As filed with the Securities and Exchange Commission on April 28, 1999
Registration Nos. 333-60337
and 811-08911
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
- -------------------------------------------------------------------------------
FORM N-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 / /
Pre-Effective Amendment No. / /
Post -Effective Amendment No. 2 /X/
And
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 / /
Amendment No. 2 /X/
GLENBROOK LIFE SCUDDER
VARIABLE ACCOUNT (A)
(Exact Name of Registrant)
Glenbrook Life and Annuity Company
(Name of Depositor)
Michael J. Velotta
Vice President, Secretary and General Counsel
Glenbrook Life and Annuity Company
3100 Sanders Road, Northbrook, Illinois 60062
(847) 402-2400
( Name and Address of Agent of Service)
Copies to:
Terry Young, Esq. Stephen E. Roth, Esq.
Allstate Life Financial Service, Inc. Sutherland Asbill & Brennan LLP
3100 Sanders Road 1275 Pennsylvania Avenue, N.W.
Northbrook, Illinois 60062 Washington, D.C. 20004-2415
Approximate Date of Proposed Public Offering:
As soon as practicable after effectiveness of the Registration Statement
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It is proposed that this filing will become effective:
/ / Immediately upon filing pursuant to paragraph (b) of Rule 485
/X/ On May 1, 1999, pursuant to paragraph (b) of Rule 485
/ / 60 days after filing pursuant to paragraph (a) of Rule 485
/ / On __________, pursuant to paragraph (a) of Rule 485
Title of Securities Being Registered:
Units of Interest in the Separate Account
under flexible payment deferred variable annuity contracts.
<PAGE>
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:
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......................................................................9
Examples...................................................................11
Condensed Financial Information............................................12
Calculation of Yield and Total Returns........................................12
Yields and Standard Total Return...........................................12
Other Performance Data.....................................................13
Glenbrook Life and the Variable Account.......................................14
Glenbrook Life and Annuity Company.........................................14
The Variable Account.......................................................15
The Fund......................................................................16
Scudder Variable Life Investment Fund......................................16
Investment Adviser for the Funds...........................................18
The Fixed Account Options.....................................................18
General Description........................................................19
Standard Fixed Account Option..............................................19
The Dollar Cost Averaging Fixed Account Option.............................20
Purchasing the Contract.......................................................21
Purchasing the Contract....................................................21
Free-Look Period...........................................................21
Crediting Your First Purchase Payment......................................21
Allocating Your Purchase Payments..........................................22
Accumulation Units.........................................................22
Accumulation Unit Value....................................................22
Transfers.....................................................................23
Telephone Transfers........................................................24
Dollar Cost Averaging......................................................24
Automatic Portfolio Rebalancing............................................25
Access to Your Money..........................................................25
Withdrawals................................................................25
Annuity Income Payments.......................................................27
Payout Start Date for Income Payments......................................27
Variable Income Payments...................................................27
Fixed Income Payments......................................................28
Annuity Transfers..........................................................29
Income Plans...............................................................29
Death Benefits................................................................30
Death Benefit Payment Provisions...........................................30
Death Benefit Amount.......................................................31
Enhanced Death Benefit Rider...............................................32
Fees and Expenses.............................................................33
Deductions from Purchase Payments..........................................33
Withdrawal Charge..........................................................33
Contract Maintenance Charge................................................33
Administrative Expense Charge..............................................34
Mortality and Expense Risk Charge..........................................34
Taxes......................................................................35
Transfer Charges...........................................................35
Fund Expenses..............................................................35
Federal Tax Matters...........................................................35
Introduction...............................................................35
Taxation of Annuities in General...........................................36
Tax Deferral.............................................................36
Non-natural Owners.......................................................36
Diversification Requirements.............................................36
Ownership Treatment......................................................37
Taxation of Partial and Full Withdrawals.................................37
Taxation of Annuity Payments.............................................38
Taxation of Death Benefits...............................................39
Penalty Tax on Premature Distributions...................................39
Aggregation of Annuity Contracts.........................................39
Tax Qualified Contracts..................................................40
Restrictions Under Section 403(b) Plans..................................40
Income Tax Withholding...................................................41
General Matters...............................................................41
Owner......................................................................41
Beneficiary................................................................41
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:
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 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:
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 (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:
- --------------------------------------------------------------------------------
Portfolio Investment Objective
- --------------------------------------------------------------------------------
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.
- --------------------------------------------------------------------------------
Bond This portfolio pursues a policy of investing for a high level
of income consistent with a high quality portfolio of debt
securities.
- --------------------------------------------------------------------------------
Capital Growth This portfolio seeks to maximize long-term capital
growth through a broad and flexible investment program.
- --------------------------------------------------------------------------------
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.
- --------------------------------------------------------------------------------
International This portfolio seeks long-term growth of capital principally
from a diversified portfolio of foreign equity securities.
- --------------------------------------------------------------------------------
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.
- --------------------------------------------------------------------------------
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 Internal Revenue 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 Internal Revenue Code;
or
o to make any changes required by the Internal Revenue 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:
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.
<PAGE>
Statement of Additional Information
For the
Scudder Horizon Advantage
Individual and Group Flexible Premium Variable Deferred Annuity Contracts
Issued Through
Glenbrook Life Scudder Variable Account (A)
Offered by
Glenbrook Life and Annuity Company
Post Office Box 94039
Palatine, IL 60094-4039
1 (800) 776-6978
-----------
This Statement of Additional Information expands upon subjects discussed in the
current Prospectus for the Scudder Horizon Advantage, a flexible premium
variable deferred annuity (the "Contract") offered by Glenbrook Life and Annuity
Company ("Company", "we," "us"). We are a wholly owned subsidiary of Allstate
Life Insurance Company.
You may obtain a copy of the Prospectus dated May 1, 1999, by calling (800)
776-6978 or writing to us at the address listed above.
This Statement of Additional Information is not a prospectus and should
be read only in conjunction with the Prospectus for the Contract.
Dated May 1, 1999
<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>
<PAGE>
Additions, Deletions or Substitutions of Investments
We retain the right, subject to any applicable law, to make additions to,
deletions from or substitutions for the Fund shares held by any subaccount. We
also reserve the right to eliminate the shares of any of the Funds and to
substitute shares of another portfolio of the Fund, or of another open-end,
registered investment company, if the shares of the portfolio are no longer
available for investment, or if, in our judgment, investment in any portfolio
would become inappropriate in view of the purposes of the Variable Account.
Substitutions of shares in a subaccount will not be made until you has been
notified of the change, and until the Securities and Exchange Commission has
approved the change, to the extent such notification and approval are required
by the Investment Company Act of 1940 (the "Act"). Nothing contained in this
Statement of Additional Information shall prevent the Variable Account from
purchasing other securities for other series or classes of contracts, or from
effecting a conversion between series or classes of contracts on the basis of
requests made by Owners.
We may also establish additional subaccounts of the Variable Account. Each
additional subaccount would purchase shares in a new portfolio of the Fund or in
another mutual fund. New subaccounts may be established when, in our sole
discretion, marketing needs or investment conditions warrant. Any new
subaccounts offered in conjunction with the Contract will be made available to
existing Owners as determined by the Company. We may also eliminate one or more
subaccounts if, in its sole discretion, marketing, tax or investment conditions
so warrant.
In the event of any such substitution or change, we may, by appropriate
endorsement, make such changes in the Contract as may be necessary or
appropriate to reflect such substitution or change. If deemed to be in the best
interests of persons having voting rights under the policies, the Variable
Account may be operated as a management company under the Act or it may be
deregistered under the Act in the event registration is no longer required.
Reinvestment
All dividends and capital gains distributions from the portfolios are
automatically reinvested in shares of the distributing portfolio at its net
asset value.
The Contract
Purchase of Contracts
We offer the Contracts to the public through brokers licensed under the
federal securities laws and state insurance laws. The Contracts are distributed
through the principal underwriter for the Variable Account, Allstate Life
Financial Services, Inc., an affiliate of Glenbrook Life and Annuity Company.
The offering of the Contracts is continuous and we do not anticipate
discontinuing the offering of the Contracts. However, we reserve the right to
discontinue the offering of the Contracts.
Performance Data
From time to time the Variable Account may publish advertisements
containing performance data relating to its subaccounts. The performance data
for the Subaccounts (other than for the Scudder Money Market Subaccount) will
always be accompanied by total return quotations. Performance figures used by
the Variable Account are based on actual historical performance of its
subaccounts for specific periods, and the figures are not intended to indicate
future performance.
Money Market Subaccount Yields
The Current Yield is computed by determining the net change (exclusive of
realized gains and losses on the sale of securities and unrealized appreciation
and depreciation) at the end of the seven-day period in the value of a
hypothetical account under a Contract having a balance of 1 unit of the Money
Market Subaccount at the beginning of the period, dividing such net change in
account value by the value of the account at the beginning of the period to
determine the base period return, and annualizing this quotient on a 365-day
basis. The net change in account value reflects (i) net income from the
Portfolio attributable to the hypothetical account and (ii) charges and
deductions imposed under the Contract that are attributable to the hypothetical
account. The charges and deductions include the per unit charges for the
hypothetical account for the Mortality and Expense Risk Charge (0.40% for
Contracts with the standard Death Benefit and 0.50% for Contracts with the
Enhanced Death Benefit) and an Administrative Expense Charge of 0.30%.
Current Yield is calculated according to the following formula:
Current Yield = ((NCS - ES) / W) x (365 / 7)
We may also disclose the Effective Yield of the Money Market Variable Account
for the same seven-day period, determined on a compounded basis. The seven-day
Effective Yield is calculated by compounding the unannualized base period return
according to the following formula:
Effective Yield = (1 + ((NCS - ES)/UV))(365 / 7) -1
Where, for both formulas:
NCS = The net change in the value of the Portfolio (exclusive of
realized gains and losses on the sale of securities and unrealized
appreciation and depreciation and exclusive of income other than
investment income) for the seven-day period attributable to a
hypothetical account having a balance of one Subaccount unit under a
Contract.
ES = Per unit expenses of the Subaccount for the Contracts for the
seven-day period.
UV = The unit value for a Contract on the first day of the seven-day
period.
The Current and Effective Yield on amounts held in the Money Market
Subaccount normally will fluctuate on a daily basis. Therefore, the disclosed
yield for any given past period is not an indication or representation of future
yields or rates of return. The Money Market Subaccount's actual yield is
affected by changes in interest rates on money market securities, average
portfolio maturity, the types and quality of portfolio securities held, and the
operating expenses.
Other Subaccount Yields
The 30-Day Yield refers to income generated by the Bond Subaccount over a
specific 30-day period. Because the yield is annualized, the yield generated
during the 30-day period is assumed to be generated each 30-day period over a
12-month period. The yield is computed by: (i) dividing the net investment
income of the Portfolio attributable to the Subaccount units less Subaccount
expenses attributable to the Contracts for the period, by (ii) the maximum
offering price per unit on the last day of the period times the daily average
number of units outstanding for the period, by (iii) compounding that yield for
a 6-month period, and by (iv) multiplying that result by 2. Expenses
attributable to the Bond Subaccount for the Contracts include the Mortality and
Expense Risk Charge (0.40% for Contracts with the standard Death Benefit and
0.50% for Contracts with the Enhanced Death Benefit) and an Administrative
Expense Charge of 0.30%.
The 30-Day Yield is calculated according to the following formula:
30-Day Yield = 2 x ((((NI -ES) / (U x UV)) + 1)(to the power of 6)- 1)
Where:
NI = Net income of the portfolio for the 30-day period attributable to the
Subaccount's units.
ES = Expenses of the Subaccount for the Contracts for the 30-day period.
U = The average daily number of units outstanding attributable to the
Contracts.
UV = The unit value for a Contract at the close (highest) of the last day in
the 30-day period.
The 30-Day Yield on amounts held in the Bond Subaccount normally will
fluctuate over time. Therefore, the disclosed yield for any given past period is
not an indication or representation of future yields or rates of return. The
Bond Subaccount's actual yield is affected by the types and quality of portfolio
securities held by the Portfolio, and its operating expenses.
