Scudder Horizon Advantage Variable Annuity
Prospectus May 1, 1999
Individual and Group Flexible Premium Deferred Variable Annuity Contracts
offered by
Glenbrook Life and Annuity Company
through
Glenbrook Life Scudder Variable Account (A)
This Prospectus describes the Scudder Horizon Advantage Variable Annuity
Contract ("Contract"). The Contract has 11 investment alternatives: 2 fixed
account options standard and Dollar Cost Averaging (both pay a guaranteed
minimum rate of interest), and 9 subaccounts of the Glenbrook Life Scudder
Variable Account (A). Money you direct to a subaccount is invested exclusively
in a single portfolio of the Scudder Variable Life Investment Fund. The 9
Scudder portfolios we offer through the subaccounts under this Contract are:
Scudder Variable Life Investment Fund
o Money Market Portfolio
o Bond Portfolio
o Capital Growth Portfolio
o Balanced Portfolio
o International Portfolio
o Growth and Income Portfolio
o Global Discovery Portfolio
o Large Company Growth Portfolio
o Small Company Growth Portfolio
Variable annuity contracts involve certain risks, including possible loss of
principal.
o The investment performance of the portfolios in which the subaccounts
invest will vary.
o We do not guarantee how any of the portfolios will perform.
o The Contract is not a deposit or obligation of any bank, and no bank
endorses or guarantees the Contract.
o Neither the U.S. Government nor any federal agency insures your investment
in the Contract.
Please read this Prospectus carefully before investing, and keep it for future
reference. It contains important information about the Scudder Horizon Advantage
Variable Annuity Contract.
The SEC has not approved or disapproved these securities or passed upon the
adequacy of the Prospectus. Any representation to the contrary is a criminal
offense.
The Contract is designed to aid you in long-term financial planning. It is
available to individuals, as well as to certain group and individual retirement
plans. You may also purchase the Contract for use as an Individual Retirement
Annuity that qualifies for special federal income tax treatment ("IRA").
To learn more about the Contract, you may want to read the Statement of
Additional Information ("SAI"), dated May 1, 1999. For a free copy of the SAI,
contact us at:
Scudder Horizon Advantage
Customer Service Center
8301 Maryland Avenue
St. Louis, Missouri 63105
1-(800) 242-4402
We have filed the SAI with the U.S. Securities and Exchange Commission ("SEC")
and have incorporated it by reference into this prospectus. The SAI's table of
contents appears at the end of this Prospectus.
The SEC maintains an Internet website (http://www.sec.gov) that contains the
SAI, material incorporated by reference, and other information. You may also
read and copy any of these documents at the SEC's public reference room in
Washington, D.C. Please call 1-800-SEC-0330 for further information on the
operation of the public reference room.
This Prospectus is valid only when accompanied by a current prospectus for the
Scudder Variable Life Investment Fund.
<PAGE>
Table of Contents
Glossary.......................................................................1
Highlights.....................................................................4
The Contract................................................................4
Free-Look...................................................................5
How to Invest...............................................................5
Investment Alternatives.....................................................5
Transfers Among Investment Alternatives.....................................6
Fees and Expenses...........................................................7
Access to Your Money........................................................7
Death Benefit...............................................................8
Income Payments.............................................................8
Inquiries...................................................................9
Fee Table.....................................................................10
Examples...................................................................12
Condensed Financial Information............................................13
Calculation of Yield and Total Returns........................................13
Yields and Standard Total Return...........................................13
Other Performance Data.....................................................14
Glenbrook Life and the Variable Account.......................................15
Glenbrook Life and Annuity Company.........................................15
The Variable Account.......................................................16
The Fund......................................................................17
Scudder Variable Life Investment Fund......................................17
Investment Adviser for the Funds...........................................19
The Fixed Account Options.....................................................19
General Description........................................................20
Standard Fixed Account Option..............................................20
The Dollar Cost Averaging Fixed Account Option.............................21
Purchasing the Contract.......................................................21
Purchasing the Contract....................................................21
Free-Look Period...........................................................22
Crediting Your First Purchase Payment......................................22
Allocating Your Purchase Payments..........................................22
Accumulation Units.........................................................23
Accumulation Unit Value....................................................23
Transfers.....................................................................24
Telephone Transfers........................................................24
Dollar Cost Averaging......................................................25
Automatic Portfolio Rebalancing............................................25
Access to Your Money..........................................................26
Withdrawals................................................................26
Annuity Income Payments.......................................................27
Payout Start Date for Income Payments......................................27
Variable Income Payments...................................................28
Fixed Income Payments......................................................29
Annuity Transfers..........................................................29
Income Plans...............................................................29
Death Benefits................................................................31
Death Benefit Payment Provisions...........................................31
Death Benefit Amount.......................................................32
Enhanced Death Benefit Rider...............................................32
Fees and Expenses.............................................................33
Deductions from Purchase Payments..........................................33
Withdrawal Charge..........................................................34
Contract Maintenance Charge................................................34
Administrative Expense Charge..............................................34
Mortality and Expense Risk Charge..........................................34
Taxes......................................................................35
Transfer Charges...........................................................35
Fund Expenses..............................................................35
Federal Tax Matters...........................................................36
Introduction...............................................................36
Taxation of Annuities in General...........................................36
Tax Deferral.............................................................36
Non-natural Owners.......................................................36
Diversification Requirements.............................................37
Ownership Treatment......................................................37
Taxation of Partial and Full Withdrawals.................................38
Taxation of Annuity Payments.............................................39
Taxation of Death Benefits...............................................39
Penalty Tax on Premature Distributions...................................39
Aggregation of Annuity Contracts.........................................40
Tax Qualified Contracts..................................................40
Restrictions Under Section 403(b) Plans..................................40
Income Tax Withholding...................................................41
General Matters...............................................................41
Owner......................................................................41
Beneficiary................................................................42
Assignments................................................................42
Delay of Payments..........................................................42
Modification...............................................................43
Customer Inquiries.........................................................43
Distribution of the Contracts.................................................43
Voting Rights.................................................................44
General Provisions............................................................45
Legal Proceedings..........................................................45
Financial Statements.......................................................45
Legal Matters..............................................................45
Year 2000..................................................................45
Statement of Additional Information Table of Contents.........................47
Condensed Financial Information...............................................49
<PAGE>
Glossary
For your convenience, we are providing a glossary of the special terms we
use in this Prospectus.
accumulation period: The period that begins when we issue your Contract and
ends when you receive annuity income payments. During the accumulation period,
earnings accumulate on a tax-deferred basis.
accumulation unit: The measurement we use to calculate the value of each
subaccount at the end of each Valuation Period.
accumulation unit value: The value of each accumulation unit that is
calculated on each Valuation Date. Each subaccount of the Variable Account has
its own accumulation unit value.
annuitant: The person(s) you identify whose life we use to determine the
amount and duration of annuity income payments. You may name joint annuitants at
the time you select an income plan.
beneficiary: The person(s) you select to receive the benefits of the
Contract if no Owner is living.
Contract Anniversary: Each anniversary of the issue date.
Contract Value: The total value of your Contract. It is equal to the value
you have accumulated under the Contract in the subaccounts of the Variable
Account plus your value in the fixed account options.
Contract Year: A period of 12 months that starts on the issue date of your
Contract or on any 12 month anniversary of that date.
fixed account options: Two options to which you can direct your money under
the Contract that provide a guarantee of principal and minimum interest. The
fixed account options are the Dollar Cost Averaging fixed account ("DCA
Account") and the standard fixed account. Fixed account assets are our general
account assets.
Fund: The Scudder Variable Life Investment Fund, an open-end diversified
management investment company composed of portfolios in which the subaccounts
invest.
income period: The period that begins on the Payout Start Date during which
you will receive income payments under the income plan you choose.
income plan: The plan you choose under which we will pay annuity income
payments to you after the Payout Start Date based on the money you accumulate in
the Contract. You can choose whether the dollar amount of the payments you
receive will be fixed, or will vary with the investment results of the
subaccounts in which you are invested at that time, or whether you receive a
combination of fixed and variable payments.
investment alternatives: The subaccounts of the Variable Account and two
fixed account options - standard and Dollar Cost Averaging.
issue date: The date we issue your Contract. We measure Contract Years and
Contract Anniversaries from the issue date.
Payout Start Date: The date on which we begin to pay you annuity income
payments.
portfolio: A separate investment portfolio of the Fund in which a
subaccount of the Variable Account invests.
