily at a
rate equivalent to 5% per year until the earlier of:
- the date we determine the death benefit, or
- the first day of the month following the oldest Contract owner's or, if the
Contract owner is not a natural person, the Annuitant's, 85th birthday.
The adjustment is equal to (a) divided by (b), and the result multiplied by (c)
where:
<TABLE>
<S> <C> <C>
(a) = the withdrawal amount,
(b) = is the Contract Value immediately
prior to the withdrawal, and
(c) = is the most recently calculated
enhanced death benefit.
</TABLE>
ENHANCED DEATH AND INCOME BENEFIT COMBINATION RIDER
You may elect not to choose the Enhanced Death Benefit Rider and may instead
choose the Enhanced Death and Income Benefit Combination Rider.
The enhanced death benefit portion of the Enhanced Death and Income Benefit
Combination Rider is as described above under "Enhanced Death Benefit Rider."
The enhanced income benefit defines a minimum amount applied to the Payout
Phase. This minimum amount is equal
27 - PROSPECTUS
<PAGE>
to the value the enhanced death benefit would be on the Payout Start Date.
The enhanced income benefit will apply if the Contract owner elects a Payout
Start Date that:
- is on or after the tenth Contract Anniversary, and
- is prior to the Annuitant's 90th Birthday.
On the Payout Start Date, you may apply the greater of the Contract Value or the
enhanced income benefit to the Payout Phase of the Contract. No Market Value
Adjustment will be applied to the enhanced income benefit amount. The enhanced
income benefit will only apply if the Income Plan selected provides payments
guaranteed for either a single or joint lives with a period certain of at least:
- 10 years, if the youngest Annuitant's age is 80 or less on the date the amount
is applied; or
- 5 years, if the youngest Annuitant's age is greater than 80 on the date the
amount is applied.
If, however, you apply the Contract Value and not the enhanced income benefit to
the Income Plan, then you may select any Income Plan we offer at that time.
DEATH BENEFIT PAYMENTS
A death benefit will be paid:
1. if the Contract owner elects to receive the death benefit distributed in a
single payment 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. We are currently
waiving the 180 day limit, but we reserve the right to enforce the limitation in
the future.
In any event, the entire value of the Contract must be distributed within 5
years after the date of death unless an Income Plan is elected or a surviving
spouse continues the Contract in accordance with the provisions described below.
If the Contract owner eligible to receive the distribution upon death is not a
natural person, the Contract owner may elect to receive the distribution upon
death in one or more distributions.
If the Contract owner is a natural person, the Contract owner may elect to
receive the distribution upon death either in one or more distributions or by
periodic payments through an Income Plan. Payments from the Income Plan must
begin within one year of the date of death and must be payable throughout:
- the life of the Contract owner; or
- a period not to exceed the life expectancy of the Contract owner; or
- the life of the Contract owner with payments guaranteed to a period not to
exceed the life expectancy of the Contract owner.
If the surviving spouse of the deceased Contract owner is the new Contract
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. If the
Contract is continued in the Accumulation Phase, the surviving spouse may make a
single withdrawal of any amount within 1 year of the date of death without
incurring a withdrawal charge or Market Value Adjustment.
28 - PROSPECTUS
<PAGE>
MORE INFORMATION
-------------------------------------------------------------------
GLENBROOK
Glenbrook is the issuer of the Contract. Glenbrook is a stock life insurance
company organized under the laws of the State of Arizona in 1998. Previously,
Glenbrook was organized under the laws of the State of Illinois in 1992.
Glenbrook was originally organized under the laws of the State of Indiana in
1965. From 1965 to 1983 Glenbrook was known as "United Standard Life Assurance
Company" and from 1983 to 1992 as "William Penn Life Assurance Company of
America."
Glenbrook is currently licensed to operate in the District of Columbia and all
states except New York. We intend to offer the Contract in those jurisdictions
in which we are licensed. Our home office is located at 3100 Sanders Road,
Northbrook, Illinois, 60062.
Glenbrook 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, a stock property-liability insurance company incorporated
under the laws of Illinois. All of the outstanding capital stock of Allstate
Insurance Company is owned by The Allstate Corporation.
Glenbrook and Allstate Life entered into a reinsurance agreement effective
June 5, 1992. Under the reinsurance agreement, Allstate Life reinsures
substantially all of Glenbrook's liabilities under its various insurance
contracts. The reinsurance agreement provides us with financial backing from
Allstate Life. However, it does not create a direct contractual relationship
between Allstate Life and you. In other words, the obligations of Allstate Life
under the reinsurance agreement are to Glenbrook; Glenbrook remains the sole
obligor under the Contract to you.
Several independent rating agencies regularly evaluate life insurers'
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 Glenbrook. A.M. Best Company also assigns Glenbrook the rating
of A+(r) because Glenbrook automatically reinsures all net business with
Allstate Life. Standard & Poor's Insurance Rating Services assigns an AA+ (Very
Strong) financial strength rating and Moody's assigns an Aa2 (Excellent)
financial strength rating to Glenbrook. Glenbrook shares the same ratings of its
parent, Allstate Life. These ratings do not reflect the investment performance
of the Variable Account. We may from time to time advertise these ratings in our
sales literature.
THE VARIABLE ACCOUNT
Glenbrook established the Glenbrook Life Multi-Manager Variable Account on
January 15, 1996. We have registered the Variable Account with the SEC as a unit
investment trust. The SEC does not supervise the management of the Variable
Account or Glenbrook.
We own the assets of the Variable Account. The Variable Account is a segregated
asset account under Arizona law. That means we account for the Variable
Account's income, gains and losses separately from the results of our other
operations. It also means that only the assets of the Variable Account that are
in excess of the reserves and other Contract liabilities with respect to the
Variable Account are subject to liabilities relating to our other operations.
Our obligations arising under the Contracts are general corporate obligations of
Glenbrook.
The Variable Account consists of 62 Variable Sub-Accounts. Each Variable
Sub-Account invests in a corresponding Portfolio. We may add new Variable
Sub-Accounts or eliminate one or more of them, if we believe marketing, tax, or
investment conditions so warrant. We may also add other Variable Sub-Accounts
that may be available under other variable annuity contracts. We do not
guarantee the investment performance of the Variable Account, its Sub-Accounts
or the Portfolios. We may use the Variable Account to fund our other annuity
contracts. We will account separately for each type of annuity contract funded
by the Variable Account.
THE PORTFOLIOS
DIVIDENDS AND CAPITAL GAIN DISTRIBUTIONS. We automatically reinvest all
dividends and capital gains distributions from the Portfolios in shares of the
distributing Portfolio at their net asset value.
VOTING PRIVILEGES. As a general matter, you do not have a direct right to vote
the shares of the Portfolios held by the Variable Sub-Accounts to which you have
allocated your Contract Value. Under current law, however, you are entitled to
give us instructions on how to vote those shares on certain matters. Based on
our present view of the law, we will vote the shares of the Portfolios that we
hold directly or indirectly through the Variable Account in accordance with
instructions that we receive from Contract owners entitled to give such
instructions.
As a general rule, before the Payout Start Date, the Contract owner or anyone
with a voting interest is the person entitled to give voting instructions. The
number of shares that a person has a right to instruct will be determined by
dividing the Contract Value allocated to the applicable Variable Sub-Account by
the net asset value per share of the corresponding Portfolio as of the record
date of the meeting. After the Payout Start Date the person receiving income
payments has the voting interest. The payee's number of votes will be determined
by dividing the reserve for such Contract allocated to the applicable Variable
Sub-Account by the net asset value per share of the corresponding Portfolio. The
29 - PROSPECTUS
<PAGE>
votes decrease as income payments are made and as the reserves for the Contract
decrease.
We will vote shares attributable to Contracts for which we have not received
instructions, as well as shares attributable to us, in the same proportion as we
vote shares for which we have received instructions, unless we determine that we
may vote such shares in our own discretion. We will apply voting instructions to
abstain on any item to be voted upon on a pro-rata basis to reduce the votes
eligible to be cast.
We reserve the right to vote Portfolio shares as we see fit without regard to
voting instructions to the extent permitted by law. If we disregard voting
instructions, we will include a summary of that action and our reasons for that
action in the next semi-annual financial report we send to you.
CHANGES IN PORTFOLIOS. If the shares of any of the Portfolios are no longer
available for investment by the Variable Account or if, in our judgment, further
investment in such shares is no longer desirable in view of the purposes of the
Contract, we may eliminate that Portfolio and substitute shares of another
eligible investment fund. Any substitution of securities will comply with the
requirements of the Investment Company Act of 1940. We also may add new Variable
Sub-Accounts that invest in additional mutual funds. We will notify you in
advance of any change.
CONFLICTS OF INTEREST. Certain of the Portfolios sell their shares to separate
accounts underlying both variable life insurance and variable annuity contracts.
It is conceivable that in the future it may be unfavorable for variable life
insurance separate accounts and variable annuity separate accounts to invest in
the same Portfolio. The boards of directors of these Portfolios monitor for
possible conflicts among separate accounts buying shares of the Portfolios.
Conflicts could develop for a variety of reasons. For example, differences in
treatment under tax and other laws or the failure by a separate account to
comply with such laws could cause a conflict. To eliminate a conflict, a
Portfolio's board of directors may require a separate account to withdraw its
participation in a Portfolio. A Portfolio's net asset value could decrease if it
had to sell investment securities to pay redemption proceeds to a separate
account withdrawing because of a conflict.
THE CONTRACT
DISTRIBUTION. ALFS, Inc.* ("ALFS"), located at 3100 Sanders Road, Northbrook, IL
60062-7154, serves as principal underwriter of the Contracts. ALFS is a wholly
owned subsidiary of Allstate Life. ALFS is a registered broker dealer under the
Securities and Exchange Act of 1934, as amended ("EXCHANGE ACT"), and is a
member of the National Association of Securities Dealers, Inc.
We will pay commissions to broker-dealers who sell the contracts. Commissions
paid may vary, but we estimate that the total commissions paid on all Contract
sales will not exceed 8% of all purchase payments. These commissions are
intended to cover distribution expenses. Sometimes, we also pay the
broker-dealer a persistency bonus in addition to the standard commissions. A
persistency bonus is not expected to exceed 0.25%, on an annual basis, of the
Contract Values considered in connection with the bonus. 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 Exchange Act,
pursuant to legal and regulatory exceptions.
Glenbrook does not pay ALFS a commission for distribution of the Contracts. The
underwriting agreement with ALFS provides that we will reimburse ALFS for any
liability to Contract owners arising out of services rendered or Contracts
issued.
ADMINISTRATION. We have primary responsibility for all administration of the
Contracts and the Variable Account. We provide the following administrative
services, among others:
- issuance of the Contracts;
- maintenance of Contract owner records;
- Contract owner services;
- calculation of unit values;
- maintenance of the Variable Account; and
- preparation of Contract owner reports.
We will send you Contract statements and transaction confirmations at least
annually. You should notify us promptly in writing of any address change. You
should read your statements and confirmations carefully and verify their
accuracy. You should contact us promptly if you have a question about a periodic
statement. We will investigate all complaints and make any necessary adjustments
retroactively, but you must notify us of a potential error within a reasonable
time after the date of the questioned statement. If you wait too long, we
reserve the right to make the adjustment as of the date that we receive notice
of the potential error.
We also will provide you with additional periodic and other reports, information
and prospectuses as may be required by federal securities laws.
------------------------
*Effective May 1, 2000, Allstate Life Financial Services, Inc. was renamed ALFS,
Inc.
30 - PROSPECTUS
<PAGE>
QUALIFIED PLANS
If you use the Contract within a qualified plan, the plan may impose different
or additional conditions or limitations on withdrawals, waivers of withdrawal
charges, death benefits, Payout Start Dates, income payments, and other Contract
features. In addition, adverse tax consequences may result if qualified plan
limits on distributions and other conditions are not met. Please consult your
qualified plan administrator for more information.
LEGAL MATTERS
Freedman, Levy, Kroll & Simonds, Washington, D.C., has advised Glenbrook on
certain federal securities law matters. All matters of state insurance law
pertaining to the Contracts, including the validity of the Contracts and
Glenbrook's right to issue such Contracts under state insurance law, have been
passed upon by Michael J. Velotta, General Counsel of Glenbrook.
YEAR 2000
Glenbrook is heavily dependent upon complex computer systems for all phases of
its operations, including customer service, and policy and contract
administration. Since many of Glenbrook's older computer software programs
recognize only the last two digits of the year in any date, some software may
have failed to operate properly in or after the year 1999, if the software was
not reprogrammed or replaced ("YEAR 2000 ISSUE"). Glenbrook believes that many
of its counterparties and suppliers also had potential Year 2000 Issues which
could affect Glenbrook. In 1995, Allstate Insurance Company commenced a four
phase plan intended to mitigate and/or prevent the adverse effects of Year 2000
Issues. These strategies included 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 included Glenbrook actively working with its major
external counterparties and suppliers to assess their compliance efforts and
Glenbrook's exposure to them. Because of the accuracy of this plan, and its
timely completion, Glenbrook has experienced no material impacts on its results
of operations, liquidity or financial position due to the Year 2000 issue. Year
2000 costs are expensed as incurred.
TAXES
-------------------------------------------------------------------
THE FOLLOWING DISCUSSION IS GENERAL AND IS NOT INTENDED AS TAX ADVICE. GLENBROOK
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 your individual circumstances.
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, you are not taxed on increases in the Contract Value
until a distribution occurs. This rule applies only where:
1. the Contract owner is a natural person,
2. the investments of the Variable Account are "adequately diversified"
according to Treasury Department regulations, and
3. Glenbrook is considered the owner of the Variable Account assets for federal
income tax purposes.
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. The income on such contracts
is taxed as ordinary income received or accrued by the owner during the taxable
year. Please see the Statement of Additional Information for a discussion of
several exceptions to the general rule for Contracts owned by non-natural
persons.
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" consistent with standards under Treasury Department
regulations. If the investments in the Variable Account are not adequately
diversified, the Contract will not be treated as an annuity contract for federal
income tax purposes. As a result, the income on the Contract will be taxed as
ordinary income received or accrued by the Contract owner during the taxable
year. Although Glenbrook does not have control over the Portfolios or their
investments, we expect the Portfolios to meet the diversification requirements.
OWNERSHIP TREATMENT. The IRS has stated that you will be considered the owner of
Variable Account assets if you possess 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, the Treasury Department announced
that the regulations do not provide guidance concerning circumstances in which
investor control of separate account investments may cause an investor to be
31 - PROSPECTUS
<PAGE>
treated as the owner of the separate account. The Treasury Department also
stated that future guidance would be issued regarding the extent that owners
could direct sub-account investments without being treated as owners of the
underlying assets of the separate account.
Your rights under the Contract are different than those described by the IRS in
rulings in which it found that contract owners were not owners of separate
account assets. For example, you have the choice to allocate premiums and
Contract Values among more investment alternatives. Also, you may be able to
transfer among investment alternatives more frequently than in such rulings.
These differences could result in you being treated as the owner of the Variable
Account. If this occurs, income and gain from the Variable Account assets would
be includible in your gross income. Glenbrook does not know what standards will
be set forth in any regulations or rulings which the Treasury Department may
issue. It is possible that future standards announced by the Treasury Department
could adversely affect the tax treatment of your Contract. We reserve the right
to modify the Contract as necessary to attempt to prevent you from being
considered the federal tax owner of the assets of the Variable Account. However,
we make no guarantee that such modification to the Contract will be successful.
TAXATION OF PARTIAL AND FULL WITHDRAWALS. If you make a partial withdrawal under
a non-Qualified Contract, amounts received are taxable to the extent the
Contract Value, without regard to surrender charges, exceeds the investment in
the Contract. The investment in the Contract is the gross premium paid for the
Contract minus any amounts previously received from the Contract if such amounts
were properly excluded from your gross income. If you make 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, is excluded from your income. If you make 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.
"Nonqualified distributions" from Roth IRAs are treated as made from
contributions first and are included in gross income only to the extent that
distributions exceed contributions. "Qualified distributions" from Roth IRAs are
not included in gross income. "Qualified distributions" are any distributions
made more than 5 taxable years after the taxable year of the first contribution
to any Roth IRA and which are:
- made on or after the date the individual attains age 59 1/2,
- made to a beneficiary after the Contract owner's death,
- attributable to the Contract owner being disabled, or
- for a first time home purchase (first time home purchases are subject to a
lifetime limit of $10,000).
If you transfer a non-Qualified Contract without full and adequate consideration
to a person other than your spouse (or to a former spouse incident to a
divorce), you will be taxed on the difference between the Contract Value and the
investment in the Contract at the time of transfer. Except for certain Qualified
Contracts, any amount you receive 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.
TAXATION OF ANNUITY PAYMENTS. Generally, the rule for income taxation of annuity
payments received from a non-Qualified Contract provides for the return of your
investment in the Contract in equal tax-free amounts over the payment period.
The balance of each payment received is taxable. For 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. If you elect 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. The annuity payments will be fully taxable
after the total amount of the investment in the Contract is excluded using these
ratios. If you die, and annuity payments cease before the total amount of the
investment in the Contract is recovered, the unrecovered amount will be allowed
as a deduction for your last taxable year.
TAXATION OF ANNUITY DEATH BENEFITS. Death of a Contract owner, or death of the
Annuitant if the Contract is owned by a non-natural person, will cause a
distribution of death benefits from a Contract. Generally, such amounts are
included 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. Please see the Statement of Additional Information
for more detail on distribution at death requirements.
PENALTY TAX ON PREMATURE DISTRIBUTIONS. A 10% penalty tax applies to the taxable
amount of any premature distribution from a non-Qualified Contract. The penalty
tax generally applies to any distribution made prior to the date you attain age
59 1/2. However, no penalty tax is incurred on distributions:
1. made on or after the date the Contract owner attains age 59 1/2;
2. made as a result of the Contract owner's death or disability;
32 - PROSPECTUS
<PAGE>
3. made in substantially equal periodic payments over the Contract owner's life
or life expectancy,
4. made under an immediate annuity, or
5. attributable to investment in the Contract before August 14, 1982.
You should consult a competent tax advisor to determine if any other exceptions
to the penalty apply to your situation. Similar exceptions may apply to
distributions from Qualified Contracts.
AGGREGATION OF ANNUITY CONTRACTS. All non-qualified deferred annuity contracts
issued by Glenbrook (or its affiliates) to the same Contract 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
Contracts may be used as investments with certain qualified plans such as:
- Individual Retirement Annuities or Accounts (IRAs) under Section 408 of the
Code;
- Roth IRAs under Section 408A of the Code;
- Simplified Employee Pension Plans under Section 408(k) of the Code;
- Savings Incentive Match Plans for Employees (SIMPLE) Plans under Section
408(p) of the Code;
- Tax Sheltered Annuities under Section 403(b) of the Code;
- Corporate and Self Employed Pension and Profit Sharing Plans; and
- State and Local Government and Tax-Exempt Organization Deferred Compensation
Plans.
The income on qualified plan and IRA investments is tax deferred and variable
annuities held by such plans do not receive any additional tax deferral. You
should review the annuity features, including all benefits and expenses, prior
to purchasing a variable annuity in a qualified plan or IRA. Glenbrook reserves
the right to limit the availablity of the Contract for use with any of the
Qualified Plans listed above.
In the case of certain 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 Tax Code provides
tax-deferred retirement savings plans for employees of certain non-profit and
educational organizations. Under Section 403(b), any Contract used for a 403(b)
plan must provide that distributions attributable to salary reduction
contributions made after December 31, 1998, and all earnings on salary reduction
contributions, may be made only:
1. on or after the date the employee
- attains age 59 1/2,
- separates from service,
- dies,
- becomes disabled, or
2. 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 Glenbrook is directed to
transfer some or all of the Contract Value to another 403(b) plan.
INCOME TAX WITHHOLDING
Glenbrook is required to withhold federal income tax at a rate of 20% on all
"eligible rollover distributions" unless you elect to make a "direct rollover"
of such amounts to an IRA or eligible retirement plan. 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 over the life (joint lives) of the participant (and
beneficiary).
Glenbrook may be required to withhold federal and state income taxes on any
distributions from non-Qualified Contracts or Qualified Contracts that are not
eligible rollover distributions, unless you notify us of your election to not
have taxes withheld.
33 - PROSPECTUS
<PAGE>
ANNUAL REPORTS AND OTHER DOCUMENTS
-------------------------------------------------------------------
Glenbrook's annual report on Form 10-K for the year ended December 31, 1999 is
incorporated herein by reference, which means that it is legally a part of this
prospectus.
After the date of this prospectus and before we terminate the offering of the
securities under this prospectus, all documents or reports we file with the SEC
under the Exchange Act are also incorporated herein by reference, which means
that they also legally become a part of this prospectus.
Statements in this prospectus, or in documents that we file later with the SEC
and that legally become a part of this prospectus, may change or supersede
statements in other documents that are legally part of this prospectus.
Accordingly, only the statement that is changed or replaced will legally be a
part of this prospectus.
We file our Exchange Act documents and reports, including our annual and
quarterly reports on Form 10-K and Form 10-Q electronically on the SEC's "EDGAR"
system using the identifying number CIK No. 0001007285. The SEC maintains a Web
site that contains reports, proxy and information statements and other
information regarding registrants that file electronically with the SEC. The
address of the site is http://www.sec.gov. You also can view these materials at
the SEC's Public Reference Room at 450 Fifth Street, N.W., Washington, D.C.
20549. For more information on the operations of SEC's Public Reference Room,
call 1-800-SEC-0330.
If you have received a copy of this prospectus, and would like a free copy of
any document incorporated herein by reference (other than exhibits not
specifically incorporated by reference into the text of such documents), please
write or call us at P.O. Box 94042, Palatine, IL 60094
(telephone: 1-800-755-5275).
EXPERTS
The financial statements and related financial statement schedule of Glenbrook
as of December 31, 1999 and 1998 and for each of the three years in the period
ended December 31, 1999, which are incorporated herein by reference, have been
audited by Deloitte & Touche LLP, Independent auditors, as stated in their
report, which are incorporated herein by reference, and are included in reliance
upon the report of such firm given upon their authority as experts in accounting
and auditing.
The financial statements of the Variable Account as of December 31, 1999, and
for each of the periods in the two years then ended that appear in the Statement
of Additional Information have been audited by Deloitte & Touche LLP,
independent auditors, as stated in their report, which are incorporated herein
by reference, and are included in reliance upon the report of such firm given
upon their authority as experts in accounting and auditing.
PERFORMANCE INFORMATION
-------------------------------------------------------------------
We may advertise the performance of the Variable Sub-Accounts, including yield
and total return information. Total return represents the change, over a
specified period of time, in the value of an investment in a Variable
Sub-Account after reinvesting all income distributions. Yield refers to the
income generated by an investment in a Variable Sub-Account over a specified
period.
All performance advertisements will include, as applicable, standardized yield
and total return figures that reflect the deduction of insurance charges, the
contract maintenance charge, and withdrawal charge. Performance advertisements
also may include total return figures that reflect the deduction of insurance
charges, but not the contract maintenance or withdrawal charges. The deduction
of such charges would reduce the performance shown. In addition, performance
advertisements may include aggregate average, year-by-year, or other types of
total return figures.
Performance information for periods prior to the inception date of the Variable
Sub-Accounts will be based on the historical performance of the corresponding
Portfolios for the periods beginning with the inception dates of the Portfolios
and adjusted to reflect current Contract expenses. You should not interpret
these figures to reflect actual historical performance of the Variable Account.
We may include in advertising and sales materials tax deferred compounding
charts and other hypothetical illustrations that compare currently taxable and
tax deferred investment programs based on selected tax brackets. Our
advertisements also may compare the performance of our Variable Sub-Accounts
with: (a) certain unmanaged market indices, including but not limited to the Dow
Jones Industrial Average, the Standard & Poor's 500, and the Shearson Lehman
Bond Index; and/or (b) other management investment companies with investment
objectives similar to the underlying funds being compared. In addition, our
advertisements may include the performance ranking assigned by various
publications, including the Wall Street Journal, Forbes, Fortune, Money,
Barron's, Business Week, USA Today, and statistical services, including Lipper
Analytical Services Mutual Fund Survey, Lipper Annuity and Closed End Survey,
the Variable Annuity Research Data Survey, and SEI.
34 - PROSPECTUS
<PAGE>
APPENDIX A
-------------------------------------------------------------------
ACCUMULATION UNIT VALUE AND NUMBER OF
ACCUMULATION UNITS OUTSTANDING FOR EACH
VARIABLE SUB-ACCOUNT SINCE CONTRACTS
WERE FIRST OFFERED
BASIC POLICY
<TABLE>
<CAPTION>
FOR THE YEARS BEGINNING JANUARY 1* AND ENDED DECEMBER 31. 1998 1999
<S> <C> <C>
-----------------------------------------------------------------------------
AIM V.I. BALANCED SUB-ACCOUNT
-----------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period $10.00 $10.73
-----------------------------------------------------------------------------
Accumulation Unit Value, End of Period $10.73 $12.66
-----------------------------------------------------------------------------
Number of Units Outstanding, End of Period -- 7,487
-----------------------------------------------------------------------------
AIM V.I. CAPITAL APPRECIATION SUB-ACCOUNT
-----------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period $10.00 $11.39
-----------------------------------------------------------------------------
Accumulation Unit Value, End of Period $11.39 $16.29
-----------------------------------------------------------------------------
Number of Units Outstanding, End of Period -- 8,743
-----------------------------------------------------------------------------
AIM V.I. DIVERSIFIED INCOME SUB-ACCOUNT
-----------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period $10.00 $10.22
-----------------------------------------------------------------------------
Accumulation Unit Value, End of Period $10.22 $ 9.91
-----------------------------------------------------------------------------
Number of Units Outstanding, End of Period -- 721
-----------------------------------------------------------------------------
AIM V.I. GLOBAL UTILITIES SUB-ACCOUNT
-----------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period $10.00 $10.73
-----------------------------------------------------------------------------
Accumulation Unit Value, End of Period $10.73 $14.16
-----------------------------------------------------------------------------
Number of Units Outstanding, End of Period -- --
-----------------------------------------------------------------------------
AIM V.I. GOVERNMENT SECURITIES SUB-ACCOUNT
-----------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period $10.00 $10.38
-----------------------------------------------------------------------------
Accumulation Unit Value, End of Period $10.38 $ 9.85
-----------------------------------------------------------------------------
Number of Units Outstanding, End of Period -- --
-----------------------------------------------------------------------------
AIM V.I. GROWTH SUB-ACCOUNT
-----------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period $10.00 $11.83
-----------------------------------------------------------------------------
Accumulation Unit Value, End of Period $11.83 $15.82
-----------------------------------------------------------------------------
Number of Units Outstanding, End of Period -- 13,275
-----------------------------------------------------------------------------
AIM V.I. GROWTH AND INCOME SUB-ACCOUNT
-----------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period $10.00 $11.36
-----------------------------------------------------------------------------
Accumulation Unit Value, End of Period $11.36 $15.09
-----------------------------------------------------------------------------
Number of Units Outstanding, End of Period -- 12,180
-----------------------------------------------------------------------------
AIM V.I. HIGH YIELD SUB-ACCOUNT
-----------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period $10.00 $10.31
-----------------------------------------------------------------------------
Accumulation Unit Value, End of Period $10.31 $11.27
-----------------------------------------------------------------------------
Number of Units Outstanding, End of Period -- 7,387
-----------------------------------------------------------------------------
AIM V.I. INTERNATIONAL EQUITY SUB-ACCOUNT
-----------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period $10.00 $10.68
-----------------------------------------------------------------------------
Accumulation Unit Value, End of Period $10.68 $16.38
-----------------------------------------------------------------------------
Number of Units Outstanding, End of Period -- 0
-----------------------------------------------------------------------------
AIM V.I. VALUE SUB-ACCOUNT
-----------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period $10.00 $11.52
-----------------------------------------------------------------------------
Accumulation Unit Value, End of Period $11.52 $14.80
-----------------------------------------------------------------------------
Number of Units Outstanding, End of Period -- 42,074
-----------------------------------------------------------------------------
</TABLE>
A-1
<PAGE>
<TABLE>
<CAPTION>
FOR THE YEARS BEGINNING JANUARY 1* AND ENDED DECEMBER 31. 1998 1999
<S> <C> <C>
-----------------------------------------------------------------------------
DREYFUS SOCIALLY RESPONSIBLE GROWTH SUB-ACCOUNT
-----------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period $10.00 $10.79
-----------------------------------------------------------------------------
Accumulation Unit Value, End of Period $10.79 $14.40
-----------------------------------------------------------------------------
Number of Units Outstanding, End of Period -- 3,130
-----------------------------------------------------------------------------
DREYFUS STOCK INDEX SUB-ACCOUNT
-----------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period $10.00 $10.87
-----------------------------------------------------------------------------
Accumulation Unit Value, End of Period $10.87 $12.97
-----------------------------------------------------------------------------
Number of Units Outstanding, End of Period -- 9,930
-----------------------------------------------------------------------------
DREYFUS VIF GROWTH & INCOME SUB-ACCOUNT
-----------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period $10.00 $10.65
-----------------------------------------------------------------------------
Accumulation Unit Value, End of Period $10.65 $12.47
-----------------------------------------------------------------------------
Number of Units Outstanding, End of Period -- 2,680
-----------------------------------------------------------------------------
DREYFUS VIF MONEY MARKET SUB-ACCOUNT
-----------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period $10.00 $10.05
-----------------------------------------------------------------------------
Accumulation Unit Value, End of Period $10.05 $10.40
-----------------------------------------------------------------------------
Number of Units Outstanding, End of Period -- --
-----------------------------------------------------------------------------
DREYFUS VIF SMALL COMPANY STOCK SUB-ACCOUNT
-----------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period $10.00 $10.65
-----------------------------------------------------------------------------
Accumulation Unit Value, End of Period $10.65 $11.66
-----------------------------------------------------------------------------
Number of Units Outstanding, End of Period -- 236
-----------------------------------------------------------------------------
FIDELITY VIP CONTRAFUND-Registered Trademark- SUB-ACCOUNT
-----------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period $10.00 $11.66
-----------------------------------------------------------------------------
Accumulation Unit Value, End of Period $11.66 $14.33
-----------------------------------------------------------------------------
Number of Units Outstanding, End of Period -- 18,963
-----------------------------------------------------------------------------
FIDELITY VIP EQUITY-INCOME SUB-ACCOUNT
-----------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period $10.00 $10.48
-----------------------------------------------------------------------------
Accumulation Unit Value, End of Period $10.48 $11.02
-----------------------------------------------------------------------------
Number of Units Outstanding, End of Period -- 30,264
-----------------------------------------------------------------------------
FIDELITY VIP GROWTH SUB-ACCOUNT
-----------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period $10.00 $11.20
-----------------------------------------------------------------------------
Accumulation Unit Value, End of Period $11.20 $15.22
-----------------------------------------------------------------------------
Number of Units Outstanding, End of Period -- 25,821
-----------------------------------------------------------------------------
FIDELITY VIP HIGH INCOME SUB-ACCOUNT
-----------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period $10.00 $10.43
-----------------------------------------------------------------------------
Accumulation Unit Value, End of Period $10.43 $11.16
-----------------------------------------------------------------------------
Number of Units Outstanding, End of Period -- 3,837
-----------------------------------------------------------------------------
GOLDMAN SACHS VIT CAPITAL GROWTH SUB-ACCOUNT
-----------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period $10.00 $11.10
-----------------------------------------------------------------------------
Accumulation Unit Value, End of Period $11.10 $13.99
-----------------------------------------------------------------------------
Number of Units Outstanding, End of Period -- --
-----------------------------------------------------------------------------
GOLDMAN SACHS CORE-SM- SMALL CAP EQUITY SUB-ACCOUNT
-----------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period $10.00 $10.60
-----------------------------------------------------------------------------
Accumulation Unit Value, End of Period $10.60 $12.36
-----------------------------------------------------------------------------
Number of Units Outstanding, End of Period -- 86
-----------------------------------------------------------------------------
</TABLE>
A-2
<PAGE>
<TABLE>
<CAPTION>
FOR THE YEARS BEGINNING JANUARY 1* AND ENDED DECEMBER 31. 1998 1999
<S> <C> <C>
-----------------------------------------------------------------------------
GOLDMAN SACHS VIT CORE-SM- U.S. EQUITY SUB-ACCOUNT
-----------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period $10.00 $10.89
-----------------------------------------------------------------------------
Accumulation Unit Value, End of Period $10.89 $13.46
-----------------------------------------------------------------------------
Number of Units Outstanding, End of Period -- 317
-----------------------------------------------------------------------------
GOLDMAN SACHS GLOBAL INCOME SUB-ACCOUNT
-----------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period $10.00 $ 9.67
-----------------------------------------------------------------------------
Accumulation Unit Value, End of Period $ 9.67 $ 9.92
-----------------------------------------------------------------------------
Number of Units Outstanding, End of Period -- --
-----------------------------------------------------------------------------
GOLDMAN SACHS VIT GROWTH AND INCOME SUB-ACCOUNT
-----------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period $10.00 $ 9.94
-----------------------------------------------------------------------------
Accumulation Unit Value, End of Period $ 9.94 $10.46
-----------------------------------------------------------------------------
Number of Units Outstanding, End of Period -- 637
-----------------------------------------------------------------------------
GOLDMAN SACHS VIT INTERNATIONAL EQUITY SUB-ACCOUNT
-----------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period $10.00 $10.84
-----------------------------------------------------------------------------
Accumulation Unit Value, End of Period $10.84 $14.25
-----------------------------------------------------------------------------
Number of Units Outstanding, End of Period -- --
-----------------------------------------------------------------------------
MFS EMERGING GROWTH SUB-ACCOUNT
-----------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period $10.00 $11.95
-----------------------------------------------------------------------------
Accumulation Unit Value, End of Period $11.95 $20.88
-----------------------------------------------------------------------------
Number of Units Outstanding, End of Period -- 1,059
-----------------------------------------------------------------------------
MFS GROWTH WITH INCOME SUB-ACCOUNT
-----------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period $10.00 $10.81
-----------------------------------------------------------------------------
Accumulation Unit Value, End of Period $10.81 $11.41
-----------------------------------------------------------------------------
Number of Units Outstanding, End of Period -- 6,295
-----------------------------------------------------------------------------
MFS NEW DISCOVERY SUB-ACCOUNT
-----------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period $10.00 $11.38
-----------------------------------------------------------------------------
Accumulation Unit Value, End of Period $11.38 $19.52
-----------------------------------------------------------------------------
Number of Units Outstanding, End of Period -- 183
-----------------------------------------------------------------------------
MORGAN STANLEY UIF EQUITY GROWTH SUB-ACCOUNT
-----------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period $10.00 $10.94
-----------------------------------------------------------------------------
Accumulation Unit Value, End of Period $10.94 $15.09
-----------------------------------------------------------------------------
Number of Units Outstanding, End of Period -- --
-----------------------------------------------------------------------------
MORGAN STANLEY UIF FIXED INCOME SUB-ACCOUNT
-----------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period $10.00 $10.15
-----------------------------------------------------------------------------
Accumulation Unit Value, End of Period $10.15 $ 9.87
-----------------------------------------------------------------------------
Number of Units Outstanding, End of Period -- --
-----------------------------------------------------------------------------
MORGAN STANLEY UIF GLOBAL EQUITY SUB-ACCOUNT
-----------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period $10.00 $10.43
-----------------------------------------------------------------------------
Accumulation Unit Value, End of Period $10.43 $10.73
-----------------------------------------------------------------------------
Number of Units Outstanding, End of Period -- --
-----------------------------------------------------------------------------
MORGAN STANLEY UIF INTERNATIONAL MAGNUM SUB-ACCOUNT
-----------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period $10.00 $10.39
-----------------------------------------------------------------------------
Accumulation Unit Value, End of Period $10.39 $12.85
-----------------------------------------------------------------------------
Number of Units Outstanding, End of Period -- --
-----------------------------------------------------------------------------
</TABLE>
A-3
<PAGE>
<TABLE>
<CAPTION>
FOR THE YEARS BEGINNING JANUARY 1* AND ENDED DECEMBER 31. 1998 1999
<S> <C> <C>
-----------------------------------------------------------------------------
MORGAN STANLEY UIF MID CAP VALUE SUB-ACCOUNT
-----------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period $10.00 $10.96
-----------------------------------------------------------------------------
Accumulation Unit Value, End of Period $10.96 $13.07
-----------------------------------------------------------------------------
Number of Units Outstanding, End of Period -- --
-----------------------------------------------------------------------------
MORGAN STANLEY UIF U.S. REAL ESTATE SUB-ACCOUNT
-----------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period $10.00 $10.18
-----------------------------------------------------------------------------
Accumulation Unit Value, End of Period $10.18 $ 9.91
-----------------------------------------------------------------------------
Number of Units Outstanding, End of Period -- --
-----------------------------------------------------------------------------
MORGAN STANLEY VALUE SUB-ACCOUNT
-----------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period $10.00 $ 9.95
-----------------------------------------------------------------------------
Accumulation Unit Value, End of Period $ 9.95 $ 9.65
-----------------------------------------------------------------------------
Number of Units Outstanding, End of Period -- --
-----------------------------------------------------------------------------
NEUBERGER BERMAN AMT GUARDIAN SUB-ACCOUNT
-----------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period $10.00 $10.81
-----------------------------------------------------------------------------
Accumulation Unit Value, End of Period $10.81 $12.28
-----------------------------------------------------------------------------
Number of Units Outstanding, End of Period -- --
-----------------------------------------------------------------------------
NEUBERGER BERMAN AMT MID CAP GROWTH SUB-ACCOUNT
-----------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period $10.00 $12.13
-----------------------------------------------------------------------------
Accumulation Unit Value, End of Period $12.13 $18.45
-----------------------------------------------------------------------------
Number of Units Outstanding, End of Period -- 296
-----------------------------------------------------------------------------
NEUBERGER BERMAN AMT PARTNERS SUB-ACCOUNT
-----------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period $10.00 $10.31
-----------------------------------------------------------------------------
Accumulation Unit Value, End of Period $10.31 $10.94
-----------------------------------------------------------------------------
Number of Units Outstanding, End of Period -- --
-----------------------------------------------------------------------------
</TABLE>
*The Contracts were first offered on November 10, 1998. The Accumulation Unit
Values in this table reflects a mortality and expense risk charge of 1.05% and
an administrative expense charge of 0.10%. All of the Variable Sub-Accounts
commenced operations on or before November 10, 1998.
A-4
<PAGE>
ACCUMULATION UNIT VALUE AND NUMBER OF
ACCUMULATION UNITS OUTSTANDING FOR EACH
VARIABLE SUB-ACCOUNT SINCE CONTRACTS
WERE FIRST OFFERED
WITH ENHANCED DEATH BENEFIT RIDER
<TABLE>
<CAPTION>
FOR THE YEARS BEGINNING JANUARY 1* AND ENDED DECEMBER 31. 1998 1999
<S> <C> <C>
-----------------------------------------------------------------------------
AIM V.I. BALANCED SUB-ACCOUNT
-----------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period $10.00 $10.73
-----------------------------------------------------------------------------
Accumulation Unit Value, End of Period $10.73 $12.63
-----------------------------------------------------------------------------
Number of Units Outstanding, End of Period -- 16,023
-----------------------------------------------------------------------------
AIM V.I. CAPITAL APPRECIATION SUB-ACCOUNT
-----------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period $10.00 $11.39
-----------------------------------------------------------------------------
Accumulation Unit Value, End of Period $11.39 $16.25
-----------------------------------------------------------------------------
Number of Units Outstanding, End of Period 1,466 17,447
-----------------------------------------------------------------------------
AIM V.I. DIVERSIFIED INCOME SUB-ACCOUNT
-----------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period $10.00 $10.22
-----------------------------------------------------------------------------
Accumulation Unit Value, End of Period $10.22 $ 9.88
-----------------------------------------------------------------------------
Number of Units Outstanding, End of Period -- --
-----------------------------------------------------------------------------
AIM V.I. GLOBAL UTILITIES SUB-ACCOUNT
-----------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period $10.00 $10.72
-----------------------------------------------------------------------------
Accumulation Unit Value, End of Period $10.72 $14.13
-----------------------------------------------------------------------------
Number of Units Outstanding, End of Period -- 154
-----------------------------------------------------------------------------
AIM V.I. GOVERNMENT SECURITIES SUB-ACCOUNT
-----------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period $10.00 $10.38
-----------------------------------------------------------------------------
Accumulation Unit Value, End of Period $10.38 $ 9.83
-----------------------------------------------------------------------------
Number of Units Outstanding, End of Period -- --
-----------------------------------------------------------------------------
AIM V.I. GROWTH SUB-ACCOUNT
-----------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period $10.00 $11.82
-----------------------------------------------------------------------------
Accumulation Unit Value, End of Period $11.82 $15.78
-----------------------------------------------------------------------------
Number of Units Outstanding, End of Period -- 14,400
-----------------------------------------------------------------------------
AIM V.I. GROWTH AND INCOME SUB-ACCOUNT
-----------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period $10.00 $11.36
-----------------------------------------------------------------------------
Accumulation Unit Value, End of Period $11.36 $15.05
-----------------------------------------------------------------------------
Number of Units Outstanding, End of Period -- 16,349
-----------------------------------------------------------------------------
AIM V.I. HIGH YIELD SUB-ACCOUNT
-----------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period $10.00 $10.31
-----------------------------------------------------------------------------
Accumulation Unit Value, End of Period $10.31 $11.25
-----------------------------------------------------------------------------
Number of Units Outstanding, End of Period -- 3,356
-----------------------------------------------------------------------------
AIM V.I. INTERNATIONAL EQUITY SUB-ACCOUNT
-----------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period $10.00 $10.68
-----------------------------------------------------------------------------
Accumulation Unit Value, End of Period $10.68 $16.34
-----------------------------------------------------------------------------
Number of Units Outstanding, End of Period -- 606
-----------------------------------------------------------------------------
AIM V.I. VALUE SUB-ACCOUNT
-----------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period $10.00 $11.52
-----------------------------------------------------------------------------
Accumulation Unit Value, End of Period $11.52 $14.76
-----------------------------------------------------------------------------
Number of Units Outstanding, End of Period -- 35,445
-----------------------------------------------------------------------------
</TABLE>
A-5
<PAGE>
<TABLE>
<CAPTION>
FOR THE YEARS BEGINNING JANUARY 1* AND ENDED DECEMBER 31. 1998 1999
<S> <C> <C>
-----------------------------------------------------------------------------
DREYFUS SOCIALLY RESPONSIBLE GROWTH SUB-ACCOUNT
-----------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period $10.00 $10.78
-----------------------------------------------------------------------------
Accumulation Unit Value, End of Period $10.78 $14.36
-----------------------------------------------------------------------------
Number of Units Outstanding, End of Period -- 1,093
-----------------------------------------------------------------------------
DREYFUS STOCK INDEX SUB-ACCOUNT
-----------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period $10.00 $10.87
-----------------------------------------------------------------------------
Accumulation Unit Value, End of Period $10.87 $12.94
-----------------------------------------------------------------------------
Number of Units Outstanding, End of Period -- 5,556
-----------------------------------------------------------------------------
DREYFUS VIF GROWTH & INCOME SUB-ACCOUNT
-----------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period $10.00 $10.64
-----------------------------------------------------------------------------
Accumulation Unit Value, End of Period $10.64 $12.43
-----------------------------------------------------------------------------
Number of Units Outstanding, End of Period -- --
-----------------------------------------------------------------------------
DREYFUS VIF MONEY MARKET SUB-ACCOUNT
-----------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period $10.00 $10.04
-----------------------------------------------------------------------------
Accumulation Unit Value, End of Period $10.04 $10.38
-----------------------------------------------------------------------------
Number of Units Outstanding, End of Period -- --
-----------------------------------------------------------------------------
DREYFUS VIF SMALL COMPANY STOCK SUB-ACCOUNT
-----------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period $10.00 $10.66
-----------------------------------------------------------------------------
Accumulation Unit Value, End of Period $10.66 $11.63
-----------------------------------------------------------------------------
Number of Units Outstanding, End of Period 737 --
-----------------------------------------------------------------------------
FIDELITY VIP CONTRAFUND-Registered Trademark- SUB-ACCOUNT
-----------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period $10.00 $11.66
-----------------------------------------------------------------------------
Accumulation Unit Value, End of Period $11.66 $14.29
-----------------------------------------------------------------------------
Number of Units Outstanding, End of Period -- 30,660
-----------------------------------------------------------------------------
FIDELITY VIP EQUITY-INCOME SUB-ACCOUNT
-----------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period $10.00 $10.47
-----------------------------------------------------------------------------
Accumulation Unit Value, End of Period $10.47 $10.99
-----------------------------------------------------------------------------
Number of Units Outstanding, End of Period -- 17,530
-----------------------------------------------------------------------------
FIDELITY VIP GROWTH SUB-ACCOUNT
-----------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period $10.00 $11.20
-----------------------------------------------------------------------------
Accumulation Unit Value, End of Period $11.20 $15.19
-----------------------------------------------------------------------------
Number of Units Outstanding, End of Period 313 45,514
-----------------------------------------------------------------------------
FIDELITY VIP HIGH INCOME SUB-ACCOUNT
-----------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period $10.00 $10.43
-----------------------------------------------------------------------------
Accumulation Unit Value, End of Period $10.43 $11.13
-----------------------------------------------------------------------------
Number of Units Outstanding, End of Period -- 3,914
-----------------------------------------------------------------------------
GOLDMAN SACHS VIT CAPITAL GROWTH SUB-ACCOUNT
-----------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period $10.00 $11.09
-----------------------------------------------------------------------------
Accumulation Unit Value, End of Period $11.09 $13.95
-----------------------------------------------------------------------------
Number of Units Outstanding, End of Period -- --
-----------------------------------------------------------------------------
GOLDMAN SACHS CORE-SM- SMALL CAP EQUITY SUB-ACCOUNT
-----------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period $10.00 $10.60
-----------------------------------------------------------------------------
Accumulation Unit Value, End of Period $10.60 $12.33
-----------------------------------------------------------------------------
Number of Units Outstanding, End of Period -- --
-----------------------------------------------------------------------------
</TABLE>
A-6
<PAGE>
<TABLE>
<CAPTION>
FOR THE YEARS BEGINNING JANUARY 1* AND ENDED DECEMBER 31. 1998 1999
<S> <C> <C>
-----------------------------------------------------------------------------
GOLDMAN SACHS VIT CORE-SM- U.S. EQUITY SUB-ACCOUNT
-----------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period $10.00 $10.89
-----------------------------------------------------------------------------
Accumulation Unit Value, End of Period $10.89 $13.42
-----------------------------------------------------------------------------
Number of Units Outstanding, End of Period -- --
-----------------------------------------------------------------------------
GOLDMAN SACHS GLOBAL INCOME SUB-ACCOUNT
-----------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period $10.00 $ 9.67
-----------------------------------------------------------------------------
Accumulation Unit Value, End of Period $ 9.67 $ 9.90
-----------------------------------------------------------------------------
Number of Units Outstanding, End of Period -- --
-----------------------------------------------------------------------------
GOLDMAN SACHS VIT GROWTH AND INCOME SUB-ACCOUNT
-----------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period $10.00 $ 9.94
-----------------------------------------------------------------------------
Accumulation Unit Value, End of Period $ 9.94 $ 9.90
-----------------------------------------------------------------------------
Number of Units Outstanding, End of Period -- --
-----------------------------------------------------------------------------
GOLDMAN SACHS VIT INTERNATIONAL EQUITY SUB-ACCOUNT
-----------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period $10.00 $10.84
-----------------------------------------------------------------------------
Accumulation Unit Value, End of Period $10.84 $14.22
-----------------------------------------------------------------------------
Number of Units Outstanding, End of Period -- --
-----------------------------------------------------------------------------
MFS EMERGING GROWTH SUB-ACCOUNT
-----------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period $10.00 $11.95
-----------------------------------------------------------------------------
Accumulation Unit Value, End of Period $11.95 $20.83
-----------------------------------------------------------------------------
Number of Units Outstanding, End of Period -- 3,068
-----------------------------------------------------------------------------
MFS GROWTH WITH INCOME SUB-ACCOUNT
-----------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period $10.00 $10.81
-----------------------------------------------------------------------------
Accumulation Unit Value, End of Period $10.81 $11.38
-----------------------------------------------------------------------------
Number of Units Outstanding, End of Period -- 3,323
-----------------------------------------------------------------------------
MFS NEW DISCOVERY SUB-ACCOUNT
-----------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period $10.00 $11.38
-----------------------------------------------------------------------------
Accumulation Unit Value, End of Period $11.38 $19.47
-----------------------------------------------------------------------------
Number of Units Outstanding, End of Period -- 1,669
-----------------------------------------------------------------------------
MORGAN STANLEY UIF EQUITY GROWTH SUB-ACCOUNT
-----------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period $10.00 $10.94
-----------------------------------------------------------------------------
Accumulation Unit Value, End of Period $10.94 $15.05
-----------------------------------------------------------------------------
Number of Units Outstanding, End of Period -- 1,953
-----------------------------------------------------------------------------
MORGAN STANLEY UIF FIXED INCOME SUB-ACCOUNT
-----------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period $10.00 $10.15
-----------------------------------------------------------------------------
Accumulation Unit Value, End of Period $10.15 $ 9.85
-----------------------------------------------------------------------------
Number of Units Outstanding, End of Period -- 1,566
-----------------------------------------------------------------------------
MORGAN STANLEY UIF GLOBAL EQUITY SUB-ACCOUNT
-----------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period $10.00 $10.43
-----------------------------------------------------------------------------
Accumulation Unit Value, End of Period $10.43 $10.71
-----------------------------------------------------------------------------
Number of Units Outstanding, End of Period 245 --
-----------------------------------------------------------------------------
MORGAN STANLEY UIF INTERNATIONAL MAGNUM SUB-ACCOUNT
-----------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period $10.00 $10.38
-----------------------------------------------------------------------------
Accumulation Unit Value, End of Period $10.38 $12.83
-----------------------------------------------------------------------------
Number of Units Outstanding, End of Period -- 624
-----------------------------------------------------------------------------
</TABLE>
A-7
<PAGE>
<TABLE>
<CAPTION>
FOR THE YEARS BEGINNING JANUARY 1* AND ENDED DECEMBER 31. 1998 1999
<S> <C> <C>
-----------------------------------------------------------------------------
MORGAN STANLEY UIF MID CAP VALUE SUB-ACCOUNT
-----------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period $10.00 $10.96
-----------------------------------------------------------------------------
Accumulation Unit Value, End of Period $10.96 $13.04
-----------------------------------------------------------------------------
Number of Units Outstanding, End of Period -- --
-----------------------------------------------------------------------------
MORGAN STANLEY UIF U.S. REAL ESTATE SUB-ACCOUNT
-----------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period $10.00 $10.17
-----------------------------------------------------------------------------
Accumulation Unit Value, End of Period $10.17 $ 9.89
-----------------------------------------------------------------------------
Number of Units Outstanding, End of Period -- --
-----------------------------------------------------------------------------
MORGAN STANLEY UIF VALUE SUB-ACCOUNT
-----------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period $10.00 $ 9.95
-----------------------------------------------------------------------------
Accumulation Unit Value, End of Period $ 9.95 $ 9.63
-----------------------------------------------------------------------------
Number of Units Outstanding, End of Period -- 903
-----------------------------------------------------------------------------
NEUBERGER BERMAN AMT GUARDIAN SUB-ACCOUNT
-----------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period $10.00 $10.80
-----------------------------------------------------------------------------
Accumulation Unit Value, End of Period $10.80 $12.25
-----------------------------------------------------------------------------
Number of Units Outstanding, End of Period -- 1,333
-----------------------------------------------------------------------------
NEUBERGER BERMAN AMT MID CAP GROWTH SUB-ACCOUNT
-----------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period $10.00 $12.12
-----------------------------------------------------------------------------
Accumulation Unit Value, End of Period $12.12 $18.40
-----------------------------------------------------------------------------
Number of Units Outstanding, End of Period -- --
-----------------------------------------------------------------------------
NEUBERGER BERMAN AMT PARTNERS SUB-ACCOUNT
-----------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period $10.00 $10.30
-----------------------------------------------------------------------------
Accumulation Unit Value, End of Period $10.30 $10.91
-----------------------------------------------------------------------------
Number of Units Outstanding, End of Period -- --
-----------------------------------------------------------------------------
</TABLE>
*The Contracts were first offered on November 10, 1998. The Accumulation Unit
Values in this table reflect a mortality and expense risk charge of 1.27% and
an administrative expense charge of 0.10%. All of the Variable Sub-Accounts
commenced operations on or before November 10, 1998.
A-8
<PAGE>
ACCUMULATION UNIT VALUE AND NUMBER OF
ACCUMULATION UNITS OUTSTANDING FOR EACH
VARIABLE SUB-ACCOUNT SINCE CONTRACTS
WERE FIRST OFFERED
WITH ENHANCED DEATH AND INCOME BENEFIT COMBINATION RIDER
<TABLE>
<CAPTION>
FOR THE YEARS BEGINNING JANUARY 1* AND ENDED DECEMBER 31. 1998 1999
<S> <C> <C>
-------------------------------------------------------------------------------
AIM V.I. BALANCED SUB-ACCOUNT
-------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period $ 10.00 $ 10.73
-------------------------------------------------------------------------------
Accumulation Unit Value, End of Period $ 10.73 $ 12.60
-------------------------------------------------------------------------------
Number of Units Outstanding, End of Period 405 43,121
-------------------------------------------------------------------------------
AIM V.I. CAPITAL APPRECIATION SUB-ACCOUNT
-------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period $ 10.00 $ 11.39
-------------------------------------------------------------------------------
Accumulation Unit Value, End of Period $ 11.39 $ 16.21
-------------------------------------------------------------------------------
Number of Units Outstanding, End of Period 398 16,046
-------------------------------------------------------------------------------
AIM V.I. DIVERSIFIED INCOME SUB-ACCOUNT
-------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period $ 10.00 $ 10.21
-------------------------------------------------------------------------------
Accumulation Unit Value, End of Period $ 10.21 $ 9.86
-------------------------------------------------------------------------------
Number of Units Outstanding, End of Period -- 1,484
-------------------------------------------------------------------------------
AIM V.I. GLOBAL UTILITIES SUB-ACCOUNT
-------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period $ 10.00 $ 10.72
-------------------------------------------------------------------------------
Accumulation Unit Value, End of Period $ 10.72 $ 14.09
-------------------------------------------------------------------------------
Number of Units Outstanding, End of Period -- --
-------------------------------------------------------------------------------
AIM V.I. GOVERNMENT SECURITIES SUB-ACCOUNT
-------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period $ 10.00 $ 10.38
-------------------------------------------------------------------------------
Accumulation Unit Value, End of Period $ 10.38 $ 9.80
-------------------------------------------------------------------------------
Number of Units Outstanding, End of Period -- --
-------------------------------------------------------------------------------
AIM V.I. GROWTH SUB-ACCOUNT
-------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period $ 10.00 $ 11.82
-------------------------------------------------------------------------------
Accumulation Unit Value, End of Period $ 11.82 $ 15.74
-------------------------------------------------------------------------------
Number of Units Outstanding, End of Period 386 21,246
-------------------------------------------------------------------------------
AIM V.I. GROWTH AND INCOME SUB-ACCOUNT
-------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period $ 10.00 $ 11.36
-------------------------------------------------------------------------------
Accumulation Unit Value, End of Period $ 11.36 $ 15.01
-------------------------------------------------------------------------------
Number of Units Outstanding, End of Period -- 11,459
-------------------------------------------------------------------------------
AIM V.I. HIGH YIELD SUB-ACCOUNT
-------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period $ 10.00 $ 10.31
-------------------------------------------------------------------------------
Accumulation Unit Value, End of Period $ 10.31 $ 11.22
-------------------------------------------------------------------------------
Number of Units Outstanding, End of Period -- 185
-------------------------------------------------------------------------------
AIM V.I. INTERNATIONAL EQUITY SUB-ACCOUNT
-------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period $ 10.00 $ 10.68
-------------------------------------------------------------------------------
Accumulation Unit Value, End of Period $ 10.68 $ 16.30
-------------------------------------------------------------------------------
Number of Units Outstanding, End of Period -- 2,943
-------------------------------------------------------------------------------
AIM V.I. VALUE SUB-ACCOUNT
-------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period $ 10.00 $ 11.51
-------------------------------------------------------------------------------
Accumulation Unit Value, End of Period $ 11.51 $ 14.73
-------------------------------------------------------------------------------
Number of Units Outstanding, End of Period -- 34,288
-------------------------------------------------------------------------------
</TABLE>
A-9
<PAGE>
<TABLE>
<CAPTION>
FOR THE YEARS BEGINNING JANUARY 1* AND ENDED DECEMBER 31. 1998 1999
<S> <C> <C>
-------------------------------------------------------------------------------
DREYFUS SOCIALLY RESPONSIBLE GROWTH SUB-ACCOUNT
-------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period $ 10.00 $10.786
-------------------------------------------------------------------------------
Accumulation Unit Value, End of Period $10.786 $ 14.33
-------------------------------------------------------------------------------
Number of Units Outstanding, End of Period -- 5,493
-------------------------------------------------------------------------------
DREYFUS STOCK INDEX SUB-ACCOUNT
-------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period $ 10.00 $ 10.87
-------------------------------------------------------------------------------
Accumulation Unit Value, End of Period $ 10.87 $ 12.90
-------------------------------------------------------------------------------
Number of Units Outstanding, End of Period 401 19,955
-------------------------------------------------------------------------------
DREYFUS VIF GROWTH & INCOME SUB-ACCOUNT
-------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period $ 10.00 $ 10.64
-------------------------------------------------------------------------------
Accumulation Unit Value, End of Period $ 10.64 $ 12.40
-------------------------------------------------------------------------------
Number of Units Outstanding, End of Period -- 3,983
-------------------------------------------------------------------------------
DREYFUS VIF MONEY MARKET SUB-ACCOUNT
-------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period $ 10.00 $ 10.04
-------------------------------------------------------------------------------
Accumulation Unit Value, End of Period $ 10.04 $ 10.36
-------------------------------------------------------------------------------
Number of Units Outstanding, End of Period -- 577
-------------------------------------------------------------------------------
DREYFUS VIF SMALL COMPANY STOCK SUB-ACCOUNT
-------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period $ 10.00 $ 10.65
-------------------------------------------------------------------------------
Accumulation Unit Value, End of Period $ 10.65 $ 11.60
-------------------------------------------------------------------------------
Number of Units Outstanding, End of Period -- 2,542
-------------------------------------------------------------------------------
FIDELITY VIP CONTRAFUND-Registered Trademark- SUB-ACCOUNT
-------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period $ 10.00 $ 11.65
-------------------------------------------------------------------------------
Accumulation Unit Value, End of Period $ 11.65 $ 14.26
-------------------------------------------------------------------------------
Number of Units Outstanding, End of Period 387 32,161
-------------------------------------------------------------------------------
FIDELITY VIP EQUITY-INCOME SUB-ACCOUNT
-------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period $ 10.00 $ 10.47
-------------------------------------------------------------------------------
Accumulation Unit Value, End of Period $ 10.47 $ 10.96
-------------------------------------------------------------------------------
Number of Units Outstanding, End of Period -- 11,621
-------------------------------------------------------------------------------
FIDELITY VIP GROWTH SUB-ACCOUNT
-------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period $ 10.00 $ 11.19
-------------------------------------------------------------------------------
Accumulation Unit Value, End of Period $ 11.19 $ 15.15
-------------------------------------------------------------------------------
Number of Units Outstanding, End of Period -- 22,088
-------------------------------------------------------------------------------
FIDELITY VIP HIGH INCOME SUB-ACCOUNT
-------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period $ 10.00 $ 10.43
-------------------------------------------------------------------------------
Accumulation Unit Value, End of Period $ 10.43 $ 11.10
-------------------------------------------------------------------------------
Number of Units Outstanding, End of Period -- 3,667
-------------------------------------------------------------------------------
GOLDMAN SACHS VIT CAPITAL GROWTH SUB-ACCOUNT
-------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period $ 10.00 $ 11.09
-------------------------------------------------------------------------------
Accumulation Unit Value, End of Period $ 11.09 $ 13.92
-------------------------------------------------------------------------------
Number of Units Outstanding, End of Period -- 2,449
-------------------------------------------------------------------------------
GOLDMAN SACHS CORE-SM- SMALL CAP EQUITY SUB-ACCOUNT
-------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period $ 10.00 $ 10.59
-------------------------------------------------------------------------------
Accumulation Unit Value, End of Period $ 10.59 $ 12.30
-------------------------------------------------------------------------------
Number of Units Outstanding, End of Period -- 17,918
-------------------------------------------------------------------------------
</TABLE>
A-10
<PAGE>
<TABLE>
<CAPTION>
FOR THE YEARS BEGINNING JANUARY 1* AND ENDED DECEMBER 31. 1998 1999
<S> <C> <C>
-------------------------------------------------------------------------------
GOLDMAN SACHS VIT CORE-SM- U.S. EQUITY SUB-ACCOUNT
-------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period $ 10.00 $ 10.89
-------------------------------------------------------------------------------
Accumulation Unit Value, End of Period $ 10.89 $ 13.39
-------------------------------------------------------------------------------
Number of Units Outstanding, End of Period 401 20,515
-------------------------------------------------------------------------------
GOLDMAN SACHS GLOBAL INCOME SUB-ACCOUNT
-------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period $ 10.00 $ 9.66
-------------------------------------------------------------------------------
Accumulation Unit Value, End of Period $ 9.66 $ 9.87
-------------------------------------------------------------------------------
Number of Units Outstanding, End of Period -- --
-------------------------------------------------------------------------------
GOLDMAN SACHS VIT GROWTH AND INCOME SUB-ACCOUNT
-------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period $ 10.00 $ 9.93
-------------------------------------------------------------------------------
Accumulation Unit Value, End of Period $ 9.93 $ 10.41
-------------------------------------------------------------------------------
Number of Units Outstanding, End of Period 419 2,081
-------------------------------------------------------------------------------
GOLDMAN SACHS VIT INTERNATIONAL EQUITY SUB-ACCOUNT
-------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period $ 10.00 $ 10.84
-------------------------------------------------------------------------------
Accumulation Unit Value, End of Period $ 10.84 $ 14.18
-------------------------------------------------------------------------------
Number of Units Outstanding, End of Period -- --
-------------------------------------------------------------------------------
MFS EMERGING GROWTH SUB-ACCOUNT
-------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period $ 10.00 $ 11.94
-------------------------------------------------------------------------------
Accumulation Unit Value, End of Period $ 11.94 $ 20.78
-------------------------------------------------------------------------------
Number of Units Outstanding, End of Period 377 19,189
-------------------------------------------------------------------------------
MFS GROWTH WITH INCOME SUB-ACCOUNT
-------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period $ 10.00 $ 10.81
-------------------------------------------------------------------------------
Accumulation Unit Value, End of Period $ 10.81 $ 11.35
-------------------------------------------------------------------------------
Number of Units Outstanding, End of Period -- 4,808
-------------------------------------------------------------------------------
MFS NEW DISCOVERY SUB-ACCOUNT
-------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period $ 10.00 $ 11.38
-------------------------------------------------------------------------------
Accumulation Unit Value, End of Period $ 11.38 $ 19.42
-------------------------------------------------------------------------------
Number of Units Outstanding, End of Period -- 707
-------------------------------------------------------------------------------
MORGAN STANLEY UIF EQUITY GROWTH SUB-ACCOUNT
-------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period $ 10.00 $ 10.94
-------------------------------------------------------------------------------
Accumulation Unit Value, End of Period $ 10.94 $ 15.02
-------------------------------------------------------------------------------
Number of Units Outstanding, End of Period 406 7,464
-------------------------------------------------------------------------------
MORGAN STANLEY UIF FIXED INCOME SUB-ACCOUNT
-------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period $ 10.00 $ 10.15
-------------------------------------------------------------------------------
Accumulation Unit Value, End of Period $ 10.15 $ 9.82
-------------------------------------------------------------------------------
Number of Units Outstanding, End of Period -- --
-------------------------------------------------------------------------------
MORGAN STANLEY UIF GLOBAL EQUITY SUB-ACCOUNT
-------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period $ 10.00 $ 10.42
-------------------------------------------------------------------------------
Accumulation Unit Value, End of Period $ 10.42 $ 10.69
-------------------------------------------------------------------------------
Number of Units Outstanding, End of Period -- 245
-------------------------------------------------------------------------------
MORGAN STANLEY UIF INTERNATIONAL MAGNUM SUB-ACCOUNT
-------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period $ 10.00 $ 10.38
-------------------------------------------------------------------------------
Accumulation Unit Value, End of Period $ 10.38 $ 12.79
-------------------------------------------------------------------------------
Number of Units Outstanding, End of Period -- --
-------------------------------------------------------------------------------
</TABLE>
A-11
<PAGE>
<TABLE>
<CAPTION>
FOR THE YEARS BEGINNING JANUARY 1* AND ENDED DECEMBER 31. 1998 1999
<S> <C> <C>
-------------------------------------------------------------------------------
MORGAN STANLEY UIF MID CAP VALUE SUB-ACCOUNT
-------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period $ 10.00 $ 10.96
-------------------------------------------------------------------------------
Accumulation Unit Value, End of Period $ 10.96 $ 13.01
-------------------------------------------------------------------------------
Number of Units Outstanding, End of Period 408 1,788
-------------------------------------------------------------------------------
MORGAN STANLEY UIF U.S. REAL ESTATE SUB-ACCOUNT
-------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period $ 10.00 $ 10.17
-------------------------------------------------------------------------------
Accumulation Unit Value, End of Period $ 10.17 $ 9.86
-------------------------------------------------------------------------------
Number of Units Outstanding, End of Period -- --
-------------------------------------------------------------------------------
MORGAN STANLEY UIF VALUE SUB-ACCOUNT
-------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period $ 10.00 $ 9.95
-------------------------------------------------------------------------------
Accumulation Unit Value, End of Period $ 9.95 $ 9.61
-------------------------------------------------------------------------------
Number of Units Outstanding, End of Period -- 17,465
-------------------------------------------------------------------------------
NEUBERGER BERMAN AMT GUARDIAN SUB-ACCOUNT
-------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period $ 10.00 $ 10.80
-------------------------------------------------------------------------------
Accumulation Unit Value, End of Period $ 10.80 $ 12.22
-------------------------------------------------------------------------------
Number of Units Outstanding, End of Period -- 1,924
-------------------------------------------------------------------------------
NEUBERGER BERMAN AMT MID CAP GROWTH SUB-ACCOUNT
-------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period $ 10.00 $ 12.12
-------------------------------------------------------------------------------
Accumulation Unit Value, End of Period $ 12.12 $ 18.36
-------------------------------------------------------------------------------
Number of Units Outstanding, End of Period -- 64
-------------------------------------------------------------------------------
NEUBERGER BERMAN AMT PARTNERS SUB-ACCOUNT
-------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period $ 10.00 $ 10.30
-------------------------------------------------------------------------------
Accumulation Unit Value, End of Period $ 10.30 $ 10.89
-------------------------------------------------------------------------------
Number of Units Outstanding, End of Period -- 17,996
-------------------------------------------------------------------------------
</TABLE>
*The Contracts were first offered on November 10, 1998. The Accumulation Unit
Values in this table reflect a mortality and expense risk charge of 1.49% and
an administrative expense charge of 0.10%. All of the Variable Sub-Accounts
commenced operations on or before November 10, 1998.
A-12
<PAGE>
APPENDIX B
MARKET VALUE ADJUSTMENT
-------------------------------------------------------------------
The Market Value Adjustment is based on the following:
I = the Treasury Rate for a maturity equal to the Guarantee Period for the week
preceding the establishment of the Guarantee Period.
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 Guarantee Period.
J = the Treasury Rate for a maturity equal to the Guarantee Period for the week
preceding the receipt of the withdrawal, transfer, death benefit, or income
payment request. If a Note with a maturity of the original Guarantee Period is
not available, we will use a weighted average.
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 X (I - J) X N
To determine the Market Value Adjustment, we will multiply the Market Value
Adjustment factor by the amount transferred, withdrawn (in excess of the Free
Withdrawal Amount), paid as a death benefit, or applied to an Income Plan from a
Guarantee Period at any time other than during the 30 day period after such
Guarantee Period expires.
B-1
<PAGE>
EXAMPLES OF MARKET VALUE ADJUSTMENT
-------------------------------------------------------------------
<TABLE>
<S> <C>
Purchase Payment: $10,000 allocated to a Guarantee Period
Guarantee Period: 5 years
Interest Rate: 4.50%
Full Withdrawal: End of Contract Year 3
</TABLE>
NOTE: These examples assume that premium taxes are not applicable.
EXAMPLE 1: (ASSUMES DECLINING INTEREST RATES)
Step 1: Calculate Contract Value at End of Contract Year 3:
= 10,000 X (1.045) TO THE POWER OF 3 = $11,411.66
Step 2: Calculate the Free Withdrawal Amount:
= .15 X (10,000.00) = $1,500.00
Step 3: Calculate the Withdrawal Charge:
= .05 X (10,000.00 - 1,500.00) = $425.00
Step 4: Calculate the Market Value Adjustment:
I = 4.50%
J = 4.20%
730 DAYS
N = -------- = 2
365 DAYS
MARKET VALUE ADJUSTMENT FACTOR: .9 X (I - J) - N
= .9 X (.045 - .042) X 2 = .0054
MARKET VALUE ADJUSTMENT = MARKET VALUE ADJUSTMENT FACTOR X AMOUNT SUBJECT TO
MARKET VALUE ADJUSTMENT:
= .0054 X (11,411.66 - 1,500) = $53.52
Step 5: Calculate the amount received by Contract owner as a result of
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 Contract Value at End of Contract Year 3:
= 10,000.00 X (1.045) TO THE POWER OF 3 = $11,411.66
Step 2: Calculate the Free Withdrawal Amount:
= .15 X (10,000.00) = $1,500.00
Step 3: Calculate the Withdrawal Charge:
= .05 X (10,000.00 - 1,500.00) = $425.00
Step 4: Calculate the Market Value Adjustment:
I = 4.50%
J = 4.80%
730 DAYS
N = -------- = 2
365 DAYS
MARKET VALUE ADJUSTMENT FACTOR: .9 X (I - J) X N
= .9 X (.045 - .048) X (2) = -.0054
MARKET VALUE ADJUSTMENT = MARKET VALUE ADJUSTMENT FACTOR X AMOUNT SUBJECT TO
MARKET VALUE ADJUSTMENT:
= -.0054 X (11,411.66 - 1,500) = -$53.52
Step 5: Calculate the amount received by Contract owner as a result of
full withdrawal at the end of Contract Year 3:
= 11,411.66 - 425.00 - 53.52 = $10,933.14
B-2
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
TABLE OF CONTENTS
-------------------------------------------------------------------
<TABLE>
<CAPTION>
DESCRIPTION
<S> <C>
----------------------------------------------------------------------------
Additions, Deletions or Substitutions of Investments
----------------------------------------------------------------------------
The Contract
----------------------------------------------------------------------------
Purchases of Contracts
----------------------------------------------------------------------------
Tax-free Exchanges (1035 Exchanges, Rollovers and Transfers)
----------------------------------------------------------------------------
Performance Information
----------------------------------------------------------------------------
Standardized Total Returns
----------------------------------------------------------------------------
Non-standardized Total Returns
----------------------------------------------------------------------------
Adjusted Historical Total Returns
----------------------------------------------------------------------------
Calculation of Accumulation Unit Values
----------------------------------------------------------------------------
Calculation of Variable Income Payments
----------------------------------------------------------------------------
Calculation of Annuity Unit Values
----------------------------------------------------------------------------
General Matters
----------------------------------------------------------------------------
Incontestability
----------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
DESCRIPTION
<S> <C>
----------------------------------------------------------------------------
Settlements
----------------------------------------------------------------------------
Safekeeping of the Variable Account's Assets
----------------------------------------------------------------------------
Premium Taxes
----------------------------------------------------------------------------
Tax Reserves
----------------------------------------------------------------------------
Federal Tax Matters
----------------------------------------------------------------------------
Qualified Plans
----------------------------------------------------------------------------
Experts
----------------------------------------------------------------------------
Financial Statements
----------------------------------------------------------------------------
</TABLE>
------------------------------
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING IN ANY JURISDICTION IN WHICH
SUCH OFFERING MAY NOT LAWFULLY BE MADE. WE DO NOT AUTHORIZE ANYONE TO PROVIDE
ANY INFORMATION OR REPRESENTATIONS REGARDING THE OFFERING DESCRIBED IN THIS
PROSPECTUS OTHER THAN AS CONTAINED IN THIS PROSPECTUS.