Standardized Total Returns
We may disclose Total Returns for one or more of the Subaccounts for
various periods of time. One of the periods of time will include the period
measured from the date the Subaccount commenced operations. When a Subaccount
has been in operation for 1, 5 and 10 years, respectively, the Total Return for
these periods will be provided. Total Returns for other periods of time may,
from time to time, also be disclosed.
Total Returns for a Contract represent the average annual compounded rates
of return that would equate a single investment of $1,000 to the redemption
value of that investment as of the last day of each of the periods. The ending
date for each period for which Total Return quotations are provided will be for
the most recent month end practicable, considering the type and media of the
communication, and will be stated in the communication.
Total Returns will be calculated using Subaccount Unit Values which
Glenbrook calculates on each Valuation Date based on the performance of the
Subaccount's underlying Portfolio, and are reduced by all fees and charges under
the Contract, including the Mortality and Expense Risk Charge (0.40% for
Contracts with the standard Death Benefit and 0.50% for Contracts with the
Enhanced Death Benefit) and an Administrative Expense Charge of 0.30%.
The Total Return is calculated according to the following formula:
TR = (ERV / P)(to the power of 1/N) - 1
Where:
TR = The average annual total return net of Subaccount recurring charges for
the Contracts.
ERV = The ending redeemable value of the hypothetical account at the end of the
period.
P = A hypothetical single payment of $1,000.
N = The number of years in the period.
Other Performance Data
Cumulative Total Returns
We may disclose Cumulative Total Returns in conjunction with the standard
format described above. The Cumulative Total Returns will be calculated using
the following formula:
CTR = (ERV / P) - 1
Where:
CTR = The Cumulative Total Return net of Subaccount recurring charges for the
period.
ERV = The ending redeemable value of the hypothetical investment at the end of
the period.
P = A hypothetical single payment of $1,000.
Adjusted Historical Portfolio Total Returns
We may also disclose yield and total return for the Fund's portfolios,
including periods before the date that the Variable Account began operations.
For periods prior to the date the Variable Account commenced operations,
adjusted historical portfolio performance information will be calculated based
on the performance of the underlying portfolios and the assumption that the
subaccounts were in existence for the same periods as those of the underlying
Funds, with some or all of the charges equal to those currently assessed against
the subaccounts.
In the tables below, average annual total returns for the Portfolios were
reduced by all fees and charges under the Contract, including the Mortality and
Expense Risk Charge (0.40% for Contracts without the Enhanced Death Benefit and
0.50% for Contracts with the Enhanced Death Benefit) and an Administrative
Expense Charge of 0.30%.
Without the Enhanced Death Benefit
<TABLE>
<CAPTION>
Ten Year Period Ending Portfolio
One Year Period Ending Five Year Period 12/31/98 or Since Inception
Portfolio 12/31/98 Ending 12/31/98 Inception Dates
- --------------------------- ------------------------ ------------------------ ------------------------ -------------------------
<S> <C> <C> <C> <C>
Money Market 4.41 4.24 4.57 7/16/85
- --------------------------- ------------------------ ------------------------ ------------------------ -------------------------
Bond 5.82 5.36 7.90 7/16/85
- --------------------------- ------------------------ ------------------------ ------------------------ -------------------------
Capital Growth 22.36 17.66 16.07 7/16/85
- --------------------------- ------------------------ ------------------------ ------------------------ -------------------------
Balanced 22.32 15.45 12.97 7/16/85
- --------------------------- ------------------------ ------------------------ ------------------------ -------------------------
International 17.66 9.55 11.04 5/1/87
- --------------------------- ------------------------ ------------------------ ------------------------ -------------------------
Growth and Income 6.15 N/A 19.31 5/2/94
- --------------------------- ------------------------ ------------------------ ------------------------ -------------------------
Global Discovery 15.63 N/A 12.07 5/1/96
- --------------------------- ------------------------ ------------------------ ------------------------ -------------------------
Large Company Growth N/A N/A N/A 5/--/99
- --------------------------- ------------------------ ------------------------ ------------------------ -------------------------
Small Company Growth N/A N/A N/A 5/--/99
- --------------------------- ------------------------ ------------------------ ------------------------ -------------------------
</TABLE>
With the Enhanced Death Benefit
<TABLE>
<CAPTION>
Ten Year Period Ending Portfolio
One Year Period Ending Five Year Period 12/31/98 or Since Inception
Portfolio 12/31/98 Ending 12/31/98 Inception Dates
- --------------------------- ------------------------ ------------------------ ------------------------ -------------------------
<S> <C> <C> <C> <C>
Money Market 4.30 4.13 4.47 7/16/85
- --------------------------- ------------------------ ------------------------ ------------------------ -------------------------
Bond 5.72 5.26 7.80 7/16/85
- --------------------------- ------------------------ ------------------------ ------------------------ -------------------------
Capital Growth 22.24 17.54 15.95 7/16/85
- --------------------------- ------------------------ ------------------------ ------------------------ -------------------------
Balanced 22.20 15.33 12.86 7/16/85
- --------------------------- ------------------------ ------------------------ ------------------------ -------------------------
International 17.54 9.44 10.93 5/1/87
- --------------------------- ------------------------ ------------------------ ------------------------ -------------------------
Growth and Income 6.04 N/A 19.19 5/2/94
- --------------------------- ------------------------ ------------------------ ------------------------ -------------------------
Global Discovery 15.51 N/A 11.95 5/--/96
- --------------------------- ------------------------ ------------------------ ------------------------ -------------------------
Large Company Growth N/A N/A N/A 5/1/99
- --------------------------- ------------------------ ------------------------ ------------------------ -------------------------
Small Company Growth N/A N/A N/A 5/1/99
- --------------------------- ------------------------ ------------------------ ------------------------ -------------------------
</TABLE>
The Variable Account may also advertise the performance of the subaccounts
relative to certain performance rankings and indices compiled by independent
organizations, such as: (a) Lipper Analytical Services, Inc.; (b) the Standard &
Poor's 500 Composite Stock Price Index ("S & P 500"); (c) A.M. Best Company; (d)
Bank Rate Monitor; and (e) Morningstar.
Tax-Free Exchanges (1035 Exchanges, Rollovers and Transfers)
We accept purchase payments that are the proceeds of a contract in a
transaction qualifying for a tax-free exchange under Section 1035 of the
Internal Revenue Code. Except as required by federal law in calculating the
basis of the contract, we do not differentiate between Section 1035 purchase
payments and non-Section 1035 purchase payments.
We also accept "rollovers" and transfers from contracts qualifying as
tax-sheltered annuities ("TSAs"), individual retirement annuities or accounts
("IRAs"), or any other Qualified Contract that is eligible to "rollover" into an
IRA. We differentiate among Non-Qualified Contracts, TSAs, IRAs and other
Qualified Contracts to the extent necessary to comply with federal tax laws. For
example, we restrict the assignment, transfer or pledge of TSAs and IRAs so the
contracts will continue to qualify for special tax treatment. If contemplating
any such exchange, rollover or transfer of a contract you should contact a
competent tax adviser with respect to the potential effects of such a
transaction.
Premium Taxes
Applicable premium tax rates depend on your state of residency and the
insurance laws and status of the Company in those states where premium taxes are
incurred. Premium tax rates may be changed by legislation, administrative
interpretations or judicial acts.
Tax Reserves
We do not establish capital gains tax reserves for the subaccount or deduct
charges for tax reserves because we believe that capital gains attributable to
the Variable Account will not be taxable. However, we reserve the right to
deduct charges to establish tax reserves for potential taxes on realized or
unrealized capital gains.
Income Payments
Calculation of Variable Annuity Unit Values
We calculate the amount of the first income payment by applying your
Contract Value allocated to each subaccount less any applicable premium tax
charge deducted at this time, to the income payment tables in the Contract. The
first Variable Annuity Income Payment is divided by the subaccount's then
current annuity unit value to determine the number of annuity units upon which
later income payments will be based. Unless transfers are made among
subaccounts, each variable income payment after the first will be equal to the
sum of the number of annuity units determined in this manner for each subaccount
times the then current annuity unit value for each respective subaccount.
Annuity units in each subaccount are valued separately and annuity unit
values will depend upon the investment experience of the particular underlying
portfolio in which the subaccount invests. The value of the annuity unit for
each subaccount at the end of any Valuation Period is calculated by: (a)
multiplying the annuity unit value at the end of the immediately preceding
Valuation Period by the subaccount's Net Investment Factor during the period;
and then (b) dividing the product by the sum of 1.0 plus the assumed investment
rate for the period. The assumed investment rate adjusts for the interest rate
assumed in the Income Payment tables used to determine the dollar amount of the
first variable annuity Income Payment, and is at an effective annual rate which
is disclosed in the Contract.
We determine the amount of the first Income Payment paid under an income
plan using the interest rate and mortality table disclosed in the Contract. Due
to judicial or legislative developments regarding the use of tables that do not
differentiate on the basis of sex, different annuity tables may be used.
General Matters
Incontestability
We will not contest the Contract after it is issued.
Settlements
Due proof of you(s) death (or Annuitant's death if there is a nonnatural
Owner) must be received prior to settlement of a death claim.
Safekeeping of the Variable Account's Assets
We hold title to the assets of the Variable Account. The assets are kept
physically segregated and held separate and apart from our general corporate
assets. Records are maintained of all purchases and redemptions of the portfolio
shares held by each of the subaccounts.
The Fund does not issue certificates and, therefore, we hold the Variable
Account's assets in open account in lieu of stock certificates. See the Fund's
prospectus for a more complete description of the custodian of the Fund.
Federal Tax Matters
Introduction
The following discussion is general and is not intended as tax advice.
Glenbrook Life makes no guarantee regarding the tax treatment of any contract or
transaction involving a contract. Federal, state, local and other tax
consequences of ownership or receipt of distributions under an annuity contract
depend on the individual circumstances of each person. If you are concerned
about any tax consequences with regard to your individual circumstances, you
should consult a competent tax adviser.
Taxation of Glenbrook Life and Annuity Company
We are taxed as a life insurance company under Part I of Subchapter L of
the Internal Revenue Code. The Variable Account is not an entity separate from
the Company, and its operations form a part of the Company. As a consequence,
the Variable Account will not be taxed separately as a "Regulated Investment
Company" under Subchapter M of the Code. Investment income and realized capital
gains of the Variable Account are automatically applied to increase reserves
under the contract. Under existing federal income tax law, Glenbrook Life
believes that the Variable Account investment income and capital gains will not
be taxed to the extent that such income and gains are applied to increase the
reserves under the Contract. Generally, reserves are amounts that Glenbrook Life
is legally required to accumulate and maintain in order to meet future
obligations under the Contracts. Glenbrook Life does not anticipate that it will
incur any federal income tax liability attributable to the Variable Account.
Therefore we do not intend to make provisions for any such taxes. If we are
taxed on investment income or capital gains of the Variable Account, then we may
impose a charge against the Variable Account in order to make provision for such
taxes.
Exceptions to the Non-natural Owner Rule
Generally, Contracts held by a non-natural owner are not treated as annuity
contracts for federal income tax purposes, unless one of several exceptions
apply. Contracts will generally be treated as held by a natural person if the
nominal owner is a trust or other entity that holds the Contract for the benefit
of a natural person. However, this special exception will not apply in the case
of an employer who is the nominal owner of a Contract under a non-qualified
deferred compensation arrangement for employees. Other exceptions to the
non-natural owner rule are: (1) Contracts acquired by an estate of a decedent by
reason of the death of the decedent; (2) certain qualified Contracts; (3)
Contracts purchased by employers upon the termination of certain qualified
plans; (4) certain Contracts used in connection with structured settlement
agreements, and (5)Contracts purchased with a single premium when the annuity
starting date is no later than a year from purchase of the annuity and
substantially equal periodic payments are made, not less frequently than
annually, during the annuity period.
IRS Required Distribution at Death Rules
To qualified as an annuity contract for federal income tax purposes, a
nonqualifed Contract must provide: (1) if any owner dies on or after the annuity
start date but before the entire interest in the contract has been distributed,
the remaining portion of such interest must be distributed at least as rapidly
as under the method of distribution being used as of the date of your death; (2)
if any owner dies prior to the annuity start date, the entire interest in the
contract will be distributed within five years after the date of your death.