Qualified Contracts: Contracts issued under plans that qualify for special
federal income tax treatment under Sections 401(a), 403(a), 403(b), 403A, 408
and 408A of the Internal Revenue Code.
subaccount: A subdivision of the Variable Account that invests exclusively
in shares of a single portfolio of the Fund. The investment performance of each
subaccount is linked directly to the investment performance of the portfolio in
which it invests.
<PAGE>
Valuation Date: Each day on which we value the assets in the subaccounts.
This is each day that the New York Stock Exchange ("NYSE") is open for trading.
We are open for business on each day the NYSE is open.
Valuation Period: The period between Valuation Dates that begins as of the
close of regular trading on the NYSE (usually 4:00 pm Eastern Time) on one
Valuation Date and ends as of the close of regular trading on the next Valuation
Date.
Variable Account: Glenbrook Life Scudder Variable Account (A), a separate
investment account composed of subaccounts that we established to receive and
invest purchase payments paid under the Contract.
we, us, our, Glenbrook Life, the Company: Glenbrook Life and Annuity
Company.
you, your, the Owner: The person having the privileges of ownership stated
in the Contract.
<PAGE>
Highlights
These highlights provide only a brief overview of the more important
features of the Contract. More detailed information about the Contract appears
later in this Prospectus. Please read this Prospectus carefully.
The Contract
The Contract provides a way for you to invest on a "tax-deferred" basis in
the fixed account options and in the Scudder portfolios through the subaccounts
of the Variable Account. "Tax-deferred" means that the earnings and appreciation
on the money in your Contract are not taxed until either you take money out by a
full or partial cash withdrawal or by annuitizing the Contract, or until we pay
the death benefit.
The Contract is designed for people seeking long-term tax-deferred
accumulation of assets, generally for retirement. The tax-deferral feature is
most attractive to people in high federal and state tax brackets. You should not
buy this Contract if you are looking for a short-term investment or if you
cannot take the risk of getting back less money than you put in.
Like all deferred annuity contracts, the Contract has two phases: the
"accumulation period" and the "income period." During the accumulation period,
you can allocate money to any combination of investment alternatives; any
earnings are tax-deferred. The income period begins once you start receiving
regular income payments from your Contract Value. The money you can accumulate
during the accumulation period, as well as the annuity income option you choose,
will determine the dollar amount of any income payments you receive.
The Contract is a "variable" annuity because the value of your Contract
will go up or down depending on the investment performance of the subaccounts in
which you invest. If you select a variable income plan, the amount of your
annuity payments in the variable plan will depend on the investment performance
of the subaccounts in which you invest. You bear the entire investment risk for
your investments in the subaccounts.
You can also direct money to the fixed account options. We guarantee
interest, as well as principal, on money placed in the fixed account options.
<PAGE>
Free-Look
You may return your Contract for a refund within 20 days after you receive
it. In most states, the amount of the refund will be the total purchase payments
you paid, plus or minus any gains or losses on the amounts you invested in the
subaccounts. We determine the value of the refund as of the date the Contract is
returned to us. We will pay the refund within 7 days after we receive the
Contract. The Contract will then be deemed void. In some states you may have
more than 20 days, or receive a refund of the amount of your purchase payments.
How to Invest
You can purchase a Contract for $2,500 or more ($2,000 for Qualified
Contracts). You may make additional payments at any time during the accumulation
period. Send your payments to:
Scudder Horizon Advantage
Customer Service Center
8301 Maryland Avenue
St. Louis, Missouri 63105
Investment Alternatives
You can invest your money in any of the following portfolios of the Scudder
Variable Life Investment Fund by directing your payments into the corresponding
subaccounts:
Money Market Bond
Capital Growth Balanced
International Growth and Income
Global Discovery Large Company Growth
Small Company Growth
<PAGE>
Each subaccount invests exclusively in shares of one portfolio of the Fund.
Each portfolio's assets are held separately from the other portfolios and each
portfolio has separate investment objectives and policies. The attached
prospectus for the Fund more fully describes the portfolios. Scudder Kemper
Investments, Inc. is the investment adviser for the portfolios.
The value of your investment in the subaccounts will fluctuate daily based
on the investment results of the portfolios in which you invest, and on the fees
and charges deducted. You bear investment risk on amounts you invest.
You may also direct all or a portion of your money to two fixed account
options: the standard fixed account option and/or the Dollar Cost Averaging
fixed account option ("DCA Account") and receive a guaranteed rate of return.
Money you place in the standard fixed account will earn interest for one year
periods at a fixed rate that is guaranteed by us never to be less than 3.5%
Purchase payments you place in the DCA Account will earn interest at an
annual rate of at least 3.5%. The payments, plus interest, will be transferred
out of the DCA Account within a year in equal monthly installments and placed in
the subaccounts and standard fixed account in the percentages you designate. You
may not transfer money into the DCA Account from another investment alternative.
Transfers Among Investment Alternatives
You have the flexibility to transfer assets within your Contract. At any
time during the accumulation period, you may transfer amounts among the
subaccounts and between the standard fixed account option and any subaccount.
Transfers cannot be made into the DCA Account.
We do not impose a charge for any transfers. In the future, we may impose a
$10 charge after the twelfth transfer in a Contract Year. We may restrict fixed
account transfers. You may want to enroll in the Dollar Cost Averaging program
or in the Automatic Portfolio Rebalancing program.
<PAGE>
Fees and Expenses
We do not take any deductions from purchase payments at the time you buy
the Contract. You invest the full amount of each purchase payment in one or more
of the investment alternatives.
We deduct two charges daily: a mortality and expense risk charge, equal on
an annual basis to no more than 0.40% of the money you have invested in the
subaccounts, and an administrative expense charge, equal on an annual basis to
no more than 0.30% of the money you have invested in the subaccounts. If you
select the Enhanced Death Benefit Rider, the daily mortality and expense risk
charge is equal on an annual basis to no more than 0.50% of the money you have
invested in the subaccounts.
We will deduct state premium taxes, which currently range from 0% to 3.5%,
if you fully withdraw all of your Contract's value, if we pay out death benefit
proceeds, or when you begin to receive annuity payments. We only charge you
premium taxes in those states that require us to pay premium taxes.
The portfolios deduct daily investment charges from the amounts you have
invested in the portfolios. These charges currently range from 0.44% to 1.72%
annually, depending on the portfolio. See the Fee Table in this Prospectus and
the prospectus for the Fund.
Access to Your Money
You may withdraw all or part of your Contract Value at any time during the
accumulation period. The minimum amount you can withdraw is $50. If your
Contract's balance after a partial withdrawal would be less than $1,000, we will
treat the withdrawal as a full withdrawal.
We do not deduct any withdrawal charges. For Qualified Contracts issued
under Internal Revenue Code ("Code") Section 403(b), certain restrictions apply.
You may also have to pay federal income taxes and a penalty tax on any money you
take out of the Contract.
<PAGE>
Death Benefit
We will pay a death benefit before the Payout Start Date on any Owner's
death or, if the Owner is not a natural person, on the annuitant's death.
The death benefit amount will be the greater of:
o The total value of your Contract on the date we determine the death
benefit; and
o The total purchase payments you made to the Contract, less any prior
withdrawals and premium taxes.
If you select the enhanced death benefit rider, then the death benefit will
be the greater of:
o The death benefit amount, as stated above, or
o The value of the Enhanced Death Benefit, described later in this
Prospectus.
If you do not take any withdrawals or make any purchase payments, the
Enhanced Death Benefit will be the greatest value of your Contract on any
Contract Anniversary.
Income Payments
The Contract allows you to receive periodic income payments beginning on
the Payout Start Date you select. You may choose among several income plans to
fit your needs. You may receive income payments for a specific period of time or
for life (either single or joint life), with or without a guaranteed number of
payments.
You may choose to have income payments come from the fixed account, one or
more of the subaccounts, or both. If you choose to have any part of the payments
come from the subaccounts, the dollar amount of the income payments you receive
may go up or down, depending on the investment performance of the portfolios you
invest in at that time.
<PAGE>
Inquiries
If you need additional information, please contract us at:
Scudder Horizon Advantage
Customer Service Center
8301 Maryland Avenue
St. Louis, Missouri 63105
1-(800) 242-4402
<PAGE>
Fee Table
The Fee Table illustrates the current expenses and fees under the Contract,
as well as the Fund's fees and expenses for the 1998 calendar year. The purpose
of this table is to help you understand the various costs and expenses that you
will pay directly and indirectly. The Fund has provided the information on the
Fund's expenses.