C-1
<PAGE>
GLG257-2
<PAGE>
THE GLENBROOK PROVIDER VARIABLE ANNUITY
Glenbrook Life and Annuity Company
P.O. Box 94042
Palatine, IL 60094
Telephone Number: 1-800-755-5275 Prospectus dated May 1, 2000
--------------------------------------------------------------------------------
Glenbrook Life and Annuity Company ("GLENBROOK") is offering the Glenbrook
Provider Variable Annuity, an individual flexible premium deferred variable
annuity contract ("CONTRACT"). This prospectus contains information about the
Contract that you should know before investing. Please keep it for future
reference.
The Contract currently offers 42 "INVESTMENT ALTERNATIVES". The investment
alternatives include 3 fixed account options ("FIXED ACCOUNT OPTIONS") and 39
variable sub-accounts ("VARIABLE SUB-ACCOUNTS") of the Glenbrook Life Multi-
Manager Variable Account ("VARIABLE ACCOUNT"). Each Variable Sub-Account invests
exclusively in shares of the portfolios ("Portfolios") of the following mutual
funds ("FUNDS"):
<TABLE>
<S> <C> <C> <C>
- AIM VARIABLE INSURANCE FUNDS
- FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS
- THE DREYFUS SOCIALLY RESPONSIBLE GROWTH TRUST
FUND, INC.
- GOLDMAN SACHS VARIABLE INSURANCE TRUST (VIT)
- DREYFUS STOCK INDEX FUND
- MFS-REGISTERED TRADEMARK- VARIABLE INSURANCE
TRUST(SM)
- DREYFUS VARIABLE INVESTMENT FUND (VIF)
- OPPENHEIMER VARIABLE ACCOUNT FUNDS
- FIDELITY VARIABLE INSURANCE PRODUCTS FUND
- THE UNIVERSAL INSTITUTIONAL FUNDS, INC.*
</TABLE>
* Formerly, the Morgan Stanley Dean Witter Universal Funds, Inc.
Each Fund has multiple investment portfolios ("PORTFOLIOS"). Not all of the
Funds and/or Portfolios, however, may be available with your Contract. You
should check with your representative for further information on the
availability of Funds and/or Portfolios. Your annuity application will list all
available Portfolios.
WE (Glenbrook) have filed a Statement of Additional Information, dated May 1,
2000, with the Securities and Exchange Commission ("SEC"). It contains more
information about the Contract and is incorporated herein by reference, which
means it is legally a part of this prospectus. Its table of contents appears on
page C-1 of this prospectus. For a free copy, please write or call us at the
address or telephone number above, or go to the SEC's Web site
(http://www.sec.gov). You can find other information and documents about us,
including documents that are legally part of this prospectus, at the SEC's Web
site.
--------------------------------------------------------------------------------
<TABLE>
<C> <S>
THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR
DISAPPROVED THE SECURITIES DESCRIBED IN THIS PROSPECTUS, NOR
HAS IT PASSED ON THE ACCURACY OR THE ADEQUACY OF THIS
PROSPECTUS. ANYONE WHO TELLS YOU OTHERWISE IS COMMITTING A
FEDERAL CRIME.
IMPORTANT THE CONTRACTS MAY BE DISTRIBUTED THROUGH BROKER-DEALERS THAT
NOTICES HAVE RELATIONSHIPS WITH BANKS OR OTHER FINANCIAL
INSTITUTIONS OR BY EMPLOYEES OF SUCH BANKS. HOWEVER, THE
CONTRACTS ARE NOT DEPOSITS, OR OBLIGATIONS OF, OR GUARANTEED
BY SUCH INSTITUTIONS OR ANY FEDERAL REGULATORY AGENCY.
INVESTMENT IN THE CONTRACTS INVOLVES INVESTMENT RISKS,
INCLUDING POSSIBLE LOSS OF PRINCIPAL. THE CONTRACTS ARE NOT
FDIC INSURED.
</TABLE>
GLG678
1 - PROSPECTUS
<PAGE>
TABLE OF CONTENTS
-------------------------------------------------------------------
<TABLE>
<CAPTION>
Page
<S> <C>
----------------------------------------------------------------------------
Overview
----------------------------------------------------------------------------
Important Terms 3
----------------------------------------------------------------------------
The Contract At A Glance 4
----------------------------------------------------------------------------
How the Contract Works 6
----------------------------------------------------------------------------
Expense Table 7
----------------------------------------------------------------------------
Financial Information 13
----------------------------------------------------------------------------
Contract Features
----------------------------------------------------------------------------
The Contract 14
----------------------------------------------------------------------------
Purchases 15
----------------------------------------------------------------------------
Contract Value 16
----------------------------------------------------------------------------
Investment Alternatives 17
----------------------------------------------------------------------------
The Variable Sub-Accounts 17
----------------------------------------------------------------------------
The Fixed Account Options 19
----------------------------------------------------------------------------
Transfers 21
----------------------------------------------------------------------------
Expenses 23
----------------------------------------------------------------------------
Access To Your Money 25
----------------------------------------------------------------------------
Income Payments 26
----------------------------------------------------------------------------
</TABLE>
<TABLE>
----------------------------------------------------------------------------
<CAPTION>
Page
<S> <C>
Death Benefits 27
----------------------------------------------------------------------------
Other Information
----------------------------------------------------------------------------
More Information: 30
----------------------------------------------------------------------------
Glenbrook 30
----------------------------------------------------------------------------
The Variable Account 30
----------------------------------------------------------------------------
The Portfolios 30
----------------------------------------------------------------------------
The Contract 31
----------------------------------------------------------------------------
Qualified Plans 32
----------------------------------------------------------------------------
Legal Matters 32
----------------------------------------------------------------------------
Year 2000 32
----------------------------------------------------------------------------
Taxes 32
----------------------------------------------------------------------------
Annual Reports and Other Documents 35
----------------------------------------------------------------------------
Experts 35
----------------------------------------------------------------------------
Performance Information 35
----------------------------------------------------------------------------
Appendix A--Accumulation Unit Values A-1
----------------------------------------------------------------------------
Appendix B--Market Value Adjustment Example B-1
----------------------------------------------------------------------------
Statement of Additional Information Table of Contents C-1
----------------------------------------------------------------------------
</TABLE>
2 - PROSPECTUS
<PAGE>
IMPORTANT TERMS
-------------------------------------------------------------------
THIS PROSPECTUS USES A NUMBER OF IMPORTANT TERMS THAT YOU MAY NOT BE FAMILIAR
WITH. THE INDEX BELOW IDENTIFIES THE PAGE THAT DESCRIBES EACH TERM. THE FIRST
USE OF EACH TERM IN THIS PROSPECTUS APPEARS IN HIGHLIGHTS.
<TABLE>
<CAPTION>
Page
<S> <C>
--------------------------------------------------------------------------------
Accumulation Phase 6
--------------------------------------------------------------------------------
Accumulation Unit 13, 16
--------------------------------------------------------------------------------
Accumulation Unit Value 13, 16
--------------------------------------------------------------------------------
Anniversary Values 28
--------------------------------------------------------------------------------
Annuitant 14
--------------------------------------------------------------------------------
Automatic Additions Plan 15
--------------------------------------------------------------------------------
Automatic Portfolio Rebalancing Program 22
--------------------------------------------------------------------------------
Beneficiary 14
--------------------------------------------------------------------------------
Cancellation Period 4
--------------------------------------------------------------------------------
*Contract 14
--------------------------------------------------------------------------------
Contract Anniversary 5
--------------------------------------------------------------------------------
Contract Owner (You) 14
--------------------------------------------------------------------------------
Contract Value 5, 16
--------------------------------------------------------------------------------
Contract Year 5
--------------------------------------------------------------------------------
Death Benefit Anniversary 28
--------------------------------------------------------------------------------
Dollar Cost Averaging Program 22
--------------------------------------------------------------------------------
Due Proof of Death 27
--------------------------------------------------------------------------------
Enhanced Death Benefit Rider 28
--------------------------------------------------------------------------------
Enhanced Death and Income Benefit Combination Rider 28
--------------------------------------------------------------------------------
</TABLE>
<TABLE>
--------------------------------------------------------------------------------
<CAPTION>
Page
<S> <C>
Fixed Account Options 19
--------------------------------------------------------------------------------
Free Withdrawal Amount 23
--------------------------------------------------------------------------------
Funds 1
--------------------------------------------------------------------------------
Glenbrook ("We") 30
--------------------------------------------------------------------------------
Guarantee Periods 19
--------------------------------------------------------------------------------
Income Plan 26
--------------------------------------------------------------------------------
Investment Alternatives 1, 17-19
--------------------------------------------------------------------------------
Issue Date 6
--------------------------------------------------------------------------------
Market Value Adjustment 20
--------------------------------------------------------------------------------
Payout Phase 6
--------------------------------------------------------------------------------
Payout Start Date 26
--------------------------------------------------------------------------------
Portfolios 1, 17
--------------------------------------------------------------------------------
Qualified Contracts 4
--------------------------------------------------------------------------------
SEC 1
--------------------------------------------------------------------------------
Settlement Value 28
--------------------------------------------------------------------------------
Systematic Withdrawal Program 25
--------------------------------------------------------------------------------
Valuation Date 15
--------------------------------------------------------------------------------
Variable Account 1
--------------------------------------------------------------------------------
Variable Sub-Account 1, 17
--------------------------------------------------------------------------------
</TABLE>
*In certain states the Contract is available only as a group Contract. If you
purchase a group Contract, we will issue you a certificate that represents your
ownership and that summarizes the provisions of the group Contract. References
to "Contract" in this prospectus include certificates, unless the context
requires otherwise.
3 - PROSPECTUS
<PAGE>
THE CONTRACT AT A GLANCE
-------------------------------------------------------------------
THE FOLLOWING IS A SNAPSHOT OF THE CONTRACT. PLEASE READ THE REMAINDER OF THIS
PROSPECTUS FOR MORE INFORMATION.
<TABLE>
<S> <C>
FLEXIBLE PAYMENTS You can purchase a Contract with as little as $3,000 ($2,000
for "QUALIFIED CONTRACTS", which are Contracts issued within
QUALIFIED PLANS). You can add to your Contract as often and
as much as you like, but each payment must be at least $50.
--------------------------------------------------------------------------------------------------------
RIGHT TO CANCEL You may cancel your Contract within 20 days of receipt or
any longer period as your state may require ("CANCELLATION
PERIOD"). Upon cancellation, we will return your purchase
payments adjusted, to the extent federal or state law
permits, to reflect the investment experience of any amounts
allocated to the Variable Account.
--------------------------------------------------------------------------------------------------------
EXPENSES You will bear the following expenses:
- Total Variable Account annual fees equal to 1.15% of
average daily net assets (1.37% if you select the
ENHANCED DEATH BENEFIT RIDER and 1.59% if you select the
ENHANCED DEATH AND INCOME BENEFIT COMBINATION RIDER)
- Annual contract maintenance charge of $35 (with certain
exceptions)
- Withdrawal charges ranging from 0% to 6% of purchase
payment withdrawn (with certain exceptions)
- Transfer fee of $10 after 12th transfer in any Contract
Year (fee currently waived)
- State premium tax (if your state imposes one)
In addition, each Portfolio pays expenses that you will bear
indirectly if you invest in a Variable Sub-Account.
--------------------------------------------------------------------------------------------------------
INVESTMENT ALTERNATIVES The Contract offers 42 investment alternatives including:
- 3 Fixed Account Options (which credit interest at rates
we guarantee)
- 39 Variable Sub-Accounts investing in Portfolios offering
professional money management by these investment
advisers:
- A I M ADVISORS, INC.
- THE DREYFUS CORPORATION
- FIDELITY MANAGEMENT & RESEARCH COMPANY
- FRANKLIN ADVISERS, INC.
- FRANKLIN MUTUAL ADVISERS, LLC
- GOLDMAN SACHS ASSET MANAGEMENT
- GOLDMAN SACHS ASSET MANAGEMENT INTERNATIONAL
- MASSACHUSETTS FINANCIAL SERVICES
- MILLER ANDERSON & SHERRERD, LLP
- MORGAN STANLEY ASSET MANAGEMENT*
- OPPENHEIMERFUNDS, INC.
- TEMPLETON GLOBAL ADVISORS LIMITED
- TEMPLETON INVESTMENT COUNSEL, INC.
TO FIND OUT CURRENT RATES BEING PAID ON THE FIXED ACCOUNT
OPTIONS OR HOW THE VARIABLE SUB-ACCOUNTS HAVE PERFORMED,
CALL US AT 1-800-755-5275.
*On December 1, 1998, Morgan Stanley Asset Management Inc.
changed its name to Morgan Stanley Dean Witter Investment
Management Inc. but continues to do business in certain
instances using the name Morgan Stanley Asset Management.
</TABLE>
4 - PROSPECTUS
<PAGE>
<TABLE>
<S> <C>
--------------------------------------------------------------------------------------------------------
SPECIAL SERVICES For your convenience, we offer these special services:
- AUTOMATIC PORTFOLIO REBALANCING PROGRAM
- AUTOMATIC ADDITIONS PROGRAM
- DOLLAR COST AVERAGING PROGRAM
- SYSTEMATIC WITHDRAWAL PROGRAM
--------------------------------------------------------------------------------------------------------
INCOME PAYMENTS You can choose fixed income payments, variable income
payments, or a combination of the two. You can receive your
income payments in one of the following ways:
- life income with guaranteed payments
- a "joint and survivor" life income with guaranteed
payments
- guaranteed payments for a specified period (5 to 30
years)
--------------------------------------------------------------------------------------------------------
DEATH BENEFITS If you or the ANNUITANT (if the Contract is owned by a
non-natural person) die before the PAYOUT START DATE, we
will pay the death benefit described in the Contract. We
offer an Enhanced Death Benefit Rider and an Enhanced Death
and Income Benefit Combination Rider.
--------------------------------------------------------------------------------------------------------
TRANSFERS Before the Payout Start Date, you may transfer your Contract
value ("CONTRACT VALUE") among the investment alternatives,
with certain restrictions. Transfers to a GUARANTEE PERIOD
of the Fixed Account must be at least $50.
We do not currently impose a fee upon transfers. However, we
reserve the right to charge $10 per transfer after the 12th
transfer in each "Contract Year", which we measure from the
date we issue your Contract or a Contract anniversary
("CONTRACT ANNIVERSARY").
--------------------------------------------------------------------------------------------------------
WITHDRAWALS You may withdraw some or all of your Contract Value at
anytime prior to the Payout Start Date. In general, you must
withdraw at least $50 at a time. Full or partial withdrawals
are available under limited circumstances on or after the
Payout Start Date. A 10% federal tax penalty may apply if
you withdraw before you are 59 1/2 years old. A withdrawal
charge and MARKET VALUE ADJUSTMENT also may apply.
</TABLE>
5 - PROSPECTUS
<PAGE>
HOW THE CONTRACT WORKS
-------------------------------------------------------------------
The Contract basically works in two ways.
First, the Contract can help you (we assume you are the CONTRACT OWNER) save for
retirement because you can invest in up to 42 investment alternatives and pay no
federal income taxes on any earnings until you withdraw them. You do this during
what we call the "ACCUMULATION PHASE" of the Contract. The Accumulation Phase
begins on the date we issue your Contract (we call that date the "ISSUE DATE")
and continues until the Payout Start Date, which is the date we apply your money
to provide income payments. During the Accumulation Phase, you may allocate your
purchase payments to any combination of the Variable Sub-Accounts and/or Fixed
Account Options. If you invest in any of the three Fixed Account Options, you
will earn a fixed rate of interest that we declare periodically. If you invest
in any of the Variable Sub-Accounts, your investment return will vary up or down
depending on the performance of the corresponding Portfolios.
Second, the Contract can help you plan for retirement because you can use it to
receive retirement income for life and/or for a pre-set number of years, by
selecting one of the income payment options (we call these "INCOME PLANS")
described on page 26. You receive income payments during what we call the
"PAYOUT PHASE" of the Contract, which begins on the Payout Start Date and
continues until we make the last payment required by the Income Plan you select.
During the Payout Phase, if you select a fixed income payment option, we
guarantee the amount of your payments, which will remain fixed. If you select a
variable income payment option, based on one or more of the Variable
Sub-Accounts, the amount of your payments will vary up or down depending on the
performance of the corresponding Portfolios. The amount of money you accumulate
under your Contract during the Accumulation Phase and apply to an Income Plan
will determine the amount of your income payments during the Payout Phase.
The timeline below illustrates how you might use your Contract.
<TABLE>
<CAPTION>
ISSUE ACCUMULATION PHASE PAYOUT START PAYOUT PHASE
DATE DATE
<S> <C> <C> <C> <C>
------------------------------------------------------------------------------------------------------------
You buy You save for You elect to receive You can receive Or you can
a Contract retirement income income payments receive income
payments or receive for a set period payments for life
a lump sum payment
</TABLE>
As the Contract owner, you exercise all of the rights and privileges provided by
the Contract. If you die, any surviving Contract owner or, if none, the
BENEFICIARY will exercise the rights and privileges provided by the Contract.
SEE"The Contract." In addition, if you die before the Payout Start Date, we will
pay a death benefit to any surviving Contract owner, or if there is none, to
your Beneficiary. SEE "Death Benefits."
Please call us at 1-800-755-5275 if you have any questions about how the
Contract works.
6 - PROSPECTUS
<PAGE>
EXPENSE TABLE
-------------------------------------------------------------------
The table below lists the expenses that you will bear directly or indirectly
when you buy a Contract. The table and the examples that follow do not reflect
premium taxes that may be imposed by the state where you reside. For more
information about Variable Account expenses, see "Expenses," below. For more
information about Portfolio expenses, please refer to the accompanying
prospectuses for the Funds.
CONTRACT OWNER TRANSACTION EXPENSES
Withdrawal Charge (as a percentage of purchase payments)*
<TABLE>
<CAPTION>
Number of Complete Years Since We Received the Purchase Payment Being Withdrawn: 0 1 2 3 4 5 6+
<S> <C> <C> <C> <C> <C> <C> <C>
------------------------------------------------------------------------------------------------------------
Applicable Charge: 6% 6% 5% 5% 4% 3% 0%
------------------------------------------------------------------------------------------------------------
Annual Contract Maintenance Charge $35.00**
------------------------------------------------------------------------------------------------------------
Transfer Fee $10.00***
------------------------------------------------------------------------------------------------------------
</TABLE>
*Each Contract Year, you may withdraw up to 15% of your aggregate purchase
payments without incurring a withdrawal charge.
**We will waive this charge in certain cases. See "Expenses."
***Applies solely to the thirteenth and subsequent transfers within a Contract
Year, excluding transfers due to dollar cost averaging and automatic
portfolio rebalancing. We are currently waiving the transfer fee.
VARIABLE ACCOUNT ANNUAL EXPENSES
(AS A PERCENTAGE OF AVERAGE DAILY NET ASSET VALUE
DEDUCTED FROM EACH VARIABLE SUB-ACCOUNT)
<TABLE>
<S> <C>
Mortality and Expense Risk Charge 1.05%*
----------------------------------------------------------------------
Administrative Expense Charge 0.10%
----------------------------------------------------------------------
Total Variable Account Annual Expenses 1.15%
----------------------------------------------------------------------
</TABLE>
*If you select the Enhanced Death Benefit Rider, the mortality and expense risk
charge is 1.27%. If you select the Enhanced Death and Income Benefit
Combination Rider, the mortality and expense risk charge is 1.49%.
7 - PROSPECTUS
<PAGE>
PORTFOLIO ANNUAL EXPENSES (AFTER VOLUNTARY REDUCTIONS AND REIMBURSEMENTS)
(AS A PERCENTAGE OF PORTFOLIO AVERAGE DAILY NET ASSETS)(1)
<TABLE>
<CAPTION>
Rule Total Portfolio
Management 12b-1 Other Annual
Portfolio Fees Fees Expenses Expenses
<S> <C> <C> <C> <C>
---------------------------------------------------------------------------------------------------------------------------------
AIM V.I. Balanced Fund (2) 0.65% N/A 0.56% 1.21%
---------------------------------------------------------------------------------------------------------------------------------
AIM V.I. Diversified Income Fund 0.60% N/A 0.23% 0.83%
---------------------------------------------------------------------------------------------------------------------------------
AIM V.I. Government Securities Fund 0.50% N/A 0.40% 0.90%
---------------------------------------------------------------------------------------------------------------------------------
AIM V.I. Growth Fund 0.63% N/A 0.10% 0.73%
---------------------------------------------------------------------------------------------------------------------------------
AIM V.I. Growth and Income Fund 0.61% N/A 0.16% 0.77%
---------------------------------------------------------------------------------------------------------------------------------
AIM V.I. International Equity Fund 0.75% N/A 0.22% 0.97%
---------------------------------------------------------------------------------------------------------------------------------
AIM V.I. Value Fund 0.61% N/A 0.15% 0.76%
---------------------------------------------------------------------------------------------------------------------------------
The Dreyfus Socially Responsible Growth Fund, Inc. 0.75% N/A 0.04% 0.79%
---------------------------------------------------------------------------------------------------------------------------------
Dreyfus Stock Index Fund 0.25% N/A 0.01% 0.26%
---------------------------------------------------------------------------------------------------------------------------------
Dreyfus VIF Growth & Income Portfolio 0.75% N/A 0.04% 0.79%
---------------------------------------------------------------------------------------------------------------------------------
Dreyfus VIF Money Market Portfolio 0.50% N/A 0.08% 0.58%
---------------------------------------------------------------------------------------------------------------------------------
Fidelity VIP Contrafund-Registered Trademark-
Portfolio (3,4) 0.58% N/A 0.09% 0.67%
---------------------------------------------------------------------------------------------------------------------------------
Fidelity VIP Equity-Income Portfolio (3,4) 0.48% N/A 0.09% 0.57%
---------------------------------------------------------------------------------------------------------------------------------
Fidelity VIP Growth Portfolio (3,4) 0.58% N/A 0.08% 0.66%
---------------------------------------------------------------------------------------------------------------------------------
Fidelity VIP High Income Portfolio (3) 0.58% N/A 0.11% 0.69%
---------------------------------------------------------------------------------------------------------------------------------
Franklin Small Cap Fund -- Class 2 (5,6) 0.55% 0.25% 0.27% 1.07%
---------------------------------------------------------------------------------------------------------------------------------
Mutual Shares Securities Fund -- Class 2 (6,7) 0.60% 0.25% 0.19% 1.04%
---------------------------------------------------------------------------------------------------------------------------------
Templeton Developing Markets Securities Fund --
Class 2 (6,8) 1.25% 0.25% 0.31% 1.81%
---------------------------------------------------------------------------------------------------------------------------------
Templeton Growth Securities Fund -- Class 2 (6,9,10) 0.83% 0.25% 0.05% 1.13%
---------------------------------------------------------------------------------------------------------------------------------
Templeton International Securities Fund -- Class 2
(6,11) 0.69% 0.25% 0.19% 1.13%
---------------------------------------------------------------------------------------------------------------------------------
Goldman Sachs VIT Capital Growth Fund (12,13) 0.75% N/A 0.25% 1.00%
---------------------------------------------------------------------------------------------------------------------------------
Goldman Sachs VIT CORE-SM- Small Cap Equity Fund
(12,13) 0.75% N/A 0.25% 1.00%
---------------------------------------------------------------------------------------------------------------------------------
Goldman Sachs VIT CORE-SM- U.S. Equity Fund (12) 0.70% N/A 0.20% 0.90%
---------------------------------------------------------------------------------------------------------------------------------
Goldman Sachs VIT Global Income Fund (12,13) 0.90% N/A 0.25% 1.15%
---------------------------------------------------------------------------------------------------------------------------------
Goldman Sachs VIT International Equity Fund (12,13) 1.00% N/A 0.35% 1.35%
---------------------------------------------------------------------------------------------------------------------------------
MFS Emerging Growth Series (14) 0.75% N/A 0.09% 0.84%
---------------------------------------------------------------------------------------------------------------------------------
MFS Growth with Income Series (14) 0.75% N/A 0.13% 0.88%
---------------------------------------------------------------------------------------------------------------------------------
MFS New Discovery Series (14,15) 0.90% N/A 0.17% 1.07%
---------------------------------------------------------------------------------------------------------------------------------
MFS Research Series (14) 0.75% N/A 0.11% 0.86%
---------------------------------------------------------------------------------------------------------------------------------
Morgan Stanley UIF Equity Growth (2) 0.29% N/A 0.56% 0.85%
---------------------------------------------------------------------------------------------------------------------------------
Morgan Stanley UIF Fixed Income (2) 0.14% N/A 0.56% 0.70%
---------------------------------------------------------------------------------------------------------------------------------
Morgan Stanley UIF Global Equity (2) 0.47% N/A 0.68% 1.15%
---------------------------------------------------------------------------------------------------------------------------------
Morgan Stanley UIF Mid Cap Value (2) 0.43% N/A 0.62% 1.05%
---------------------------------------------------------------------------------------------------------------------------------
Morgan Stanley UIF Value (2) 0.18% N/A 0.67% 0.85%
---------------------------------------------------------------------------------------------------------------------------------
Oppenheimer Aggressive Growth Fund/VA 0.66% N/A 0.01% 0.67%
---------------------------------------------------------------------------------------------------------------------------------
Oppenheimer Capital Appreciation Fund/VA 0.68% N/A 0.02% 0.70%
---------------------------------------------------------------------------------------------------------------------------------
Oppenheimer Global Securities Fund/VA 0.67% N/A 0.02% 0.69%
---------------------------------------------------------------------------------------------------------------------------------
Oppenheimer Main Street Growth & Income Fund/VA 0.73% N/A 0.05% 0.78%
---------------------------------------------------------------------------------------------------------------------------------
Oppenheimer Strategic Bond Fund/VA 0.74% N/A 0.04% 0.78%
---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) The figures shown in the table are for the year ended December 31, 1999
(except as otherwise noted).
(2) Absent voluntary reductions and reimbursements for certain Portfolios,
"Management Fees," "12b-1 Fees", "Other Expenses," and "Total Portfolio
Annual Expenses" as a percent of average net assets of the portfolios would
have been as follows:
<TABLE>
<CAPTION>
Rule Total Portfolio
Management 12b-1 Other Annual
Portfolio Fees Fees Expenses Expenses
<S> <C> <C> <C> <C>
---------------------------------------------------------------------------------------------------------------------------------
AIM V.I. Balanced Fund 0.75% N/A 0.56% 1.31%
---------------------------------------------------------------------------------------------------------------------------------
Morgan Stanley UIF Equity Growth 0.55% N/A 0.56% 1.11%
---------------------------------------------------------------------------------------------------------------------------------
Morgan Stanley UIF Fixed Income 0.40% N/A 0.56% 0.96%
---------------------------------------------------------------------------------------------------------------------------------
Morgan Stanley UIF Global Equity 0.80% N/A 0.68% 1.48%
---------------------------------------------------------------------------------------------------------------------------------
Morgan Stanley UIF Mid Cap Value 0.75% N/A 0.62% 1.37%
---------------------------------------------------------------------------------------------------------------------------------
Morgan Stanley UIF Value 0.55% N/A 0.67% 1.22%
---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
The Portfolio's Advisors may discontinue all or part of these voluntary
reductions and reimbursements at any time.
8 - PROSPECTUS
<PAGE>
(3) Initial Class.
(4) A portion of the brokerage commissions that certain funds pay was used to
reduce fund expenses. In addition, through arrangements with certain funds',
or Fidelity Management & Research Company ("FMR") on behalf of certain
funds' custodian, credits realized as a result of uninvested cash balances
were used to reduce a portion of each applicable fund's expenses. With these
reductions, the "Total Portfolio Annual Expenses" presented in the table
would have been 0.65% for Contrafund-Registered Trademark- Portfolio, 0.56%
for Equity-Income Portfolio, and 0.65% for Growth Portfolio.
(5) On February 8, 2000, a merger and reorganization was approved that combined
the assets of the fund with a similar fund of the Templeton Variable
Products Series Fund, effective May 1, 2000. On February 8, 2000, fund
shareholders approved new management fees, which apply to the combined fund
effective May 1, 2000. The table shows restated total expenses based on the
new fees and assets of the fund as of December 31, 1999, and not the assets
of the combined fund. However, if the table reflected both the new fees and
the combined assets, the fund's expenses after May 1, 2000 would be
estimated as: "Management Fees" 0.55%, "Rule 12b-1 Fees" 0.25%, "Other
Expenses" 0.27%, and "Total Portfolio Annual Expenses" 1.07%.
(6) The funds' class 2 distribution plan or "Rule 12b-1 plan" is described in
the fund's prospectus.
(7) On February 8, 2000, a merger and reorganization was approved that combined
the fund with a similar fund of Templeton Variable Products Series Fund,
effective May 1, 2000. The table shows total expenses based on the funds
assets as of December 31, 1999, and not the assets of the combined fund.
However, if the table reflected combined assets, the fund's expenses after
May 1, 2000 would be estimated as: "Management Fees" 0.60%, "Rule 12b-1
Fees" 0.25%, "Other Expenses" 0.19%, and "Total Portfolio Annual Expenses"
1.04%.
(8) On February 8, 2000, shareholders approved a merger and reorganization that
combined the fund with the Templeton Developing Markets Equity Fund,
effective May 1, 2000. The shareholders of that fund had approved new
management fees, which apply to combined fund effective May 1, 2000. The
table shows restated total expenses based on the new fees and the assets of
the fund as of December 31, 1999, and not the assets of the combined fund.
However, if the table reflected both the new fees and the combined assets,
the fund's expenses after May 1, 2000 would be estimated as: "Management
Fees" 1.25%, "Rule 12b-1 Fees" 0.25%, "Other Expenses" 0.29%, and "Total
Portfolio Annual Expenses" 1.79%.
(9) On February 8, 2000, a merger and reorganization was approved that combined
the fund with a similar fund of Templeton Variable Products Series Fund,
effective May 1, 2000. The table shows total expenses based on the fund's
assets as of December 31, 1999, and not the assets of the combined fund.
However, if the table reflected combined assets, the fund's expenses after
May 1, 2000 would be estimated as: "Management Fees" 0.80%, "Rule 12b-1
Fees" 0.25%, "Other Expenses" 0.05%, and "Total Portfolio Annual Expenses"
1.10%
(10) The fund administration fee is paid indirectly through the management fee.
(11) On February 8, 2000, shareholders approved a merger and reorganization that
combined the fund with the Templeton International Equity Fund, effective
May 1, 2000. The shareholders of that fund had approved new management fees,
which apply to combined fund effective May 1, 2000. The table shows restated
total expenses based on the new fees and the assets of the fund as of
December 31, 1999, and not the assets of the combined fund. However, if the
table reflected both the new fees and the combined assets, the fund's
expenses after May 1, 2000 would be estimated as: "Management Fees" 0.65%,
"Rule 12b-1 Fees" 0.25%, "Other Expenses" 0.20%, and "Total Portfolio Annual
Expenses" 1.10%.
(12) The Funds' expenses are based on estimated expenses for the fiscal year
December 31, 2000.
(13) Goldman Sachs Asset Management and Goldman Sachs Asset Management
International, the investment advisors, have voluntarily agreed to reduce or
limit certain other expenses (excluding management fees, taxes, interest,
brokerage fees, litigation, indemnification, and other extraordinary
expenses) to the extent such expenses exceed the percentage stated in the
calculated per annum (above table) as of each fund's respective average
daily net assets. Without the limitations described above, "Other Expenses"
and "Total Portfolio Annual Expenses" would be estimated as follows:
<TABLE>
<CAPTION>
Rule Total Portfolio
Management 12b-1 Other Annual
Portfolio Fees Fees Expenses Expenses
<S> <C> <C> <C> <C>
---------------------------------------------------------------------------------------------------------------------------------
Goldman Sachs VIT Capital Growth Fund 0.75% N/A 0.94% 1.69%
---------------------------------------------------------------------------------------------------------------------------------
Goldman Sachs VIT CORE-SM- Small Cap Equity Fund 0.75% N/A 0.75% 1.50%
---------------------------------------------------------------------------------------------------------------------------------
Goldman Sachs VIT Global Income Fund 0.90% N/A 1.78% 2.68%
---------------------------------------------------------------------------------------------------------------------------------
Goldman Sachs VIT International Equity Fund 1.00% N/A 0.77% 1.77%
---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
The Portfolio Advisor may discontinue all or part of these voluntary reductions
at any time.
9 - PROSPECTUS
<PAGE>
(14) Each series has an expense offset arrangement which reduces the series'
custodian fee based upon the amount of cash maintained by the series with
its custodian and dividend disbursing agent. Each series may enter into
other such arrangements and directed brokerage arrangements, which would
also have the effect of reducing the series' expenses. "Other Expenses" do
not take into account these expense reductions, and are therefore higher
than the actual expenses of the series. Had these fee reductions been taken
into account, "Total Portfolio Annual Expenses" would be lower for certain
series and would equal: 0.83% for Emerging Growth Series, 0.87% for Growth
with Income Series, 1.05% for New Discovery Series, and 0.85% for Research
Series.
(15) MFS has contractually agreed, subject to reimbursement, to bear expenses
for these series such that each such series' "Other Expenses" (after taking
into account the expense offset arrangement described above), do not exceed
the following percentages of the average daily net assets of the series
during the current fiscal year: 0.15% for New Discovery Series. These
contractual fee arrangements will continue until at least May 1, 2001,
unless changed with the consent of the board of trustees which oversees the
series.
10 - PROSPECTUS
<PAGE>
Example 1
The example below shows the dollar amount of expenses that you would bear
directly or indirectly if you:
- invested $1,000 in a Variable Sub-Account,
- earned a 5% annual return on your investment,
- surrendered your Contract, or you began receiving income payments for a
specified period of less than 120 months, at the end of each time period, and
- elected the Enhanced Death and Income Benefit Combination Rider.
THE EXAMPLE DOES NOT INCLUDE ANY TAXES OR TAX PENALTIES YOU MAY BE REQUIRED TO
PAY IF YOU SURRENDER YOUR CONTRACT.
<TABLE>
<CAPTION>
Variable Sub-Account 1 Year 3 Years 5 Years 10 Years
<S> <C> <C> <C> <C>
---------------------------------------------------------------------------------------------------------------------------------
AIM V.I. Balanced $80 $133 $179 $322
---------------------------------------------------------------------------------------------------------------------------------
AIM V.I. Diversified Income $77 $121 $159 $285
---------------------------------------------------------------------------------------------------------------------------------
AIM V.I. Government Securities $77 $123 $163 $292
---------------------------------------------------------------------------------------------------------------------------------
AIM V.I. Growth $76 $118 $154 $274
---------------------------------------------------------------------------------------------------------------------------------
AIM V.I. Growth and Income $76 $119 $156 $278
---------------------------------------------------------------------------------------------------------------------------------
AIM V.I. International Equity $78 $125 $167 $299
---------------------------------------------------------------------------------------------------------------------------------
AIM V.I. Value $76 $119 $156 $277
---------------------------------------------------------------------------------------------------------------------------------
The Dreyfus Socially Responsible Growth Fund, Inc. $76 $120 $157 $280
---------------------------------------------------------------------------------------------------------------------------------
Dreyfus Stock Index Fund $71 $103 $130 $225
---------------------------------------------------------------------------------------------------------------------------------
Dreyfus VIF Growth & Income $76 $120 $157 $280
---------------------------------------------------------------------------------------------------------------------------------
Dreyfus VIF Money Market $74 $113 $147 $259
---------------------------------------------------------------------------------------------------------------------------------
Fidelity VIP Contrafund-Registered Trademark- $75 $116 $151 $268
---------------------------------------------------------------------------------------------------------------------------------
Fidelity VIP Equity-Income $74 $113 $146 $258
---------------------------------------------------------------------------------------------------------------------------------
Fidelity VIP Growth $75 $116 $151 $267
---------------------------------------------------------------------------------------------------------------------------------
Fidelity VIP High Income $75 $117 $152 $270
---------------------------------------------------------------------------------------------------------------------------------
Franklin Small Cap -- Class 2 $79 $128 $172 $309
---------------------------------------------------------------------------------------------------------------------------------
Mutual Shares Securities -- Class 2 $79 $127 $170 $306
---------------------------------------------------------------------------------------------------------------------------------
Templeton Developing Markets Securities -- Class 2 $87 $151 $208 $379
---------------------------------------------------------------------------------------------------------------------------------
Templeton Growth Securities -- Class 2 $80 $130 $175 $315
---------------------------------------------------------------------------------------------------------------------------------
Templeton International Securities -- Class 2 $80 $130 $175 $315
---------------------------------------------------------------------------------------------------------------------------------
Goldman Sachs VIT Capital Growth $78 $126 $168 $302
---------------------------------------------------------------------------------------------------------------------------------
Goldman Sachs VIT CORE-SM- Small Cap Equity $78 $126 $168 $302
---------------------------------------------------------------------------------------------------------------------------------
Goldman Sachs VIT CORE-SM- U.S. Equity $77 $123 $163 $292
---------------------------------------------------------------------------------------------------------------------------------
Goldman Sachs VIT Global Income $80 $131 $176 $317
---------------------------------------------------------------------------------------------------------------------------------
Goldman Sachs VIT International Equity $82 $137 $186 $336
---------------------------------------------------------------------------------------------------------------------------------
MFS Emerging Growth $77 $121 $160 $286
---------------------------------------------------------------------------------------------------------------------------------
MFS Growth with Income $77 $122 $162 $290
---------------------------------------------------------------------------------------------------------------------------------
MFS New Discovery $79 $128 $172 $309
---------------------------------------------------------------------------------------------------------------------------------
MFS Research $77 $122 $161 $288
---------------------------------------------------------------------------------------------------------------------------------
Morgan Stanley UIF Equity Growth $77 $122 $160 $287
---------------------------------------------------------------------------------------------------------------------------------
Morgan Stanley UIF Fixed Income $75 $117 $153 $271
---------------------------------------------------------------------------------------------------------------------------------
Morgan Stanley UIF Global Equity $80 $131 $176 $317
---------------------------------------------------------------------------------------------------------------------------------
Morgan Stanley UIF Mid Cap Value $79 $128 $171 $307
---------------------------------------------------------------------------------------------------------------------------------
Morgan Stanley UIF Value $77 $122 $160 $287
---------------------------------------------------------------------------------------------------------------------------------
Oppenheimer Aggressive Growth $75 $116 $151 $268
---------------------------------------------------------------------------------------------------------------------------------
Oppenheimer Capital Appreciation $75 $117 $153 $271
---------------------------------------------------------------------------------------------------------------------------------
Oppenheimer Global Securities $75 $117 $152 $270
---------------------------------------------------------------------------------------------------------------------------------
Oppenheimer Main Street Growth & Income $76 $119 $157 $279
---------------------------------------------------------------------------------------------------------------------------------
Oppenheimer Strategic Bond $76 $119 $157 $279
---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
11 - PROSPECTUS
<PAGE>
Example 2
Same assumptions as Example 1 above, except that you decided not to surrender
your Contract, or you began receiving income payments for a specified period of
at least 120 months, at the end of each period.
<TABLE>
<CAPTION>
Variable Sub-Account 1 Year 3 Years 5 Years 10 Years
<S> <C> <C> <C> <C>
---------------------------------------------------------------------------------------------------------------------------------
AIM V.I. Balanced $29 $ 90 $153 $322
---------------------------------------------------------------------------------------------------------------------------------
AIM V.I. Diversified Income $26 $ 78 $134 $285
---------------------------------------------------------------------------------------------------------------------------------
AIM V.I. Government Securities $26 $ 81 $137 $292
---------------------------------------------------------------------------------------------------------------------------------
AIM V.I. Growth $25 $ 75 $129 $274
---------------------------------------------------------------------------------------------------------------------------------
AIM V.I. Growth and Income $25 $ 77 $131 $278
---------------------------------------------------------------------------------------------------------------------------------
AIM V.I. International Equity $27 $ 83 $141 $299
---------------------------------------------------------------------------------------------------------------------------------
AIM V.I. Value $25 $ 76 $130 $277
---------------------------------------------------------------------------------------------------------------------------------
The Dreyfus Socially Responsible Growth Fund, Inc. $25 $ 77 $132 $280
---------------------------------------------------------------------------------------------------------------------------------
Dreyfus Stock Index Fund $20 $ 61 $104 $225
---------------------------------------------------------------------------------------------------------------------------------
Dreyfus VIF Growth & Income $25 $ 77 $132 $280
---------------------------------------------------------------------------------------------------------------------------------
Dreyfus VIF Money Market $23 $ 71 $121 $259
---------------------------------------------------------------------------------------------------------------------------------
Fidelity VIP Contrafund-Registered Trademark- $24 $ 74 $126 $268
---------------------------------------------------------------------------------------------------------------------------------
Fidelity VIP Equity-Income $23 $ 70 $121 $258
---------------------------------------------------------------------------------------------------------------------------------
Fidelity VIP Growth $24 $ 73 $125 $267
---------------------------------------------------------------------------------------------------------------------------------
Fidelity VIP High Income $24 $ 74 $127 $270
---------------------------------------------------------------------------------------------------------------------------------
Franklin Small Cap -- Class 2 $28 $ 86 $146 $309
---------------------------------------------------------------------------------------------------------------------------------
Mutual Shares Securities -- Class 2 $28 $ 85 $145 $306
---------------------------------------------------------------------------------------------------------------------------------
Templeton Developing Markets Securities -- Class 2 $36 $108 $183 $379
---------------------------------------------------------------------------------------------------------------------------------
Templeton Growth Securities -- Class 2 $29 $ 88 $149 $315
---------------------------------------------------------------------------------------------------------------------------------
Templeton International Securities -- Class 2 $29 $ 88 $149 $315
---------------------------------------------------------------------------------------------------------------------------------
Goldman Sachs VIT Capital Growth $27 $ 84 $143 $302
---------------------------------------------------------------------------------------------------------------------------------
Goldman Sachs VIT CORE-SM- Small Cap Equity $27 $ 84 $143 $302
---------------------------------------------------------------------------------------------------------------------------------
Goldman Sachs VIT CORE-SM- U.S. Equity $26 $ 81 $137 $292
---------------------------------------------------------------------------------------------------------------------------------
Goldman Sachs VIT Global Income $29 $ 88 $150 $317
---------------------------------------------------------------------------------------------------------------------------------
Goldman Sachs VIT International Equity $31 $ 94 $160 $336
---------------------------------------------------------------------------------------------------------------------------------
MFS Emerging Growth $26 $ 79 $134 $286
---------------------------------------------------------------------------------------------------------------------------------
MFS Growth with Income $26 $ 80 $136 $290
---------------------------------------------------------------------------------------------------------------------------------
MFS New Discovery $28 $ 86 $146 $309
---------------------------------------------------------------------------------------------------------------------------------
MFS Research $26 $ 79 $135 $288
---------------------------------------------------------------------------------------------------------------------------------
Morgan Stanley UIF Equity Growth $26 $ 79 $135 $287
---------------------------------------------------------------------------------------------------------------------------------
Morgan Stanley UIF Fixed Income $24 $ 74 $127 $271
---------------------------------------------------------------------------------------------------------------------------------
Morgan Stanley UIF Global Equity $29 $ 88 $150 $317
---------------------------------------------------------------------------------------------------------------------------------
Morgan Stanley UIF Mid Cap Value $28 $ 85 $145 $307
---------------------------------------------------------------------------------------------------------------------------------
Morgan Stanley UIF Value $26 $ 79 $135 $287
---------------------------------------------------------------------------------------------------------------------------------
Oppenheimer Aggressive Growth $24 $ 74 $126 $268
---------------------------------------------------------------------------------------------------------------------------------
Oppenheimer Capital Appreciation $24 $ 74 $127 $271
---------------------------------------------------------------------------------------------------------------------------------
Oppenheimer Global Securities $24 $ 74 $127 $270
---------------------------------------------------------------------------------------------------------------------------------
Oppenheimer Main Street Growth & Income $25 $ 77 $131 $279
---------------------------------------------------------------------------------------------------------------------------------
Oppenheimer Strategic Bond $25 $ 77 $131 $279
---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
PLEASE REMEMBER THAT YOU ARE LOOKING AT EXAMPLES AND NOT A REPRESENTATION OF
PAST OR FUTURE EARNINGS. YOUR ACTUAL EXPENSES MAY BE LOWER OR GREATER THAN THOSE
SHOWN ABOVE. SIMILARLY, YOUR RATE OF RETURN MAY BE LOWER OR GREATER THAN 5%,
WHICH IS NOT GUARANTEED. THE EXAMPLES ASSUME THAT ANY PORTFOLIO EXPENSE WAIVERS
OR REIMBURSEMENT ARRANGEMENTS DESCRIBED IN THE FOOTNOTES TO THE PORTFOLIO ANNUAL
EXPENSE TABLE ARE IN EFFECT FOR THE PERIODS PRESENTED. THE ABOVE EXAMPLES ASSUME
THE ELECTION OF THE ENHANCED DEATH AND INCOME BENEFIT COMBINATION RIDER WITH A
MORTALITY AND EXPENSE RISK CHARGE OF 1.49%. IF THAT RIDER WERE NOT ELECTED, THE
EXPENSE FIGURES SHOWN ABOVE WOULD BE SLIGHTLY LOWER. TO REFLECT THE CONTRACT
MAINTENANCE CHARGE IN THE EXAMPLES, WE ESTIMATED AN EQUIVALENT PERCENTAGE
CHARGE, BASED ON THE CURRENT AVERAGE CONTRACT SIZE OF $47,490.
12 - PROSPECTUS
<PAGE>
FINANCIAL INFORMATION
-------------------------------------------------------------------
To measure the value of your investment in the Variable Sub-Accounts during the
Accumulation Phase, we use a unit of measure we call the "ACCUMULATION UNIT".
Each Variable Sub-Account has a separate value for its Accumulation Units we
call "ACCUMULATION UNIT VALUE." Accumulation Unit Value is analogous to, but not
the same as, the share price of a mutual fund.
Attached as Appendix A to this prospectus are tables showing the Accumulation
Unit Values of each Variable Sub-Account since the date the Contracts were first
offered. No Accumulation Unit Values are shown for the following Variable
Sub-Accounts which commenced operations as of May 1, 2000: Franklin Small Cap
(Class 2), Mutal Shares Securities (Class 2), and Templeton Growth Securities
(Class 2). To obtain a fuller picture of each Variable Sub-Account's finances,
please refer to the Variable Account's financial statements contained in the
Statement of Additional Information. The financial statements of Glenbrook also
appear in the Statement of Additional Information.
13 - PROSPECTUS
<PAGE>
THE CONTRACT
-------------------------------------------------------------------
CONTRACT OWNER
The Glenbrook Provider Variable Annuity is a contract between you, the Contract
owner, and Glenbrook, a life insurance company. As the Contract owner, you may
exercise all of the rights and privileges provided to you by the Contract. That
means it is up to you to select or change (to the extent permitted):
- the investment alternatives during the Accumulation and Payout Phases,
- the amount and timing of your purchase payments and withdrawals,
- the programs you want to use to invest or withdraw money,
- the income payment plan you want to use to receive retirement income,
- the Annuitant (either yourself or someone else) on whose life the income
payments will be based,
- the Beneficiary or Beneficiaries who will receive the benefits that the
Contract provides when the last surviving Contract owner dies, and
- any other rights that the Contract provides.
If you die, any surviving Contract owner, or, if none, the Beneficiary may
exercise the rights and privileges provided to them by the Contract.
The Contract cannot be jointly owned by both a non-natural person and a natural
person.
You can use the Contract with or without a qualified plan. A qualified plan is a
personal retirement savings plan, such as an IRA or tax-sheltered annuity, that
meets the requirements of the Internal Revenue Code. Qualified plans may limit
or modify your rights and privileges under the Contract. We use the term
"Qualified Contract" to refer to a Contract issued within a qualified plan. See
"Qualified Plans" on page 34.
ANNUITANT
The Annuitant is the individual whose life determines the amount and duration of
income payments (other than under Income Plans with guaranteed payments for a
specified period). You initially designate an Annuitant in your application. You
may change the Annuitant at any time prior to the Payout Start Date (only if the
Contract owner is a natural person). You may designate a joint Annuitant, who is
a second person on whose life income payments depend. We permit joint Annuitants
only on or after the Payout Start Date. If the Annuitant dies prior to the
Payout Start Date, the new Annuitant will be:
(i) the youngest Contract owner; otherwise,
(ii) the youngest Beneficiary.
BENEFICIARY
The Beneficiary is the person who may elect to receive the death benefit or
become the new Contract owner if the sole surviving Contract owner dies before
the Payout Start Date. If the sole surviving Contract owner dies after the
Payout Start Date, the Beneficiary will receive any guaranteed income payments
scheduled to continue.
You may name one or more Beneficiaries when you apply for a Contract. You may
change or add Beneficiaries at any time, unless you have designated an
irrevocable Beneficiary. We will provide a change of Beneficiary form to be
signed and filed with us. Any change will be effective at the time you sign the
written notice. Until we receive your written notice to change a Beneficiary, we
are entitled to rely on the most recent Beneficiary information in our files. We
will not be liable as to any payment or settlement made prior to receiving the
written notice. Accordingly, if you wish to change your Beneficiary, you should
deliver your written notice to us promptly.
If you did not name a Beneficiary or, unless otherwise provided in the
Beneficiary designation, if a named Beneficiary is no longer living and there
are no other surviving Beneficiaries, the new Beneficiary will be:
- your spouse or, if he or she is no longer alive,
- your surviving children equally, or if you have no surviving children,
- your estate.
If more than one Beneficiary survives you (or survives the Annuitant, if the
Contract owner is not a natural person) we will divide the death benefit among
your Beneficiaries according to your most recent written instructions. If you
have not given us written instructions, we will pay the death benefit in equal
amounts to the surviving Beneficiaries.
MODIFICATION OF THE CONTRACT
Only a Glenbrook officer may approve a change in or waive any provision of the
Contract. Any change or waiver must be in writing. None of our agents has the
authority to change or waive the provisions of the Contract. We may not change
the terms of the Contract without your consent, except to conform the Contract
to applicable law or changes in the law. If a provision of the Contract is
inconsistent with state law, we will follow state law.
ASSIGNMENT
We will not honor an assignment of an interest in a Contract as collateral or
security for a loan. However, you may assign periodic income payments under the
Contract prior to the Payout Start Date. No Beneficiary may assign benefits
under the Contract until they are payable to the Beneficiary. We will not be
bound by any assignment until the assignor signs
14 - PROSPECTUS
<PAGE>
it and files it with us. We are not responsible for the validity of any
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. An assignment may also result in taxes or
tax penalties. YOU SHOULD CONSULT WITH AN ATTORNEY BEFORE TRYING TO ASSIGN YOUR
CONTRACT.
PURCHASES
-------------------------------------------------------------------
MINIMUM PURCHASE PAYMENTS
Your initial purchase payment must be at least $3,000 ($2,000 for a Qualified
Contract). All subsequent purchase payments must be $50 or more. You may make
purchase payments at any time prior to the Payout Start Date. We reserve the
right to limit the maximum amount of purchase payments we will accept.
AUTOMATIC ADDITIONS PROGRAM
You may make subsequent purchase payments by automatically transferring money
from your bank account. Consult your representative for more detailed
information.
ALLOCATION OF PURCHASE PAYMENTS
At the time you apply for a Contract, you must decide how to allocate your
purchase payments among the investment alternatives. The allocation you specify
on your application will be effective immediately. All allocations must be in
whole percents that total 100% or in whole dollars. You can change your
allocations by notifying us in writing.
We will allocate your purchase payments to the investment alternatives according
to your most recent instructions on file with us. Unless you notify us in
writing otherwise, we will allocate subsequent purchase payments according to
the allocation for the previous purchase payment. We will effect any change in
allocation instructions at the time we receive written notice of the change in
good order.
We will credit the initial purchase payment that accompanies your completed
application to your Contract within 2 business days after we receive the payment
at our home office. If your application is incomplete, we will ask you to
complete your application within 5 business days. If you do so, we will credit
your initial purchase payment to your Contract within that 5 business day
period. If you do not, we will return your purchase payment at the end of the 5
business day period unless you expressly allow us to hold it until you complete
the application. We will credit subsequent purchase payments to the Contract at
the close of the business day on which we receive the purchase payment at our
home office.
We are open for business each day Monday through Friday that the New York Stock
Exchange is open for business. We also refer to these days as "VALUATION DATES."
Our business day closes when the New York Stock Exchange closes, usually 4 p.m.
Eastern Time (3 p.m. Central Time). If we receive your purchase payment after
3 p.m. Central Time on any Valuation Date, we will credit your purchase payment
using the Accumulation Unit Values computed on the next Valuation Date.
RIGHT TO CANCEL
You may cancel the Contract by returning it to us within the Cancellation
Period, which is the 20 day period after you receive the Contract, or a longer
period should your state require it. You may return it by delivering it or
mailing it to us. If you exercise this "RIGHT TO CANCEL," the Contract
terminates and we will pay you the full amount of your purchase payments
allocated to the Fixed Account. We also will return your purchase payments
allocated to the Variable Account adjusted, to the extent federal or state law
permits, to reflect investment gain or loss that occurred from the date of
allocation through the date of cancellation. Some states may require us to
return a greater amount to you.
In states where we are required to refund purchase payments, we reserve the
right during the Cancellation Period to invest any purchase payments you
allocated to a Variable Sub-Account to the Money Market Variable Sub-Account
available under the Contract. We will notify you if we do so. At the end of the
Cancellation Period, you may then allocate your money to other Variable
Sub-Accounts.
15 - PROSPECTUS
<PAGE>
CONTRACT VALUE
-------------------------------------------------------------------
Your Contract Value at any time during the Accumulation Phase is equal to the
sum of the value of your Accumulation Units in the Variable Sub-Accounts you
have selected, plus the value of your investment in the Fixed Account Options.
ACCUMULATION UNITS
To determine the number of Accumulation Units of each Variable Sub-Account to
credit to your Contract, we divide (i) the amount of the purchase payment or
transfer you have allocated to a Variable Sub-Account by (ii) the Accumulation
Unit Value of that Variable Sub-Account next computed after we receive your
payment or transfer. For example, if we receive a $10,000 purchase payment
allocated to a Variable Sub-Account when the Accumulation Unit Value for the
Sub-Account is $10, we would credit 1,000 Accumulation Units of that Variable
Sub-Account to your Contract. Withdrawals and transfers from a Variable
Sub-Account would, of course, reduce the number of Accumulation Units of that
Sub-Account allocated to your Contract.
ACCUMULATION UNIT VALUE
As a general matter, the Accumulation Unit Value for each Variable Sub-Account
will rise or fall to reflect:
- changes in the share price of the Portfolio in which the Variable Sub-Account
invests, and
- the deduction of amounts reflecting the mortality and expense risk charge,
administrative expense charge, and any provision for taxes that have accrued
since we last calculated the Accumulation Unit Value.
We determine contract maintenance charges, withdrawal charges, and transfer fees
(currently waived) separately for each Contract. They do not affect Accumulation
Unit Value. Instead, we obtain payment of those charges and fees by redeeming
Accumulation Units. For details on how we calculate Accumulation Unit Value,
please refer to the Statement of Additional Information.
We determine a separate Accumulation Unit Value for each Variable Sub-Account on
each Valuation Date. We also determine a separate set of Accumulation Unit
Values reflecting the cost of the Enhanced Death Benefit Rider and the Enhanced
Death and Income Benefit Combination Rider described on pages 27-28.
YOU SHOULD REFER TO THE PROSPECTUSES FOR THE FUNDS THAT ACCOMPANY THIS
PROSPECTUS FOR A DESCRIPTION OF HOW THE ASSETS OF EACH PORTFOLIO ARE VALUED,
SINCE THAT DETERMINATION DIRECTLY BEARS ON THE ACCUMULATION UNIT VALUE OF THE
CORRESPONDING VARIABLE SUB-ACCOUNT AND, THEREFORE, YOUR CONTRACT VALUE.
16 - PROSPECTUS
<PAGE>
INVESTMENT ALTERNATIVES: THE VARIABLE SUB-ACCOUNTS
-------------------------------------------------------------------
You may allocate your purchase payments to up to 39 Variable Sub-Accounts. Each
Variable Sub-Account invests in the shares of a corresponding Portfolio. Each
Portfolio has its own investment objective(s) and policies. We briefly describe
the Portfolios below.
For more complete information about each Portfolio, including expenses and risks
associated with the Portfolio, please refer to the accompanying prospectuses for
the Funds. You should carefully review the Fund prospectuses before allocating
amounts to the Variable Sub-Accounts.
<TABLE>
<CAPTION>
<S> <C> <C>
Portfolio: Each Portfolio Seeks: Investment Advisor:
<CAPTION>
AIM VARIABLE INSURANCE FUNDS*
<S> <C> <C>
AIM V.I. Balanced Fund As high a total return as possible, consistent A I M Advisors, Inc.
with preservation of capital
AIM V.I. Diversified Income Fund A high level of current income
AIM V.I. Government Securities Fund A high level of current income consistent with
a reasonable concern for safety of principal
AIM V.I. Growth Fund Growth of capital
AIM V.I. Growth and Income Fund Growth of capital with a secondary objective of
current income
AIM V.I. International Equity Fund Long-term growth of capital
AIM V.I. Value Fund Long-term growth of capital and income as a
secondary objective
THE DREYFUS SOCIALLY RESPONSIBLE GROWTH FUND, INC.; THE DREYFUS STOCK INDEX FUND; AND THE DREYFUS VARIABLE INVESTMENT FUND
(VIF) (COLLECTIVELY, THE DREYFUS FUNDS)
The Dreyfus Socially Responsible Growth Capital growth and, secondarily, current income The Dreyfus Corporation
Fund, Inc.
Dreyfus Stock Index Fund To match the total return of the Standard &
Poor's 500 Composite Stock Price Index
Dreyfus VIF Growth & Income Portfolio Long-term capital growth, current income and
growth of income, consistent with reasonable
investment risk
Dreyfus VIF Money Market Portfolio A high level of current income as is consistent
with the preservation of capital and the
maintenance of liquidity
FIDELITY VARIABLE INSURANCE PRODUCTS FUND
Fidelity VIP Contrafund-Registered Trademark- Long-term capital appreciation Fidelity Management &
Portfolio Research Company
Fidelity VIP Equity-Income Portfolio Reasonable income
Fidelity VIP Growth Portfolio Capital appreciation
Fidelity VIP High Income Portfolio High level of current income while also
considering growth of capital
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST (VIP) -- CLASS 2
Franklin Small Cap Fund (surviving fund of Long-term capital growth Franklin Advisers, Inc.
merger with Franklin Small Cap Investments
Fund)
Mutual Shares Securities Fund (surviving fund Capital appreciation. Secondary goal is income. Franklin Mutual Advisers,
of merger with Mutual Shares Investments Fund) LLC.
Templeton Developing Markets Securities Fund Long-term capital appreciation Templeton Investment
(previously Templeton Developing Markets Fund) Counsel, Inc.
Templeton Growth Securities Fund (surviving Long-term capital growth Templeton Global Advisors
fund of merger with Templeton Stock Fund) Limited
Templeton International Securities Fund Long-term capital growth Templeton Investment
(previously Templeton International Fund) Counsel, Inc.
GOLDMAN SACHS VARIABLE INSURANCE TRUST (VIT)
Goldman Sachs VIT Capital Growth Fund Long-term growth of capital Goldman Sachs Asset
Management
Goldman Sachs VIT CORE-SM- Small Cap Equity Long-term growth of capital
Fund
Goldman Sachs VIT CORE-SM- U.S. Equity Fund Long-term growth of capital and dividend income
Goldman Sachs VIT Global Income Fund A high total return, emphasizing current income
and, to a lesser extent providing opportunities
for capital appreciation
Goldman Sachs VIT International Equity Fund Long-term capital appreciation Goldman Sachs Asset
Management International
</TABLE>
17 - PROSPECTUS
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
Portfolio: Each Portfolio Seeks: Investment Advisor:
<CAPTION>
MFS-REGISTERED TRADEMARK- VARIABLE INSURANCE TRUST-SM-
<S> <C> <C>
MFS Emerging Growth Series Long-term growth of capital Massachusetts Financial
Services
MFS Growth with Income Series Reasonable current income and long-term growth
of capital and income
MFS New Discovery Series Capital appreciation
MFS Research Series Long-term growth of capital and future income
THE UNIVERSAL INSTITUTIONAL FUNDS, INC.**
Morgan Stanley UIF Equity Growth Long-term capital appreciation Morgan Stanley Asset
Management
Morgan Stanley UIF Fixed Income Above-average total return over a market cycle
of three to five years
Morgan Stanley UIF Global Equity Long-term capital appreciation
Morgan Stanley UIF Mid Cap Value Above-average total return over a market cycle
of three to five years
Morgan Stanley UIF Value Above-average total return over a market cycle Miller Anderson & Sherrerd,
of three to five years LLP
OPPENHEIMER VARIABLE ACCOUNT FUNDS
Oppenheimer Aggressive Growth Fund/VA Capital appreciation OppenheimerFunds, Inc.
Oppenheimer Capital Appreciation Fund/VA Capital appreciation
Oppenheimer Global Securities Fund/VA Long-term capital appreciation
Oppenheimer Main Street Growth & Income Fund/VA High total return, which includes growth in the
value of its shares as well as current income,
from equity and debt securities
Oppenheimer Strategic Bond Fund/VA High level of current income
</TABLE>
*A portfolio's investment objective may be changed by the Fund's Board of
Trustees without shareholders approval.
**Formerly, the Morgan Stanley Dean Witter Universal Funds, Inc.
VARIABLE INSURANCE TRUST PORTFOLIOS MAY NOT BE MANAGED BY THE SAME PORTFOLIO
MANAGERS WHO MANAGE RETAIL MUTUAL FUNDS WITH SIMILAR NAMES. THESE PORTFOLIOS ARE
LIKELY TO DIFFER FROM RETAIL FUNDS IN ASSETS, CASH FLOW, AND TAX MATTERS.
ACCORDINGLY, THE HOLDINGS AND INVESTMENT RESULTS OF A PORTFOLIO CAN BE EXPECTED
TO BE HIGHER OR LOWER THAN THE INVESTMENT RESULTS OF RETAIL MUTUAL FUNDS.
18 - PROSPECTUS
<PAGE>
INVESTMENT ALTERNATIVES: THE FIXED ACCOUNT OPTIONS
-------------------------------------------------------------------
You may allocate all or a portion of your purchase payments to the Fixed
Account. You may choose from among 3 Fixed Account Options including 2 dollar
cost averaging options and the option to invest in one or more Guarantee Periods
included in the Guaranteed Maturity Fixed Account. The Fixed Account Options may
not be available in all states. Please consult with your representative for
current information. The Fixed Account supports our insurance and annuity
obligations. The Fixed Account consists of our general assets other than those
in segregated asset accounts. We have sole discretion to invest the assets of
the Fixed Account, subject to applicable law. Any money you allocate to a Fixed
Account Option does not entitle you to share in the investment experience of the
Fixed Account.
DOLLAR COST AVERAGING FIXED ACCOUNT OPTIONS
DOLLAR COST AVERAGING FIXED ACCOUNT OPTION. Purchase payments that you allocate
to the DOLLAR COST AVERAGING FIXED ACCOUNT OPTION ("DCA FIXED ACCOUNT OPTION")
will earn interest for a one year period at the current rate in effect at the
time of allocation. We will credit interest daily at a rate that will compound
over the year to the annual interest rate we guaranteed at the time of
allocation. After the one year period, we will declare a renewal rate which we
guarantee for a full year. Subsequent renewal dates will be every twelve months
for each payment or transfer.
We will follow your instructions in transferring amounts monthly from the DCA
Fixed Account Option. However, you may not choose less than 3 or more than 36
monthly installments. Further, you must transfer each purchase payment and all
its earnings out of this Option by means of dollar cost averaging within 36
months of payment. At the end of 36 months, we will transfer the remaining
payment and associated earnings to the Money Market Variable Sub-Account. No
transfers are permitted into the Dollar Cost Averaging Fixed Account.
SHORT TERM DOLLAR COST AVERAGING FIXED ACCOUNT OPTION. You may establish a Short
Term Dollar Cost Averaging Program by allocating purchase payments to THE SHORT
TERM DOLLAR COST AVERAGING FIXED ACCOUNT OPTION ("SHORT TERM DCA FIXED ACCOUNT
OPTION"). We will credit interest to purchase payments you allocate to this
Option for up to one year at the current rate in effect at the time of
allocation.
We will follow your instructions in transferring amounts monthly from the Short
Term DCA Fixed Account Option. However, you may not choose less than 3 or more
than 12 monthly installments. Further, you must transfer each purchase payment
and all its earnings out of this Option by means of dollar cost averaging within
12 months. If you discontinue the Dollar Cost Averaging Program before the end
of the transfer period, we will transfer the remaining balance in this Option to
the Money Market Variable Sub-Account unless you request a different investment
alternative. No transfers are permitted into the Short Term Dollar Cost
Averaging Fixed Account.
We bear the investment risk for all amounts allocated to the DCA Fixed Account
Option and the Short Term DCA Fixed Account Option. That is because we guarantee
the current and renewal interest rates we credit to the amounts you allocate to
either of these Options, which will never be less than the minimum guaranteed
rate in the Contract. Currently, we determine, in our sole discretion, the
amount of interest credited in excess of the guaranteed rate.
We may declare more than one interest rate for different monies based upon the
date of allocation to the DCA Fixed Account Option and the Short Term DCA Fixed
Account Option. For current interest rate information, please contact your
representative or our customer support unit at 1-800-755-5275.
GUARANTEE PERIODS
Each payment or transfer allocated to a Guarantee Period earns interest at a
specified rate that we guarantee for a period of years. Guarantee Periods may
range from 1 to 10 years. We are currently offering Guarantee Periods of 1, 3,
5, 7, and 10 years in length. In the future we may offer Guarantee Periods of
different lengths or stop offering some Guarantee Periods.
You select the Guarantee Period for each payment or transfer. If you do not
select a Guarantee Period, we will assign the same period(s) you selected for
your most recent purchase payment(s).
Each payment or transfer allocated to a Guarantee Period must be at least $50.
We reserve the right to limit the number of additional purchase payments that
you may allocate to this Option.
INTEREST RATES. We will tell you what interest rates and Guarantee Periods we
are offering at a particular time. We will not change the interest rate that we
credit to a particular allocation until the end of the relevant Guarantee
Period. We may declare different interest rates for Guarantee Periods of the
same length that begin at different times.
We have no specific formula for determining the rate of interest that we will
declare initially or in the future. We will set those interest rates based on
investment returns available at the time of the determination. In addition, we
may consider various other factors in determining interest rates including
regulatory and tax requirements, our sales commission and administrative
expenses, general economic trends, and competitive factors. WE DETERMINE THE
INTEREST RATES TO BE DECLARED IN OUR SOLE DISCRETION. WE CAN NEITHER
19 - PROSPECTUS
<PAGE>
PREDICT NOR GUARANTEE WHAT THOSE RATES WILL BE IN THE FUTURE. For current
interest rate information, please contact your representative or Glenbrook at
1-800-755-5275.
HOW WE CREDIT INTEREST. We will credit interest daily to each amount allocated
to a Guarantee Period at a rate that compounds to the annual interest rate that
we declared at the beginning of the applicable Guarantee Period. The following
example illustrates how a purchase payment allocated to a Guaranteed Period
would grow, given an assumed Guarantee Period and annual interest rate:
<TABLE>
<S> <C>
Purchase Payment......................... $10,000
Guarantee Period......................... 5 years
Annual Interest Rate..................... 4.50%
</TABLE>
<TABLE>
<CAPTION>
END OF CONTRACT YEAR
<S> <C> <C> <C> <C> <C>
YEAR 1 YEAR 2 YEAR 3 YEAR 4 YEAR 5
Beginning Contract Value $10,000.00
X (1 + Annual Interest Rate) X 1.045
----------
$10,450.00
Contract Value at end of Contract Year $10,450.00
X (1 + Annual Interest Rate) X 1.045
----------
$10,920.25
Contract Value at end of Contract Year $10,920.25
X (1 + Annual Interest Rate) X 1.045
----------
$11,411.66
Contract Value at end of Contract Year $11,411.66
X (1 + Annual Interest Rate) X 1.045
----------
$11,925.19
Contract Value at end of Contract Year $11,925.19
X (1 + Annual Interest Rate) X 1.045
----------
$12,461.82
Total Interest Credited During Guarantee Period = $2,461.82 ($12,461.82 - $10,000.00)
</TABLE>
This example assumes no withdrawals during the entire 5 year Guarantee Period.
If you were to make a withdrawal, you may be required to pay a withdrawal
charge. In addition, the amount withdrawn may be increased or decreased by a
Market Value Adjustment that reflects changes in interest rates since the time
you invested the amount withdrawn. The hypothetical interest rate is for
illustrative purposes only and is not intended to predict future interest rates
to be declared under the Contract. Actual interest rates declared for any given
Guarantee Period may be more or less than shown above.
RENEWALS. Prior to the end of each Guarantee Period, we will mail you a notice
asking you what to do with your money, including the accrued interest. During
the 30-day period after the end of the Guarantee Period, you may:
1. Take no action. We will automatically apply your money to a new Guarantee
Period of the same length as the expiring Guarantee Period. The new Guarantee
Period will begin on the day the previous Guarantee Period ends. The new
interest rate will be our current declared rate for a Guarantee Period of that
length; or
2. Instruct us to apply your money to one or more new Guarantee Periods of your
choice. The new Guarantee Period(s) will begin on the day the previous Guarantee
Period ends. The new interest rate will be our then current declared rate for
those Guarantee Periods; or
3. Instruct us to transfer all or a portion of your money to one or more
Variable Sub-Accounts of the Variable Account. We will effect the transfer on
the day we receive your instructions. We will not adjust the amount transferred
to include a Market Value Adjustment; or
4. Withdraw all or a portion of your money. You may be required to pay a
withdrawal charge, but we will not adjust the amount withdrawn to include a
Market Value Adjustment. You may also be required to pay premium taxes and
income tax withholding, if applicable. We will pay interest from the day the
Guarantee Period expired until the date of withdrawal. The interest will be the
rate for the shortest Guarantee Period then being offered. Amounts not withdrawn
will be applied to a new Guarantee Period of the same length as the previous
Guarantee Period. The new Guarantee Period will begin on the day the previous
Guarantee Period ends.
MARKET VALUE ADJUSTMENT. All withdrawals and transfers from a Guarantee Period,
other than those taken during the 30 day period after such Guarantee Period
expires, are subject to a Market Value Adjustment. A Market Value Adjustment
also may apply upon payment of a death benefit and when you apply amounts
currently invested in a
20 - PROSPECTUS
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Guarantee Period to an Income Plan (unless paid or applied during the 30-day
period after such Guarantee Period expires). We also will not apply a Market
Value Adjustment to a withdrawal you make:
- within the Free Withdrawal Amount as described on page 23,
- that qualify for one of the waivers as described on page 24,
- to satisfy the IRS minimum distribution rules for the Contract, or
- a single withdrawal made by a surviving spouse made within one year after
continuing the Contract.