The five year requirement is satisfied if:
(1) any portion of the owner's interest which is payable to a designated
beneficiary is distributed over the life of such beneficiary (or over a
period not extending beyond the life expectancy of the beneficiary), and
(2) the distributions begin within one year of the owner's death.
If the owner's designated beneficiary is the surviving spouse of you, the
Contract may be continued with the surviving spouse as the new owner. If the
owner of the Contract is a non-natural person, the annuitant is treated as the
owner for purposes of applying the distribution at death rules. In addition, a
change in the annuitant on a Contract owned by a non-natural person will be
treated as the death of the owner.
Qualified Plans
This annuity contract may be used with several types of Qualified Plans.
The tax rules applicable to participants in such Qualified Plans vary according
to the type of Plan and the terms and conditions of the Plan. Qualified Plan
participants, and owners, annuitants and beneficiaries under the Contract may be
subject to the terms and conditions of the plan regardless of the terms of the
Contract.
Types of Qualified Plans
IRAs
Section 408 of the Code permits eligible individuals to contribute to an
individual retirement program known as an IRA. IRAs are subject to limitations
on the amount that can be contributed and on the time when distributions may
commence. Certain distributions from other types of qualified plans may be
"rolled over" on a tax-deferred basis into an IRA. An IRA generally may not
provide life insurance, but it may provide a Death Benefit that equals the
greater of the premiums paid or the Contract Value. The Contract provides a
Death Benefit that in certain circumstances may exceed the greater of the
payments or the Contract Value. If the IRS treats the Death Benefit as violating
the prohibition on investment in life insurance contracts, the Contract would
not qualify as an IRA.
Roth IRAs
Section 408A of the Code permits eligible individuals to make nondeductible
contributions to an individual retirement program known as a Roth IRA. Roth IRAs
are subject to limitations on the amount that can be contributed. In certain
instances, distributions from Roth IRAs are excluded from gross income. Subject
to certain limits, a traditional Individual Retirement Account or Annuity may be
converted or "rolled over" to a Roth IRA. The taxable portion of a conversion or
rollover distribution is included in gross income, but is exempted from the 10%
penalty tax on premature distributions.
Simplified Employee Pension Plans
Section 408(k) of the Code allows employers to establish simplified
employee pension plans for their employees using the employees' IRAs if certain
criteria are met. Under these plans the employer may, within limits, make
deductible contributions on behalf of the employees to their individual
retirement annuities. Employers intending to use the Contract in connection with
such plans should seek competent advice.
Savings Incentive Match Plans for Employees (SIMPLE Plans)
Sections 408(p) and 401(k) of the Tax Code allow employers with 100 or
fewer employees to establish SIMPLE retirement plans for their employees. SIMPLE
plans may be structured as a SIMPLE retirement account using an employee's IRA
to hold the assets, or as a Section 401(k) qualified cash or deferred
arrangement. In general, a SIMPLE plan consists of a salary deferral program for
eligible employees and matching or nonelective contributions made by employers.
Employers intending to use the Contract in conjunction with SIMPLE plans should
seek competent tax and legal advice.
Tax Sheltered Annuities
Section 403(b) of the Tax Code permits public school employees and
employees of certain types of tax-exempt organizations (specified in Section
501(c)(3) of the Code) to have their employers purchase Contracts for them.
Subject to certain limitations, a Section 403(b) plan allows an employer to
exclude the purchase payments from the employees' gross income. A Contract used
for a Section 403(b) plan must provide that distributions attributable to salary
reduction contributions made after 12/31/88, and all earnings on salary
reduction contributions, may be made only on or after: o the date the employee
attains age 59 1/2, o separates from service, o dies, o becomes disabled, or o
on the account of hardship (earnings on salary reduction contributions may not
be distributed for hardship).
These limitations do not apply to withdrawals where Glenbrook Life is directed
to transfer some or all of the Contract Value to another 403(b) plan.
Corporate and Self-Employed Pension and Profit Sharing Plans
Sections 401(a) and 403(a) of the Tax Code permit corporate employers to
establish various types of tax favored retirement plans for employees. The Tax
Code permits self-employed individuals to establish tax favored retirement plans
for themselves and their employees. Such retirement plans may permit the
purchase of Contracts in order to provide benefits under the plans.
State and Local Government and Tax-Exempt Organization Deferred Compensation
Plans
Section 457 of the Tax Code permits employees of state and local
governments and tax-exempt organizations to defer a portion of their
compensation without paying current taxes. The employees must be participants in
an eligible deferred compensation plan. Employees with Contracts under the plan
are considered general creditors of the employer. The employer, as owner of the
Contract, has the sole right to the proceeds of the Contract. Generally, under
the non-natural owner rules, such Contracts are not treated as annuity contracts
for federal income tax purposes. Under these plans, contributions made for the
benefit of the employees will not be included in the employees' gross income
until distributed from the plan. However, all the compensation deferred under a
457 plan must remain the sole property of the employer. As property of the
employer, the assets of the plan are subject to the claims of the employer's
general creditors, until such time as the assets are made available to the
employee or a beneficiary.
Legal Matters
Sutherland Asbill & Brennan LLP of Washington, D.C. has provided advice on
certain legal matters relating to the federal securities laws. All matters of
Illinois law pertaining to the Contracts, including the validity of the Contract
and Glenbrook's authority to issue the Contract under Illinois Insurance Law,
have been passed upon by Michael J. Velotta, General Counsel of Glenbrook Life
and Annuity Company.
Experts
The financial statements of Glenbrook Life and Annuity Company as of
December 31, 1998 and 1997 and for each of the three years in the period ended
December 31, 1998 and the financial statements of the Glenbrook Life Scudder
Variable Account (A) as of December 31, 1998 and for the period ended December
31, 1998 included in this Registration Statement have been audited by Deloitte &
Touche, independent auditors, as stated in their reports appearing herein, and
are included in reliance upon the reports of such firm given upon their
authority as experts in accounting and auditing.
Financial Statements
The financial statements of Glenbrook, which are included in this Statement
of Additional Information, should be considered only as bearing on the ability
of Glenbrook to meet its obligation under the Contract. They should not be
considered as bearing on the investment performance of the assets held in the
Variable Account.
<PAGE>
Financial Statements
INDEX
PAGE
Independent Auditors' Report................................................F-1
Financial Statements:
Statements of Financial Position
December 31, 1998 and 1997........................................F-2
Statements of Operations and Comprehensive Income for the Years Ended
December 31, 1998, 1997 and 1996..................................F-3
Statements of Shareholder's Equity for the Years Ended
December 31, 1998, 1997 and 1996..................................F-4
Statements of Cash Flows for the Years Ended
December 31, 1998, 1997 and 1996..................................F-5
Notes to Financial Statements........................................F-6
Schedule IV - Reinsurance for the Years Ended
December 31, 1998, 1997 and 1996..................................F-17
<PAGE>
INDEPENDENT AUDITORS' REPORT
TO THE BOARD OF DIRECTORS AND SHAREHOLDER OF
GLENBROOK LIFE AND ANNUITY COMPANY:
We have audited the accompanying Statements of Financial Position of Glenbrook
Life and Annuity Company (the "Company", an affiliate of The Allstate
Corporation) as of December 31, 1998 and 1997, and the related Statements of
Operations and Comprehensive Income, Shareholder's Equity and Cash Flows for
each of the three years in the period ended December 31, 1998. Our audits also
included Schedule IV - Reinsurance. These financial statements and financial
statement schedule are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements and
financial statement schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all material
respects, the financial position of the Company as of December 31, 1998 and
1997, and the results of its operations and its cash flows for each of the three
years in the period ended December 31, 1998 in conformity with generally
accepted accounting principles. Also, in our opinion, Schedule IV - Reinsurance,
when considered in relation to the basic financial statements taken as a whole,
presents fairly, in all material respects, the information set forth therein.
/s/ Deloitte & Touche LLP
Chicago, Illinois
February 19, 1999
F-1
<PAGE>
GLENBROOK LIFE AND ANNUITY COMPANY
STATEMENTS OF FINANCIAL POSITION
December 31,
------------
($ in thousands) 1998 1997
---- ----
ASSETS
Investments
Fixed income securities, at fair value
(amortized cost $87,415 and $81,369) $ 94,313 $ 86,243
Short-term 4,663 4,231
---------- ----------
Total investments 98,976 90,474
Reinsurance recoverable from Allstate Life
Insurance Company 3,113,278 2,637,983
Other assets 2,590 2,549
Separate Accounts 993,622 620,535
---------- ----------
TOTAL ASSETS $4,208,466 $3,351,541
========== ==========
LIABILITIES
Contractholder funds 3,113,278 2,637,983
Current income taxes payable 2,181 609
Deferred income taxes 2,499 1,772
Payable to affiliates, net 3,583 2,698
Separate Accounts 993,622 620,535
---------- ----------
TOTAL LIABILITIES 4,115,163 3,263,597
---------- ----------
COMMITMENTS AND CONTINGENT LIABILITIES (NOTE 9)
SHAREHOLDER'S EQUITY
Common stock, $500 par value, 4,200 shares
authorized, issued and outstanding 2,100 2,100
Additional capital paid-in 69,641 69,641
Retained income 17,079 13,035
Accumulated other comprehensive income:
Unrealized net capital gains 4,483 3,168
---------- ----------
Total accumulated other comprehensive income 4,483 3,168
---------- ----------
TOTAL SHAREHOLDER'S EQUITY 93,303 87,944
---------- ----------
TOTAL LIABILITIES AND SHAREHOLDER'S EQUITY $4,208,466 $3,351,541
========== ==========
See notes to financial statements.
F-2
<PAGE>
GLENBROOK LIFE AND ANNUITY COMPANY
STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
Year Ended December 31,
-----------------------
($ in thousands) 1998 1997 1996
---- ---- ----
REVENUES
Net investment income $ 6,231 $ 5,304 $ 3,774
Realized capital gains and losses (5) 3,460 --
------- ------- -------
INCOME FROM OPERATIONS BEFORE INCOME TAX EXPENSE 6,226 8,764 3,774
Income tax expense 2,182 3,078 1,339
------- ------- -------
NET INCOME 4,044 5,686 2,435
------- ------- -------
OTHER COMPREHENSIVE INCOME, AFTER-TAX
Change in unrealized net capital
gains and losses 1,315 378 (567)
------- ------- -------
COMPREHENSIVE INCOME $ 5,359 $ 6,064 $ 1,868
======= ======= =======
See notes to financial statements.
F-3
<PAGE>
GLENBROOK LIFE AND ANNUITY COMPANY
STATEMENTS OF SHAREHOLDER'S EQUITY
December 31,
------------
($ in thousands) 1998 1997 1996
---- ---- ----
COMMON STOCK $ 2,100 $ 2,100 $ 2,100
-------- -------- --------
ADDITIONAL CAPITAL PAID-IN
Balance, beginning of year 69,641 69,641 49,641
Capital contribution -- -- 20,000
-------- -------- --------
Balance, end of year 69,641 69,641 69,641
-------- -------- --------
RETAINED INCOME
Balance, beginning of year 13,035 7,349 4,914
Net income 4,044 5,686 2,435
-------- -------- --------
Balance, end of year 17,079 13,035 7,349
-------- -------- --------
ACCUMULATED OTHER COMPREHENSIVE INCOME
Balance, beginning of year 3,168 2,790 3,357
Change in unrealized net capital gains
and losses 1,315 378 (567)
-------- -------- --------
Balance, end of year 4,483 3,168 2,790
-------- -------- --------
Total shareholder's equity $ 93,303 $ 87,944 $ 81,880
======== ======== ========
See notes to financial statements.