Contract Owner Transaction Expenses
Sales Load Imposed on Purchases None
Deferred Sales Charge None
Surrender Fee None
Transfer Fee (1)
Annual Contract Fee None
Variable Account Annual Expenses
(as a percentage of your average net assets in the Variable Account)
With the Enhanced Death Benefit
Mortality and Expense Risk Charge (2) 0.50%
Administrative Expense Charge 0.30%
-----
Total Variable Account Annual Expenses 0.80%
Without the Enhanced Death Benefit
Mortality and Expense Risk Charge (2) 0.40%
Administrative Expense Charge 0.30%
-----
Total Variable Account Annual Expenses 0.70%
<PAGE>
Scudder Variable Life Investment Fund Annual Expenses (as a percentage of
average net assets for the 1998 calendar year)
Management Fees Total
after Other Expenses Expenses after
Portfolio Fee Waiver* Fee Waiver*
- --------- ----------- -----------
Money Market 0.37% 0.07% 0.44%
Bond 0.48% 0.09% 0.57%
Capital Growth 0.46% 0.04% 0.50%
Balanced 0.48% 0.08% 0.56%
International 0.87% 0.17% 1.04%
Growth and Income 0.47% 0.09% 0.56%
Global Discovery* 0.91% 0.81% 1.72%
Large Company Growth** 0.58% 0.67% 1.25%
Small Company Growth** 0.88% 0.62% 1.50%
* Until April 30, 1998, the Adviser agreed to waive a portion of its management
fee to the extent necessary to limit the expenses of the Global Discovery
Portfolio to 1.50% of average daily net assets. As a result, actual 1998
expenses without giving effect to the expense limitation were: management fee
0.97% and total expenses 1.78%.
** Until April 2000, the Adviser agreed to waive all or a portion of its
management fee to limit the expenses of the Large Company Growth Portfolio and
the Small Company Growth Portfolio to 1.25% and 1.50% respectively of average
daily net assets. Without these limitations the Fund estimates that total
expenses for the Large Company Growth Portfolio and the Small Company Growth
Portfolio would be 1.09% and 1.90%, respectively. (1) We do not impose a
transfer charge. We may in the future assess a $10 charge after the 12th
transfer in a Contract Year. We do not count transfers due to Dollar Cost
Averaging and Automatic Portfolio Rebalancing as transfers. (2) If you receive
variable periodic income payments, we will assess the mortality and expense risk
charge during the payout phase of the Contract.
Examples
The following examples illustrate the expenses you would pay on a $1,000
investment, assuming a 5% annual return, if you continued the Contract,
surrendered or annuitized at the end of each period.
(With the Enhanced Death Benefit (1))
Fund portfolio 1 Year 3 Years
- -------------- ------ -------
Money Market $13 $39
Bond $14 $43
Capital Growth $13 $41
Balanced $14 $43
International $19 $58
Growth and Income $14 $43
Global Discovery $26 $78
Large Company Growth $21 $64
Small Company Growth $23 $72
(Without the Enhanced Death Benefit (2))
Fund portfolio 1 Year 3 Years
- -------------- ------ -------
Money Market $12 $36
Bond $13 $40
Capital Growth $12 $38
Balanced $13 $40
International $18 $55
Growth and Income $13 $40
Global Discovery $25 $75
Large Company Growth $20 $61
Small Company Growth $22 $69
(1) Total Variable Account Annual Expenses of 0.80%
(2) Total Variable Account Annual Expenses of 0.70%
You should not consider the examples above to represent past or future
expenses, performance or return. The assumed 5% return is hypothetical. Actual
expenses and returns may be greater or less than those shown. Neither the fee
table nor the examples reflects the deduction of any premium taxes.
<PAGE>
Condensed Financial Information
Condensed financial information for the subaccounts is included at the end
of this Prospectus.
Calculation of Yield and Total Returns
Yields and Standard Total Return
We may advertise the yields and standard average annual total returns for
the subaccounts. These figures will be based on historical earnings and are not
intended to indicate future performance.
Yields and standard total returns include all charges and expenses you
would pay under the Contract -- the mortality and expense risk charge (0.40% for
Contracts with the standard death benefit; 0.50% for Contracts with the enhanced
death benefit) and an administrative expense charge of 0.30%.
The yield of the Money Market Subaccount refers to the annualized
investment income that an investment in the Subaccount generates over a
specified seven-day period. The effective yield of the Money Market Subaccount
is calculated in a similar way but, when annualized, we assume that the income
earned by the investment has been reinvested. The effective yield will be
slightly higher than the yield because of the compounding effect of the assumed
reinvestment.
The yield of a subaccount (except the Money Market Subaccount) refers to
the annualized income that an investment in the subaccount generates over a
specified thirty-day period.
The average annual total return of a subaccount assumes that an investment
has been held in the subaccount for certain periods of time including the period
measured from the date the subaccount began operations. We will provide the
average annual total return for each subaccount that has been in operation for
1, 5, and 10 years. The total return quotations will represent the average
annual compounded rates of return that an initial investment of $1,000 would
earn as of the last day of the 1, 5 and 10 year periods.
<PAGE>
The yield and total return calculations are not reduced by any premium
taxes. Applying premium taxes will reduce the yield and total return of a
Contract.
For additional information regarding yield and total return calculations,
please refer to the SAI.
Other Performance Data
We may disclose average annual total return in nonstandard formats and
cumulative total return. This means that the data may be presented for different
time periods and different dollar amounts.
We may also present historic performance data for the portfolios since
their inception reduced by all fees and charges you would pay under the Contract
- -- the mortality and expense risk charge (0.40% for Contracts with the standard
death benefit; 0.50% for Contracts with the enhanced death benefit) and an
administrative expense charge of 0.30%.
Such adjusted historic performance includes data that precedes the
inception dates of the subaccounts, but is designed to show the performance that
would have resulted if the Contract had been available during that time.
We will only disclose non-standard performance data if we also disclose the
standard performance data. For additional information regarding the calculation
of other performance data, please refer to the SAI.
Advertising, sales literature, and other communications may compare the
expense and performance data for the Contract and each subaccount with other
variable annuities tracked by independent services such as Lipper Analytical
Services, Inc., Morningstar and the Variable Annuity Research Data Service.
These services monitor and rank the performance and expenses of variable annuity
issuers on an industry-wide basis. We may also make comparisons using other
indices that measure performance, such as Standard & Poor's 500 Composite or the
Dow Jones Industrial Average. Unmanaged indices may assume reinvestment of
dividends but do not deduct administrative and management costs and expenses.
<PAGE>
We may report other information including the effect of tax-deferred
compounding on a subaccount's returns, illustrated by tables, graphs, or charts.
Tax-deferred compounding can lead to substantial long-term accumulation of
assets, if the portfolio's investment experience is positive. Sales literature,
advertisements or other reports may refer to A.M. Best's, Moody's and Standard &
Poor's rating of Glenbrook Life as an insurance company.
Glenbrook Life and the Variable Account
Glenbrook Life and Annuity Company
Glenbrook Life and Annuity Company (we, us, Glenbrook Life) issues the
Contract. We are a stock life insurance company that was organized under the
laws of Illinois in 1992 and redomesticated as a corporation under the laws of
Arizona on December 28, 1998. We were originally organized under the laws of
Indiana in 1965. From 1965 to 1983 we were known as "United Standard Life
Assurance Company" and from 1983 to 1992 we were known as "William Penn Life
Assurance Company of America." We are licensed to operate in Puerto Rico, the
District of Columbia and all states except New York. We intend to market the
Contract in those jurisdictions in which we are licensed to operate. Our main
administrative office is located at 3100 Sanders Road, Northbrook, Illinois
60062.
We are a wholly owned subsidiary of Allstate Life Insurance Company
("Allstate Life"), a stock life insurance company incorporated under the laws of
Illinois. Allstate Life is a wholly owned subsidiary of Allstate Insurance
Company ("Allstate"), a stock property-liability insurance company incorporated
under the laws of Illinois. The Allstate Corporation ("Corporation") owns all of
the outstanding capital stock of Allstate. On June 30, 1995, Sears Roebuck and
Co. ("Sears") distributed its 80.3% ownership in the Corporation to Sears common
shareholders through a tax-free dividend.
<PAGE>
We entered into a reinsurance agreement with Allstate Life, effective June
5, 1992. Under the reinsurance agreement, fixed account purchase payments are
automatically transferred to Allstate Life and become invested with the assets
of Allstate Life. Allstate Life accepts 100% of the liability under such
contracts. However, the obligations of Allstate Life under the reinsurance
agreement are to us. We remain the sole obligor under the Contract to the
Owners.
We are engaged in a business that is highly competitive because of the
large number of stock and mutual life insurance companies and other entities
competing in the sale of insurance and annuities. There are approximately 1,700
stock, mutual and other types of insurers in business in the United States.