We apply the Market Value Adjustment to reflect changes in interest rates from
the time you first allocate money to a Guarantee Period to the time you remove
it from that Guarantee Period. We calculate the Market Value Adjustment by
comparing the TREASURY RATE for a period equal to the Guarantee Period at its
inception to the Treasury Rate for a period equal to the Guarantee Period when
you remove your money. "Treasury Rate" means the U.S. Treasury Note Constant
Maturity Yield as reported in Federal Reserve Bulletin Release H.15.
The Market Value Adjustment may be positive or negative, depending on changes in
interest rates. As such, you bear the investment risk associated with changes in
interest rates. If interest rates increase significantly, the Market Value
Adjustment and any withdrawal charge, premium taxes, and income tax withholding
(if applicable) could reduce the amount you receive upon full withdrawal from a
Guaranteed Period to an amount that is less than the purchase payment applied to
that period plus interest earned under the Contract.
Generally, if the original Treasury Rate at the time you allocate money to a
Guarantee Period is higher than the applicable current Treasury Rate for a
period equal to the Guarantee Period, then the Market Value Adjustment will
result in a higher amount payable to you, transferred or applied to an Income
Plan. Conversely, if the Treasury Rate at the time you allocate money to a
Guarantee Period is lower than the applicable Treasury Rate for a period equal
to the Guarantee Period, then the Market Value Adjustment will result in a lower
amount payable to you, transferred or applied to an Income Plan.
For example, assume that you purchase a Contract and you select an initial
Guarantee Period of 5 years and the 5 year Treasury Rate for that duration is
4.50%. Assume that at the end of 3 years, you make a partial withdrawal. If, at
that later time, the current 5 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 you. Conversely, if the current 5 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 you.
The formula for calculating Market Value Adjustments is set forth in Appendix B
to this prospectus, which also contains additional examples of the application
of the Market Value Adjustment.
INVESTMENT ALTERNATIVES: TRANSFERS
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TRANSFERS DURING THE ACCUMULATION PHASE
During the Accumulation Phase, you may transfer Contract Value among the
investment alternatives. You may not transfer Contract Value to either the
Short-Term Dollar Cost Averaging Fixed Account or the Dollar Cost Averaging
Fixed Account Options. You may request transfers in writing on a form that we
provided or by telephone according to the procedure described below. The minimum
amount that you may transfer into a Guarantee Period is $50. We currently do not
assess, but reserve the right to assess, a $10 charge on each transfer in excess
of 12 per Contract Year. All transfers to or from more than one Portfolio on any
given day counts as one transfer.
We will process transfer requests that we receive before 3:00 p.m. Central Time
on any Valuation Date using the Accumulation Unit Values for that Date. We will
process requests completed after 3:00 p.m. Central Time on any Valuation Date
using the Accumulation Unit Values for the next Valuation Date. The Contract
permits us to defer transfers from the Fixed Account for up to six months from
the date we receive your request. If we decide to postpone transfers for 30 days
or more, we will pay interest as required by applicable law. Any interest would
be payable from the date we receive the transfer request to the date we make the
transfer.
If you transfer an amount from a Guarantee Period other than during the 30 day
period after such Guarantee Period expires, we will increase or decrease the
amount by a Market Value Adjustment.
We reserve the right to waive any transfer restrictions.
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TRANSFERS DURING THE PAYOUT PHASE
During the Payout Phase, you may make transfers among the Variable Sub-Accounts
so as to change the relative weighting of the Variable Sub-Accounts on which
your variable income payments will be based. In addition, you will have a
limited ability to make transfers from the Variable Sub-Accounts to increase the
proportion of your income payments consisting of fixed income payments. You may
not, however, convert any portion of your right to receive fixed income payments
into variable income payments.
If you choose an Income Plan that depends on any person's life, you may not make
any transfers for the first 6 months after the Payout Start Date. Thereafter,
you may make transfers among the Variable Sub-Accounts or make transfers from
the Variable Sub-Accounts to increase the proportion of your income payments
consisting of fixed income payments. Your transfers must be at least 6 months
apart.
TELEPHONE TRANSFERS
You may make transfers by telephone by calling 1-800-755-5275. The cut off time
for telephone transfer requests is 3:00 p.m. Central time. In the event that the
New York Stock Exchange closes early, i.e., before 3:00 p.m. Central Time, or in
the event that the Exchange closes early for a period of time but then reopens
for trading on the same day, we will process telephone transfer requests as of
the close of the Exchange on that particular day. We will not accept 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 Exchange.
We may suspend, modify or terminate the telephone transfer privilege at any time
without notice.
We use procedures that we believe provide reasonable assurance that the
telephone transfers are genuine. For example, we tape telephone conversations
with persons purporting to authorize transfers and request identifying
information. Accordingly, we disclaim any liability for losses resulting from
allegedly unauthorized telephone transfers. However, if we do not take
reasonable steps to help ensure that a telephone authorization is valid, we may
be liable for such losses.
DOLLAR COST AVERAGING PROGRAM
Through our Dollar Cost Averaging Program, you may automatically transfer a
fixed dollar amount every month during the Accumulation Phase from the Short
Term Dollar Cost Averaging Fixed Account or the Dollar Cost Averaging Fixed
Account, to any Variable Sub-Account. You may not use the Dollar Cost Averaging
Program to transfer amounts to the Guarantee Periods.
We will not charge a transfer fee for transfers made under this Program, nor
will such transfer count against the 12 transfers you can make each Contract
Year without paying a transfer fee.
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 this Program does not assure you of a greater profit from your
purchases under the Program nor will it prevent or necessarily reduce losses in
a declining market. Call or write us for instructions on how to enroll.
AUTOMATIC PORTFOLIO REBALANCING PROGRAM
Once you have allocated your money among the Variable Sub-Accounts, the
performance of each Sub-Account may cause a shift in the percentage you
allocated to each Sub-Account. If you select our Automatic Portfolio Rebalancing
Program, we will automatically rebalance the Contract Value in each Variable
Sub-Account and return it to the desired percentage allocations. We will not
include money you allocate to the Fixed Account Options in the Automatic
Portfolio Rebalancing Program.
We will rebalance your account each quarter according to your instructions. We
will transfer amounts among the Variable Sub-Accounts to achieve the percentage
allocations you specify. You can change your allocations at any time by
contacting us in writing or by telephone. The new allocation will be effective
with the first rebalancing that occurs after we receive your request. We are not
responsible for rebalancing that occurs prior to receipt of your request.
Example:
Assume that you want your initial purchase payment split among 2 Variable
Sub-Accounts. You want 40% to be in the Fidelity VIP High Income Variable
Sub-Account and 60% to be in the AIM V.I. Growth Variable Sub-Account. Over
the next 2 months the bond market does very well while the stock market
performs poorly. At the end of the first quarter, the Fidelity VIP High
Income Variable Sub-Account now represents 50% of your holdings because of
its increase in value. If you choose to have your holdings rebalanced
quarterly, on the first day of the next quarter, we would sell some of your
units in the Fidelity VIP High Income Variable Sub-Account and use the money
to buy more units in the AIM V.I. Growth Variable Sub-Account so that the
percentage allocations would again be 40% and 60% respectively.
The Automatic Portfolio Rebalancing Program is available only during the
Accumulation Phase. The transfers made under the Program do not count towards
the 12 transfers you can make without paying a transfer fee, and are not subject
to a transfer fee. Portfolio rebalancing is consistent with maintaining your
allocation of investments among market segments, although it is accomplished by
reducing your Contract Value allocated to the better performing segments.
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EXPENSES
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As a Contract owner, you will bear, directly or indirectly, the charges and
expenses described below.
CONTRACT MAINTENANCE CHARGE
During the Accumulation Phase, on each Contract Anniversary, we will deduct a
$35 contract maintenance charge from your Contract Value invested in each
Variable Sub-Account in proportion to the amount invested. If you surrender your
Contract, we will deduct the contract maintenance charge pro rated for the part
of the Contract Year elapsed, unless your Contract qualifies for a waiver,
described below.
The charge is to compensate us for the cost of administering the Contracts and
the Variable Account. Maintenance costs include expenses we incur collecting
purchase payments; keeping records; processing death claims, cash withdrawals,
and policy changes; proxy statements; calculating Accumulation Unit Values and
income payments; and issuing reports to Contract owners and regulatory agencies.
We cannot increase the charge. However, we will waive this charge if, as of the
Contract Anniversary or upon full surrender:
- total purchase payments equal $50,000 or more, or
- all money is allocated to the Fixed Account.
In addition, we will waive the Contract Maintenance Charge if total purchase
payments are $50,000 or more as of the Payout Start Date.
MORTALITY AND EXPENSE RISK CHARGE
We deduct a mortality and expense risk charge daily at an annual rate of 1.05%
of the average daily net assets you have invested in the Variable Sub-Accounts
(1.27% if you select the Enhanced Death Benefit Rider, and 1.49% if you select
the Enhanced Death and Income Benefit Combination Rider). The mortality and
expense risk charge is for all the insurance benefits available with your
Contract (including our guarantee of annuity rates and the death benefits), for
certain expenses of the Contract, and for assuming the risk (expense risk) that
the current charges will be sufficient in the future to cover the cost of
administering the Contract. If the charges under the Contract are not
sufficient, then we will bear the loss. We charge an additional amount for the
Enhanced Death Benefit Rider and the Enhanced Death and Income Benefit
Combination Rider to compensate us for the additional risk that we accept by
providing these options.
We guarantee that we will not raise the mortality and expense risk charge. We
assess the mortality and expense risk charge during both the Accumulation Phase
and the Payout Phase.
ADMINISTRATIVE EXPENSE CHARGE
We deduct an administrative expense charge daily at an annual rate of 0.10% of
the average daily net assets you have invested in the Variable Sub-Accounts. We
intend this charge to cover actual administrative expenses that 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 attributed to that Contract. We
assess this charge each day during the Accumulation Phase and the Payout Phase.
We guarantee that we will not raise this charge.
TRANSFER FEE
We do not currently impose a fee upon transfers among the investment
alternatives. However, we reserve the right to charge $10 per transfer after the
12th transfer in each Contract Year. We will not charge a transfer fee on
transfers that are part of a Dollar Cost Averaging or Automatic Portfolio
Rebalancing Program.
WITHDRAWAL CHARGE
We may assess a withdrawal charge of up to 6% of the purchase payment(s) you
withdraw. The charge declines to 0% over a 6 year period that begins on the day
we receive your payment. A schedule showing how the charge declines is shown on
page 7. During each Contract Year, you can withdraw up to 15% of the aggregate
amount of your purchase payments without paying the charge. Unused portions of
this "Free Withdrawal Amount" are not carried forward to future Contract Years.
We will deduct withdrawal charges, if applicable, from the amount paid.
For purposes of calculating the withdrawal charge, we will treat withdrawals as
coming from the oldest purchase payments first. However, for federal income tax
purposes, please note that withdrawals are considered to have come first from
earnings, which means you pay taxes on the earnings portion of your withdrawal.
We do not apply a withdrawal charge in the following situations:
- on the Payout Start Date (a withdrawal charge may apply if you terminate
income payments to be received for a specified period;
- withdrawals taken to satisfy IRS minimum distribution rules for the Contract;
or
- withdrawals that qualify for one of the waivers as described below.
23 - PROSPECTUS
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We use the amounts obtained from the withdrawal charge to pay sales commissions
and other promotional or distribution expenses associated with marketing the
Contracts. To the extent that the withdrawal charge does not cover all sales
commissions and other promotional or distribution expenses, we may use any of
our corporate assets, including potential profit which may arise from the
mortality and expense risk charge or any other charges or fee described above,
to make up any difference.
Withdrawals also may be subject to tax penalties or income tax and a Market
Value Adjustment. You should consult your own tax counsel or other tax advisers
regarding any withdrawals.
CONFINEMENT WAIVER. We will waive the withdrawal charge and any Market Value
Adjustment on all withdrawals taken prior to the Payout Start Date under your
Contract if the following conditions are satisfied:
1. You or the Annuitant, if the Contract owner is not a natural person, are
confined to a long term care facility or a hospital for at least 90 consecutive
days. You or the Annuitant must enter the long term care facility or hospital at
least 30 days after the Issue Date;
2. You request the withdrawal and provide written proof of the stay no later
than 90 days following the end of your or the Annuitant's stay at the long term
care facility or hospital; and
3. A physician must have prescribed the stay and the stay must be medically
necessary (as defined in the Contract).
You may not claim this benefit if you, the Annuitant, or a member of your or the
Annuitant's immediate family, is the physician prescribing your or the
Annuitant's stay in a long term care facility.
TERMINAL ILLNESS WAIVER. We will waive the withdrawal charge and any Market
Value Adjustment on all withdrawals taken prior to the Payout Start Date under
your Contract if:
1. you or the Annuitant (if the Contract owner is not a natural person) are
first diagnosed with a terminal illness at least 30 days after the Issue Date;
and
2. you claim this benefit and deliver adequate proof of diagnosis to us.
UNEMPLOYMENT WAIVER. We will waive the withdrawal charge and any Market Value
Adjustment on one partial or a full withdrawal taken prior to the Payout Start
Date under your Contract, if you meet the following requirements:
1. you or the Annuitant, if the Contract owner is not a natural person, become
unemployed at least one year after the Issue Date;
2. you or the Annuitant, if the Contract owner is not a natural person, receive
unemployment compensation as defined in the Contract for at least 30 days as a
result of that unemployment; and
3. you or the Annuitant, if the Contract owner is not a natural person, claim
this benefit within 180 days of your or the Annuitant's initial receipt of
unemployment compensation.
Please refer to your Contract for more detailed information about the terms and
conditions of these waivers.
The laws of your state may limit the availability of these waivers and may also
change certain terms and/or benefits available under the waivers. You should
consult your Contract for further details on these variations. Also, even if you
do not need to pay our withdrawal charge or a Market Value Adjustment because of
these waivers, you still may be required to pay taxes or tax penalties on the
amount withdrawn. You should consult your tax adviser to determine the effect of
a withdrawal on your taxes.
PREMIUM TAXES
Some states and other governmental entities (e.g., municipalities) charge
premium taxes or similar taxes. We are responsible for paying these taxes and
will deduct them from your Contract Value. Some of these taxes are due when the
Contract is issued, others are due when income payments begin or upon surrender.
Our current practice is not to charge anyone for these taxes until income
payments begin or when a total withdrawal occurs, including payment upon death.
At our discretion, we may discontinue this practice and deduct premium taxes
from the purchase payments. Premium taxes generally range from 0% to 4%,
depending on the state.
At the Payout Start Date, if applicable, we deduct the charge for premium taxes
from each investment alternative in the proportion that the Contract owner's
value in the investment alternative bears to the total Contract Value.
DEDUCTION FOR SEPARATE ACCOUNT INCOME TAXES
We are not currently maintaining a provision for taxes. In the future, however,
we may establish a provision for taxes if we determine, in our sole discretion,
that we will incur a tax as a result of the operation of the Variable Account.
We will deduct for any taxes we incur as a result of the operation of the
Variable Account, whether or not we previously made a provision for taxes and
whether or not it was sufficient. Our status under the Internal Revenue Code is
briefly described in the Statement of Additional Information.
OTHER EXPENSES
Each Portfolio deducts advisory fees and other expenses from its assets. You
indirectly bear the charges and expenses of the Portfolios whose shares are held
by the Variable Sub-
24 - PROSPECTUS
<PAGE>
Accounts. These fees and expenses are described in the accompanying prospectuses
for the Funds. For a summary of current estimates of those charges and expenses,
see page 8. We may receive compensation from the investment advisers or
administrators of the Portfolios in connection with the administrative services
we provide to the Portfolios.
ACCESS TO YOUR MONEY
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You can withdraw some or all of your Contract Value at any time prior to the
Payout Start Date.
The amount payable upon withdrawal is the Contract Value (or portion thereof)
next computed after we receive the request for a withdrawal at our home office,
adjusted by any Market Value Adjustment, less any withdrawal charges, contract
maintenance charges, income tax withholding, penalty tax, and any premium taxes.
We will pay withdrawals from the Variable Account within 7 days of receipt of
the request, subject to postponement in certain circumstances.
You can withdraw money from the Variable Account or the Fixed Account Options.
To complete a partial withdrawal from the Variable Account, we will cancel
Accumulation Units in an amount equal to the withdrawal and any applicable
withdrawal charge and premium taxes.
You must name the investment alternative from which you are taking the
withdrawal. If none is named, then the withdrawal request is incomplete and
cannot be honored.
In general, you must withdraw at least $50 at a time. You also may withdraw a
lesser amount if you are withdrawing your entire interest in a Variable
Sub-Account.
If you request a total withdrawal, we may require you to return your Contract to
us.
POSTPONEMENT OF PAYMENTS
We may postpone the payment of any amounts due from the Variable Account under
the Contract if:
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 SEC; or
3. The SEC permits delay for your protection.
In addition, we may delay payments or transfers from the Fixed Account Options
for up to 6 months (or shorter period if required by law). If we delay payment
for 30 days or more, we will pay interest as required by law.
SYSTEMATIC WITHDRAWAL PROGRAM
You may choose to receive systematic withdrawal payments on a monthly,
quarterly, semi-annual, or annual basis at any time prior to the Payout Start
Date. The minimum amount of each systematic withdrawal is $50. At our
discretion, systematic withdrawals may not be offered in conjunction with the
Dollar Cost Averaging Program or Automatic Portfolio Rebalancing Program.
Depending on fluctuations in the value of the Variable Sub-Accounts and the
value of the Fixed Account Options, systematic withdrawals may reduce or even
exhaust the Contract Value. Income taxes may apply to systematic withdrawals.
Please consult your tax advisor before taking any withdrawal.
We will make systematic withdrawal payments to you or your designated payee. At
our discretion, we may modify or suspend the Systematic Withdrawal Program and
charge a processing fee for the service. If we modify or suspend the Systematic
Withdrawal Program, existing systematic withdrawal payments will not be
affected.
MINIMUM CONTRACT VALUE
If your request for a partial withdrawal would reduce your Contract Value to
less than $2,000, we may treat it as a request to withdraw your entire Contract
Value. Your Contract will terminate if you withdraw all of your Contract Value.
We will, however, ask you to confirm your withdrawal request before terminating
your Contract. If we terminate your Contract, we will distribute to you its
Contract Value, adjusted by any applicable Market Value Adjustment, less
withdrawal and other charges and applicable taxes.
25 - PROSPECTUS
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INCOME PAYMENTS
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PAYOUT START DATE
You select the Payout Start Date in your application. The Payout Start Date is
the day that we apply your money to an Income Plan. The Payout Start Date must
be:
- at least 30 days after the Issue Date; and
- no later than the day the Annuitant reaches age 90, or the 10th Contract
Anniversary, if later.
You may change the Payout Start Date at any time by notifying us in writing of
the change at least 30 days before the scheduled Payout Start Date. Absent a
change, we will use the Payout Start Date stated in your Contract.
INCOME PLANS
An Income Plan is a series of scheduled payments to you or someone you
designate. You may choose and change your choice of Income Plan until 30 days
before the Payout Start Date. If you do not select an Income Plan, we will make
income payments in accordance with Income Plan 1 with guaranteed payments for 10
years.
Three Income Plans are available under the Contract. Each is available to
provide:
- fixed income payments;
- variable income payments; or
- a combination of the two.
The three Income Plans are:
INCOME PLAN 1 -- LIFE INCOME WITH GUARANTEED PAYMENTS. Under this plan, we make
periodic income payments for at least as long as the Annuitant lives. If the
Annuitant dies before we have made all of the guaranteed income payments, we
will continue to pay the remainder of the guaranteed income payments as required
by the Contract.
INCOME PLAN 2 -- JOINT AND SURVIVOR LIFE INCOME WITH GUARANTEED PAYMENTS. Under
this plan, we make periodic income payments for at least as long as either the
Annuitant or the joint Annuitant is alive. If both the Annuitant and the joint
Annuitant die before we have made all of the guaranteed income payments, we will
continue to pay the remainder of the guaranteed income payments as required by
the Contract.
INCOME PLAN 3 -- GUARANTEED PAYMENTS FOR A SPECIFIED PERIOD (5 YEARS TO 30
YEARS). Under this plan, we make periodic income payments for the period you
have chosen. These payments do not depend on the Annuitant's life. You may elect
to receive guaranteed payments for periods ranging from 5 to 30 years. Income
payments for less than 120 months may be subject to a withdrawal charge. We will
deduct the mortality and expense risk charge from the Variable Sub-Account
assets that support variable income payments even though we may not bear any
mortality risk.
The length of any guaranteed payment period under your selected Income Plan
generally will affect the dollar amounts of each income payment. As a general
rule, longer guarantee periods result in lower income payments, all other things
being equal. For example, if you choose an Income Plan with payments that depend
on the life of the Annuitant but with no minimum specified period for guaranteed
payments, the income payments generally will be greater than the income payments
made under the same Income Plan with a minimum specified period for guaranteed
payments.
If you choose Income Plan 1 or 2, or, if available, another Income Plan with
payments that continue for the life of the Annuitant or joint Annuitant, we may
require proof of age and sex of the Annuitant or joint Annuitant before starting
income payments, and proof that the Annuitant or joint Annuitant are alive
before we make each payment. Please note that under such Income Plans, if you
elect to take no minimum guaranteed payments, it is possible that the payee
could receive only 1 income payment if the Annuitant and any joint Annuitant
both die before the second income payment, or only 2 income payments if they die
before the third income payment, and so on.
Generally, you may not make withdrawals after the Payout Start Date. One
exception to this rule applies if you are receiving variable income payments
that do not depend on the life of the Annuitant (such as under Income Plan 3).
In that case you may terminate all or part of the Variable Account portion of
the income payments at any time and receive a lump sum equal to the present
value of the remaining variable payments associated with the amount withdrawn.
The minimum amount you may withdraw under this feature is $1,000. A withdrawal
charge may apply. We deduct applicable premium taxes from the Contract Value at
the Payout Start Date.
We may make other Income Plans available.
If you elected the Enhanced Death and Income Benefit Combination Option, you may
be able to apply an amount greater than your Contract Value to an Income Plan.
You must apply at least the Contract Value in the Fixed Account on the Payout
Start Date to fixed income payments. If you wish to apply any portion of your
Fixed Account balance to provide variable income payments, you should plan ahead
and transfer that amount to the Variable Sub-Accounts prior to the Payout Start
Date. If you do not tell us how to allocate your Contract Value among fixed and
variable income payments, we will apply your Contract Value in the Variable
Account to variable income payments and your Contract Value in the Fixed Account
to fixed income payments.
We will apply your Contract Value, adjusted by any applicable Market Value
Adjustment, less applicable taxes to your Income Plan on the Payout Start Date.
If the amount
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available to apply under an Income Plan is less than $2,000, or not enough to
provide an initial payment of at least $20, and state law permits, we may:
- pay you the Contract Value, adjusted by any applicable Market Value Adjustment
and less any applicable taxes, in a lump sum instead of the periodic payments
you have chosen; or
- reduce the frequency of your payments so that each payment will be at least
$20.
VARIABLE INCOME PAYMENTS
The amount of your variable income payments depends upon the investment results
of the Variable Sub-Accounts you select, the premium taxes you pay, the age and
sex of the Annuitant, and the Income Plan you choose. We guarantee that the
payments will not be affected by (a) actual mortality experience and (b) the
amount of our administration expenses.
We cannot predict the total amount of your variable income payments. Your
variable income payments may be more or less than your total purchase payments
because (a) variable income payments vary with the investment results of the
underlying Portfolios; and (b) the Annuitant could live longer or shorter than
we expect based on the tables we use.
In calculating the amount of the periodic payments in the annuity tables in the
Contract, we assumed an annual investment rate of 3%. If the actual net
investment return of the Variable Sub-Accounts you choose is less than this
assumed investment rate, then the dollar amount of your variable income payments
will decrease. The dollar amount of your variable income payments will increase,
however, if the actual net investment return exceeds the assumed investment
rate. The dollar amount of the variable income payments stays level if the net
investment return equals the assumed investment rate. Please refer to the
Statement of Additional Information for more detailed information as to how we
determine variable income payments.
FIXED INCOME PAYMENTS
We guarantee income payment amounts derived from any Fixed Account Option for
the duration of the Income Plan. We calculate the fixed income payments by:
1. adjusting the portion of the Contract Value in any Fixed Account Option on
the Payout Start Date by any applicable Market Value Adjustment;
2. deducting any applicable premium tax; and
3. applying the resulting amount to the greater of (a) the appropriate value
from the income payment table in your Contract or (b) such other value as we are
offering at that time.
We may defer making fixed income payments for a period of up to 6 months or any
shorter time state law may require. If we defer payments for 30 days or more, we
will pay interest as required by law from the date we receive the withdrawal
request to the date we make payment.
CERTAIN EMPLOYEE BENEFIT PLANS
The Contracts offered by this prospectus contain income payment tables that
provide for different payments to men and women of the same age, except in
states that require unisex tables. We reserve the right to use income payment
tables that do not distinguish on the basis of sex to the extent permitted by
applicable law. In certain employment-related situations, employers are required
by law to use the same income payment tables for men and women. Accordingly, if
the Contract is to be used in connection with an employment-related retirement
or benefit plan and we do not offer unisex annuity tables in your state, you
should consult with legal counsel as to whether the purchase of a Contract is
appropriate.
DEATH BENEFITS
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We will pay a death benefit prior to the Payout Start Date on:
1. the death of any Contract owner or,
2. the death of the Annuitant, if the Contract is owned by a non-natural person.
We will pay the death benefit to the new Contract owner as determined
immediately after the death. The new Contract owner would be a surviving
Contract owner or, if none, the Beneficiary(ies). In the case of the death of
the Annuitant, we will pay the death benefit to the current Contract owner.
A claim for a distribution on death must include DUE PROOF OF DEATH. We will
accept the following documentation as "Due Proof of Death":
- a certified copy of a death certificate,
- a certified copy of a decree of a court of competent jurisdiction as to the
finding of death, or
- any other proof acceptable to us.
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DEATH BENEFIT AMOUNT
Prior to the Payout Start Date, the death benefit is equal to the greatest of:
1. the Contract Value as of the date we determine the value of the death
benefit, or
2. the SETTLEMENT VALUE (that is, the amount payable on a full withdrawal of
Contract Value) on the date we determine the value of the death benefit, or
3. the Contract Value on each DEATH BENEFIT ANNIVERSARY prior to the date we
determine the death benefit, increased by purchase payments made since that
Death Benefit Anniversary and reduced by an adjustment for any partial
withdrawals since that Death Benefit Anniversary. 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 3
Death Benefit Anniversaries.
The withdrawal adjustment is equal to (a) divided by (b), with the result
multiplied by (c), where:
<TABLE>
<S> <C> <C>
(a) = is the withdrawal amount;
(b) = is the Contract Value immediately
prior to the withdrawal; and
(c) = is the Contract value on the Death
Benefit Anniversary adjusted by any
prior purchase payments or withdrawals
made since that Anniversary.
</TABLE>
We will determine the value of the death benefits as of the end of the Valuation
Date on which we receive a complete request for payment of the death benefit. If
we receive a request after 3 p.m. Central Time on a Valuation Date, we will
process the request as of the end of the following Valuation Date.
ENHANCED DEATH BENEFIT RIDER
If the Contract owner is a living individual, the enhanced death benefit applies
only upon the death of the Contract owner. If the Contract owner is not a living
individual, the enhanced death benefit applies only upon the death of the
Annuitant. For Contracts with the Enhanced Death Benefit Rider, the death
benefit will be the greatest of (1) through (3) above, or (4) the enhanced death
benefit. The enhanced death benefit is equal to the greater of the Enhanced
Death Benefit A or Enhanced Death Benefit B. Enhanced Death Benefit B may not be
available in all states.
That enhanced death benefit will never be greater than the maximum death benefit
allowed by any state nonforfeiture laws that govern the Contract.
ENHANCED DEATH BENEFIT A. At issue, Enhanced Death Benefit A is equal to the
initial purchase payment. After issue, Enhanced Death Benefit A is the greatest
of the ANNIVERSARY VALUES as of the date we determine 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. The adjustment is
equal to (a) divided by (b), and the result multiplied by (c) where:
<TABLE>
<S> <C> <C>
(a) = is the withdrawal amount,
(b) = is the Contract Value immediately
prior to the withdrawal, and
(c) = is the Contract Value on that Contract
Anniversary adjusted by any prior
purchase payments and withdrawals
since that Contract Anniversary.
</TABLE>
We will calculate Anniversary Values for each Contract Anniversary prior to the
oldest Contract owner's or the Annuitant's, if the Contract owner is not a
natural person, 80th birthday.
ENHANCED DEATH BENEFIT B. The Enhanced Death Benefit B is equal to total
purchase payments made reduced by a withdrawal adjustment, as defined below.
Each purchase payment and each withdrawal adjustment will accumulate daily at a
rate equivalent to 5% per year until the earlier of:
- the date we determine the death benefit, or
- the first day of the month following the oldest Contract owner's or, if the
Contract owner is not a natural person, the Annuitant's, 85th birthday.
The adjustment is equal to (a) divided by (b), and the result multiplied by (c)
where:
<TABLE>
<S> <C> <C>
(a) = the withdrawal amount,
(b) = is the Contract Value immediately
prior to the withdrawal, and
(c) = is the most recently calculated
enhanced death benefit.
</TABLE>
ENHANCED DEATH AND INCOME BENEFIT COMBINATION RIDER
You may elect not to choose the Enhanced Death Benefit Rider and may instead
choose the Enhanced Death and Income Benefit Combination Rider.
The enhanced death benefit portion of the Enhanced Death and Income Benefit
Combination Rider is as described above under "Enhanced Death Benefit Rider."
The enhanced income benefit defines a minimum amount applied to the Payout
Phase. This minimum amount is equal to the value the enhanced death benefit
would be on the Payout Start Date.
28 - PROSPECTUS
<PAGE>
The enhanced income benefit will apply if the Contract owner elects a Payout
Start Date that:
- is on or after the tenth Contract Anniversary, and
- is prior to the Annuitant's 90th Birthday.
On the Payout Start Date, you may apply the greater of the Contract Value or the
enhanced income benefit to the Payout Phase of the Contract. No Market Value
Adjustment will be applied to the enhanced income benefit amount. The enhanced
income benefit will only apply if the Income Plan selected provides payments
guaranteed for either a single or joint lives with a period certain of at least:
- 10 years, if the youngest Annuitant's age is 80 or less on the date the amount
is applied; or
- 5 years, if the youngest Annuitant's age is greater than 80 on the date the
amount is applied.
If, however, you apply the Contract Value and not the enhanced income benefit to
the Income Plan, then you may select any Income Plan we offer at that time.
DEATH BENEFIT PAYMENTS
A death benefit will be paid:
1. if the Contract owner elects to receive the death benefit distributed in a
single payment 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. We are currently
waiving the 180 day limit, but we reserve the right to enforce the limitation in
the future.
In any event, the entire value of the Contract must be distributed within 5
years after the date of death unless an Income Plan is elected or a surviving
spouse continues the Contract in accordance with the provisions described below.
If the Contract owner eligible to receive the distribution upon death is not a
natural person, the Contract owner may elect to receive the distribution upon
death in one or more distributions.
If the Contract owner is a natural person, the Contract owner may elect to
receive the distribution upon death either in one or more distributions or by
periodic payments through an Income Plan. Payments from the Income Plan must
begin within one year of the date of death and must be payable throughout:
- the life of the Contract owner; or
- a period not to exceed the life expectancy of the Contract owner; or
- the life of the Contract owner with payments guaranteed to a period not to
exceed the life expectancy of the Contract owner.
If the surviving spouse of the deceased Contract owner is the new Contract
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. If the
Contract is continued in the Accumulation Phase, the surviving spouse may make a
single withdrawal of any amount within 1 year of the date of death without
incurring a withdrawal charge or Market Value Adjustment.
29 - PROSPECTUS
<PAGE>
MORE INFORMATION
-------------------------------------------------------------------
GLENBROOK
Glenbrook is the issuer of the Contract. Glenbrook is a stock life insurance
company organized under the laws of the State of Arizona in 1998. Previously,
Glenbrook was organized under the laws of the State of Illinois in 1992.
Glenbrook was originally organized under the laws of the State of Indiana in
1965. From 1965 to 1983 Glenbrook was known as "United Standard Life Assurance
Company" and from 1983 to 1992 as "William Penn Life Assurance Company of
America."
Glenbrook is currently licensed to operate in the District of Columbia and all
states except New York. We intend to offer the Contract in those jurisdictions
in which we are licensed. Our home office is located at 3100 Sanders Road,
Northbrook, Illinois, 60062.
Glenbrook 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, a stock property-liability insurance company incorporated
under the laws of Illinois. All of the outstanding capital stock of Allstate
Insurance Company is owned by The Allstate Corporation.
Glenbrook and Allstate Life entered into a reinsurance agreement effective
June 5, 1992. Under the reinsurance agreement, Allstate Life reinsures
substantially all of Glenbrook's liabilities under its various insurance
contracts. The reinsurance agreement provides us with financial backing from
Allstate Life. However, it does not create a direct contractual relationship
between Allstate Life and you. In other words, the obligations of Allstate Life
under the reinsurance agreement are to Glenbrook; Glenbrook remains the sole
obligor under the Contract to you.
Several independent rating agencies regularly evaluate life insurers'
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 Glenbrook. A.M. Best Company also assigns Glenbrook the rating
of A+(r) because Glenbrook automatically reinsures all net business with
Allstate Life. Standard & Poor's Insurance Rating Services assigns an AA+ (Very
Strong) financial strength rating and Moody's assigns an Aa2 (Excellent)
financial strength rating to Glenbrook. Glenbrook shares the same ratings of its
parent, Allstate Life. These ratings do not reflect the investment performance
of the Variable Account. We may from time to time advertise these ratings in our
sales literature.
THE VARIABLE ACCOUNT
Glenbrook established the Glenbrook Life Multi-Manager Variable Account on
January 15, 1996. We have registered the Variable Account with the SEC as a unit
investment trust. The SEC does not supervise the management of the Variable
Account or Glenbrook.
We own the assets of the Variable Account. The Variable Account is a segregated
asset account under Arizona law. That means we account for the Variable
Account's income, gains and losses separately from the results of our other
operations. It also means that only the assets of the Variable Account that are
in excess of the reserves and other Contract liabilities with respect to the
Variable Account are subject to liabilities relating to our other operations.
Our obligations arising under the Contracts are general corporate obligations of
Glenbrook.
The Variable Account consists of 62 Variable Sub-Accounts. Each Variable
Sub-Account invests in a corresponding Portfolio. We may add new Variable
Sub-Accounts or eliminate one or more of them, if we believe marketing, tax, or
investment conditions so warrant. We may also add other Variable Sub-Accounts
that may be available under other variable annuity contracts. We do not
guarantee the investment performance of the Variable Account, its Sub-Accounts
or the Portfolios. We may use the Variable Account to fund our other annuity
contracts. We will account separately for each type of annuity contract funded
by the Variable Account.
THE PORTFOLIOS
DIVIDENDS AND CAPITAL GAIN DISTRIBUTIONS. We automatically reinvest all
dividends and capital gains distributions from the Portfolios in shares of the
distributing Portfolio at their net asset value.
VOTING PRIVILEGES. As a general matter, you do not have a direct right to vote
the shares of the Portfolios held by the Variable Sub-Accounts to which you have
allocated your Contract Value. Under current law, however, you are entitled to
give us instructions on how to vote those shares on certain matters. Based on
our present view of the law, we will vote the shares of the Portfolios that we
hold directly or indirectly through the Variable Account in accordance with
instructions that we receive from Contract owners entitled to give such
instructions.
As a general rule, before the Payout Start Date, the Contract owner or anyone
with a voting interest is the person entitled to give voting instructions. The
number of shares that a person has a right to instruct will be determined by
dividing the Contract Value allocated to the applicable Variable Sub-Account by
the net asset value per share of the corresponding Portfolio as of the record
date of the meeting. After the Payout Start Date the person receiving income
payments has the voting interest. The payee's number of votes will be determined
by dividing the reserve for such Contract allocated to the applicable Variable
Sub-Account by the net asset value per share of the corresponding Portfolio. The
30 - PROSPECTUS
<PAGE>
votes decrease as income payments are made and as the reserves for the Contract
decrease.
We will vote shares attributable to Contracts for which we have not received
instructions, as well as shares attributable to us, in the same proportion as we
vote shares for which we have received instructions, unless we determine that we
may vote such shares in our own discretion. We will apply voting instructions to
abstain on any item to be voted upon on a pro-rata basis to reduce the votes
eligible to be cast.
We reserve the right to vote Portfolio shares as we see fit without regard to
voting instructions to the extent permitted by law. If we disregard voting
instructions, we will include a summary of that action and our reasons for that
action in the next semi-annual financial report we send to you.
CHANGES IN PORTFOLIOS. If the shares of any of the Portfolios are no longer
available for investment by the Variable Account or if, in our judgment, further
investment in such shares is no longer desirable in view of the purposes of the
Contract, we may eliminate that Portfolio and substitute shares of another
eligible investment fund. Any substitution of securities will comply with the
requirements of the Investment Company Act of 1940. We also may add new Variable
Sub-Accounts that invest in additional mutual funds. We will notify you in
advance of any change.
CONFLICTS OF INTEREST. Certain of the Portfolios sell their shares to separate
accounts underlying both variable life insurance and variable annuity contracts.
It is conceivable that in the future it may be unfavorable for variable life
insurance separate accounts and variable annuity separate accounts to invest in
the same Portfolio. The boards of directors of these Portfolios monitor for
possible conflicts among separate accounts buying shares of the Portfolios.
Conflicts could develop for a variety of reasons. For example, differences in
treatment under tax and other laws or the failure by a separate account to
comply with such laws could cause a conflict. To eliminate a conflict, a
Portfolio's board of directors may require a separate account to withdraw its
participation in a Portfolio. A Portfolio's net asset value could decrease if it
had to sell investment securities to pay redemption proceeds to a separate
account withdrawing because of a conflict.
THE CONTRACT
DISTRIBUTION. ALFS, Inc.* ("ALFS"), located at 3100 Sanders Road, Northbrook, IL
60062-7154, serves as principal underwriter of the Contracts. ALFS is a wholly
owned subsidiary of Allstate Life. ALFS is a registered broker dealer under the
Securities and Exchange Act of 1934, as amended ("EXCHANGE ACT"), and is a
member of the National Association of Securities Dealers, Inc.
We will pay commissions to broker-dealers who sell the contracts. Commissions
paid may vary, but we estimate that the total commissions paid on all Contract
sales will not exceed 8% of all purchase payments. These commissions are
intended to cover distribution expenses. Sometimes, we also pay the
broker-dealer a persistency bonus in addition to the standard commissions. A
persistency bonus is not expected to exceed 0.25%, on an annual basis, of the
Contract Values considered in connection with the bonus. 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 Exchange Act,
pursuant to legal and regulatory exceptions.
Glenbrook does not pay ALFS a commission for distribution of the Contracts. The
underwriting agreement with ALFS provides that we will reimburse ALFS for any
liability to Contract owners arising out of services rendered or Contracts
issued.
ADMINISTRATION. We have primary responsibility for all administration of the
Contracts and the Variable Account. We provide the following administrative
services, among others:
- issuance of the Contracts;
- maintenance of Contract owner records;
- Contract owner services;
- calculation of unit values;
- maintenance of the Variable Account; and
- preparation of Contract owner reports.
We will send you Contract statements and transaction confirmations at least
annually. You should notify us promptly in writing of any address change. You
should read your statements and confirmations carefully and verify their
accuracy. You should contact us promptly if you have a question about a periodic
statement. We will investigate all complaints and make any necessary adjustments
retroactively, but you must notify us of a potential error within a reasonable
time after the date of the questioned statement. If you wait too long, we
reserve the right to make the adjustment as of the date that we receive notice
of the potential error.
We also will provide you with additional periodic and other reports, information
and prospectuses as may be required by federal securities laws.
------------------------
*Effective May 1, 2000, Allstate Life Financial Services, Inc. was renamed ALFS,
Inc.
31 - PROSPECTUS
<PAGE>
QUALIFIED PLANS
If you use the Contract within a qualified plan, the plan may impose different
or additional conditions or limitations on withdrawals, waivers of withdrawal
charges, death benefits, Payout Start Dates, income payments, and other Contract
features. In addition, adverse tax consequences may result if qualified plan
limits on distributions and other conditions are not met. Please consult your
qualified plan administrator for more information.
LEGAL MATTERS
Freedman, Levy, Kroll & Simonds, Washington, D.C., has advised Glenbrook on
certain federal securities law matters. All matters of state insurance law
pertaining to the Contracts, including the validity of the Contracts and
Glenbrook's right to issue such Contracts under state insurance law, have been
passed upon by Michael J. Velotta, General Counsel of Glenbrook.
YEAR 2000
Glenbrook is heavily dependent upon complex computer systems for all phases of
its operations, including customer service, and policy and contract
administration. Since many of Glenbrook's older computer software programs
recognize only the last two digits of the year in any date, some software may
have failed to operate properly in or after the year 1999, if the software was
not reprogrammed or replaced ("YEAR 2000 ISSUE"). Glenbrook believes that many
of its counterparties and suppliers also had potential Year 2000 Issues which
could affect Glenbrook. In 1995, Allstate Insurance Company commenced a four
phase plan intended to mitigate and/or prevent the adverse effects of Year 2000
Issues. These strategies included 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 included Glenbrook actively working with its major
external counterparties and suppliers to assess their compliance efforts and
Glenbrook's exposure to them. Because of the accuracy of this plan, and its
timely completion, Glenbrook has experienced no material impacts on its results
of operations, liquidity or financial position due to the Year 2000 issue. Year
2000 costs are expensed as incurred.
TAXES
-------------------------------------------------------------------
THE FOLLOWING DISCUSSION IS GENERAL AND IS NOT INTENDED AS TAX ADVICE. GLENBROOK
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 your individual circumstances.
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, you are not taxed on increases in the Contract Value
until a distribution occurs. This rule applies only where:
1. the Contract owner is a natural person,
2. the investments of the Variable Account are "adequately diversified"
according to Treasury Department regulations, and
3. Glenbrook is considered the owner of the Variable Account assets for federal
income tax purposes.
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. The income on such contracts
is taxed as ordinary income received or accrued by the owner during the taxable
year. Please see the Statement of Additional Information for a discussion of
several exceptions to the general rule for Contracts owned by non-natural
persons.
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" consistent with standards under Treasury Department
regulations. If the investments in the Variable Account are not adequately
diversified, the Contract will not be treated as an annuity contract for federal
income tax purposes. As a result, the income on the Contract will be taxed as
ordinary income received or accrued by the Contract owner during the taxable
year. Although Glenbrook does not have control over the Portfolios or their
investments, we expect the Portfolios to meet the diversification requirements.
OWNERSHIP TREATMENT. The IRS has stated that you will be considered the owner of
Variable Account assets if you possess 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, the Treasury Department announced
that the regulations do not provide guidance concerning circumstances in which
investor control of separate account investments may cause an investor to be
32 - PROSPECTUS
<PAGE>
treated as the owner of the separate account. The Treasury Department also
stated that future guidance would be issued regarding the extent that owners
could direct sub-account investments without being treated as owners of the
underlying assets of the separate account.
Your rights under the Contract are different than those described by the IRS in
rulings in which it found that contract owners were not owners of separate
account assets. For example, you have the choice to allocate premiums and
Contract Values among more investment alternatives. Also, you may be able to
transfer among investment alternatives more frequently than in such rulings.
These differences could result in you being treated as the owner of the Variable
Account. If this occurs, income and gain from the Variable Account assets would
be includible in your gross income. Glenbrook does not know what standards will
be set forth in any regulations or rulings which the Treasury Department may
issue. It is possible that future standards announced by the Treasury Department
could adversely affect the tax treatment of your Contract. We reserve the right
to modify the Contract as necessary to attempt to prevent you from being
considered the federal tax owner of the assets of the Variable Account. However,
we make no guarantee that such modification to the Contract will be successful.
TAXATION OF PARTIAL AND FULL WITHDRAWALS. If you make a partial withdrawal under
a non-Qualified Contract, amounts received are taxable to the extent the
Contract Value, without regard to surrender charges, exceeds the investment in
the Contract. The investment in the Contract is the gross premium paid for the
Contract minus any amounts previously received from the Contract if such amounts
were properly excluded from your gross income. If you make 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, is excluded from your income. If you make 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.
"Nonqualified distributions" from Roth IRAs are treated as made from
contributions first and are included in gross income only to the extent that
distributions exceed contributions. "Qualified distributions" from Roth IRAs are
not included in gross income. "Qualified distributions" are any distributions
made more than 5 taxable years after the taxable year of the first contribution
to any Roth IRA and which are:
- made on or after the date the individual attains age 59 1/2,
- made to a beneficiary after the Contract owner's death,
- attributable to the Contract owner being disabled, or
- for a first time home purchase (first time home purchases are subject to a
lifetime limit of $10,000).
If you transfer a non-Qualified Contract without full and adequate consideration
to a person other than your spouse (or to a former spouse incident to a
divorce), you will be taxed on the difference between the Contract Value and the
investment in the Contract at the time of transfer. Except for certain Qualified
Contracts, any amount you receive 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.
TAXATION OF ANNUITY PAYMENTS. Generally, the rule for income taxation of annuity
payments received from a non-Qualified Contract provides for the return of your
investment in the Contract in equal tax-free amounts over the payment period.
The balance of each payment received is taxable. For 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. If you elect 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. The annuity payments will be fully taxable
after the total amount of the investment in the Contract is excluded using these
ratios. If you die, and annuity payments cease before the total amount of the
investment in the Contract is recovered, the unrecovered amount will be allowed
as a deduction for your last taxable year.
TAXATION OF ANNUITY DEATH BENEFITS. Death of a Contract owner, or death of the
Annuitant if the Contract is owned by a non-natural person, will cause a
distribution of death benefits from a Contract. Generally, such amounts are
included 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. Please see the Statement of Additional Information
for more detail on distribution at death requirements.
PENALTY TAX ON PREMATURE DISTRIBUTIONS. A 10% penalty tax applies to the taxable
amount of any premature distribution from a non-Qualified Contract. The penalty
tax generally applies to any distribution made prior to the date you attain age
59 1/2. However, no penalty tax is incurred on distributions:
1. made on or after the date the Contract owner attains age 59 1/2;
2. made as a result of the Contract owner's death or disability;
33 - PROSPECTUS
<PAGE>
3. made in substantially equal periodic payments over the Contract owner's life
or life expectancy,
4. made under an immediate annuity, or
5. attributable to investment in the Contract before August 14, 1982.
You should consult a competent tax advisor to determine if any other exceptions
to the penalty apply to your situation. Similar exceptions may apply to
distributions from Qualified Contracts.
AGGREGATION OF ANNUITY CONTRACTS. All non-qualified deferred annuity contracts
issued by Glenbrook (or its affiliates) to the same Contract 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
Contracts may be used as investments with certain qualified plans such as:
- Individual Retirement Annuities or Accounts (IRAs) under Section 408 of the
Code;
- Roth IRAs under Section 408A of the Code;
- Simplified Employee Pension Plans under Section 408(k) of the Code;
- Savings Incentive Match Plans for Employees (SIMPLE) Plans under Section
408(p) of the Code;
- Tax Sheltered Annuities under Section 403(b) of the Code;
- Corporate and Self Employed Pension and Profit Sharing Plans; and
- State and Local Government and Tax-Exempt Organization Deferred Compensation
Plans.
The income on qualified plan and IRA investments is tax deferred and variable
annuities held by such plans do not receive any additional tax deferral. You
should review the annuity features, including all benefits and expenses, prior
to purchasing a variable annuity in a qualified plan or IRA. Glenbrook reserves
the right to limit the availablity of the Contract for use with any of the
Qualified Plans listed below.
In the case of certain 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 Tax Code provides
tax-deferred retirement savings plans for employees of certain non-profit and
educational organizations. Under Section 403(b), any Contract used for a 403(b)
plan must provide that distributions attributable to salary reduction
contributions made after December 31, 1998, and all earnings on salary reduction
contributions, may be made only:
1. on or after the date the employee
- attains age 59 1/2,
- separates from service,
- dies,
- becomes disabled, or
2. 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 Glenbrook is directed to
transfer some or all of the Contract Value to another 403(b) plan.
INCOME TAX WITHHOLDING
Glenbrook is required to withhold federal income tax at a rate of 20% on all
"eligible rollover distributions" unless you elect to make a "direct rollover"
of such amounts to an IRA or eligible retirement plan. 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 over the life (joint lives) of the participant (and
beneficiary).
Glenbrook may be required to withhold federal and state income taxes on any
distributions from non-Qualified Contracts or Qualified Contracts that are not
eligible rollover distributions, unless you notify us of your election to not
have taxes withheld.
34 - PROSPECTUS
<PAGE>
ANNUAL REPORTS AND OTHER DOCUMENTS
-------------------------------------------------------------------
Glenbrook's annual report on Form 10-K for the year ended December 31, 1999 is
incorporated herein by reference, which means that it is legally a part of this
prospectus.
After the date of this prospectus and before we terminate the offering of the
securities under this prospectus, all documents or reports we file with the SEC
under the Exchange Act are also incorporated herein by reference, which means
that they also legally become a part of this prospectus.
Statements in this prospectus, or in documents that we file later with the SEC
and that legally become a part of this prospectus, may change or supersede
statements in other documents that are legally part of this prospectus.
Accordingly, only the statement that is changed or replaced will legally be a
part of this prospectus.
We file our Exchange Act documents and reports, including our annual and
quarterly reports on Form 10-K and Form 10-Q electronically on the SEC's "EDGAR"
system using the identifying number CIK No. 0001007285. The SEC maintains a Web
site that contains reports, proxy and information statements and other
information regarding registrants that file electronically with the SEC. The
address of the site is http://www.sec.gov. You also can view these materials at
the SEC's Public Reference Room at 450 Fifth Street, N.W., Washington, D.C.
20549. For more information on the operations of SEC's Public Reference Room,
call 1-800-SEC-0330.
If you have received a copy of this prospectus, and would like a free copy of
any document incorporated herein by reference (other than exhibits not
specifically incorporated by reference into the text of such documents), please
write or call us at P.O. Box 94042, Palatine, IL 60094
(telephone: 1-800-755-5275).
EXPERTS
The financial statements and related financial statement schedule of Glenbrook
as of December 31, 1999 and 1998 and for each of the three years in the period
ended December 31, 1999, which are incorporated herein by reference, have been
audited by Deloitte & Touche LLP, independent auditors, as stated in their
report, which are incorporated herein by reference, and are included in reliance
upon the report of such firm given upon their authority as experts in accounting
and auditing.
The financial statements of the Variable Account as of December 31, 1999, and
for each of the periods in the two years then ended that appear in the Statement
of Additional Information have been audited by Deloitte & Touche LLP,
independent auditors, as stated in their report, which are incorporated herein
by reference, and are included in reliance upon the report of such firm given
upon their authority as experts in accounting and auditing.
PERFORMANCE INFORMATION
-------------------------------------------------------------------
We may advertise the performance of the Variable Sub-Accounts, including yield
and total return information. Total return represents the change, over a
specified period of time, in the value of an investment in a Variable
Sub-Account after reinvesting all income distributions. Yield refers to the
income generated by an investment in a Variable Sub-Account over a specified
period.
All performance advertisements will include, as applicable, standardized yield
and total return figures that reflect the deduction of insurance charges, the
contract maintenance charge, and withdrawal charge. Performance advertisements
also may include total return figures that reflect the deduction of insurance
charges, but not the contract maintenance or withdrawal charges. The deduction
of such charges would reduce the performance shown. In addition, performance
advertisements may include aggregate average, year-by-year, or other types of
total return figures.
Performance information for periods prior to the inception date of the Variable
Sub-Accounts will be based on the historical performance of the corresponding
Portfolios for the periods beginning with the inception dates of the Portfolios
and adjusted to reflect current Contract expenses. You should not interpret
these figures to reflect actual historical performance of the Variable Account.
We may include in advertising and sales materials tax deferred compounding
charts and other hypothetical illustrations that compare currently taxable and
tax deferred investment programs based on selected tax brackets. Our
advertisements also may compare the performance of our Variable Sub-Accounts
with: (a) certain unmanaged market indices, including but not limited to the Dow
Jones Industrial Average, the Standard & Poor's 500, and the Shearson Lehman
Bond Index; and/or (b) other management investment companies with investment
objectives similar to the underlying funds being compared. In addition, our
advertisements may include the performance ranking assigned by various
publications, including the Wall Street Journal, Forbes, Fortune, Money,
Barron's, Business Week, USA Today, and statistical services, including Lipper
Analytical Services Mutual Fund Survey, Lipper Annuity and Closed End Survey,
the Variable Annuity Research Data Survey, and SEI.
35 - PROSPECTUS
<PAGE>
APPENDIX A
-------------------------------------------------------------------
ACCUMULATION UNIT VALUE AND NUMBER OF
ACCUMULATION UNITS OUTSTANDING FOR EACH
VARIABLE SUB-ACCOUNT SINCE CONTRACTS WERE FIRST OFFERED
BASIC POLICY
<TABLE>
<CAPTION>
For the Years Beginning January 1* and Ended December 31, 1998 1999
<S> <C> <C>
-------------------------------------------------------------------------------
AIM V.I. BALANCED SUB-ACCOUNT
-------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period $ 10.00 $ 10.73
-------------------------------------------------------------------------------
Accumulation Unit Value, End of Period $ 10.73 $ 12.66
-------------------------------------------------------------------------------
Number of Units Outstanding, End of Period -- 7,487
-------------------------------------------------------------------------------
AIM V.I. DIVERSIFIED INCOME SUB-ACCOUNT
-------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period $ 10.00 $ 10.22
-------------------------------------------------------------------------------
Accumulation Unit Value, End of Period $ 10.22 $ 9.91
-------------------------------------------------------------------------------
Number of Units Outstanding, End of Period -- 721
-------------------------------------------------------------------------------
AIM V.I. GOVERNMENT SECURITIES SUB-ACCOUNT
-------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period $ 10.00 $ 10.38
-------------------------------------------------------------------------------
Accumulation Unit Value, End of Period $ 10.38 $ 9.85
-------------------------------------------------------------------------------
Number of Units Outstanding, End of Period -- --
-------------------------------------------------------------------------------
AIM V.I. GROWTH SUB-ACCOUNT
-------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period $ 10.00 $ 11.83
-------------------------------------------------------------------------------
Accumulation Unit Value, End of Period $ 11.83 $ 15.82
-------------------------------------------------------------------------------
Number of Units Outstanding, End of Period -- 13,275
-------------------------------------------------------------------------------
AIM V.I. GROWTH AND INCOME SUB-ACCOUNT
-------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period $ 10.00 $ 11.36
-------------------------------------------------------------------------------
Accumulation Unit Value, End of Period $ 11.36 $ 15.09
-------------------------------------------------------------------------------
Number of Units Outstanding, End of Period -- 12,180
-------------------------------------------------------------------------------
AIM V.I. INTERNATIONAL EQUITY SUB-ACCOUNT
-------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period $ 10.00 $ 10.68
-------------------------------------------------------------------------------
Accumulation Unit Value, End of Period $ 10.68 $ 16.38
-------------------------------------------------------------------------------
Number of Units Outstanding, End of Period -- --
-------------------------------------------------------------------------------
AIM V.I. VALUE SUB-ACCOUNT
-------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period $ 10.00 $ 11.52
-------------------------------------------------------------------------------
Accumulation Unit Value, End of Period $ 11.52 $ 14.80
-------------------------------------------------------------------------------
Number of Units Outstanding, End of Period -- 42,074
-------------------------------------------------------------------------------
DREYFUS SOCIALLY RESPONSIBLE GROWTH SUB-ACCOUNT
-------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period $ 10.00 $ 10.79
-------------------------------------------------------------------------------
Accumulation Unit Value, End of Period $ 10.79 $ 14.40
-------------------------------------------------------------------------------
Number of Units Outstanding, End of Period -- 3,130
-------------------------------------------------------------------------------
DREYFUS STOCK INDEX SUB-ACCOUNT
-------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period $ 10.00 $ 10.87
-------------------------------------------------------------------------------
Accumulation Unit Value, End of Period $ 10.87 $ 12.97
-------------------------------------------------------------------------------
Number of Units Outstanding, End of Period -- 9,930
-------------------------------------------------------------------------------
DREYFUS VIF GROWTH AND INCOME SUB-ACCOUNT
-------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period $ 10.00 $ 10.65
-------------------------------------------------------------------------------
Accumulation Unit Value, End of Period $ 10.65 $ 12.47
-------------------------------------------------------------------------------
Number of Units Outstanding, End of Period -- 2,680
-------------------------------------------------------------------------------
</TABLE>
A-1
<PAGE>
<TABLE>
<CAPTION>
For the Years Beginning January 1* and Ended December 31, 1998 1999
<S> <C> <C>
-------------------------------------------------------------------------------
DREYFUS VIF MONEY MARKET SUB-ACCOUNT
-------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period $ 10.00 $ 10.05
-------------------------------------------------------------------------------
Accumulation Unit Value, End of Period $ 10.05 $ 10.40
-------------------------------------------------------------------------------
Number of Units Outstanding, End of Period -- --
-------------------------------------------------------------------------------
FIDELITY VIP CONTRAFUND-Registered Trademark- SUB-ACCOUNT
-------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period $ 10.00 $ 11.66
-------------------------------------------------------------------------------
Accumulation Unit Value, End of Period $ 11.66 $ 14.33
-------------------------------------------------------------------------------
Number of Units Outstanding, End of Period -- 18,963
-------------------------------------------------------------------------------
FIDELITY VIP EQUITY-INCOME SUB-ACCOUNT
-------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period $ 10.00 $ 10.48
-------------------------------------------------------------------------------
Accumulation Unit Value, End of Period $ 10.48 $ 11.02
-------------------------------------------------------------------------------
Number of Units Outstanding, End of Period -- 30,264
-------------------------------------------------------------------------------
FIDELITY VIP GROWTH SUB-ACCOUNT
-------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period $ 10.00 $ 11.20
-------------------------------------------------------------------------------
Accumulation Unit Value, End of Period $ 11.20 $ 15.22
-------------------------------------------------------------------------------
Number of Units Outstanding, End of Period -- 25,821
-------------------------------------------------------------------------------
FIDELITY VIP HIGH INCOME SUB-ACCOUNT
-------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period $ 10.00 $ 10.43
-------------------------------------------------------------------------------
Accumulation Unit Value, End of Period $ 10.43 $ 11.16
-------------------------------------------------------------------------------
Number of Units Outstanding, End of Period -- 3,837
-------------------------------------------------------------------------------
FRANKLIN SMALL CAP INVESTMENTS (CLASS 2) SUB-ACCOUNT(1,2)
-------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period -- $ 10.00
-------------------------------------------------------------------------------
Accumulation Unit Value, End of Period -- $ 12.70
-------------------------------------------------------------------------------
Number of Units Outstanding, End of Period -- --
-------------------------------------------------------------------------------
MUTUAL SHARES INVESTMENTS (CLASS 2) SUB-ACCOUNT(1,2)
-------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period -- $ 10.00
-------------------------------------------------------------------------------
Accumulation Unit Value, End of Period -- $ 10.31
-------------------------------------------------------------------------------
Number of Units Outstanding, End of Period -- --
-------------------------------------------------------------------------------
TEMPLETON DEVELOPING MARKETS EQUITY (CLASS 2)
SUB-ACCOUNT(1,3)
-------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period -- $ 10.00
-------------------------------------------------------------------------------
Accumulation Unit Value, End of Period -- $ 12.16
-------------------------------------------------------------------------------
Number of Units Outstanding, End of Period -- --
-------------------------------------------------------------------------------
TEMPLETON STOCK (CLASS 2) SUB-ACCOUNT(1,2)
-------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period -- $ 10.00
-------------------------------------------------------------------------------
Accumulation Unit Value, End of Period -- $ 11.37
-------------------------------------------------------------------------------
Number of Units Outstanding, End of Period -- --
-------------------------------------------------------------------------------
TEMPLETON INTERNATIONAL EQUITY (CLASS 2) SUB-ACCOUNT(1,3)
-------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period -- $ 10.00
-------------------------------------------------------------------------------
Accumulation Unit Value, End of Period -- $ 11.26
-------------------------------------------------------------------------------
Number of Units Outstanding, End of Period -- --
-------------------------------------------------------------------------------
GOLDMAN SACHS VIT CAPITAL GROWTH SUB-ACCOUNT
-------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period $ 10.00 $ 11.10
-------------------------------------------------------------------------------
Accumulation Unit Value, End of Period $ 11.10 $ 13.99
-------------------------------------------------------------------------------
Number of Units Outstanding, End of Period -- --
-------------------------------------------------------------------------------
</TABLE>
A-2
<PAGE>
<TABLE>
<CAPTION>
For the Years Beginning January 1* and Ended December 31, 1998 1999
<S> <C> <C>
-------------------------------------------------------------------------------
GOLDMAN SACHS VIT CORE-SM- SMALL CAP EQUITY SUB-ACCOUNT
-------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period $ 10.00 $ 10.60
-------------------------------------------------------------------------------
Accumulation Unit Value, End of Period $ 10.60 $ 12.36
-------------------------------------------------------------------------------
Number of Units Outstanding, End of Period -- 86
-------------------------------------------------------------------------------
GOLDMAN SACHS VIT CORE-SM- U.S. EQUITY SUB-ACCOUNT
-------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period $ 10.00 $ 10.90
-------------------------------------------------------------------------------
Accumulation Unit Value, End of Period $ 10.90 $ 13.46
-------------------------------------------------------------------------------
Number of Units Outstanding, End of Period -- 317
-------------------------------------------------------------------------------
GOLDMAN SACHS VIT GLOBAL INCOME SUB-ACCOUNT
-------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period $ 10.00 $ 9.67
-------------------------------------------------------------------------------
Accumulation Unit Value, End of Period $ 9.67 $ 9.92
-------------------------------------------------------------------------------
Number of Units Outstanding, End of Period -- --
-------------------------------------------------------------------------------
GOLDMAN SACHS VIT INTERNATIONAL EQUITY SUB-ACCOUNT
-------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period $ 10.00 $ 10.84
-------------------------------------------------------------------------------
Accumulation Unit Value, End of Period $ 10.84 $ 14.25
-------------------------------------------------------------------------------
Number of Units Outstanding, End of Period -- --
-------------------------------------------------------------------------------
MFS EMERGING GROWTH SUB-ACCOUNT
-------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period $ 10.00 $ 11.95
-------------------------------------------------------------------------------
Accumulation Unit Value, End of Period $ 11.95 $ 20.88
-------------------------------------------------------------------------------
Number of Units Outstanding, End of Period -- 1,059
-------------------------------------------------------------------------------
MFS GROWTH WITH INCOME SUB-ACCOUNT
-------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period $ 10.00 $ 10.81
-------------------------------------------------------------------------------
Accumulation Unit Value, End of Period $ 10.81 $ 11.41
-------------------------------------------------------------------------------
Number of Units Outstanding, End of Period -- 6,295
-------------------------------------------------------------------------------
MFS NEW DISCOVERY SUB-ACCOUNT
-------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period $ 10.00 $ 11.38
-------------------------------------------------------------------------------
Accumulation Unit Value, End of Period $ 11.38 $ 19.52
-------------------------------------------------------------------------------
Number of Units Outstanding, End of Period -- 183
-------------------------------------------------------------------------------
MFS RESEARCH SUB-ACCOUNT(1)
-------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period -- $ 10.00
-------------------------------------------------------------------------------
Accumulation Unit Value, End of Period -- $ 11.53
-------------------------------------------------------------------------------
Number of Units Outstanding, End of Period -- --
-------------------------------------------------------------------------------
MORGAN STANLEY UIF EQUITY GROWTH SUB-ACCOUNT
-------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period $ 10.00 $ 10.94
-------------------------------------------------------------------------------
Accumulation Unit Value, End of Period $ 10.94 $ 15.09
-------------------------------------------------------------------------------
Number of Units Outstanding, End of Period -- --
-------------------------------------------------------------------------------
MORGAN STANLEY UIF FIXED INCOME SUB-ACCOUNT
-------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period $ 10.00 $ 10.15
-------------------------------------------------------------------------------
Accumulation Unit Value, End of Period $ 10.15 $ 9.87
-------------------------------------------------------------------------------
Number of Units Outstanding, End of Period -- --
-------------------------------------------------------------------------------
MORGAN STANLEY UIF GLOBAL EQUITY SUB-ACCOUNT
-------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period $ 10.00 $ 10.43
-------------------------------------------------------------------------------
Accumulation Unit Value, End of Period $ 10.43 $ 10.73
-------------------------------------------------------------------------------
Number of Units Outstanding, End of Period -- --
-------------------------------------------------------------------------------
</TABLE>
A-3
<PAGE>
<TABLE>
<CAPTION>
For the Years Beginning January 1* and Ended December 31, 1998 1999
<S> <C> <C>
-------------------------------------------------------------------------------
MORGAN STANLEY UIF MID CAP VALUE SUB-ACCOUNT
-------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period $ 10.00 $ 10.96
-------------------------------------------------------------------------------
Accumulation Unit Value, End of Period $ 10.96 $ 13.07
-------------------------------------------------------------------------------
Number of Units Outstanding, End of Period -- --
-------------------------------------------------------------------------------
MORGAN STANLEY UIF VALUE SUB-ACCOUNT
-------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period $ 10.00 $ 9.95
-------------------------------------------------------------------------------
Accumulation Unit Value, End of Period $ 9.95 $ 9.65
-------------------------------------------------------------------------------
Number of Units Outstanding, End of Period -- --
-------------------------------------------------------------------------------
OPPENHEIMER AGGRESSIVE GROWTH SUB-ACCOUNT(1)
-------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period -- $ 10.00
-------------------------------------------------------------------------------
Accumulation Unit Value, End of Period -- $ 13.73
-------------------------------------------------------------------------------
Number of Units Outstanding, End of Period -- --
-------------------------------------------------------------------------------
OPPENHEIMER CAPITAL APPRECIATION SUB-ACCOUNT(1)
-------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period -- $ 10.00
-------------------------------------------------------------------------------
Accumulation Unit Value, End of Period -- $ 12.11
-------------------------------------------------------------------------------
Number of Units Outstanding, End of Period -- --
-------------------------------------------------------------------------------
OPPENHEIMER GLOBAL SECURITIES SUB-ACCOUNT(1)
-------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period -- $ 10.00
-------------------------------------------------------------------------------
Accumulation Unit Value, End of Period -- $ 13.11
-------------------------------------------------------------------------------
Number of Units Outstanding, End of Period -- --
-------------------------------------------------------------------------------
OPPENHEIMER MAIN STREET GROWTH & INCOME SUB-ACCOUNT(1)
-------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period -- $ 10.00
-------------------------------------------------------------------------------
Accumulation Unit Value, End of Period -- $ 10.78
-------------------------------------------------------------------------------
Number of Units Outstanding, End of Period -- --
-------------------------------------------------------------------------------
OPPENHEIMER STRATEGIC BOND SUB-ACCOUNT(1)
-------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period -- $ 10.00
-------------------------------------------------------------------------------
Accumulation Unit Value, End of Period -- $ 10.16
-------------------------------------------------------------------------------
Number of Units Outstanding, End of Period -- --
-------------------------------------------------------------------------------
</TABLE>
* The Contracts were first offered on November 10, 1998. The Accumulation Unit
Values in this table reflect a mortality and expense risk charge of 1.05% and
an administrative expense charge of 0.10%. All of the Variable Sub-Accounts
commenced operations on or before November 10, 1998 except as described in
the footnotes below.
(1) Variable Sub-Accounts that commenced operations on December 17, 1999.
(2) Effective May 1, 2000, the Portfolios in which the Franklin Small Cap
Investments (Class 2), Mutual Shares Investments (Class 2), and Templeton
Stock (Class 2) Variable Sub-Accounts invested were merged into the Franklin
Small Cap (Class 2), Mutual Shares Securities (Class 2), and the Templeton
Growth Securities (Class 2) Portfolios. Accordingly, for administrative
convenience, as of May 1, 2000, the corresponding Variable Sub-Accounts
merged with and into new Variable Sub-Accounts named Franklin Small Cap
(Class 2), Mutual Shares Securities (Class 2), and Templeton Growth
Securities (Class 2) respectively, with Accumulation Unit Values starting at
$10.00.
(3) Effective May 1, 2000 the Portfolios in which the Templeton Developing
Markets Equity (Class 2) and Templeton International Equity (Class 2)
Variable Sub-Accounts invest were renamed the Templeton Developing Markets
Securities (Class 2) and Templeton International Securities (Class 2).
Accordingly, for administrative convenience, as of May 1, 2000, the
corresponding Variable Sub-Accounts were renamed Templeton Developing
Markets Securities (Class 2) and Templeton International Securities
(Class 2) respectively.
No Accumulation Unit Values are shown for the following new sub-accounts that
commenced operations as of the date of this prospectus: Franklin Small Cap
(Class 2), Mutual Shares Securities (Class 2), and Templeton Growth
Securities (Class 2).