F-4
<PAGE>
<TABLE>
<CAPTION>
GLENBROOK LIFE AND ANNUITY COMPANY
STATEMENTS OF CASH FLOWS
Year Ended December 31,
-----------------------
($ in thousands) 1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 4,044 $ 5,686 $ 2,435
Adjustments to reconcile net income to net cash
provided by operating activities
Amortization and other non-cash items (24) 29 --
Realized capital gains and losses 5 (3,460) --
Changes in:
Income taxes payable 1,590 240 (1,223)
Other operating assets and liabilities 915 961 717
-------- -------- --------
Net cash provided by operating activities 6,530 3,456 1,929
-------- -------- --------
CASH FLOWS FROM INVESTING ACTIVITIES
Fixed income securities
Proceeds from sales 1,966 1,405 --
Investment collections 7,123 14,217 2,891
Investment purchases (15,250) (50,115) (5,667)
Participation in Separate Accounts -- 13,981 (232)
Change in short-term investments, net (369) (2,944) 815
-------- -------- --------
Net cash used in investing activities (6,530) (23,456) (2,193)
-------- -------- --------
CASH FLOWS FROM FINANCING ACTIVITIES
Capital contribution -- 20,000 --
-------- -------- --------
Net cash provided by financing activities -- 20,000 --
-------- -------- --------
NET DECREASE IN CASH -- -- (264)
CASH AT THE BEGINNING OF YEAR -- -- 264
-------- -------- --------
CASH AT END OF YEAR $ -- $ -- $ --
======== ======== ========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Noncash financing activity:
Capital contribution receivable from
Allstate Life Insurance Company $ -- $ -- $ 20,000
======== ======== ========
<FN>
See notes to financial statements.
</FN>
</TABLE>
F-5
<PAGE>
GLENBROOK LIFE AND ANNUITY COMPANY
NOTES TO FINANCIAL STATEMENTS
1. GENERAL
BASIS OF PRESENTATION
The accompanying financial statements include the accounts of Glenbrook Life and
Annuity Company (the "Company"), a wholly owned subsidiary of Allstate Life
Insurance Company ("ALIC"), which is wholly owned by Allstate Insurance Company
("AIC"), a wholly owned subsidiary of The Allstate Corporation (the
"Corporation"). These financial statements have been prepared in conformity with
generally accepted accounting principles.
To conform with the 1998 presentation, certain amounts in the prior years'
financial statements and notes have been reclassified.
NATURE OF OPERATIONS
The Company markets savings products and life insurance through banks, direct
marketing and broker-dealers. Savings products include deferred annuities, such
as variable annuities and fixed rate single and flexible premium annuities. Life
insurance includes universal life and variable life products. The Company has
entered into exclusive distribution arrangements with management investment
companies to market its variable annuity contracts. In 1998, substantially all
of the Company's statutory premiums and deposits were from annuities. The
Company re-domesticated its operations from Illinois to Arizona in 1998.
Annuity contracts and life insurance policies issued by the Company are subject
to discretionary surrender or withdrawal by customers, subject to applicable
surrender charges. These policies and contracts are reinsured primarily with
ALIC (see Note 3), which invests premiums and deposits to provide cash flows
that will be used to fund future benefits and expenses.
The Company monitors economic and regulatory developments which have the
potential to impact its business. There continues to be proposed federal and
state regulation and legislation that, if passed, would allow banks greater
participation in securities and insurance businesses, which would present an
increased level of competition, as well as opportunities, for sales of the
Company's life and savings products. Furthermore, the market for deferred
annuities and interest-sensitive life insurance is enhanced by the tax
incentives available under current law. Any legislative changes which lessen
these incentives are likely to negatively impact the demand for these products.
Although the Company currently benefits from agreements with financial services
entities who market and distribute its products, change in control of these
non-affiliated entities with which the Company has alliances could have a
detrimental effect on the Company's sales.
Additionally, traditional demutualizations of mutual insurance companies and
enacted and pending state legislation to permit mutual insurance companies to
convert to a hybrid structure known as a mutual holding company could have a
number of significant effects on the Company by (1) increasing industry
competition through consolidation caused by mergers and acquisitions related to
the new corporate form of business; and (2) increasing competition in the
capital markets.
F-6
<PAGE>
The Company is authorized to sell life and savings products in all states except
New York, as well as in the District of Columbia. The top geographic locations
for statutory premiums and deposits for the Company are Florida, Pennsylvania,
Texas, California and Tennessee for the year ended December 31, 1998. No other
jurisdiction accounted for more than 5% of statutory premiums and deposits.
Substantially all premiums and deposits are ceded to ALIC under reinsurance
agreements.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
INVESTMENTS
Fixed income securities include bonds and mortgage-backed securities. All fixed
income securities are carried at fair value and may be sold prior to their
contractual maturity ("available for sale"). The difference between amortized
cost and fair value, net of deferred income taxes, is reflected as a component
of shareholder's equity. Provisions are recognized for declines in the value of
fixed income securities that are other than temporary. Such writedowns are
included in realized capital gains and losses. Short-term investments are
carried at cost or amortized cost, which approximates fair value.
Investment income consists primarily of interest and dividends on short-term
investments. Interest is recognized on an accrual basis and dividends are
recorded at the ex-dividend date. Interest income on mortgage-backed securities
is determined on the effective yield method, based on the estimated principal
repayments. Accrual of income is suspended for fixed income securities that are
in default or when the receipt of interest payments is in doubt. Realized
capital gains and losses are determined on a specific identification basis.
REINSURANCE
The Company has reinsurance agreements whereby substantially all premiums,
contract charges, credited interest, policy benefits and certain expenses are
ceded to ALIC. Such amounts are reflected net of such reinsurance in the
statements of operations and comprehensive income. The amounts shown in the
Company's statements of operations and comprehensive income relate to the
investment of those assets of the Company that are not transferred under
reinsurance agreements. Reinsurance recoverable and the related contractholder
funds are reported separately in the statements of financial position. The
Company continues to have primary liability as the direct insurer for risks
reinsured.
RECOGNITION OF PREMIUM REVENUES AND CONTRACT CHARGES
Revenues on universal life-type contracts are comprised of contract charges and
fees, and are recognized when assessed against the policyholder account balance.
Revenues on investment contracts include contract charges and fees for contract
administration and surrenders. These revenues are recognized when levied against
the contract balance. All premium revenues and contract charges are primarily
reinsured with ALIC.
INCOME TAXES
The income tax provision is calculated under the liability method and presented
net of reinsurance. Deferred tax assets and liabilities are recorded based on
the difference between the financial statement and tax bases of assets and
liabilities at the enacted tax rates.
F-7
<PAGE>
Deferred income taxes arise from unrealized capital gains and losses on fixed
income securities carried at fair value and differences in the tax bases of
investments.
SEPARATE ACCOUNTS
The Company issues flexible premium deferred variable annuity and variable life
policies, the assets and liabilities of which are legally segregated and
reflected in the accompanying statements of financial position as assets and
liabilities of the Separate Accounts. The Company's Separate Accounts consist
of: Glenbrook Life and Annuity Company Separate Account A, Glenbrook Life and
Annuity Company Variable Annuity Account, Glenbrook Life Variable Life Separate
Account A, Glenbrook Life Scudder Variable Account (A), Glenbrook Life
Multi-Manager Variable Account, Glenbrook Life AIM Variable Life Separate
Account A and Glenbrook Life Variable Life Separate Account B. Each of the
Separate Accounts are unit investment trusts registered with the Securities and
Exchange Commission.
The assets of the Separate Accounts are carried at fair value. Investment income
and realized capital gains and losses of the Separate Accounts accrue directly
to the contractholders and, therefore, are not included in the Company's
statements of operations and comprehensive income. Revenues to the Company from
the Separate Accounts consist of contract maintenance fees, administration fees,
mortality and expense risk charges and cost of insurance charges, all of which
are reinsured with ALIC.
Prior to 1998, the Company had an ownership interest ("Participation") in the
Separate Accounts. The Company's Participation was carried at fair value and
unrealized gains and losses, net of deferred income taxes, were shown as a
component of shareholder's equity. Investment income and realized capital gains
and losses which arose from the Participation were included in the Company's
statements of operations and comprehensive income. The Company liquidated its
Participation during 1997, which resulted in a pretax realized capital gain of
$3.5 million.
CONTRACTHOLDER FUNDS
Contractholder funds arise from the issuance of individual or group policies and
contracts that include an investment component, including most fixed annuities
and universal life policies. Payments received are recorded as interest-bearing
liabilities. Contractholder funds are equal to deposits received and interest
credited to the benefit of the contractholder less withdrawals, mortality
charges and administrative expenses. During 1998, credited interest rates on
contractholder funds ranged from 3.46% to 11.00% for those contracts with fixed
interest rates and from 3.75% to 10.00% for those with flexible rates.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the amounts reported in the financial statements and accompanying notes.
Actual results could differ from those estimates.
F-8
<PAGE>
NEW ACCOUNTING STANDARDS
In 1998, the Company adopted Statement of Financial Accounting Standards
("SFAS") No. 130, "Reporting Comprehensive Income." Comprehensive income is a
measurement of certain changes in shareholder's equity that result from
transactions and other economic events other than transactions with
shareholders. For the Company, these consist of changes in unrealized gains and
losses on the investment portfolio (See Note 8).
In 1998, the Company adopted SFAS No. 131, "Disclosures about Segments of an
Enterprise and Related Information." SFAS No. 131 redefines how segments are
determined and requires additional segment disclosures for both annual and
interim financial reporting. The Company has identified itself as a single
operating segment.
PENDING ACCOUNTING STANDARDS
In December 1997, the Accounting Standards Executive Committee of the American
Institute of Certified Public Accountants ("AICPA") issued Statement of Position
("SOP") 97-3, "Accounting by Insurance and Other Enterprises for
Insurance-related Assessments." The SOP is required to be adopted in 1999. The
SOP provides guidance concerning when to recognize a liability for
insurance-related assessments and how those liabilities should be measured.
Specifically, insurance-related assessments should be recognized as liabilities
when all of the following criteria have been met: 1) an assessment has been
imposed or it is probable that an assessment will be imposed, 2) the event
obligating an entity to pay an assessment has occurred and 3) the amount of the
assessment can be reasonably estimated. The Company is currently evaluating the
effects of this SOP on its accounting for insurance-related assessments. Certain
information required for compliance is not currently available and therefore the
Company is studying alternatives for estimating the accrual. In addition,
industry groups are working to improve the information available. Adoption of
this standard is not expected to be material to the results of operations or
financial position of the Company.
3. RELATED PARTY TRANSACTIONS
REINSURANCE
The Company has reinsurance agreements whereby substantially all premiums,
contract charges, credited interest, policy benefits and certain expenses are
ceded to ALIC and reflected net of such reinsurance in the statements of
operations and comprehensive income. The amounts shown in the Company's
statements of operations and comprehensive income relate to the investment of
those assets of the Company that are not transferred under reinsurance
agreements. Reinsurance recoverable and the related contracholder funds are
reported separately in the statements of financial position. The Company
continues to have primary liability as the direct insurer for risks reinsured.
F-9
<PAGE>
Investment income earned on the assets which support contractholder funds is not
included in the Company's financial statements as those assets are owned and
managed under terms of reinsurance agreements. The following amounts were ceded
to ALIC under reinsurance agreements.
YEAR ENDED DECEMBER 31,
-----------------------
($ in thousands) 1998 1997 1996
-------- -------- --------
Contract charges $ 19,009 $ 11,641 $ 4,254
Credited interest, policy benefits, and
certain expenses 218,008 179,954 113,703
BUSINESS OPERATIONS
The Company utilizes services provided by AIC and ALIC and business facilities
owned or leased, and operated by AIC in conducting its business activities. The
Company reimburses AIC and ALIC for the operating expenses incurred on behalf of
the Company. The cost to the Company is determined by various allocation methods
and is primarily related to the level of services provided. Operating expenses,
including compensation and retirement and other benefit programs, allocated to
the Company were $15,949, $19,243 and $4,804 in 1998, 1997 and 1996,
respectively. Of these costs, the Company retains investment related expenses.
All other costs are ceded to ALIC under reinsurance agreements.