Several independent rating agencies regularly evaluate life insurer's
claims-paying ability, quality of investments and overall stability. A.M. Best
Company assigns an A+r to us and an A+ for financial strength to Allstate Life
which automatically reinsures all our net business. Standard & Poor's Insurance
Rating Services assigns us an AA+ (very strong) for financial strength rating
and Moody's assigns us an Aa2 (Excellent) for financial strength rating. These
ratings do not relate to the investment performance of the Variable Account.
The Variable Account
We established the Glenbrook Life Scudder Variable Account (A) as a
separate investment account on August 26, 1998 under Illinois law. The Variable
Account became subject to Arizona law when we redomesticated on December 28,
1998. The Variable Account receives and invests purchase payments made under the
Contracts. We may offer other variable annuities for which the Variable Account
may receive and invest payments.
Under Arizona law, the assets of the Variable Account are held separately
from our other assets. That portion of the assets of the Variable Account equal
to the reserves and other Contract liabilities with respect to the Variable
Account is not chargeable with liabilities arising out of any other business
Glenbrook Life may conduct. The income, gains and losses, realized or
unrealized, from assets allocated to the Variable Account are credited to or
charged against the Variable Account, without regard to other income, gains or
losses of Glenbrook Life. The obligations under the Contracts are obligations of
Glenbrook Life.
<PAGE>
The Variable Account is divided into subaccounts. Each subaccount invests
exclusively in shares of one of the portfolios of the Scudder Variable Life
Investment Fund. We may add additional subaccounts in the future, some of which
may be available under other variable annuity contracts.
The Variable Account is registered with the Securities and Exchange
Commission ("SEC") as a unit investment trust under the Investment Company Act
of 1940, as amended, (the "1940 Act") and meets the definition of a "separate
account" under the federal securities laws. Registration with the SEC does not
involve supervision of the management or investment practices or policies of the
Variable Account, the Fund, or Glenbrook Life by the SEC.
The Fund
The Variable Account invests exclusively in shares of the Scudder Variable
Life Investment Fund (the "Fund"). The Fund is registered with the SEC under the
1940 Act as an open-end, diversified management investment company.
The Fund is designed to provide an investment vehicle for variable annuity
contracts and variable life insurance policies.
The general public may not purchase shares of the underlying portfolios.
The investment objectives and policies of the underlying portfolios may be
similar to those of other portfolios and mutual funds managed by the same
investment adviser that are sold directly to the public. You should not expect
that the investment results of other portfolios would be similar to those of the
underlying portfolios.
<PAGE>
Scudder Variable Life Investment Fund
The subaccounts invest exclusively in Class A shares of the following
Scudder portfolios:
Money Market Bond
Capital Growth Balanced
International Growth and Income
Global Discovery Large Company Growth
Small Company Growth
Each portfolio represents, in effect, a separate mutual fund with its own
distinct investment objectives and policies. The gains or losses of one
portfolio have no effect on another portfolio's investment performance.
The investment objectives and policies of the portfolios available under
the Contract are summarized below:
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Portfolio Investment Objective
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Money Market This portfolio seeks to maintain the stability of
capital and, consistent therewith, to maintain the liquidity
of capital and to provide current income. The Portfolio seeks
to maintain a net asset value of $1.00 per share.
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Bond This portfolio pursues a policy of investing for a high level
of income consistent with a high quality portfolio of debt
securities.
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Capital Growth This portfolio seeks to maximize long-term capital
growth through a broad and flexible investment program.
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Balanced This portfolio pursues a balance of growth and income from a
diversified portfolio of equity and fixed income securities.
The portfolio also seeks long-term preservation of capital
through a quality-oriented investment approach that is
designed to reduce risk.
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International This portfolio seeks long-term growth of capital principally
from a diversified portfolio of foreign equity securities.
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Growth and This portfolio seeks long-term growth of capital, current
Income income and growth of income.
- --------------------------------------------------------------------------------
Global This portfolio pursues above-average capital
Discovery appreciation over the long term by investing primarily in the
equity securities of small companies throughout the world.
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Large Company This portfolio seeks long-term growth of capital through
Growth investment primarily in the equity securities of seasoned,
financially strong U.S. growth companies.
- --------------------------------------------------------------------------------
Small Company This portfolio pursues long-term growth of capital by
Growth investing primarily in the common stocks of emerging growth
companies that are poised to be leaders in the next century.
There can be no assurance that any portfolio will achieve its objective.
The Scudder Variable Life Investment Fund prospectus contains more complete
information about the portfolios, including a description of the risks involved
in investing in each portfolio. A copy of the Fund's prospectus is attached to
this Prospectus. You should read the Fund's prospectus carefully before you
invest.
Investment Adviser for the Funds
Scudder Kemper Investments, Inc. (the "Adviser") is an investment adviser
registered with the SEC under the Investment Advisers Act of 1940, as amended.
The Adviser manages daily investments and business affairs of the Fund, subject
to the policies established by the Trustees of the Fund.
The Fixed Account Options
Purchase payments you allocate or transfer to the fixed account options
become part of our general account. Because of exemptive and exclusionary
provisions, we have not registered interests in the general account under either
the Securities Act of 1933 ("1933 Act") or the 1940 Act. Neither the general
account nor any interests in it are generally subject to the provisions of the
1933 or 1940 Acts, and, as a result, the staff of the SEC has not reviewed the
disclosures in this prospectus relating to the fixed account. However,
disclosures regarding the fixed account may be subject to the provisions of the
federal securities laws relating to the accuracy and completeness of statements
made in prospectuses.
The general account includes all of our general assets, except those assets
segregated in separate accounts such as the Variable Account. Unlike the
Variable Account, all assets in the general account are subject to the general
liabilities of our business operations. We bear the full investment risk for all
amounts contributed to the general account. We have the sole discretion to
invest the general account's assets, subject to applicable law. Amounts you
direct into the fixed account options do not share in the investment experience
of our general account.
General Description
We guarantee that we will credit daily interest to the money you direct to
the fixed account. The daily interest will equal or exceed the minimum
guaranteed rate of 3.5%. We may declare higher or lower interest rates in the
future. We determine interest rates at our sole discretion. We have no specific
formula for determining fixed account interest rates. Amounts allocated to the
fixed account options do not get charged the Variable Account asset based
charges of 0.70% (0.80% if you elect the Enhanced Death Benefit Rider).
Standard Fixed Account Option
Money you direct to the standard fixed account option earns interest at a
declared rate for one year. The declared rate is the current rate in effect at
the time of your allocation or transfer. Once declared, the rate is guaranteed
for 12 months. As each one year period expires, we will declare a renewal rate.
On or about the end of each one year period, we will notify you of the new
interest rate(s). It will not be less than the 3.5% guaranteed rate found in the
Contract. We may declare more than one interest rate for different monies you
have in the standard fixed account option based upon the date of your allocation
or transfer into the standard fixed account.
You may allocate all or a portion of your premium payment to the standard
fixed account option. You may withdraw or transfer your money from the standard
fixed account option at any time on a first-in, first-out basis. If you withdraw
money from the standard fixed account, you will receive the amount you
requested, minus any applicable premium taxes and tax withholding.
The Dollar Cost Averaging Fixed Account Option
You may allocate all or a portion of your purchase payments to the Dollar
Cost Averaging fixed account (the "DCA Account"). Each purchase payment you
place in the DCA Account will earn interest for up to one year at a declared
rate of interest. The declared rate will be the current rate in effect at the
time you direct your purchase payment into the DCA Account. The rate will never
be less than 3.5%.
Each purchase payment you direct into the DCA Account, and interest earned
on that payment, will be transferred out of the DCA Account in equal monthly
installments within one year. You can select fewer than 12 monthly transfers,
but you may not select more than 12. At the end of 12 months from the date of
your allocation to the DCA Account, we will transfer any remaining portion of
the purchase payment and interest in the DCA Account to the Money Market
Subaccount.
You must specify the investment alternatives that will receive the monthly
installments. You must also specify the percentage (whole percentages only,
totaling 100%) of each monthly installment that each investment alternative
should receive.
You can only put money into the DCA Account when you make purchase
payments. You may not transfer funds into the DCA Account from other investment
alternatives.
Purchasing the Contract
Purchasing the Contract
You may purchase the Contract with a first purchase payment of $2,500 or
more ($2,000 for a Qualified Contract). We will issue the Contract if the
annuitant and contract owner are age 90 or younger. The first payment is the
only payment we require you to make under the Contract. There are no
requirements on how much to pay or how many payments to make. You decide the
amount of each payment. You may add money to your Contract automatically through
Automatic Additions. We may limit the dollar amount of purchase payments we will
accept in the future.