A-4
<PAGE>
ACCUMULATION UNIT VALUE AND NUMBER OF
ACCUMULATION UNITS OUTSTANDING FOR EACH
VARIABLE SUB-ACCOUNT SINCE CONTRACTS WERE FIRST OFFERED
WITH ENHANCED DEATH BENEFIT RIDER
<TABLE>
<CAPTION>
For the Years Beginning January 1* and Ended December 31, 1998 1999
<S> <C> <C>
-------------------------------------------------------------------------------
AIM V.I. BALANCED SUB-ACCOUNT
-------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period $ 10.00 $ 10.73
-------------------------------------------------------------------------------
Accumulation Unit Value, End of Period $ 10.73 $ 12.63
-------------------------------------------------------------------------------
Number of Units Outstanding, End of Period -- 16,023
-------------------------------------------------------------------------------
AIM V.I. DIVERSIFIED INCOME SUB-ACCOUNT
-------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period $ 10.00 $ 10.22
-------------------------------------------------------------------------------
Accumulation Unit Value, End of Period $ 10.22 $ 9.88
-------------------------------------------------------------------------------
Number of Units Outstanding, End of Period -- --
-------------------------------------------------------------------------------
AIM V.I. GOVERNMENT SECURITIES SUB-ACCOUNT
-------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period $ 10.00 $ 10.38
-------------------------------------------------------------------------------
Accumulation Unit Value, End of Period $ 10.38 $ 9.83
-------------------------------------------------------------------------------
Number of Units Outstanding, End of Period -- --
-------------------------------------------------------------------------------
AIM V.I. GROWTH SUB-ACCOUNT
-------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period $ 10.00 $ 11.82
-------------------------------------------------------------------------------
Accumulation Unit Value, End of Period $ 11.82 $ 15.78
-------------------------------------------------------------------------------
Number of Units Outstanding, End of Period -- 14,400
-------------------------------------------------------------------------------
AIM V.I. GROWTH AND INCOME SUB-ACCOUNT
-------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period $ 10.00 $ 11.36
-------------------------------------------------------------------------------
Accumulation Unit Value, End of Period $ 11.36 $ 15.05
-------------------------------------------------------------------------------
Number of Units Outstanding, End of Period -- 16,349
-------------------------------------------------------------------------------
AIM V.I. INTERNATIONAL EQUITY SUB-ACCOUNT
-------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period $ 10.00 $ 10.68
-------------------------------------------------------------------------------
Accumulation Unit Value, End of Period $ 10.68 $ 16.34
-------------------------------------------------------------------------------
Number of Units Outstanding, End of Period -- 606
-------------------------------------------------------------------------------
AIM V.I. VALUE SUB-ACCOUNT
-------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period $ 10.00 $ 11.52
-------------------------------------------------------------------------------
Accumulation Unit Value, End of Period $ 11.52 $ 14.76
-------------------------------------------------------------------------------
Number of Units Outstanding, End of Period -- 35,445
-------------------------------------------------------------------------------
DREYFUS SOCIALLY RESPONSIBLE GROWTH SUB-ACCOUNT
-------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period $ 10.00 $ 10.78
-------------------------------------------------------------------------------
Accumulation Unit Value, End of Period $ 10.78 $ 14.36
-------------------------------------------------------------------------------
Number of Units Outstanding, End of Period -- 1,093
-------------------------------------------------------------------------------
DREYFUS STOCK INDEX SUB-ACCOUNT
-------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period $ 10.00 $ 10.87
-------------------------------------------------------------------------------
Accumulation Unit Value, End of Period $ 10.87 $ 12.94
-------------------------------------------------------------------------------
Number of Units Outstanding, End of Period -- 5,556
-------------------------------------------------------------------------------
DREYFUS VIF GROWTH AND INCOME SUB-ACCOUNT
-------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period $ 10.00 $ 10.64
-------------------------------------------------------------------------------
Accumulation Unit Value, End of Period $ 10.64 $ 12.43
-------------------------------------------------------------------------------
Number of Units Outstanding, End of Period -- --
-------------------------------------------------------------------------------
</TABLE>
A-5
<PAGE>
<TABLE>
<CAPTION>
For the Years Beginning January 1* and Ended December 31, 1998 1999
<S> <C> <C>
-------------------------------------------------------------------------------
DREYFUS VIF MONEY MARKET SUB-ACCOUNT
-------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period $ 10.00 $ 10.04
-------------------------------------------------------------------------------
Accumulation Unit Value, End of Period $ 10.04 $ 10.38
-------------------------------------------------------------------------------
Number of Units Outstanding, End of Period -- --
-------------------------------------------------------------------------------
FIDELITY VIP CONTRAFUND-Registered Trademark- SUB-ACCOUNT
-------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period $ 10.00 $ 11.66
-------------------------------------------------------------------------------
Accumulation Unit Value, End of Period $ 11.66 $ 14.29
-------------------------------------------------------------------------------
Number of Units Outstanding, End of Period -- 30,660
-------------------------------------------------------------------------------
FIDELITY VIP EQUITY-INCOME SUB-ACCOUNT
-------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period $ 10.00 $ 10.47
-------------------------------------------------------------------------------
Accumulation Unit Value, End of Period $ 10.47 $ 10.99
-------------------------------------------------------------------------------
Number of Units Outstanding, End of Period -- 17,530
-------------------------------------------------------------------------------
FIDELITY VIP GROWTH SUB-ACCOUNT
-------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period $ 10.00 $ 11.20
-------------------------------------------------------------------------------
Accumulation Unit Value, End of Period $ 11.20 $ 15.19
-------------------------------------------------------------------------------
Number of Units Outstanding, End of Period 313 45,514
-------------------------------------------------------------------------------
FIDELITY VIP HIGH INCOME SUB-ACCOUNT
-------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period $ 10.00 $ 10.43
-------------------------------------------------------------------------------
Accumulation Unit Value, End of Period $ 10.43 $ 11.13
-------------------------------------------------------------------------------
Number of Units Outstanding, End of Period -- 3,914
-------------------------------------------------------------------------------
FRANKLIN SMALL CAP INVESTMENTS (CLASS 2) SUB-ACCOUNT(1,2)
-------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period -- $ 10.00
-------------------------------------------------------------------------------
Accumulation Unit Value, End of Period -- $ 12.67
-------------------------------------------------------------------------------
Number of Units Outstanding, End of Period -- --
-------------------------------------------------------------------------------
MUTUAL SHARES INVESTMENTS (CLASS 2) SUB-ACCOUNT(1,2)
-------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period -- $ 10.00
-------------------------------------------------------------------------------
Accumulation Unit Value, End of Period -- $ 10.31
-------------------------------------------------------------------------------
Number of Units Outstanding, End of Period -- --
-------------------------------------------------------------------------------
TEMPLETON DEVELOPING MARKETS EQUITY (CLASS 2)
SUB-ACCOUNT(1,3)
-------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period -- $ 10.00
-------------------------------------------------------------------------------
Accumulation Unit Value, End of Period -- $ 12.16
-------------------------------------------------------------------------------
Number of Units Outstanding, End of Period -- --
-------------------------------------------------------------------------------
TEMPLETON STOCK (CLASS 2) SUB-ACCOUNT(1,2)
-------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period -- $ 10.00
-------------------------------------------------------------------------------
Accumulation Unit Value, End of Period -- $ 11.36
-------------------------------------------------------------------------------
Number of Units Outstanding, End of Period -- --
-------------------------------------------------------------------------------
TEMPLETON INTERNATIONAL EQUITY (CLASS 2) SUB-ACCOUNT(1,3)
-------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period -- $ 10.00
-------------------------------------------------------------------------------
Accumulation Unit Value, End of Period -- $ 11.25
-------------------------------------------------------------------------------
Number of Units Outstanding, End of Period -- --
-------------------------------------------------------------------------------
GOLDMAN SACHS VIT CAPITAL GROWTH SUB-ACCOUNT
-------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period $ 10.00 $ 11.09
-------------------------------------------------------------------------------
Accumulation Unit Value, End of Period $ 11.09 $ 13.95
-------------------------------------------------------------------------------
Number of Units Outstanding, End of Period -- --
-------------------------------------------------------------------------------
</TABLE>
A-6
<PAGE>
<TABLE>
<CAPTION>
For the Years Beginning January 1* and Ended December 31, 1998 1999
<S> <C> <C>
-------------------------------------------------------------------------------
GOLDMAN SACHS VIT CORE-SM- SMALL CAP EQUITY SUB-ACCOUNT
-------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period $ 10.00 $ 10.60
-------------------------------------------------------------------------------
Accumulation Unit Value, End of Period $ 10.60 $ 12.36
-------------------------------------------------------------------------------
Number of Units Outstanding, End of Period -- --
-------------------------------------------------------------------------------
GOLDMAN SACHS VIT CORE-SM- U.S. EQUITY SUB-ACCOUNT
-------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period $ 10.00 $ 10.89
-------------------------------------------------------------------------------
Accumulation Unit Value, End of Period $ 10.89 $ 13.46
-------------------------------------------------------------------------------
Number of Units Outstanding, End of Period -- --
-------------------------------------------------------------------------------
GOLDMAN SACHS VIT GLOBAL INCOME SUB-ACCOUNT
-------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period $ 10.00 $ 9.67
-------------------------------------------------------------------------------
Accumulation Unit Value, End of Period $ 9.67 $ 9.90
-------------------------------------------------------------------------------
Number of Units Outstanding, End of Period -- --
-------------------------------------------------------------------------------
GOLDMAN SACHS VIT INTERNATIONAL EQUITY SUB-ACCOUNT
-------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period $ 10.00 $ 10.84
-------------------------------------------------------------------------------
Accumulation Unit Value, End of Period $ 10.84 $ 14.22
-------------------------------------------------------------------------------
Number of Units Outstanding, End of Period -- --
-------------------------------------------------------------------------------
MFS EMERGING GROWTH SUB-ACCOUNT
-------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period $ 10.00 $ 11.95
-------------------------------------------------------------------------------
Accumulation Unit Value, End of Period $ 11.95 $ 20.83
-------------------------------------------------------------------------------
Number of Units Outstanding, End of Period -- 3,068
-------------------------------------------------------------------------------
MFS GROWTH WITH INCOME SUB-ACCOUNT
-------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period $ 10.00 $ 10.81
-------------------------------------------------------------------------------
Accumulation Unit Value, End of Period $ 10.81 $ 11.38
-------------------------------------------------------------------------------
Number of Units Outstanding, End of Period -- 3,323
-------------------------------------------------------------------------------
MFS NEW DISCOVERY SUB-ACCOUNT
-------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period $ 10.00 $ 11.38
-------------------------------------------------------------------------------
Accumulation Unit Value, End of Period $ 11.38 $ 19.47
-------------------------------------------------------------------------------
Number of Units Outstanding, End of Period -- 1,669
-------------------------------------------------------------------------------
MFS RESEARCH SUB-ACCOUNT(1)
-------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period -- $ 10.00
-------------------------------------------------------------------------------
Accumulation Unit Value, End of Period -- $ 11.52
-------------------------------------------------------------------------------
Number of Units Outstanding, End of Period -- --
-------------------------------------------------------------------------------
MORGAN STANLEY UIF EQUITY GROWTH SUB-ACCOUNT
-------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period $ 10.00 $ 10.94
-------------------------------------------------------------------------------
Accumulation Unit Value, End of Period $ 10.94 $ 15.05
-------------------------------------------------------------------------------
Number of Units Outstanding, End of Period -- 1,953
-------------------------------------------------------------------------------
MORGAN STANLEY UIF FIXED INCOME SUB-ACCOUNT
-------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period $ 10.00 $ 10.15
-------------------------------------------------------------------------------
Accumulation Unit Value, End of Period $ 10.15 $ 9.85
-------------------------------------------------------------------------------
Number of Units Outstanding, End of Period -- 1,566
-------------------------------------------------------------------------------
MORGAN STANLEY UIF GLOBAL EQUITY SUB-ACCOUNT
-------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period $ 10.00 $ 10.43
-------------------------------------------------------------------------------
Accumulation Unit Value, End of Period $ 10.43 $ 10.71
-------------------------------------------------------------------------------
Number of Units Outstanding, End of Period 245 --
-------------------------------------------------------------------------------
</TABLE>
A-7
<PAGE>
<TABLE>
<CAPTION>
For the Years Beginning January 1* and Ended December 31, 1998 1999
<S> <C> <C>
-------------------------------------------------------------------------------
MORGAN STANLEY UIF MID CAP VALUE SUB-ACCOUNT
-------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period $ 10.00 $ 10.96
-------------------------------------------------------------------------------
Accumulation Unit Value, End of Period $ 10.96 $ 13.04
-------------------------------------------------------------------------------
Number of Units Outstanding, End of Period -- --
-------------------------------------------------------------------------------
MORGAN STANLEY UIF VALUE SUB-ACCOUNT
-------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period $ 10.00 $ 9.95
-------------------------------------------------------------------------------
Accumulation Unit Value, End of Period $ 9.95 $ 9.63
-------------------------------------------------------------------------------
Number of Units Outstanding, End of Period -- 903
-------------------------------------------------------------------------------
OPPENHEIMER AGGRESSIVE GROWTH SUB-ACCOUNT(1)
-------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period -- $ 10.00
-------------------------------------------------------------------------------
Accumulation Unit Value, End of Period -- $ 13.72
-------------------------------------------------------------------------------
Number of Units Outstanding, End of Period -- --
-------------------------------------------------------------------------------
OPPENHEIMER CAPITAL APPRECIATION SUB-ACCOUNT(1)
-------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period -- $ 10.00
-------------------------------------------------------------------------------
Accumulation Unit Value, End of Period -- $ 12.11
-------------------------------------------------------------------------------
Number of Units Outstanding, End of Period -- --
-------------------------------------------------------------------------------
OPPENHEIMER GLOBAL SECURITIES SUB-ACCOUNT(1)
-------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period -- $ 10.00
-------------------------------------------------------------------------------
Accumulation Unit Value, End of Period -- $ 13.10
-------------------------------------------------------------------------------
Number of Units Outstanding, End of Period -- --
-------------------------------------------------------------------------------
OPPENHEIMER MAIN STREET GROWTH & INCOME SUB-ACCOUNT(1)
-------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period -- $ 10.00
-------------------------------------------------------------------------------
Accumulation Unit Value, End of Period -- $ 10.77
-------------------------------------------------------------------------------
Number of Units Outstanding, End of Period -- --
-------------------------------------------------------------------------------
OPPENHEIMER STRATEGIC BOND SUB-ACCOUNT(1)
-------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period -- $ 10.00
-------------------------------------------------------------------------------
Accumulation Unit Value, End of Period -- $ 10.16
-------------------------------------------------------------------------------
Number of Units Outstanding, End of Period -- --
-------------------------------------------------------------------------------
</TABLE>
* The Contracts were first offered on November 10, 1998. The Accumulation Unit
Values in this table reflect a mortality and expense risk charge of 1.27% and
an administrative expense charge of 0.10%. All of the Variable Sub-Accounts
commenced operations on or before November 10, 1998 except as described in
the footnotes below.
(1) Variable Sub-Accounts commenced operations on December 17, 1999.
(2) Effective May 1, 2000, the Portfolios in which the Franklin Small Cap
Investments (Class 2), Mutual Shares Investments (Class 2), and Templeton
Stock (Class 2) Variable Sub-Accounts invested were merged into the Franklin
Small Cap (Class 2), Mutual Shares Securities (Class 2), and the Templeton
Growth Securities (Class 2) Portfolios. Accordingly, for administrative
convenience, as of May 1, 2000, the corresponding Variable Sub-Accounts
merged with and into new Variable Sub-Accounts named Franklin Small Cap
(Class 2), Mutual Shares Securities (Class 2), and Templeton Growth
Securities (Class 2) respectively, with Accumulation Unit Values starting at
$10.00.
(3) Effective May 1, 2000 the Portfolios in which the Templeton Developing
Markets Equity (Class 2) and Templeton International Equity (Class 2)
Variable Sub-Accounts invest were renamed the Templeton Developing Markets
Securities (Class 2) and Templeton International Securities (Class 2).
Accordingly, for administrative convenience, as of May 1, 2000, the
corresponding Variable Sub-Accounts were renamed Templeton Developing
Markets Securities (Class 2) and Templeton International Securities
(Class 2) respectively.
No Accumulation Unit Values are shown for the following new sub-accounts that
commenced operations as of the date of this prospectus: Franklin Small Cap
(Class 2), Mutual Shares Securities (Class 2), and Templeton Growth
Securities (Class 2).
A-8
<PAGE>
ACCUMULATION UNIT VALUE AND NUMBER OF
ACCUMULATION UNITS OUTSTANDING FOR EACH
VARIABLE SUB-ACCOUNT SINCE CONTRACTS WERE FIRST OFFERED
WITH ENHANCED DEATH BENEFIT AND INCOME BENEFIT COMBINATION RIDER
<TABLE>
<CAPTION>
For the Years Beginning January 1* and Ended December 31, 1998 1999
<S> <C> <C>
-------------------------------------------------------------------------------
AIM V.I. BALANCED SUB-ACCOUNT
-------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period $ 10.00 $ 10.73
-------------------------------------------------------------------------------
Accumulation Unit Value, End of Period $ 10.73 $ 12.60
-------------------------------------------------------------------------------
Number of Units Outstanding, End of Period 405 43,121
-------------------------------------------------------------------------------
AIM V.I. DIVERSIFIED INCOME SUB-ACCOUNT
-------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period $ 10.00 $ 10.21
-------------------------------------------------------------------------------
Accumulation Unit Value, End of Period $ 10.21 $ 9.86
-------------------------------------------------------------------------------
Number of Units Outstanding, End of Period -- 1,484
-------------------------------------------------------------------------------
AIM V.I. GOVERNMENT SECURITIES SUB-ACCOUNT
-------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period $ 10.00 $ 10.38
-------------------------------------------------------------------------------
Accumulation Unit Value, End of Period $ 10.38 $ 9.80
-------------------------------------------------------------------------------
Number of Units Outstanding, End of Period -- --
-------------------------------------------------------------------------------
AIM V.I. GROWTH SUB-ACCOUNT
-------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period $ 10.00 $ 11.82
-------------------------------------------------------------------------------
Accumulation Unit Value, End of Period $ 11.82 $ 15.74
-------------------------------------------------------------------------------
Number of Units Outstanding, End of Period 386 21,246
-------------------------------------------------------------------------------
AIM V.I. GROWTH AND INCOME SUB-ACCOUNT
-------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period $ 10.00 $ 11.36
-------------------------------------------------------------------------------
Accumulation Unit Value, End of Period $ 11.36 $ 15.01
-------------------------------------------------------------------------------
Number of Units Outstanding, End of Period -- 11,459
-------------------------------------------------------------------------------
AIM V.I. INTERNATIONAL EQUITY SUB-ACCOUNT
-------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period $ 10.00 $ 10.68
-------------------------------------------------------------------------------
Accumulation Unit Value, End of Period $ 10.68 $ 16.30
-------------------------------------------------------------------------------
Number of Units Outstanding, End of Period -- 2,943
-------------------------------------------------------------------------------
AIM V.I. VALUE SUB-ACCOUNT
-------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period $ 10.00 $ 11.51
-------------------------------------------------------------------------------
Accumulation Unit Value, End of Period $ 11.51 $ 14.73
-------------------------------------------------------------------------------
Number of Units Outstanding, End of Period -- 34,288
-------------------------------------------------------------------------------
DREYFUS SOCIALLY RESPONSIBLE GROWTH SUB-ACCOUNT
-------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period $ 10.00 $ 10.78
-------------------------------------------------------------------------------
Accumulation Unit Value, End of Period $ 10.78 $ 14.33
-------------------------------------------------------------------------------
Number of Units Outstanding, End of Period -- 5,493
-------------------------------------------------------------------------------
DREYFUS STOCK INDEX SUB-ACCOUNT
-------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period $ 10.00 $ 10.87
-------------------------------------------------------------------------------
Accumulation Unit Value, End of Period $ 10.87 $ 12.90
-------------------------------------------------------------------------------
Number of Units Outstanding, End of Period 401 19,955
-------------------------------------------------------------------------------
DREYFUS VIF GROWTH AND INCOME SUB-ACCOUNT
-------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period $ 10.00 $ 10.64
-------------------------------------------------------------------------------
Accumulation Unit Value, End of Period $ 10.64 $ 12.40
-------------------------------------------------------------------------------
Number of Units Outstanding, End of Period -- 3,983
-------------------------------------------------------------------------------
</TABLE>
A-9
<PAGE>
<TABLE>
<CAPTION>
For the Years Beginning January 1* and Ended December 31, 1998 1999
<S> <C> <C>
-------------------------------------------------------------------------------
DREYFUS VIF MONEY MARKET SUB-ACCOUNT
-------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period $ 10.00 $ 10.04
-------------------------------------------------------------------------------
Accumulation Unit Value, End of Period $ 10.04 $ 10.36
-------------------------------------------------------------------------------
Number of Units Outstanding, End of Period -- 577
-------------------------------------------------------------------------------
FIDELITY VIP CONTRAFUND-Registered Trademark- SUB-ACCOUNT
-------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period $ 10.00 $ 11.65
-------------------------------------------------------------------------------
Accumulation Unit Value, End of Period $ 11.65 $ 14.26
-------------------------------------------------------------------------------
Number of Units Outstanding, End of Period 387 32,161
-------------------------------------------------------------------------------
FIDELITY VIP EQUITY-INCOME SUB-ACCOUNT
-------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period $ 10.00 $ 10.47
-------------------------------------------------------------------------------
Accumulation Unit Value, End of Period $ 10.47 $ 10.96
-------------------------------------------------------------------------------
Number of Units Outstanding, End of Period -- 11,621
-------------------------------------------------------------------------------
FIDELITY VIP GROWTH SUB-ACCOUNT
-------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period $ 10.00 $ 11.19
-------------------------------------------------------------------------------
Accumulation Unit Value, End of Period $ 11.19 $ 15.15
-------------------------------------------------------------------------------
Number of Units Outstanding, End of Period -- 22,088
-------------------------------------------------------------------------------
FIDELITY VIP HIGH INCOME SUB-ACCOUNT
-------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period $ 10.00 $ 10.43
-------------------------------------------------------------------------------
Accumulation Unit Value, End of Period $ 10.43 $ 11.10
-------------------------------------------------------------------------------
Number of Units Outstanding, End of Period -- 3,667
-------------------------------------------------------------------------------
FRANKLIN SMALL CAP INVESTMENTS (CLASS 2) SUB-ACCOUNT(1,2)
-------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period -- $ 10.00
-------------------------------------------------------------------------------
Accumulation Unit Value, End of Period -- $ 12.66
-------------------------------------------------------------------------------
Number of Units Outstanding, End of Period -- --
-------------------------------------------------------------------------------
MUTUAL SHARES INVESTMENTS (CLASS 2) SUB-ACCOUNT(1,2)
-------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period -- $ 10.00
-------------------------------------------------------------------------------
Accumulation Unit Value, End of Period -- $ 10.30
-------------------------------------------------------------------------------
Number of Units Outstanding, End of Period -- --
-------------------------------------------------------------------------------
TEMPLETON DEVELOPING MARKETS EQUITY (CLASS 2)
SUB-ACCOUNT(1,3)
-------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period -- $ 10.00
-------------------------------------------------------------------------------
Accumulation Unit Value, End of Period -- $ 12.15
-------------------------------------------------------------------------------
Number of Units Outstanding, End of Period -- --
-------------------------------------------------------------------------------
TEMPLETON STOCK (CLASS 2) SUB-ACCOUNT(1,2)
-------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period -- $ 10.00
-------------------------------------------------------------------------------
Accumulation Unit Value, End of Period -- $ 11.36
-------------------------------------------------------------------------------
Number of Units Outstanding, End of Period -- --
-------------------------------------------------------------------------------
TEMPLETON INTERNATIONAL EQUITY (CLASS 2) SUB-ACCOUNT(1,3)
-------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period -- $ 10.00
-------------------------------------------------------------------------------
Accumulation Unit Value, End of Period -- $ 11.25
-------------------------------------------------------------------------------
Number of Units Outstanding, End of Period -- --
-------------------------------------------------------------------------------
GOLDMAN SACHS VIT CAPITAL GROWTH SUB-ACCOUNT
-------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period $ 10.00 $ 11.09
-------------------------------------------------------------------------------
Accumulation Unit Value, End of Period $ 11.09 $ 13.92
-------------------------------------------------------------------------------
Number of Units Outstanding, End of Period -- 2,449
-------------------------------------------------------------------------------
</TABLE>
A-10
<PAGE>
<TABLE>
<CAPTION>
For the Years Beginning January 1* and Ended December 31, 1998 1999
<S> <C> <C>
-------------------------------------------------------------------------------
GOLDMAN SACHS VIT CORE-SM- SMALL CAP EQUITY SUB-ACCOUNT
-------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period $ 10.00 $ 10.59
-------------------------------------------------------------------------------
Accumulation Unit Value, End of Period $ 10.59 $ 12.30
-------------------------------------------------------------------------------
Number of Units Outstanding, End of Period -- 17,918
-------------------------------------------------------------------------------
GOLDMAN SACHS VIT CORE-SM- U.S. EQUITY SUB-ACCOUNT
-------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period $ 10.00 $ 10.89
-------------------------------------------------------------------------------
Accumulation Unit Value, End of Period $ 10.89 $ 13.39
-------------------------------------------------------------------------------
Number of Units Outstanding, End of Period 401 20,515
-------------------------------------------------------------------------------
GOLDMAN SACHS VIT GLOBAL INCOME SUB-ACCOUNT
-------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period $ 10.00 $ 9.66
-------------------------------------------------------------------------------
Accumulation Unit Value, End of Period $ 9.66 $ 9.87
-------------------------------------------------------------------------------
Number of Units Outstanding, End of Period -- --
-------------------------------------------------------------------------------
GOLDMAN SACHS VIT INTERNATIONAL EQUITY SUB-ACCOUNT
-------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period $ 10.00 $ 10.84
-------------------------------------------------------------------------------
Accumulation Unit Value, End of Period $ 10.84 $ 14.18
-------------------------------------------------------------------------------
Number of Units Outstanding, End of Period -- --
-------------------------------------------------------------------------------
MFS EMERGING GROWTH SUB-ACCOUNT
-------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period $ 10.00 $ 11.94
-------------------------------------------------------------------------------
Accumulation Unit Value, End of Period $ 11.94 $ 20.78
-------------------------------------------------------------------------------
Number of Units Outstanding, End of Period 377 19,189
-------------------------------------------------------------------------------
MFS GROWTH WITH INCOME SUB-ACCOUNT
-------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period $ 10.00 $ 10.81
-------------------------------------------------------------------------------
Accumulation Unit Value, End of Period $ 10.81 $ 11.35
-------------------------------------------------------------------------------
Number of Units Outstanding, End of Period -- 4,808
-------------------------------------------------------------------------------
MFS NEW DISCOVERY SUB-ACCOUNT
-------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period $10.000 $11.381
-------------------------------------------------------------------------------
Accumulation Unit Value, End of Period $11.381 $ 19.42
-------------------------------------------------------------------------------
Number of Units Outstanding, End of Period -- 707
-------------------------------------------------------------------------------
MFS RESEARCH SUB-ACCOUNT(1)
-------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period -- $ 10.00
-------------------------------------------------------------------------------
Accumulation Unit Value, End of Period -- $ 11.52
-------------------------------------------------------------------------------
Number of Units Outstanding, End of Period -- --
-------------------------------------------------------------------------------
MORGAN STANLEY UIF EQUITY GROWTH SUB-ACCOUNT
-------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period $10.000 $10.941
-------------------------------------------------------------------------------
Accumulation Unit Value, End of Period $10.941 $ 15.02
-------------------------------------------------------------------------------
Number of Units Outstanding, End of Period 406 7,464
-------------------------------------------------------------------------------
MORGAN STANLEY UIF FIXED INCOME SUB-ACCOUNT
-------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period $ 10.00 $ 10.15
-------------------------------------------------------------------------------
Accumulation Unit Value, End of Period $ 10.15 $ 9.82
-------------------------------------------------------------------------------
Number of Units Outstanding, End of Period -- --
-------------------------------------------------------------------------------
MORGAN STANLEY UIF GLOBAL EQUITY SUB-ACCOUNT
-------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period $ 10.00 $ 10.42
-------------------------------------------------------------------------------
Accumulation Unit Value, End of Period $ 10.42 $ 10.69
-------------------------------------------------------------------------------
Number of Units Outstanding, End of Period -- 245
-------------------------------------------------------------------------------
</TABLE>
A-11
<PAGE>
<TABLE>
<CAPTION>
For the Years Beginning January 1* and Ended December 31, 1998 1999
<S> <C> <C>
-------------------------------------------------------------------------------
MORGAN STANLEY UIF MID CAP VALUE SUB-ACCOUNT
-------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period $ 10.00 $ 10.96
-------------------------------------------------------------------------------
Accumulation Unit Value, End of Period $ 10.96 $ 13.01
-------------------------------------------------------------------------------
Number of Units Outstanding, End of Period 408 1,788
-------------------------------------------------------------------------------
MORGAN STANLEY UIF VALUE SUB-ACCOUNT
-------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period $ 10.00 $ 9.95
-------------------------------------------------------------------------------
Accumulation Unit Value, End of Period $ 9.95 $ 9.61
-------------------------------------------------------------------------------
Number of Units Outstanding, End of Period -- 17,465
-------------------------------------------------------------------------------
OPPENHEIMER AGGRESSIVE GROWTH SUB-ACCOUNT(1)
-------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period -- $ 10.00
-------------------------------------------------------------------------------
Accumulation Unit Value, End of Period -- $ 13.72
-------------------------------------------------------------------------------
Number of Units Outstanding, End of Period -- --
-------------------------------------------------------------------------------
OPPENHEIMER CAPITAL APPRECIATION SUB-ACCOUNT(1)
-------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period -- $ 10.00
-------------------------------------------------------------------------------
Accumulation Unit Value, End of Period -- $ 12.10
-------------------------------------------------------------------------------
Number of Units Outstanding, End of Period -- --
-------------------------------------------------------------------------------
OPPENHEIMER GLOBAL SECURITIES SUB-ACCOUNT(1)
-------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period -- $ 10.00
-------------------------------------------------------------------------------
Accumulation Unit Value, End of Period -- $ 13.10
-------------------------------------------------------------------------------
Number of Units Outstanding, End of Period -- --
-------------------------------------------------------------------------------
OPPENHEIMER MAIN STREET GROWTH & INCOME SUB-ACCOUNT(1)
-------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period -- $ 10.00
-------------------------------------------------------------------------------
Accumulation Unit Value, End of Period -- $ 10.77
-------------------------------------------------------------------------------
Number of Units Outstanding, End of Period -- --
-------------------------------------------------------------------------------
OPPENHEIMER STRATEGIC BOND SUB-ACCOUNT(1)
-------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period -- $ 10.00
-------------------------------------------------------------------------------
Accumulation Unit Value, End of Period -- $ 10.15
-------------------------------------------------------------------------------
Number of Units Outstanding, End of Period -- --
-------------------------------------------------------------------------------
</TABLE>
* The Contracts were first offered on November 10, 1998. The Accumulation Unit
Values in this table reflect a mortality and expense risk charge of 1.49% and
an administrative expense charge of 0.10%. All of the Variable Sub-Accounts
commenced operations on or before November 10, 1998 except as described in
the footnotes below.
(1) Variable Sub-Accounts that commenced operations on December 17, 1999.
(2) Effective May 1, 2000, the Portfolios in which the Franklin Small Cap
Investments (Class 2), Mutual Shares Investments (Class 2), and Templeton
Stock (Class 2) Variable Sub-Accounts invested were merged into the Franklin
Small Cap (Class 2), Mutual Shares Securities (Class 2), and the Templeton
Growth Securities (Class 2) Portfolios. Accordingly, for administrative
convenience, as of May 1, 2000, the corresponding Variable Sub-Accounts
merged with and into new Variable Sub-Accounts named Franklin Small Cap
(Class 2), Mutual Shares Securities (Class 2), and Templeton Growth
Securities (Class 2) respectively, with Accumulation Unit Values starting at
$10.00.
(3) Effective May 1, 2000 the Portfolios in which the Templeton Developing
Markets Equity (Class 2) and Templeton International Equity (Class 2)
Variable Sub-Accounts invest were renamed the Templeton Developing Markets
Securities (Class 2) and Templeton International Securities (Class 2).
Accordingly, for administrative convenience, as of May 1, 2000, the
corresponding Variable Sub-Accounts were renamed Templeton Developing
Markets Securities (Class 2) and Templeton International Securities
(Class 2) respectively.
No Accumulation Unit Values are shown for the following new sub-accounts that
commenced operations as of the date of this prospectus: Franklin Small Cap
(Class 2), Mutual Shares Securities (Class 2), and Templeton Growth
Securities (Class 2).
A-12
<PAGE>
APPENDIX B
MARKET VALUE ADJUSTMENT
-------------------------------------------------------------------
The Market Value Adjustment is based on the following:
I = the Treasury Rate for a maturity equal to the Guarantee Period for the week
preceding the establishment of the Guarantee Period.
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 Guarantee Period.
J = the Treasury Rate for a maturity equal to the Guarantee Period for the week
preceding the receipt of the withdrawal, transfer, death benefit, or income
payment request. If a Note with a maturity of the original Guarantee Period is
not available, we will use a weighted average.
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 X (I - J) X N
To determine the Market Value Adjustment, we will multiply the Market Value
Adjustment factor by the amount transferred, withdrawn (in excess of the Free
Withdrawal Amount), paid as a death benefit, or applied to an Income Plan from a
Guarantee Period at any time other than during the 30 day period after such
Guarantee Period expires.
B-1
<PAGE>
EXAMPLES OF MARKET VALUE ADJUSTMENT
-------------------------------------------------------------------
<TABLE>
<S> <C>
Purchase Payment: $10,000 allocated to a Guarantee Period
Guarantee Period: 5 years
Interest Rate: 4.50%
Full Withdrawal: End of Contract Year 3
</TABLE>
NOTE: These examples assume that premium taxes are not applicable.
EXAMPLE 1: (ASSUMES DECLINING INTEREST RATES)
Step 1: Calculate Contract Value at End of Contract Year 3:
= 10,000.00 X (1.045)TO THE POWER OF 3 = $11,411.66
Step 2: Calculate the Free Withdrawal Amount:
= .15 X (10,000.00) = $1,500.00
Step 3: Calculate the Withdrawal Charge:
= .05 X (10,000 - 1,500) = $425.00
Step 4: Calculate the Market Value Adjustment:
I = 4.50%
J = 4.20%
730 DAYS
N = -------- = 2
365 DAYS
MARKET VALUE ADJUSTMENT FACTOR: .9 X (I - J) X N
= .9 X (.045 - .042) X 2 = .0054
MARKET VALUE ADJUSTMENT = MARKET VALUE ADJUSTMENT FACTOR X AMOUNT SUBJECT TO
MARKET VALUE ADJUSTMENT:
= .0054 X (11,411.66 - 1,500) = $53.52
Step 5: Calculate the amount received by Contract owner as a result of
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 Contract Value at End of Contract Year 3:
= 10,000.00 X (1.045)TO THE POWER OF 3 = $11,411.66
Step 2: Calculate the Free Withdrawal Amount:
= .15 X (10,000.00) = $1,500.00
Step 3: Calculate the Withdrawal Charge:
= .05 X (10,000.00 - 1,500.00) = $425.00
Step 4: Calculate the Market Value Adjustment:
I = 4.50%
J = 4.80%
N = 730 DAYS = 2
--------
365 DAYS
MARKET VALUE ADJUSTMENT FACTOR: .9 X (I - J) X N
= .9 X (.045 - .048) X (2) = -.0054
MARKET VALUE ADJUSTMENT = MARKET VALUE ADJUSTMENT FACTOR X AMOUNT SUBJECT TO
MARKET VALUE ADJUSTMENT:
= -.0054 X (11,411.66 - 1,500) = -$53.52
Step 5: Calculate the amount received by Contract owner as a result of
full withdrawal at the end of Contract Year 3:
= 11,411.66 - 425.00 - 53.52 = $10,933.14
B-2
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
TABLE OF CONTENTS
-------------------------------------------------------------------
<TABLE>
<CAPTION>
Description
<S> <C>
----------------------------------------------------------------------------
Additions, Deletions or Substitutions of Investments
----------------------------------------------------------------------------
The Contract
----------------------------------------------------------------------------
Purchases of Contracts
----------------------------------------------------------------------------
Tax-free Exchanges (1035 Exchanges, Rollovers and Transfers)
----------------------------------------------------------------------------
Performance Information
----------------------------------------------------------------------------
Standardized Total Returns
----------------------------------------------------------------------------
Non-standardized Total Returns
----------------------------------------------------------------------------
Adjusted Historical Total Returns
----------------------------------------------------------------------------
Calculation of Accumulation Unit Values
----------------------------------------------------------------------------
Calculation of Variable Income Payments
----------------------------------------------------------------------------
Calculation of Annuity Unit Values
----------------------------------------------------------------------------
General Matters
----------------------------------------------------------------------------
Incontestability
----------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Description
<S> <C>
----------------------------------------------------------------------------
Settlements
----------------------------------------------------------------------------
Safekeeping of the Variable Account's Assets
----------------------------------------------------------------------------
Premium Taxes
----------------------------------------------------------------------------
Tax Reserves
----------------------------------------------------------------------------
Federal Tax Matters
----------------------------------------------------------------------------
Qualified Plans
----------------------------------------------------------------------------
Experts
----------------------------------------------------------------------------
Financial Statements
----------------------------------------------------------------------------
</TABLE>
------------------------------
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING IN ANY JURISDICTION IN WHICH
SUCH OFFERING MAY NOT LAWFULLY BE MADE. WE DO NOT AUTHORIZE ANYONE TO PROVIDE
ANY INFORMATION OR REPRESENTATIONS REGARDING THE OFFERING DESCRIBED IN THIS
PROSPECTUS OTHER THAN AS CONTAINED IN THIS PROSPECTUS.
C-1
<PAGE>
GLG678
<PAGE>
THE GLENBROOK PROVIDER VARIABLE ANNUITY
Glenbrook Life and Annuity Company
P.O. Box 94042
Palatine, IL 60094
Telephone Number: 1-800-755-5275 Prospectus dated May 1, 2000
--------------------------------------------------------------------------------
Glenbrook Life and Annuity Company ("GLENBROOK") is offering the Glenbrook
Provider Variable Annuity, an individual flexible premium deferred variable
annuity contract ("CONTRACT"). This prospectus contains information about the
Contract that you should know before investing. Please keep it for future
reference.
The Contract currently offers 35 "INVESTMENT ALTERNATIVES". The investment
alternatives include 3 fixed account options ("FIXED ACCOUNT OPTIONS") and 32
variable sub-accounts ("VARIABLE SUB-ACCOUNTS") of the Glenbrook Life Multi-
Manager Variable Account ("VARIABLE ACCOUNT"). Each Variable Sub-Account invests
exclusively in shares of one of the portfolios ("PORTFOLIOS") of the following
mutual funds ("FUNDS"):
<TABLE>
<S> <C>
- AIM VARIABLE INSURANCE FUNDS
- FEDERATED INSURANCE SERIES
- FIDELITY VARIABLE INSURANCE PRODUCTS FUND
- FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS
TRUST
- MFS-REGISTERED TRADEMARK- VARIABLE INSURANCE
TRUST-SM-
- OPPENHEIMER VARIABLE ACCOUNT FUNDS
- STI CLASSIC VARIABLE TRUST
</TABLE>
Not all of the Funds and/or Portfolios, however, may be available with your
Contract. You should check with your representative for further information on
the availability of Funds and/or Portfolios. Your annuity application will list
all available Portfolios.
WE (Glenbrook) have filed a Statement of Additional Information, dated May 1,
2000, with the Securities and Exchange Commission ("SEC"). It contains more
information about the Contract and is incorporated herein by reference, which
means it is legally a part of this prospectus. Its table of contents appears on
page C-1 of this prospectus. For a free copy, please write or call us at the
address or telephone number above, or go to the SEC's Web site
(http://www.sec.gov). You can find other information and documents about us,
including documents that are legally part of this prospectus, at the SEC's Web
site.
--------------------------------------------------------------------------------
<TABLE>
<C> <S>
THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR
DISAPPROVED THE SECURITIES DESCRIBED IN THIS PROSPECTUS, NOR
HAS IT PASSED ON THE ACCURACY OR THE ADEQUACY OF THIS
PROSPECTUS. ANYONE WHO TELLS YOU OTHERWISE IS COMMITTING A
FEDERAL CRIME.
IMPORTANT THE CONTRACTS MAY BE DISTRIBUTED THROUGH BROKER-DEALERS THAT
NOTICES HAVE RELATIONSHIPS WITH BANKS OR OTHER FINANCIAL
INSTITUTIONS OR BY EMPLOYEES OF SUCH BANKS. HOWEVER, THE
CONTRACTS ARE NOT DEPOSITS, OR OBLIGATIONS OF, OR GUARANTEED
BY SUCH INSTITUTIONS OR ANY FEDERAL REGULATORY AGENCY.
INVESTMENT IN THE CONTRACTS INVOLVES INVESTMENT RISKS,
INCLUDING POSSIBLE LOSS OF PRINCIPAL. THE CONTRACTS ARE NOT
FDIC INSURED.
</TABLE>
GLG677
1 PROSPECTUS
<PAGE>
TABLE OF CONTENTS
-------------------------------------------------------------------
<TABLE>
<CAPTION>
PAGE
----------------------------------------------------------------------------
<S> <C>
OVERVIEW
----------------------------------------------------------------------------
Important Terms 3
----------------------------------------------------------------------------
The Contract At A Glance 4
----------------------------------------------------------------------------
How the Contract Works 6
----------------------------------------------------------------------------
Expense Table 7
----------------------------------------------------------------------------
Financial Information 12
----------------------------------------------------------------------------
CONTRACT FEATURES
----------------------------------------------------------------------------
The Contract 13
----------------------------------------------------------------------------
Purchases 14
----------------------------------------------------------------------------
Contract Value 15
----------------------------------------------------------------------------
Investment Alternatives 16
----------------------------------------------------------------------------
The Variable Sub-Accounts 16
----------------------------------------------------------------------------
The Fixed Account Options 18
----------------------------------------------------------------------------
Transfers 20
----------------------------------------------------------------------------
Expenses 22
----------------------------------------------------------------------------
Access To Your Money 24
----------------------------------------------------------------------------
Income Payments 25
----------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PAGE
----------------------------------------------------------------------------
<S> <C>
Death Benefits 26
----------------------------------------------------------------------------
OTHER INFORMATION
----------------------------------------------------------------------------
More Information: 29
----------------------------------------------------------------------------
Glenbrook 29
----------------------------------------------------------------------------
The Variable Account 29
----------------------------------------------------------------------------
The Portfolios 29
----------------------------------------------------------------------------
The Contract 30
----------------------------------------------------------------------------
Qualified Plans 31
----------------------------------------------------------------------------
Legal Matters 31
----------------------------------------------------------------------------
Year 2000 31
----------------------------------------------------------------------------
Taxes 31
----------------------------------------------------------------------------
Annual Reports and Other Documents 34
----------------------------------------------------------------------------
Experts 34
----------------------------------------------------------------------------
Performance Information 34
----------------------------------------------------------------------------
APPENDIX A--ACCUMULATION UNIT VALUES A-1
----------------------------------------------------------------------------
APPENDIX B--MARKET VALUE ADJUSTMENT EXAMPLE B-1
----------------------------------------------------------------------------
STATEMENT OF ADDITIONAL INFORMATION TABLE OF CONTENTS C-1
----------------------------------------------------------------------------
</TABLE>
2 PROSPECTUS
<PAGE>
IMPORTANT TERMS
-------------------------------------------------------------------
THIS PROSPECTUS USES A NUMBER OF IMPORTANT TERMS THAT YOU MAY NOT BE FAMILIAR
WITH. THE INDEX BELOW IDENTIFIES THE PAGE THAT DESCRIBES EACH TERM. THE FIRST
USE OF EACH TERM IN THIS PROSPECTUS APPEARS IN HIGHLIGHTS.
<TABLE>
<CAPTION>
PAGE
--------------------------------------------------------------------------------
<S> <C>
Accumulation Phase 6
--------------------------------------------------------------------------------
Accumulation Unit 12, 15
--------------------------------------------------------------------------------
Accumulation Unit Value 12, 15
--------------------------------------------------------------------------------
Anniversary Values 27
--------------------------------------------------------------------------------
Annuitant 13
--------------------------------------------------------------------------------
Automatic Additions Plan 14
--------------------------------------------------------------------------------
Automatic Portfolio Rebalancing Program 21
--------------------------------------------------------------------------------
Beneficiary 13
--------------------------------------------------------------------------------
Cancellation Period 4
--------------------------------------------------------------------------------
*Contract 13
--------------------------------------------------------------------------------
Contract Anniversary 5
--------------------------------------------------------------------------------
Contract Owner (You) 13
--------------------------------------------------------------------------------
Contract Value 5, 15
--------------------------------------------------------------------------------
Contract Year 5
--------------------------------------------------------------------------------
Death Benefit Anniversary 27
--------------------------------------------------------------------------------
Dollar Cost Averaging Program 21
--------------------------------------------------------------------------------
Due Proof of Death 26
--------------------------------------------------------------------------------
Enhanced Death Benefit Rider 27
--------------------------------------------------------------------------------
Enhanced Death and Income Benefit Combination Rider 27
--------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PAGE
--------------------------------------------------------------------------------
<S> <C>
Fixed Account Options 18
--------------------------------------------------------------------------------
Free Withdrawal Amount 22
--------------------------------------------------------------------------------
Funds 1
--------------------------------------------------------------------------------
Glenbrook ("We") 29
--------------------------------------------------------------------------------
Guarantee Periods 18
--------------------------------------------------------------------------------
Income Plan 25
--------------------------------------------------------------------------------
Investment Alternatives 1, 16-18
--------------------------------------------------------------------------------
Issue Date 6
--------------------------------------------------------------------------------
Market Value Adjustment 19
--------------------------------------------------------------------------------
Payout Phase 6
--------------------------------------------------------------------------------
Payout Start Date 25
--------------------------------------------------------------------------------
Portfolios 1, 16
--------------------------------------------------------------------------------
Qualified Contracts 4
--------------------------------------------------------------------------------
SEC 1
--------------------------------------------------------------------------------
Settlement Value 27
--------------------------------------------------------------------------------
Systematic Withdrawal Program 24
--------------------------------------------------------------------------------
Valuation Date 14
--------------------------------------------------------------------------------
Variable Account 1
--------------------------------------------------------------------------------
Variable Sub-Account 1, 16
--------------------------------------------------------------------------------
</TABLE>
*In certain states the Contract is available only as a group Contract. If you
purchase a group Contract, we will issue you a certificate that represents your
ownership and that summarizes the provisions of the group Contract. References
to "Contract" in this prospectus include certificates, unless the context
requires otherwise.
3 PROSPECTUS
<PAGE>
THE CONTRACT AT A GLANCE
-------------------------------------------------------------------
THE FOLLOWING IS A SNAPSHOT OF THE CONTRACT. PLEASE READ THE REMAINDER OF THIS
PROSPECTUS FOR MORE INFORMATION.
<TABLE>
<S> <C>
FLEXIBLE PAYMENTS You can purchase a Contract with as little as $3,000 ($2,000
for "QUALIFIED CONTRACTS", which are Contracts issued within
QUALIFIED PLANS). You can add to your Contract as often and
as much as you like, but each payment must be at least $50.
--------------------------------------------------------------------------------------------------------
RIGHT TO CANCEL You may cancel your Contract within 20 days of receipt or
any longer period as your state may require ("CANCELLATION
PERIOD"). Upon cancellation, we will return your purchase
payments adjusted, to the extent federal or state law
permits, to reflect the investment experience of any amounts
allocated to the Variable Account.
--------------------------------------------------------------------------------------------------------
EXPENSES You will bear the following expenses:
- Total Variable Account annual fees equal to 1.15% of
average daily net assets (1.37% if you select the
ENHANCED DEATH BENEFIT RIDER and 1.59% if you select the
ENHANCED DEATH AND INCOME BENEFIT COMBINATION RIDER)
- Annual contract maintenance charge of $35 (with certain
exceptions)
- Withdrawal charges ranging from 0% to 6% of purchase
payment withdrawn (with certain exceptions)
- Transfer fee of $10 after 12th transfer in any Contract
Year (fee currently waived)
- State premium tax (if your state imposes one)
In addition, each Portfolio pays expenses that you will bear
indirectly if you invest in a Variable Sub-Account.
--------------------------------------------------------------------------------------------------------
INVESTMENT ALTERNATIVES The Contract offers 35 investment alternatives including:
- 3 Fixed Account Options (which credit interest at rates
we guarantee)
- 32 Variable Sub-Accounts investing in Portfolios offering
professional money management by these investment
advisers:
- A I M ADVISORS, INC.
- FEDERATED INVESTMENT MANAGEMENT COMPANY
- FIDELITY MANAGEMENT & RESEARCH COMPANY
- FRANKLIN ADVISERS, INC.
- MASSACHUSETTS FINANCIAL SERVICES
- OPPENHEIMERFUNDS, INC.
- SUNTRUST BANK
- TEMPLETON GLOBAL ADVISORS LIMITED
- TRUSCO CAPITAL MANAGEMENT, INC.
TO FIND OUT CURRENT RATES BEING PAID ON THE FIXED ACCOUNT
OPTIONS OR HOW THE VARIABLE SUB-ACCOUNTS HAVE PERFORMED,
CALL US AT 1-800-755-5275.
</TABLE>
4 PROSPECTUS
<PAGE>
<TABLE>
<S> <C>
--------------------------------------------------------------------------------------------------------
SPECIAL SERVICES For your convenience, we offer these special services:
- AUTOMATIC PORTFOLIO REBALANCING PROGRAM
- AUTOMATIC ADDITIONS PROGRAM
- DOLLAR COST AVERAGING PROGRAM
- SYSTEMATIC WITHDRAWAL PROGRAM
--------------------------------------------------------------------------------------------------------
INCOME PAYMENTS You can choose fixed income payments, variable income
payments, or a combination of the two. You can receive your
income payments in one of the following ways:
- life income with guaranteed payments
- a "joint and survivor" life income with guaranteed
payments
- guaranteed payments for a specified period (5 to 30
years)
--------------------------------------------------------------------------------------------------------
DEATH BENEFITS If you or the ANNUITANT (if the Contract is owned by a
non-natural person) die before the PAYOUT START DATE, we
will pay the death benefit described in the Contract. We
offer an Enhanced Death Benefit Rider and an Enhanced Death
and Income Benefit Combination Rider.
--------------------------------------------------------------------------------------------------------
TRANSFERS Before the Payout Start Date, you may transfer your Contract
value ("CONTRACT VALUE") among the investment alternatives,
with certain restrictions. Transfers to a GUARANTEE PERIOD
of the Fixed Account must be at least $50.
We do not currently impose a fee upon transfers. However, we
reserve the right to charge $10 per transfer after the 12th
transfer in each "Contract Year", which we measure from the
date we issue your Contract or a Contract anniversary
("CONTRACT ANNIVERSARY").
--------------------------------------------------------------------------------------------------------
WITHDRAWALS You may withdraw some or all of your Contract Value at
anytime prior to the Payout Start Date. In general, you must
withdraw at least $50 at a time. Full or partial withdrawals
are available under limited circumstances on or after the
Payout Start Date. A 10% federal tax penalty may apply if
you withdraw before you are 59 1/2 years old. A withdrawal
charge and MARKET VALUE ADJUSTMENT also may apply.
</TABLE>
5 PROSPECTUS
<PAGE>
HOW THE CONTRACT WORKS
-------------------------------------------------------------------
The Contract basically works in two ways.
First, the Contract can help you (we assume you are the CONTRACT OWNER) save for
retirement because you can invest in up to 35 investment alternatives and pay no
federal income taxes on any earnings until you withdraw them. You do this during
what we call the "ACCUMULATION PHASE" of the Contract. The Accumulation Phase
begins on the date we issue your Contract (we call that date the "ISSUE DATE")
and continues until the Payout Start Date, which is the date we apply your money
to provide income payments. During the Accumulation Phase, you may allocate your
purchase payments to any combination of the Variable Sub-Accounts and/or Fixed
Account Options. If you invest in any of the three Fixed Account Options, you
will earn a fixed rate of interest that we declare periodically. If you invest
in any of the Variable Sub-Accounts, your investment return will vary up or down
depending on the performance of the corresponding Portfolios.
Second, the Contract can help you plan for retirement because you can use it to
receive retirement income for life and/or for a pre-set number of years, by
selecting one of the income payment options (we call these "INCOME PLANS")
described on page 25. You receive income payments during what we call the
"PAYOUT PHASE" of the Contract, which begins on the Payout Start Date and
continues until we make the last payment required by the Income Plan you select.
During the Payout Phase, if you select a fixed income payment option, we
guarantee the amount of your payments, which will remain fixed. If you select a
variable income payment option, based on one or more of the Variable
Sub-Accounts, the amount of your payments will vary up or down depending on the
performance of the corresponding Portfolios. The amount of money you accumulate
under your Contract during the Accumulation Phase and apply to an Income Plan
will determine the amount of your income payments during the Payout Phase.
The timeline below illustrates how you might use your Contract.
<TABLE>
<CAPTION>
ISSUE ACCUMULATION PHASE PAYOUT START PAYOUT PHASE
DATE DATE
<S> <C> <C> <C> <C>
------------------------------------------------------------------------------------------------------------
You buy You save for You elect to receive You can receive Or you can
a Contract retirement income income payments receive income
payments or receive for a set period payments for life
a lump sum payment
</TABLE>
As the Contract owner, you exercise all of the rights and privileges provided by
the Contract. If you die, any surviving Contract owner or, if none, the
BENEFICIARY will exercise the rights and privileges provided by the Contract.
SEE"The Contract." In addition, if you die before the Payout Start Date, we will
pay a death benefit to any surviving Contract owner, or if there is none, to
your Beneficiary. SEE "Death Benefits."
Please call us at 1-800-755-5275 if you have any questions about how the
Contract works.
6 PROSPECTUS
<PAGE>
EXPENSE TABLE
-------------------------------------------------------------------
The table below lists the expenses that you will bear directly or indirectly
when you buy a Contract. The table and the examples that follow do not reflect
premium taxes that may be imposed by the state where you reside. For more
information about Variable Account expenses, see "Expenses," below. For more
information about Portfolio expenses, please refer to the accompanying
prospectuses for the Funds.
CONTRACT OWNER TRANSACTION EXPENSES
Withdrawal Charge (as a percentage of purchase payments)*
<TABLE>
<CAPTION>
Number of Complete
Years Since We
Received the Purchase
Payment Being
Withdrawn: 0 1 2 3 4 5 6+
<S> <C> <C> <C> <C> <C> <C> <C>
--------------------------------------------------------------------------------------------------------------
Applicable Charge: 6% 6% 5% 5% 4% 3% 0%
--------------------------------------------------------------------------------------------------------------
Annual Contract Maintenance Charge $35.00**
--------------------------------------------------------------------------------------------------------------
Transfer Fee $10.00***
--------------------------------------------------------------------------------------------------------------
</TABLE>
*Each Contract Year, you may withdraw up to 15% of your aggregate purchase
payments without incurring a withdrawal charge.
**We will waive this charge in certain cases. See "Expenses."
***Applies solely to the thirteenth and subsequent transfers within a Contract
Year, excluding transfers due to dollar cost averaging and automatic
portfolio rebalancing. We are currently waiving the transfer fee.
VARIABLE ACCOUNT ANNUAL EXPENSES
(AS A PERCENTAGE OF AVERAGE DAILY NET ASSET VALUE
DEDUCTED FROM EACH VARIABLE SUB-ACCOUNT)
<TABLE>
<S> <C>
Mortality and Expense Risk Charge 1.05%*
----------------------------------------------------------------------
Administrative Expense Charge 0.10%
----------------------------------------------------------------------
Total Variable Account Annual Expenses 1.15%
----------------------------------------------------------------------
</TABLE>
*If you select the Enhanced Death Benefit Rider, the mortality and expense risk
charge is 1.27%. If you select the Enhanced Death and Income Benefit
Combination Rider, the mortality and expense risk charge is 1.49%.
7 PROSPECTUS
<PAGE>
PORTFOLIO ANNUAL EXPENSES (AFTER VOLUNTARY REDUCTIONS AND REIMBURSEMENTS)
(AS A PERCENTAGE OF PORTFOLIO AVERAGE DAILY NET ASSETS) *
<TABLE>
<CAPTION>
Total Portfolio
Management Rule 12b-1 Other Annual
Portfolio Fees Fees Expenses Expenses
<S> <C> <C> <C> <C>
---------------------------------------------------------------------------------------------------------------------------------
AIM V.I. Balanced Fund (1) 0.65% N/A 0.56% 1.21%
---------------------------------------------------------------------------------------------------------------------------------
AIM V.I. Capital Appreciation Fund 0.62% N/A 0.11% 0.73%
---------------------------------------------------------------------------------------------------------------------------------
AIM V.I. Growth Fund 0.63% N/A 0.10% 0.73%
---------------------------------------------------------------------------------------------------------------------------------
AIM V.I. Growth and Income Fund 0.61% N/A 0.16% 0.77%
---------------------------------------------------------------------------------------------------------------------------------
AIM V.I. High Yield Fund (1) 0.35% N/A 0.79% 1.14%
---------------------------------------------------------------------------------------------------------------------------------
AIM V.I. Value Fund 0.61% N/A 0.15% 0.76%
---------------------------------------------------------------------------------------------------------------------------------
Federated Prime Money Fund II (1) 0.50% N/A 0.23% 0.73%
---------------------------------------------------------------------------------------------------------------------------------
Fidelity VIP Contrafund-Registered Trademark-
Portfolio (2,3) 0.58% N/A 0.09% 0.67%
---------------------------------------------------------------------------------------------------------------------------------
Fidelity VIP Equity-Income Portfolio (2,3) 0.48% N/A 0.09% 0.57%
---------------------------------------------------------------------------------------------------------------------------------
Fidelity VIP Growth Portfolio (2,3) 0.58% N/A 0.08% 0.66%
---------------------------------------------------------------------------------------------------------------------------------
Fidelity VIP High Income Portfolio (2) 0.58% N/A 0.11% 0.69%
---------------------------------------------------------------------------------------------------------------------------------
Fidelity VIP Index 500 Portfolio (2,4) 0.24% N/A 0.04% 0.28%
---------------------------------------------------------------------------------------------------------------------------------
Fidelity VIP Overseas Portfolio (2,3) 0.73% N/A 0.18% 0.91%
---------------------------------------------------------------------------------------------------------------------------------
MFS Emerging Growth Series (5) 0.75% N/A 0.09% 0.84%
---------------------------------------------------------------------------------------------------------------------------------
MFS Growth with Income Series (5) 0.75% N/A 0.13% 0.88%
---------------------------------------------------------------------------------------------------------------------------------
MFS Research Series (5) 0.75% N/A 0.11% 0.86%
---------------------------------------------------------------------------------------------------------------------------------
Oppenheimer Aggressive Growth Fund/VA 0.66% N/A 0.01% 0.67%
---------------------------------------------------------------------------------------------------------------------------------
Oppenheimer Capital Appreciation Fund/VA 0.68% N/A 0.02% 0.70%
---------------------------------------------------------------------------------------------------------------------------------
Oppenheimer Global Securities Fund/VA 0.67% N/A 0.02% 0.69%
---------------------------------------------------------------------------------------------------------------------------------
Oppenheimer Main Street Growth & Income Fund/VA 0.73% N/A 0.05% 0.78%
---------------------------------------------------------------------------------------------------------------------------------
Oppenheimer Multiple Strategies Fund/VA 0.72% N/A 0.01% 0.73%
---------------------------------------------------------------------------------------------------------------------------------
Oppenheimer Strategic Bond Fund/VA 0.74% N/A 0.04% 0.78%
---------------------------------------------------------------------------------------------------------------------------------
STI Capital Appreciation Fund (1) 0.94% N/A 0.21% 1.15%
---------------------------------------------------------------------------------------------------------------------------------
STI Growth and Income Fund (6) 0.90% N/A 0.30% 1.20%
---------------------------------------------------------------------------------------------------------------------------------
STI International Equity Fund (1) 0.86% N/A 0.74% 1.60%
---------------------------------------------------------------------------------------------------------------------------------
STI Investment Grade Bond Fund (1) 0.30% N/A 0.45% 0.75%
---------------------------------------------------------------------------------------------------------------------------------
STI Mid-Cap Equity Fund (1) 0.80% N/A 0.35% 1.15%
---------------------------------------------------------------------------------------------------------------------------------
STI Quality Growth Stock Fund (6) 1.00% N/A 0.30% 1.30%
---------------------------------------------------------------------------------------------------------------------------------
STI Small Cap Value Equity Fund (1) 0.52% N/A 0.68% 1.20%
---------------------------------------------------------------------------------------------------------------------------------
STI Value Income Stock Fund (1) 0.79% N/A 0.16% 0.95%
---------------------------------------------------------------------------------------------------------------------------------
Templeton Global Income Securities Fund -- Class 2
(7,9,10) 0.60% 0.25% 0.05% 0.90%
---------------------------------------------------------------------------------------------------------------------------------
Templeton Growth Securities Fund -- Class 2
(8,9,10) 0.83% 0.25% 0.05% 1.13%
---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
* The figures shown in the table are for the year ended December 31, 1999
(except as otherwise noted).
(1) Absent voluntary reductions and reimbursements for certain Portfolios,
"Management Fees," "Rule 12b-1 Fees," "Other Expenses," and "Total Portfolio
Annual Expenses" as a percent of average net assets of the portfolios would
have been as follows:
<TABLE>
<CAPTION>
Total Portfolio
Management Rule 12b-1 Other Annual
Portfolio Fees Fees Expenses Expenses
<S> <C> <C> <C> <C>
---------------------------------------------------------------------------------------------------------------------------------
AIM V.I. Balanced Fund 0.75% N/A 0.56% 1.31%
---------------------------------------------------------------------------------------------------------------------------------
AIM V.I. High Yield 0.63% N/A 0.79% 1.42%
---------------------------------------------------------------------------------------------------------------------------------
Federated Prime Money Fund II 0.50% N/A 0.48% 0.98%
---------------------------------------------------------------------------------------------------------------------------------
STI Capital Appreciation Fund 1.15% N/A 0.21% 1.36%
---------------------------------------------------------------------------------------------------------------------------------
STI International Equity Fund 1.25% N/A 0.74% 1.99%
---------------------------------------------------------------------------------------------------------------------------------
STI Investment Grade Bond Fund 0.74% N/A 0.45% 1.19%
---------------------------------------------------------------------------------------------------------------------------------
STI Mid-Cap Equity Fund 1.15% N/A 0.35% 1.50%
---------------------------------------------------------------------------------------------------------------------------------
STI Small Cap Value Equity Fund 1.15% N/A 0.68% 1.83%
---------------------------------------------------------------------------------------------------------------------------------
STI Value Income Stock Fund 0.80% N/A 0.16% 0.96%
---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
The Portfolio's Advisors may discontinue all or part of these voluntary
reductions and reimbursements at any time.
8 PROSPECTUS
<PAGE>
(2) Initial Class.
(3) A portion of the brokerage commissions that certain funds pay was used to
reduce fund expenses. In addition, through arrangements with certain funds',
or Fidelity Management & Research Company ("FMR") on behalf of certain
funds' custodian, credits realized as a result of uninvested cash balances
were used to reduce a portion of each applicable fund's expenses. With these
reductions, the total "Total Portfolio Annual Expenses" presented in the
table would have been 0.65% for Contrafund-Registered Trademark- Portfolio,
0.56% for Equity-Income Portfolio, 0.66% for Growth Portfolio, and 0.87% for
Overseas Portfolio.
(4) FMR agreed to reimburse a portion of the Index 500 Portfolio's expenses
during the period. Without this reimbursement, the Portfolio's "Management
Fee," "Rule 12b-1 Fee," "Other Expenses," and "Total Portfolio Annual
Expense" would have been: 0.24%, N/A, 0.10%, and 0.34% respectively.
(5) Each series has an expense offset arrangement which reduces the series'
custodian fee based upon the amount of cash maintained by the series with
its custodian and dividend disbursing agent. Each series may enter into
other such arrangements and directed brokerage arrangements, which would
also have the effect of reducing the series' expenses. "Other Expenses" do
not take into account these expense reductions, and are therefore higher
than the actual expenses of the series. Had these fee reductions been taken
into account, "Total Portfolio Annual Expenses" would be lower for certain
series and would equal: 0.83% for Emerging Growth Series, 0.87% for Growth
with Income Series, and 0.85% for Research Series.
(6) "Other Expenses" are based on estimated amounts for the current year.
(7) On February 8, 2000, a merger and reorganization was approved that combined
the fund with a similar fund of Templeton Variable Products Series Fund,
effective May 1, 2000. The table shows total expenses based on the fund's
assets as of December 31, 1999, and not the assets of the combined fund.
However, if the table reflected combined assets, the fund's expenses after
May 1, 2000 would be estimated as: "Management Fees" 0.60%, "Rule 12b-1
Fees" 0.25%, "Other Expenses" 0.04%, and "Total Portfolio Annual Expenses"
0.89%.
(8) On February 8, 2000, a merger and reorganization was approved that combined
the fund with a similar fund of Templeton Variable Products Series Fund,
effective May 1, 2000. The table shows total expenses based on the fund's
assets as of December 31, 1999, and not the assets of the combined fund.
However, if the table reflected combined assets, the fund's expenses after
May 1, 2000 would be estimated as: "Management Fees" 0.80%, "Rule 12b-1
Fees" 0.25%, "Other Expenses" 0.05%, and "Total Portfolio Annual Expenses"
1.10%.
(9) The fund administration fee is paid indirectly through the management fee.
(10) The funds' class 2 distribution plan or "Rule 12b-1 plan" is described in
the fund's prospectus.
9 PROSPECTUS
<PAGE>
Example 1
The example below shows the dollar amount of expenses that you would bear
directly or indirectly if you:
- invested $1,000 in a Variable Sub-Account,
- earned a 5% annual return on your investment,
- surrendered your Contract, or you began receiving income payments for a
specified period of less than 120 months, at the end of each time period, and
- elected the Enhanced Death and Income Benefit Combination Rider.
THE EXAMPLE DOES NOT INCLUDE ANY TAXES OR TAX PENALTIES YOU MAY BE REQUIRED TO
PAY IF YOU SURRENDER YOUR CONTRACT.
<TABLE>
<CAPTION>
Variable Sub-Account 1 Year 3 Years 5 Years 10 Years
<S> <C> <C> <C> <C>
---------------------------------------------------------------------------------------------------------------------------------
AIM V.I. Balanced $80 $133 $179 $322
---------------------------------------------------------------------------------------------------------------------------------
AIM V.I. Capital Appreciation $76 $118 $154 $274
---------------------------------------------------------------------------------------------------------------------------------
AIM V.I. Growth $76 $118 $154 $274
---------------------------------------------------------------------------------------------------------------------------------
AIM V.I. Growth & Income $76 $119 $156 $278
---------------------------------------------------------------------------------------------------------------------------------
AIM V.I. High Yield $80 $130 $175 $316
---------------------------------------------------------------------------------------------------------------------------------
AIM V.I. Value $76 $119 $156 $277
---------------------------------------------------------------------------------------------------------------------------------
Federated Prime Money Fund II $76 $118 $154 $274
---------------------------------------------------------------------------------------------------------------------------------
Fidelity VIP Equity-Income $74 $113 $146 $258
---------------------------------------------------------------------------------------------------------------------------------
Fidelity VIP Growth $75 $116 $151 $267
---------------------------------------------------------------------------------------------------------------------------------
Fidelity VIP High Income $75 $117 $152 $270
---------------------------------------------------------------------------------------------------------------------------------
Fidelity VIP Overseas $77 $122 $161 $289
---------------------------------------------------------------------------------------------------------------------------------
Fidelity VIP Contrafund-Registered Trademark- $75 $116 $151 $268
---------------------------------------------------------------------------------------------------------------------------------
Fidelity VIP Index 500 $71 $104 $131 $227
---------------------------------------------------------------------------------------------------------------------------------
MFS Emerging Growth $77 $121 $160 $286
---------------------------------------------------------------------------------------------------------------------------------
MFS Growth with Income $77 $122 $162 $290
---------------------------------------------------------------------------------------------------------------------------------
MFS Research $77 $122 $161 $288
---------------------------------------------------------------------------------------------------------------------------------
Oppenheimer Aggressive Growth $75 $116 $151 $268
---------------------------------------------------------------------------------------------------------------------------------
Oppenheimer Capital Appreciation $75 $117 $153 $271
---------------------------------------------------------------------------------------------------------------------------------
Oppenheimer Global Securities $75 $117 $152 $270
---------------------------------------------------------------------------------------------------------------------------------
Oppenheimer Main Street Growth & Income $76 $119 $157 $279
---------------------------------------------------------------------------------------------------------------------------------
Oppenheimer Multiple Strategies $76 $118 $154 $274
---------------------------------------------------------------------------------------------------------------------------------
Oppenheimer Strategic Bond $76 $119 $157 $279
---------------------------------------------------------------------------------------------------------------------------------
STI Capital Appreciation $80 $131 $176 $317
---------------------------------------------------------------------------------------------------------------------------------
STI Growth and Income $80 $132 $178 $321
---------------------------------------------------------------------------------------------------------------------------------
STI International Equity $84 $144 $198 $360
---------------------------------------------------------------------------------------------------------------------------------
STI Investment Grade Bond $76 $118 $155 $276
---------------------------------------------------------------------------------------------------------------------------------
STI Mid-Cap Equity $80 $131 $176 $317
---------------------------------------------------------------------------------------------------------------------------------
STI Quality Growth Stock $81 $135 $183 $331
---------------------------------------------------------------------------------------------------------------------------------
STI Small Cap Value Equity $80 $132 $178 $321
---------------------------------------------------------------------------------------------------------------------------------
STI Value Income Stock $78 $125 $166 $297
---------------------------------------------------------------------------------------------------------------------------------
Templeton Global Income Securities -- Class 2 $77 $123 $163 $292
---------------------------------------------------------------------------------------------------------------------------------
Templeton Growth Securities -- Class 2 $80 $130 $175 $315
---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
10 PROSPECTUS
<PAGE>
Example 2
Same assumptions as Example 1 above, except that you decided not to surrender
your Contract, or you began receiving income payments for a specified period of
at least 120 months, at the end of each period.
<TABLE>
<CAPTION>
Variable Sub-Account 1 Year 3 Years 5 Years 10 Years
<S> <C> <C> <C> <C>
---------------------------------------------------------------------------------------------------------------------------------
AIM V.I. Balanced $29 $ 90 $153 $322
---------------------------------------------------------------------------------------------------------------------------------
AIM V.I. Capital Appreciation $25 $ 75 $129 $274
---------------------------------------------------------------------------------------------------------------------------------
AIM V.I. Growth $25 $ 75 $129 $274
---------------------------------------------------------------------------------------------------------------------------------
AIM V.I. Growth & Income $25 $ 77 $131 $278
---------------------------------------------------------------------------------------------------------------------------------
AIM V.I. High Yield $29 $ 88 $150 $316
---------------------------------------------------------------------------------------------------------------------------------
AIM V.I. Value $25 $ 76 $130 $277
---------------------------------------------------------------------------------------------------------------------------------
Federated Prime Money Fund II $25 $ 75 $129 $274
---------------------------------------------------------------------------------------------------------------------------------
Fidelity VIP Equity-Income $23 $ 70 $121 $258
---------------------------------------------------------------------------------------------------------------------------------
Fidelity VIP Growth $24 $ 73 $125 $267
---------------------------------------------------------------------------------------------------------------------------------
Fidelity VIP High Income $24 $ 74 $127 $270
---------------------------------------------------------------------------------------------------------------------------------
Fidelity VIP Overseas $26 $ 80 $136 $289
---------------------------------------------------------------------------------------------------------------------------------
Fidelity VIP Contrafund-Registered Trademark- $24 $ 74 $126 $268
---------------------------------------------------------------------------------------------------------------------------------
Fidelity VIP Index 500 $20 $ 61 $105 $227
---------------------------------------------------------------------------------------------------------------------------------
MFS Emerging Growth $26 $ 79 $134 $286
---------------------------------------------------------------------------------------------------------------------------------
MFS Growth with Income $26 $ 80 $136 $290
---------------------------------------------------------------------------------------------------------------------------------
MFS Research $26 $ 79 $135 $288
---------------------------------------------------------------------------------------------------------------------------------
Oppenheimer Aggressive Growth $24 $ 74 $126 $268
---------------------------------------------------------------------------------------------------------------------------------
Oppenheimer Capital Appreciation $24 $ 74 $127 $271
---------------------------------------------------------------------------------------------------------------------------------
Oppenheimer Global Securities $24 $ 74 $127 $270
---------------------------------------------------------------------------------------------------------------------------------
Oppenheimer Main Street Growth & Income $25 $ 77 $131 $279
---------------------------------------------------------------------------------------------------------------------------------
Oppenheimer Multiple Strategies $25 $ 75 $129 $274
---------------------------------------------------------------------------------------------------------------------------------
Oppenheimer Strategic Bond $25 $ 77 $131 $279
---------------------------------------------------------------------------------------------------------------------------------
STI Capital Appreciation $29 $ 88 $150 $317
---------------------------------------------------------------------------------------------------------------------------------
STI Growth and Income $29 $ 90 $153 $321
---------------------------------------------------------------------------------------------------------------------------------
STI International Equity $33 $102 $173 $360
---------------------------------------------------------------------------------------------------------------------------------
STI Investment Grade Bond $25 $ 76 $130 $276
---------------------------------------------------------------------------------------------------------------------------------
STI Mid-Cap Equity $29 $ 88 $150 $317
---------------------------------------------------------------------------------------------------------------------------------
STI Quality Growth Stock $30 $ 93 $158 $331
---------------------------------------------------------------------------------------------------------------------------------
STI Small Cap Value Equity $29 $ 90 $153 $321
---------------------------------------------------------------------------------------------------------------------------------
STI Value Income Stock $27 $ 82 $140 $297
---------------------------------------------------------------------------------------------------------------------------------
Templeton Global Income Securities -- Class 2 $26 $ 81 $137 $292
---------------------------------------------------------------------------------------------------------------------------------
Templeton Growth Securities -- Class 2 $29 $ 88 $149 $315
---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
PLEASE REMEMBER THAT YOU ARE LOOKING AT EXAMPLES AND NOT A REPRESENTATION OF
PAST OR FUTURE EARNINGS. YOUR ACTUAL EXPENSES MAY BE LOWER OR GREATER THAN THOSE
SHOWN ABOVE. SIMILARLY, YOUR RATE OF RETURN MAY BE LOWER OR GREATER THAN 5%,
WHICH IS NOT GUARANTEED. THE EXAMPLES ASSUME THAT ANY PORTFOLIO EXPENSE WAIVERS
OR REIMBURSEMENT ARRANGEMENTS DESCRIBED IN THE FOOTNOTES TO THE PORTFOLIO'S
ANNUAL EXPENSE TABLE ARE IN EFFECT FOR THE PERIODS PRESENTED BELOW. THE ABOVE
EXAMPLES ASSUME THE ELECTION OF THE ENHANCED DEATH AND INCOME BENEFIT
COMBINATION RIDER WITH A MORTALITY AND EXPENSE RISK CHARGE OF 1.49%. IF THAT
RIDER WERE NOT ELECTED, THE EXPENSE FIGURES SHOWN ABOVE WOULD BE SLIGHTLY LOWER.