4. INVESTMENTS
FAIR VALUES
The amortized cost, gross unrealized gains and losses, and fair value for fixed
income securities are as follows:
AMORTIZED GROSS UNREALIZED FAIR
COST GAINS LOSSES VALUE
---- ----- ------ -----
AT DECEMBER 31, 1998
U.S. government and agencies $24,350 $ 4,308 $ -- $28,658
Municipal 656 24 -- 680
Corporate 33,009 1,575 (39) 34,545
Mortgage-backed securities 29,400 1,047 (17) 30,430
------- ------- ------- -------
Total fixed income securities $87,415 $ 6,954 $ (56) $94,313
======= ======= ======= =======
AT DECEMBER 31, 1997
U.S. government and agencies $24,419 $ 2,961 $ -- $27,380
Municipal 656 17 -- 673
Corporate 25,476 840 -- 26,316
Mortgage-backed securities 30,818 1,056 -- 31,874
------- ------- ------- -------
Total fixed income securities $81,369 $ 4,874 $ -- $86,243
======= ======= ======= =======
F-10
<PAGE>
SCHEDULED MATURITIES
The scheduled maturities for fixed income securities are as follows at December
31, 1998:
AMORTIZED FAIR
COST VALUE
---- -----
Due in one year or less $ 400 $ 400
Due after one year through five years 8,711 8,943
Due after five years through ten years 36,027 39,009
Due after ten years 12,877 15,531
------- -------
58,015 63,883
Mortgage-backed securities 29,400 30,430
------- -------
Total $87,415 $94,313
======= =======
Actual maturities may differ from those scheduled as a result of prepayments by
the issuers.
NET INVESTMENT INCOME
YEAR ENDED DECEMBER 31, 1998 1997 1996
------- ------- -------
Fixed income securities $ 6,151 $ 5,014 $ 3,478
Short-term investments 183 231 126
Participation in Separate Accounts -- 161 232
------- ------- -------
Investment income, before expense 6,334 5,406 3,836
Investment expense 103 102 62
------- ------- -------
Net investment income $ 6,231 $ 5,304 $ 3,774
======= ======= =======
REALIZED CAPITAL GAINS AND LOSSES
YEAR ENDED DECEMBER 31, 1998 1997 1996
------- ------- -------
Fixed income securities $ (5) $ (61) $ --
Short-term investments -- 6 --
Participation in Separate Accounts -- 3,515 --
------- ------- -------
Realized capital gains and losses (5) 3,460 --
Income taxes 2 (1,211) --
------- ------- -------
Realized capital gains and losses,
after tax $ (3) $ 2,249 $ --
======= ======= =======
Excluding calls and prepayments, gross losses of $5 and $61 were realized on
sales of fixed income securities during 1998 and 1997, respectively. There were
no gains or losses, excluding calls and prepayments during 1996.
F-11
<PAGE>
UNREALIZED NET CAPITAL GAINS
Unrealized net capital gains on fixed income securities included in
shareholder's equity at December 31, 1998 are as follows:
<TABLE>
<CAPTION>
COST/
AMORTIZED FAIR GROSS UNREALIZED UNREALIZED
COST VALUE GAINS LOSSES NET GAINS
---- ----- ----- ------ ---------
<S> <C> <C> <C> <C> <C>
Fixed income securities $ 87,415 $ 94,313 $ 6,954 $ (56) $ 6,898
======== ======== ======== ========
Deferred income taxes (2,415)
--------
Unrealized net capital gains $ 4,483
========
</TABLE>
CHANGE IN UNREALIZED NET CAPITAL GAINS
YEAR ENDED DECEMBER 31,
1998 1997 1996
------- ------- -------
Fixed income securities $ 2,024 $ 2,410 $(2,239)
Participation in Separate Accounts -- (1,829) 1,368
Deferred income taxes (709) (203) 304
------- ------- -------
Increase (decrease) in unrealized
net capital gains $ 1,315 $ 378 $ (567)
======= ======= =======
SECURITIES ON DEPOSIT
At December 31, 1998, fixed income securities with a carrying value of $11,416
were on deposit with regulatory authorities as required by law.
5. FINANCIAL INSTRUMENTS
In the normal course of business, the Company invests in various financial
assets and incurs various financial liabilities. The fair value estimates of
financial instruments presented below are not necessarily indicative of the
amounts the Company might pay or receive in actual market transactions.
Potential taxes and other transaction costs have not been considered in
estimating fair value. The disclosures that follow do not reflect the fair value
of the Company as a whole since a number of the Company's significant assets
(including reinsurance recoverable) and liabilities (including universal
life-type insurance reserves and deferred income taxes) are not considered
financial instruments and are not carried at fair value. Other assets and
liabilities considered financial instruments, such as accrued investment income,
are generally of a short-term nature. Their carrying values are assumed to
approximate fair value.
F-12
<PAGE>
FINANCIAL ASSETS
The carrying value and fair value of financial assets at December 31, are as
follows:
1998 1997
---- ----
CARRYING FAIR CARRYING FAIR
VALUE VALUE VALUE VALUE
----- ----- ----- -----
Fixed income securities $ 94,313 $ 94,313 $ 86,243 $ 86,243
Short-term investments 4,663 4,663 4,231 4,231
Separate Accounts 993,622 993,622 620,535 620,535
Fair values for fixed income securities are based on quoted market prices where
available. Non-quoted securities are valued based on discounted cash flows using
current interest rates for similar securities. Short-term investments are highly
liquid investments with maturities of less than one year whose carrying value
approximates fair value. Separate Accounts assets are carried in the statements
of financial position at fair value based on quoted market prices.
FINANCIAL LIABILITIES
The carrying value and fair value of financial liabilities at December 31, are
as follows:
1998 1997
---- ----
CARRYING FAIR CARRYING FAIR
VALUE VALUE VALUE VALUE
----- ----- ----- -----
Contractholder funds on
investment contracts $3,130,228 $2,967,101 $2,636,331 $2,492,095
Separate Accounts 993,622 993,622 620,535 620,535
The fair value of contractholder funds on investment contracts is based on the
terms of the underlying contracts. Reserves on investment contracts with no
stated maturities (single premium and flexible premium deferred annuities) are
valued at the account balance less surrender charges. The fair value of
immediate annuities and annuities without life contingencies with fixed terms is
estimated using discounted cash flow calculations based on interest rates
currently offered for contracts with similar terms and durations. Separate
Accounts liabilities are carried at the fair value of the underlying assets.
6. INCOME TAXES
For 1996, the Company filed a separate federal income tax return. Beginning in
1997, the Company joined the Corporation and its other eligible domestic
subsidiaries (the "Allstate Group") in the filing of a consolidated federal
income tax return and is party to a federal income tax allocation agreement (the
"Allstate Tax Sharing Agreement"). Under the Allstate Tax Sharing Agreement, the
Company pays to or receives from the Corporation the amount, if any, by which
the Allstate Group's federal income tax liability is affected by virtue of
inclusion of the Company in the consolidated federal income tax return.
Effectively, this results in the Company's annual income tax provision being
computed, with adjustments, as if the Company filed a separate return.
F-13
<PAGE>
Prior to Sears, Roebuck and Co.'s ("Sears") distribution ("Sears distribution")
on June 30, 1995 of its 80.3% ownership in the Corporation to Sears
shareholders, the Allstate Group joined with Sears and its domestic business
units (the "Sears Group") in the filing of a consolidated federal income tax
return (the "Sears Tax Group") and were parties to a federal income tax
allocation agreement (the "Tax Sharing Agreement"). Under the Tax Sharing
Agreement, the Company, through the Corporation, paid to or received from the
Sears Group the amount, if any, by which the Sears Tax Group's federal income
tax liability was affected by virtue of inclusion of the Company in the
consolidated federal income tax return.
As a result of the Sears distribution, the Allstate Group was no longer included
in the Sears Tax Group, and the Tax Sharing Agreement was terminated.
Accordingly, the Allstate Group and Sears Group entered into a new tax sharing
agreement, which adopts many of the principles of the Tax Sharing Agreement and
governs their respective rights and obligations with respect to federal income
taxes for all periods prior to the Sears distribution, including the treatment
of audits of tax returns for such periods.
The Internal Revenue Service ("IRS") has completed its review of the Allstate
Group's federal income tax returns through the 1993 tax year. Any adjustment
that may result from IRS examinations of tax returns are not expected to have a
material impact on the financial position, liquidity or results of operations of
the Company.
The components of the deferred income tax liability at December 31, are as
follows:
1998 1997
------- -------
Unrealized net capital gains $(2,415) $(1,706)
Difference in tax bases of investments (84) (66)
------- -------
Total deferred liability $(2,499) $(1,772)
======= =======
The components of income tax expense for the year ended December 31, are as
follows:
1998 1997 1996
------ ------ ------
Current $2,164 $3,037 $1,335
Deferred 18 41 4
------ ------ ------
Total income tax expense $2,182 $3,078 $1,339
====== ====== ======
The Company paid income taxes of $592, $2,839 and $2,446 in 1998, 1997 and 1996,
respectively. The Company had a current income tax liability of $2,181 and $609
at December 31, 1998 and 1997, respectively.
F-14
<PAGE>
A reconciliation of the statutory federal income tax rate to the effective
income tax rate on income from operations for the year ended December 31, is as
follows:
1998 1997 1996
------ ------ ------
Statutory federal income tax rate 35.0% 35.0% 35.0%
Other -- .1 .5
------ ------ ------
Effective income tax rate 35.0% 35.1% 35.5%
====== ====== ======
7. STATUTORY FINANCIAL INFORMATION
PERMITTED STATUTORY ACCOUNTING PRACTICES
The Company prepares its statutory financial statements in accordance with
accounting principles and practices prescribed or permitted by the Arizona
Department of Insurance. Prescribed statutory accounting practices include a
variety of publications of the National Association of Insurance Commissioners
("NAIC"), as well as state laws, regulations and general administrative rules.
Permitted statutory accounting practices encompass all accounting practices not
so prescribed. The Company does not follow any permitted statutory accounting
practices that have a significant impact on statutory surplus or statutory net
income.
The NAIC's codification initiative has produced a comprehensive guide of revised
statutory accounting principles. While the NAIC has approved a January 1, 2001
implementation date for the newly developed guidance, companies must adhere to
the implementation date adopted by their state of domicile. The Company's state
of domicile, Arizona, is continuing its comparison of codification and current
statutory accounting requirements to determine necessary revisions to existing
state laws and regulations. The requirements are not expected to have a material
impact on the statutory surplus of the Company.
DIVIDENDS
The ability of the Company to pay dividends is dependent on business conditions,
income, cash requirements of the Company and other relevant factors. The payment
of shareholder dividends by the Company without the prior approval of the state
insurance regulator is limited to formula amounts based on net income and
capital and surplus, determined in accordance with statutory accounting
practices, as well as the timing and amount of dividends paid in the preceding
twelve months. The maximum amount of dividends that the Company can distribute
during 1999 without prior approval of the Arizona Department of Insurance is
$4,698.
F-15
<PAGE>
8. OTHER COMPREHENSIVE INCOME
The components of other comprehensive income on a pretax and after-tax basis for
the year ended December 31, are as follows:
<TABLE>
<CAPTION>
1998 1997 1996
----------------------------- ---------------------------- -----------------------------
After- After- After-
Pretax Tax tax Pretax Tax tax Pretax Tax tax
------ --- --- ------ --- --- ------ --- ---
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Unrealized capital gains
and losses:
- --------------------------
Unrealized holding gains
(losses) arising during
the period $ 2,019 $ (707) $ 1,312 $ 4,034 $(1,412) $ 2,622 $ (871) $ 304 $ (567)
Less: reclassification
adjustment for realized
net capital gains
included in net income (5) 2 (3) 3,453 (1,209) 2,244 -- -- --
------- ------- ------- ------- ------- ------- ------- ------- -------
Unrealized net capital
gains (losses) $ 2,024 $ (709) $ 1,315 $ 581 $ (203) $ 378 $ (871) $ 304 $ (567)
------- ------- ------- ------- ------- ------- ------- ------- -------
Other comprehensive
income $ 2,024 $ (709) $ 1,315 $ 581 $ (203) $ 378 $ (871) $ 304 $ (567)
======= ======= ======= ======= ======= ======= ======= ======= =======
</TABLE>
9. COMMITMENTS AND CONTINGENT LIABILITIES
REGULATION AND LEGAL PROCEEDINGS
The Company's business is subject to the effects of a changing social, economic
and regulatory environment. Public and regulatory initiatives have varied and
have included employee benefit regulations, removal of barriers preventing banks
from engaging in the securities and insurance business, tax law changes
affecting the taxation of insurance companies, the tax treatment of insurance
products and its impact on the relative desirability of various personal
investment vehicles, and proposed legislation to prohibit the use of gender in
determining insurance rates and benefits. The ultimate changes and eventual
effects, if any, of these initiatives are uncertain.