Free-Look Period
You may return your Contract to us for a refund within 20 days after you
receive it. In most states, the amount of the refund will be the total purchase
payments you paid, plus or minus any investment gains or losses on the amounts
you invested in the subaccounts from the date of the allocation through the date
we determine the refund. You will receive a full refund of the amounts you
allocated to the fixed account options. We determine the value of the refund as
of the date we receive the refunded Contract. We will pay the refund within 7
days after we receive the Contract. The Contract will then be deemed void. In
some states you may have more than 20 days. If your state requires us to refund
premium payments, your refund will equal the entire amount of the premium
payments you paid.
Crediting Your First Purchase Payment
When we receive a properly completed application with your first payment,
we will credit that payment to the Contract within two business days of
receiving the payment. If we receive an incomplete application, then we will
credit the payment within two business days of receiving the completed
application. If, for any reason, we do not credit the payment to your account
within five business days, then we will immediately return the payment to you.
You may, after receiving notice of our delay, specifically request that we do
not return the payment. We reserve the right to reject any application.
We will credit all additional payments to your Contract at the close of the
Valuation Period in which we receive the payment.
Allocating Your Purchase Payments
On the application, you instruct us how to allocate your purchase payment
among the investment alternatives. You must allocate your payments to the
investment alternative either in whole percentages (from 0% to 100% totaling
100%) or in whole dollars (totaling the entire dollar amount of your payment).
Unless you send us written notice of a change, we will allocate each additional
payment you make according to the instructions for the previous purchase
payment. Any change in allocation instructions will be effective at the time we
receive the notice in good order.
Accumulation Units
Each purchase payment you allocate to the subaccounts will be credited to
the Contract as accumulation units. For example, if you make a $10,000 purchase
payment to the Money Market Subaccount when its accumulation unit value equals
$10, then we will credit 1,000 accumulation units for the Money Market
Subaccount to your Contract. The Variable Account, in turn, will purchase
$10,000 worth of shares of the Money Market Portfolio of the Fund.
Accumulation Unit Value
Each subaccount values its accumulation units separately. The value of
accumulation units will change for each Valuation Period according to the
investment performance of the shares of the portfolio held by each subaccount
and the deduction of certain expenses and charges.
The value of an accumulation unit in a subaccount for any Valuation Period
equals the value of the accumulation unit as of the immediately preceding
Valuation Period, multiplied by the Net Investment Factor for that subaccount
for the current Valuation Period. The Net Investment Factor for a Valuation
Period is a number representing the change, since the last Valuation Date, in
the value of subaccount 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.
You should expect the value of your Contract to change daily to reflect the
investment experience of the portfolios in which you are invested through the
subaccounts, any interest earned on the fixed account options, and the deduction
of certain expenses and charges.
Transfers
You may transfer your Contract's value among investment alternatives before
the Payout Start Date, subject to the following restrictions. You may make
transfers among all the investment alternatives at any time, except you may not
make transfers into the DCA Account. Transfers from the standard fixed account
option are taken out on a first-in, first-out basis.
We reserve the right to assess a $10 charge on each transfer after the
twelfth transfer in a Contract Year. We presently waive this charge. We reserve
the right to waive transfer restrictions. Transfers to or from more than one
investment alternative on the same day are treated as one transfer. Transfers
through Dollar Cost Averaging and Automatic Portfolio Rebalancing do not count
as transfers.
After the Payout Start Date, transfers among subaccounts or from a variable
amount income payment to a fixed amount income payment may be made only once
every six months and may not be made during the first six months following the
Payout Start Date. After the Payout Start Date, transfers out of a fixed amount
income payment are not permitted.
Telephone Transfers
We accept telephone transfer requests at (800)242-4402, if we receive them
by 3:00 p.m., Central Time. We will not accept telephone transfer requests
received at any other telephone number or after 3:00 p.m., Central Time.
Telephone transfer requests received before 3:00 p.m., Central Time are
effected at the next computed accumulation unit value for the subaccounts
involved. If the NYSE closes early (i.e. before 3:00 p.m. Central Time), or if
it closes for a period of time, but then reopens for trading on the same day, we
will process telephone transfer requests at the close of the NYSE on that
particular day.
We use procedures that we believe provide reasonable assurance that
telephone transfers are authorized by the proper persons. We may tape telephone
conversations with persons who claim to authorize the transfer and we may
request identifying information from such persons. We disclaim any liability for
losses resulting from telephone transfers if the claim is that the transfer was
not properly authorized. However, if we do not take reasonable steps to help
ensure that such authorizations are valid, then we may be liable for such
losses.
Dollar Cost Averaging
Before the Payout Start Date, you may make transfers automatically through
Dollar Cost Averaging (DCA). DCA permits you to transfer a specified amount in
equal monthly installments from the one year fixed DCA Account or any subaccount
to any of the subaccounts. DCA may not be used to transfer amounts to the fixed
account. There is no charge for participating in the DCA program. DCA transfers
do not count towards the twelve free transfers allowed during each Contract
Year.
By transferring a set amount on a regular schedule, instead of transferring
the total amount at one particular time, you may reduce the risk of investing in
the underlying portfolio only when the price is high. Participating in the DCA
program does not guarantee a profit and it does not protect against a loss if
market prices decline.
Automatic Portfolio Rebalancing
Transfers may be made automatically through Automatic Portfolio Rebalancing
before the Payout Start Date. If you elect Automatic Portfolio Rebalancing, then
we will rebalance all of your money allocated to the subaccounts to your desired
allocations on a quarterly basis. Each quarter, money will be transferred among
subaccounts to achieve the desired allocation.
Unless you send us written notice of a change, the desired allocation will
be the allocation you first selected. The new allocation will be effective with
the first rebalancing that occurs after we receive the written request. We are
not responsible for rebalancing that occurs before our receipt of your written
request.
Transfers made though Automatic Portfolio Rebalancing are not counted
toward the twelve free transfers permitted per Contract Year. Any money you have
allocated to the fixed account options will not be included in the rebalancing.
Access to Your Money
Withdrawals
You may withdraw all or part of your Contract Value at any time before the
Payout Start Date and before the Owner's death (or the annuitant's death if the
Owner is not a natural person).
The amount you may withdraw is the full Contract Value next computed after
we receive the request for a withdrawal, minus any applicable federal
withholding or premium taxes. We do not deduct any withdrawal charges from a
full or partial withdrawal.
We will pay withdrawals from the Variable Account within seven days of
receiving the request, unless we delay payments for reasons specified below in
"Delay of Payments."
To complete a partial withdrawal from the Variable Account, we will redeem
accumulation units in an amount equal to the withdrawal and any applicable
premium taxes. You must name the investment alternatives from which you want to
make the withdrawal. If you do not name an investment alternative, we will not
honor the incomplete withdrawal request.
If any portion of the withdrawal is to be taken from the standard fixed
account option, then the amount requested will be deducted on a first-in,
first-out basis.
The minimum amount you may withdraw is $50. If your Contract Value after a
partial withdrawal would be less than $1,000, then we will treat the request as
a request for a full withdrawal and we will pay out the entire Contract Value,
minus any charges and premium taxes. We may waive these withdrawal restrictions.
You may take partial withdrawals automatically through Systematic
Withdrawals on a monthly, quarterly, semi-annual or annual basis. You may
request Systematic Withdrawals of $50 or more at any time before the Payout
Start Date. We may prohibit Systematic Withdrawals if you also elect Dollar Cost
Averaging.
If you have a valid telephone transfer request form on file with us, then
you may make a partial withdrawal by telephone. We calculate the Contract Value
we will pay you at the price next computed after we receive your withdrawal
request. We will pay you the amount you request within seven days of when we
receive your request. Unless you elect in writing not to have federal income
taxes withheld, we, by law, must withhold taxes from the taxable portion of the
withdrawal.
Partial and full withdrawals may be subject to federal income tax and a 10%
tax penalty. This tax and penalty are explained in "Federal Tax Matters" on page
[35].
After the Payout Start Date, we will permit withdrawals only when annuity
payments are being made from the Variable Account for a specified number of
payments only (i.e., Income Plan 3). In that case, you may terminate the
Variable Account portion of the income payments at any time and receive a lump
sum equal to the commuted balance of the remaining variable payments due. The
commuted balance of the remaining variable payments will be equal to the net
present value of the future stream of payments using a discount rate of 3% and
the annuity unit value next determined after the receipt of your request.
Annuity Income Payments
Payout Start Date for Income Payments
The Payout Start Date is the day that we will start paying income payments
under the Contract. You may change the Payout Start Date at any time by sending
us written notice at least 30 days before the scheduled Payout Start Date. The
Payout Start Date must be:
o at least one month after the issue date; and
o no later than the day the annuitant reaches age 90, or the 10th anniversary
of the issue date, if later.