TO REFLECT THE CONTRACT MAINTENANCE CHARGE IN THE EXAMPLES, WE ESTIMATED AN
EQUIVALENT PERCENTAGE CHARGE, BASED ON THE CURRENT AVERAGE CONTRACT SIZE OF
$47,490.
11 PROSPECTUS
<PAGE>
FINANCIAL INFORMATION
-------------------------------------------------------------------
To measure the value of your investment in the Variable Sub-Accounts during the
Accumulation Phase, we use a unit of measure we call the "ACCUMULATION UNIT."
Each Variable Sub-Account has a separate value for its Accumulation Units we
call "ACCUMULATION UNIT VALUE". Accumulation Unit Value is analogous to, but not
the same as, the share price of a mutual fund.
Attached as Appendix A to this prospectus are tables showing the Accumulation
Unit Values of each Variable Sub-Account since the date the Contracts were first
offered. No Accumulation Unit Values are shown for the following Variable
Sub-Accounts that had not commenced operations as of December 31, 1999: Fidelity
VIP Index 500, Fidelity VIP Overseas, Oppenheimer Multiple Strategies, STI
Growth and Income, STI International Equity, STI Investment Grade Bond, STI
Mid-Cap Equity, STI Quality Growth Stock, STI Small Cap Value Equity, Templeton
Global Income Securities (Class 2), Templeton Growth Securities (Class 2). To
obtain a fuller picture of each Variable Sub-Account's finances, please refer to
the Variable Account's financial statements contained in the Statement of
Additional Information. The financial statements of Glenbrook and the Variable
Account appear in the Statement of Additional Information.
12 PROSPECTUS
<PAGE>
THE CONTRACT
-------------------------------------------------------------------
CONTRACT OWNER
The Glenbrook Provider Variable Annuity is a contract between you, the Contract
owner, and Glenbrook, a life insurance company. As the Contract owner, you may
exercise all of the rights and privileges provided to you by the Contract. That
means it is up to you to select or change (to the extent permitted):
- the investment alternatives during the Accumulation and Payout Phases,
- the amount and timing of your purchase payments and withdrawals,
- the programs you want to use to invest or withdraw money,
- the income payment plan you want to use to receive retirement income,
- the Annuitant (either yourself or someone else) on whose life the income
payments will be based,
- the Beneficiary or Beneficiaries who will receive the benefits that the
Contract provides when the last surviving Contract owner dies, and
- any other rights that the Contract provides.
If you die, any surviving Contract owner, or, if none, the Beneficiary may
exercise the rights and privileges provided to them by the Contract.
The Contract cannot be jointly owned by both a non-natural person and a natural
person.
You can use the Contract with or without a qualified plan. A qualified plan is a
personal retirement savings plan, such as an IRA or tax-sheltered annuity, that
meets the requirements of the Internal Revenue Code. Qualified plans may limit
or modify your rights and privileges under the Contract. We use the term
"Qualified Contract" to refer to a Contract issued within a qualified plan. See
"Qualified Plans" on page 30.
ANNUITANT
The Annuitant is the individual whose life determines the amount and duration of
income payments (other than under Income Plans with guaranteed payments for a
specified period). You initially designate an Annuitant in your application. You
may change the Annuitant at any time prior to the Payout Start Date (only if the
Contract owner is a natural person). You may designate a joint Annuitant, who is
a second person on whose life income payments depend. We permit joint Annuitants
only on or after the Payout Start Date. If the Annuitant dies prior to the
Payout Start Date, the new Annuitant will be:
(i) the youngest Contract owner; otherwise,
(ii) the youngest Beneficiary.
BENEFICIARY
The Beneficiary is the person who may elect to receive the death benefit or
become the new Contract owner if the sole surviving Contract owner dies before
the Payout Start Date. If the sole surviving Contract owner dies after the
Payout Start Date, the Beneficiary will receive any guaranteed income payments
scheduled to continue.
You may name one or more Beneficiaries when you apply for a Contract. You may
change or add Beneficiaries at any time, unless you have designated an
irrevocable Beneficiary. We will provide a change of Beneficiary form to be
signed and filed with us. Any change will be effective at the time you sign the
written notice. Until we receive your written notice to change a Beneficiary, we
are entitled to rely on the most recent Beneficiary information in our files. We
will not be liable as to any payment or settlement made prior to receiving the
written notice. Accordingly, if you wish to change your Beneficiary, you should
deliver your written notice to us promptly.
If you did not name a Beneficiary or, unless otherwise provided in the
Beneficiary designation, if a named Beneficiary is no longer living and there
are no other surviving Beneficiaries, the new Beneficiary will be:
- your spouse or, if he or she is no longer alive,
- your surviving children equally, or if you have no surviving children,
- your estate.
If more than one Beneficiary survives you (or survives the Annuitant, if the
Contract owner is not a natural person) we will divide the death benefit among
your Beneficiaries according to your most recent written instructions. If you
have not given us written instructions, we will pay the death benefit in equal
amounts to the surviving Beneficiaries.
MODIFICATION OF THE CONTRACT
Only a Glenbrook officer may approve a change in or waive any provision of the
Contract. Any change or waiver must be in writing. None of our agents has the
authority to change or waive the provisions of the Contract. We may not change
the terms of the Contract without your consent, except to conform the Contract
to applicable law or changes in the law. If a provision of the Contract is
inconsistent with state law, we will follow state law.
ASSIGNMENT
We will not honor an assignment of an interest in a Contract as collateral or
security for a loan. However, you may assign periodic income payments under the
Contract prior to the Payout Start Date. No Beneficiary may assign benefits
under the Contract until they are payable to the Beneficiary. We will not be
bound by any assignment until the assignor signs
13 PROSPECTUS
<PAGE>
it and files it with us. We are not responsible for the validity of any
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. An assignment may also result in taxes or
tax penalties. YOU SHOULD CONSULT WITH AN ATTORNEY BEFORE TRYING TO ASSIGN YOUR
CONTRACT.
PURCHASES
-------------------------------------------------------------------
MINIMUM PURCHASE PAYMENTS
Your initial purchase payment must be at least $3,000 ($2,000 for a Qualified
Contract). All subsequent purchase payments must be $50 or more. You may make
purchase payments at any time prior to the Payout Start Date. We reserve the
right to limit the maximum amount of purchase payments we will accept.
AUTOMATIC ADDITIONS PROGRAM
You may make subsequent purchase payments by automatically transferring money
from your bank account. Consult your representative for more detailed
information.
ALLOCATION OF PURCHASE PAYMENTS
At the time you apply for a Contract, you must decide how to allocate your
purchase payments among the investment alternatives. The allocation you specify
on your application will be effective immediately. All allocations must be in
whole percents that total 100% or in whole dollars. You can change your
allocations by notifying us in writing.
We will allocate your purchase payments to the investment alternatives according
to your most recent instructions on file with us. Unless you notify us in
writing otherwise, we will allocate subsequent purchase payments according to
the allocation for the previous purchase payment. We will effect any change in
allocation instructions at the time we receive written notice of the change in
good order.
We will credit the initial purchase payment that accompanies your completed
application to your Contract within 2 business days after we receive the payment
at our home office. If your application is incomplete, we will ask you to
complete your application within 5 business days. If you do so, we will credit
your initial purchase payment to your Contract within that 5 business day
period. If you do not, we will return your purchase payment at the end of the 5
business day period unless you expressly allow us to hold it until you complete
the application. We will credit subsequent purchase payments to the Contract at
the close of the business day on which we receive the purchase payment at our
home office.
We are open for business each day Monday through Friday that the New York Stock
Exchange is open for business. We also refer to these days as "VALUATION DATES."
Our business day closes when the New York Stock Exchange closes, usually 4 p.m.
Eastern Time (3 p.m. Central Time). If we receive your purchase payment after
3 p.m. Central Time on any Valuation Date, we will credit your purchase payment
using the Accumulation Unit Values computed on the next Valuation Date.
RIGHT TO CANCEL
You may cancel the Contract by returning it to us within the Cancellation
Period, which is the 20 day period after you receive the Contract, or a longer
period should your state require it. You may return it by delivering it or
mailing it to us. If you exercise this "RIGHT TO CANCEL," the Contract
terminates and we will pay you the full amount of your purchase payments
allocated to the Fixed Account. We also will return your purchase payments
allocated to the Variable Account adjusted, to the extent federal or state law
permits, to reflect investment gain or loss that occurred from the date of
allocation through the date of cancellation. Some states may require us to
return a greater amount to you.
In states where we are required to refund purchase payments, we reserve the
right during the Cancellation Period to invest any purchase payments you
allocated to a Variable Sub-Account to the Money Market Variable Sub-Account
available under the Contract. We will notify you if we do so. At the end of the
Cancellation Period, you may then allocate your money to other Variable
Sub-Accounts.
14 PROSPECTUS
<PAGE>
CONTRACT VALUE
-------------------------------------------------------------------
Your Contract Value at any time during the Accumulation Phase is equal to the
sum of the value of your Accumulation Units in the Variable Sub-Accounts you
have selected, plus the value of your investment in the Fixed Account Options.
ACCUMULATION UNITS
To determine the number of Accumulation Units of each Variable Sub-Account to
credit to your Contract, we divide (i) the amount of the purchase or transfer
payment you have allocated to a Variable Sub-Account by (ii) the Accumulation
Unit Value of that Variable Sub-Account next computed after we receive your
payment or transfer. For example, if we receive a $10,000 purchase payment
allocated to a Variable Sub-Account when the Accumulation Unit Value for the
Sub-Account is $10, we would credit 1,000 Accumulation Units of that Variable
Sub-Account to your Contract. Withdrawals and transfers from a Variable
Sub-Account would, of course, reduce the number of Accumulation Units of that
Sub-Account allocated to your Contract.
ACCUMULATION UNIT VALUE
As a general matter, the Accumulation Unit Value for each Variable Sub-Account
will rise or fall to reflect:
- changes in the share price of the Portfolio in which the Variable Sub-Account
invests, and
- the deduction of amounts reflecting the mortality and expense risk charge,
administrative expense charge, and any provision for taxes that have accrued
since we last calculated the Accumulation Unit Value.
We determine contract maintenance charges, withdrawal charges, and transfer fees
(currently waived) separately for each Contract. They do not affect Accumulation
Unit Value. Instead, we obtain payment of those charges and fees by redeeming
Accumulation Units. For details on how we calculate Accumulation Unit Value,
please refer to the Statement of Additional Information.
We determine a separate Accumulation Unit Value for each Variable Sub-Account on
each Valuation Date. We also determine a separate set of Accumulation Unit
Values reflecting the cost of the Enhanced Death Benefit Rider and the Enhanced
Death and Income Benefit Combination Rider described on pages 27-28.
YOU SHOULD REFER TO THE PROSPECTUSES FOR THE FUNDS THAT ACCOMPANY THIS
PROSPECTUS FOR A DESCRIPTION OF HOW THE ASSETS OF EACH PORTFOLIO ARE VALUED,
SINCE THAT DETERMINATION DIRECTLY BEARS ON THE ACCUMULATION UNIT VALUE OF THE
CORRESPONDING VARIABLE SUB-ACCOUNT AND, THEREFORE, YOUR CONTRACT VALUE.
15 PROSPECTUS
<PAGE>
INVESTMENT ALTERNATIVES: THE VARIABLE SUB-ACCOUNTS
-------------------------------------------------------------------
You may allocate your purchase payments to up to 32 Variable Sub-Accounts. Each
Variable Sub-Account invests in the shares of a corresponding Portfolio. Each
Portfolio has its own investment objective(s) and policies. We briefly describe
the Portfolios below.
For more complete information about each Portfolio, including expenses and risks
associated with the Portfolio, please refer to the accompanying prospectuses for
the Funds. You should carefully review the Fund prospectuses before allocating
amounts to the Variable Sub-Accounts.
<TABLE>
<CAPTION>
Portfolio: Each Portfolio Seeks: Investment Advisor:
<S> <C> <C>
-----------------------------------------------------------------------------------------------------------------------------
AIM VARIABLE INSURANCE FUNDS*
-----------------------------------------------------------------------------------------------------------------------------
AIM V.I. Balanced Fund As high a total return as possible, consistent
with preservation of capital
------------------------------------------------------------------------------------------------
AIM V.I. Capital Appreciation Fund Growth of capital
------------------------------------------------------------------------------------------------
AIM V.I. Growth Fund Growth of capital
------------------------------------------------------------------------------------------------
AIM V.I. Growth and Income Fund Growth of capital with a secondary objective of A I M Advisors, Inc.
current income
------------------------------------------------------------------------------------------------
AIM V.I. High Yield Fund A high level of current income
------------------------------------------------------------------------------------------------
AIM V.I. Value Fund Long-term growth of capital and income as a
secondary objective
-----------------------------------------------------------------------------------------------------------------------------
FEDERATED INSURANCE SERIES
-----------------------------------------------------------------------------------------------------------------------------
Federated Prime Money Fund II Current income consistent with the stability of Federated Investment
principal and liquidity Management Company
-----------------------------------------------------------------------------------------------------------------------------
FIDELITY VARIABLE INSURANCE PRODUCTS FUND
-----------------------------------------------------------------------------------------------------------------------------
Fidelity VIP Contrafund-Registered Trademark- Long-term capital appreciation
Portfolio
------------------------------------------------------------------------------------------------
Fidelity VIP Equity-Income Portfolio Reasonable income
------------------------------------------------------------------------------------------------
Fidelity VIP Growth Portfolio Capital appreciation
------------------------------------------------------------------------------------------------
Fidelity VIP High Income Portfolio High level of current income while also Fidelity Management &
considering growth of capital Research Company
------------------------------------------------------------------------------------------------
Fidelity VIP Index 500 Portfolio Investment results that correspond to the total
return of common stocks publicly traded in the
United States, as represented by the S&P 500
------------------------------------------------------------------------------------------------
Fidelity VIP Overseas Portfolio Long-term growth of capital
-----------------------------------------------------------------------------------------------------------------------------
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST (VIP) -- CLASS 2
-----------------------------------------------------------------------------------------------------------------------------
Templeton Global Income Securities Fund High current income. Capital appreciation is a Franklin Advisers, Inc.
(surviving fund of merger with Templeton Bond secondary consideration.
Fund)
-----------------------------------------------------------------------------------------------------------------------------
Templeton Growth Securities Fund (surviving Long-term capital growth Templeton Global Advisors
fund of merger with Templeton Stock Fund) Limited
-----------------------------------------------------------------------------------------------------------------------------
MFS-REGISTERED TRADEMARK- VARIABLE INSURANCE TRUST-SM-
-----------------------------------------------------------------------------------------------------------------------------
MFS Emerging Growth Series Long-term growth of capital
------------------------------------------------------------------------------------------------
MFS Growth with Income Series Reasonable current income and long-term growth Massachusetts Financial
of capital and income Services
------------------------------------------------------------------------------------------------
MFS Research Series Long-term growth of capital and future income
-----------------------------------------------------------------------------------------------------------------------------
OPPENHEIMER VARIABLE ACCOUNT FUNDS
-----------------------------------------------------------------------------------------------------------------------------
Oppenheimer Aggressive Growth Fund/VA Capital appreciation
------------------------------------------------------------------------------------------------
Oppenheimer Capital Appreciation Fund/VA Capital appreciation
------------------------------------------------------------------------------------------------
Oppenheimer Global Securities Fund/VA Long-term capital appreciation
------------------------------------------------------------------------------------------------
Oppenheimer Main Street Growth & Income Fund/VA High total return, which includes growth in the
value of its shares as well as current income, OppenheimerFunds, Inc.
from equity and debt securities
------------------------------------------------------------------------------------------------
Oppenheimer Multiple Strategies Fund/VA A high total investment return which includes
current income and capital appreciation in the
value of its shares.
------------------------------------------------------------------------------------------------
Oppenheimer Strategic Bond Fund/VA High level of current income
-----------------------------------------------------------------------------------------------------------------------------
</TABLE>
16 PROSPECTUS
<PAGE>
<TABLE>
<CAPTION>
Portfolio: Each Portfolio Seeks: Investment Advisor:
<S> <C> <C>
-----------------------------------------------------------------------------------------------------------------------------
STI CLASSIC VARIABLE TRUST
-----------------------------------------------------------------------------------------------------------------------------
STI Capital Appreciation Fund Captial Appreciation SunTrust Bank
-----------------------------------------------------------------------------------------------------------------------------
STI Growth and Income Fund Long-term capital appreciation with the Trusco Capital Management
secondary goal of current income Trusco Capital Inc.
Management, Inc.
-----------------------------------------------------------------------------------------------------------------------------
STI International Equity Fund Long-term capital appreciation SunTrust Bank
-----------------------------------------------------------------------------------------------------------------------------
STI Investment Grade Bond Fund High total return through current income and SunTrust Bank
capital appreciation, while preserving the
principal amount invested
-----------------------------------------------------------------------------------------------------------------------------
STI Mid-Cap Equity Fund Capital appreciation SunTrust Bank
-----------------------------------------------------------------------------------------------------------------------------
STI Quality Growth Stock Fund Long-term capital appreciation with nominal Trusco Capital Management
dividend income Inc.
-----------------------------------------------------------------------------------------------------------------------------
STI Small Cap Value Equity Fund Capital appreciation with the secondary goal of SunTrust Bank
current income
-----------------------------------------------------------------------------------------------------------------------------
STI Value Income Stock Fund Current income with the secondary goal of SunTrust Bank
capital appreciation
-----------------------------------------------------------------------------------------------------------------------------
</TABLE>
*A portfolio's investment objective may be changed by the Fund's Board of
Trustees without shareholder approval.
VARIABLE INSURANCE TRUST PORTFOLIOS MAY NOT BE MANAGED BY THE SAME PORTFOLIO
MANAGERS WHO MANAGE RETAIL MUTUAL FUNDS WITH SIMILAR NAMES. THESE PORTFOLIOS ARE
LIKELY TO DIFFER FROM RETAIL FUNDS IN ASSETS, CASH FLOW, AND TAX MATTERS.
ACCORDINGLY, THE HOLDINGS AND INVESTMENT RESULTS OF A PORTFOLIO CAN BE EXPECTED
TO BE HIGHER OR LOWER THAN THE INVESTMENT RESULTS OF RETAIL MUTUAL FUNDS.
17 PROSPECTUS
<PAGE>
INVESTMENT ALTERNATIVES: THE FIXED ACCOUNT OPTIONS
-------------------------------------------------------------------
You may allocate all or a portion of your purchase payments to the Fixed
Account. You may choose from among 3 Fixed Account Options including 2 dollar
cost averaging options and the option to invest in one or more Guarantee Periods
included in the Guaranteed Maturity Fixed Account. The Fixed Account Options may
not be available in all states. Please consult with your representative for
current information. The Fixed Account supports our insurance and annuity
obligations. The Fixed Account consists of our general assets other than those
in segregated asset accounts. We have sole discretion to invest the assets of
the Fixed Account, subject to applicable law. Any money you allocate to a Fixed
Account Option does not entitle you to share in the investment experience of the
Fixed Account.
DOLLAR COST AVERAGING FIXED ACCOUNT OPTIONS
DOLLAR COST AVERAGING FIXED ACCOUNT OPTION. Purchase payments that you allocate
to the DOLLAR COST AVERAGING FIXED ACCOUNT OPTION ("DCA FIXED ACCOUNT OPTION")
will earn interest for a one year period at the current rate in effect at the
time of allocation. We will credit interest daily at a rate that will compound
over the year to the annual interest rate we guaranteed at the time of
allocation. After the one year period, we will declare a renewal rate which we
guarantee for a full year. Subsequent renewal dates will be every twelve months
for each payment or transfer.
We will follow your instructions in transferring amounts monthly from the DCA
Fixed Account Option. However, you may not choose less than 3 or more than 36
monthly installments. Further, you must transfer each purchase payment and all
its earnings out of this Option by means of dollar cost averaging within 36
months of payment. At the end of 36 months, we will transfer the remaining
payment and associated earnings to the Money Market Variable Sub-Account. No
transfers are permitted into the Dollar Cost Averaging Fixed Account.
SHORT TERM DOLLAR COST AVERAGING FIXED ACCOUNT OPTION. You may establish a Short
Term Dollar Cost Averaging Program by allocating purchase payments to the SHORT
TERM DOLLAR COST AVERAGING FIXED ACCOUNT OPTION ("SHORT TERM DCA FIXED ACCOUNT
OPTION"). We will credit interest to purchase payments you allocate to this
Option for up to one year at the current rate in effect at the time of
allocation.
We will follow your instructions in transferring amounts monthly from the Short
Term DCA Fixed Account Option. However, you may not choose less than 3 or more
than 12 monthly installments. Further, you must transfer each purchase payment
and all its earnings out of this Option by means of dollar cost averaging within
12 months. If you discontinue the Dollar Cost Averaging Program before the end
of the transfer period, we will transfer the remaining balance in this Option to
the Money Market Variable Sub-Account unless you request a different investment
alternative. No transfers are permitted into the Short Term Dollar Cost
Averaging Fixed Account.
We bear the investment risk for all amounts allocated to the DCA Fixed Account
Option and the Short Term DCA Fixed Account Option. That is because we guarantee
the current and renewal interest rates we credit to the amounts you allocate to
either of these Options, which will never be less than the minimum guaranteed
rate in the Contract. Currently, we determine, in our sole discretion, the
amount of interest credited in excess of the guaranteed rate.
We may declare more than one interest rate for different monies based upon the
date of allocation to the DCA Fixed Account Option and the Short Term DCA Fixed
Account Option. For current interest rate information, please contact your
representative or our customer support unit at 1-800-755-5275.
GUARANTEE PERIODS
Each payment or transfer allocated to a Guarantee Period earns interest at a
specified rate that we guarantee for a period of years. Guarantee Periods may
range from 1 to 10 years. We are currently offering Guarantee Periods of 1, 3,
5, 7, and 10 years in length. In the future we may offer Guarantee Periods of
different lengths or stop offering some Guarantee Periods.
You select the Guarantee Period for each payment or transfer. If you do not
select a Guarantee Period, we will assign the same period(s) you selected for
your most recent purchase payment(s).
Each payment or transfer allocated to a Guarantee Period must be at least $50.
We reserve the right to limit the number of additional purchase payments that
you may allocate to this Option.
INTEREST RATES. We will tell you what interest rates and Guarantee Periods we
are offering at a particular time. We will not change the interest rate that we
credit to a particular allocation until the end of the relevant Guarantee
Period. We may declare different interest rates for Guarantee Periods of the
same length that begin at different times.
We have no specific formula for determining the rate of interest that we will
declare initially or in the future. We will set those interest rates based on
investment returns available at the time of the determination. In addition, we
may consider various other factors in determining interest rates including
regulatory and tax requirements, our sales commission and administrative
expenses, general economic trends, and competitive factors. WE DETERMINE THE
INTEREST RATES TO BE DECLARED IN OUR SOLE DISCRETION. WE CAN NEITHER
18 PROSPECTUS
<PAGE>
PREDICT NOR GUARANTEE WHAT THOSE RATES WILL BE IN THE FUTURE. For current
interest rate information, please contact your representative or Glenbrook at
1-800-755-5275.
HOW WE CREDIT INTEREST. We will credit interest daily to each amount allocated
to a Guarantee Period at a rate that compounds to the annual interest rate that
we declared at the beginning of the applicable Guarantee Period. The following
example illustrates how a purchase payment allocated to a Guaranteed Period
would grow, given an assumed Guarantee Period and annual interest rate:
<TABLE>
<S> <C>
Purchase Payment......................... $10,000
Guarantee Period......................... 5 years
Annual Interest Rate..................... 4.50%
</TABLE>
<TABLE>
<CAPTION>
END OF CONTRACT YEAR
YEAR 1 YEAR 2 YEAR 3 YEAR 4 YEAR 5
<S> <C> <C> <C> <C> <C>
Beginning Contract Value $10,000.00
X (1 + Annual Interest Rate) X 1.045
----------
$10,450.00
Contract Value at end of Contract Year $10,450.00
X (1 + Annual Interest Rate) X 1.045
----------
$10,920.25
Contract Value at end of Contract Year $10,920.25
X (1 + Annual Interest Rate) X 1.045
----------
$11,411.66
Contract Value at end of Contract Year $11,411.66
X (1 + Annual Interest Rate) X 1.045
----------
$11,925.19
Contract Value at end of Contract Year $11,925.19
X (1 + Annual Interest Rate) X 1.045
----------
$12,461.82
Total Interest Credited During Guarantee Period = $2,461.82 ($12,461.82 - $10,000)
</TABLE>
This example assumes no withdrawals during the entire 5 year Guarantee Period.
If you were to make a withdrawal, you may be required to pay a withdrawal
charge. In addition, the amount withdrawn may be increased or decreased by a
Market Value Adjustment that reflects changes in interest rates since the time
you invested the amount withdrawn. The hypothetical interest rate is for
illustrative purposes only and is not intended to predict future interest rates
to be declared under the Contract. Actual interest rates declared for any given
Guarantee Period may be more or less than shown above.
RENEWALS. Prior to the end of each Guarantee Period, we will mail you a notice
asking you what to do with your money, including the accrued interest. During
the 30-day period after the end of the Guarantee Period, you may:
1. Take no action. We will automatically apply your money to a new Guarantee
Period of the same length as the expiring Guarantee Period. The new Guarantee
Period will begin on the day the previous Guarantee Period ends. The new
interest rate will be our current declared rate for a Guarantee Period of that
length; or
2. Instruct us to apply your money to one or more new Guarantee Periods of your
choice. The new Guarantee Period(s) will begin on the day the previous Guarantee
Period ends. The new interest rate will be our then current declared rate for
those Guarantee Periods; or
3. Instruct us to transfer all or a portion of your money to one or more
Variable Sub-Accounts of the Variable Account. We will effect the transfer on
the day we receive your instructions. We will not adjust the amount transferred
to include a Market Value Adjustment; or
4. Withdraw all or a portion of your money. You may be required to pay a
withdrawal charge, but we will not adjust the amount withdrawn to include a
Market Value Adjustment. You may also be required to pay premium taxes and
income tax withholding, if applicable. We will pay interest from the day the
Guarantee Period expired until the date of withdrawal. The interest will be the
rate for the shortest Guarantee Period then being offered. Amounts not withdrawn
will be applied to a new Guarantee Period of the same length as the previous
Guarantee Period. The new Guarantee Period will begin on the day the previous
Guarantee Period ends.
MARKET VALUE ADJUSTMENT. All withdrawals and transfers from a Guarantee Period,
other than those taken during the 30 day period after such Guarantee Period
expires, are subject to a Market Value Adjustment. A Market Value Adjustment
also may apply upon payment of a death benefit and when you apply amounts
currently invested in a
19 PROSPECTUS
<PAGE>
Guarantee Period to an Income Plan (unless paid or applied during the 30-day
period after such Guarantee Period expires). We also will not apply a Market
Value Adjustment to a withdrawal you make:
- within the Free Withdrawal Amount as described on page 22,
- that qualify for one of the waivers as described on page 23,
- to satisfy the IRS minimum distribution rules for the Contract, or
- a single withdrawal made by a surviving spouse made within one year after
continuing the Contract.
We apply the Market Value Adjustment to reflect changes in interest rates from
the time you first allocate money to a Guarantee Period to the time you remove
it from that Guarantee Period. We calculate the Market Value Adjustment by
comparing the TREASURY RATE for a period equal to the Guarantee Period at its
inception to the Treasury Rate for a period equal to the Guarantee Period when
you remove your money. "Treasury Rate" means the U.S. Treasury Note Constant
Maturity Yield as reported in Federal Reserve Bulletin Release H.15.
The Market Value Adjustment may be positive or negative, depending on changes in
interest rates. As such, you bear the investment risk associated with changes in
interest rates. If interest rates increase significantly, the Market Value
Adjustment and any withdrawal charge, premium taxes, and income tax withholding
(if applicable) could reduce the amount you receive upon full withdrawal from a
Guaranteed Period to an amount that is less than the purchase payment applied to
that period plus interest earned under the Contract.
Generally, if the original Treasury Rate at the time you allocate money to a
Guarantee Period is higher than the applicable current Treasury Rate for a
period equal to the Guarantee Period, then the Market Value Adjustment will
result in a higher amount payable to you, transferred or applied to an Income
Plan. Conversely, if the Treasury Rate at the time you allocate money to a
Guarantee Period is lower than the applicable Treasury Rate for a period equal
to the Guarantee Period, then the Market Value Adjustment will result in a lower
amount payable to you, transferred or applied to an Income Plan.
For example, assume that you purchase a Contract and you select an initial
Guarantee Period of 5 years and the 5 year Treasury Rate for that duration is
4.50%. Assume that at the end of 3 years, you make a partial withdrawal. If, at
that later time, the current 5 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 you. Conversely, if the current 5 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 you.
The formula for calculating Market Value Adjustments is set forth in Appendix B
to this prospectus, which also contains additional examples of the application
of the Market Value Adjustment.
INVESTMENT ALTERNATIVES: TRANSFERS
-------------------------------------------------------------------
TRANSFERS DURING THE ACCUMULATION PHASE
During the Accumulation Phase, you may transfer Contract Value among the
investment alternatives. You may not transfer Contract Value to the Short-Term
Dollar Cost Averaging Fixed Account Option or the Dollar Cost Averaging Fixed
Account Option. You may request transfers in writing on a form that we provided
or by telephone according to the procedure described below. The minimum amount
that you may transfer into a Guarantee Period is $50. We currently do not
assess, but reserve the right to assess, a $10 charge on each transfer in excess
of 12 per Contract Year. All transfers to or from more than one Portfolio on any
given day counts as one transfer.
We will process transfer requests that we receive before 3:00 p.m. Central Time
on any Valuation Date using the Accumulation Unit Values for that Date. We will
process requests completed after 3:00 p.m. Central Time on any Valuation Date
using the Accumulation Unit Values for the next Valuation Date. The Contract
permits us to defer transfers from the Fixed Account for up to six months from
the date we receive your request. If we decide to postpone transfers for 30 days
or more, we will pay interest as required by applicable law. Any interest would
be payable from the date we receive the transfer request to the date we make the
transfer.
If you transfer an amount from a Guarantee Period other than during the 30 day
period after such Guarantee Period expires, we will increase or decrease the
amount by a Market Value Adjustment.
We reserve the right to waive any transfer restrictions.
20 PROSPECTUS
<PAGE>
TRANSFERS DURING THE PAYOUT PHASE
During the Payout Phase, you may make transfers among the Variable Sub-Accounts
so as to change the relative weighting of the Variable Sub-Accounts on which
your variable income payments will be based. In addition, you will have a
limited ability to make transfers from the Variable Sub-Accounts to increase the
proportion of your income payments consisting of fixed income payments. You may
not, however, convert any portion of your right to receive fixed income payments
into variable income payments.
If you choose an Income Plan that depends on any person's life, you may not make
any transfers for the first 6 months after the Payout Start Date. Thereafter,
you may make transfers among the Variable Sub-Accounts or make transfers from
the Variable Sub-Accounts to increase the proportion of your income payments
consisting of fixed income payments. Your transfers must be at least 6 months
apart.
TELEPHONE TRANSFERS
You may make transfers by telephone by calling 1-800-755-5275. The cut off time
for telephone transfer requests is 3:00 p.m. Central time. In the event that the
New York Stock Exchange closes early, i.e., before 3:00 p.m. Central Time, or in
the event that the Exchange closes early for a period of time but then reopens
for trading on the same day, we will process telephone transfer requests as of
the close of the Exchange on that particular day. We will not accept 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 Exchange.
We may suspend, modify or terminate the telephone transfer privilege at any time
without notice.
We use procedures that we believe provide reasonable assurance that the
telephone transfers are genuine. For example, we tape telephone conversations
with persons purporting to authorize transfers and request identifying
information. Accordingly, we disclaim any liability for losses resulting from
allegedly unauthorized telephone transfers. However, if we do not take
reasonable steps to help ensure that a telephone authorization is valid, we may
be liable for such losses.
DOLLAR COST AVERAGING PROGRAM
Through our Dollar Cost Averaging Program, you may automatically transfer a
fixed dollar amount every month during the Accumulation Phase from the Short
Term Dollar Cost Averaging Fixed Account or the Dollar Cost Averaging Fixed
Account, to any Variable Sub-Account. You may not use the Dollar Cost Averaging
Program to transfer amounts to the Guarantee Periods.
We will not charge a transfer fee for transfers made under this Program, nor
will such transfer count against the 12 transfers you can make each Contract
Year without paying a transfer fee.
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 this Program does not assure you of a greater profit from your
purchases under the Program nor will it prevent or necessarily reduce losses in
a declining market. Call or write us for instructions on how to enroll.
AUTOMATIC PORTFOLIO REBALANCING PROGRAM
Once you have allocated your money among the Variable Sub-Accounts, the
performance of each Sub-Account may cause a shift in the percentage you
allocated to each Sub-Account. If you select our Automatic Portfolio Rebalancing
Program, we will automatically rebalance the Contract Value in each Variable
Sub-Account and return it to the desired percentage allocations. We will not
include money you allocate to the Fixed Account Options in the Automatic
Portfolio Rebalancing Program.
We will rebalance your account each quarter according to your instructions. We
will transfer amounts among the Variable Sub-Accounts to achieve the percentage
allocations you specify. You can change your allocations at any time by
contacting us in writing or by telephone. The new allocation will be effective
with the first rebalancing that occurs after we receive your request. We are not
responsible for rebalancing that occurs prior to receipt of your request.
Example:
Assume that you want your initial purchase payment split among 2 Variable
Sub-Accounts. You want 40% to be in the Fidelity VIP High Income Variable
Sub-Account and 60% to be in the AIM V.I. Growth Variable Sub-Account. Over
the next 2 months the bond market does very well while the stock market
performs poorly. At the end of the first quarter, the Fidelity VIP High
Income Variable Sub-Account now represents 50% of your holdings because of
its increase in value. If you choose to have your holdings rebalanced
quarterly, on the first day of the next quarter, we would sell some of your
units in the Fidelity VIP High Income Variable Sub-Account and use the money
to buy more units in the AIM V.I. Growth Variable Sub-Account so that the
percentage allocations would again be 40% and 60% respectively.
The Automatic Portfolio Rebalancing Program is available only during the
Accumulation Phase. The transfers made under the Program do not count towards
the 12 transfers you can make without paying a transfer fee, and are not subject
to a transfer fee. Portfolio rebalancing is consistent with maintaining your
allocation of investments among market segments, although it is accomplished by
reducing your Contract Value allocated to the better performing segments.
21 PROSPECTUS
<PAGE>
EXPENSES
-------------------------------------------------------------------
As a Contract owner, you will bear, directly or indirectly, the charges and
expenses described below.
CONTRACT MAINTENANCE CHARGE
During the Accumulation Phase, on each Contract Anniversary, we will deduct a
$35 contract maintenance charge from your Contract Value invested in each
Variable Sub-Account in proportion to the amount invested. If you surrender your
Contract, we will deduct the contract maintenance charge pro rated for the part
of the Contract Year elapsed, unless your Contract qualifies for a waiver,
described below.
The charge is to compensate us for the cost of administering the Contracts and
the Variable Account. Maintenance costs include expenses we incur collecting
purchase payments; keeping records; processing death claims, cash withdrawals,
and policy changes; proxy statements; calculating Accumulation Unit Values and
income payments; and issuing reports to Contract owners and regulatory agencies.
We cannot increase the charge. However, we will waive this charge if, as of the
Contract Anniversary or upon full surrender:
- total purchase payments equal $50,000 or more, or
- all money is allocated to the Fixed Account.
In addition, we will waive the Contract Maintenance Charge if total purchase
payments are $50,000 or more as of the Payout Start Date.
MORTALITY AND EXPENSE RISK CHARGE
We deduct a mortality and expense risk charge daily at an annual rate of 1.05%
of the average daily net assets you have invested in the Variable Sub-Accounts
(1.27% if you select the Enhanced Death Benefit Rider, and 1.49% if you select
the Enhanced Death and Income Benefit Combination Rider). The mortality and
expense risk charge is for all the insurance benefits available with your
Contract (including our guarantee of annuity rates and the death benefits), for
certain expenses of the Contract, and for assuming the risk (expense risk) that
the current charges will be sufficient in the future to cover the cost of
administering the Contract. If the charges under the Contract are not
sufficient, then we will bear the loss. We charge an additional amount for the
Enhanced Death Benefit Rider and the Enhanced Death and Income Benefit
Combination Rider to compensate us for the additional risk that we accept by
providing these options.
We guarantee that we will not raise the mortality and expense risk charge. We
assess the mortality and expense risk charge during both the Accumulation Phase
and the Payout Phase.
ADMINISTRATIVE EXPENSE CHARGE
We deduct an administrative expense charge daily at an annual rate of 0.10% of
the average daily net assets you have invested in the Variable Sub-Accounts. We
intend this charge to cover actual administrative expenses that 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 attributed to that Contract. We
assess this charge each day during the Accumulation Phase and the Payout Phase.
We guarantee that we will not raise this charge.
TRANSFER FEE
We do not currently impose a fee upon transfers among the investment
alternatives. However, we reserve the right to charge $10 per transfer after the
12th transfer in each Contract Year. We will not charge a transfer fee on
transfers that are part of a Dollar Cost Averaging or Automatic Portfolio
Rebalancing Program.
WITHDRAWAL CHARGE
We may assess a withdrawal charge of up to 6% of the purchase payment(s) you
withdraw. The charge declines to 0% over a 6 year period that begins on the day
we receive your payment. A schedule showing how the charge declines is shown on
page 7. During each Contract Year, you can withdraw up to 15% of the aggregate
amount of your purchase payments without paying the charge. Unused portions of
this "Free Withdrawal Amount" are not carried forward to future Contract Years.
We will deduct withdrawal charges, if applicable, from the amount paid.
For purposes of calculating the withdrawal charge, we will treat withdrawals as
coming from the oldest purchase payments first. However, for federal income tax
purposes, please note that withdrawals are considered to have come first from
earnings, which means you pay taxes on the earnings portion of your withdrawal.
We do not apply a withdrawal charge in the following situations:
- on the Payout Start Date (a withdrawal charge may apply if you terminate
income payments to be received for a specified period;
- withdrawals taken to satisfy IRS minimum distribution rules for the Contract;
or
- withdrawals that qualify for one of the waivers as described below.
We use the amounts obtained from the withdrawal charge to pay sales commissions
and other promotional or distribution expenses associated with marketing the
Contracts. To the extent that the withdrawal charge does not cover all sales
commissions and other promotional or distribution expenses, we may use any of
our corporate assets, including potential profit which may arise from the
mortality and expense risk
22 PROSPECTUS
<PAGE>
charge or any other charges or fee described above, to make up any difference.
Withdrawals also may be subject to tax penalties or income tax and a Market
Value Adjustment. You should consult your own tax counsel or other tax advisers
regarding any withdrawals.
CONFINEMENT WAIVER. We will waive the withdrawal charge and any Market Value
Adjustment on all withdrawals taken prior to the Payout Start Date under your
Contract if the following conditions are satisfied:
1. You or the Annuitant, if the Contract owner is not a natural person, are
confined to a long term care facility or a hospital for at least 90 consecutive
days. You or the Annuitant must enter the long term care facility or hospital at
least 30 days after the Issue Date;
2. You request the withdrawal and provide written proof of the stay no later
than 90 days following the end of your or the Annuitant's stay at the long term
care facility or hospital; and
3. A physician must have prescribed the stay and the stay must be medically
necessary (as defined in the Contract).
You may not claim this benefit if you, the Annuitant, or a member of your or the
Annuitant's immediate family, is the physician prescribing your or the
Annuitant's stay in a long term care facility.
TERMINAL ILLNESS WAIVER. We will waive the withdrawal charge and any Market
Value Adjustment on all withdrawals taken prior to the Payout Start Date under
your Contract if:
1. you or the Annuitant (if the Contract owner is not a natural person) are
first diagnosed with a terminal illness at least 30 days after the Issue Date;
and
2. you claim this benefit and deliver adequate proof of diagnosis to us.
UNEMPLOYMENT WAIVER. We will waive the withdrawal charge and any Market Value
Adjustment on one partial or a full withdrawal taken prior to the Payout Start
Date under your Contract, if you meet the following requirements:
1. you or the Annuitant, if the Contract owner is not a natural person, become
unemployed at least one year after the Issue Date;
2. you or the Annuitant, if the Contract owner is not a natural person, receive
unemployment compensation as defined in the Contract for at least 30 days as a
result of that unemployment; and
3. you or the Annuitant, if the Contract owner is not a natural person, claim
this benefit within 180 days of your or the Annuitant's initial receipt of
unemployment compensation.
Please refer to your Contract for more detailed information about the terms and
conditions of these waivers.
The laws of your state may limit the availability of these waivers and may also
change certain terms and/or benefits available under the waivers. You should
consult your Contract for further details on these variations. Also, even if you
do not need to pay our withdrawal charge or a Market Value Adjustment because of
these waivers, you still may be required to pay taxes or tax penalties on the
amount withdrawn. You should consult your tax adviser to determine the effect of
a withdrawal on your taxes.
PREMIUM TAXES
Some states and other governmental entities (e.g., municipalities) charge
premium taxes or similar taxes. We are responsible for paying these taxes and
will deduct them from your Contract Value. Some of these taxes are due when the
Contract is issued, others are due when income payments begin or upon surrender.
Our current practice is not to charge anyone for these taxes until income
payments begin or when a total withdrawal occurs, including payment upon death.
At our discretion, we may discontinue this practice and deduct premium taxes
from the purchase payments. Premium taxes generally range from 0% to 4%,
depending on the state.
At the Payout Start Date, if applicable, we deduct the charge for premium taxes
from each investment alternative in the proportion that the Contract owner's
value in the investment alternative bears to the total Contract Value.
DEDUCTION FOR SEPARATE ACCOUNT INCOME TAXES
We are not currently maintaining a provision for taxes. In the future, however,
we may establish a provision for taxes if we determine, in our sole discretion,
that we will incur a tax as a result of the operation of the Variable Account.
We will deduct for any taxes we incur as a result of the operation of the
Variable Account, whether or not we previously made a provision for taxes and
whether or not it was sufficient. Our status under the Internal Revenue Code is
briefly described in the Statement of Additional Information.
OTHER EXPENSES
Each Portfolio deducts advisory fees and other expenses from its assets. You
indirectly bear the charges and expenses of the Portfolios whose shares are held
by the Variable Sub-Accounts. These fees and expenses are described in the
accompanying prospectuses for the Funds. For a summary of current estimates of
those charges and expenses, see page 8. We may receive compensation from the
investment advisers or administrators of the Portfolios in connection with the
administrative services we provide to the Portfolios.
23 PROSPECTUS
<PAGE>
ACCESS TO YOUR MONEY
-------------------------------------------------------------------
You can withdraw some or all of your Contract Value at any time prior to the
Payout Start Date.
The amount payable upon withdrawal is the Contract Value (or portion thereof)
next computed after we receive the request for a withdrawal at our home office,
adjusted by any Market Value Adjustment, less any withdrawal charges, contract
maintenance charges, income tax withholding, penalty tax, and any premium taxes.
We will pay withdrawals from the Variable Account within 7 days of receipt of
the request, subject to postponement in certain circumstances.
You can withdraw money from the Variable Account or the Fixed Account Options.
To complete a partial withdrawal from the Variable Account, we will cancel
Accumulation Units in an amount equal to the withdrawal and any applicable
withdrawal charge and premium taxes.
You must name the investment alternative from which you are taking the
withdrawal. If none is named, then the withdrawal request is incomplete and
cannot be honored.
In general, you must withdraw at least $50 at a time. You also may withdraw a
lesser amount if you are withdrawing your entire interest in a Variable
Sub-Account.
If you request a total withdrawal, we may require you to return your Contract to
us.
POSTPONEMENT OF PAYMENTS
We may postpone the payment of any amounts due from the Variable Account under
the Contract if:
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 SEC; or
3. The SEC permits delay for your protection.
In addition, we may delay payments or transfers from the Fixed Account Options
for up to 6 months (or shorter period if required by law). If we delay payment
for 30 days or more, we will pay interest as required by law.
SYSTEMATIC WITHDRAWAL PROGRAM
You may choose to receive systematic withdrawal payments on a monthly,
quarterly, semi-annual, or annual basis at any time prior to the Payout Start
Date. The minimum amount of each systematic withdrawal is $50. At our
discretion, systematic withdrawals may not be offered in conjunction with the
Dollar Cost Averaging Program or Automatic Portfolio Rebalancing Program.
Depending on fluctuations in the value of the Variable Sub-Accounts and the
value of the Fixed Account Options, systematic withdrawals may reduce or even
exhaust the Contract Value. Income taxes may apply to systematic withdrawals.
Please consult your tax advisor before taking any withdrawal.
We will make systematic withdrawal payments to you or your designated payee. At
our discretion, we may modify or suspend the Systematic Withdrawal Program and
charge a processing fee for the service. If we modify or suspend the Systematic
Withdrawal Program, existing systematic withdrawal payments will not be
affected.
MINIMUM CONTRACT VALUE
If your request for a partial withdrawal would reduce your Contract Value to
less than $2,000, we may treat it as a request to withdraw your entire Contract
Value. Your Contract will terminate if you withdraw all of your Contract Value.
We will, however, ask you to confirm your withdrawal request before terminating
your Contract. If we terminate your Contract, we will distribute to you its
Contract Value, adjusted by any applicable Market Value Adjustment, less
withdrawal and other charges and applicable taxes.
24 PROSPECTUS
<PAGE>
INCOME PAYMENTS
-------------------------------------------------------------------
PAYOUT START DATE
You select the Payout Start Date in your application. The Payout Start Date is
the day that we apply your money to an Income Plan. The Payout Start Date must
be:
- at least 30 days after the Issue Date; and
- no later than the day the Annuitant reaches age 90, or the 10th Contract
Anniversary, if later.
You may change the Payout Start Date at any time by notifying us in writing of
the change at least 30 days before the scheduled Payout Start Date. Absent a
change, we will use the Payout Start Date stated in your Contract.
INCOME PLANS
An Income Plan is a series of scheduled payments to you or someone you
designate. You may choose and change your choice of Income Plan until 30 days
before the Payout Start Date. If you do not select an Income Plan, we will make
income payments in accordance with Income Plan 1 with guaranteed payments for 10
years.
Three Income Plans are available under the Contract. Each is available to
provide:
- fixed income payments;
- variable income payments; or
- a combination of the two.
The three Income Plans are:
INCOME PLAN 1 -- LIFE INCOME WITH GUARANTEED PAYMENTS. Under this plan, we make
periodic income payments for at least as long as the Annuitant lives. If the
Annuitant dies before we have made all of the guaranteed income payments, we
will continue to pay the remainder of the guaranteed income payments as required
by the Contract.
INCOME PLAN 2 -- JOINT AND SURVIVOR LIFE INCOME WITH GUARANTEED PAYMENTS. Under
this plan, we make periodic income payments for at least as long as either the
Annuitant or the joint Annuitant is alive. If both the Annuitant and the joint
Annuitant die before we have made all of the guaranteed income payments, we will
continue to pay the remainder of the guaranteed income payments as required by
the Contract.
INCOME PLAN 3 -- GUARANTEED PAYMENTS FOR A SPECIFIED PERIOD (5 YEARS TO 30
YEARS). Under this plan, we make periodic income payments for the period you
have chosen. These payments do not depend on the Annuitant's life. You may elect
to receive guaranteed payments for periods ranging from 5 to 30 years. Income
payments for less than 120 months may be subject to a withdrawal charge. We will
deduct the mortality and expense risk charge from the Variable Sub-Account
assets that support variable income payments even though we may not bear any
mortality risk.
The length of any guaranteed payment period under your selected Income Plan
generally will affect the dollar amounts of each income payment. As a general
rule, longer guarantee periods result in lower income payments, all other things
being equal. For example, if you choose an Income Plan with payments that depend
on the life of the Annuitant but with no minimum specified period for guaranteed
payments, the income payments generally will be greater than the income payments
made under the same Income Plan with a minimum specified period for guaranteed
payments.
If you choose Income Plan 1 or 2, or, if available, another Income Plan with
payments that continue for the life of the Annuitant or joint Annuitant, we may
require proof of age and sex of the Annuitant or joint Annuitant before starting
income payments, and proof that the Annuitant or joint Annuitant are alive
before we make each payment. Please note that under such Income Plans, if you
elect to take no minimum guaranteed payments, it is possible that the payee
could receive only 1 income payment if the Annuitant and any joint Annuitant
both die before the second income payment, or only 2 income payments if they die
before the third income payment, and so on.
Generally, you may not make withdrawals after the Payout Start Date. One
exception to this rule applies if you are receiving variable income payments
that do not depend on the life of the Annuitant (such as under Income Plan 3).
In that case you may terminate all or part of the Variable Account portion of
the income payments at any time and receive a lump sum equal to the present
value of the remaining variable payments associated with the amount withdrawn.
The minimum amount you may withdraw under this feature is $1,000. A withdrawal
charge may apply. We deduct applicable premium taxes from the Contract Value at
the Payout Start Date.
We may make other Income Plans available.
If you elected the Enhanced Death and Income Benefit Combination Option, you may
be able to apply an amount greater than your Contract Value to an Income Plan.
You must apply at least the Contract Value in the Fixed Account on the Payout
Start Date to fixed income payments. If you wish to apply any portion of your
Fixed Account balance to provide variable income payments, you should plan ahead
and transfer that amount to the Variable Sub-Accounts prior to the Payout Start
Date. If you do not tell us how to allocate your Contract Value among fixed and
variable income payments, we will apply your Contract Value in the Variable
Account to variable income payments and your Contract Value in the Fixed Account
to fixed income payments.
We will apply your Contract Value, adjusted by any applicable Market Value
Adjustment, less applicable taxes to your Income Plan on the Payout Start Date.
If the amount
25 PROSPECTUS
<PAGE>
available to apply under an Income Plan is less than $2,000, or not enough to
provide an initial payment of at least $20, and state law permits, we may:
- pay you the Contract Value, adjusted by any applicable Market Value Adjustment
and less any applicable taxes, in a lump sum instead of the periodic payments
you have chosen; or
- reduce the frequency of your payments so that each payment will be at least
$20.
VARIABLE INCOME PAYMENTS
The amount of your variable income payments depends upon the investment results
of the Variable Sub-Accounts you select, the premium taxes you pay, the age and
sex of the Annuitant, and the Income Plan you choose. We guarantee that the
payments will not be affected by (a) actual mortality experience and (b) the
amount of our administration expenses.
We cannot predict the total amount of your variable income payments. Your
variable income payments may be more or less than your total purchase payments
because (a) variable income payments vary with the investment results of the
underlying Portfolios; and (b) the Annuitant could live longer or shorter than
we expect based on the tables we use.
In calculating the amount of the periodic payments in the annuity tables in the
Contract, we assumed an annual investment rate of 3%. If the actual net
investment return of the Variable Sub-Accounts you choose is less than this
assumed investment rate, then the dollar amount of your variable income payments
will decrease. The dollar amount of your variable income payments will increase,
however, if the actual net investment return exceeds the assumed investment
rate. The dollar amount of the variable income payments stays level if the net
investment return equals the assumed investment rate. Please refer to the
Statement of Additional Information for more detailed information as to how we
determine variable income payments.
FIXED INCOME PAYMENTS
We guarantee income payment amounts derived from any Fixed Account Option for
the duration of the Income Plan. We calculate the fixed income payments by:
1. adjusting the portion of the Contract Value in any Fixed Account Option on
the Payout Start Date by any applicable Market Value Adjustment;
2. deducting any applicable premium tax; and
3. applying the resulting amount to the greater of (a) the appropriate value
from the income payment table in your Contract or (b) such other value as we are
offering at that time.
We may defer making fixed income payments for a period of up to 6 months or any
shorter time state law may require. If we defer payments for 30 days or more, we
will pay interest as required by law from the date we receive the withdrawal
request to the date we make payment.
CERTAIN EMPLOYEE BENEFIT PLANS
The Contracts offered by this prospectus contain income payment tables that
provide for different payments to men and women of the same age, except in
states that require unisex tables. We reserve the right to use income payment
tables that do not distinguish on the basis of sex to the extent permitted by
applicable law. In certain employment-related situations, employers are required
by law to use the same income payment tables for men and women. Accordingly, if
the Contract is to be used in connection with an employment-related retirement
or benefit plan and we do not offer unisex annuity tables in your state, you
should consult with legal counsel as to whether the purchase of a Contract is
appropriate.
DEATH BENEFITS
-------------------------------------------------------------------
We will pay a death benefit prior to the Payout Start Date on:
1. the death of any Contract owner or,
2. the death of the Annuitant, if the Contract is owned by a non-natural person.
We will pay the death benefit to the new Contract owner as determined
immediately after the death. The new Contract owner would be a surviving
Contract owner or, if none, the Beneficiary(ies). In the case of the death of
the Annuitant, we will pay the death benefit to the current Contract owner.
A claim for a distribution on death must include DUE PROOF OF DEATH. We will
accept the following documentation as "Due Proof of Death":
- a certified copy of a death certificate,
- a certified copy of a decree of a court of competent jurisdiction as to the
finding of death, or
26 PROSPECTUS
<PAGE>
- any other proof acceptable to us.
DEATH BENEFIT AMOUNT
Prior to the Payout Start Date, the death benefit is equal to the greatest of:
1. the Contract Value as of the date we determine the value of the death
benefit, or
2. the SETTLEMENT VALUE (that is, the amount payable on a full withdrawal of
Contract Value) on the date we determine the value of the death benefit, or
3. the Contract Value on each DEATH BENEFIT ANNIVERSARY prior to the date we
determine the death benefit, increased by purchase payments made since that
Death Benefit Anniversary and reduced by an adjustment for any partial
withdrawals since that Death Benefit Anniversary. 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 3
Death Benefit Anniversaries.
The withdrawal adjustment is equal to (a) divided by (b), with the result
multiplied by (c), where:
<TABLE>
<S> <C> <C>
(a) = is the withdrawal amount;
(b) = is the Contract Value immediately
prior to the withdrawal; and
(c) = is the Contract value on the Death
Benefit Anniversary adjusted by any
prior purchase payments or withdrawals
made since that Anniversary.
</TABLE>
We will determine the value of the death benefit as of the end of the Valuation
Date on which we receive a complete request for payment of the death benefit. If
we receive a request after 3 p.m. Central Time on a Valuation Date, we will
process the request as of the end of the following Valuation Date.
ENHANCED DEATH BENEFIT RIDER
If the Contract owner is a living individual, the enhanced death benefit applies
only upon the death of the Contract owner. If the Contract owner is not a living
individual, the enhanced death benefit applies only upon the death of the
Annuitant. For Contracts with the Enhanced Death Benefit Rider, the death
benefit will be the greatest of (1) through (3) above, or (4) the enhanced death
benefit. The enhanced death benefit is equal to the greater of the Enhanced
Death Benefit A or Enhanced Death Benefit B. Enhanced Death Benefit B may not be
available in all states.
That enhanced death benefit will never be greater than the maximum death benefit
allowed by any state nonforfeiture laws that govern the Contract.
ENHANCED DEATH BENEFIT A. At issue, Enhanced Death Benefit A is equal to the
initial purchase payment. After issue, Enhanced Death Benefit A is the greatest
of the ANNIVERSARY VALUES as of the date we determine 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. The adjustment is
equal to (a) divided by (b), and the result multiplied by (c) where:
<TABLE>
<S> <C> <C>
(a) = is the withdrawal amount,
(b) = is the Contract Value immediately
prior to the withdrawal, and
(c) = is the Contract Value on that Contract
Anniversary adjusted by any prior
purchase payments and withdrawals
since that Contract Anniversary.
</TABLE>
We will calculate Anniversary Values for each Contract Anniversary prior to the
oldest Contract owner's or the Annuitant's, if the Contract owner is not a
natural person, 80th birthday.
ENHANCED DEATH BENEFIT B. The Enhanced Death Benefit B is equal to total
purchase payments made reduced by a withdrawal adjustment, as defined below.
Each purchase payment and each withdrawal adjustment will accumulate daily at a
rate equivalent to 5% per year until the earlier of:
- the date we determine the death benefit, or
- the first day of the month following the oldest Contract owner's or, if the
Contract owner is not a natural person, the Annuitant's, 85th birthday.
The adjustment is equal to (a) divided by (b), and the result multiplied by (c)
where:
<TABLE>
<S> <C> <C>
(a) = the withdrawal amount,
(b) = is the Contract Value immediately
prior to the withdrawal, and
(c) = is the most recently calculated
enhanced death benefit.
</TABLE>
ENHANCED DEATH AND INCOME BENEFIT COMBINATION RIDER
You may elect not to choose the Enhanced Death Benefit Rider and may instead
choose the Enhanced Death and Income Benefit Combination Rider.
The enhanced death benefit portion of the Enhanced Death and Income Benefit
Combination Rider is as described above under "Enhanced Death Benefit Rider."
The enhanced income benefit defines a minimum amount applied to the Payout
Phase. This minimum amount is equal
27 PROSPECTUS
<PAGE>
to the value the enhanced death benefit would be on the Payout Start Date.
The enhanced income benefit will apply if the Contract owner elects a Payout
Start Date that:
- is on or after the tenth Contract Anniversary, and
- is prior to the Annuitant's 90th Birthday.
On the Payout Start Date, you may apply the greater of the Contract Value or the
enhanced income benefit to the Payout Phase of the Contract. No Market Value
Adjustment will be applied to the enhanced income benefit amount. The enhanced
income benefit will only apply if the Income Plan selected provides payments
guaranteed for either a single or joint lives with a period certain of at least:
- 10 years, if the youngest Annuitant's age is 80 or less on the date the amount
is applied; or
- 5 years, if the youngest Annuitant's age is greater than 80 on the date the
amount is applied.
If, however, you apply the Contract Value and not the enhanced income benefit to
the Income Plan, then you may select any Income Plan we offer at that time.
DEATH BENEFIT PAYMENTS
A death benefit will be paid:
1. if the Contract owner elects to receive the death benefit distributed in a
single payment 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. We are currently
waiving the 180 day limit, but we reserve the right to enforce the limitation in
the future.
In any event, the entire value of the Contract must be distributed within 5
years after the date of death unless an Income Plan is elected or a surviving
spouse continues the Contract in accordance with the provisions described below.
If the Contract owner eligible to receive the distribution upon death is not a
natural person, the Contract owner may elect to receive the distribution upon
death in one or more distributions.
If the Contract owner is a natural person, the Contract owner may elect to
receive the distribution upon death either in one or more distributions or by
periodic payments through an Income Plan. Payments from the Income Plan must
begin within one year of the date of death and must be payable throughout:
- the life of the Contract owner; or
- a period not to exceed the life expectancy of the Contract owner; or
- the life of the Contract owner with payments guaranteed to a period not to
exceed the life expectancy of the Contract owner.
If the surviving spouse of the deceased Contract owner is the new Contract
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. If the
Contract is continued in the Accumulation Phase, the surviving spouse may make a
single withdrawal of any amount within 1 year of the date of death without
incurring a withdrawal charge or Market Value Adjustment.
28 PROSPECTUS
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MORE INFORMATION
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GLENBROOK
Glenbrook is the issuer of the Contract. Glenbrook is a stock life insurance
company organized under the laws of the State of Arizona in 1998. Previously,
Glenbrook was organized under the laws of the State of Illinois in 1992.
Glenbrook was originally organized under the laws of the State of Indiana in
1965. From 1965 to 1983 Glenbrook was known as "United Standard Life Assurance
Company" and from 1983 to 1992 as "William Penn Life Assurance Company of
America."
Glenbrook is currently licensed to operate in the District of Columbia and all
states except New York. We intend to offer the Contract in those jurisdictions
in which we are licensed. Our home office is located at 3100 Sanders Road,
Northbrook, Illinois, 60062.
Glenbrook 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, a stock property-liability insurance company incorporated
under the laws of Illinois. All of the outstanding capital stock of Allstate
Insurance Company is owned by The Allstate Corporation.
Glenbrook and Allstate Life entered into a reinsurance agreement effective
June 5, 1992. Under the reinsurance agreement, Allstate Life reinsures
substantially all of Glenbrook's liabilities under its various insurance
contracts. The reinsurance agreement provides us with financial backing from
Allstate Life. However, it does not create a direct contractual relationship
between Allstate Life and you. In other words, the obligations of Allstate Life
under the reinsurance agreement are to Glenbrook; Glenbrook remains the sole
obligor under the Contract to you.
Several independent rating agencies regularly evaluate life insurers'
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 Glenbrook. A.M. Best Company also assigns Glenbrook the rating
of A+(r) because Glenbrook automatically reinsures all net business with
Allstate Life. Standard & Poor's Insurance Rating Services assigns an AA+ (Very
Strong) financial strength rating and Moody's assigns an Aa2 (Excellent)
financial strength rating to Glenbrook. Glenbrook shares the same ratings of its
parent, Allstate Life. These ratings do not reflect the investment performance
of the Variable Account. We may from time to time advertise these ratings in our
sales literature.
THE VARIABLE ACCOUNT
Glenbrook established the Glenbrook Life Multi-Manager Variable Account on
January 15, 1996. We have registered the Variable Account with the SEC as a unit
investment trust. The SEC does not supervise the management of the Variable
Account or Glenbrook.
We own the assets of the Variable Account. The Variable Account is a segregated
asset account under Arizona law. That means we account for the Variable
Account's income, gains and losses separately from the results of our other
operations. It also means that only the assets of the Variable Account that are
in excess of the reserves and other Contract liabilities with respect to the
Variable Account are subject to liabilities relating to our other operations.
Our obligations arising under the Contracts are general corporate obligations of
Glenbrook.
The Variable Account consists of 62 Variable Sub-Accounts. Each Variable
Sub-Account invests in a corresponding Portfolio. We may add new Variable
Sub-Accounts or eliminate one or more of them, if we believe marketing, tax, or
investment conditions so warrant. We may also add other Variable Sub-Accounts
that may be available under other variable annuity contracts. We do not
guarantee the investment performance of the Variable Account, its Sub-Accounts
or the Portfolios. We may use the Variable Account to fund our other annuity
contracts. We will account separately for each type of annuity contract funded
by the Variable Account.
THE PORTFOLIOS
DIVIDENDS AND CAPITAL GAIN DISTRIBUTIONS. We automatically reinvest all
dividends and capital gains distributions from the Portfolios in shares of the
distributing Portfolio at their net asset value.
VOTING PRIVILEGES. As a general matter, you do not have a direct right to vote
the shares of the Portfolios held by the Variable Sub-Accounts to which you have
allocated your Contract Value. Under current law, however, you are entitled to
give us instructions on how to vote those shares on certain matters. Based on
our present view of the law, we will vote the shares of the Portfolios that we
hold directly or indirectly through the Variable Account in accordance with
instructions that we receive from Contract owners entitled to give such
instructions.
As a general rule, before the Payout Start Date, the Contract owner or anyone
with a voting interest is the person entitled to give voting instructions. The
number of shares that a person has a right to instruct will be determined by
dividing the Contract Value allocated to the applicable Variable Sub-Account by
the net asset value per share of the corresponding Portfolio as of the record
date of the meeting. After the Payout Start Date the person receiving income
payments has the voting interest. The payee's number of votes will be determined
by dividing the reserve for such Contract allocated to the applicable Variable
Sub-Account by the net asset value per share of the corresponding Portfolio. The
29 PROSPECTUS
<PAGE>
votes decrease as income payments are made and as the reserves for the Contract
decrease.
We will vote shares attributable to Contracts for which we have not received
instructions, as well as shares attributable to us, in the same proportion as we
vote shares for which we have received instructions, unless we determine that we
may vote such shares in our own discretion. We will apply voting instructions to
abstain on any item to be voted upon on a pro-rata basis to reduce the votes
eligible to be cast.
We reserve the right to vote Portfolio shares as we see fit without regard to
voting instructions to the extent permitted by law. If we disregard voting
instructions, we will include a summary of that action and our reasons for that
action in the next semi-annual financial report we send to you.
CHANGES IN PORTFOLIOS. If the shares of any of the Portfolios are no longer
available for investment by the Variable Account or if, in our judgment, further
investment in such shares is no longer desirable in view of the purposes of the
Contract, we may eliminate that Portfolio and substitute shares of another
eligible investment fund. Any substitution of securities will comply with the
requirements of the Investment Company Act of 1940. We also may add new Variable
Sub-Accounts that invest in additional mutual funds. We will notify you in
advance of any change.
CONFLICTS OF INTEREST. Certain of the Portfolios sell their shares to separate
accounts underlying both variable life insurance and variable annuity contracts.
It is conceivable that in the future it may be unfavorable for variable life
insurance separate accounts and variable annuity separate accounts to invest in
the same Portfolio. The boards of directors of these Portfolios monitor for
possible conflicts among separate accounts buying shares of the Portfolios.
Conflicts could develop for a variety of reasons. For example, differences in
treatment under tax and other laws or the failure by a separate account to
comply with such laws could cause a conflict. To eliminate a conflict, a
Portfolio's board of directors may require a separate account to withdraw its
participation in a Portfolio. A Portfolio's net asset value could decrease if it
had to sell investment securities to pay redemption proceeds to a separate
account withdrawing because of a conflict.
THE CONTRACT
DISTRIBUTION. ALFS, Inc.* ("ALFS"), located at 3100 Sanders Road, Northbrook, IL
60062-7154, serves as principal underwriter of the Contracts. ALFS is a wholly
owned subsidiary of Allstate Life. ALFS is a registered broker dealer under the
Securities and Exchange Act of 1934, as amended ("EXCHANGE ACT"), and is a
member of the National Association of Securities Dealers, Inc.
We will pay commissions to broker-dealers who sell the contracts. Commissions
paid may vary, but we estimate that the total commissions paid on all Contract
sales will not exceed 8% of all purchase payments. These commissions are
intended to cover distribution expenses. Sometimes, we also pay the
broker-dealer a persistency bonus in addition to the standard commissions. A
persistency bonus is not expected to exceed 0.25%, on an annual basis, of the
Contract Values considered in connection with the bonus. 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 Exchange Act,
pursuant to legal and regulatory exceptions.
Glenbrook does not pay ALFS a commission for distribution of the Contracts. The
underwriting agreement with ALFS provides that we will reimburse ALFS for any
liability to Contract owners arising out of services rendered or Contracts
issued.
ADMINISTRATION. We have primary responsibility for all administration of the
Contracts and the Variable Account. We provide the following administrative
services, among others:
- issuance of the Contracts;
- maintenance of Contract owner records;
- Contract owner services;
- calculation of unit values;
- maintenance of the Variable Account; and
- preparation of Contract owner reports.
We will send you Contract statements and transaction confirmations at least
annually. You should notify us promptly in writing of any address change. You
should read your statements and confirmations carefully and verify their
accuracy. You should contact us promptly if you have a question about a periodic
statement. We will investigate all complaints and make any necessary adjustments
retroactively, but you must notify us of a potential error within a reasonable
time after the date of the questioned statement. If you wait too long, we
reserve the right to make the adjustment as of the date that we receive notice
of the potential error.
We also will provide you with additional periodic and other reports, information
and prospectuses as may be required by federal securities laws.
------------------------
*Effective May 1, 2000, Allstate Life Financial Services, Inc. was renamed ALFS,
Inc.
30 PROSPECTUS
<PAGE>
QUALIFIED PLANS
If you use the Contract with a qualified plan, the plan may impose different or
additional conditions or limitations on withdrawals, waivers of withdrawal
charges, death benefits, Payout Start Dates, income payments, and other Contract
features. In addition, adverse tax consequences may result if qualified plan
limits on distributions and other conditions are not met. Please consult your
qualified plan administrator for more information.
LEGAL MATTERS
Freedman, Levy, Kroll & Simonds, Washington, D.C., has advised Glenbrook on
certain federal securities law matters. All matters of state insurance law
pertaining to the Contracts, including the validity of the Contracts and
Glenbrook's right to issue such Contracts under state insurance law, have been
passed upon by Michael J. Velotta, General Counsel of Glenbrook.
YEAR 2000
Glenbrook is heavily dependent upon complex computer systems for all phases of
its operations, including customer service, and policy and contract
administration. Since many of Glenbrook's older computer software programs
recognize only the last two digits of the year in any date, some software may
have failed to operate properly in or after the year 1999, if the software was
not reprogrammed or replaced ("YEAR 2000 ISSUE"). Glenbrook believes that many
of its counterparties and suppliers also had potential Year 2000 Issues which
could affect Glenbrook. In 1995, Allstate Insurance Company commenced a four
phase plan intended to mitigate and/or prevent the adverse effects of Year 2000
Issues. These strategies included 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 included Glenbrook actively working with its major
external counterparties and suppliers to assess their compliance efforts and
Glenbrook's exposure to them. Because of the accuracy of this plan, and its
timely completion, Glenbrook has experienced no material impacts on its results
of operations, liquidity or financial position due to the Year 2000 issue. Year
2000 costs are expensed as incurred.
TAXES
-------------------------------------------------------------------
THE FOLLOWING DISCUSSION IS GENERAL AND IS NOT INTENDED AS TAX ADVICE. GLENBROOK
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 your individual circumstances.
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, you are not taxed on increases in the Contract Value
until a distribution occurs. This rule applies only where:
1. the Contract owner is a natural person,
2. the investments of the Variable Account are "adequately diversified"
according to Treasury Department regulations, and
3. Glenbrook is considered the owner of the Variable Account assets for federal
income tax purposes.
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. The income on such contracts
is taxed as ordinary income received or accrued by the owner during the taxable
year. Please see the Statement of Additional Information for a discussion of
several exceptions to the general rule for Contracts owned by non-natural
persons.
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" consistent with standards under Treasury Department
regulations. If the investments in the Variable Account are not adequately
diversified, the Contract will not be treated as an annuity contract for federal
income tax purposes. As a result, the income on the Contract will be taxed as
ordinary income received or accrued by the Contract owner during the taxable
year. Although Glenbrook does not have control over the Portfolios or their
investments, we expect the Portfolios to meet the diversification requirements.