From time to time the Company is involved in pending and threatened litigation
in the normal course of its business in which claims for monetary damages are
asserted. In the opinion of management, the ultimate liability, if any, arising
from such pending or threatened litigation is not expected to have a material
effect on the results of operations, liquidity or financial position of the
Company.
F-16
<PAGE>
GLENBROOK LIFE AND ANNUITY COMPANY
SCHEDULE IV--REINSURANCE
($ IN THOUSANDS)
GROSS NET
YEAR ENDED DECEMBER 31, 1998 AMOUNT CEDED AMOUNT
--------- --------- -------
Life insurance in force $ 12,056 $ 12,056 $ --
========= ========= =======
Premiums and contract charges:
Life and annuities $ 19,009 $ 19,009 $ --
========= ========= =======
GROSS NET
YEAR ENDED DECEMBER 31, 1997 AMOUNT CEDED AMOUNT
--------- --------- -------
Life insurance in force $ 4,095 $ 4,095 $ --
========= ========= =======
Premiums and contract charges:
Life and annuities $ 11,641 $ 11,641 $ --
========= ========= =======
GROSS NET
YEAR ENDED DECEMBER 31, 1996 AMOUNT CEDED AMOUNT
--------- --------- -------
Life insurance in force $ 2,436 $ 2,436 $ --
========= ========= =======
Premiums and contract charges:
Life and annuities $ 4,254 $ 4,254 $ --
========= ========= =======
F-17
<PAGE>
GLENBROOK LIFE SCUDDER
VARIABLE ACCOUNT (A)
Financial Statements as of December 31, 1998
and for the period ended December 31, 1998, and
Independent Auditors' Report
<PAGE>
GLENBROOK LIFE SCUDDER VARIABLE ACCOUNT (A)
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
Page
INDEPENDENT AUDITORS' REPORT 1
STATEMENTS OF NET ASSETS AS OF DECEMBER 31, 1998 FOR THE
FOLLOWING:
Investments in the Scudder Variable Life Investment
Fund, Inc. Portfolios: 2
Money Market
Bond
Capital Growth
Balanced
Growth and Income
International
Global Discovery
STATEMENTS OF OPERATIONS FOR THE FOLLOWING:
FOR THE PERIOD NOVEMBER 30, 1998 (COMMENCEMENT OF OPERATIONS)
TO DECEMBER 31, 1998 3
Investments in the Scudder Variable Life Investment
Fund, Inc. Portfolios:
Money Market
Bond
Capital Growth
Balanced
Growth and Income
International
Global Discovery
STATEMENTS OF CHANGES IN NET ASSETS FOR THE FOLLOWING:
FOR THE PERIOD NOVEMBER 30, 1998 (COMMENCEMENT OF OPERATIONS)
TO DECEMBER 31, 1998 4
Investments in the Scudder Variable Life Investment
Fund, Inc. Portfolios:
Money Market
Bond
Capital Growth
Balanced
Growth and Income
International
Global Discovery
NOTES TO FINANCIAL STATEMENTS 5-7
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Shareholder of
Glenbrook Life and Annuity Company:
We have audited the accompanying statements of net assets of each of the
sub-accounts ("portfolios" for purposes of this report), listed in the table of
contents, that comprise Glenbrook Life Scudder Variable Account (A), (the
"Account"), a Separate Account of Glenbrook Life and Annuity Company, an
affiliate of The Allstate Corporation, as of December 31 1998, and the related
statements of operations and changes in net assets for the period indicated in
the table of contents. These financial statements are the responsibility of the
Account's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. Our procedures included
confirmation of securities owned at December 31, 1998. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all material
respects, the financial position of the portfolios, listed in the table of
contents, that comprise the Account as of December 31, 1998, and the results of
their operations, and changes in their net assets for the period, indicated in
the table of contents, in conformity with generally accepted accounting
principles.
/s/ Deloitte & Touche LLP
Chicago, Illinois
March 18, 1999
1
<PAGE>
GLENBROOK LIFE SCUDDER VARIABLE ACCOUNT (A)
STATEMENTS OF NET ASSETS
DECEMBER 31, 1998
- --------------------------------------------------------------------------------
($ and shares in whole amounts)
ASSETS
Investments in the Scudder Variable Life Investment
Fund, Inc. Portfolios:
Money Market, 31,222 shares (cost $31,222) $ 31,222
Bond, 1,171 shares (cost $8,069) 8,057
Capital Growth, 336 shares (cost $8,046) 8,056
Balanced, 1,291 shares (cost $19,570) 19,636
Growth and Income, 719 shares (cost $8,042) 8,064
International --
Global Discovery --
--------------
Net assets $ 75,035
==============
See notes to financial statements.
2
<PAGE>
<TABLE>
<CAPTION>
GLENBROOK LIFE SCUDDER VARIABLE ACCOUNT (A)
STATEMENTS OF OPERATIONS
- ----------------------------------------------------------------------------------------------------------------------------
($ in whole amounts)
Scudder Variable Life Investment Fund, Inc. Portfolios
---------------------------------------------------------------------
For the period November 30, 1998 to December 31, 1998
---------------------------------------------------------------------
MONEY CAPITAL GROWTH AND INTER- GLOBAL
MARKET BOND GROWTH BALANCED INCOME NATIONAL DISCOVERY
------- ------- ------- -------- ---------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
INVESTMENT INCOME
Dividends $ 4 $ -- $ -- $ -- $ -- $ -- $ --
Charges from Glenbrook Life and
Annuity Company:
Mortality and expense risk -- -- -- -- -- -- --
Administrative expense -- -- -- -- -- -- --
------- ------- ------- ------- ------- ------- -------
Net investment income 4 -- -- -- -- -- --
REALIZED AND UNREALIZED GAINS
(LOSSES) ON INVESTMENTS
Realized gains (losses) from sales of investments:
Proceeds from sales 1 -- -- -- -- -- --
Cost of investments sold 1 -- -- -- -- -- --
------- ------- ------- ------- ------- ------- -------
Net realized gains -- -- -- -- -- -- --
Change in unrealized gains (losses) -- (12) 10 66 22 -- --
------- ------- ------- ------- ------- ------- -------
Net gains (losses) on investments -- (12) 10 66 22 -- --
------- ------- ------- ------- ------- ------- -------
CHANGE IN NET ASSETS RESULTING
FROM OPERATIONS $ 4 $ (12) $ 10 $ 66 $ 22 $ -- $ --
======= ======= ======= ======= ======= ======= =======
<FN>
See notes to financial statements.
</FN>
</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
GLENBROOK LIFE SCUDDER VARIABLE ACCOUNT (A)
STATEMENTS OF CHANGES IN NET ASSETS
- ----------------------------------------------------------------------------------------------------------------------------
($ in whole amounts)
Scudder Variable Life Investment Fund, Inc. Portfolios
---------------------------------------------------------------------
For the period November 30, 1998 to December 31, 1998
---------------------------------------------------------------------
MONEY CAPITAL GROWTH AND INTER- GLOBAL
MARKET BOND GROWTH BALANCED INCOME NATIONAL DISCOVERY
------- ------- ------- -------- ---------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
FROM OPERATIONS
Net investment income $ 4 $ -- $ -- $ -- $ -- $ -- $ --
Net realized gains -- -- -- -- -- -- --
Change in unrealized gains (losses) -- (12) 10 66 22 -- --
------- ------- ------- ------- ------- ------- -------
Change in net assets resulting from operations 4 (12) 10 66 22 -- --
FROM CAPITAL TRANSACTIONS
Deposits 31,211 8,000 8,000 19,425 8,000 -- --
Benefit payments -- -- -- -- -- -- --
Payments on termination -- -- -- -- -- -- --
Transfers among the portfolios and with the
Fixed Account - net 7 69 46 145 42 -- --
------- ------- ------- ------- ------- ------- -------
Change in net assets resulting from capital
transactions 31,218 8,069 8,046 19,570 8,042 -- --
------- ------- ------- ------- ------- ------- -------
INCREASE IN NET ASSETS 31,222 8,057 8,056 19,636 8,064 -- --
NET ASSETS AT BEGINNING OF PERIOD -- -- -- -- -- -- --
------- ------- ------- ------- ------- ------- -------
NET ASSETS AT END OF PERIOD $31,222 $ 8,057 $ 8,056 $19,636 $ 8,064 $ -- $ --
======= ======= ======= ======= ======= ======= =======
<FN>
See notes to financial statements.
</FN>
</TABLE>
4
<PAGE>
GLENBROOK LIFE SCUDDER VARIABLE ACCOUNT (A)
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
1. ORGANIZATION
Glenbrook Life Scudder Variable Account (A) (the "Account"), a unit
investment trust registered with the Securities and Exchange Commission
under the Investment Company Act of 1940, is a Separate Account of
Glenbrook Life and Annuity Company ("Glenbrook Life"). The assets of the
Account are legally segregated from those of Glenbrook Life. Glenbrook Life
is wholly owned by Allstate Life Insurance Company, a wholly owned
subsidiary of Allstate Insurance Company, which is wholly owned by The
Allstate Corporation. The Account was established on August 26, 1998, by
resolution of the Board of Directors of Glenbrook Life and began accepting
contractholder deposits on November 30, 1998.
Glenbrook Life issues certain annuity contracts, the deposits of which are
invested at the direction of the contractholder in the sub-accounts
("portfolios" for purposes of this report) that comprise the Account.
Contractholders bear all of the investment risk for amounts allocated to
the account. The portfolios invest in the Scudder Variable Life Investment
Fund, Inc. (the "Fund").
Glenbrook Life provides insurance and administrative services to the
contractholders for a fee.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
VALUATION OF INVESTMENTS - Investments consist of shares of the Fund and
are stated at fair value based on quoted market prices at December 31,
1998.
INVESTMENT INCOME - Investment income consists of dividends declared by the
Fund and is recognized on the date of record.
REALIZED GAINS AND LOSSES - Realized gains and losses represent the
difference between the proceeds from sales of portfolio shares by the
Account and the cost of such shares, which is determined on a weighted
average basis.
FEDERAL INCOME TAXES - The Account intends to qualify as a segregated asset
account as defined in the Internal Revenue Code ("Code"). As such, the
operations of the Account are included in the tax return of Glenbrook Life.
Glenbrook Life is taxed as a life insurance company under the Code. No
federal income taxes are payable by the Account in 1998 as the Account did
not generate taxable income.
5
<PAGE>
3. CONTRACT CHARGES
Glenbrook Life assumes mortality and expense risks related to the
operations of the Account and deducts charges daily at a rate equal to .40%
per annum of the daily net assets of the Account. An enhanced death benefit
rider is available at an additional charge of .10%, bringing the total
mortality and expense charge to .50%. Glenbrook Life guarantees that the
amount of these charges will not increase over the life of the contract.
Glenbrook Life deducts administrative expense charges daily at a rate equal
to .30% per annum of the daily net assets of the Account.
4. FINANCIAL INSTRUMENTS
The only financial instruments of the Account are the investments in each
of the portfolios, which are carried at fair value, based on quoted market
prices.
6
<PAGE>
<TABLE>
<CAPTION>
5. UNITS ISSUED AND REDEEMED
(Units in whole amounts)
Unit activity during 1998:
--------------------------
Units Units Accumulation
Outstanding Units Units Outstanding Unit Value
December 31, Issued Redeemed December 31, December 31,
1997 1998 31, 1998
------------- ------------- ------------- ------------- --------------
<S> <C> <C> <C> <C> <C>
Investments in Scudder Variable Account
Portfolios:
Money Market -- 3,111 -- 3,111 $ 10.04
Bond -- 806 -- 806 10.00
Capital Growth -- 752 -- 752 10.71
Balanced -- 1,848 -- 1,848 10.63
Growth and Income -- 803 -- 803 10.04
Global Discovery -- -- -- -- 10.86
International -- -- -- -- 10.38
</TABLE>
<PAGE>
PART C
OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS.