The dollar amount of the income payments may be variable, fixed, or both.
The method of calculating the first annuity payment is different for the two
types of payments.
Variable Income Payments
The dollar amount of variable income payments depends upon:
o the investment experience of the subaccounts you select,
o any premium taxes due,
o the age and sex of the annuitant, and
o the income plan you chose.
We guarantee that the amount of the income payment will not be affected by
actual mortality experience and the amount of our administration expenses. Your
Contract contains income payment tables that provide for different benefit
payments to men and women of the same age (except in states which require unisex
annuity tables). Nevertheless, in accordance with the U.S. Supreme Court's
decision in Arizona Governing Committee v. Norris, in certain employment-related
situations, annuity tables that do not vary on the basis of sex will be used.
The total income payments we will pay to you may be more or less than the
total of the purchase payments you paid to us because:
o variable income payments will vary with the investment results of the
underlying portfolios, and
o annuitants may live longer than, or not as long as, expected.
The income plan option selected will affect the dollar amount of each
annuity payment.
Income payments are determined based on an assumed investment rate, the
investment performance of the portfolios in which the subaccounts you select
invest, and the deduction of certain fees and charges. If the actual net
investment experience of the subaccounts is less than the assumed investment
rate, then the dollar amount of the income payments will decrease. If the net
investment experience equals the assumed investment rate, then the dollar amount
of the income payments will stay level. If the net investment experience exceeds
the assumed investment rate, then the dollar amount of the income payments will
increase. The assumed investment rate under the Contract is 3%. For more
information on how variable income payments are determined, see the SAI.
Fixed Income Payments
If you choose to have any portion of your annuity income payments come from
the fixed account, the payment amount will be fixed for the duration of the
income plan and guaranteed by us. We calculate the dollar amount of the fixed
income payment by applying the portion of the Contract Value in the fixed
account on the Payout Start Date minus any applicable premium tax, to the value
from the income payment table in your Contract. We will pay you a higher amount
if we are offering it at that time.
Annuity Transfers
After the Payout Start Date, you may not make any transfers from the fixed
account. You may transfer amounts between subaccounts, or from the variable
income payment to the fixed income payment starting six months after the Payout
Start Date. Transfers may be made once every six months thereafter.
Income Plans
The income plans offered under the Contract include:
Income Plan 1 - Life Income with Guaranteed Payments:
We will make payments for as long as the annuitant lives. If the annuitant
dies before the selected number of guaranteed payments have been made, then we
will continue to pay the remainder of the guaranteed payments to the
beneficiary.
Income Plan 2 - Joint and Survivor Life Income with Guaranteed Payments:
We will make payments for as long as either the annuitant or joint
annuitant, named at the time of income plan selection, lives. If both the
annuitant and the joint annuitant die before the selected number of guaranteed
payments have been made, then we will continue to pay the remainder of the
guaranteed payments to the beneficiary.
Income Plan 3 - Guaranteed Number of Payments:
We will make payments for a specified number of months beginning on the
Payout Start Date. These payments do not depend on the annuitant's life. The
guaranteed number of months may range from 60 to 360. The mortality and expense
risk charge will be deducted from Variable Account assets supporting these
payments even though we do not bear any mortality risk.
You may change the income plan until 30 days before the Payout Start Date.
If you chose an income plan which depends on the annuitant or joint annuitant's
life, then we will require proof of age before income payments begin. Applicable
premium taxes will be assessed.
If you do not select an income plan, then we will make income payments in
accordance with Income Plan 1 Life Income with Guaranteed Payments for 120
Months. Other income plans may be available upon request at our discretion. We
currently use sex-distinct annuity tables. However, if Congress or the states
pass legislation, then we reserve the right to use income payment tables that do
not distinguish on the basis of sex. Special rules and limitations may apply to
certain Qualified Contracts.
If the Contract Value to be applied to an income plan is less than $2,000
or the monthly payments determined under the income plan are less than $20, then
we may pay the Contract Value, minus any applicable taxes, in a lump sum or we
may change the payment frequency to an interval that results in income payments
of at least $20.
Death Benefits
Death Benefit Payment Provisions
A death benefit may be paid to the new Owner determined immediately after
the death if, before the Payout Start Date:
o any Owner dies; or
o the annuitant dies and an Owner is not a natural person.
If the new Owner eligible to receive the death benefit is not a natural
person, then the new Owner may elect to receive the death benefit in one or more
payments. Otherwise, if the new Owner is a natural person, then the new Owner
may elect to receive the death benefit in one or more payments or in periodic
payments through an annuity income plan.
The entire death benefit must be paid within five years after the date of
death unless an income plan is selected or a surviving spouse continues the
Contract in accordance with the following:
If an income plan is elected, payments from the income plan must begin
within one year of the date of death and must be payable throughout:
o the new Owner's life; or
o a period not to exceed the new Owner's life expectancy; or
o the new Owner's life with payments guaranteed for a period not to exceed
the new Owner's life expectancy.
If the deceased owner's surviving spouse is the new Owner, then the spouse
may elect one of the options listed above or may continue the Contract in the
accumulation phase as if the death had not occurred. We will only permit the
Contract to be continued once. On the day the Contract is continued, we will set
the Contract Value equal to the Death Benefit or Enhanced Death Benefit, as
appropriate, calculated as of the date on which we receive all the information
we need to process your spouse's request to continue the Contract after your
death. Because the Death Benefit and Enhanced Death Benefit can never be less
than the current Contract Value at that time, our resetting the Contract Value
will never cause the Contract Value to decrease.
Death Benefit Amount
Before the Payout Start Date, the death benefit amount is equal to the
greater of:
o the Contract Value on the date we determine the death benefit, or
o the sum of all purchase payments, minus any prior withdrawals and premium
taxes.
We will determine the value of the death benefit at the end of the
Valuation Period during which we receive a complete request for payment of the
death benefit. A complete request includes proof of death, and such other
documentation as we may require in our discretion. In addition to the above
alternatives, upon purchase of the Contract, if the Owner is age 75 or younger,
then the Owner can select the Enhanced Death Benefit Rider.
Enhanced Death Benefit Rider
If the Owner is a living individual and that Owner dies, then the enhanced
death benefit applies only for the death of such Owner. If an Owner is not a
living individual, then the enhanced death benefit applies only for the
annuitant's death.
If you select this Rider, then the death benefit will be the greater of :
o the death benefit amount, as stated above, or
o the value of the Enhanced Death Benefit.
On the issue date, the Enhanced Death Benefit is the initial purchase
payment. After the issue date, the Enhanced Death Benefit is recalculated
whenever you make a purchase payment, take a withdrawal, or on the Contract
Anniversary as follows:
o For purchase payments, the Enhanced Death Benefit equals the most recently
calculated Enhanced Death Benefit plus the purchase payment.
o For withdrawals, the Enhanced Death Benefit equals the most recently
calculated Enhanced Death Benefit reduced by the amount of the withdrawal.
o On each Contract Anniversary, the Enhanced Death Benefit equals the greater
of the Contract Value or the most recently calculated Enhanced Death
Benefit.
If you do not take any withdrawals or make any purchase payments, the
Enhanced Death Benefit will be the greatest value of your Contract on any
Contract Anniversary on or before the date we calculate the death benefit.
We will recalculate the Enhanced Death Benefit for purchase payments,
withdrawals and on Contract anniversaries until the oldest Owner, or the
annuitant if the Owner is not a living individual, reaches age 80. After age 80,
the Enhanced Death Benefit will be recalculated only for purchase payments and
withdrawals.
We will determine the value of the death benefit at the end of the
Valuation Period during which we receive a complete request for payment,
including proof of death. We will not settle any death claim until we receive
proof of death.
Fees and Expenses
Deductions from Purchase Payments
We do not take any deductions from your purchase payments. Therefore, the
full amount of every purchase payment is invested in the investment alternatives
you select.
Withdrawal Charge
There are no withdrawal charges under the Contract. We do not take
withdrawal charges when you request a full or partial withdrawal. You may
withdraw all or part of your Contract Value at any time before the earlier of
the Payout Start Date or an Owner's death (if the Owner is not a natural person,
the annuitant's death).
We may withhold federal and state income tax from withdrawal amounts.
Certain terminations may also be subject to a federal tax penalty.
Contract Maintenance Charge
There is no Contract maintenance charge. We bear the maintenance costs.