OWNERSHIP TREATMENT. The IRS has stated that you will be considered the owner of
Variable Account assets if you possess 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, the Treasury Department announced
that the regulations do not provide guidance concerning circumstances in which
investor control of separate account investments may cause an investor to be
31 PROSPECTUS
<PAGE>
treated as the owner of the separate account. The Treasury Department also
stated that future guidance would be issued regarding the extent that owners
could direct sub-account investments without being treated as owners of the
underlying assets of the separate account.
Your rights under the Contract are different than those described by the IRS in
rulings in which it found that contract owners were not owners of separate
account assets. For example, you have the choice to allocate premiums and
Contract Values among more investment alternatives. Also, you may be able to
transfer among investment alternatives more frequently than in such rulings.
These differences could result in you being treated as the owner of the Variable
Account. If this occurs, income and gain from the Variable Account assets would
be includible in your gross income. Glenbrook does not know what standards will
be set forth in any regulations or rulings which the Treasury Department may
issue. It is possible that future standards announced by the Treasury Department
could adversely affect the tax treatment of your Contract. We reserve the right
to modify the Contract as necessary to attempt to prevent you from being
considered the federal tax owner of the assets of the Variable Account. However,
we make no guarantee that such modification to the Contract will be successful.
TAXATION OF PARTIAL AND FULL WITHDRAWALS. If you make a partial withdrawal under
a non-Qualified Contract, amounts received are taxable to the extent the
Contract Value, without regard to surrender charges, exceeds the investment in
the Contract. The investment in the Contract is the gross premium paid for the
Contract minus any amounts previously received from the Contract if such amounts
were properly excluded from your gross income. If you make 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, is excluded from your income. If you make 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.
"Nonqualified distributions" from Roth IRAs are treated as made from
contributions first and are included in gross income only to the extent that
distributions exceed contributions. "Qualified distributions" from Roth IRAs are
not included in gross income. "Qualified distributions" are any distributions
made more than 5 taxable years after the taxable year of the first contribution
to any Roth IRA and which are:
- made on or after the date the individual attains age 59 1/2,
- made to a beneficiary after the Contract owner's death,
- attributable to the Contract owner being disabled, or
- for a first time home purchase (first time home purchases are subject to a
lifetime limit of $10,000).
If you transfer a non-Qualified Contract without full and adequate consideration
to a person other than your spouse (or to a former spouse incident to a
divorce), you will be taxed on the difference between the Contract Value and the
investment in the Contract at the time of transfer. Except for certain Qualified
Contracts, any amount you receive 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.
TAXATION OF ANNUITY PAYMENTS. Generally, the rule for income taxation of annuity
payments received from a non-Qualified Contract provides for the return of your
investment in the Contract in equal tax-free amounts over the payment period.
The balance of each payment received is taxable. For 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. If you elect 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. The annuity payments will be fully taxable
after the total amount of the investment in the Contract is excluded using these
ratios. If you die, and annuity payments cease before the total amount of the
investment in the Contract is recovered, the unrecovered amount will be allowed
as a deduction for your last taxable year.
TAXATION OF ANNUITY DEATH BENEFITS. Death of a Contract owner, or death of the
Annuitant if the Contract is owned by a non-natural person, will cause a
distribution of death benefits from a Contract. Generally, such amounts are
included 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. Please see the Statement of Additional Information
for more detail on distribution at death requirements.
PENALTY TAX ON PREMATURE DISTRIBUTIONS. A 10% penalty tax applies to the taxable
amount of any premature distribution from a non-Qualified Contract. The penalty
tax generally applies to any distribution made prior to the date you attain age
59 1/2. However, no penalty tax is incurred on distributions:
1. made on or after the date the Contract owner attains age 59 1/2;
2. made as a result of the Contract owner's death or disability;
32 PROSPECTUS
<PAGE>
3. made in substantially equal periodic payments over the Contract owner's life
or life expectancy,
4. made under an immediate annuity, or
5. attributable to investment in the Contract before August 14, 1982.
You should consult a competent tax advisor to determine if any other exceptions
to the penalty apply to your situation. Similar exceptions may apply to
distributions from Qualified Contracts.
AGGREGATION OF ANNUITY CONTRACTS. All non-qualified deferred annuity contracts
issued by Glenbrook (or its affiliates) to the same Contract 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
Contracts may be used as investments with certain qualified plans such as:
- Individual Retirement Annuities or Accounts (IRAs) under Section 408 of the
Code;
- Roth IRAs under Section 408A of the Code;
- Simplified Employee Pension Plans under Section 408(k) of the Code;
- Savings Incentive Match Plans for Employees (SIMPLE) Plans under Section
408(p) of the Code;
- Tax Sheltered Annuities under Section 403(b) of the Code;
- Corporate and Self Employed Pension and Profit Sharing Plans; and
- State and Local Government and Tax-Exempt Organization Deferred Compensation
Plans.
The income on qualified plan and IRA investments is tax deferred and variable
annuities held by such plans do not receive any additional tax deferral. You
should review the annuity features, including all benefits and expenses, prior
to purchasing a variable annuity in a qualified plan or IRA. Glenbrook reserves
the right to limit the availablity of the Contract for use with any of the
Qualified Plans listed above.
In the case of certain 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 Tax Code provides
tax-deferred retirement savings plans for employees of certain non-profit and
educional organizations. Under Section 403(b), any Contract used for a 403(b)
plan must provide that distributions attributable to salary reduction
contributions made after December 31, 1998, and all earnings on salary reduction
contributions, may be made only:
1. on or after the date the employee
- attains age 59 1/2,
- separates from service,
- dies,
- becomes disabled, or
2. 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 Glenbrook is directed to
transfer some or all of the Contract Value to another 403(b) plan.
INCOME TAX WITHHOLDING
Glenbrook is required to withhold federal income tax at a rate of 20% on all
"eligible rollover distributions" unless you elect to make a "direct rollover"
of such amounts to an IRA or eligible retirement plan. 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 over the life (joint lives) of the participant (and
beneficiary).
Glenbrook may be required to withhold federal and state income taxes on any
distributions from non-Qualified Contracts or Qualified Contracts that are not
eligible rollover distributions, unless you notify us of your election to not
have taxes withheld
33 PROSPECTUS
<PAGE>
ANNUAL REPORTS AND OTHER DOCUMENTS
-------------------------------------------------------------------
Glenbrook's annual report on Form 10-K for the year ended December 31, 1999 is
incorporated herein by reference, which means that it is legally a part of this
prospectus.
After the date of this prospectus and before we terminate the offering of the
securities under this prospectus, all documents or reports we file with the SEC
under the Exchange Act are also incorporated herein by reference, which means
that they also legally become a part of this prospectus.
Statements in this prospectus, or in documents that we file later with the SEC
and that legally become a part of this prospectus, may change or supersede
statements in other documents that are legally part of this prospectus.
Accordingly, only the statement that is changed or replaced will legally be a
part of this prospectus.
We file our Exchange Act documents and reports, including our annual and
quarterly reports on Form 10-K and Form 10-Q electronically on the SEC's "EDGAR"
system using the identifying number CIK No. 0001007285. The SEC maintains a Web
site that contains reports, proxy and information statements and other
information regarding registrants that file electronically with the SEC. The
address of the site is http://www.sec.gov. You also can view these materials at
the SEC's Public Reference Room at 450 Fifth Street, N.W., Washington, D.C.
20549. For more information on the operations of SEC's Public Reference Room,
call 1-800-SEC-0330.
If you have received a copy of this prospectus, and would like a free copy of
any document incorporated herein by reference (other than exhibits not
specifically incorporated by reference into the text of such documents), please
write or call us at P.O. Box 94042, Palatine, IL 60094
(telephone: 1-800-755-5275).
EXPERTS
The financial statements and related financial statement schedule of Glenbrook
as of December 31, 1999 and 1998 and for each of the three years in the period
ended December 31, 1999, which are incorporated herein by reference, have been
audited by Deloitte & Touche LLP, independent auditors, as stated in their
report, which are incorporated herein by reference, and are included in reliance
upon the report of such firm given upon their authority as experts in accounting
and auditing.
The financial statements of the Variable Account as of December 31, 1999, and
for each of the periods in the two years then ended that appear in the Statement
of Additional Information have been audited by Deloitte & Touche LLP,
independent auditors, as stated in their report which are incorporated herein by
reference, and are included in reliance upon the report of such firm given upon
their authority as experts in accounting and auditing.
PERFORMANCE INFORMATION
-------------------------------------------------------------------
We may advertise the performance of the Variable Sub-Accounts, including yield
and total return information. Total return represents the change, over a
specified period of time, in the value of an investment in a Variable
Sub-Account after reinvesting all income distributions. Yield refers to the
income generated by an investment in a Variable Sub-Account over a specified
period.
All performance advertisements will include, as applicable, standardized yield
and total return figures that reflect the deduction of insurance charges, the
contract maintenance charge, and withdrawal charge. Performance advertisements
also may include total return figures that reflect the deduction of insurance
charges, but not the contract maintenance or withdrawal charges. The deduction
of such charges would reduce the performance shown. In addition, performance
advertisements may include aggregate average, year-by-year, or other types of
total return figures.
Performance information for periods prior to the inception date of the Variable
Sub-Accounts will be based on the historical performance of the corresponding
Portfolios for the periods beginning with the inception dates of the Portfolios
and adjusted to reflect current Contract expenses. You should not interpret
these figures to reflect actual historical performance of the Variable Account.
We may include in advertising and sales materials tax deferred compounding
charts and other hypothetical illustrations that compare currently taxable and
tax deferred investment programs based on selected tax brackets. Our
advertisements also may compare the performance of our Variable Sub-Accounts
with: (a) certain unmanaged market indices, including but not limited to the Dow
Jones Industrial Average, the Standard & Poor's 500, and the Shearson Lehman
Bond Index; and/or (b) other management investment companies with investment
objectives similar to the underlying funds being compared. In addition, our
advertisements may include the performance ranking assigned by various
publications, including the Wall Street Journal, Forbes, Fortune, Money,
Barron's, Business Week, USA Today, and statistical services, including Lipper
Analytical Services Mutual Fund Survey, Lipper Annuity and Closed End Survey,
the Variable Annuity Research Data Survey, and SEI.
34 PROSPECTUS
<PAGE>
APPENDIX A
-------------------------------------------------------------------
ACCUMULATION UNIT VALUE AND NUMBER OF
ACCUMULATION UNITS OUTSTANDING FOR EACH
VARIABLE SUB-ACCOUNT SINCE CONTRACTS WERE FIRST OFFERED
BASIC POLICY
<TABLE>
<CAPTION>
FOR THE YEARS BEGINNING JANUARY 1* AND ENDED DECEMBER 31, 1998 1999
-----------------------------------------------------------------------------
<S> <C> <C>
AIM V.I. BALANCED SUB-ACCOUNT
-----------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period $10.00 $10.73
-----------------------------------------------------------------------------
Accumulation Unit Value, End of Period $10.73 $12.66
-----------------------------------------------------------------------------
Number of Units Outstanding, End of Period -- 7,487
-----------------------------------------------------------------------------
AIM V.I. CAPITAL APPRECIATION SUB-ACCOUNT
-----------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period $10.00 $11.39
-----------------------------------------------------------------------------
Accumulation Unit Value, End of Period $11.39 $16.29
-----------------------------------------------------------------------------
Number of Units Outstanding, End of Period -- 8,743
-----------------------------------------------------------------------------
AIM V.I. GROWTH SUB-ACCOUNT
-----------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period $10.00 $11.83
-----------------------------------------------------------------------------
Accumulation Unit Value, End of Period $11.83 $15.82
-----------------------------------------------------------------------------
Number of Units Outstanding, End of Period -- 13,275
-----------------------------------------------------------------------------
AIM V.I. GROWTH AND INCOME SUB-ACCOUNT
-----------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period $10.00 $11.36
-----------------------------------------------------------------------------
Accumulation Unit Value, End of Period $11.36 $15.09
-----------------------------------------------------------------------------
Number of Units Outstanding, End of Period -- 12,180
-----------------------------------------------------------------------------
AIM V.I. HIGH YIELD SUB-ACCOUNT
-----------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period $10.00 $10.31
-----------------------------------------------------------------------------
Accumulation Unit Value, End of Period $10.31 $11.27
-----------------------------------------------------------------------------
Number of Units Outstanding, End of Period -- 7,387
-----------------------------------------------------------------------------
AIM V.I. VALUE SUB-ACCOUNT
-----------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period $10.00 $11.52
-----------------------------------------------------------------------------
Accumulation Unit Value, End of Period $11.52 $14.80
-----------------------------------------------------------------------------
Number of Units Outstanding, End of Period -- 42,074
-----------------------------------------------------------------------------
FEDERATED PRIME MONEY FUND II SUB-ACCOUNT(2)
-----------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period -- $10.00
-----------------------------------------------------------------------------
Accumulation Unit Value, End of Period -- $10.06
-----------------------------------------------------------------------------
Number of Units Outstanding, End of Period -- 7,985
-----------------------------------------------------------------------------
FIDELITY VIP CONTRAFUND-Registered Trademark- SUB-ACCOUNT
-----------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period $10.00 $11.66
-----------------------------------------------------------------------------
Accumulation Unit Value, End of Period $11.66 $14.33
-----------------------------------------------------------------------------
Number of Units Outstanding, End of Period -- 18,963
-----------------------------------------------------------------------------
FIDELITY VIP EQUITY-INCOME SUB-ACCOUNT
-----------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period $10.00 $10.48
-----------------------------------------------------------------------------
Accumulation Unit Value, End of Period $10.48 $11.02
-----------------------------------------------------------------------------
Number of Units Outstanding, End of Period -- 30,264
-----------------------------------------------------------------------------
FIDELITY VIP GROWTH SUB-ACCOUNT
-----------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period $10.00 $11.20
-----------------------------------------------------------------------------
Accumulation Unit Value, End of Period $11.20 $15.22
-----------------------------------------------------------------------------
Number of Units Outstanding, End of Period -- 25,821
-----------------------------------------------------------------------------
FIDELITY VIP HIGH INCOME SUB-ACCOUNT
-----------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period $10.00 $10.43
-----------------------------------------------------------------------------
Accumulation Unit Value, End of Period $10.43 $11.16
-----------------------------------------------------------------------------
Number of Units Outstanding, End of Period -- 3,837
-----------------------------------------------------------------------------
MFS EMERGING GROWTH SUB-ACCOUNT
-----------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period $10.00 $11.95
-----------------------------------------------------------------------------
Accumulation Unit Value, End of Period $11.95 $20.88
-----------------------------------------------------------------------------
Number of Units Outstanding, End of Period -- 1,059
-----------------------------------------------------------------------------
</TABLE>
A-1
<PAGE>
<TABLE>
<CAPTION>
FOR THE YEARS BEGINNING JANUARY 1* AND ENDED DECEMBER 31, 1998 1999
-----------------------------------------------------------------------------
<S> <C> <C>
MFS GROWTH WITH INCOME SUB-ACCOUNT
-----------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period $10.00 $10.81
-----------------------------------------------------------------------------
Accumulation Unit Value, End of Period $10.81 $11.41
-----------------------------------------------------------------------------
Number of Units Outstanding, End of Period -- 6,295
-----------------------------------------------------------------------------
MFS RESEARCH SUB-ACCOUNT(3)
-----------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period -- $10.00
-----------------------------------------------------------------------------
Accumulation Unit Value, End of Period -- $11.53
-----------------------------------------------------------------------------
Number of Units Outstanding, End of Period -- --
-----------------------------------------------------------------------------
OPPENHEIMER AGGRESSIVE GROWTH SUB-ACCOUNT(3)
-----------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period -- $10.00
-----------------------------------------------------------------------------
Accumulation Unit Value, End of Period -- $13.73
-----------------------------------------------------------------------------
Number of Units Outstanding, End of Period -- --
-----------------------------------------------------------------------------
OPPENHEIMER CAPITAL APPRECIATION SUB-ACCOUNT(3)
-----------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period -- $10.00
-----------------------------------------------------------------------------
Accumulation Unit Value, End of Period -- $12.11
-----------------------------------------------------------------------------
Number of Units Outstanding, End of Period -- --
-----------------------------------------------------------------------------
OPPENHEIMER GLOBAL SECURITIES SUB-ACCOUNT(3)
-----------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period -- $10.00
-----------------------------------------------------------------------------
Accumulation Unit Value, End of Period -- $13.11
-----------------------------------------------------------------------------
Number of Units Outstanding, End of Period -- --
-----------------------------------------------------------------------------
OPPENHEIMER MAIN STREET GROWTH AND INCOME SUB-ACCOUNT(3)
-----------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period -- $10.00
-----------------------------------------------------------------------------
Accumulation Unit Value, End of Period -- $10.78
-----------------------------------------------------------------------------
Number of Units Outstanding, End of Period -- --
-----------------------------------------------------------------------------
OPPENHEIMER STRATEGIC BOND SUB-ACCOUNT(3)
-----------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period -- $10.00
-----------------------------------------------------------------------------
Accumulation Unit Value, End of Period -- $10.16
-----------------------------------------------------------------------------
Number of Units Outstanding, End of Period -- --
-----------------------------------------------------------------------------
STI CAPITAL APPRECIATION SUB-ACCOUNT(1)
-----------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period -- $10.00
-----------------------------------------------------------------------------
Accumulation Unit Value, End of Period -- $10.60
-----------------------------------------------------------------------------
Number of Units Outstanding, End of Period -- 10,425
-----------------------------------------------------------------------------
STI VALUE INCOME STOCK SUB-ACCOUNT(1)
-----------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period -- $10.00
-----------------------------------------------------------------------------
Accumulation Unit Value, End of Period -- $ 9.46
-----------------------------------------------------------------------------
Number of Units Outstanding, End of Period -- 5,699
-----------------------------------------------------------------------------
TEMPLETON STOCK (CLASS 2) SUB-ACCOUNT(3,4)
-----------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period -- $10.00
-----------------------------------------------------------------------------
Accumulation Unit Value, End of Period -- $11.37
-----------------------------------------------------------------------------
Number of Units Outstanding, End of Period -- --
-----------------------------------------------------------------------------
TEMPLETON BOND SUB-ACCOUNT (CLASS 2) (3,4)
-----------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period -- $10.00
-----------------------------------------------------------------------------
Accumulation Unit Value, End of Period -- $ 9.26
-----------------------------------------------------------------------------
Number of Units Outstanding, End of Period -- --
-----------------------------------------------------------------------------
</TABLE>
* The Contracts were first offered on November 10, 1998. The Accumulation Unit
Values in this table reflect a mortality and expense risk charge of 1.05%
and an administrative expense charge of 0.10%. All of the Variable
Sub-Accounts commenced operations on or before November 10, 1998 except as
described in the footnotes below.
(1) Variable Sub-Accounts commenced operations on May 1, 1999.
(2) Variable Sub-Accounts commenced operations on November 11, 1999.
(3) Variable Sub-Accounts commenced operations on December 17, 1999.
(4) Effective May 1, 2000, the Portfolios in which the Templeton Stock
(Class 2) and Templeton Bond (Class 2) Variable Sub-Accounts invested were
merged into the Templeton Growth Securities (Class 2) and Templeton Global
Income Securities (Class 2) Portfolios. Accordingly, for administrative
convenience, as of May 1, 2000, the corresponding Variable Sub-Accounts
merged with and into new Variable Sub-Accounts named Templeton Growth
Securities (Class 2) and Templeton Bond (Class 2), with an Accumulation Unit
Value starting at $10.00.
No Accumulation Unit Values are shown for the following new sub-accounts
that commenced operations as of the date of this prospectus. Fidelity VIP
Index 500, Fidelity VIP Overseas, Oppenheimer Multiple Strategies, STI
Growth and Income, STI International Equity, STI Investment Grade Bond, STI
Mid-Cap Equity, STI, Quality Growth Stock, STI Small Cap Value Equity,
Templeton Global Income Securities (Class 2), Templeton Growth Securities
(Class 2).
A-2
<PAGE>
ACCUMULATION UNIT VALUE AND NUMBER OF
ACCUMULATION UNITS OUTSTANDING FOR EACH
VARIABLE SUB-ACCOUNT SINCE CONTRACTS WERE FIRST OFFERED
WITH ENHANCED DEATH BENEFIT RIDER
<TABLE>
<CAPTION>
FOR THE YEARS BEGINNING JANUARY 1* AND ENDED DECEMBER 31, 1998 1999
-----------------------------------------------------------------------------
<S> <C> <C>
AIM V.I. BALANCED SUB-ACCOUNT
-----------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period $10.00 $10.73
-----------------------------------------------------------------------------
Accumulation Unit Value, End of Period $10.73 $12.63
-----------------------------------------------------------------------------
Number of Units Outstanding, End of Period -- 16,023
-----------------------------------------------------------------------------
AIM V.I. CAPITAL APPRECIATION SUB-ACCOUNT
-----------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period $10.00 $11.39
-----------------------------------------------------------------------------
Accumulation Unit Value, End of Period $11.39 $16.25
-----------------------------------------------------------------------------
Number of Units Outstanding, End of Period 1,466 17,447
-----------------------------------------------------------------------------
AIM V.I. GROWTH SUB-ACCOUNT
-----------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period $10.00 $11.82
-----------------------------------------------------------------------------
Accumulation Unit Value, End of Period $11.82 $15.78
-----------------------------------------------------------------------------
Number of Units Outstanding, End of Period -- 14,400
-----------------------------------------------------------------------------
AIM V.I. GROWTH AND INCOME SUB-ACCOUNT
-----------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period $10.00 $11.36
-----------------------------------------------------------------------------
Accumulation Unit Value, End of Period $11.36 $15.05
-----------------------------------------------------------------------------
Number of Units Outstanding, End of Period -- 16,349
-----------------------------------------------------------------------------
AIM V.I. HIGH YIELD SUB-ACCOUNT
-----------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period $10.00 $10.31
-----------------------------------------------------------------------------
Accumulation Unit Value, End of Period $10.31 $11.25
-----------------------------------------------------------------------------
Number of Units Outstanding, End of Period -- 3,356
-----------------------------------------------------------------------------
AIM V.I. VALUE SUB-ACCOUNT
-----------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period $10.00 $11.52
-----------------------------------------------------------------------------
Accumulation Unit Value, End of Period $11.52 $14.76
-----------------------------------------------------------------------------
Number of Units Outstanding, End of Period -- 35,445
-----------------------------------------------------------------------------
FEDERATED PRIME MONEY FUND II SUB-ACCOUNT(2)
-----------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period -- $10.00
-----------------------------------------------------------------------------
Accumulation Unit Value, End of Period -- $10.06
-----------------------------------------------------------------------------
Number of Units Outstanding, End of Period -- 2,093
-----------------------------------------------------------------------------
FIDELITY VIP CONTRAFUND-Registered Trademark- SUB-ACCOUNT
-----------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period $10.00 $11.66
-----------------------------------------------------------------------------
Accumulation Unit Value, End of Period $11.66 $14.29
-----------------------------------------------------------------------------
Number of Units Outstanding, End of Period -- 30,660
-----------------------------------------------------------------------------
FIDELITY VIP EQUITY-INCOME SUB-ACCOUNT
-----------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period $10.00 $10.47
-----------------------------------------------------------------------------
Accumulation Unit Value, End of Period $10.47 $10.99
-----------------------------------------------------------------------------
Number of Units Outstanding, End of Period -- 17,530
-----------------------------------------------------------------------------
FIDELITY VIP GROWTH SUB-ACCOUNT
-----------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period $10.00 $11.20
-----------------------------------------------------------------------------
Accumulation Unit Value, End of Period $11.20 $15.19
-----------------------------------------------------------------------------
Number of Units Outstanding, End of Period 313 45,514
-----------------------------------------------------------------------------
FIDELITY VIP HIGH INCOME SUB-ACCOUNT
-----------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period $10.00 $10.43
-----------------------------------------------------------------------------
Accumulation Unit Value, End of Period $10.43 $11.13
-----------------------------------------------------------------------------
Number of Units Outstanding, End of Period -- 3,914
-----------------------------------------------------------------------------
MFS EMERGING GROWTH SUB-ACCOUNT
-----------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period $10.00 $11.95
-----------------------------------------------------------------------------
Accumulation Unit Value, End of Period $11.95 $20.83
-----------------------------------------------------------------------------
Number of Units Outstanding, End of Period -- 3,068
-----------------------------------------------------------------------------
</TABLE>
A-3
<PAGE>
<TABLE>
<CAPTION>
FOR THE YEARS BEGINNING JANUARY 1* AND ENDED DECEMBER 31, 1998 1999
-----------------------------------------------------------------------------
<S> <C> <C>
MFS GROWTH WITH INCOME SUB-ACCOUNT
-----------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period $10.00 $10.81
-----------------------------------------------------------------------------
Accumulation Unit Value, End of Period $10.81 $11.38
-----------------------------------------------------------------------------
Number of Units Outstanding, End of Period -- 3,323
-----------------------------------------------------------------------------
MFS RESEARCH SUB-ACCOUNT(3)
-----------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period -- $10.00
-----------------------------------------------------------------------------
Accumulation Unit Value, End of Period -- $11.52
-----------------------------------------------------------------------------
Number of Units Outstanding, End of Period -- --
-----------------------------------------------------------------------------
OPPENHEIMER AGGRESSIVE GROWTH SUB-ACCOUNT(3)
-----------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period -- $10.00
-----------------------------------------------------------------------------
Accumulation Unit Value, End of Period -- $13.72
-----------------------------------------------------------------------------
Number of Units Outstanding, End of Period -- --
-----------------------------------------------------------------------------
OPPENHEIMER CAPITAL APPRECIATION SUB-ACCOUNT(3)
-----------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period -- $10.00
-----------------------------------------------------------------------------
Accumulation Unit Value, End of Period -- $12.11
-----------------------------------------------------------------------------
Number of Units Outstanding, End of Period -- --
-----------------------------------------------------------------------------
OPPENHEIMER GLOBAL SECURITIES SUB-ACCOUNT(3)
-----------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period -- $10.00
-----------------------------------------------------------------------------
Accumulation Unit Value, End of Period -- $13.10
-----------------------------------------------------------------------------
Number of Units Outstanding, End of Period -- --
-----------------------------------------------------------------------------
OPPENHEIMER MAIN STREET GROWTH AND INCOME SUB-ACCOUNT(3)
-----------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period -- $10.00
-----------------------------------------------------------------------------
Accumulation Unit Value, End of Period -- $10.77
-----------------------------------------------------------------------------
Number of Units Outstanding, End of Period -- --
-----------------------------------------------------------------------------
OPPENHEIMER STRATEGIC BOND SUB-ACCOUNT(3)
-----------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period -- $10.00
-----------------------------------------------------------------------------
Accumulation Unit Value, End of Period -- $10.16
-----------------------------------------------------------------------------
Number of Units Outstanding, End of Period -- --
-----------------------------------------------------------------------------
STI CAPITAL APPRECIATION SUB-ACCOUNT(1)
-----------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period -- $10.00
-----------------------------------------------------------------------------
Accumulation Unit Value, End of Period -- $10.60
-----------------------------------------------------------------------------
Number of Units Outstanding, End of Period -- 12,985
-----------------------------------------------------------------------------
STI VALUE INCOME STOCK SUB-ACCOUNT(1)
-----------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period -- $10.00
-----------------------------------------------------------------------------
Accumulation Unit Value, End of Period -- $ 9.46
-----------------------------------------------------------------------------
Number of Units Outstanding, End of Period -- 4,408
-----------------------------------------------------------------------------
TEMPLETON STOCK (CLASS 2) SUB-ACCOUNT(3,4)
-----------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period -- $10.00
-----------------------------------------------------------------------------
Accumulation Unit Value, End of Period -- $11.36
-----------------------------------------------------------------------------
Number of Units Outstanding, End of Period -- --
-----------------------------------------------------------------------------
TEMPLETON BOND SUB-ACCOUNT (CLASS 2) (3,4)
-----------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period -- $10.00
-----------------------------------------------------------------------------
Accumulation Unit Value, End of Period -- $ 9.25
-----------------------------------------------------------------------------
Number of Units Outstanding, End of Period -- --
-----------------------------------------------------------------------------
</TABLE>
* The Contracts were first offered on November 10, 1998. The Accumulation Unit
Values in this table reflect a mortality and expense risk charge of 1.27%
and an administrative expense charge of 0.10%. All of the Variable
Sub-Accounts commenced operations on or before November 10, 1998 except as
described in the footnotes below.
(1) Variable Sub-Accounts commenced operations on May 1, 1999.
(2) Variable Sub-Accounts commenced operations on November 11, 1999.
(3) Variable Sub-Accounts commenced operations on December 17, 1999.
(4) Effective May 1, 2000, the Portfolios in which the Templeton Stock
(Class 2) and Templeton Bond (Class 2) Variable Sub-Accounts invested were
merged into the Templeton Growth Securities (Class 2) and Templeton Global
Income Securities (Class 2) Portfolios. Accordingly, for administrative
convenience, as of May 1, 2000, the corresponding Variable Sub-Accounts
merged with and into new Variable Sub-Accounts named Templeton Growth
Securities (Class 2) and Templeton Bond (Class 2), with an Accumulation Unit
Value starting at $10.00.
No Accumulation Unit Values are shown for the following new sub-accounts
that commenced operations as of the date of this prospectus. Fidelity VIP
Index 500, Fidelity VIP Overseas, Oppenheimer Multiple Strategies, STI
Growth and Income, STI International Equity, STI Investment Grade Bond, STI
Mid-Cap Equity, STI, Quality Growth Stock, STI Small Cap Value Equity,
Templeton Global Income Securities (Class 2), Templeton Growth Securities
(Class 2).
A-4
<PAGE>
ACCUMULATION UNIT VALUE AND NUMBER OF
ACCUMULATION UNITS OUTSTANDING FOR EACH
VARIABLE SUB-ACCOUNT SINCE CONTRACTS WERE FIRST OFFERED
WITH ENHANCED DEATH AND INCOME BENEFIT COMBINATION RIDER
<TABLE>
<CAPTION>
FOR THE YEARS BEGINNING JANUARY 1* AND ENDED DECEMBER 31, 1998 1999
-----------------------------------------------------------------------------
<S> <C> <C>
AIM V.I. BALANCED SUB-ACCOUNT
-----------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period $10.00 $10.73
-----------------------------------------------------------------------------
Accumulation Unit Value, End of Period $10.73 $12.60
-----------------------------------------------------------------------------
Number of Units Outstanding, End of Period 405 43,121
-----------------------------------------------------------------------------
AIM V.I. CAPITAL APPRECIATION SUB-ACCOUNT
-----------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period $10.00 $11.39
-----------------------------------------------------------------------------
Accumulation Unit Value, End of Period $11.39 $16.21
-----------------------------------------------------------------------------
Number of Units Outstanding, End of Period 398 16,046
-----------------------------------------------------------------------------
AIM V.I. GROWTH SUB-ACCOUNT
-----------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period $10.00 $11.82
-----------------------------------------------------------------------------
Accumulation Unit Value, End of Period $11.82 $15.74
-----------------------------------------------------------------------------
Number of Units Outstanding, End of Period 386 21,246
-----------------------------------------------------------------------------
AIM V.I. GROWTH AND INCOME SUB-ACCOUNT
-----------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period $10.00 $11.36
-----------------------------------------------------------------------------
Accumulation Unit Value, End of Period $11.36 $15.01
-----------------------------------------------------------------------------
Number of Units Outstanding, End of Period -- 11,459
-----------------------------------------------------------------------------
AIM V.I. HIGH YIELD SUB-ACCOUNT
-----------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period $10.00 $10.31
-----------------------------------------------------------------------------
Accumulation Unit Value, End of Period $10.31 $11.22
-----------------------------------------------------------------------------
Number of Units Outstanding, End of Period -- 185
-----------------------------------------------------------------------------
AIM V.I. VALUE SUB-ACCOUNT
-----------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period $10.00 $11.51
-----------------------------------------------------------------------------
Accumulation Unit Value, End of Period $11.51 $14.73
-----------------------------------------------------------------------------
Number of Units Outstanding, End of Period -- 34,288
-----------------------------------------------------------------------------
FEDERATED PRIME MONEY FUND II SUB-ACCOUNT(2)
-----------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period -- $10.00
-----------------------------------------------------------------------------
Accumulation Unit Value, End of Period -- $10.06
-----------------------------------------------------------------------------
Number of Units Outstanding, End of Period -- 5,291
-----------------------------------------------------------------------------
FIDELITY VIP CONTRAFUND-Registered Trademark- SUB-ACCOUNT
-----------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period $10.00 $11.65
-----------------------------------------------------------------------------
Accumulation Unit Value, End of Period $11.65 $14.26
-----------------------------------------------------------------------------
Number of Units Outstanding, End of Period 387 32,161
-----------------------------------------------------------------------------
FIDELITY VIP EQUITY-INCOME SUB-ACCOUNT
-----------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period $10.00 $10.47
-----------------------------------------------------------------------------
Accumulation Unit Value, End of Period $10.47 $10.96
-----------------------------------------------------------------------------
Number of Units Outstanding, End of Period -- 11,621
-----------------------------------------------------------------------------
FIDELITY VIP GROWTH SUB-ACCOUNT
-----------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period $10.00 $11.19
-----------------------------------------------------------------------------
Accumulation Unit Value, End of Period $11.19 $15.15
-----------------------------------------------------------------------------
Number of Units Outstanding, End of Period -- 22,088
-----------------------------------------------------------------------------
FIDELITY VIP HIGH INCOME SUB-ACCOUNT
-----------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period $10.00 $10.43
-----------------------------------------------------------------------------
Accumulation Unit Value, End of Period $10.43 $11.10
-----------------------------------------------------------------------------
Number of Units Outstanding, End of Period -- 3,667
-----------------------------------------------------------------------------
MFS EMERGING GROWTH SUB-ACCOUNT
-----------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period $10.00 $11.94
-----------------------------------------------------------------------------
Accumulation Unit Value, End of Period $11.94 $20.78
-----------------------------------------------------------------------------
Number of Units Outstanding, End of Period 377 19,189
-----------------------------------------------------------------------------
</TABLE>
A-5
<PAGE>
<TABLE>
<CAPTION>
FOR THE YEARS BEGINNING JANUARY 1* AND ENDED DECEMBER 31, 1998 1999
-----------------------------------------------------------------------------
<S> <C> <C>
MFS GROWTH WITH INCOME SUB-ACCOUNT
-----------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period $10.00 $10.81
-----------------------------------------------------------------------------
Accumulation Unit Value, End of Period $10.81 $11.35
-----------------------------------------------------------------------------
Number of Units Outstanding, End of Period -- 4,808
-----------------------------------------------------------------------------
MFS RESEARCH SUB-ACCOUNT(3)
-----------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period -- $10.00
-----------------------------------------------------------------------------
Accumulation Unit Value, End of Period -- $11.52
-----------------------------------------------------------------------------
Number of Units Outstanding, End of Period -- --
-----------------------------------------------------------------------------
OPPENHEIMER AGGRESSIVE GROWTH SUB-ACCOUNT(3)
-----------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period -- $10.00
-----------------------------------------------------------------------------
Accumulation Unit Value, End of Period -- $13.72
-----------------------------------------------------------------------------
Number of Units Outstanding, End of Period -- --
-----------------------------------------------------------------------------
OPPENHEIMER CAPITAL APPRECIATION SUB-ACCOUNT(3)
-----------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period -- $10.00
-----------------------------------------------------------------------------
Accumulation Unit Value, End of Period -- $12.10
-----------------------------------------------------------------------------
Number of Units Outstanding, End of Period -- --
-----------------------------------------------------------------------------
OPPENHEIMER GLOBAL SECURITIES SUB-ACCOUNT(3)
-----------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period -- $10.00
-----------------------------------------------------------------------------
Accumulation Unit Value, End of Period -- $13.10
-----------------------------------------------------------------------------
Number of Units Outstanding, End of Period -- --
-----------------------------------------------------------------------------
OPPENHEIMER MAIN STREET GROWTH AND INCOME SUB-ACCOUNT(3)
-----------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period -- $10.00
-----------------------------------------------------------------------------
Accumulation Unit Value, End of Period -- $10.77
-----------------------------------------------------------------------------
Number of Units Outstanding, End of Period -- --
-----------------------------------------------------------------------------
OPPENHEIMER STRATEGIC BOND SUB-ACCOUNT(3)
-----------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period -- $10.00
-----------------------------------------------------------------------------
Accumulation Unit Value, End of Period -- $10.15
-----------------------------------------------------------------------------
Number of Units Outstanding, End of Period -- --
-----------------------------------------------------------------------------
STI CAPITAL APPRECIATION SUB-ACCOUNT(1)
-----------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period -- $10.00
-----------------------------------------------------------------------------
Accumulation Unit Value, End of Period -- $10.59
-----------------------------------------------------------------------------
Number of Units Outstanding, End of Period -- 21,740
-----------------------------------------------------------------------------
STI VALUE INCOME STOCK SUB-ACCOUNT(1)
-----------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period -- $10.00
-----------------------------------------------------------------------------
Accumulation Unit Value, End of Period -- $ 9.46
-----------------------------------------------------------------------------
Number of Units Outstanding, End of Period -- 11,848
-----------------------------------------------------------------------------
TEMPLETON STOCK (CLASS 2) SUB-ACCOUNT(3,4)
-----------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period -- $10.00
-----------------------------------------------------------------------------
Accumulation Unit Value, End of Period -- $11.36
-----------------------------------------------------------------------------
Number of Units Outstanding, End of Period -- --
-----------------------------------------------------------------------------
TEMPLETON BOND SUB-ACCOUNT (CLASS 2) (3,4)
-----------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period -- $10.00
-----------------------------------------------------------------------------
Accumulation Unit Value, End of Period -- $ 9.24
-----------------------------------------------------------------------------
Number of Units Outstanding, End of Period -- --
-----------------------------------------------------------------------------
</TABLE>
* The Contracts were first offered on November 10, 1998. The Accumulation Unit
Values in this table reflect a mortality and expense risk charge of 1.27%
and an administrative expense charge of 0.10%. All of the Variable
Sub-Accounts commenced operations on or before November 10, 1998 except as
described in the footnotes below.
(1) Variable Sub-Accounts commenced operations on May 1, 1999.
(2) Variable Sub-Accounts commenced operations on November 11, 1999.
(3) Variable Sub-Accounts commenced operations on December 17, 1999.
(4) Effective May 1, 2000, the Portfolios in which the Templeton Stock
(Class 2) and Templeton Bond (Class 2) Variable Sub-Accounts invested was
were into the Templeton Growth Securities (Class 2) and Templeton Global
Income Securities (Class 2) Portfolios. Accordingly, for administrative
convenience, as of May 1, 2000, the corresponding Variable Sub-Accounts
merged with and into new Variable Sub-Accounts named Templeton Growth
Securities (Class 2) and Templeton Bond (Class 2), with an Accumulation Unit
Value starting at $10.00.
No Accumulation Unit Values are shown for the following new sub-accounts
that commenced operations as of the date of this prospectus. Fidelity VIP
Index 500, Fidelity VIP Overseas, Oppenheimer Multiple Strategies, STI
Growth and Income, STI International Equity, STI Investment Grade Bond, STI
Mid-Cap Equity, STI, Quality Growth Stock, STI Small Cap Value Equity,
Templeton Global Income Securities (Class 2), Templeton Growth Securities
(Class 2).
A-6
<PAGE>
APPENDIX B
MARKET VALUE ADJUSTMENT
-------------------------------------------------------------------
The Market Value Adjustment is based on the following:
I = the Treasury Rate for a maturity equal to the Guarantee Period for the week
preceding the establishment of the Guarantee Period.
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 Guarantee Period.
J = the Treasury Rate for a maturity equal to the Guarantee Period for the week
preceding the receipt of the withdrawal, transfer, death benefit, or income
payment request. If a Note with a maturity of the original Guarantee Period is
not available, we will use a weighted average.
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 X (I - J) X N
To determine the Market Value Adjustment, we will multiply the Market Value
Adjustment factor by the amount transferred, withdrawn (in excess of the Free
Withdrawal Amount), paid as a death benefit, or applied to an Income Plan from a
Guarantee Period at any time other than during the 30 day period after such
Guarantee Period expires.
B-1
<PAGE>
EXAMPLES OF MARKET VALUE ADJUSTMENT
-------------------------------------------------------------------
<TABLE>
<S> <C>
Purchase Payment: $10,000 allocated to a Guarantee Period
Guarantee Period: 5 years
Interest Rate: 4.50%
Full Withdrawal: End of Contract Year 3
</TABLE>
NOTE: These examples assume that premium taxes are not applicable.
EXAMPLE 1: (ASSUMES DECLINING INTEREST RATES)
Step 1: Calculate Contract Value at End of Contract Year 3:
= 10,000 X (1.045)TO THE POWER OF 3 = $11,411.66
Step 2: Calculate the Free Withdrawal Amount:
= .15 X 10,000 = $1,500.00
Step 3: Calculate the Withdrawal Charge:
= .05 X (10,000 - 1,500) = $425.00
Step 4: Calculate the Market Value Adjustment:
I = 4.50%
J = 4.20%
730 DAYS
N = -------- = 2
365 DAYS
MARKET VALUE ADJUSTMENT FACTOR: .9 X (I - J) X N
= .9 X (.045 - .042) X 2 = .0054
MARKET VALUE ADJUSTMENT = MARKET VALUE ADJUSTMENT FACTOR X AMOUNT SUBJECT TO
MARKET VALUE ADJUSTMENT:
= .0054 X (11,411.66 - 1,500) = $53.52
Step 5: Calculate the amount received by Contract owner as a result of
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 Contract Value at End of Contract Year 3:
= 10,000.00 X (1.045)TO THE POWER OF 3 = $11,411.66
Step 2: Calculate the Free Withdrawal Amount:
= .15 X (10,000.00) = $1,500.00
Step 3: Calculate the Withdrawal Charge:
= .05 X (10,000.00 - 1,500.00) = $425.00
Step 4: Calculate the Market Value Adjustment:
I = 4.50%
J = 4.80%
730 DAYS
N = -------- = 2
365 DAYS
MARKET VALUE ADJUSTMENT FACTOR: .9 X (I - J) X N
= .9 X (.045 - .048) X 2 = -.0054
MARKET VALUE ADJUSTMENT = MARKET VALUE ADJUSTMENT FACTOR X AMOUNT SUBJECT TO
MARKET VALUE ADJUSTMENT:
= -.0054 X (11,411.66 - 1,500) = -$53.52
Step 5: Calculate the amount received by Contract owner as a result of
full withdrawal at the end of Contract Year 3:
= 11,411.66 - 425.00 - 53.52 = $10,933.14
B-2
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
TABLE OF CONTENTS
-------------------------------------------------------------------
<TABLE>
<CAPTION>
Description
<S> <C>
----------------------------------------------------------------------------
Additions, Deletions or Substitutions of Investments
----------------------------------------------------------------------------
The Contract
----------------------------------------------------------------------------
Purchases of Contracts
----------------------------------------------------------------------------
Tax-free Exchanges (1035 Exchanges, Rollovers and Transfers)
----------------------------------------------------------------------------
Performance Information
----------------------------------------------------------------------------
Standardized Total Returns
----------------------------------------------------------------------------
Non-standardized Total Returns
----------------------------------------------------------------------------
Adjusted Historical Total Returns
----------------------------------------------------------------------------
Calculation of Accumulation Unit Values
----------------------------------------------------------------------------
Calculation of Variable Income Payments
----------------------------------------------------------------------------
Calculation of Annuity Unit Values
----------------------------------------------------------------------------
</TABLE>
<TABLE>
----------------------------------------------------------------------------
<CAPTION>
Description
<S> <C>
General Matters
----------------------------------------------------------------------------
Incontestability
----------------------------------------------------------------------------
Settlements
----------------------------------------------------------------------------
Safekeeping of the Variable Account's Assets
----------------------------------------------------------------------------
Premium Taxes
----------------------------------------------------------------------------
Tax Reserves
----------------------------------------------------------------------------
Federal Tax Matters
----------------------------------------------------------------------------
Qualified Plans
----------------------------------------------------------------------------
Experts
----------------------------------------------------------------------------
Financial Statements
----------------------------------------------------------------------------
</TABLE>
------------------------------
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING IN ANY JURISDICTION IN WHICH
SUCH OFFERING MAY NOT LAWFULLY BE MADE. WE DO NOT AUTHORIZE ANYONE TO PROVIDE
ANY INFORMATION OR REPRESENTATIONS REGARDING THE OFFERING DESCRIBED IN THIS
PROSPECTUS OTHER THAN AS CONTAINED IN THIS PROSPECTUS.
C-1
<PAGE>
GLG677
<PAGE>
THE GLENBROOK PROVIDER VARIABLE ANNUITY
Glenbrook Life and Annuity Company Statement of Additional Information
Multi-Manager Variable Account Dated May 1, 2000
Post Office Box 94092
Palatine, IL 60094-4039
1 (800) 755- 5275
This Statement of Additional Information supplements the information in the
prospectus for each of the two forms Glenbrook Provider Variable Annuity
Contracts that we offer. This Statement of Additional Information is not a
prospectus. You should read it with the prospectus, dated May 1, 2000, for each
form of Contract. You may obtain a prospectus by calling or writing us at the
address or telephone number listed above.
Except as otherwise noted, this Statement of Additional Information uses the
same defined terms as the prospectus for each of the two forms Glenbrook
Provider Variable Annuity Contracts that we offer. For convenience, we sometimes
refer to the second form of Contract that offers the Enhanced Death and Income
Benefit Combination Rider as the Glenbrook Enhanced Provider Variable Annuity
contract ("Enhanced Provider Contract").
Certain Variable Sub-Accounts offered with the Enhanced Provider Contract are
not available under the Provider Contract. Also, the Enhanced Provider Contracts
are offered through multiple sales channels that may offer different
combinations of the Variable Sub-Accounts. If you own an Enhanced Provider
Contract, please refer to your prospectus for the Variable Sub-Accounts
available under your Contract.
TABLE OF CONTENTS
Description Page
Additions, Deletions or Substitutions of Investments
The Contract
Purchases of Contracts
Tax-free Exchanges (1035 Exchanges, Rollovers and
Transfers)
Performance Information
Standardized Total Returns
Non-standardized Total Returns
Adjusted historical Total Returns
Calculation of Accumulation Unit Values
Calculation of Variable Income Payments
Calculation of Annuity Unit Values
General Matters
Incontestability
Settlements
Safekeeping of the Variable Account's Assets
Premium Taxes
Tax Reserves
Federal Tax Matters
Qualified Plans
Experts
Financial Statements
<PAGE>
ADDITIONS, DELETIONS OR SUBSTITUTIONS OF INVESTMENTS
We may add, delete, or substitute the Portfolio shares held by any Variable
Sub-Account to the extent the law permits. We may substitute shares of any
Portfolio with those of another Portfolio of the same or different mutual
Portfolio if the shares of the Portfolio are no longer available for investment,
or if we believe investment in any Portfolio would become inappropriate in view
of the purposes of the Variable Account.
We will not substitute shares attributable to a Contract owner's interest in a
Variable Sub-Account until we have notified the Contract owner of the change,
and until the Securities and Exchange Commission has approved the change, to the
extent such notification and approval are required by law. 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 Contract owners.
We also may establish additional Variable Sub-Accounts or series of Variable
Sub-Accounts. Each additional Variable Sub-Account would purchase shares in a
new Portfolio of the same or different mutual fund. We may establish new
Variable Sub-Accounts when we believe marketing needs or investment conditions
warrant. We determine the basis on which we will offer any new Variable
Sub-Accounts in conjunction with the Contract to existing Contract owners. We
may eliminate one or more Variable Sub-Accounts if, in our sole discretion,
marketing, tax or investment conditions so warrant.
We may, by appropriate endorsement, change the Contract as we believe necessary
or appropriate to reflect any substitution or change in the Portfolios. If we
believe the best interests of persons having voting rights under the Contracts
would be served, we may operate the Variable Account as a management company
under the Investment Company Act of 1940 or we may withdraw its registration
under such Act if such registration is no longer required.
<PAGE>
THE CONTRACT
The Contract is primarily designed to aid individuals in long-term financial
planning. You can use it for retirement planning regardless of whether the
retirement plan qualifies for special federal income tax treatment.
PURCHASE OF CONTRACTS
We offer the Contracts to the public through banks as well as brokers licensed
under the federal securities laws and state insurance laws. The principal
underwriter for the Variable Account, ALFS, Inc.* ("ALFS"), distributes the
Contracts. ALFS is an affiliate of Glenbrook. The offering of the Contracts is
continuous. We do not anticipate discontinuing the offering of the Contracts,
but we reserve the right to do so at any time.
TAX-FREE EXCHANGES (1035 EXCHANGES, ROLLOVERS AND TRANSFERS)
We accept purchase payments that are the proceeds of a Contract in a transaction
qualifying for a tax-free exchange under Section 1035 of the Internal Revenue
Code ("Code"). Except as required by federal law in calculating the basis of the
Contract, we do not differentiate between Section 1035 purchase payments and
non-Section 1035 purchase payments.
We also accept "rollovers" and transfers from Contracts qualifying as
tax-sheltered annuities ("TSAs"), individual retirement annuities or accounts
("IRAs"), or any other Qualified Contract that is eligible to "rollover" into an
IRA. We differentiate among non-Qualified Contracts, TSAs, IRAs and other
Qualified Contracts to the extent necessary to comply with federal tax laws. For
example, we restrict the assignment, transfer, or pledge of TSAs and IRAs so the
Contracts will continue to qualify for special tax treatment. A Contract 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.
------------------------
*Effective May 1, 2000, Allstate Life Financial Services, Inc. was renamed ALFS,
Inc.
<PAGE>
PERFORMANCE INFORMATION
From time to time we may advertise the "standardized," "non-standardized," and
"adjusted historical" total returns of the Variable Sub-Accounts, as described
below. Please remember that past performance is not an estimate or guarantee of
future performance and does not necessarily represent the actual experience of
amounts invested by a particular Contract owner. No performance information is
shown for the Provider Contract which we are no longer marketing. Also, please
note that the performance figures shown do not reflect any applicable taxes.
STANDARDIZED TOTAL RETURNS
A Variable Sub-Account's standardized total return represents the average annual
total return of that Sub-Account over a particular period. We compute
standardized total return by finding the annual percentage rate that, 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 Variable Sub-Account's operations,
if shorter than any of the foregoing. We use the following formula prescribed by
the SEC for computing standardized total return:
1000(1 + T)n = ERV
where:
T = average annual total return
ERV = ending redeemable value of a hypothetical $1,000 payment
made at the beginning of 1, 5, or 10 year periods or
shorter period
n = number of years in the period
1000 = hypothetical $1,000 investment
When factoring in the withdrawal charge assessed upon redemption, we exclude the
Free Withdrawal Amount, which is the amount you can withdraw from the Contract
without paying a withdrawal charge. We also use the withdrawal charge that would
apply upon redemption at the end of each period. Thus, for example, when
factoring in the withdrawal charge for a one year standardized total return
calculation, we would use the withdrawal charge that applies to a withdrawal of
a purchase payment made one year prior.
When factoring in the contract maintenance charge, we pro rate the charge by
dividing (i) the contract maintenance charge by (ii) the average contract size
of $47,490. We then multiply the resulting percentage by a hypothetical $1,000
investment.
The standardized total returns for the Variable Sub-Accounts available under
each form of Contract for the periods ended December 31, 1999 are set out below.
No standardized total returns are shown for the Dreyfus VIF Money Market
the Fidelity VIP II Index 500, Fidelity VIP Overseas, Oppenheimer Multiple
Strategies/VA, STI Growth and Income, STI International Equity, STI Investment
Grade Bond, STI Mid-Cap Equity, STI Quality Growth Stock, STI Small Cap Equity,
and Templeton Bond Variable Sub-Accounts, because they commenced operations on
January 24, 2000 and the Franklin Small Cap (Class 2), Mutual Shares
Securities, Templeton Global Income Securities (Class 2) and Templeton Growth
Securities (Class 2) Sub-Accounts, which commenced operations on May 1, 2000.
The Enhanced Provider Contracts were first offered to the public on November 10,
1998. Accordingly, performance figures for certain Variable Sub-Accounts prior
to that date reflect the historical performance of the Variable Sub-Accounts,
adjusted to reflect the current level of charges that apply to the Variable
Sub-Accounts under the Enhanced Provider Contracts, as well as the withdrawal
and contract maintenance charges described above.
<PAGE>
Enhanced Provider Contracts
(Without the Enhanced Death Benefit Rider or the Enhanced Death and Income
Benefit Combination Rider)
<TABLE>
<CAPTION>
Ten Years or
Since Inception
Variable Sub-account 1 Year 5 Year (if less)*
------ ------ ----------------
<S> <C> <C> <C>
AIM V.I. Balanced 12.77% N/A 18.49%
AIM V.I. Capital Appreciation 37.79% N/A 32.37%
AIM V.I. Diversified Income -8.21% N/A -3.61%
AIM V.I. Global Utilities 26.86% N/A 21.74%
AIM V.I. Government Securities -10.30% N/A -1.01%
AIM V.I. Growth 28.52% N/A 33.85%
AIM V.I. Growth and Income 27.54% N/A 30.16%
AIM V.I. High Yield 4.09% N/A 6.53%
AIM V.I. International Equity 48.10% N/A 31.88%
AIM V.I. Value 23.24% N/A 30.01%
The Dreyfus Socially Responsible Growth 28.23% N/A 24.18%
Dreyfus Stock Index 14.05% N/A 22.56%
Dreyfus VIF Growth & Income 11.87% N/A 11.75%
Dreyfus VIF Money Market -1.62% N/A 1.98%
Dreyfus VIF Small Company Stock 4.17% N/A 3.50%
Federated Prime Money Fund II N/A N/A -4.53%**
Fidelity VIP Equity-Income -0.06% N/A 3.10%
Fidelity VIP Growth 30.69% N/A 23.06%
Fidelity VIP High Income 1.75% N/A -3.06%
Fidelity VIP Contrafund(R) 17.66% N/A 20.50%
Templeton Developing Markets Securities - Class 2 N/A N/A 16.49%**
Templeton International Securities N/A N/A 7.46%**
Templeton Stock N/A N/A 8.49%**
Goldman Sachs VIT Capital Growth 20.84% N/A 29.78%
Goldman Sachs Large Cap Growth 28.91% N/A 39.51%
Goldman Sachs VIT CORE(SM) Small Cap Equity 11.41% N/A 15.93%
Goldman Sachs VIT CORE(SM) U.S. Equity 18.28% N/A 25.25%
Goldman Sachs VIT Global Income -2.55% N/A -5.24%
Goldman Sachs Growth and Income 0% N/A 1.74%
Goldman Sachs VIT International Equity 26.23% N/A 32.01%
Goldman Sachs VIT Mid Cap Value Fund -6.41% N/A -5.85%
MFS Emerging Growth Series 69.52% N/A 43.63%
MFS Growth with Income Series 0.30% N/A 12.31%
MFS New Discovery Series 66.26% N/A 75.41%
MFS Research Series N/A N/A 10.15%**
Morgan Stanley Equity Growth 32.68% N/A 39.02%
Morgan Stanley Fixed Income -7.93% N/A -5.68%
Morgan Stanley International Magnum 18.59% N/A 20.16%
Morgan Stanley Global Equity -2.27% N/A 1.88%
Morgan Stanley U.S. Real Estate -7.77% N/A -5.35%
Morgan Stanley Mid Cap Value 14.04% N/A 22.00%
Morgan Stanley Value -8.20% N/A -7.66%
Neuberger Berman AMT Guardian 8.45% N/A 15.25%
Neuberger Berman AMT Mid-Cap Growth 46.96% N/A 66.75%
Neuberger Berman AMT Partners .97% N/A 3.66%
Oppenheimer Aggressive Growth N/A N/A 32.14%**
Oppenheimer Capital Appreciation N/A N/A 16.01%**
Oppenheimer Global Securities N/A N/A 25.96%**
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C>
Oppenheimer Main Street Growth and Income Fund N/A N/A 2.65%**
Oppenheimer Strategic Bond N/A N/A -3.52%**
STI Capital Appreciation N/A N/A .84%**
STI Value Income Stock N/A N/A -10.55%**
</TABLE>
*The Variable Sub-Accounts listed above commenced operations on November 10,
1998, with the exception of the following sub-accounts:
(a) STI Capital Appreciation and STI Value Income Stock Variable
Sub-Accounts, which commenced operations on May 1, 1999.
(b) Federated Prime Money II Fund Sub-Account, which commenced operations on
November 11, 1999; and
(c) Templeton Developing Markets Securities, Templeton International Securities,
MFS Research, Oppenheimer Aggressive Growth, Oppenheimer Capital Appreciation,
Oppenheimer Global Securities, Oppenheimer Main Street Growth & Income, and
Oppenheimer Strategic Bond variable Sub-Accounts, which commenced operations on
December 17, 1999.
**Performance figures are not annualized.
(With the Enhanced Death Benefit Rider)
<TABLE>
<CAPTION>
Ten Years or
Since Inception
Variable Sub-account 1 Year 5 Year (if less)*
------ ------ ----------------
<S> <C> <C> <C>
AIM V.I. Balanced 12.51% N/A 18.22%
AIM V.I. Capital Appreciation 37.48% N/A 32.07%
AIM V.I. Diversified Income -8.43% N/A -3.83%
AIM V.I. Global Utilities 26.57% N/A 21.47%
AIM V.I. Government Securities -10.51% N/A -1.24%
AIM V.I. Growth 28.22% N/A 33.55%
AIM V.I. Growth and Income 27.25% N/A 29.86%
AIM V.I. High Yield 3.85% N/A 6.28%
AIM V.I. International Equity 47.77% N/A 31.58%
AIM V.I. Value 22.96% N/A 29.71%
The Dreyfus Socially Responsible Growth 27.94% N/A 23.90%
Dreyfus Stock Index 13.79% N/A 22.28%
Dreyfus VIF Growth & Income 11.61% N/A 11.49%
Dreyfus VIF Money Market -1.84% N/A 1.75%
<PAGE>
Dreyfus VIF Small Company Stock 3.92% N/A 3.27%
Federated Prime Money Fund II N/A N/A -4.57%**
Fidelity VIP Equity-Income -0.29% N/A 2.86%
Fidelity VIP Growth 30.39% N/A 22.78%
Fidelity VIP High Income 1.51% N/A -3.28%
Fidelity VIP Contrafund(R) 17.39% N/A 20.23%
Templeton Developing Markets Securities - class 2 N/A N/A 16.44%**
Templeton International Securities N/A N/A 7.42%**
Templeton Stock N/A N/A 8.45%**
Goldman Sachs VIT Capital Growth 20.57% N/A 29.48%
Goldman Sachs VIT CORE Large Cap Growth 28.62% N/A 39.19%
Goldman Sachs VIT CORE(SM) Small Cap Equity 11.15% N/A 15.66%
Goldman Sachs VIT CORE(SM) U.S. Equity 18.01% N/A 24.96%
Goldman Sachs VIT Global Income -2.77% N/A -5.46%
Goldman Sachs Growth and Income -.23% N/A -.80%
Goldman Sachs VIT International Equity 25.94% N/A 31.71%
Goldman Sachs VIT Mid Cap Value Fund -6.63% N/A -6.06%
MFS Emerging Growth Series 69.14% N/A 43.31%
MFS Growth with Income Series 0.07% N/A 12.06%
MFS New Discovery Series 65.88% N/A 75.02%
MFS Research Series N/A N/A 10.11%**
Morgan Stanley Equity Growth 32.38% N/A 38.71%
Morgan Stanley Fixed Income -8.14% N/A -5.90%
Morgan Stanley Global Equity -2.49% N/A 1.64%
Morgan Stanley International Magnum 18.32% N/A 19.89%
Morgan Stanley Mid Cap Value 13.78% N/A 21.73%
Morgan Stanley U.S. Real Estate -7.99% N/A -5.57%
Morgan Stanley Value -8.41% N/A -7.87%
Neuberger Berman AMT Guardian 8.20% N/A 14.99%
Neuberger Berman AMT Mid-Cap Growth 46.62% N/A 66.36%
Neuberger Berman Partners 0.74% N/A 3.42%
Oppenheimer Aggressive Growth N/A N/A 32.09%**
Oppenheimer Capital Appreciation N/A N/A 15.97%**
Oppenheimer Global Securities N/A N/A 25.91%**
Oppenheimer Main Street Growth and Income Fund N/A N/A 2.61%**
Oppenheimer Multiple Strategies Fund/VA N/A N/A N/A
Oppenheimer Strategic Bond Fund/VA N/A N/A -3.56%**
STI Capital Appreciation Fund N/A N/A -.80%**
STI Value Income Stock Fund N/A N/A -10.58%**
</TABLE>
*The inception dates of the Variable Sub-Accounts appear in the first table
above.
<PAGE>
(With the Enhanced Death and Income Benefit Combination Rider)
<TABLE>
<CAPTION>
Ten Years or
Variable Sub-account 1 Year 5 Year Since Inception*
------ ------ ----------------
<S> <C> <C> <C>
AIM V.I. Balanced 12.25% N/A 17.95%
AIM V.I. Capital Appreciation 37.16% N/A 31.77%
AIM V.I. Diversified Income -8.64% N/A -4.05%
AIM V.I. Global Utilities 26.28% N/A 21.19%
AIM V.I. Government Securities -10.71% N/A -1.47%
AIM V.I. Growth 27.93% N/A 33.25%
AIM V.I. Growth and Income 26.96% N/A 29.57%
AIM V.I. High Yield 3.61% N/A 6.04%
AIM V.I. International Equity 47.43% N/A 31.28%
AIM V.I. Value 22.68% N/A 29.42%
The Dreyfus Socially Responsible Growth 27.64% N/A 23.62%
Dreyfus Stock Index 13.53% N/A 22.00%
Dreyfus VIF Growth & Income 11.35% N/A 11.24%
Dreyfus VIF Money Market -2.07% N/A 1.52%
Dreyfus VIF Small Company Stock 3.69% N/A 3.03%
Federated Prime Money Fund II N/A N/A -4.60%**
Fidelity VIP Equity-Income -0.52% N/A 11.71%
Fidelity VIP Growth 30.10% N/A 16.32%
Fidelity VIP High Income 1.28% N/A 9.30%
Fidelity VIP Contrafund(R) 17.12% N/A 19.96%
Templeton Developing Markets Securities - class 2 N/A N/A 16.40%**
Templeton International Securities N/A N/A 7.38%**
Templeton Stock N/A N/A 8.41%**
Goldman Sachs VIT Capital Growth 17.57% N/A 26.63%
Goldman Sachs VIT CORE Large Cap Growth 28.32% N/A 38.88%
Goldman Sachs VIT CORE(SM) Small Cap Equity 10.89% N/A 15.40%
Goldman Sachs VIT CORE(SM) U.S. Equity 17.74% N/A 24.68%
Goldman Sachs VIT Global Income -3.00% N/A -5.68%
Goldman Sachs VIT Growth and Income Fund -0.46% N/A -1.03%
Goldman Sachs VIT International Equity 25.66% N/A 31.41%
Goldman Sachs VIT Mid Cap Value Fund -6.84% N/A -6.28%
MFS Emerging Growth Series 68.76% N/A 42.99%
MFS Growth with Income Series -0.16% N/A 11.80%
MFS New Discovery Series 65.51% N/A 74.62%
MFS Research Series 17.14% N/A 10.07%**
Morgan Stanley Equity Growth 32.08% N/A 25.02%
Morgan Stanley Fixed Income -8.35% N/A 1.44%
Morgan Stanley Global Equity -2.72% N/A 1.40%
Morgan Stanley International Magnum 18.05% N/A 19.61%
Morgan Stanley Mid Cap Value 13.52% N/A 18.63%
Morgan Stanley U.S. Real Estate -8.20% N/A -5.79%
Morgan Stanley Value -8.62% N/A -3.35%
Neuberger Berman AMT Guardian 7.95% N/A 14.72%
Neuberger Berman AMT Mid-Cap Growth 46.29% N/A 65.99%
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C>
Neuberger Berman Partners 0.50% N/A 3.18%
Oppenheimer Aggressive Growth 75.87% N/A 32.04%**
Oppenheimer Capital Appreciation 34.51% N/A 15.92%**
Oppenheimer Global Securities 51.10% N/A 25.87%**
Oppenheimer Main Street Growth and Income Fund 14.84% N/A 2.57%**
Oppenheimer Strategic Bond -3.78% N/A -3.60%**
STI Capital Appreciation 1.84% N/A 4.71%
STI Value Income Stock -9.70% N/A -49.49%
</TABLE>
*The inception dates of the Variable Sub-Accounts appear in the table above.
NON-STANDARDIZED TOTAL RETURNS
From time to time, we also may quote average annual total returns that do not
reflect the withdrawal charge. We calculate these "non-standardized total
returns" in exactly the same way as the standardized total returns described
above, except that we replace the ending redeemable value of the hypothetical
account for the period with an ending redeemable value for the period that does
not take into account any charges on amounts surrendered.
In addition, we 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 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).
The non-standardized total returns for the Variable Sub-Accounts for the periods
ended December 31, 1999 are set out below. No non-standardized total returns are
shown for the Fidelity VIP II Index 500, Fidelity VIP Overseas, Oppenheimer
Multiple Strategies, STI Growth and Income, STI International Equity, STI
Investment Grade Bond, STI Mid-Cap Equity, STI Quality Growth Stock, STI Small
Cap Equity, and Templeton Bond Variable Sub-Accounts, because they commenced
operations on January 24, 2000 and the Franklin Small Cap (Class 2), Mutual
Shares Securities, Templeton Global Income Securities (Class 2) and Templeton
Growth Securities (Class 2) Variable Sub-Accounts, which commenced operations
on May 1, 2000..
Enhanced Provider Contracts
(Without the Enhanced Death Benefit Rider or the Enhanced Death and Income
Benefit Combination Rider)
<TABLE>
<CAPTION>
Ten Years or
Since Inception
Variable Sub-account 1 Year 5 Year (if less)*
------ ------ ----------------
<S> <C> <C> <C>
AIM V.I. Balanced 17.94% N/A 22.97%
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C>
AIM V.I. Capital Appreciation 42.96% N/A 34.46%
AIM V.I. Diversified Income -3.04% N/A -0.83%
AIM V.I. Global Utilities 32.04% N/A 24.00%
AIM V.I. Government Securities -5.12% N/A 1.70%
AIM V.I. Growth Fund 33.69% N/A 35.92%
AIM V.I. Growth and Income 32.71% N/A 32.28%
AIM V.I. High Yield 9.26% N/A 11.07%
AIM V.I. International Equity 53.28% N/A 33.99%
AIM V.I. Value 28.41% N/A 32.13%
The Dreyfus Socially Responsible Growth 33.40% N/A 25.45%
Dreyfus Stock Index 19.23% N/A 24.80%
Dreyfus VIF Growth & Income 17.04% N/A 13.22%
Dreyfus VIF Money Market 3.56% N/A 3.67%
Dreyfus VIF Small Company Stock 9.34% N/A 5.16%
Federated Prime Money Fund II N/A N/A 0.64%**
Fidelity VIP Equity-Income 5.11% N/A 5.72%
Fidelity VIP Growth 35.87% N/A 24.35%
Fidelity VIP High Income 6.92% N/A -1.24%
Fidelity VIP Contrafund(R) 22.83% N/A 21.83%
Templeton Developing Markets Securities - class 2 N/A N/A 21.66%**
Templeton International Securities N/A N/A 12.64%**
Templeton Stock N/A N/A 13.66%**
Goldman Sachs VIT Capital Growth 26.02% N/A 34.20%
Goldman Sachs VIT CORE Large Cap Growth Fund 34.09% N/A 43.89%
Goldman Sachs VIT CORE(SM) Small Cap Equity 16.58% N/A 20.42%
Goldman Sachs VIT CORE(SM) U.S. Equity 23.45% N/A 29.69%
Goldman Sachs VIT Global Income 2.63% N/A -0.63%
Goldman Sachs Growth and Income 5.18% N/A 4.02%
Goldman Sachs VIT International Equity 31.41% N/A 36.43%
Goldman Sachs VIT Mid Cap Value Fund -1.24% N/A -1.23%
MFS Emerging Growth Series 74.70% N/A 44.66%
MFS Growth with Income Series 5.47% N/A 13.77%
MFS New Discovery Series 71.43% N/A 79.67%
MFS Research Series N/A N/A 15.33%**
Morgan Stanley Equity Growth 37.86% N/A 43.41%
Morgan Stanley Fixed Income -2.75% N/A -1.06%
Morgan Stanley Global Equity 2.91% N/A 6.45%
Morgan Stanley U.S. Real Estate 2.60% N/A -.74%
Morgan Stanley International Magnum 23.76% N/A 24.64%
Morgan Stanley Mid Cap Value 19.22% N/A 26.47%
Morgan Stanley Value -3.03% N/A -3.02%
Neuberger Berman AMT Guardian 13.62% N/A 19.75%
Neuberger Berman AMT Mid-Cap Growth 52.13% N/A 71.03%
Neuberger Berman Partners 6.41% N/A 8.22%
Oppenheimer Aggressive Growth N/A N/A 37.32%**
Oppenheimer Capital Appreciation N/A N/A 21.18%**
Oppenheimer Global Securities N/A N/A 31.13%**
Oppenheimer Main Street Growth and Income Fund N/A N/A 7.82%**
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C>
Oppenheimer Strategic Bond N/A N/A 1.65%**
STI Capital Appreciation N/A N/A 42.65%
STI Value Income Stock N/A N/A -28.55%
</TABLE>
*The inception dates of the Variable Sub-Accounts appear in the table under
"Standardized Total Returns."
(With the Enhanced Death Benefit Rider)
<TABLE>
<CAPTION>
Ten Years or
Since Inception
Variable Sub-account 1 Year 5 Year (if less)*
------ ------ ----------------
<S> <C> <C> <C>
AIM V.I. Balanced 17.68% N/A 22.70%
AIM V.I. Capital Appreciation 42.65% N/A 34.17%
AIM V.I. Diversified Income -3.25% N/A -1.05%
AIM V.I. Global Utilities 31.75% N/A 23.73%
AIM V.I. Government Securities -5.33% N/A 1.48%
AIM V.I. Growth 33.40% N/A 35.62%
AIM V.I. Growth and Income 32.42% N/A 31.99%
AIM V.I. High Yield 9.02% N/A 10.83%
AIM V.I. International Equity 52.94% N/A 33.69%
AIM V.I. Value 28.13% N/A 31.84%
The Dreyfus Socially Responsible Growth 33.11% N/A 25.17%
Dreyfus Stock Index 18.96% N/A 24.52%
Dreyfus VIF Growth & Income 16.78% N/A 12.98%
Dreyfus VIF Money Market 3.33% N/A 3.45%
Dreyfus VIF Small Company Stock 9.10% N/A 4.93%
Federated Prime Money Fund II N/A N/A 0.61%**
Fidelity VIP Equity-Income 4.88% N/A 5.48%
Fidelity VIP Growth 35.57% N/A 24.08%
Fidelity VIP High Income 6.68% N/A -1.45%
Fidelity VIP Contrafund(R) 22.56% N/A 21.56%
Templeton Developing Markets Securities - class 2 N/A N/A 21.62%**
Templeton International Securities N/A N/A 12.60%**
Templeton Stock N/A N/A 13.62%**
Goldman Sachs VIT Capital Growth 25.74% N/A 33.91%
Goldman Sachs VIT CORE Large Cap Growth Fund 33.79% N/A 43.58%
Goldman Sachs VIT CORE(SM) Small Cap Equity 16.32% N/A 20.16%
Goldman Sachs VIT CORE(SM) U.S. Equity 23.18% N/A 29.41%
Goldman Sachs VIT Global Income 2.40% N/A -0.85%
Goldman Sachs Growth and Income 4.95% N/A 3.79%
Goldman Sachs VIT International Equity 31.12% N/A 36.13%
Goldman Sachs VIT Mid Cap Value Fund -1.45% N/A -1.44%
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C>
MFS Emerging Growth Series 74.31% N/A 44.34%
MFS Growth with Income Series 5.24% N/A 13.52%
MFS New Discovery Series 71.06% N/A 79.27%
MFS Research Series N/A N/A 15.29%**
Morgan Stanley Equity Growth 37.55% N/A 43.09%
Morgan Stanley Fixed Income -2.97% N/A -1.28%
Morgan Stanley Global Equity 2.68% N/A 6.21%
Morgan Stanley International Magnum 23.49% N/A 24.36%
Morgan Stanley Mid Cap Value 18.95% N/A 26.19%
Morgan Stanley U.S. Real Estate -2.81% N/A -0.95%
Morgan Stanley Value -3.24% N/A -3.24%
Neuberger Berman AMT Guardian 13.37% N/A 19.48%
Neuberger Berman AMT Mid-Cap Growth 51.80% N/A 70.65%
Neuberger Berman Partners 5.91% N/A 7.98%
Oppenheimer Aggressive Growth N/A N/A 37.27%**
Oppenheimer Capital Appreciation N/A N/A 21.14%**
Oppenheimer Global Securities N/A N/A 31.09%**
Oppenheimer Main Street Growth and Income Fund N/A N/A 7.78%**
Oppenheimer Strategic Bond N/A N/A 1.62%**
STI Capital Appreciation N/A N/A 5.97%**
STI Value Income Stock N/A N/A -5.41%**
</TABLE>
*The inception dates of the Variable Sub-Accounts appear in the first table
under "Standardized Total Returns."