(a) Financial Statements
All required financial statements are included in Part B of this
Registration Statement.
(b) Exhibits
(1) Form of Resolution of the Board of Directors of Glenbrook Life and Annuity
Company authorizing establishment of the Glenbrook Life Scudder Variable
Account (A). 1/
(2) Not Applicable.
(3) Form of Underwriting Agreement. 1/
(4) Glenbrook Life and Annuity Company Flexible Premium Deferred Variable
Annuity Contract.1/
(5) Glenbrook Life and Annuity Company Flexible Premium Deferred Variable
Annuity Contract Application. 1/
(6)(a)(i) Articles of Incorporation of Glenbrook Life and Annuity Company.2/
(ii) Amended and Restated Articles of Incorporation and Articles of
Redomestication of Glenbrook Life and Annuity Company.4/
(b)(i) By-laws of Glenbrook Life and Annuity Company.2/
(ii) Amended and Restated Bylaws of Glenbrook Life and Annuity Company.4/
(7) Form of Reinsurance Agreement between Glenbrook Life and Annuity Company
and Allstate Life Insurance Company.3/
(8) Participation Agreement between Scudder Variable Life Investment Fund and
Glenbrook Life and Annuity Company.5/
(9) Opinion and Consent of Michael J. Velotta, Vice President, Secretary and
General Counsel of Glenbrook Life and Annuity Company.5/
(10)(a) Independent Auditors' Consent.5/
(b) Consent of Sutherland Asbill & Brennan LLP.5/
(11) Not Applicable.
(12) Not Applicable.
(13) Computation of Performance Quotations.1/
(14) Not Applicable.
(15) Powers of Attorney.1/ 4/ 5/
1/ Incorporated herein by reference to Registrant's initial filing of this Form
N-4 Registration Statement filed with the SEC via EDGARLINK on July 31, 1998
(File No. 333-60337).
2/ Incorporated herein by reference to Depositor's Form S-1 Registration
Statement filed with the SEC via EDGARLINK on June 28, 1996 (File No.
333-07275).
3/ Incorporated herein by reference to Pre-Effective Amendment No. 1 to Form N-4
Registration Statement filed with the SEC via EDGARLINK on November 22, 1995
(File No. 033-62203).
4/ Incorporated herein by reference to Registrant's Post-Effective Amendment No.
1 to Form N-4 Registration Statement filed with the SEC via EDGARLINK on
February 25, 1999 (File No. 333-60337).
5/ Filed herewith.
25. DIRECTORS AND OFFICERS OF THE DEPOSITOR
<TABLE>
<CAPTION>
NAME AND PRINCIPAL
BUSINESS ADDRESS POSITIONS AND OFFICES WITH DEPOSITOR
<S> <C>
Louis G. Lower, II Chairman of the Board and Chief Executive Officer
Michael J. Velotta Vice President, Secretary, General Counsel and Director
Peter H. Heckman President, Chief Operating Officer and Director
Brent H. Hamann Director
John R. Hunter Director
Thomas J. Wilson, II Director and Vice Chairman
Marla G. Friedman Vice President
Kevin R. Slawin Vice President and Director
G. Craig Whitehead Assistant Vice President and Director
Timothy N. Vander Pas Assistant Vice President and Director
A. Sales Miller Vice President, Operations
James P. Zils Treasurer
Casey J. Sylla Chief Investment Officer
Sarah R. Donahue Assistant Vice President and Director
Emma M. Kalaidjian Assistant Secretary
Paul N. Kierig Assistant Secretary
Mary J. McGinn Assistant Secretary
Keith A. Hauschildt Assistant Vice President and Controller
Barry S. Paul Assistant Vice President
Robert N. Roeters Assistant Vice President
C. Nelson Strom Assistant Vice President and Corporate Actuary
Kathleen A. Urbanowicz Assistant Vice President, Operations
Brenda D. Sneed Assistant Secretary and Assistant General Counsel
Nancy M. Bufalino Assistant Treasurer
Patricia W. Wilson Assistant Treasurer
Gregory C. Sernett Assistant Secretary
Joanne M. Derrig Assistant Secretary and Chief Compliance Officer
</TABLE>
The principal business address of the foregoing officers and directors is 3100
Sanders Road, Northbrook, Illinois 60062.
26. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH DEPOSITOR OR REGISTRANT
Incorporated herein by reference to the Form 10-K Report, Commission File
#1-11840, The Allstate Corporation. (March 26, 1999)
27. NUMBER OF CONTRACT OWNERS
As of April 13, 1999, there were 3 qualified and 58 non-qualified contracts in
force.
<PAGE>
28. INDEMNIFICATION
The by-laws of both Glenbrook Life and Annuity Company (Depositor) and Allstate
Life Financial Services, Inc. (Principal Underwriter), provide for the
indemnification of its Directors, Officers and Controlling Persons, against
expenses, judgments, fines and amounts paid in settlement as incurred by such
person, if such person acted properly. No indemnification shall be made in
respect of any claim, issue or matter as to which such person shall have been
adjudged to be liable for negligence or misconduct in the performance of a duty
to the Company, unless a court determines such person is entitled to such
indemnity.
Insofar as indemnification for liability arising under the Securities Act of
1933 may be permitted to Directors, Officers and Controlling Persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant of expenses incurred
or paid by a Director, Officer or Controlling Person of the registrant in the
successful defense of any action, suit, or proceeding) is asserted such
Director, Officer or Controlling Person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
29. RELATIONSHIP OF PRINCIPAL UNDERWRITER TO OTHER INVESTMENT COMPANIES
(a) The Fund's principal underwriter, Allstate Life Financial Services, Inc.,
currently acts as a principal underwriter, depositor, sponsor, or investment
adviser for the following entities:
- - Glenbrook Life and Annuity Company Variable Annuity Account
- - Glenbrook Life Multi-Manager Variable Account
- - Glenbrook Life and Annuity Company Variable Annuity Account
- - Glenbrook Life Variable Life Separate Account B
- - Allstate Life of New York Separate Account A
- - Glenbrook Life AIM Variable Life Separate Account A
- - Glenbrook Life Scudder Variable Account (A)
- - Glenbrook Life Variable Life Separate Account A
- - Allstate Life Insurance Company Separate Account A
(b) Following are the names, business addresses, positions, and offices, of each
director, officer, or partner of the principal underwriter:
<TABLE>
<CAPTION>
NAME AND PRINCIPAL
BUSINESS ADDRESS POSITION OR OFFICE
<S> <C>
Louis G. Lower, II Director
Kevin R. Slawin Director
Michael J. Velotta Director and Secretary
Thomas J. Wilson II Director
John R. Hunter President, Chief Executive Officer and Director
Diane Bellas Vice President and Controller
Brent H. Hamann Vice President
Andrea J. Schur Vice President
Terry Young General Counsel and Assistant Secretary
James P. Zils Treasurer
Lisa A. Burnell Assistant Vice President and Compliance Officer
Robert N. Roeters Assistant Vice President
Emma M. Kalaidjian Assistant Secretary
Brenda D. Sneed Assistant Secretary
Gregory C. Sernett Assistant Secretary
Nancy M. Bufalino Assistant Treasurer
</TABLE>
The principal address of Allstate Life Financial Services, Inc. is 3100 Sanders
Road, Northbrook, Illinois 60062.
(c) Underwriter Compensation during fiscal year ended December 31, 1998:
<TABLE>
<CAPTION>
(1) (2) (3) (4) (5)
<S> <C> <C> <C> <C>
NAME OF PRINCIPAL NET UNDERWRITING COMPENSATION ON BROKERAGE
UNDERWRITER DISCOUNTS AND COMMISSIONS REDEMPTION COMMISSION COMPENSATION
Allstate Life _______ None None None
Financial Services, Inc.
</TABLE>
30. LOCATION OF ACCOUNTS AND RECORDS
The Depositor, Glenbrook Life and Annuity Company, is located at 3100 Sanders
Road, Northbrook, Illinois 60062.
The Principal Underwriter, Allstate Life Financial Services, Inc., is located at
3100 Sanders Road, Northbrook, Illinois 60062.
Each company maintains physical possession of each account, book, or other
document required to be maintained by Section 31(a) of the 1940 Act and the
Rules under it.
31. MANAGEMENT SERVICES
None.
32. UNDERTAKINGS
The Registrant promises to file a post-effective amendment to this Registration
Statement as frequently as is necessary to ensure that the audited financial
statements in the Registration Statement are never more than 16 months old for
so long as payments under the variable annuity contracts may be accepted.
Registrant furthermore agrees to include either as part of any application to
purchase a contract offered by the prospectus, a space that an applicant can
check to request a Statement of Additional Information or a post card or similar
written communication affixed to or included in the Prospectus that the
applicant can remove to send for a Statement of Additional Information. Finally,
the Registrant agrees to deliver any Statement of Additional Information and any
Financial Statements required to be made available under this Form N-4 promptly
upon written or oral request.
Representations Pursuant to Section 403(b) of the Internal Revenue Code
The Depositor, Glenbrook Life and Annuity Company ("Glenbrook Life"), represents
that it is relying upon a November 28, 1988 Securities and Exchange Commission
no-action letter issued to the American Council of Life Insurance ("ACLI") and
that the provisions of paragraphs 1-4 of the no-action letter have been complied
with.
Representations Regarding Contract Expense
The Depositor, Glenbrook Life, represents that the fees and charges deducted
under the Individual and Group Flexible Premium Deferred Variable Annuity
contracts hereby registered by this Registration Statement, in the aggregate,
are reasonable in relation to the services rendered, the expenses expected to be
incurred, and the risks assumed by Glenbrook Life.
<PAGE>
SIGNATURES
As required by the Securities Act of 1933 and the Investment Company Act of
1940, the Registrant, Glenbrook Life Scudder Variable Account (A), certifies
that it meets the requirements of Securities Act Rule 485(b) for effectiveness
of this registration statement and has caused this registration statement to be
signed on its behalf, in the Township of Northfield, and the State of Illinois,
on the __ day of April, 1999.
GLENBROOK LIFE SCUDDER VARIABLE ACCOUNT (A)
(REGISTRANT)
BY: GLENBROOK LIFE AND ANNUITY COMPANY
(DEPOSITOR)
(SEAL)
Attest: /s/BRENDA D. SNEED By: /s/MICHAEL J. VELOTTA
------------------ ---------------------
Brenda D. Sneed Michael J. Velotta
Assistant Secretary Vice President, Secretary,
and Assistant General Counsel General Counsel and Director
Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940, this Registration Statement has been duly signed below by
the following Directors and Officers of Glenbrook Life and Annuity Company on
the ___ day of April, 1999.
<TABLE>
<CAPTION>
<S> <C>
* LOUIS G. LOWER, II Chairman of the Board of Directors and Chief Executive Officer
- -------------------- (Principal Executive Officer)
Louis G. Lower, II
/s/ MICHAEL J. VELOTTA Vice President, Secretary, General Counsel and Director
- -----------------------
Michael J. Velotta
* PETER H. HECKMAN President, Chief Operating Officer and Director
- ------------------
Peter H. Heckman
* JOHN R. HUNTER Director
- ----------------
John R. Hunter
* BRENT H. HAMANN Director
- -----------------
Brent H. Hamann
* TIMOTHY N. VANDER PAS Director
- -----------------------
Timothy N. Vander Pas
* THOMAS J. WILSON, II Vice Chairman and Director
- ------------------------
Thomas J. Wilson, II
* KEVIN R. SLAWIN Vice President and Director
- ----------------- (Principal Financial Officer)
Kevin R. Slawin
*SARAH R. DONAHUE Director, Assistant Vice President
- -----------------
Sarah R. Donahue
* G. CRAIG WHITEHEAD Senior Vice President and Director
- --------------------
G. Craig Whitehead
</TABLE>
<PAGE>
* JAMES P. ZILS Treasurer
- ---------------
James P. Zils
* CASEY J. SYLLA Chief Investment Officer
- ----------------
Casey J. Sylla
* KEITH A. HAUSCHILDT Assistant Vice President and Controller
- --------------------- (Principal Accounting Officer)
Keith A. Hauschildt
By: /s/ Michael J. Velotta, pursuant to Power of Attorney previously filed and
filed herewith. Michael J. Velotta
<PAGE>
Exhibit Index
Exhibit 8 Participation Agreement
Exhibit 9 Opinion and Consent of Michael J. Velotta, Vice President,
Secretary and General Counsel of Glenbrook Life and
Annuity Company
Exhibit 10(a) Independent Auditors' Consent
Exhibit 10(b) Consent of Sutherland Asbill & Brennan
Exhibit 15 Powers of Attorney
Thomas J. Wilson II
Sarah R. Donahue
PARTICIPATION AGREEMENT
PARTICIPATION AGREEMENT (the "Agreement") made by and between SCUDDER
VARIABLE LIFE INVESTMENT FUND (the "Fund"), a Massachusetts business trust
created under a Declaration of Trust dated March 15, 1985, as amended, with a
principal place of business in Boston, Massachusetts and Glenbrook Life and
Annuity Company, a stock life insurance company incorporated under the laws of
Illinois (the "Company"), with a principal place of business in Northbrook,
Illinois on behalf of Glenbrook Life Scudder Variable Account A, a separate
account of the Company, and any other separate account of the Company as
designated by the Company from time to time, upon written notice to the Fund in
accordance with Section 9 herein (each, an "Account").