Maintenance costs include, but are not limited to, expenses incurred in billing
and collecting purchase payments; keeping records; processing death claims, cash
withdrawals, and Contract changes; calculating accumulation unit and annuity
unit values; and issuing reports to Owners and regulatory agencies.
Administrative Expense Charge
We deduct a daily administrative expense charge that equals, on an annual
basis, 0.30% of the daily net assets you have allocated to the subaccounts. This
charge is designed to cover actual administrative expenses. The administrative
charge does not necessarily equal the expenses we incur.
Mortality and Expense Risk Charge
We deduct a daily mortality and expense risk charge that equals, on an
annual basis, 0.40% of the daily net assets you have allocated to the
subaccounts. We guarantee that the 0.40% rate will not increase over the
Contract's life.
The mortality risk arises from our guarantee to cover all death benefits
and to make income payments in accordance with the income plan you select. The
expense risk arises from the possibility that the contract maintenance and
administrative expense charges, both of which are guaranteed not to increase,
will not be enough to cover actual administrative expenses.
If you select the Enhanced Death Benefit Rider, then we will deduct an
additional mortality and expense risk charge equal, on an annual basis, to 0.10%
of the daily net assets you have allocated to the subaccounts. This results in a
total annual charge of 0.50% of daily net assets in the subaccounts.
We guarantee that the 0.50% rate for the Enhanced Death Benefit Rider will
not increase over your Contract's life. For amounts allocated to the Variable
Account, we deduct the mortality and expense risk charge during the accumulation
and payout phases of the Contract.
Taxes
We deduct applicable state premium taxes or other taxes relative to the
Contract (collectively referred to as "premium taxes") either at the Payout
Start Date, when a total withdrawal occurs, or when we distribute the death
benefit. Current premium tax rates range from 0 to 3.5%. We reserve the right to
deduct premium taxes from the purchase payments even where the premium taxes are
assessed at the Payout Start Date or upon total withdrawal.
At the Payout Start Date, we will deduct the charge for premium taxes from
each investment alternative in the proportion that your value in that investment
alternative bears to your total Contract Value.
Transfer Charges
We do not deduct transfer charges. However, in the future, we may assess a
$10 charge on each transfer after the twelfth transfer in a Contract Year. This
excludes transfers through Dollar Cost Averaging and Automatic Portfolio
Rebalancing. We presently waive this charge.
Fund Expenses
The portfolios deduct investment charges from the amounts you have invested
in the portfolios. A complete description of the expenses and deductions from
the portfolios may be found in the Fund's prospectus. The Fund's prospectus
accompanies this Prospectus.
Federal Tax Matters
Introduction
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 your individual circumstances.
If you are concerned about any tax consequences with regard to your individual
circumstances, then 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 owner is a "natural person",
(2) the investments of the Variable Account are "adequately diversified" in
accordance with Treasury Department Regulations, and
(3) Glenbrook Life 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 contract is taxed as ordinary
income received or accrued by the owner during the taxable year. Please see the
SAI 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 owner during the taxable year. Although Glenbrook Life 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 the Variable Account investments may cause an investor to be
treated as the owner of the Variable Account. The Treasury Department also
stated that future Guidance would be issued regarding the extent that owners
could direct subaccount investments without being treated as owners of the
underlying assets of the Variable Account.
Your rights under this Contract are different from those described by the
IRS in rulings in which it found that contract owners were not owners of
Variable Account assets. For example, you have the choice to allocate premiums
and contract values among more investment options. Also you may be able to
transfer among investment options 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 included in your gross income. Glenbrook Life 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 exceeds the investment in
the contract. The investment in the Contract is the gross premiums 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 as 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 five taxable years after the taxable year of the first
contribution to any Roth IRA and which are:
o made on or after the date the individual attains age 59 1/2,
o made to a beneficiary after the owner's death,
o attributable to the owner being disabled, or
o 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 payments received from a
nonqualified 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 Death Benefits
Death of an 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 SAI 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 nonqualified Contract. The penalty tax generally applies to
any distribution made before the date you attain age 59 1/2. However, no penalty
tax is incurred on distributions:
(1) made on or after the date the owner attains age 59 1/2,
(2) made as a result of an owner's death or disability,
(3) made in substantially equal periodic payments over the owner's life or life
expectancy,
(4) made under an immediate annuity, or
(5) attributable to an 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 Life (or
our affiliates) to the same owner during any calendar year will be aggregated
and treated as one annuity contract for purposes of determining the taxable
amount of a distribution.
Tax Qualified Contracts
The Contract may be used as investments with certain Qualified Plans such
as:
o Individual Retirement Annuities or Accounts (IRAs) under Section 408(b) of
the Code;
o Roth IRAs under Section 408A of the Code;
o Simplified Employee Pension Plans under Section 408(k) of the Code;
o Savings Incentive Match Plans for Employees (SIMPLE) Plans under Section
408(p) of the Code;
o Tax Sheltered Annuities under Section 403(b) of the Code;
o Corporate and Self Employed Pension and Profit Sharing Plans; and
o State and Local Government and Tax-Exempt Organization Deferred
Compensation Plans.
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 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 on or after the
date the employee:
o attains age 59 1/2,
o separates from service,
o dies,
o becomes disabled, or
o on account of hardship (earnings on salary reduction contributions may not
be distributed on account of hardship).
These limitations do not apply to withdrawals where Glenbrook Life is
directed to transfer some or all of the Contract Value to another Section 403(b)
plan.
Income Tax Withholding
We are 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
(3) over the life (joint lives) of the participant (and beneficiary).
Glenbrook Life may be required to withhold federal and state income taxes on any
distributions from nonqualified Contracts, or qualified Contracts that are not
eligible rollover distributions, unless you notify us of your election not to
have taxes withheld.
General Matters
Owner
The Owner ("you") has the sole right to exercise all rights and privileges
under the Contract, except as otherwise provided in the Contract. Both a
nonnatural and natural person cannot jointly own the Contract.
Beneficiary
Subject to the terms of any irrevocable beneficiary designation, you may
change the beneficiary at any time by sending us written notice. Any change will
be effective at the time you sign the notice, whether or not the annuitant is
living when we receive the change. We will not be liable for any payment or
settlement made before we receive the written notice.
Unless otherwise provided in the beneficiary designation, if a beneficiary
predeceases the Owner and there are no other surviving beneficiaries, then the
new beneficiary will be the Owner's spouse. If deceased then, the Owner's
children (in equal shares). If deceased, then the Owner's estate.
Multiple beneficiaries may be named. Unless otherwise provided in the
beneficiary designation, if more than one beneficiary survives the Owner, then
the surviving beneficiaries will share equally in any amounts due.
Assignments
We will not honor an assignment of an interest in a Contract as collateral
or security for a loan. The Owner may assign other benefits under the Contract
before the Payout Start Date. No beneficiary may assign benefits under the
Contract until they are due. We will not be bound by an assignment unless it is
signed by the Owner and filed with us. We are not responsible for the validity
of an assignment. Federal law prohibits or restricts the assignment of benefits
under many types of retirement plans and the terms of such plans may themselves
contain restrictions on assignments.
Delay of Payments
Payment of any amounts due from the Variable Account under the Contract
will be made within seven days, unless:
o The NYSE is closed for other than usual weekends or holidays, or trading on
the NYSE is otherwise restricted;
o An emergency exists as defined by the SEC; or
o The SEC permits delay for the protection of the Owners.
Payments or transfers from the fixed account may be delayed for up to 6
months.
Modification
We cannot modify the Contract without your consent, except:
o to make the Contract meet the requirements of the 1940 Act;
o to make the Contract comply with any changes in the Code;
or
o to make any changes required by the Code or by any other applicable law.
Customer Inquiries
If you would like additional information, please contract a representative
of the Company or call us at:
Scudder Horizon Advantage
Customer Service Center
8301 Maryland Avenue
St. Louis, Missouri 63105
1- (800) 242-4402
Distribution of the Contracts
Allstate Life Financial Services, Inc. ("ALFS"), 3100 Sanders Road,
Northbrook, Illinois, a wholly owned subsidiary of Allstate Life Insurance
Company, acts as the principal underwriter of the Contracts. ALFS is registered
with the SEC as a broker-dealer under the Securities Exchange Act of 1934 and is
a member of the National Association of Securities Dealers, Inc. ("NASD"). ALFS
is also registered with the SEC as an investment adviser under the Investment
Advisers Act of 1940.
ALFS has contracted with Scudder Investors Services, Inc. ("Scudder") for
Scudder's services in connection with the distribution of the Contract. Scudder
is registered with the SEC as a broker-dealer under the 1934 Act and is a member
of the NASD. Individuals directly involved in the sale of the Contract are
registered representatives of Scudder and appointed licensed agents of the
Company. The principal address of Scudder is Two International Place, Boston,
Massachusetts 02110-4103.