Enhanced Provider Contracts
(With the Enhanced Death and Income Benefit Combination Rider)
<TABLE>
<CAPTION>
Ten Years or
Since Inception
Variable Sub-account 1 Year 5 Year (if less)*
------ ------ ----------------
<S> <C> <C> <C>
AIM V.I. Balanced 17.42% N/A 22.43%
AIM V.I. Capital Appreciation 42.34% N/A 33.87%
AIM V.I. Diversified Income -3.47% N/A -1.26%
AIM V.I. Global Utilities 31.46% N/A 23.46%
AIM V.I. Government Securities -5.54% N/A 1.25%
AIM V.I. Growth 33.10% N/A 35.33%
AIM V.I. Growth and Income 32.13% N/A 31.70%
AIM V.I. High Yield 8.78% N/A 10.58%
AIM V.I. International Equity 52.61% N/A 33.40%
AIM V.I. Value 27.85% N/A 31.55%
The Dreyfus Socially Responsible Growth 32.82% N/A 24.90%
Dreyfus Stock Index 18.70% N/A 24.25%
Dreyfus VIF Growth & Income 16.53% N/A 12.73%
Dreyfus VIF Money Market 3.10% N/A 3.22%
Dreyfus VIF Small Company Stock 8.86% N/A 4.70%
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C>
Federated Prime Money Fund II 2.95% N/A 0.57%**
Fidelity VIP Equity-Income 4.65% N/A 5.25%
Fidelity VIP Growth 35.27% N/A 23.80%
Fidelity VIP High Income 6.45% N/A -1.67%
Fidelity VIP Contrafund(R) 22.30% N/A 21.29%
Templeton Developing Markets Securities - class 2 51.16% N/A 21.57%**
Templeton International Securities 21.53% N/A 12.56%**
Templeton Stock N/A N/A 13.58%**
Goldman Sachs VIT Capital Growth 22.74% N/A 31.07%
Goldman Sachs VIT CORE Large Cap Growth Fund 33.50% N/A 43.26%
Goldman Sachs VIT CORE(SM) Small Cap Equity 16.07% N/A 19.90%
Goldman Sachs VIT CORE(SM) U.S. Equity 22.91% N/A 29.13%
Goldman Sachs VIT Global Income 2.18% N/A -1.06%
Goldman Sachs VIT Growth and Income Fund 4.71% N/A 3.56%
Goldman Sachs VIT International Equity 30.83% N/A 35.83%
Goldman Sachs VIT Mid Cap Value Fund -1.67% N/A -1.66%
MFS Emerging Growth Series 73.93% N/A 44.03%
MFS Growth with Income Series 5.01% N/A 13.27%
MFS New Discovery Series 70.68% N/A 78.88%
MFS Research Series 22.32% N/A 15.24%**
Morgan Stanley Equity Growth 37.25% N/A 26.27%
Morgan Stanley Fixed Income -3.18% N/A 3.14%
Morgan Stanley Global Equity 2.46% N/A 5.98%
Morgan Stanley U.S. Real Estate 3.03% N/A 1.17%
Morgan Stanley International Magnum 23.22% N/A 24.09%
Morgan Stanley Mid Cap Value 18.69% N/A 19.98%
Morgan Stanley Value -3.45% N/A -1.53%
Neuberger Berman AMT Guardian 13.12% N/A 19.22%
Neuberger Berman AMT Mid-Cap Growth 51.46% N/A 70.28%
Neuberger Berman Partners 5.68% N/A 7.74%
Oppenheimer Aggressive Growth 81.05% N/A 37.22%
Oppenheimer Capital Appreciation 39.68% N/A 21.10%
Oppenheimer Global Securities 56.27% N/A 31.04%
Oppenheimer Main Street Growth and Income Fund 20.01% N/A 7.74%**
Oppenheimer Strategic Bond 1.39% N/A 1.58%**
STI Capital Appreciation 7.01% N/A 42.03%
STI Value Income Stock -4.53% N/A -28.86*
</TABLE>
*The inception dates of the Variable Sub-Accounts appear in the first table
under "Standardized Total Returns."
ADJUSTED HISTORICAL TOTAL RETURNS
<PAGE>
We may advertise the total return for periods prior to the date that the
Variable Sub-Accounts commenced operations. We will calculate such "adjusted
historical total returns" using the historical performance of the underlying
Portfolios and adjusting such performance to reflect the current level of
charges that apply to the Variable Sub-Accounts under the Contract and the
contract maintenance charge, but not the withdrawal charge.
The adjusted historical total returns for the Variable Sub-Accounts for the
periods ended December 31, 1999 are set out below. No adjusted historical
total returns are shown for the STI Growth and Income or Quality Growth Stock
Variable Sub-Accounts because the funds in which they invest commenced
operations on December 31, 1999.
Enhanced Provider Contracts
The inception dates of the Portfolios are as follows:
<TABLE>
<CAPTION>
Portfolio Inception Date
--------- --------------
<S> <C>
-------------------------------------------------------------------- ----------------------------------------
FUND PORTFOLIO INCEPTION DATE
-------------------------------------------------------------------- ----------------------------------------
-------------------------------------------------------------------- ----------------------------------------
AIM V.I. Balanced Fund 5/1/98
-------------------------------------------------------------------- ----------------------------------------
AIM V.I. Capital Appreciation Fund 5/5/93
-------------------------------------------------------------------- ----------------------------------------
AIM V.I. Diversified Income Fund 5/5/93
-------------------------------------------------------------------- ----------------------------------------
AIM V.I. Global Utilities Fund 5/2/94
-------------------------------------------------------------------- ----------------------------------------
AIM V.I. Government Securities Fund 5/5/93
-------------------------------------------------------------------- ----------------------------------------
AIM V.I. Growth Fund 5/5/93
-------------------------------------------------------------------- ----------------------------------------
AIM V.I. Growth and Income Fund 5/2/94
-------------------------------------------------------------------- ----------------------------------------
AIM V.I. High Yield 5/1/98
-------------------------------------------------------------------- ----------------------------------------
AIM V.I. International Equity Fund 5/5/93
-------------------------------------------------------------------- ----------------------------------------
AIM V.I. Value Fund 5/5/93
-------------------------------------------------------------------- ----------------------------------------
-------------------------------------------------------------------- ----------------------------------------
The Dreyfus Socially Responsible Growth Fund, Inc. 10/7/93
-------------------------------------------------------------------- ----------------------------------------
Dreyfus Stock Index Fund 9/29/89
-------------------------------------------------------------------- ----------------------------------------
Dreyfus VIF Growth & Income Portfolio 5/2/94
-------------------------------------------------------------------- ----------------------------------------
Dreyfus VIF Money Market Portfolio 8/31/90
-------------------------------------------------------------------- ----------------------------------------
Dreyfus VIF Small Company Stock Portfolio 5/1/96
-------------------------------------------------------------------- ----------------------------------------
-------------------------------------------------------------------- ----------------------------------------
Federated Prime Money Fund II 11/21/94
-------------------------------------------------------------------- ----------------------------------------
-------------------------------------------------------------------- ----------------------------------------
Fidelity VIP Contrafund(R) Portfolio 1/3/95
-------------------------------------------------------------------- ----------------------------------------
Fidelity VIP Equity-Income Portfolio 10/9/86
-------------------------------------------------------------------- ----------------------------------------
Fidelity VIP Growth Portfolio 10/9/86
-------------------------------------------------------------------- ----------------------------------------
Fidelity VIP High Income Portfolio 9/19/85
-------------------------------------------------------------------- ----------------------------------------
Fidelity VIP Index 500 Portfolio 8/27/92
-------------------------------------------------------------------- ----------------------------------------
Fidelity VIP Overseas Portfolio 1/28/97
-------------------------------------------------------------------- ----------------------------------------
-------------------------------------------------------------------- ----------------------------------------
Franklin Small Cap Fund - Class 2 11/1/95
-------------------------------------------------------------------- ----------------------------------------
Mutual Shares Securities Fund - Class 2 11/8/96
-------------------------------------------------------------------- ----------------------------------------
Templeton Global Income Securities Fund - Class 2 1/24/89
-------------------------------------------------------------------- ----------------------------------------
Templeton Developing Markets Securities Fund - Class 2 3/4/96
-------------------------------------------------------------------- ----------------------------------------
Templeton International Securities Fund - Class 2 5/1/92
-------------------------------------------------------------------- ----------------------------------------
Templeton Growth Securities Fund - Class 2 3/15/94
-------------------------------------------------------------------- ----------------------------------------
-------------------------------------------------------------------- ----------------------------------------
Goldman Sachs VIT Capital Growth Fund 4/30/98
-------------------------------------------------------------------- ----------------------------------------
</TABLE>
<PAGE>
<TABLE>
<S> <C>
-------------------------------------------------------------------- ----------------------------------------
Goldman Sachs VIT CORESM Small Cap Equity Fund 2/13/98
-------------------------------------------------------------------- ----------------------------------------
Goldman Sachs VIT CORESM U.S. Equity Fund 2/13/98
-------------------------------------------------------------------- ----------------------------------------
Goldman Sachs VIT Global Income Fund 1/12/98
-------------------------------------------------------------------- ----------------------------------------
Goldman Sachs VIT Growth and Income Fund 1/12/98
-------------------------------------------------------------------- ----------------------------------------
Goldman Sachs VIT International Equity Fund 1/12/98
-------------------------------------------------------------------- ----------------------------------------
-------------------------------------------------------------------- ----------------------------------------
MFS Emerging Growth Series 7/24/95
-------------------------------------------------------------------- ----------------------------------------
MFS Growth with Income Series 10/9/95
-------------------------------------------------------------------- ----------------------------------------
MFS New Discovery Series 5/1/98
-------------------------------------------------------------------- ----------------------------------------
MFS Research Series 7/26/95
-------------------------------------------------------------------- ----------------------------------------
-------------------------------------------------------------------- ----------------------------------------
Morgan Stanley UIF Equity Growth Portfolio 1/2/97
-------------------------------------------------------------------- ----------------------------------------
Morgan Stanley UIF Fixed Income Portfolio 1/2/97
-------------------------------------------------------------------- ----------------------------------------
Morgan Stanley UIF Global Equity Portfolio 1/2/97
-------------------------------------------------------------------- ----------------------------------------
Morgan Stanley UIF International Magnum Portfolio 1/2/97
-------------------------------------------------------------------- ----------------------------------------
Morgan Stanley UIF Mid Cap Value Portfolio 1/2/97
-------------------------------------------------------------------- ----------------------------------------
Morgan Stanley UIF U.S. Real Estate Portfolio 3/3/97
-------------------------------------------------------------------- ----------------------------------------
Morgan Stanley UIF Value Portfolio 1/2/97
-------------------------------------------------------------------- ----------------------------------------
-------------------------------------------------------------------- ----------------------------------------
Neuberger Berman AMT Guardian 11/3/97
-------------------------------------------------------------------- ----------------------------------------
Neuberger Berman AMT Mid-Cap Growth 11/3/97
-------------------------------------------------------------------- ----------------------------------------
Neuberger Berman AMT Partners 3/22/94
-------------------------------------------------------------------- ----------------------------------------
-------------------------------------------------------------------- ----------------------------------------
Oppenheimer Aggressive Growth Fund/VA 8/15/86
-------------------------------------------------------------------- ----------------------------------------
Oppenheimer Capital Appreciation Fund/VA 4/3/85
-------------------------------------------------------------------- ----------------------------------------
Oppenheimer Global Securities Fund/VA 11/12/90
-------------------------------------------------------------------- ----------------------------------------
Oppenheimer Main Street Growth and Income Fund/VA 7/5/95
-------------------------------------------------------------------- ----------------------------------------
Oppenheimer Multiple Strategies Fund/VA 2/9/87
-------------------------------------------------------------------- ----------------------------------------
Oppenheimer Strategic Bond Fund/VA 5/3/93
-------------------------------------------------------------------- ----------------------------------------
-------------------------------------------------------------------- ----------------------------------------
STI Capital Appreciation Fund 10/2/95
-------------------------------------------------------------------- ----------------------------------------
STI Growth and Income Fund 12/31/99
-------------------------------------------------------------------- ----------------------------------------
STI International Equity Fund 11/7/96
-------------------------------------------------------------------- ----------------------------------------
STI Investment Grade Bond Fund 10/2/95
-------------------------------------------------------------------- ----------------------------------------
STI Mid-Cap Equity Fund 10/2/95
-------------------------------------------------------------------- ----------------------------------------
STI Quality Growth Stock Fund 12/31/99
-------------------------------------------------------------------- ----------------------------------------
STI Small Cap Value Equity Fund 10/21/97
-------------------------------------------------------------------- ----------------------------------------
STI Value Income Stock Fund 10/2/95
-------------------------------------------------------------------- ----------------------------------------
</TABLE>
Enhanced Provider Contracts
(Without the Enhanced Death Benefit Rider or Enhanced Death and Income Benefit
Rider)
<TABLE>
<CAPTION>
Ten Years or
Since Inception
Variable Sub-account 1 Year 5 Year (if less)*
------ ------ ----------------
<S> <C> <C> <C>
AIM V.I. Balanced 12.77% N/A 15.43%
AIM V.I. Capital Appreciation 37.79% 23.89% 20.89%
AIM V.I. Diversified Income -8.21% 6.13% 4.65%
AIM V.I. Global Utilities 26.86% 20.18% 16.82%
AIM V.I. Government Securities -10.30% 4.63% 3.40%
AIM V.I. Growth 28.52% 27.92% 21.47%
AIM V.I. Growth and Income 27.54% 26.47% 22.85%
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C>
AIM V.I. High Yield 4.09% N/A -3.14%
AIM V.I. International Equity 48.10% 20.23% 17.41%
AIM V.I. Value 23.24% 25.52% 21.62%
The Dreyfus Socially Responsible Growth 28.23% 26.87% 22.57%
Dreyfus Stock Index 14.05% 26.38% 16.31%
Dreyfus VIF Growth & Income 11.87% 23.27% 19.68%
Dreyfus VIF Money Market -1.62% 3.34% 3.61%
Dreyfus VIF Small Company Stock 4.17% N/A 6.83%
Federated Prime Money Fund II -1.75% 3.16% 3.15%
Fidelity VIP Equity-Income -0.06% 15.00% 12.20%
Fidelity VIP Growth 30.69% 24.38% 16.84%
Fidelity VIP High Income 1.75% 6.57% 9.78%
Fidelity VIP Contrafund(R) 17.66% N/A 24.49%
Templeton Developing Markets Securities - class 2 46.37% N/A -8.04%
Templeton International Securities 16.66% 15.36% 13.89%
Templeton Stock 22.15% 15.70% 12.63%
Goldman Sachs VIT Capital Growth 20.84% N/A 20.31%
Goldman Sachs VIT CORE Large Cap Growth Fund 28.91% N/A 23.92%
Goldman Sachs VIT CORE(SM) Small Cap Equity 11.41% N/A -0.56%
Goldman Sachs VIT CORE(SM) U.S. Equity 18.28% N/A 16.94%
Goldman Sachs VIT Global Income -2.55% N/A -0.26%
Goldman Sachs Growth and Income 0% N/A 1.74%
Goldman Sachs VIT International Equity Fund 26.23% N/A 22.70%
Goldman Sachs VIT Mid Cap Value Fund -6.41% N/A -13.33%
MFS Emerging Growth Series 69.52% N/A 34.55%
MFS Growth with Income Series 0.30% N/A 19.22%
MFS New Discovery Series 66.26% N/A 36.63%
MFS Research Series 17.46% N/A 21.00%**
Morgan Stanley Equity Growth 32.68% N/A 27.99%
Morgan Stanley Fixed Income -7.93% N/A 2.69%
Morgan Stanley Global Equity -2.27% N/A 9.86%
Morgan Stanley U.S. Real Estate -7.77% N/A -1.49%
Morgan Stanley International Magnum 18.59% N/A 11.07%
Morgan Stanley Mid Cap Value 14.04% N/A 22.84%
Morgan Stanley Value -8.20% N/A 2.56%
Neuberger Berman AMT Guardian 8.45% N/A 20.98%
Neuberger Berman AMT Mid-Cap Growth 46.96% N/A 50.19%
Neuberger Berman Partners 0.97% N/A 15.87%
Oppenheimer Aggressive Growth 76.34% 27.98% 19.00%
Oppenheimer Capital Appreciation 34.86% 28.93% 17.05%
Oppenheimer Global Securities 51.50% 19.97% 15.40%
Oppenheimer Main Street Growth and Income Fund 15.14% N/A 23.95%
Oppenheimer Strategic Bond -3.52% 6.56% 5.79%
STI Capital Appreciation 2.31% N/A 22.59%
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C>
STI Value Income Stock -9.28% N/A 11.67%
</TABLE>
*The inception dates of the portfolios appear in the first table under
"Adjusted Historical Total Returns."
(With Enhanced Death Benefit Rider)*
<TABLE>
<CAPTION>
Ten Years or
Since Inception
Variable Sub-account 1 Year 5 Year (if less)*
------ ------ ----------------
<S> <C> <C> <C>
AIM V.I. Balanced 12.51% N/A 15.16%
AIM V.I. Capital Appreciation 37.48% 23.61% 20.62%
AIM V.I. Diversified Income -8.43% 23.61% 4.42%
AIM V.I. Global Utilities 26.57% 19.91% 16.56%
AIM V.I. Government Securities -10.51% 4.39% 3.17%
AIM V.I. Growth 28.22% 27.64% 21.21%
AIM V.I. Growth and Income 27.25% 26.19% 22.58%
AIM V.I. High Yield 3.85% N/A -3.36%
AIM V.I. International Equity 47.77% 19.97% 17.16%
AIM V.I. Value 22.96% 25.24% 21.35%
The Dreyfus Socially Responsible Growth 27.94% 26.60% 22.31%
Dreyfus Stock Index 13.79% 26.10% 16.06%
Dreyfus VIF Growth & Income 11.61% 23.00% 19.42%
Dreyfus VIF Money Market -1.84% 3.11% 3.38%
Dreyfus VIF Small Company Stock 3.92% N/A 6.59%
Federated Prime Money Fund II -1.98% 2.93% 2.92%
Fidelity VIP Equity-Income -0.29% 14.75% 11.96%
Fidelity VIP Growth 30.39% 24.11% 16.58%
Fidelity VIP High Income 1.51% 6.34% 9.54%
Fidelity VIP Contrafund(R) 17.39% N/A 24.21%
Templeton Developing Markets Securities - class 2 46.04% N/A -8.26%**
Templeton International Securities 16.40% 15.11% 13.64%**
Templeton Stock 21.88% 15.45% 11.91%
Goldman Sachs VIT Capital Growth 20.57% N/A 20.03%
Goldman Sachs VIT CORE Large Cap Growth Fund 28.62% N/A 23.64%
Goldman Sachs VIT CORE(SM) Small Cap Equity 11.15% N/A -0.79%
Goldman Sachs VIT CORE(SM) U.S. Equity 18.01% N/A 16.67%
Goldman Sachs VIT Global Income -2.77% N/A -0.49%
Goldman Sachs Growth and Income -.23% N/A 1.50%
Goldman Sachs VIT International Equity Fund 25.94% N/A 22.42%
Goldman Sachs VIT Mid Cap Value Fund -6.63% N/A -13.53%
MFS Emerging Growth Series 69.14% N/A 34.25%
MFS Growth with Income Series 0.07% N/A 18.96%
MFS New Discovery Series 65.88% N/A 36.32%
MFS Research Series 17.19% N/A 20.73%**
Morgan Stanley Equity Growth 32.38% N/A 27.71%
Morgan Stanley Fixed Income -8.14% N/A 2.45%
Morgan Stanley Global Equity -2.49% N/A 9.61%
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C>
Morgan Stanley International Magnum 18.32% N/A 10.82%
Morgan Stanley Mid Cap Value 13.78% N/A 22.56%
Morgan Stanley U.S. Real Estate -7.99% N/A -1.72%
Morgan Stanley Value -8.41% N/A 2.32%
Neuberger Berman AMT Guardian 8.20% N/A 20.70%
Neuberger Berman AMT Mid-Cap Growth 46.62% N/A 49.86%
Neuberger Berman Partners 0.74% 19.08% 15.62%
Oppenheimer Aggressive Growth 75.94% 27.69% 18.74%
Oppenheimer Capital Appreciation 34.56% 28.64% 16.79%
Oppenheimer Global Securities 51.16% 19.70% 15.15%
Oppenheimer Main Street Growth and Income Fund 14.88% N/A 23.67%
Oppenheimer Strategic Bond Fund/VA -3.75% 6.32% 5.55%
STI Capital Appreciation 2.07% N/A 22.31%
STI Value Income Stock -9.49% N/A 11.42%
</TABLE>
*Performance figures have been adjusted to reflect the current charge for the
Enhanced Death Benefit Rider as if that feature had been available throughout
the periods shown.
**The inception dates of the portfolio appear in the first table under
"Adjusted Historical Total Returns."
(With the Enhanced Death and Income Benefit Combination Rider)*
<TABLE>
<CAPTION>
Ten Years or
Since Inception
Variable Sub-account 1 Year 5 Year (if less)*
------ ------ ----------------
<S> <C> <C> <C>
AIM V.I. Balanced 12.25% N/A 14.90%
AIM V.I. Capital Appreciation 37.16% 23.34% 20.36%
AIM V.I. Diversified Income -8.64% 5.66% 4.19%
AIM V.I. Global Utilities 26.28% 19.64% 16.30%
AIM V.I. Government Securities -10.71% 4.16% 2.95%
AIM V.I. Growth 27.93% 27.36% 20.94%
AIM V.I. Growth and Income 26.96% 25.91% 22.30%
AIM V.I. High Yield 3.61% N/A -3.58%
AIM V.I. International Equity 47.43% 19.70% 16.90%
AIM V.I. Value 22.68% 24.97% 21.08%
The Dreyfus Socially Responsible Growth 27.64% 26.32% 22.04%
Dreyfus Stock Index 13.53% 25.83% 15.81%
Dreyfus VIF Growth & Income 11.35% 22.73% 19.15%
Dreyfus VIF Money Market -2.07% 2.87% 3.16%
Dreyfus VIF Small Company Stock 3.69% N/A 6.35%
Federated Prime Money Fund II -2.22% 2.69% 2.69%
Fidelity VIP Equity-Income -0.52% 14.49% 11.71%
Fidelity VIP Growth 30.10% 23.83% 16.32%
Fidelity VIP High Income 1.28% 6.10% 9.30%
Fidelity VIP Contrafund(R) 17.12% N/A 23.93%
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C>
Templeton Developing Markets Securities - class 2 45.99% N/A -8.27%
Templeton International Securities 16.35% 15.10% 13.64%
Templeton Stock 17.24% 14.38% 11.28%
Goldman Sachs VIT Capital Growth 17.57% N/A 18.13%
Goldman Sachs VIT CORE Large Cap Growth Fund 28.32% N/A 23.36%
Goldman Sachs VIT CORE(SM) Small Cap Equity 10.89% N/A -1.02%
Goldman Sachs VIT CORE(SM) U.S. Equity 17.74% N/A 16.40%
Goldman Sachs VIT Global Income -3.00% N/A -0.72%
Goldman Sachs VIT Growth and Income Fund -0.46% N/A 1.27%
Goldman Sachs VIT International Equity Fund 25.66% N/A 22.14%
Goldman Sachs VIT Mid Cap Value Fund -6.84% N/A -13.74%
MFS Emerging Growth Series 68.76% N/A 33.95%
MFS Growth with Income Series -0.16% N/A 18.69%
MFS New Discovery Series 65.51% N/A 36.01%
MFS Research Series 17.14% N/A 20.72%
Morgan Stanley Equity Growth 32.08% N/A 27.42%
Morgan Stanley Fixed Income -8.35% N/A 2.22%
Morgan Stanley Global Equity -2.72% N/A 9.36%
Morgan Stanley International Magnum 18.05% N/A 10.57%
Morgan Stanley Mid Cap Value 13.52% N/A 22.29%
Morgan Stanley U.S. Real Estate -8.20% N/A -1.94%
Morgan Stanley Value -8.62% N/A 2.09%
Neuberger Berman AMT Guardian 7.95% N/A 20.43%
Neuberger Berman AMT Mid-Cap Growth 46.29% N/A 49.52%
Neuberger Berman Partners 0.50% 18.82% 15.36%
Oppenheimer Aggressive Growth 75.87% 27.68% 17.50%**
Oppenheimer Capital Appreciation 34.51% 28.63% 15.98%**
Oppenheimer Global Securities 51.10% 19.70% 15.14%**
Oppenheimer Main Street Growth and Income Fund 14.84% N/A 23.66%**
Oppenheimer Strategic Bond -3.78% 6.31% 5.55%**
STI Capital Appreciation 1.84% N/A 22.04%
STI Value Income Stock -9.70% N/A 11.17%
</TABLE>
*Performance figures have been adjusted to reflect the current charge for the
Enhanced Death and Income Benefit Combination Rider as if that feature had been
available throughout the periods shown.
**The inception dates of the portfolios appear in the first table under
"Adjusted Historical Total Returns."
CALCULATION OF ACCUMULATION UNIT VALUES
The value of Accumulation Units will change each Valuation Period according to
the investment performance of the Portfolio shares purchased by each Variable
Sub-Account and the deduction of certain expenses and charges. A "Valuation
Period" is the period from the end of one Valuation Date and continues to the
end of the next Valuation Date. A Valuation Date ends at the close of regular
trading on the New York Stock Exchange (currently 3:00 p.m. Central Time).
<PAGE>
The Accumulation Unit Value of a Variable Sub-Account for any Valuation Period
equals the Accumulation Unit Value as of the immediately preceding Valuation
Period, multiplied by the Net Investment Factor (described below) for that
Sub-Account for the current Valuation Period.
NET INVESTMENT FACTOR
The Net Investment Factor for a Valuation Period is a number representing the
change, since the last Valuation Period, 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. We determine the Net
Investment Factor for each Variable Sub-Account for any Valuation Period by
dividing (A) by (B) and subtracting (C) from the result, where:
(A) is the sum of:
(1) the net asset value per share of the Portfolio underlying the
Variable Sub-Account determined at the end of the current Valuation
Period; plus,
(2) the per share amount of any dividend or capital gain distributions
made by the Portfolio underlying the Variable Sub-Account during the
current Valuation Period;
(B) is the net asset value per share of the Portfolio underlying the
Variable Sub-Account determined as of the end of the immediately
preceding Valuation Period; and
(C) is the annualized mortality and expense risk and administrative
expense charges divided by 365 and then multiplied by the number of
calendar days in the current Valuation Period.
<PAGE>
CALCULATION OF VARIABLE INCOME PAYMENTS
We calculate the amount of the first variable income payment under an Income
Plan by applying the Contract Value allocated to each Variable Sub-Account less
any applicable premium tax charge deducted at the time, to the income payment
tables in the Contract. We divide the amount of the first variable annuity
income payment by the Variable Sub-Account's then current Annuity Unit value to
determine the number of annuity units ("Annuity Units") upon which later income
payments will be based. To determine income payments after the first, we simply
multiply the number of Annuity Units determined in this manner for each Variable
Sub-Account by the then current Annuity Unit value ("Annuity Unit Value") for
that Variable Sub-Account.
CALCULATION OF ANNUITY UNIT VALUES
Annuity Units in each Variable Sub-Account are valued separately and Annuity
Unit Values will depend upon the investment experience of the particular
Portfolio in which the Variable Sub-Account invests. We calculate the Annuity
Unit Value for each Variable Sub-Account at the end of any Valuation Period by:
o multiplying the Annuity Unit Value at the end of the immediately preceding
Valuation Period by the Variable Sub-Account's Net Investment Factor
(described in the preceding section) for the Period; and then
o dividing the product by the sum of 1.0 plus the assumed investment rate for
the Valuation 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 income
payment, and is at an effective annual rate which is disclosed in the Contract.
We determine the amount of the first variable income payment paid under an
Income Plan using the income payment tables set out in the Contracts. The
Contracts include tables that differentiate on the basis of sex, except in
states that require the use of unisex tables.
GENERAL MATTERS
INCONTESTABILITY
We will not contest the Contract after we issue it.
SETTLEMENTS
The Contract must be returned to us prior to any settlement. We must receive due
proof of the Contract owner(s) death (or Annuitant's death if there is a
non-natural Contract owner) before we will settle a death claim.
SAFEKEEPING OF THE VARIABLE ACCOUNT'S ASSETS
We hold title to the assets of the Variable Account. We keep the assets
physically segregated and separate and apart from our general corporate assets.
We maintain records of all purchases and redemptions of the Portfolio shares
held by each of the Variable Sub-Accounts.
The Portfolios do not issue stock certificates. Therefore, we hold the Variable
Account's assets in open account in lieu of stock certificates. See the
Portfolios' prospectuses for a more complete description of the custodian of the
Portfolios.
<PAGE>
PREMIUM TAXES
Applicable premium tax rates depend on the Contract owner's state of residency
and the insurance laws and our status in those states where premium taxes are
incurred. Premium tax rates may be changed by legislation, administrative
interpretations, or judicial acts.
TAX RESERVES
We do not establish capital gains tax reserves for any Variable Sub-Account nor
do we deduct charges for tax reserves because we believe that capital gains
attributable to the Variable Account will not be taxable. However, we reserve
the right to deduct charges to establish tax reserves for potential taxes on
realized or unrealized capital gains.
FEDERAL TAX MATTERS
THE FOLLOWING DISCUSSION IS GENERAL AND IS NOT INTENDED AS TAX ADVICE. WE MAKE
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 GLENBROOK LIFE AND ANNUITY COMPANY
Glenbrook 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 Glenbrook, and its operations form a part of Glenbrook, 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, Glenbrook 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,
Glenbrook does not anticipate that it will incur any federal income tax
liability attributable to the Variable Account, and therefore Glenbrook does not
intend to make provisions for any such taxes. If Glenbrook is taxed on
investment income or capital gains of the Variable Account, then Glenbrook 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 annuity 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
<PAGE>
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
The Contract may be used with several types of qualified plans. The income on
qualified plan and IRA investments is tax deferred and variable annuities held
by such plans do not receive any additional tax deferral. You should review the
annuity features, including all benefits and expenses, prior to purchasing a
variable annuity in a qualified plan or IRA. Glenbrook reserves the right to
limit the availability of the Contract for use with any of the Qualified Plans
listed below. 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.
Contract 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.
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 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.
<PAGE>
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.
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 Glenbrook 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.
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
Section 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.
<PAGE>
EXPERTS
The financial statements and the related financial statement schedule included
in this Statement of Additional Information have been audited by Deloitte &
Touche LLP, independent auditors, as stated in their reports appearing herein,
and are included in reliance upon the reports of such firm given upon their
authority as experts in accounting and auditing.
FINANCIAL STATEMENTS
The financial statements of the Variable Account and Glenbrook and the
accompanying Independent Auditors' Report appear on the pages that follow. The
financial statements of Glenbrook included herein should be considered only as
bearing upon the ability of Glenbrook to meet its obligations under the
Contracts.
<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", an affiliate of The Allstate
Corporation) as of December 31, 1999 and 1998, and the related Statements of
Operations and Comprehensive Income, Shareholder's Equity and Cash Flows for
each of the three years in the period ended December 31, 1999. 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, 1999 and
1998, and the results of its operations and its cash flows for each of the three
years in the period ended December 31, 1999 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 25, 2000
F-1
<PAGE>
GLENBROOK LIFE AND ANNUITY COMPANY
STATEMENTS OF FINANCIAL POSITION
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------------
1999 1998
------------ ------------
($ IN THOUSANDS, EXCEPT PAR
VALUE DATA)
<S> <C> <C>
ASSETS
Investments
Fixed income securities, at fair value (amortized cost
$94,173 and $87,415)..................................... $ 92,937 $ 94,313
Short-term................................................ 53,063 4,663
---------- ----------
Total investments......................................... 146,000 98,976
Cash........................................................ 9 --
Reinsurance recoverable from Allstate Life Insurance
Company................................................... 4,144,165 3,113,278
Deferred income taxes....................................... 293 --
Other assets................................................ 2,706 2,590
Separate Accounts........................................... 1,541,756 993,622
---------- ----------
TOTAL ASSETS.......................................... $5,834,929 $4,208,466
========== ==========
LIABILITIES
Reserve for life-contingent contract benefits............... 800 --
Contractholder funds........................................ 4,143,365 3,113,278
Current income taxes payable................................ 2,360 2,181
Deferred income taxes....................................... -- 2,499
Payable to affiliates, net.................................. 4,122 3,583
Separate Accounts........................................... 1,541,756 993,622
---------- ----------
TOTAL LIABILITIES..................................... 5,692,403 4,115,163
---------- ----------
COMMITMENTS AND CONTINGENT LIABILITIES (NOTE 11)
SHAREHOLDER'S EQUITY
Common stock, $500 par value, 10,000 and 4,200 shares
authorized, 5,000 and 4,200 shares issued and
outstanding............................................... 2,500 2,100
Additional capital paid-in.................................. 119,241 69,641
Retained income............................................. 21,588 17,079
Accumulated other comprehensive (loss) income:
Unrealized net capital (losses) gains..................... (803) 4,483
---------- ----------
Total accumulated other comprehensive (loss) income... (803) 4,483
---------- ----------
TOTAL SHAREHOLDER'S EQUITY............................ 142,526 93,303
---------- ----------
TOTAL LIABILITIES AND SHAREHOLDER'S EQUITY............ $5,834,929 $4,208,466
========== ==========
</TABLE>
See notes to financial statements.
F-2
<PAGE>
GLENBROOK LIFE AND ANNUITY COMPANY
STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------
1999 1998 1997
-------- -------- --------
($ IN THOUSANDS)
<S> <C> <C> <C>
REVENUES
Net investment income..................................... $6,579 $6,231 $5,304
Realized capital gains and losses......................... 312 (5) 3,460
------ ------ ------
INCOME FROM OPERATIONS BEFORE INCOME TAX EXPENSE............ 6,891 6,226 8,764
INCOME TAX EXPENSE.......................................... 2,382 2,182 3,078
------ ------ ------
NET INCOME.................................................. 4,509 4,044 5,686
------ ------ ------
OTHER COMPREHENSIVE (LOSS) INCOME, AFTER-TAX
Change in unrealized net capital gains and losses......... (5,286) 1,315 378
------ ------ ------
COMPREHENSIVE (LOSS) INCOME................................. $ (777) $5,359 $6,064
====== ====== ======
</TABLE>
See notes to financial statements.
F-3
<PAGE>
GLENBROOK LIFE AND ANNUITY COMPANY
STATEMENTS OF SHAREHOLDER'S EQUITY
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------------
1999 1998 1997
-------- -------- --------
($ IN THOUSANDS)
<S> <C> <C> <C>
COMMON STOCK
Balance, beginning of year.................................. $ 2,100 $ 2,100 $ 2,100
Issuance of new shares of stock............................. 400 -- --
-------- ------- -------
Balance, end of year........................................ 2,500 2,100 2,100
-------- ------- -------
ADDITIONAL CAPITAL PAID-IN
Balance, beginning of year.................................. 69,641 69,641 69,641
Capital contribution........................................ 49,600 -- --
-------- ------- -------
Balance, end of year........................................ 119,241 69,641 69,641
-------- ------- -------
RETAINED INCOME
Balance, beginning of year.................................. 17,079 13,035 7,349
Net income.................................................. 4,509 4,044 5,686
-------- ------- -------
Balance, end of year........................................ 21,588 17,079 13,035
-------- ------- -------
ACCUMULATED OTHER COMPREHENSIVE (LOSS) INCOME
Balance, beginning of year.................................. 4,483 3,168 2,790
Change in unrealized net capital gains and losses........... (5,286) 1,315 378
-------- ------- -------
Balance, end of year........................................ (803) 4,483 3,168
-------- ------- -------
Total shareholder's equity.............................. $142,526 $93,303 $87,944
======== ======= =======
</TABLE>
See notes to financial statements.
F-4
<PAGE>
GLENBROOK LIFE AND ANNUITY COMPANY
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------
1999 1998 1997
-------- -------- --------
($ IN THOUSANDS)
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income.................................................. $ 4,509 $ 4,044 $ 5,686
Adjustments to reconcile net income to net cash provided by
operating activities
Amortization and other non-cash items................... (65) (24) 29
Realized capital gains and losses....................... (312) 5 (3,460)
Changes in:
Income taxes payable.................................. 235 1,590 240
Other operating assets and liabilities................ 264 915 961
-------- -------- --------
Net cash provided by operating activities............... 4,631 6,530 3,456
-------- -------- --------
CASH FLOWS FROM INVESTING ACTIVITIES
Fixed income securities
Proceeds from sales....................................... 9,049 1,966 1,405
Investment collections.................................... 4,945 7,123 14,217
Investment purchases...................................... (20,328) (15,250) (50,115)
Participation in Separate Accounts.......................... -- -- 13,981
Change in short-term investments, net....................... (48,288) (369) (2,944)
-------- -------- --------
Net cash used in investing activities................... (54,622) (6,530) (23,456)
-------- -------- --------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of common stock...................... 400 -- --
Capital contribution........................................ 49,600 -- 20,000
-------- -------- --------
Net cash provided by financing activities............... 50,000 -- 20,000
-------- -------- --------
NET INCREASE IN CASH........................................ 9 -- --
CASH AT THE BEGINNING OF YEAR............................... -- -- --
-------- -------- --------
CASH AT END OF YEAR......................................... $ 9 $ -- $ --
======== ======== ========
</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"). These financial statements have been prepared in conformity with
generally accepted accounting principles.
NATURE OF OPERATIONS
The Company markets savings and life insurance products through banks and
securities firms. Savings products include deferred annuities and immediate
annuities without life contingencies. Deferred annuities include fixed rate,
market value adjusted, indexed and variable annuities. Life insurance consists
of interest-sensitive life and variable life insurance. In 1999, substantially
all of the Company's statutory premiums and deposits were from annuities.
Annuity contracts and life insurance policies issued by the Company are subject
to discretionary surrender or withdrawal by customers, subject to applicable
surrender charges. These policies and contracts are reinsured primarily with
ALIC (see Note 3), which invests premiums and deposits to provide cash flows
that will be used to fund future benefits and expenses.
The Company monitors economic and regulatory developments which have the
potential to impact its business. Recently enacted federal legislation will
allow for banks and other financial organizations to have greater participation
in the securities and insurance businesses. This legislation may present an
increased level of competition for sales of the Company's 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.
Additionally, traditional demutualizations of mutual insurance companies and
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; and (2) increasing competition in the
capital markets.
Although the Company currently benefits from agreements with financial services
entities who market and distribute its products, change in control of these
non-affiliated entities with which the Company has alliances could negatively
impact the Company's sales.
The Company is authorized to sell life and savings products in all states except
New York, as well as in the District of Columbia. The top geographic locations
for statutory premiums and deposits for the Company were Florida, California,
Pennsylvania, Michigan, Texas, Illinois and New Jersey for the year ended
December 31, 1999. No other jurisdiction accounted for more than 5% of statutory
premiums and deposits. Substantially all premiums and deposits 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 or amortized cost, which approximates fair value.
Investment income consists primarily of interest and short-term investment
dividends. Interest is recognized on an accrual basis and dividends are recorded
at the ex-dividend date. 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 RECOVERABLE
The Company has reinsurance agreements whereby substantially all contract
charges, credited interest, policy benefits and certain expenses are ceded to
ALIC. Such amounts are reflected net of such reinsurance in the statements of
operations and comprehensive income. Investment income earned on the assets
which support contractholder funds and the reserve for life-contingent contract
benefits is not included in the Company's financial statements as those assets
are owned and managed under terms of reinsurance agreements. Reinsurance
recoverable and the related reserve for life-contingent contract benefits and
contractholder funds
F-6
<PAGE>
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 INSURANCE REVENUE AND RELATED BENEFITS AND INTEREST CREDITED
Interest-sensitive life contracts are insurance contracts whose terms are not
fixed and guaranteed. The terms that may be changed include premiums paid by the
contractholder, interest credited to the contractholder account balance and one
or more amounts assessed against the contractholder. Premiums from these
contracts are reported as deposits to contractholder funds. Contract charge
revenue consists of fees assessed against the contractholder account balance for
cost of insurance (mortality risk), contract administration and surrender
charges. Contract benefits include interest credited to contracts and claims
incurred in excess of the related contractholder account balance.
Contracts that do not subject the Company to significant risk arising from
mortality or morbidity are referred to as investment contracts. Fixed rate
annuities, market value adjusted annuities, indexed annuities and immediate
annuities without life contingencies are considered investment contracts.
Deposits received for such contracts are reported as deposits to contractholder
funds. Contract charge revenue for investment contracts consists of charges
assessed against the contractholder account balance for contract administration
and surrenders. Contract benefits include interest credited and claims incurred
in excess of the related contractholder account balance.
Crediting rates for fixed rate and interest-sensitive life contracts are
adjusted periodically by the Company to reflect current market conditions.
Crediting rates for indexed annuities are based on an interest rate index, such
as LIBOR or an equity index, such as the S&P 500.
Investment contracts include variable annuity and variable life contracts which
are sold as Separate Accounts products. The assets supporting these products are
legally segregated and available only to settle Separate Accounts contract
obligations. Deposits received are reported as Separate Accounts liabilities.
The Company's contract charge revenue for these contracts consists of charges
assessed against the Separate Accounts fund balances for contract maintenance,
administration, mortality, expense and surrenders.
All contract charges, contract benefits and interest credited are reinsured.
INCOME TAXES
The income tax provision is calculated under the liability method and presented
net of reinsurance. 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. Deferred income taxes arise primarily from
unrealized capital gains and losses on fixed income securities carried at fair
value and differences in the tax bases of investments.
SEPARATE ACCOUNTS
The Company issues deferred variable annuity and variable life contracts, the
assets and liabilities of which are legally segregated and recorded as assets
and liabilities of the Separate Accounts. Absent any contract provisions wherein
the Company contractually guarantees either a minimum return or account value to
the beneficiaries of the contractholders in the form of a death benefit, the
contractholders bear the investment risk that the Separate Accounts' funds may
not meet their stated objectives.
The assets of the Separate Accounts are carried at fair value. Separate Accounts
liabilities represent the contractholders' claim to the related assets and are
carried at the fair value of the assets. In the event that the asset value of
certain contractholder accounts are projected to be below the value guaranteed
by the Company, a liability is established through a charge to earnings.
Investment income and realized capital gains and losses of the Separate Accounts
accrue directly to the contractholders and therefore, are not included in the
Company's statements of operations and comprehensive income. Revenues to the
Company from the Separate Accounts consist of contract maintenance and
administration fees, and mortality, surrender and expense charges.
Prior to 1998, the Company had an ownership interest ("Participation") in the
Separate Accounts. The Company's Participation was carried at fair value and
unrealized gains and losses, net of deferred income taxes, were shown as a
component of shareholder's equity. Investment income and realized capital gains
and losses which arose from the Participation were included in the Company's
statements of operations and comprehensive income. The Company liquidated its
Participation during 1997, which resulted in a pretax realized capital gain of
$3.5 million.
RESERVE FOR LIFE-CONTINGENT CONTRACT BENEFITS
The reserve for life-contingent contract benefits, which relates to certain
variable annuity contract guarantees, is computed on the basis of assumptions as
to mortality, future investment yields, terminations and expenses at the time
the policy is issued. These assumptions include provisions for adverse deviation
and generally vary by such characteristics as type of coverage, year of issue
and policy duration. Detailed reserve assumptions and reserve interest rates are
outlined in Note 6.
CONTRACTHOLDER FUNDS
Contractholder funds arise from the issuance of interest-sensitive life and
certain investment contracts. Deposits
F-7
<PAGE>
received are recorded as interest-bearing liabilities. Contractholder funds are
equal to deposits received, net of commissions, and interest credited to the
benefit of the contractholder less withdrawals, mortality charges, and
administrative expenses. Detailed information on crediting rates and surrender
and withdrawal protection on contractholder funds are outlined in Note 6.
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.
NEW ACCOUNTING STANDARDS
In 1999, the Company adopted 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: 1) an assessment has been imposed or it is
probable that an assessment will be imposed, 2) the event obligating an entity
to pay an assessment has occurred and 3) the amount of the assessment can be
reasonably estimated. Adoption of this statement was not material to the
Company's results of operations or financial position.
3. RELATED PARTY TRANSACTIONS
REINSURANCE
The Company has reinsurance agreements whereby substantially all contract
charges, credited interest, policy benefits and certain expenses are ceded to
ALIC and reflected net of such reinsurance in the statements of operations and
comprehensive income. Reinsurance recoverable and the related reserve for
life-contingent contract benefits 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.
Investment income earned on the assets which support contractholder funds and
the reserve for life-contingent contract benefits is not included in the
Company's financial statements as those assets are owned and managed under terms
of reinsurance agreements. The following amounts were ceded to ALIC under
reinsurance agreements.
<TABLE>
<CAPTION>
Year Ended December 31,
1999 1998 1997
-------- -------- --------
<S> <C> <C> <C>
Contract charges $ 27,175 $ 19,009 $ 11,641
Credited interest, policy
benefits, and certain
expenses 253,945 218,008 179,954
</TABLE>
BUSINESS OPERATIONS
The Company utilizes services performed by AIC and ALIC and business facilities
owned or leased, and operated by AIC in conducting its business activities. The
Company reimburses AIC and ALIC for the operating expenses incurred on behalf of
the Company. The Company is charged for the cost of these operating expenses
based on the level of services provided. Operating expenses, including
compensation and retirement and other benefit programs, allocated to the Company
were $26,555, $15,949, and $19,243 in 1999, 1998 and 1997, respectively. Of
these costs, the Company retains investment related expenses. All other costs
are ceded to ALIC under reinsurance agreements.
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
At December 31, 1999 Cost Gains Losses Value
-------------------- --------- -------- -------- --------
<S> <C> <C> <C> <C>
U.S. government and
agencies $24,274 $1,260 $ -- $25,534
Municipal 1,656 -- (112) 1,544
Corporate 49,255 9 (2,022) 47,242
Mortgage-backed
securities 18,988 96 (467) 18,617
------- ------ ------- -------
Total fixed income
securities $94,173 $1,365 $(2,601) $92,937
======= ====== ======= =======
At December 31, 1998
U.S. government and
agencies $24,350 $4,308 $ -- $28,658
Municipal 656 24 -- 680
Corporate 33,009 1,575 (39) 34,545
Mortgage-backed
securities 29,400 1,047 (17) 30,430
------- ------ ------- -------
Total fixed income
securities $87,415 $6,954 $ (56) $94,313
======= ====== ======= =======
</TABLE>
SCHEDULED MATURITIES
The scheduled maturities for fixed income securities are as follows at December
31, 1999:
<TABLE>
<CAPTION>
Amortized Fair
Cost Value
--------- --------
<S> <C> <C>
Due after one year through five years $30,974 $31,085
Due after five years through ten years 32,583 30,911
Due after ten years 11,628 12,324
------- -------
75,185 74,320
Mortgage-backed securities 18,988 18,617
------- -------
Total $94,173 $92,937
======= =======
</TABLE>
Actual maturities may differ from those scheduled as a result of prepayments by
the issuers.
F-8
<PAGE>
NET INVESTMENT INCOME
<TABLE>
<CAPTION>
Year Ended December 31, 1999 1998 1997
----------------------- -------- -------- --------
<S> <C> <C> <C>
Fixed income securities $6,458 $6,151 $5,014
Short-term investments 230 183 231
Participation in Separate Accounts -- -- 161
------ ------ ------
Investment income, before expense 6,688 6,334 5,406
Investment expense 109 103 102
------ ------ ------
Net investment income $6,579 $6,231 $5,304
====== ====== ======
</TABLE>
REALIZED CAPITAL GAINS AND LOSSES
<TABLE>
<CAPTION>
Year Ended December 31, 1999 1998 1997
----------------------- -------- -------- --------
<S> <C> <C> <C>
Fixed income securities $ 312 $(5) $ (61)
Short-term investments -- -- 6
Participation in Separate Accounts -- -- 3,515
----- --- -------
Realized capital gains and losses 312 (5) 3,460
Income Taxes (109) 2 (1,211)
----- --- -------
Realized capital gains and losses,
after tax $ 203 $(3) $ 2,249
===== === =======
</TABLE>
Excluding calls and prepayments, gross gains of $370 were realized on sales of
fixed income securities during 1999, and gross losses of $58, $5 and $61 were
realized on sales of fixed income securities during 1999, 1998 and 1997,
respectively. There were no gross gains realized on sales of fixed income
securities during 1998 and 1997.
UNREALIZED NET CAPITAL GAINS AND LOSSES
Unrealized net capital losses on fixed income securities included in
shareholder's equity at December 31, 1999 are as follows:
<TABLE>
<CAPTION>
Gross
Cost/ Unrealized Unrealized
Amortized Fair ------------------- Net
Cost Value Gains Losses Losses
--------- -------- -------- -------- ----------
<S> <C> <C> <C> <C> <C>
Fixed income
securities $94,173 $92,937 $ 1,365 $(2,601) $(1,236)
======= ======= ======= =======
Deferred income taxes 433
-------
Unrealized net
capital losses $ (803)
=======
</TABLE>
CHANGE IN UNREALIZED NET CAPITAL GAINS AND LOSSES
<TABLE>
<CAPTION>
Year Ended December 31, 1999 1998 1997
----------------------- -------- -------- --------
<S> <C> <C> <C>
Fixed income securities $(8,134) $2,024 $ 2,410
Participation in Separate Accounts -- -- (1,829)
Deferred income taxes 2,848 (709) (203)
------- ------ -------
(Decrease) increase in unrealized
net capital gains $(5,286) $1,315 $ 378
======= ====== =======
</TABLE>
SECURITIES ON DEPOSIT
At December 31, 1999, fixed income securities with a carrying value of $10,346
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 deferred income taxes) and liabilities
(including interest-sensitive life insurance reserves) are not considered
financial instruments and are not carried at fair value. Other assets and
liabilities considered financial instruments, such as accrued investment income
and cash, are generally of a short-term nature. Their carrying values are
assumed to approximate fair value.
FINANCIAL ASSETS
The carrying value and fair value of financial assets at December 31, are as
follows:
<TABLE>
<CAPTION>
1999 1998
----------------------- -------------------
Carrying Fair Carrying Fair
Value Value Value Value
---------- ---------- -------- --------
<S> <C> <C> <C> <C>
Fixed income
securities $ 92,937 $ 92,937 $ 94,313 $ 94,313
Short-term
investments 53,063 53,063 4,663 4,663
Separate Accounts 1,541,756 1,541,756 993,622 993,622
</TABLE>
Fair values for fixed income securities are based on quoted market prices where
available. Non-quoted securities are valued based on discounted cash flows using
current interest rates for similar securities. Short-term investments are highly
liquid investments with maturities of less than one year whose carrying value
are deemed to approximate fair value. Separate Accounts assets are carried in
the statements of financial position at fair value based on quoted market
prices.
FINANCIAL LIABILITIES
The carrying value and fair value of financial liabilities at December 31, are
as follows:
<TABLE>
<CAPTION>
1998 1999
----------------------- -----------------------
Carrying Fair Carrying Fair
Value Value Value Value
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Contractholder funds
on investment
contracts $4,156,964 $3,924,117 $3,130,228 $2,967,101
Separate Accounts 1,541,756 1,541,756 993,622 993,622
</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.
F-9
<PAGE>
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. RESERVE FOR LIFE-CONTINGENT CONTRACT BENEFITS AND CONTRACTHOLDER FUNDS
At December 31, 1999 the reserve for life-contingent contract benefits consisted
of reserves for immediate annuities. The assumptions for mortality generally
utilized in calculating immediate annuity reserves is the 1983 group annuity
mortality table. Interest rate assumptions for immediate annuities vary from
3.5% to 7.2%. Other estimation methods used for immediate annuities include the
present value of contractually fixed benefits.
At December 31, contractholder funds consists of the following:
<TABLE>
<CAPTION>
1999 1998
---------- ----------
<S> <C> <C>
Interest-sensitive life $ 9,503 $ 3,335
Fixed annuities:
Immediate annuities 17,856 12,643
Deferred annuities 4,116,006 3,097,300
---------- ----------
Total contractholder funds $4,143,365 $3,113,278
========== ==========
</TABLE>
Contractholder funds are equal to deposits received, net of commissions, and
interest credited to the benefit of the contractholder less withdrawals,
mortality charges and administrative expenses. Interest rates credited range
from 4.0% to 7.2% for interest-sensitive life contracts; 3.5% to 7.2% for
immediate annuities and 4.3% to 6.7% for deferred annuities. Withdrawal and
surrender charge protection includes: i) for interest-sensitive life, either a
percentage of account balance or dollar amount grading off generally over 20
years; and, ii) for deferred annuities not subject to a market value adjustment,
either a declining or a level percentage charge generally over nine years or
less. Approximately 1% of deferred annuities are subject to a market value
adjustment.
7. CORPORATION RESTRUCTURING
On November 10, 1999 the Corporation announced a series of strategic initiatives
to aggressively expand its selling and service capabilities. The Corporation
also announced that it is implementing a program to reduce expenses by
approximately $600 million. The reduction will result in the elimination of
approximately 4,000 current non-agent positions, across all employment grades
and categories by the end of 2000, or approximately 10% of the Corporation's
non-agent work force. The impact of the reduction in employee positions is not
expected to materially impact the results of operations of the Company.
These cost reductions are part of a larger initiative to redeploy the cost
savings to finance new initiatives including investments in direct access and
internet channels for new sales and service capabilities, new competitive
pricing and underwriting techniques, new agent and claim technology and enhanced
marketing and advertising. As a result of the cost reduction program, the
Corporation recorded restructuring and related charges of $81 million pretax
during the fourth quarter of 1999. The Corporation anticipates that additional
pretax restructuring related charges of approximately $100 million will be
expensed as incurred throughout 2000. The Company's allocable share of these
expenses were immaterial in 1999 and are expected to be immaterial in 2000.
8. INCOME TAXES
For 1996, the Company filed a separate federal income tax return. Beginning in
1997, the Company joined the Corporation and its other eligible domestic
subsidiaries (the "Allstate Group") in the filing of a consolidated federal
income tax return and is party to a federal income tax allocation agreement (the
"Allstate Tax Sharing Agreement"). Under the Allstate Tax Sharing Agreement, the
Company pays to or receives from the Corporation the amount, if any, by which
the Allstate Group's federal income tax liability is 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.
Prior to June 30, 1995, the Corporation was a subsidiary of Sears Roebuck & Co.
("Sears") and was, with its eligible domestic subsidiaries, included in the
Sears consolidated federal income tax return and federal income tax allocation
agreement. Effective June 30, 1995, the Corporation and Sears entered into a new
tax sharing agreement, which governs their respective rights and obligations
with respect to federal income taxes for all periods during which the
Corporation was a subsidiary of Sears, including the treatment of audits of tax
returns for such periods.
The Internal Revenue Service ("IRS") has completed its review of the Allstate
Group's federal income tax returns through the 1993 tax year. Any adjustment
that may result from IRS examinations of tax returns are not expected to have a
material impact on the financial position, liquidity or results of operations of
the Company.
F-10
<PAGE>
The components of the deferred income tax assets and liabilities at December 31,
are as follows:
<TABLE>
<CAPTION>
1999 1998
-------- --------
<S> <C> <C>
Deferred Assets
Unrealized net capital losses $ 433 $ --
----- -------
Total deferred assets 433 --
Deferred Liabilities
Difference in tax bases of investments (140) (84)
Unrealized net capital gains -- (2,415)
----- -------
Total deferred liabilities (140) (2,499)
----- -------
Net deferred asset (liability) $ 293 $(2,499)
===== =======
</TABLE>
Although realization is not assured, management believes it is more likely than
not that the deferred tax asset will be realized based on the assumptions that
certain levels of income will be achieved.
The components of income tax expense for the year ended December 31, are as
follows:
<TABLE>
<CAPTION>
1999 1998 1997
-------- -------- --------
<S> <C> <C> <C>
Current $2,326 $2,164 $3,037
Deferred 56 18 41
------ ------ ------
Total income tax expense $2,382 $2,182 $3,078
====== ====== ======
</TABLE>
The Company paid income taxes of $2,148, $592 and $2,839 in 1999, 1998 and 1997,
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>
1999 1998 1997
-------- -------- --------
<S> <C> <C> <C>
Statutory federal income tax rate 35.0% 35.0% 35.0%
Other (.4) -- .1
---- ---- ----
Effective income tax rate 34.6% 35.0% 35.1%
==== ==== ====
</TABLE>
9. STATUTORY FINANCIAL INFORMATION
The Company's statutory capital and surplus was $141,362 and $84,865 at December
31, 1999 and 1998, respectively. The Company's statutory net income was $4,179,
$4,698 and $3,636 for the years ended December 31, 1999, 1998 and 1997,
respectively.
PERMITTED STATUTORY ACCOUNTING PRACTICES
The Company prepares its statutory financial statements in accordance with
accounting practices prescribed or permitted by the Arizona 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 significant impact on statutory surplus or statutory net
income.
The NAIC's codification initiative has produced a comprehensive guide of
statutory accounting principles, which the Company will implement in January
2001. The Company's state of domicile, Arizona, has passed legislation revising
various statutory accounting requirements to conform to codification. These
requirements are not expected to have a material impact on the statutory surplus
of the Company.
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 the Company 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 2000 without prior approval of the Arizona Department of Insurance is
$4,179.
RISK-BASED CAPITAL
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,
business, asset and interest rate risks. At December, 31 1999, RBC for the
Company was significantly above levels that would require regulatory action.
F-11
<PAGE>
10. OTHER COMPREHENSIVE INCOME
The components of other comprehensive income on a pretax and after-tax basis for
the year ended December 31, are as follows:
<TABLE>
<CAPTION>
1999 1998 1997
------------------------------- ------------------------------- -------------------------------
PRETAX TAX AFTER-TAX PRETAX TAX AFTER-TAX PRETAX TAX AFTER-TAX
-------- -------- --------- -------- -------- --------- -------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Unrealized capital gains and
losses:
----------------------------
Unrealized holding (losses)
gains arising during the
period $(7,822) $2,739 $(5,083) $2,019 $(707) $1,312 $4,034 $(1,412) $2,622
Less: reclassification
adjustments 312 (109) 203 (5) 2 (3) 3,453 (1,209) 2,244
------- ------ ------- ------ ----- ------ ------ ------- ------
Unrealized net capital
(losses) gains $(8,134) $2,848 $(5,286) $2,024 $(709) $1,315 $ 581 $ (203) $ 378
------- ------ ------- ------ ----- ------ ------ ------- ------
Other comprehensive (loss)
income $(8,134) $2,848 $(5,286) $2,024 $(709) $1,315 $ 581 $ (203) $ 378
======= ====== ======= ====== ===== ====== ====== ======= ======
</TABLE>
11. COMMITMENTS AND CONTINGENT LIABILITIES
REGULATION AND LEGAL PROCEEDINGS
The Company's business is subject to the effects of a changing social, economic
and regulatory environment. Public and regulatory initiatives have varied and
have included employee benefit regulations, 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 rates and benefits. The ultimate changes and eventual
effects, if any, of these initiatives are uncertain.
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. In the opinion of management, the ultimate liability, if any, arising
from such pending or threatened litigation is not expected to have a material
effect on the results of operations, liquidity or financial position of the
Company.
GUARANTY FUNDS
Under state insurance guaranty fund laws, insurers doing business in a state can
be assessed, up to prescribed limits, for certain obligations of insolvent
insurance companies to policyholders and claimants. The Company's expenses
related to these funds have been immaterial. These expenses are ceded to ALIC
under reinsurance agreements.
MARKETING AND COMPLIANCE ISSUES
Companies operating in the insurance and financial services markets have come
under the scrutiny of regulators with respect to market conduct and compliance
issues. Under certain circumstances, companies have been held responsible for
providing incomplete or misleading sales materials and for replacing existing
policies with policies that were less advantageous to the policyholder. The
Company monitors its sales materials and enforces compliance procedures to
mitigate any exposure to potential litigation. The Company is a member of the
Insurance Marketplace Standards Association, an organization which advocates
ethical market conduct.
F-12
<PAGE>
GLENBROOK LIFE AND ANNUITY COMPANY
SCHEDULE IV--REINSURANCE
($ IN THOUSANDS)
<TABLE>
<CAPTION>
GROSS NET
AMOUNT CEDED AMOUNT
-------- -------- --------
<S> <C> <C> <C>
YEAR ENDED DECEMBER 31, 1999
Life insurance in force..................................... $23,586 $23,586 $ --
======= ======= =======
Premiums and contract charges:
Life and annuities........................................ $27,175 $27,175 $ --
======= ======= =======
<CAPTION>
GROSS NET
AMOUNT CEDED AMOUNT
-------- -------- --------
<S> <C> <C> <C>
YEAR ENDED DECEMBER 31, 1998
Life insurance in force..................................... $12,056 $12,056 $ --
======= ======= =======
Premiums and contract charges:
Life and annuities........................................ $19,009 $19,009 $ --
======= ======= =======
<CAPTION>
GROSS NET
AMOUNT CEDED AMOUNT
-------- -------- --------
<S> <C> <C> <C>
YEAR ENDED DECEMBER 31, 1997
Life insurance in force..................................... $ 4,095 $ 4,095 $ --
======= ======= =======
Premiums and contract charges:
Life and annuities........................................ $11,641 $11,641 $ --
======= ======= =======
</TABLE>
F-13
<PAGE>
------------------------------------------------------------
GLENBROOK LIFE MULTI-
MANAGER VARIABLE
ACCOUNT
FINANCIAL STATEMENTS AS OF DECEMBER 31, 1999 AND FOR THE
PERIODS ENDED DECEMBER 31, 1999 AND DECEMBER 31, 1998 AND
INDEPENDENT AUDITORS' REPORT
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Shareholder of
Glenbrook Life and Annuity Company:
We have audited the accompanying statement of net assets of Glenbrook Life
Multi-Manager Variable Account as of December 31, 1999 (including the assets
of each of the individual sub-accounts which comprise the Account as
disclosed in Note 1), and the related statements of operations for the period
then ended and the statements of changes in net assets for each of the
periods in the two year period then ended for each of the individual
sub-accounts which comprise the Account. These financial statements are the
responsibility of management. Our responsibility is to express an opinion on
these financial statements 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. Our procedures included
confirmation of securities owned at December 31, 1999 by correspondence with the
account custodians. 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 Glenbrook Life Multi-Manager Variable
Account as of December 31, 1999 (including the assets of each of the individual
sub-accounts which comprise the Account), and the results of operations for
each of the individual sub-accounts for the period then ended and the changes
in their net assets for each of the periods in the two year period then ended
in conformity with generally accepted accounting principles.
/s/ Deloitte & Touche LLP
Chicago, Illinois
March 27, 2000
<PAGE>
GLENBROOK LIFE MULTI-MANAGER VARIABLE ACCOUNT
<TABLE>
<CAPTION>
STATEMENT OF NET ASSETS
DECEMBER 31, 1999
------------------------------------------------------------------------------------------------------------------------------------
<S> <C>
NET ASSETS
Allocation to Sub-Accounts investing in the AIM Variable Insurance Funds:
Capital Appreciation, 30,068 shares (cost $847,645) $ 1,069,820
Diversified Income, 22,719 shares (cost $254,416) 228,554
Government Securities, 39,177 shares (cost $431,684) 416,451
Growth, 40,053 shares (cost $1,056,820) 1,291,711
Growth and Income, 56,629 shares (cost $1,355,614) 1,788,924
International Equity, 5,662 shares (cost $125,807) 165,836
Global Utilities, 1,141 shares (cost $20,935) 26,017
Value, 99,695 shares (cost $2,793,653) 3,335,849
Balanced, 64,471 shares (cost $792,523) 840,704
High Yield, 13,650 shares (cost $126,505) 123,123
Allocation to Sub-Accounts investing in the American Century Variable Portfolios, Inc.:
American Century VP Balanced, 34,262 shares (cost $270,618) 266,897
American Century VP International, 8,985 shares (cost $69,392) 112,310
Allocation to Sub-Accounts investing in the Dreyfus Variable Investment Fund:
VIF Growth and Income, 20,531 shares (cost $456,922) 523,127
VIF Money Market, 515,668 shares (cost $515,668) 515,668
VIF Small Company Stock, 6,301 shares (cost $93,940) 105,162
Allocation to Sub-Account investing in the Dreyfus Socially Responsible Growth Fund, Inc., 8,304 shares (cost $272,645) 324,421
Allocation to Sub-Account investing in the Dreyfus Stock Index Fund, 58,798 shares (cost $1,810,503) 2,260,801
Allocation to Sub-Accounts investing in the Fidelity Variable Insurance Products Fund:
VIP Growth, 32,641 shares (cost $1,560,575) 1,792,960
VIP High Income, 43,426 shares (cost $497,092) 491,149
VIP Equity-Income, 76,173 shares (cost $1,893,706) 1,958,416
Allocation to Sub-Accounts investing in the Fidelity Variable Insurance Products Fund II:
VIP II Contrafund, 55,195 shares (cost $1,412,463) 1,608,946
Allocation to Sub-Accounts investing in the MFS Variable Insurance Trust:
MFS Emerging Growth, 24,262 shares (cost $545,158) 920,492
MFS Limited Maturity, 7,516 shares (cost $76,890) 73,735
MFS Growth With Income, 7,708 shares (cost $157,213) 164,266
MFS New Discovery, 2,884 shares (cost $35,658) 49,814
</TABLE>
See notes to financial statements.
2
<PAGE>
GLENBROOK LIFE MULTI-MANAGER VARIABLE ACCOUNT
STATEMENT OF NET ASSETS (CONTINUED)
DECEMBER 31, 1999
<TABLE>
------------------------------------------------------------------------------------------------------------------------------------
<S> <C>
NET ASSETS
Allocation to Sub-Accounts investing in the Goldman Sachs Variable Insurance Trust:
Growth and Income, 2,602 shares (cost $29,124) $ 28,331
CORE U.S. Equity, 19,958 shares (cost $251,242) 279,015
CORE Large Cap Growth, 0 shares (cost $0) -
CORE Small Cap Equity, 20,901 shares (cost $185,156) 221,548
Capital Growth, 2,435 shares (cost $29,739) 34,112
Mid Cap Value, 0 shares (cost $0) -
International Equity, 0 shares (cost $0) -
Global Income, 0 shares (cost $0) -
Allocation to Sub-Accounts investing in the Morgan Stanley Dean Witter Universal Funds, Inc.:
Fixed Income, 1,536 shares (cost $16,018) 15,432
Equity Growth, 6,969 shares (cost $116,945) 141,534
Value, 16,407 shares (cost $191,980) 176,540
Mid Cap Value, 1,490 shares (cost $22,717) 23,271
U.S. Real Estate, 0 shares (cost $0) -
Global Equity, 201 shares (cost $2,585) 2,617
International Magnum, 577 shares (cost $7,543) 8,010
Allocation to Sub-Accounts investing in the Neuberger & Berman Advisers Management Trust:
AMT Guardian, 2,515 shares (cost $39,302) 39,861
AMT Partners, 9,981 shares (cost $194,510) 196,017
AMT Mid-Cap Growth, 274 shares (cost $4,234) 6,652
Allocation to Sub-Accounts investing in the STI Classic Variable Trust:
STI Capital Appreciation, 23,609 shares (cost $469,005) 478,554
STI Value Income Stock, 15,700 shares (cost $219,076) 207,708
Allocatin to Sub-Account investing in the Federated Insurance Series:
Federated Prime Money Fund II, 154,678 shares (cost $154,678) 154,678
-----------------
Total Assets 22,469,033
LIABILITIES
Payable to Glenbrook Life and Annuity Company:
Accrued contract charges 6,367
-----------------
Net Assets $ 22,462,666
=================
</TABLE>
See notes to financial statements.
3
<PAGE>
GLENBROOK LIFE MULTI-MANAGER VARIABLE ACCOUNT
<TABLE>
<CAPTION>
STATEMENTS OF OPERATIONS
-----------------------------------------------------------------------------------------------------------------------------------
AIM Variable Insurance Funds Sub-Accounts
-------------------------------------------------------------------------
For the Period Ended December 31, 1999
-------------------------------------------------------------------------
Capital Diversified Government Growth &
Appreciation Income Securities Growth Income
------------- ----------- ----------- ------------ ------------
<S> <C> <C> <C> <C> <C>
INVESTMENT INCOME
Dividends $24,819 $14,091 $15,295 $38,538 $25,226
Charges from Glenbrook Life and Annuity Company:
Mortality and expense risk (5,790) (2,888) (3,769) (8,866) (14,959)
Administrative expense (428) (223) (280) (678) (1,134)
--------- -------- -------- --------- ---------
Net investment income (loss) 18,601 10,980 11,246 28,994 9,133
--------- -------- -------- --------- ---------
REALIZED AND UNREALIZED GAINS
(LOSSES) ON INVESTMENTS
Realized gains (losses) from sales of investments:
Proceeds from sales 51,697 63,133 13,810 108,708 266,730
Cost of investments sold 48,710 66,242 14,375 94,667 219,304
--------- -------- -------- --------- ---------
Net realized gains (losses) 2,987 (3,109) (565) 14,041 47,426
--------- -------- -------- --------- ---------
Change in unrealized gains (losses) 201,864 (15,493) (15,693) 183,688 307,544
--------- -------- -------- --------- ---------
Net gains (losses) on investments 204,851 (18,602) (16,258) 197,729 354,970
--------- -------- -------- --------- ---------
CHANGE IN NET ASSETS
RESULTING FROM OPERATIONS $223,452 $(7,622) $(5,012) $226,723 $364,103
========= ======== ======== ========= =========
</TABLE>
See notes to financial statements.