The underwriting agreement with ALFS provides for indemnification of ALFS
by us for liability to Owners arising out of services rendered or Contracts
issued.
Voting Rights
The Owner or anyone with a voting interest in a subaccount may instruct us
on how to vote at the Fund's shareholder meetings. We will solicit and cast each
vote according to the procedures set up by the Fund and to the extent required
by law. We reserve the right to vote the eligible shares in our own right, if
subsequently permitted by the 1940 Act, its regulations or interpretations
thereof.
We will vote Fund shares for which no timely instructions were received in
proportion to the voting instructions which we receive with respect to all
Contracts participating in that subaccount. We will apply voting instructions to
abstain on a pro-rata basis to reduce the votes eligible to be cast.
Before the Payout Start Date, you hold the voting interest in the
subaccount. We will determine the number of your votes by dividing your
Contract's value in the subaccount by the net asset value per share of the
applicable portfolio.
After the Payout Start Date, the person receiving variable income payments
has the voting interest and the votes decrease as income payments are made and
the reserves for the Contract decrease. That person's number of votes will be
determined by dividing the reserve for such Contract allocated to the applicable
subaccount by the net asset value per share of the corresponding eligible
portfolio.
General Provisions
Legal Proceedings
From time to time we are involved in pending and threatened litigation in
the normal course of our business in which claims for monetary damages are
asserted. Management, after consultation with legal counsel, does not anticipate
the ultimate liability arising from such pending or threatened litigation to
have a material effect on our financial condition.
Financial Statements
Our financial statements and the financial statements of the Variable
Account are included in the SAI.
Legal Matters
Sutherland Asbill & Brennan LLP has provided advice on certain legal
matters relating to the federal securities laws applicable to the issue and sale
of the Contracts. Michael J. Velotta, General Counsel of the Company, has passed
upon all matters of Illinois law pertaining to the Contracts, including the
validity of the Contracts and our right to issue such Contracts under Arizona
insurance law.
Year 2000
We are heavily dependent upon complex computer systems for all phases of
our operations, including customer service, and contract administration. Since
many of our older computer software programs recognize only the last two digits
of the year in any date, some software may fail to operate properly in or after
the year 1999, if software is not reprogrammed, remediated or replaced, ("Year
2000 Issue"). We believe that many of our counterparties and suppliers also have
Year 2000 Issues that could affect us. In 1995, Allstate commenced a plan
intended to mitigate and/or prevent the adverse effects of Year 2000 Issues.
These strategies include normal development and enhancement of new and existing
systems, upgrades to operating systems already covered by maintenance agreements
and modifications to existing systems to make them Year 2000 compliant. The plan
also includes us actively working with our major external counterparties and
suppliers to assess their compliance efforts and our exposure to them. Allstate
is currently in the process of identifying key processes and developing
contingency plans in the event that the systems supporting its key processes are
not Year 2000 compliant at the end of 1999. Management believes these
contingency plans should be completed by mid-1999. Until these plans are
complete, management is unable to determine an estimate of the most reasonably
possible worst case scenario due to issues relating to the Year 2000. We
presently believe that we will resolve the Year 2000 Issue in a timely manner,
and the financial impact will not materially affect the results of our
operations, liquidity or financial position. Year 2000 costs are and will be
expensed as incurred.
<PAGE>
<TABLE>
<CAPTION>
Statement of Additional Information Table of Contents
<S> <C>
Additions, Deletions or Substitutions of Investments............................................1
Reinvestment....................................................................................1
The Contract....................................................................................1
Purchase of Contracts...........................................................................1
Performance Data................................................................................2
Money Market Subaccount Yields.........................................................2
Other Subaccount Yields................................................................3
Standardized Total Returns......................................................................4
Other Performance Data..........................................................................5
Cumulative Total Returns...............................................................5
Adjusted Historical Portfolio Total Returns............................................5
Without the Enhanced Death Benefit.....................................................6
With the Enhanced Death Benefit........................................................6
Tax-Free Exchanges (1035 Exchanges, Rollovers and Transfers)...........................7
Premium Taxes...................................................................................7
Tax Reserves....................................................................................7
Income Payments.................................................................................7
Calculation of Variable Annuity Unit Values............................................7
General Matters.................................................................................8
Incontestability.......................................................................8
Settlements............................................................................8
Safekeeping of the Variable Account's Assets...........................................8
Federal Tax Matters.............................................................................9
Introduction...........................................................................9
Taxation of Glenbrook Life and Annuity Company.........................................9
Exceptions to the Non-natural Owner Rule...............................................9
IRS Require Distribution at Death Rules...............................................10
Qualified Plans.......................................................................10
Types of Qulified Plans...............................................................10
IRAs.........................................................................11
Roth IRAs....................................................................11
Simplified Employee Pension Plans............................................11
Savings Incentive Match Plans for Employees (SIMPLE Plans)...................12
Tax Sheltered Annuities......................................................12
Corporate and Self-Employed Pension and Profit Sharing Plans.................12
State and Local Government and Tax-Exempt Organization ......................13
Deferred Compensation Plans..................................................13
Legal Matters..................................................................................13
Experts........................................................................................13
Financial Statements...........................................................................13
</TABLE>
Order Form
Please send me a copy of the most recent Statement of Additional Information
for the Glenbrook Life Scudder Variable Account (A).
(Date) (Name)
(Street Address)
(City) (State) (Zip Code)
Send to: Glenbrook Life and Annuity Company
PO Box 94039
Palatine, IL 60094-4039
Attn: Annuity Services
<PAGE>
Condensed Financial Information
The following condensed financial information shows accumulation unit
values for each subaccount for each year since the subaccount started operation.
Accumulation unit value is the unit we use to calculate the value of your
interest in a subaccount. Accumulation unit value does not reflect the deduction
of certain charges that we subtract from your Contract Value. The data is
obtained from the audited financial statement of the Variable Account that can
be found in the SAI.
Money Market subaccount
- ------------ -------------------- ------------------ ------------------------
Accumulation unit Accumulation Number of accumulation
value at beginning unit value at units outstanding at
of year the end of the the end of the year
year
- ------------ -------------------- ------------------ ------------------------
1998* $10.00 $10.04 3,111
- ------------ -------------------- ------------------ ------------------------
Bond subaccount
- ------------ -------------------- ------------------ ------------------------
Accumulation unit Accumulation Number of accumulation
value at beginning unit value at units outstanding at
of year the end of the the end of the year
year
- ------------ -------------------- ------------------ ------------------------
1998* $10.00 $10.00 806
- ------------ -------------------- ------------------ ------------------------
Capital Growth subaccount
- ------------ -------------------- ------------------ ------------------------
Accumulation unit Accumulation Number of accumulation
value at beginning unit value at units outstanding at
of year the end of the the end of the year
year
- ------------ -------------------- ------------------ ------------------------
1998* $10.00 $10.71 752
- ------------ -------------------- ------------------ ------------------------
Balanced subaccount
- ------------ -------------------- ------------------ ------------------------
Accumulation unit Accumulation Number of accumulation
value at beginning unit value at units outstanding at
of year the end of the the end of the year
year
- ------------ -------------------- ------------------ ------------------------
1998* $10.00 $10.63 1,848
- ------------ -------------------- ------------------ ------------------------
International subaccount
- ------------ -------------------- ------------------ ------------------------
Accumulation unit Accumulation Number of accumulation
value at beginning unit value at units outstanding at
of year the end of the the end of the year
year
- ------------ -------------------- ------------------ ------------------------
1998* $10.00 $10.38 ---
- ------------ -------------------- ------------------ ------------------------
Growth and Income subaccount
- ------------ -------------------- ------------------ ------------------------
Accumulation unit Accumulation Number of accumulation
value at beginning unit value at units outstanding at
of year the end of the the end of the year
year
- ------------ -------------------- ------------------ ------------------------
1998* $10.00 $10.04 803
- ------------ -------------------- ------------------ ------------------------
Global Discovery subaccount
- ------------ -------------------- ------------------ ------------------------
Accumulation unit Accumulation Number of accumulation
value at beginning unit value at units outstanding at
of year the end of the the end of the year
year
- ------------ -------------------- ------------------ ------------------------
1998* $10.00 $10.86 ---
- ------------ -------------------- ------------------ ------------------------
* From commencement of each subaccount on November 30, 1998.
Because the Large Company Growth and Small Company Growth subaccounts did not
begin operations under May 1, 1999, there is no condensed financial information
for these subaccounts for the year ended December 31, 1998.