4
<PAGE>
GLENBROOK LIFE MULTI-MANAGER VARIABLE ACCOUNT
<TABLE>
<CAPTION>
STATEMENTS OF OPERATIONS
-----------------------------------------------------------------------------------------------------------------------------------
AIM Variable Insurance Funds Sub-Accounts
------------------------------------------------------------------------
For the Period Ended December 31, 1999
------------------------------------------------------------------------
International Global High
Equity Utilities Value Balanced Yield
------------ ----------- ----------- --------- ----------
<S> <C> <C> <C> <C> <C>
INVESTMENT INCOME
Dividends $6,109 $404 $99,958 $12,965 $7,756
Charges from Glenbrook Life and Annuity Company:
Mortality and expense risk (1,100) (174) (22,918) (2,667) (214)
Administrative expense (82) (12) (1,745) (189) (19)
-------- ------- --------- -------- -------
Net investment income (loss) 4,927 218 75,295 10,109 7,523
-------- ------- --------- -------- -------
REALIZED AND UNREALIZED GAINS
(LOSSES) ON INVESTMENTS
Realized gains (losses) from sales of investments:
Proceeds from sales 9,388 175 261,436 12,756 214
Cost of investments sold 10,662 173 214,792 13,294 225
-------- ------- --------- -------- -------
Net realized gains (losses) (1,274) 2 46,644 (538) (11)
-------- ------- --------- -------- -------
Change in unrealized gains (losses) 42,725 5,081 422,054 48,043 (3,382)
-------- ------- --------- -------- -------
Net gains (losses) on investments 41,451 5,083 468,698 47,505 (3,393)
-------- ------- --------- -------- -------
CHANGE IN NET ASSETS
RESULTING FROM OPERATIONS $46,378 $5,301 $543,993 $57,614 $4,130
======== ======= ========= ======== =======
</TABLE>
See notes to financial statements.
5
<PAGE>
GLENBROOK LIFE MULTI-MANAGER VARIABLE ACCOUNT
<TABLE>
<CAPTION>
STATEMENTS OF OPERATIONS
-----------------------------------------------------------------------------------------------------------------------------------
American Century Variable
Portfolios, Inc. Sub-Accounts Dreyfus Variable Investment Fund Sub-Accounts
------------------------------ ---------------------------------------------
For the Period Ended December 31, 1999
-----------------------------------------------------------------------
American American VIF VIF VIF
Century Century Growth and Money Small Company
VP Balanced VP International Income Market Stock
------------ ---------------- ----------- --------- -------------
<S> <C> <C> <C> <C> <C>
INVESTMENT INCOME
Dividends $33,476 $ - $24,855 $8,969 $ -
Charges from Glenbrook Life and Annuity Company:
Mortality and expense risk (3,112) (1,175) (6,080) (2,507) (1,232)
Administrative expense (239) (87) (466) (189) (89)
-------- -------- -------- --------- --------
Net investment income (loss) 30,125 (1,262) 18,309 6,273 (1,321)
-------- -------- -------- --------- --------
REALIZED AND UNREALIZED GAINS
(LOSSES) ON INVESTMENTS
Realized gains (losses) from sales of investments:
Proceeds from sales 2,879 21,515 53,707 253,369 13,406
Cost of investments sold 3,208 16,611 53,327 253,369 11,361
-------- -------- -------- --------- --------
Net realized gains (losses) (329) 4,904 380 - 2,045
-------- -------- -------- --------- --------
Change in unrealized gains (losses) (9,390) 43,274 52,631 - 10,456
-------- -------- -------- --------- --------
Net gains (losses) on investments (9,719) 48,178 53,011 - 12,501
-------- -------- -------- --------- --------
CHANGE IN NET ASSETS
RESULTING FROM OPERATIONS $20,406 $46,916 $71,320 $6,273 $11,180
======== ======== ======== ========= ========
</TABLE>
See notes to financial statements.
6
<PAGE>
GLENBROOK LIFE MULTI-MANAGER VARIABLE ACCOUNT
<TABLE>
<CAPTION>
STATEMENTS OF OPERATIONS
-----------------------------------------------------------------------------------------------------------------------------------
Dreyfus Socially
Responsible Dreyfus Stock
Growth Fund, Inc. Index Fund Fidelity Variable Insurance Products
Sub-Account Sub-Account Fund Sub-Accounts
------------------- ----------------- ----------------------------------------
For the Period Ended December 31,1999
--------------------------------------------------------------------------------
Dreyfus Socially VIP VIP
Responsible Dreyfus Stock VIP High Equity-
Growth Fund, Inc. Index Fund Growth Income Income
---------------- -------------- ----------- ----------- ----------
<S> <C> <C> <C> <C> <C>
INVESTMENT INCOME
Dividends $15,392 $39,624 $26,003 $33,365 $63,618
Charges from Glenbrook Life and Annuity Company:
Mortality and expense risk (2,259) (25,843) (6,851) (4,863) (19,155)
Administrative expense (175) (1,957) (534) (365) (1,459)
-------- --------- --------- -------- ---------
Net investment income (loss) 12,958 11,824 18,618 28,137 43,004
-------- --------- --------- -------- ---------
REALIZED AND UNREALIZED GAINS
(LOSSES) ON INVESTMENTS
Realized gains (losses) from sales of investments:
Proceeds from sales 23,394 371,822 69,697 50,851 246,254
Cost of investments sold 18,839 330,648 59,386 49,865 245,774
-------- --------- --------- -------- ---------
Net realized gains (losses) 4,555 41,174 10,311 986 480
-------- --------- --------- -------- ---------
Change in unrealized gains (losses) 39,160 268,612 189,564 (2,946) 17,820
-------- --------- --------- -------- ---------
Net gains (losses) on investments 43,715 309,786 199,875 (1,960) 18,300
-------- --------- --------- -------- ---------
CHANGE IN NET ASSETS
RESULTING FROM OPERATIONS $56,673 $321,610 $218,493 $26,177 $61,304
======== ========= ========= ======== =========
</TABLE>
See notes to financial statements.
7
<PAGE>
GLENBROOK LIFE MULTI-MANAGER VARIABLE ACCOUNT
<TABLE>
<CAPTION>
STATEMENTS OF OPERATIONS
----------------------------------------------------------------------------------------------------------------------------------
Fidelity Variable
Insurance Products
Fund II Sub-Account MFS Variable Insurance Trust Sub-Accounts
------------------- -------------------------------------------------------
For the Period Ended December 31,1999
-----------------------------------------------------------------------------
VIP II MFS Emerging MFS Limited MFS Growth MFS New
Contrafund Growth Maturity With Income Discovery
-------------- ------------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
INVESTMENT INCOME
Dividends $12,548 $ - $6,100 $189 $870
Charges from Glenbrook Life and Annuity Company:
Mortality and expense risk (7,401) (5,804) (911) (938) (163)
Administrative expense (553) (424) (68) (72) (12)
--------- --------- ------- -------- --------
Net investment income (loss) 4,594 (6,228) 5,121 (821) 695
--------- --------- ------- -------- --------
REALIZED AND UNREALIZED GAINS
(LOSSES) ON INVESTMENTS
Realized gains (losses) from sales of investments:
Proceeds from sales 57,245 43,467 1,587 15,862 157
Cost of investments sold 56,746 35,221 1,667 16,898 150
--------- --------- ------- -------- --------
Net realized gains (losses) 499 8,246 (80) (1,036) 7
--------- --------- ------- -------- --------
Change in unrealized gains (losses) 153,062 352,999 (5,524) 7,053 14,155
--------- --------- ------- -------- --------
Net gains (losses) on investments 153,561 361,245 (5,604) 6,017 14,162
--------- --------- ------- -------- --------
CHANGE IN NET ASSETS
RESULTING FROM OPERATIONS $158,155 $355,017 $(483) $5,196 $14,857
========= ========= ======= ======== ========
</TABLE>
See notes to financial statements.
8
<PAGE>
GLENBROOK LIFE MULTI-MANAGER VARIABLE ACCOUNT
<TABLE>
<CAPTION>
STATEMENTS OF OPERATIONS
----------------------------------------------------------------------------------------------------------------------------
Goldman Sachs Variable Insurance Trust Sub-Accounts
-------------------------------------------------------------------
For the Period Ended December 31, 1999
-------------------------------------------------------------------
CORE CORE
Growth and CORE Large Cap Small Cap Capital
Income U.S. Equity Growth Equity Growth
------------ ------------ ---------- --------- -----------
<S> <C> <C> <C> <C> <C>
INVESTMENT INCOME
Dividends $316 $4,018 $ - $491 $763
Charges from Glenbrook Life and Annuity Company:
Mortality and expense risk (264) (2,317) - (1,827) (244)
Administrative expense (19) (156) - (122) (16)
-------- -------- ------ -------- -------
Net investment income (loss) 33 1,545 - (1,458) 503
-------- -------- ------ -------- -------
REALIZED AND UNREALIZED GAINS
(LOSSES) ON INVESTMENTS
Realized gains (losses) from sales of investments:
Proceeds from sales 9,528 23,680 - 12,673 287
Cost of investments sold 10,079 24,346 - 12,294 262
-------- -------- ------ -------- -------
Net realized gains (losses) (551) (666) - 379 25
-------- -------- ------ -------- -------
Change in unrealized gains (losses) (861) 27,597 - 36,391 4,372
-------- -------- ------ -------- -------
Net gains (losses) on investments (1,412) 26,931 - 36,770 4,397
-------- -------- ------ -------- -------
CHANGE IN NET ASSETS
RESULTING FROM OPERATIONS $(1,379) $28,476 $ - $35,312 $4,900
======== ======== ====== ======== =======
</TABLE>
See notes to financial statements.
9
<PAGE>
GLENBROOK LIFE MULTI-MANAGER VARIABLE ACCOUNT
<TABLE>
<CAPTION>
STATEMENTS OF OPERATIONS
--------------------------------------------------------------------------------------------------------------------------------
Morgan Stanley Dean Witter
Goldman Sachs Variable Universal Funds, Inc.
Insurance Trust Sub-Accounts Sub-Accounts
----------------------------------------- --------------------------
For the Period Ended December 31, 1999
---------------------------------------------------------------------
Mid Cap International Global Fixed Equity
Value Equity Income Income Growth
------------ ------------- ---------- ------------ ------------
<S> <C> <C> <C> <C> <C>
INVESTMENT INCOME
Dividends $ - $ - $ - $701 $4,553
Charges from Glenbrook Life and Annuity Company:
Mortality and expense risk (14) - - (99) (947)
Administrative expense (1) - - (8) (65)
------- ------ ------ ----- --------
Net investment income (loss) (15) - - 594 3,541
------- ------ ------ ----- --------
REALIZED AND UNREALIZED GAINS
(LOSSES) ON INVESTMENTS
Realized gains (losses) from sales of investments:
Proceeds from sales 4,900 - - 100 13,589
Cost of investments sold 5,036 - - 105 14,113
------- ------ ------ ----- --------
Net realized gains (losses) (136) - - (5) (524)
------- ------ ------ ----- --------
Change in unrealized gains (losses) (163) - - (586) 24,318
------- ------ ------ ----- --------
Net gains (losses) on investments (299) - - (591) 23,794
------- ------ ------ ----- --------
CHANGE IN NET ASSETS
RESULTING FROM OPERATIONS $(314) $ - $ - $3 $27,335
======= ====== ====== ===== ========
</TABLE>
See notes to financial statements.
10
<PAGE>
GLENBROOK LIFE MULTI-MANAGER VARIABLE ACCOUNT
<TABLE>
<CAPTION>
STATEMENTS OF OPERATIONS
-------------------------------------------------------------------------------------------------------------------------------
Morgan Stanley Dean Witter Universal Funds, Inc. Sub-Accounts
----------------------------------------------------------------------
For the Period Ended December 31, 1999
----------------------------------------------------------------------
Mid Cap U.S. Global International
Value Value Real Estate Equity Magnum
---------- ----------- ----------- ---------- -------------
<S> <C> <C> <C> <C> <C>
INVESTMENT INCOME
Dividends $2,153 $2,098 $ - $148 $55
Charges from Glenbrook Life and Annuity Company:
Mortality and expense risk (1,748) (130) - (38) (11)
Administrative expense (116) (8) - (3) (1)
-------- -------- ------ ------- -----
Net investment income (loss) 289 1,960 - 107 43
-------- -------- ------ ------- -----
REALIZED AND UNREALIZED GAINS
(LOSSES) ON INVESTMENTS
Realized gains (losses) from sales of investments:
Proceeds from sales 28,639 9,841 - 2,405 11
Cost of investments sold 29,891 10,650 - 2,525 12
-------- -------- ------ ------- -----
Net realized gains (losses) (1,252) (809) - (120) (1)
-------- -------- ------ ------- -----
Change in unrealized gains (losses) (15,440) 354 - (35) 468
-------- -------- ------ ------- -----
Net gains (losses) on investments (16,692) (455) - (155) 467
-------- -------- ------ ------- -----
CHANGE IN NET ASSETS
RESULTING FROM OPERATIONS $(16,403) $1,505 $ - $(48) $510
======== ======== ====== ======= =====
</TABLE>
See notes to financial statements.
11
<PAGE>
GLENBROOK LIFE MULTI-MANAGER VARIABLE ACCOUNT
<TABLE>
<CAPTION>
STATEMENTS OF OPERATIONS
----------------------------------------------------------------------------------------------------------------------------------
Neuberger & Berman STI Classic
Advisers Management Trust Sub-Accounts Variable Trust Sub-Accounts
-------------------------------------------- -------------------------
For the Period Ended December 31, 1999
------------------------------------------------------------------------
AMT Value
AMT AMT Mid-Cap Capital Income
Guardian Partners Growth Appreciation (c) Stock (c)
---------- ----------- -------- ---------------- -----------
<S> <C> <C> <C> <C> <C>
INVESTMENT INCOME
Dividends $ - $431 $ - $247 $928
Charges from Glenbrook Life and Annuity Company:
Mortality and expense risk (277) (1,871) (21) (508) (277)
Administrative expense (19) (126) (2) (38) (21)
----- -------- ------- -------- --------
Net investment income (loss) (296) (1,566) (23) (299) 630
----- -------- ------- -------- --------
REALIZED AND UNREALIZED GAINS
(LOSSES) ON INVESTMENTS
Realized gains (losses) from sales of investments:
Proceeds from sales 853 14,144 20 14,392 235
Cost of investments sold 926 14,973 18 15,245 259
----- -------- ------- -------- --------
Net realized gains (losses) (73) (829) 2 (853) (24)
----- -------- ------- -------- --------
Change in unrealized gains (losses) 559 1,507 2,418 9,550 (11,368)
----- -------- ------- -------- --------
Net gains (losses) on investments 486 678 2,420 8,697 (11,392)
----- -------- ------- -------- --------
CHANGE IN NET ASSETS
RESULTING FROM OPERATIONS $190 $(888) $2,397 $8,398 $(10,762)
===== ======== ======= ======== ========
</TABLE>
(c) For the Period Beginning May 1, 1999 and Ended December 31, 1999
See notes to financial statements.
12
<PAGE>
GLENBROOK LIFE MULTI-MANAGER VARIABLE ACCOUNT
<TABLE>
<CAPTION>
STATEMENTS OF OPERATIONS
----------------------------------------------------------------------------------------------
Ferderated
Insurance Series
Sub-Account
--------------------------
For the Period Ended
December 31, 1999
--------------------------
Federated Prime
Money Fund II (d)
--------------------------
INVESTMENT INCOME
<S> <C>
Dividends $ 584
Charges from Glenbrook Life and Annuity Company:
Mortality and expense risk (130)
Administrative expense (11)
--------------------------
Net investment income (loss) 443
--------------------------
REALIZED AND UNREALIZED GAINS
(LOSSES) ON INVESTMENTS
Realized gains (losses) from sales of investments:
Proceeds from sales 131
Cost of investments sold 131
--------------------------
Net realized gains (losses) -
--------------------------
Change in unrealized gains (losses) -
--------------------------
Net gains (losses) on investments -
--------------------------
CHANGE IN NET ASSETS
RESULTING FROM OPERATIONS $ 443
==========================
</TABLE>
(d) For the Period Beginning November 1, 1999 and Ended December 31, 1999
See notes to financial statements.
13
<PAGE>
GLENBROOK LIFE MULTI-MANAGER VARIABLE ACCOUNT
<TABLE>
<CAPTION>
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31,
---------------------------------------------------------------------------------------------------------------------------------
AIM Variable Insurance Funds Sub-Accounts
--------------------------------------------------------------------------------
Capital Apprecation Diversifed Income Government Securities
------------------------ ------------------------ ------------------------
1999 1998 (a) 1999 1998 (a) 1999 1998 (a)
---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
FROM OPERATIONS
Net investment income (loss) $ 18,601 $ 5,272 $ 10,980 $ 10,547 $ 11,246 $ 1,419
Net realized gains (losses) 2,987 (3,233) (3,109) (206) (565) 4,531
Change in unrealized gains (losses) 201,864 20,311 (15,493) (10,370) (15,693) 460
---------- ---------- ---------- ---------- ---------- ----------
Change in net assets resulting from operations 223,452 22,350 (7,622) (29) (5,012) 6,410
---------- ---------- ---------- ---------- ---------- ----------
FROM CAPITAL TRANSACTIONS
Deposits 554,381 172,947 85,926 158,204 - 48,226
Benefit payments - - - - (10,033) (16,403)
Payments on termination (1,095) - (10,841) (3,438) (720) -
Contract maintenance charges (334) (130) (62) (94) (100) (45)
Transfers among the sub-accounts
and with the Fixed Account - net 31,478 66,468 (27,193) 33,638 342,750 51,260
---------- ---------- ---------- ---------- ---------- ----------
Change in net assets resulting
from capital transactions 584,430 239,285 47,830 188,310 331,897 83,038
---------- ---------- ---------- ---------- ---------- ----------
INCREASE (DECREASE) IN NET ASSETS 807,882 261,635 40,208 188,281 326,885 89,448
NET ASSETS AT BEGINNING OF PERIOD 261,635 - 188,281 - 89,448 -
---------- ---------- ---------- ---------- ---------- ----------
NET ASSETS AT END OF PERIOD $1,069,517 $ 261,635 $ 228,489 $ 188,281 $ 416,333 $ 89,448
========== ========== ========== ========== ========== ==========
</TABLE>
(a) For the Period Beginning January 26, 1998 and Ended December 31, 1998.
See notes to financial statements.
14
<PAGE>
GLENBROOK LIFE MULTI-MANAGER VARIABLE ACCOUNT
<TABLE>
<CAPTION>
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31,
---------------------------------------------------------------------------------------------------------------------------------
AIM Variable Insurance Funds Sub-Accounts
--------------------------------------------------------------------------------
Growth Growth and Income International Equity
------------------------ ------------------------ ------------------------
1999 1998 (a) 1999 1998 (a) 1999 1998 (a)
---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
FROM OPERATIONS
Net investment income (loss) $ 57,696 $ 23,206 $ 9,133 $ 5,211 $ 4,927 $ 115
Net realized gains (losses) (14,662) 1,338 47,426 (1,268) (1,274) (20)
Change in unrealized gains (losses) 183,688 51,203 307,544 125,765 42,725 (2,696)
---------- ---------- ---------- ---------- ---------- ----------
Change in net assets resulting from operations 226,722 75,747 364,103 129,708 46,378 (2,601)
---------- ---------- ---------- ---------- ---------- ----------
FROM CAPITAL TRANSACTIONS
Deposits 635,333 358,667 565,038 797,348 49,428 71,124
Benefit payments - - (12,063) - - -
Payments on termination (15,013) (450) (93,841) (19,107) (3,300) -
Contract maintenance charges (401) (212) (560) (469) (41) (39)
Transfers among the sub-accounts
and with the Fixed Account - net 20,066 (9,114) 24,967 33,293 (5,534) 10,374
---------- ---------- ---------- ---------- ---------- ----------
Change in net assets resulting
from capital transactions 639,985 348,891 483,541 811,065 40,553 81,459
---------- ---------- ---------- ---------- ---------- ----------
INCREASE (DECREASE) IN NET ASSETS 866,707 424,638 847,644 940,773 86,931 78,858
NET ASSETS AT BEGINNING OF PERIOD 424,638 - 940,773 - 78,858 -
---------- ---------- ---------- ---------- ---------- ----------
NET ASSETS AT END OF PERIOD $1,291,345 $ 424,638 $1,788,417 $ 940,773 $ 165,789 $ 78,858
========== ========== ========== ========== ========== ==========
</TABLE>
(a) For the Period Beginning January 26, 1998 and Ended December 31, 1998.
See notes to financial statements.
15
<PAGE>
GLENBROOK LIFE MULTI-MANAGER VARIABLE ACCOUNT
<TABLE>
<CAPTION>
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31,
---------------------------------------------------------------------------------------------------------------------------------
AIM Variable Insurance Funds Sub-Accounts
--------------------------------------------------------------------------------
Global Utilities Value Balanced
------------------------ ------------------------ ------------------------
1999 1998 (a) 1999 1998 (a) 1999 1998 (a)
---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
FROM OPERATIONS
Net investment income (loss) $ 218 $ - $ 75,295 $ 44,116 $ 10,109 $ 54
Net realized gains (losses) 2 - 46,644 (1,403) (538) 6
Change in unrealized gains (losses) 5,081 - 422,054 120,143 48,043 138
---------- ---------- ---------- ---------- ---------- ----------
Change in net assets resulting from operations 5,301 - 543,993 162,856 57,614 198
---------- ---------- ---------- ---------- ---------- ----------
FROM CAPITAL TRANSACTIONS
Deposits - - 1,549,179 901,135 716,040 4,200
Benefit payments - - (10,108) (31,209) - -
Payments on termination - - (51,767) (17,715) (2,565) -
Contract maintenance charges (7) - (1,064) (579) (239) (2)
Transfers among the sub-accounts
and with the Fixed Account - net 20,715 - 143,384 146,799 65,275 (55)
---------- ---------- ---------- ---------- ---------- ----------
Change in net assets resulting
from capital transactions 20,708 - 1,629,624 998,431 778,511 4,143
---------- ---------- ---------- ---------- ---------- ----------
INCREASE (DECREASE) IN NET ASSETS 26,009 - 2,173,617 1,161,287 836,125 4,341
NET ASSETS AT BEGINNING OF PERIOD - - 1,161,287 - 4,341 -
---------- ---------- ---------- ---------- ---------- ----------
NET ASSETS AT END OF PERIOD $ 26,009 $ - $3,334,904 $1,161,287 $ 840,466 $ 4,341
========== ========== ========== ========== ========== ==========
</TABLE>
(a) For the Period Beginning January 26, 1998 and Ended December 31, 1998.
See notes to financial statements.
16
<PAGE>
GLENBROOK LIFE MULTI-MANAGER VARIABLE ACCOUNT
<TABLE>
<CAPTION>
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31,
-----------------------------------------------------------------------------------------------------------------------------------
AIM Variable Insurance
Funds Sub-Accounts American Century Variable Portfolios, Inc. Sub-Accounts
-------------------------- -------------------------------------------------------
American Century American Century
High Yield VP Balanced VP International
-------------------------- -------------------------- ---------------------------
1999 1998 (a) 1999 1998 1999 1998
------------ ------------ ------------ ------------ ------------- ------------
<S> <C> <C> <C> <C> <C> <C>
FROM OPERATIONS
Net investment income (loss) $ 7,523 $ - $ 30,125 $ (124) $ (1,262) $ 295
Net realized gains (losses) (11) - (329) 246 4,904 6
Change in unrealized gains (losses) (3,382) - (9,390) 5,669 43,274 (356)
------------ ------------ ------------ ------------ ------------- ------------
Change in net assets resulting from operations 4,130 - 20,406 5,791 46,916 (55)
------------ ------------ ------------ ------------ ------------- ------------
FROM CAPITAL TRANSACTIONS
Deposits 109,155 - - 171,446 - 42,627
Benefit payments - - - - - -
Payments on termination - - - - - -
Contract maintenance charges (34) - (42) (105) (15) (32)
Transfers among the sub-accounts
and with the Fixed Account - net 9,837 - 36,223 33,103 372 22,465
------------ ------------ ------------ ------------ ------------- ------------
Change in net assets resulting
from capital transactions 118,958 - 36,181 204,444 357 65,060
------------ ------------ ------------ ------------ ------------- ------------
INCREASE (DECREASE) IN NET ASSETS 123,088 - 56,587 210,235 47,273 65,005
NET ASSETS AT BEGINNING OF PERIOD - - 210,235 - 65,005 -
------------ ------------ ------------ ------------ ------------- ------------
NET ASSETS AT END OF PERIOD $ 123,088 $ - $ 266,822 $ 210,235 $ 112,278 $ 65,005
============ ============ ============ ============ ============= ============
</TABLE>
(a) For the Period Beginning January 26, 1998 and Ended December 31, 1998.
See notes to financial statements.
17
<PAGE>
GLENBROOK LIFE MULTI-MANAGER VARIABLE ACCOUNT
<TABLE>
<CAPTION>
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31,
-----------------------------------------------------------------------------------------------------------------------------------
Dreyfus Variable Investment Fund Sub-Accounts
-----------------------------------------------------------------------------------
VIF Growth and Income VIF Money Market VIF Small Company Stock
-------------------------- -------------------------- ---------------------------
1999 1998 1999 1998 1999 1998
------------ ------------ ------------ ------------ ------------- ------------
<S> <C> <C> <C> <C> <C> <C>
FROM OPERATIONS
Net investment income (loss) $ 18,309 $ 460 $ 6,273 $ 5,245 $ (1,321) $ (222)
Net realized gains (losses) 380 (1,484) - - 2,045 (477)
Change in unrealized gains (losses) 52,631 13,573 - - 10,456 767
------------ ------------ ------------ ------------ ------------- ------------
Change in net assets resulting from operations 71,320 12,549 6,273 5,245 11,180 68
------------ ------------ ------------ ------------ ------------- ------------
FROM CAPITAL TRANSACTIONS
Deposits 84,986 365,739 47,218 347,973 20,821 71,142
Benefit payments - - - - (3,013) -
Payments on termination (18,765) (2,763) (14,496) (64,355) - -
Contract maintenance charges (123) (196) (133) (73) (28) (37)
Transfers among the sub-accounts
and with the Fixed Account - net (8,006) 18,237 331,072 (143,202) 1,462 3,537
------------ ------------ ------------ ------------ ------------- ------------
Change in net assets resulting
from capital transactions 58,092 381,017 363,661 140,343 19,242 74,642
------------ ------------ ------------ ------------ ------------- ------------
INCREASE (DECREASE) IN NET ASSETS 129,412 393,566 369,934 145,588 30,422 74,710
NET ASSETS AT BEGINNING OF PERIOD 393,566 - 145,588 - 74,710 -
------------ ------------ ------------ ------------ ------------- ------------
NET ASSETS AT END OF PERIOD $ 522,978 $ 393,566 $ 515,522 $ 145,588 $ 105,132 $ 74,710
============ ============ ============ ============ ============= ============
</TABLE>
See notes to financial statements.
18
<PAGE>
GLENBROOK LIFE MULTI-MANAGER VARIABLE ACCOUNT
<TABLE>
<CAPTION>
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31,
-----------------------------------------------------------------------------------------------------------------------------------
Fidelity Variable
Dreyfus Socially Responsible Dreyfus Stock Index Fund Insurance Products
Growth Fund, Inc. Sub-Account Sub-Account Sub-Accounts
----------------------------- -------------------------- ---------------------------
Dreyfus Socially Responsible
Growth Fund, Inc. Dreyfus Stock Index Fund VIP Growth
----------------------------- -------------------------- ---------------------------
1999 1998 1999 1998 (a) 1999 1998
------------ ------------ ------------ ------------ ------------- ------------
<S> <C> <C> <C> <C> <C> <C>
FROM OPERATIONS
Net investment income (loss) $ 12,958 $ 3,845 $ 11,824 $ 3,855 $ 18,618 $ (1,774)
Net realized gains (losses) 4,555 (499) 41,174 (6,056) 10,311 (179)
Change in unrealized gains (losses) 39,160 7,917 268,612 181,686 189,564 42,820
------------ ------------ ------------ ------------ ------------- ------------
Change in net assets resulting from operations 56,673 11,263 321,610 179,485 218,493 40,867
------------ ------------ ------------ ------------ ------------- ------------
FROM CAPITAL TRANSACTIONS
Deposits 122,780 110,960 475,153 1,357,174 1,171,458 187,018
Benefit payments - - - - - -
Payments on termination (75) - (65,685) (20,302) (5,901) (180)
Contract maintenance charges (69) (63) (822) (808) (580) (120)
Transfers among the sub-accounts
and with the Fixed Account - net 19,528 3,332 (91,929) 106,284 180,461 908
------------ ------------ ------------ ------------ ------------- ------------
Change in net assets resulting
from capital transactions 142,164 114,229 316,717 1,442,348 1,345,438 187,626
------------ ------------ ------------ ------------ ------------- ------------
INCREASE (DECREASE) IN NET ASSETS 198,837 125,492 638,327 1,621,833 1,563,931 228,493
NET ASSETS AT BEGINNING OF PERIOD 125,492 - 1,621,833 - 228,521 28
------------ ------------ ------------ ------------ ------------- ------------
NET ASSETS AT END OF PERIOD $ 324,329 $ 125,492 $ 2,260,160 $ 1,621,833 $ 1,792,452 $ 228,521
============ ============ ============ ============ ============= ============
</TABLE>
(a) For the Period Beginning January 26, 1998 and Ended December 31, 1998.
See notes to financial statements.
19
<PAGE>
GLENBROOK LIFE MULTI-MANAGER VARIABLE ACCOUNT
<TABLE>
<CAPTION>
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31,
-----------------------------------------------------------------------------------------------------------------------------------
Fidelity Variable Insurance
Fidelity Variable Insurance Products Fund Sub-Accounts Products Fund II Sub-Account
------------------------------------------------------ ---------------------------
VIP High Income VIP Equity-Income VIP II Contrafund
-------------------------- -------------------------- ---------------------------
1999 1998 1999 1998 (a) 1999 1998
------------ ------------ ------------ ------------ ------------- ------------
<S> <C> <C> <C> <C> <C> <C>
FROM OPERATIONS
Net investment income (loss) $ 28,137 $ (3,094) $ 43,004 $ (12,007) $ 4,594 $ (1,763)
Net realized gains (losses) 986 (21,206) 480 (9,976) 499 (995)
Change in unrealized gains (losses) (2,946) (2,998) 17,820 46,890 153,062 43,419
------------ ------------ ------------ ------------ ------------- ------------
Change in net assets resulting from operations 26,177 (27,298) 61,304 24,907 158,155 40,661
------------ ------------ ------------ ------------ ------------- ------------
FROM CAPITAL TRANSACTIONS
Deposits 109,918 347,005 654,938 1,188,390 1,013,145 177,256
Benefit payments (4,021) - - - - -
Payments on termination (14,736) (8,150) (48,179) (17,597) (5,384) (8,133)
Contract maintenance charges (87) (177) (510) (653) (383) (158)
Transfers among the sub-accounts
and with the Fixed Account - net 27,680 34,671 (19,755) 115,016 137,715 95,588
------------ ------------ ------------ ------------ ------------- ------------
Change in net assets resulting
from capital transactions 118,754 373,349 586,494 1,285,156 1,145,093 264,553
------------ ------------ ------------ ------------ ------------- ------------
INCREASE (DECREASE) IN NET ASSETS 144,931 346,051 647,798 1,310,063 1,303,248 305,214
NET ASSETS AT BEGINNING OF PERIOD 346,079 28 1,310,063 - 305,242 28
------------ ------------ ------------ ------------ ------------- ------------
NET ASSETS AT END OF PERIOD $ 491,010 $ 346,079 $ 1,957,861 $ 1,310,063 $ 1,608,490 $ 305,242
============ ============ ============ ============ ============= ============
</TABLE>
(a) For the Period Beginning January 26, 1998 and Ended December 31, 1998.
See notes to financial statements.
20
<PAGE>
GLENBROOK LIFE MULTI-MANAGER VARIABLE ACCOUNT
<TABLE>
<CAPTION>
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31,
-----------------------------------------------------------------------------------------------------------------------------------
MFS Variable Insurance Trust Sub-Accounts
-----------------------------------------------------------------------------------
MFS Emerging Growth MFS Limited Maturity MFS Growth with Income
-------------------------- -------------------------- ---------------------------
1999 1998 1999 1998 1999 1998 (b)
------------ ------------ ------------ ------------ ------------- ------------
<S> <C> <C> <C> <C> <C> <C>
FROM OPERATIONS
Net investment income (loss) $ (6,228) $ (899) $ 5,121 $ 902 $ (821) $ -
Net realized gains (losses) 8,246 (4,763) (80) 1,395 (1,036) -
Change in unrealized gains (losses) 352,999 22,335 (5,524) (505) 7,053 -
------------ ------------ ------------ ------------ ------------- ------------
Change in net assets resulting from operations 355,017 16,673 (483) 1,792 5,196 -
------------ ------------ ------------ ------------ ------------- ------------
FROM CAPITAL TRANSACTIONS
Deposits 355,904 127,409 - 41,606 147,169 -
Benefit payments - - - - - -
Payments on termination (2,301) - - - (1,330) -
Contract maintenance charges (278) (88) (45) (27) (46) -
Transfers among the sub-accounts
and with the Fixed Account - net 46,446 21,421 19,884 10,987 13,231 -
------------ ------------ ------------ ------------ ------------- ------------
Change in net assets resulting
from capital transactions 399,771 148,742 19,839 52,566 159,024 -
------------ ------------ ------------ ------------ ------------- ------------
INCREASE (DECREASE) IN NET ASSETS 754,788 165,415 19,356 54,358 164,220 -
NET ASSETS AT BEGINNING OF PERIOD 165,443 28 54,358 - - -
------------ ------------ ------------ ------------ ------------- ------------
NET ASSETS AT END OF PERIOD $ 920,231 $ 165,443 $ 73,714 $ 54,358 $ 164,220 $ -
============ ============ ============ ============ ============= ============
</TABLE>
(b) For the Period Beginning November 9, 1998 and Ended December 31, 1998.
See notes to financial statements.
21
<PAGE>
GLENBROOK LIFE MULTI-MANAGER VARIABLE ACCOUNT
<TABLE>
<CAPTION>
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31,
-----------------------------------------------------------------------------------------------------------------------------------
MFS Variable Insurance
Trust Sub-Accounts Goldman Sachs Variable Insurance Trust Sub-Acounts
-------------------------- -------------------------------------------------------
MFS New Discovery Growth and Income CORE U.S. Equity
-------------------------- -------------------------- ---------------------------
1999 1998 (b) 1999 1998 (b) 1999 1998 (b)
------------ ------------ ------------ ------------ ------------- ------------
<S> <C> <C> <C> <C> <C> <C>
FROM OPERATIONS
Net investment income (loss) $ 695 $ - $ 33 $ (3) $ 1,545 $ (3)
Net realized gains (losses) 7 - (551) - (666) -
Change in unrealized gains (losses) 14,155 - (861) 68 27,597 176
------------ ------------ ------------ ------------ ------------- ------------
Change in net assets resulting from operations 14,857 - (1,379) 65 28,476 173
------------ ------------ ------------ ------------ ------------- ------------
FROM CAPITAL TRANSACTIONS
Deposits 23,194 - 26,360 4,200 250,100 4,200
Benefit payments - - - - - -
Payments on termination - - (1,436) - (2,463) -
Contract maintenance charges (14) - (9) (2) (80) (2)
Transfers among the sub-accounts
and with the Fixed Account - net 11,762 - 629 (105) (1,463) (5)
------------ ------------ ------------ ------------ ------------- ------------
Change in net assets resulting
from capital transactions 34,942 - 25,544 4,093 246,094 4,193
------------ ------------ ------------ ------------ ------------- ------------
INCREASE (DECREASE) IN NET ASSETS 49,799 - 24,165 4,158 274,570 4,366
NET ASSETS AT BEGINNING OF PERIOD - - 4,158 - 4,366 -
------------ ------------ ------------ ------------ ------------- ------------
NET ASSETS AT END OF PERIOD $ 49,799 $ - $ 28,323 $ 4,158 $ 278,936 $ 4,366
============ ============ ============ ============ ============= ============
</TABLE>
(b) For the Period Beginning November 9, 1998 and Ended December 31, 1998.
See notes to financial statements.
22
<PAGE>
GLENBROOK LIFE MULTI-MANAGER VARIABLE ACCOUNT
<TABLE>
<CAPTION>
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31,
-----------------------------------------------------------------------------------------------------------------------------------
Goldman Sachs Variable Insurance Trust Sub-Accounts
-----------------------------------------------------------------------------------
CORE Large Cap Growth CORE Small Cap Equity Capital Growth
-------------------------- -------------------------- ---------------------------
1999 1998 (b) 1999 1998 (b) 1999 1998 (b)
------------ ------------ ------------ ------------ ------------- ------------
<S> <C> <C> <C> <C> <C> <C>
FROM OPERATIONS
Net investment income (loss) $ - $ - $ (1,458) $ - $ 503 $ -
Net realized gains (losses) - - 379 - 25 -
Change in unrealized gains (losses) - - 36,391 - 4,372 -
------------ ------------ ------------ ------------ ------------- ------------
Change in net assets resulting from operations - - 35,312 - 4,900 -
------------ ------------ ------------ ------------ ------------- ------------
FROM CAPITAL TRANSACTIONS
Deposits - - 196,342 - 16,338 -
Benefit payments - - - - - -
Payments on termination - - (426) - - -
Contract maintenance charges - - (76) - (9) -
Transfers among the sub-accounts
and with the Fixed Account - net - - (9,667) - 12,873 -
------------ ------------ ------------ ------------ ------------- ------------
Change in net assets resulting
from capital transactions - - 186,173 - 29,202 -
------------ ------------ ------------ ------------ ------------- ------------
INCREASE (DECREASE) IN NET ASSETS - - 221,485 - 34,102 -
NET ASSETS AT BEGINNING OF PERIOD - - - - - -
------------ ------------ ------------ ------------ ------------- ------------
NET ASSETS AT END OF PERIOD $ - $ - $ 221,485 $ - $ 34,102 $ -
============ ============ ============ ============ ============= ============
</TABLE>
(b) For the Period Beginning November 9, 1998 and Ended December 31, 1998.
See notes to financial statements.
23
<PAGE>
GLENBROOK LIFE MULTI-MANAGER VARIABLE ACCOUNT
<TABLE>
<CAPTION>
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31,
-----------------------------------------------------------------------------------------------------------------------------------
Goldman Sachs Variable Insurance Trust Sub-Accounts
-----------------------------------------------------------------------------------
Mid Cap Value International Equity Global Income
-------------------------- -------------------------- ---------------------------
1999 1998 (b) 1999 1998 (b) 1999 1998 (b)
------------ ------------ ------------ ------------ ------------- ------------
<S> <C> <C> <C> <C> <C> <C>
FROM OPERATIONS
Net investment income (loss) $ (15) $ (1) $ - $ - $ - $ -
Net realized gains (losses) (136) - - - - -
Change in unrealized gains (losses) (163) 163 - - - -
------------ ------------ ------------ ------------ ------------- ------------
Change in net assets resulting from operations (314) 162 - - - -
------------ ------------ ------------ ------------ ------------- ------------
FROM CAPITAL TRANSACTIONS
Deposits (5,000) 5,000 - - - -
Benefit payments - - - - - -
Payments on termination - - - - - -
Contract maintenance charges 3 (3) - - - -
Transfers among the sub-accounts
and with the Fixed Account - net 152 - - - - -
------------ ------------ ------------ ------------ ------------- ------------
Change in net assets resulting
from capital transactions (4,845) 4,997 - - - -
------------ ------------ ------------ ------------ ------------- ------------
INCREASE (DECREASE) IN NET ASSETS (5,159) 5,159 - - - -
NET ASSETS AT BEGINNING OF PERIOD 5,159 - - - - -
------------ ------------ ------------ ------------ ------------- ------------
NET ASSETS AT END OF PERIOD $ - $ 5,159 $ - $ - $ - $ -
============ ============ ============ ============ ============= ============
</TABLE>
(b) For the Period Beginning November 9, 1998 and Ended December 31, 1998.
See notes to financial statements.
24
<PAGE>
GLENBROOK LIFE MULTI-MANAGER VARIABLE ACCOUNT
<TABLE>
<CAPTION>
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31,
-----------------------------------------------------------------------------------------------------------------------------------
Morgan Stanley Dean Witter Universal Funds, Inc. Sub-Accounts
-----------------------------------------------------------------------------------
Fixed Income Equity Growth Value
-------------------------- -------------------------- ---------------------------
1999 1998 (b) 1999 1998 (b) 1999 1998 (b)
------------ ------------ ------------ ------------ ------------- ------------
<S> <C> <C> <C> <C> <C> <C>
FROM OPERATIONS
Net investment income (loss) $ 594 $ - $ 3,541 $ (3) $ 289 $ -
Net realized gains (losses) (5) - (524) - (1,252) -
Change in unrealized gains (losses) (586) - 24,318 271 (15,440) -
------------ ------------ ------------ ------------ ------------- ------------
Change in net assets resulting from operations 3 - 27,335 268 (16,403) -
------------ ------------ ------------ ------------ ------------- ------------
FROM CAPITAL TRANSACTIONS
Deposits 15,425 - 92,874 4,200 206,900 -
Benefit payments - - - - - -
Payments on termination - - - - (2,037) -
Contract maintenance charges (4) - (42) (2) (50) -
Transfers among the sub-accounts
and with the Fixed Account - net 4 - 16,889 (28) (11,920) -
------------ ------------ ------------ ------------ ------------- ------------
Change in net assets resulting
from capital transactions 15,425 - 109,721 4,170 192,893 -
------------ ------------ ------------ ------------ ------------- ------------
INCREASE (DECREASE) IN NET ASSETS 15,428 - 137,056 4,438 176,490 -
NET ASSETS AT BEGINNING OF PERIOD - - 4,438 - - -
------------ ------------ ------------ ------------ ------------- ------------
NET ASSETS AT END OF PERIOD $ 15,428 $ - $ 141,494 $ 4,438 $ 176,490 $ -
============ ============ ============ ============ ============= ============
</TABLE>
(b) For the Period Beginning November 9, 1998 and Ended December 31, 1998.
See notes to financial statements.
25
<PAGE>
GLENBROOK LIFE MULTI-MANAGER VARIABLE ACCOUNT
<TABLE>
<CAPTION>
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31,
-----------------------------------------------------------------------------------------------------------------------------------
Morgan Stanley Dean Witter Universal Funds, Inc. Sub-Accounts
-----------------------------------------------------------------------------------
Mid Cap Value U.S. Real Estate Global Equity
-------------------------- -------------------------- ---------------------------
1999 1998 (b) 1999 1998 (b) 1999 1998 (b)
------------ ------------ ------------ ------------ ------------- ------------
<S> <C> <C> <C> <C> <C> <C>
FROM OPERATIONS
Net investment income (loss) $ 1,960 $ 93 $ - $ - $ 107 $ 21
Net realized gains (losses) (809) 6 - - (120) -
Change in unrealized gains (losses) 354 200 - - (35) 68
------------ ------------ ------------ ------------ ------------- ------------
Change in net assets resulting from operations 1,505 299 - - (48) 89
------------ ------------ ------------ ------------ ------------- ------------
FROM CAPITAL TRANSACTIONS
Deposits 7,396 4,200 - - - 2,475
Benefit payments - - - - - -
Payments on termination - - - - - -
Contract maintenance charges (8) (2) - - (4) (1)
Transfers among the sub-accounts
and with the Fixed Account - net 9,902 (28) - - 110 (4)
------------ ------------ ------------ ------------ ------------- ------------
Change in net assets resulting
from capital transactions 17,290 4,170 - - 106 2,470
------------ ------------ ------------ ------------ ------------- ------------
INCREASE (DECREASE) IN NET ASSETS 18,795 4,469 - - 58 2,559
NET ASSETS AT BEGINNING OF PERIOD 4,469 - - - 2,559 -
------------ ------------ ------------ ------------ ------------- ------------
NET ASSETS AT END OF PERIOD $ 23,264 $ 4,469 $ - $ - $ 2,617 $ 2,559
============ ============ ============ ============ ============= ============
</TABLE>
(b) For the Period Beginning November 9, 1998 and Ended December 31, 1998.
See notes to financial statements.
26
<PAGE>
GLENBROOK LIFE MULTI-MANAGER VARIABLE ACCOUNT
<TABLE>
<CAPTION>
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31,
-----------------------------------------------------------------------------------------------------------------------------------
Morgan Stanley Dean Witter
Universal Funds, Inc. Neuberger & Berman Advisers
Sub-Accounts Management Trust Sub-Accounts
-------------------------- -------------------------------------------------------
International Magnum AMT Guardian AMT Partners
-------------------------- -------------------------- ---------------------------
1999 1998 (b) 1999 1998 (b) 1999 1998 (b)
------------ ------------ ------------ ------------ ------------- ------------
<S> <C> <C> <C> <C> <C> <C>
FROM OPERATIONS
Net investment income (loss) $ 43 $ - $ (296) $ - $ (1,566) $ -
Net realized gains (losses) (1) - (73) - (829) -
Change in unrealized gains (losses) 468 - 559 - 1,507 -
------------ ------------ ------------ ------------ ------------- ------------
Change in net assets resulting from operations 510 - 190 - (888) -
------------ ------------ ------------ ------------ ------------- ------------
FROM CAPITAL TRANSACTIONS
Deposits 7,500 - 40,089 - 208,943 -
Benefit payments - - - - - -
Payments on termination - - (600) - (426) -
Contract maintenance charges (2) - (11) - (56) -
Transfers among the sub-accounts
and with the Fixed Account - net - - 182 - (11,611) -
------------ ------------ ------------ ------------ ------------- ------------
Change in net assets resulting
from capital transactions 7,498 - 39,660 - 196,850 -
------------ ------------ ------------ ------------ ------------- ------------
INCREASE (DECREASE) IN NET ASSETS 8,008 - 39,850 - 195,962 -
NET ASSETS AT BEGINNING OF PERIOD - - - - - -
------------ ------------ ------------ ------------ ------------- ------------
NET ASSETS AT END OF PERIOD $ 8,008 $ - $ 39,850 $ - $ 195,962 $ -
============ ============ ============ ============ ============= ============
</TABLE>
(b) For the Period Beginning November 9, 1998 and Ended December 31, 1998.
See notes to financial statements.
27
<PAGE>
GLENBROOK LIFE MULTI-MANAGER VARIABLE ACCOUNT
<TABLE>
<CAPTION>
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31,
-----------------------------------------------------------------------------------------------------------------------------------
Neuberger & Berman Federated
Advisers Management STI Classic Variable Insurance Series
Trust Sub-Accounts Trust Sub-Accounts Sub-Account
-------------------------- -------------------------- ----------------
Capital Value Income Federated Prime
AMT Mid-Cap Growth Appreciation Stock Money Fund II
-------------------------- ------------- ------------ ----------------
1999 1998 (b) 1999 (c) 1999 (c) 1999 (d)
------------ ------------ ------------- ------------ ----------------
<S> <C> <C> <C> <C> <C>
FROM OPERATIONS
Net investment income (loss) $ (23) $ - $ (299) $ 630 $ 443
Net realized gains (losses) 2 - (853) (24) -
Change in unrealized gains (losses) 2,418 - 9,550 (11,368) -
------------ ------------ ------------- ------------ ----------------
Change in net assets resulting from operations 2,397 - 8,398 (10,762) 443
------------ ------------ ------------- ------------ ----------------
FROM CAPITAL TRANSACTIONS
Deposits 4,263 - 417,583 202,922 152,133
Benefit payments - - - - -
Payments on termination - - 306 - -
Contract maintenance charges (2) - (135) (59) (44)
Transfers among the sub-accounts
and with the Fixed Account - net (8) - 52,267 15,548 2,102
------------ ------------ ------------- ------------ ----------------
Change in net assets resulting
from capital transactions 4,253 - 470,021 218,411 154,191
------------ ------------ ------------- ------------ ----------------
INCREASE (DECREASE) IN NET ASSETS 6,650 - 478,419 207,649 154,634
NET ASSETS AT BEGINNING OF PERIOD - - - - -
------------ ------------ ------------- ------------ ----------------
NET ASSETS AT END OF PERIOD $ 6,650 $ - $ 478,419 207,649 $ 154,634
============ ============ ============= ============ ================
</TABLE>
(b) For the Period Beginning November 9, 1998 and Ended December 31, 1998.
(c) For the Period Beginning May 1, 1999 and Ended December 31, 1999.
(d) For the Period Beginning November 1, 1999 and Ended December 31, 1999.
See notes to financial statements.
28
<PAGE>
GLENBROOK LIFE MULTI-MANAGER VARIABLE ACCOUNT
NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
1. ORGANIZATION
Glenbrook Life Multi-Manager Variable Account (the "Account"), a unit
investment trust registered with the Securities and Exchange Commission
under the Investment Company Act of 1940, is a Separate Account of
Glenbrook Life and Annuity Company ("Glenbrook Life"). The assets of the
Account are legally segregated from those of Glenbrook Life. Glenbrook
Life is wholly owned by Allstate Life Insurance Company, a wholly owned
subsidiary of Allstate Insurance Company, which is wholly owned by The
Allstate Corporation.
Glenbrook Life issues two variable annuity contracts, the Enhanced
Glenbrook Provider and the Glenbrook Provider (collectively the
"Contracts"), the deposits of which are invested at the direction of the
contractholders in the sub-accounts that comprise the Account. Absent any
contract provisions wherein Glenbrook Life contractually guarantees either
a minimum return or account value to the beneficiaries of the
contractholders in the form of a death benefit, the contractholders bear
the investment risk that the sub-accounts may not meet their stated
objectives. The sub-accounts invest in the following underlying mutual
fund portfolios (collectively the "Funds"):
<TABLE>
<S> <C>
AIM VARIABLE INSURANCE FUNDS MFS VARIABLE INSURANCE TRUST
Capital Appreciation MFS Emerging Growth
Diversified Income MFS Limited Maturity
Government Securities MFS Growth with Income
Growth MFS New Discovery
Growth and Income GOLDMAN SACHS VARIABLE INSURANCE TRUST
International Equity Growth and Income
Global Utilities CORE U.S. Equity
Value CORE Large Cap Growth
Balanced CORE Small Cap Equity
High Yield Capital Growth
AMERICAN CENTURY VARIABLE PORTFOLIOS, INC. Mid Cap Value
American Century VP Balanced International Equity
American Century VP International Global Income
DREYFUS VARIABLE INVESTMENT FUND MORGAN STANLEY DEAN WITTER UNIVERSAL FUNDS, INC.
VIF Growth and Income Fixed Income
VIF Money Market Equity Growth
VIF Small Company Stock Value
DREYFUS SOCIALLY RESPONSIBLE GROWTH FUND, INC. Mid Cap Value
DREYFUS STOCK INDEX FUND U.S. Real Estate
FIDELITY VARIABLE INSURANCE PRODUCTS FUND Global Equity
VIP Growth International Magnum
VIP High Income NEUBERGER & BERMAN ADVISERS MANAGEMENT TRUST
VIP Equity-Income AMT Guardian
FIDELITY VARIABLE INSURANCE PRODUCTS FUND II AMT Partners
VIP II Contrafund AMT Mid-Cap Growth
FEDERATED INSURANCE SERIES STI CLASSIC VARIABLE TRUST
Federated Prime Money Fund II STI Capital Appreciation
STI Value Income Stock
</TABLE>
-29-
<PAGE>
1. ORGANIZATION (continued)
Glenbrook Life provides insurance and administrative services to the
contractholders for a fee. Glenbrook Life also maintains a fixed account
("Fixed Account"), to which contractholders may direct their deposits and
receive a fixed rate of return. Glenbrook Life has sole discretion to
invest the assets of the Fixed Account, subject to applicable law.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
VALUATION OF INVESTMENTS - Investments consist of shares of the Funds and
are stated at fair value based on quoted market prices at December 31,
1999.
INVESTMENT INCOME - Investment income consists of dividends declared by
the Funds and is recognized on the ex-dividend date.
REALIZED GAINS AND LOSSES - Realized gains and losses represent the
difference between the proceeds from sales of shares by the Account and
the cost of such shares, which is determined on a weighted average basis.
FEDERAL INCOME TAXES - The Account intends to qualify as a segregated
asset account as defined in the Internal Revenue Code ("Code"). As such,
the operations of the Account are included in the tax return of Glenbrook
Life. Glenbrook Life is taxed as a life insurance company under the Code.
No federal income taxes are allocable to the Account as the Account did
not generate taxable income.
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.
3. EXPENSES
ADMINISTRATIVE EXPENSE CHARGE - Glenbrook Life deducts administrative
expense charges daily at a rate equal to .10% per annum of the average
daily net assets of the Account. Glenbrook Life guarantees that the amount
of this charge will not increase over the lives of the Contracts.
CONTRACT MAINTENANCE CHARGE - Glenbrook Life deducts an annual maintenance
charge of $35 on each contract anniversary and guarantees that this charge
will not increase over the lives of the Contracts. This charge will be
waived if certain conditions are met.
MORTALITY AND EXPENSE RISK CHARGE - Glenbrook Life assumes mortality and
expense risks related to the operations of the Account and deducts charges
daily. The mortality and expense risk charge covers insurance benefits
available with the Contracts and certain expenses of the Contracts. It
also covers the risk that the current charges will not be sufficient in
the future to cover the cost of administering the contract. Glenbrook Life
guarantees that the amount of this charge will not increase over the life
of the contract. At the contractholder's discretion, additional options,
primarily death benefits, may be purchased for an additional charge.
Glenbrook Life guarantees that the amount of this charge will not increase
over the lives of the contracts.
-30-
<PAGE>
4. UNITS ISSUED AND REDEEMED
(Units in whole amounts)
<TABLE>
<CAPTION>
GLENBROOK PROVIDER
UNIT ACTIVITY DURING 1999:
----------------------------------
Units Units Accumulation
Outstanding Units Units Outstanding Unit Value
December 31, 1998 Issued Redeemed December 31, 1999 December 31, 1999
----------------- -------- -------- ----------------- -----------------
<S> <C> <C> <C> <C> <C>
Investments in AIM Variable Insurance Funds
Sub-Accounts:
Capital Appreciation 6,547 1,332 (2) 7,877 $ 17.63
Diversified Income 9,663 7,054 (3,217) 13,500 9.80
Government Securities 692 29 (2) 719 10.29
Growth 15,902 620 (2,257) 14,265 18.00
Growth and Income 20,638 4,900 (4,441) 21,097 17.08
International Equity 1,491 - (284) 1,207 17.51
Global Utilities - - - - -
Value 34,858 8,032 (8,036) 34,854 17.04
Balanced - - - - -
High Yield - - - - -
Investments in the American Century Variable
Portfolios Inc. Sub-Accounts:
American Century VP Balanced 9,621 174 (2) 9,793 13.18
American Century VP International 344 28 (1) 371 19.02
Investments in Dreyfus Variable Investment
Fund Sub-Accounts:
VIF Growth & Income 15,709 1,597 (3,577) 13,729 13.64
VIF Money Market 750 9,973 (4,372) 6,351 10.94
VIF Small Company Stock 710 - (2) 708 11.30
Investment in Dreyfus Socially Responsible
Growth Sub-Account: 4,726 2,207 - 6,933 17.69
Investment in Dreyfus Stock Index Sub-Account: 39,205 4,306 (6,106) 37,405 15.27
Investment in the Fidelity Variable Insurance
Products Fund Sub-Accounts:
VIP Growth 6,361 1,832 (677) 7,516 19.95
VIP High Income 5,530 723 (152) 6,101 10.86
VIP Equity-Income 40,266 7,872 (7,870) 40,268 11.82
Investment in the Fidelity Variable Insurance
Products Fund II Sub-Account:
VIP II Contrafund 9,350 2,013 (921) 10,442 17.41
Investments in MFS Variable Insurance Trust
Sub-Accounts:
MFS Emerging Growth 4,972 1,344 (70) 6,246 25.40
MFS Limited Maturity 1,014 42 (61) 995 10.78
MFS Growth with Income - - - - -
MFS New Discovery - - - - -
Investments in the Goldman Sachs Variable
Insurance Trust Sub-Accounts:
Growth and Income - - - - -
CORE U.S. Equity - - - - -
CORE Large Cap Growth - - - - -
CORE Small Cap Equity - - - - -
Capital Growth - - - - -
Mid Cap Value - - - - -
International Equity - - - - -
Global Income - - - - -
Investments in Morgan Stanley Dean Witter
Universal Funds, Inc. Sub-Accounts
Fixed Income - - - - -
Equity Growth - - - - -
Value - - - - -
Mid Cap Value - - - - -
U.S. Real Estate - - - - -
Global Equity - - - - -
International Magnum - - - - -
Investments in Neuberger & Berman Advisers
Management Trust Sub-Accounts
AMT Guardian - - - - -
AMT Partners - - - - -
AMT Mid Cap Growth - - - - -
Investments in the STI Classic Variable
Trust Sub-Accounts:
Capital Appreciation - - - - -
Value Income Stock - - - - -
Investment in Federated Insurance Series
Sub-Account:
Prime Money Fund II - - - - -
</TABLE>
Units relating to accrued contract maintenance charges are included in units
redeemed.
31
<PAGE>
4. UNITS ISSUED AND REDEEMED
(Units in whole amounts)
<TABLE>
<CAPTION>
GLENBROOK PROVIDER WITH ENHANCED DEATH BENEFIT RIDER
UNIT ACTIVITY DURING 1999:
----------------------------------
Units Units Accumulation
Outstanding Units Units Outstanding Unit Value
December 31, 1998 Issued Redeemed December 31, 1999 December 31, 1999
----------------- -------- -------- ----------------- -----------------
<S> <C> <C> <C> <C> <C>
Investments in AIM Variable Insurance Funds
Sub-Accounts:
Capital Appreciation 5,197 8,783 (84) 13,896 $ 17.59
Diversified Income 8,931 1,481 (2,811) 7,601 9.78
Government Securities 7,546 33,335 (1,065) 39,816 10.27
Growth 15,252 2,032 (2,646) 14,638 17.96
Growth and Income 52,358 7,353 (11,248) 48,463 17.05
International Equity 5,403 89 (525) 4,967 17.47
Global Utilities - 1,584 - 1,584 15.05
Value 52,510 19,382 (7,822) 64,070 17.01
Balanced - - - - -
High Yield - - - - -
Investments in the American Century Variable
Portfolios Inc. Sub-Accounts:
American Century VP Balanced 7,716 2,771 (3) 10,484 13.14
American Century VP International 5,196 1,681 (1,331) 5,546 18.97
Investments in Dreyfus Variable Investment
Fund Sub-Accounts:
VIF Growth & Income 18,031 1,081 (515) 18,597 13.60
VIF Money Market 13,027 45,596 (18,281) 40,342 10.91
VIF Small Company Stock 5,753 - 1 5,754 11.28
Investment in Dreyfus Socially Responsible
Growth Sub-Account: 4,373 406 (1,251) 3,528 7.64
Investment in Dreyfus Stock Index Sub-Account: 86,935 11,884 (18,040) 80,779 15.24
Investment in the Fidelity Variable Insurance
Products Fund Sub-Accounts:
VIP Growth 8,947 4,741 (2,447) 11,241 19.90
VIP High Income 28,509 2,527 (3,565) 27,471 10.84
VIP Equity-Income 76,050 6,651 (12,509) 70,192 11.80
Investment in the Fidelity Variable Insurance
Products Fund II Sub-Account:
VIP II Contrafund 11,838 3,213 (178) 14,873 17.37
Investments in MFS Variable Insurance Trust
Sub-Accounts:
MFS Emerging Growth 6,085 6,268 (1,424) 10,929 25.33
MFS Limited Maturity 3,996 1,864 (3) 5,857 10.75
MFS Growth with Income - - - - -
MFS New Discovery - - - - -
Investments in the Goldman Sachs Variable
Insurance Trust Sub-Accounts:
Growth and Income - - - - -
CORE U.S. Equity - - - - -
CORE Large Cap Growth - - - - -
CORE Small Cap Equity - - - - -
Capital Growth - - - - -
Mid Cap Value - - - - -
International Equity - - - - -
Global Income - - - - -
Investments in Morgan Stanley Dean Witter
Universal Funds, Inc. Sub-Accounts
Fixed Income - - - - -
Equity Growth - - - - -
Value - - - - -
Mid Cap Value - - - - -
U.S. Real Estate - - - - -
Global Equity - - - - -
International Magnum - - - - -
Investments in Neuberger & Berman Advisers
Management Trust Sub-Accounts
AMT Guardian - - - - -
AMT Partners - - - - -
AMT Mid Cap Growth - - - - -
Investments in the STI Classic Variable
Trust Sub-Accounts:
Capital Appreciation - - - - -
Value Income Stock - - - - -
Investment in Federated Insurance Series
Sub-Account:
Prime Money Fund II - - - - -
</TABLE>
Units relating to accrued contract maintenance charges are included in units
redeemed.
32
<PAGE>
4. UNITS ISSUED AND REDEEMED
(Units in whole amounts)
<TABLE>
<CAPTION>
ENHANCED GLENBROOK PROVIDER
UNIT ACTIVITY DURING 1999:
----------------------------------
Units Units Accumulation
Outstanding Units Units Outstanding Unit Value
December 31, 1998 Issued Redeemed December 31, 1999 December 31, 1999
----------------- -------- -------- ----------------- -----------------
<S> <C> <C> <C> <C> <C>
Investments in AIM Variable Insurance
Funds Sub-Accounts:
Capital Appreciation - 8,745 (2) 8,743 $ 16.29
Diversified Income - 721 - 721 9.91
Government Securities - - - - -
Growth - 13,279 (4) 13,275 15.82
Growth and Income - 12,183 (3) 12,180 15.09
International Equity - - - - -
Global Utilities - - - - -
Value - 42,090 16) 42,074 14.80
Balanced - 7,489 (2) 7,487 12.66
High Yield - 7,389 (2) 7,387 11.27
Investments in the American Century Variable
Portfolios Inc. Sub-Accounts:
American Century VP Balanced - - - - -
American Century VP International - - - - -
Investments in Dreyfus Variable Investment
Fund Sub-Accounts:
VIF Growth & Income - 2,681 (1) 2,680 12.47
VIF Money Market - - - - -
VIF Small Company Stock - 236 - 236 11.66
Investment in Dreyfus Socially Responsible
Growth Sub-Account: - 3,137 (7) 3,130 14.40
Investment in Dreyfus Stock Index Sub-Account: - 9,936 (6) 9,930 12.97
Investment in the Fidelity Variable Insurance
Products Fund Sub-Accounts:
VIP Growth - 25,833 12) 25,821 15.22
VIP High Income - 3,838 (1) 3,837 11.16
VIP Equity-Income - 30,273 (9) 30,264 11.02
Investment in the Fidelity Variable Insurance
Products Fund II Sub-Account:
VIP II Contrafund - 18,975 12) 18,963 14.33
Investments in MFS Variable Insurance Trust
Sub-Accounts:
MFS Emerging Growth - 1,060 (1) 1,059 20.88
MFS Limited Maturity - - - - -
MFS Growth with Income - 6,299 (4) 6,295 11.41
MFS New Discovery - 183 - 183 19.52
Investments in the Goldman Sachs Variable
Insurance Trust Sub-Accounts:
Growth and Income - 637 - 637 10.46
CORE U.S. Equity - 317 - 317 13.46
CORE Large Cap Growth - - - - -
CORE Small Cap Equity - 86 - 86 12.36
Capital Growth - - - - -
Mid Cap Value - - - - -
International Equity - - - - -
Global Income - - - - -
Investments in Morgan Stanley Dean Witter
Universal Funds, Inc. Sub-Accounts
Fixed Income - - - - -
Equity Growth - - - - -
Value - - - - -
Mid Cap Value - - - - -
U.S. Real Estate - - - - -
Global Equity - - - - -
International Magnum - - - - -
Investments in Neuberger & Berman Advisers
Management Trust Sub-Accounts
AMT Guardian - - - - -
AMT Partners - - - - -
AMT Mid Cap Growth - 296 - 296 18.45
Investments in the STI Classic Variable
Trust Sub-Accounts:
Capital Appreciation - 10,428 (3) 10,425 10.60
Value Income Stock - 5,700 (1) 5,699 9.46
Investment in Federated Insurance Series
Sub-Account:
Prime Money Fund II - 7,988 (3) 7,985 10.06
</TABLE>
Units relating to accrued contract maintenance charges are included in units
redeemed.
33
<PAGE>
4. UNITS ISSUED AND REDEEMED
(Units in whole amounts)
<TABLE>
<CAPTION>
ENHANCED GLENBROOK PROVIDER WITH ENHANCED DEATH BENEFIT RIDER
UNIT ACTIVITY DURING 1999:
----------------------------------
Units Units Accumulation
Outstanding Units Units Outstanding Unit Value
December 31, 1998 Issued Redeemed December 31, 1999 December 31, 1999
----------------- -------- -------- ----------------- -----------------
<S> <C> <C> <C> <C> <C>
Investments in AIM Variable Insurance
Funds Sub-Accounts:
Capital Appreciation 1,466 15,985 (4) 17,447 $ 16.25
Diversified Income - - - - -
Government Securities - - - - -
Growth - 14,404 (4) 14,400 15.78
Growth and Income - 16,354 (5) 16,349 15.05
International Equity - 606 - 606 16.34
Global Utilities - 154 - 154 14.13
Value - 35,455 (10) 35,445 14.76
Balanced - 16,028 (5) 16,023 12.63
High Yield - 3,357 (1) 3,356 11.25
Investments in the American Century Variable
Portfolios Inc. Sub-Accounts:
American Century VP Balanced - - - - -
American Century VP International - - - - -
Investments in Dreyfus Variable Investment
Fund Sub-Accounts:
VIF Growth & Income - - - - -
VIF Money Market - - - - -
VIF Small Company Stock 737 - (737) - -
Investment in Dreyfus Socially Responsible
Growth Sub-Account: - 1,093 - 1,093 14.36
Investment in Dreyfus Stock Index Sub-Account: - 5,558 (2) 5,556 12.94
Investment in the Fidelity Variable Insurance
Products Fund Sub-Accounts:
VIP Growth 313 45,214 (13) 45,514 15.19
VIP High Income - 3,915 (1) 3,914 11.13
VIP Equity-Income - 17,535 (5) 17,530 10.99
Investment in the Fidelity Variable Insurance
Products Fund II Sub-Account:
VIP II Contrafund - 30,669 (9) 30,660 14.29
Investments in MFS Variable Insurance Trust
Sub-Accounts:
MFS Emerging Growth - 3,068 - 3,068 20.83
MFS Limited Maturity - -
MFS Growth with Income - 3,388 (65) 3,323 11.38
MFS New Discovery - 1,669 - 1,669 19.47
Investments in the Goldman Sachs Variable
Insurance Trust Sub-Accounts:
Growth and Income - - - - -
CORE U.S. Equity - - - - -
CORE Large Cap Growth - - - - -
CORE Small Cap Equity - - - - -
Capital Growth - - - - -
Mid Cap Value 517 - (517) - -
International Equity - - - - -
Global Income - - - - -
Investments in Morgan Stanley Dean Witter
Universal Funds, Inc. Sub-Accounts
Fixed Income - 1,566 - 1,566 9.85
Equity Growth - 1,954 (1) 1,953 15.05
Value - 903 - 903 9.63
Mid Cap Value - - - - -
U.S. Real Estate - - - - -
Global Equity 245 - (245) - -
International Magnum - 625 (1) 624 12.83
Investments in Neuberger & Berman Advisers
Management Trust Sub-Accounts
AMT Guardian - 1,333 - 1,333 12.25
AMT Partners - - - - -
AMT Mid Cap Growth - - - - -
Investments in the STI Classic Variable
Trust Sub-Accounts:
Capital Appreciation - 12,989 (4) 12,985 10.60
Value Income Stock - 4,409 (1) 4,408 9.46
Investment in Federated Insurance Series
Sub-Account:
Prime Money Fund II - 2,093 - 2,093 10.06
</TABLE>
Units relating to accrued contract maintenance charges are included in units
redeemed.
34
<PAGE>
4. UNITS ISSUED AND REDEEMED
(Units in whole amounts)
<TABLE>
<CAPTION>
Enhanced Glenbrook Provider With Enhanced Death Benefit Rider
Income Benefit Combination Rider
UNIT ACTIVITY DURING 1999:
----------------------------------
Units Units Accumulation
Outstanding Units Units Outstanding Unit Value
December 31, 1998 Issued Redeemed December 31, 1999 December 31, 1999
----------------- -------- -------- ----------------- -----------------
<S> <C> <C> <C> <C> <C>
Investments in AIM Variable Insurance
Funds Sub-Accounts:
Capital Appreciation 398 16,538 (890) 16,046 $ 16.21
Diversified Income - 1,484 - 1,484 9.86
Government Securities - - - - -
Growth 386 20,954 (94) 21,246 15.74
Growth and Income - 12,269 (810) 11,459 15.01
International Equity - 2,944 (1) 2,943 16.30
Global Utilities - - - - -
Value - 34,573 (285) 34,288 14.73
Balanced 405 42,945 (229) 43,121 12.60
High Yield - 185 - 185 11.22
Investments in the American Century Variable
Portfolios Inc. Sub-Accounts:
American Century VP Balanced - - - - -
American Century VP International - - - - -
Investments in Dreyfus Variable Investment
Fund Sub-Accounts:
VIF Growth & Income - 4,036 (53) 3,983 12.40
VIF Money Market - 1,159 (582) 577 10.36
VIF Small Company Stock - 2,544 (2) 2,542 11.60
Investment in Dreyfus Socially Responsible
Growth Sub-Account: - 5,495 (2) 5,493 14.33
Investment in Dreyfus Stock Index Sub-Account: 401 21,487 (1,933) 19,955 12.90
Investment in the Fidelity Variable Insurance
Products Fund Sub-Accounts:
VIP Growth - 22,199 (111) 22,088 15.15
VIP High Income - 3,668 (1) 3,667 11.10
VIP Equity-Income - 11,679 (58) 11,621 10.96
Investment in the Fidelity Variable Insurance
Products Fund II Sub-Account:
VIP II Contrafund 387 33,316 (1,542) 32,161 14.26
Investments in MFS Variable Insurance Trust
Sub-Accounts:
MFS Emerging Growth 377 18,928 (116) 19,189 20.78
MFS Limited Maturity - - - - -
MFS Growth with Income - 5,523 (715) 4,808 11.35
MFS New Discovery - 707 - 707 19.42
Investments in the Goldman Sachs Variable
Insurance Trust Sub-Accounts:
Growth and Income 419 1,802 (140) 2,081 10.41
CORE U.S. Equity 401 20,828 (714) 20,515 13.39
CORE Large Cap Growth - - - - -
CORE Small Cap Equity - 18,952 (1,034) 17,918 12.30
Capital Growth - 2,450 (1) 2,449 13.92
Mid Cap Value - - - - -
International Equity - - - - -
Global Income - - - - -
Investments in Morgan Stanley Dean Witter
Universal Funds, Inc. Sub-Accounts
Fixed Income -
Equity Growth 406 7,061 (3) 7,464 15.02
Value - 18,913 (1,448) 17,465 9.61
Mid Cap Value 408 1,381 (1) 1,788 13.01
U.S. Real Estate - - - - -
Global Equity - 245 - 245 10.69
International Magnum - - - - -
Investments in Neuberger & Berman Advisers
Management Trust Sub-Accounts
AMT Guardian - 1,977 (53) 1,924 12.22
AMT Partners - 19,220 (1,224) 17,996 10.89
AMT Mid Cap Growth - 64 - 64 18.36
Investments in the STI Classic Variable
Trust Sub-Accounts:
Capital Appreciation - 23,173 (1,433) 21,740 10.59
Value Income Stock - 11,851 (3) 11,848 9.46
Investment in Federated Insurance Series
Sub-Account:
Prime Money Fund II - 5,293 (2) 5,291 10.06
</TABLE>
Units relating to accrued contract maintenance charges are included in units
redeemed.
35