WHEREAS, the Fund acts as the investment vehicle for the separate accounts
established for variable life insurance policies and variable annuity contracts
(collectively referred to herein as "Variable Insurance Products") to be offered
by insurance companies which have entered into participation agreements
substantially identical to this Agreement ("Participating Insurance Companies")
and their affiliated insurance companies; and
WHEREAS, the beneficial interest in the Fund is divided into several series
of shares of beneficial interest without par value ("Shares"), and additional
series of Shares may be established, each designated a "Portfolio" and
representing the interest in a particular managed portfolio of securities; and
WHEREAS, each Portfolio of the Fund, except the Money Market Portfolio, is
divided into two classes of Shares, and additional classes of Shares may be
established; and
WHEREAS, the Parties desire to evidence their agreement as to certain other
matters,
NOW THEREFORE, in consideration of the foregoing and the mutual covenants
and agreements hereinafter contained, the parties hereto agree as follows:
1. Duty of Fund to Sell.
The Fund shall make its Shares available for purchase at the applicable net
asset value per Share by Participating Insurance Companies and their affiliates
and separate accounts on those days on which the Fund calculates its net asset
value pursuant to rules of the Securities and Exchange Commission; provided,
however, that the Trustees of the Fund may refuse to sell Shares of any
Portfolio to any person, or suspend or terminate the offering of Shares of any
Portfolio, if such action is required by law or by regulatory authorities having
jurisdiction or is, in the sole discretion of the Trustees, necessary in the
best interest of the shareholders of any Portfolio.
2. Fund Materials.
The Fund, at its expense, shall provide the Company or its designee with
camera-ready copy or computer diskette versions of all prospectuses and
statements of additional information and any supplements thereto, annual and
semi-annual reports and proxy materials (collectively, "Fund Materials") to be
printed and distributed by the Company or its broker/dealer to the Company's
existing or prospective contract owners, as appropriate. The Company agrees to
bear the cost of printing and distributing such Fund Materials.
3. Requirement to Execute Participation Agreement; Requests.
Each Participating Insurance Company shall, prior to purchasing Shares in
the Fund, execute and deliver a participation agreement in a form substantially
identical to this Agreement.
The Fund shall make available, upon written request from the Participating
Insurance Company given in accordance with Paragraph 9, to each Participating
Insurance Company which has executed an Agreement and which Agreement has not
been terminated pursuant to Paragraph 7 (i) a list of all other Participating
Insurance Companies, and (ii) a copy of the Agreement as executed by any other
Participating Insurance Company.
The Fund shall also make available upon request to each Participating
Insurance Company which has executed an Agreement and which Agreement has not
been terminated pursuant to Paragraph 7, the net asset value of any Portfolio of
the Fund as of any date upon which the Fund calculates the net asset value of
its Portfolios for the purpose of purchase and redemption of Shares.
4. Indemnification.
(a) The Company agrees to indemnify and hold harmless the Fund and each of
its Trustees and officers and each person, if any, who controls the Fund within
the meaning of Section 15 of the Securities Act of 1933 (the "Act") against any
and all losses, claims, damages, liabilities or litigation (including legal and
other expenses), arising out of the acquisition of any Shares by any person, to
which the Fund or such Trustees, officers or controlling person may become
subject under the Act, under any other statute, at common law or otherwise,
which (i) may be based upon any wrongful act by the Company, any of its
employees or representatives, any affiliate of or any person acting on behalf of
the Company or a principal underwriter of its insurance products, or (ii) may be
based upon any untrue statement or alleged untrue statement of a material fact
contained in a registration statement or prospectus covering Shares or any
amendment thereof or supplement thereto or the omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein not misleading if such a statement or omission was made
in reliance upon information furnished to the Fund by the Company, or (iii) may
be based on any untrue statement or alleged untrue statement of a material fact
contained in a registration statement or prospectus covering insurance products
sold by the Company or any insurance company which is an affiliate thereof, or
any amendments or supplement thereto, or the omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statement or statements therein not misleading, unless such statement or
omission was made in reliance upon information furnished to the Company or such
affiliate by or on behalf of the Fund; provided, however, that in no case (i) is
the Company's indemnity in favor of a Trustee or officer or any other person
deemed to protect such Trustee or officer or other person against any liability
to which any such person would otherwise be subject by reason of willful
misfeasance, bad faith, or gross negligence in the performance of his duties or
by reason of his reckless disregard of obligations and duties under this
Agreement or (ii) is the Company to be liable under its indemnity agreement
contained in this Paragraph 4 with respect to any claim made against the Fund or
any person indemnified unless the Fund or such person, as the case may be, shall
have notified the Company in writing pursuant to Paragraph 9 within a reasonable
time after the summons or other first legal process giving information of the
nature of the claims shall have been served upon the Fund or upon such person
(or after the Fund or such person shall have received notice of such service on
any designated agent), but failure to notify the Company of any such claim shall
not relieve the Company from any liability which it has to the Fund or any
person against whom such action is brought otherwise than on account of its
indemnity agreement contained in this Paragraph 4. The Company shall be entitled
to participate, at its own expense, in the defense, or, if it so elects, to
assume the defense of any suit brought to enforce any such liability, but, if it
elects to assume the defense, such defense shall be conducted by counsel chosen
by it and satisfactory to the Fund, to its officers and Trustees, or to any
controlling person or persons, defendant or defendants in the suit. In the event
that the Company elects to assume the defense of any such suit and retain such
counsel, the Fund, such officers and Trustees or controlling person or persons,
defendant or defendants in the suit, shall bear the fees and expenses of any
additional counsel retained by them, but, in case the Company does not elect to
assume the defense of any such suit, the Company will reimburse the Fund, such
officers and Trustees or controlling person or persons, defendant or defendants
in such suit, for the reasonable fees and expenses of any counsel retained by
them. The Company agrees promptly to notify the Fund pursuant to Paragraph 9 of
the commencement of any litigation or proceedings against it in connection with
the issue and sale of any Shares.
(b) The Fund agrees to indemnify and hold harmless the Company and each of
its directors and officers and each person, if any, who controls the Company
within the meaning of Section 15 of the Act against any and all losses, claims,
damages, liabilities or litigation (including legal and other expenses) to which
it or such directors, officers or controlling person may become subject under
the Act, under any other statute, at common law or otherwise, arising out of the
acquisition of any Shares by any person which (i) may be based upon any wrongful
act by the Fund, any of its employees or representatives or a principal
underwriter of the Fund, or (ii) may be based upon any untrue statement or
alleged untrue statement of a material fact contained in a registration
statement or prospectus covering Shares or any amendment thereof or supplement
thereto or the omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading unless such statement or omission was made in reliance upon
information furnished to the Fund by the Company or (iii) may be based on any
untrue statement or alleged untrue statement of a material fact contained in a
registration statement or prospectus covering insurance products sold by the
Company, or any amendment or supplement thereto, or the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statement or statements therein not misleading, if such
statement or omission was made in reliance upon information furnished to the
Company by or on behalf of the Fund; provided, however, that in no case (i) is
the Fund's indemnity in favor of a director or officer or any other person
deemed to protect such director or officer or other person against any liability
to which any such person would otherwise be subject by reason of willful
misfeasance, bad faith, or gross negligence in the performance of his duties or
by reason of his reckless disregard of obligations and duties under this
Agreement or (ii) is the Fund to be liable under its indemnity agreement
contained in this Paragraph 4 with respect to any claims made against the
Company or any such director, officer or controlling person unless it or such
director, officer or controlling person, as the case may be, shall have notified
the Fund in writing pursuant to Paragraph 9 within a reasonable time after the
summons or other first legal process giving information of the nature of the
claim shall have been served upon it or upon such director, officer or
controlling person (or after the Company or such director, officer or
controlling person shall have received notice of such service on any designated
agent), but failure to notify the Fund of any claim shall not relieve it from
any liability which it may have to the person against whom such action is
brought otherwise than on account of its indemnity agreement contained in this
Paragraph. The Fund will be entitled to participate at its own expense in the
defense, or, if it so elects, to assume the defense of any suit brought to
enforce any such liability, but if the Fund elects to assume the defense, such
defense shall be conducted by counsel chosen by it and satisfactory to the
Company, its directors, officers or controlling person or persons, defendant or
defendants, in the suit. In the event the Fund elects to assume the defense of
any such suit and retain such counsel, the Company, its directors, officers or
controlling person or persons, defendant or defendants in the suit, shall bear
the fees and expenses of any additional counsel retained by them, but, in case
the Fund does not elect to assume the defense of any such suit, it will
reimburse the Company or such directors, officers or controlling person or
persons, defendant or defendants in the suit, for the reasonable fees and
expenses of any counsel retained by them. The Fund agrees promptly to notify the
Company pursuant to Paragraph 9 of the commencement of any litigation or
proceedings against it or any of its officers or Trustees in connection with the
issuance or sale of any Shares.
The provisions of this Section 4 shall survive the termination of the Agreement.
5. Procedure for Resolving Irreconcilable Conflicts.
(a) The Trustees of the Fund will monitor the operations of the Fund for
the existence of any material irreconcilable conflict among the interests of all
the contract holders and policy owners of Variable Insurance Products (the
"Participants") of all separate accounts investing in the Fund. An
irreconcilable material conflict may arise, among other things, from: (a) an
action by any state insurance regulatory authority; (b) a change in applicable
insurance laws or regulations; (c) a tax ruling or provision of the Internal
Revenue Code or the regulations thereunder; (d) any other development relating
to the tax treatment of insurers, contract holders or policy owners or
beneficiaries of Variable Insurance Products; (e) the manner in which the
investments of any Portfolio are being managed; (f) a difference in voting
instructions given by variable annuity contract holders, on the one hand, and
variable life insurance policy owners, on the other hand, or by the contract
holders or policy owners of different participating insurance companies; or (g)
a decision by an insurer to override the voting instructions of Participants.
(b) The Company will be responsible for reporting any potential or existing
conflicts to the Trustees of the Fund. The Company will be responsible for
assisting the Trustees in carrying out their responsibilities under this
Paragraph 5(b) and Paragraph 5(a), by providing the Trustees with all
information reasonably necessary for the Trustees to consider the issues raised.
The Fund will also request its investment adviser to report to the Trustees any
such conflict which comes to the attention of the adviser.
(c) If it is determined by a majority of the Trustees of the Fund, or a
majority of its disinterested Trustees, that a material irreconcilable conflict
exists involving the Company, the Company shall, at its expense, and to the
extent reasonably practicable (as determined by a majority of the disinterested
Trustees), take whatever steps are necessary to eliminate the irreconcilable
material conflict, including withdrawing the assets allocable to some or all of
the separate accounts from the Fund or any Portfolio or class thereof and
reinvesting such assets in a different investment medium, including another
Portfolio of the Fund or class thereof, offering to the affected Participants
the option of making such a change or establishing a new funding medium
including a registered investment company.
For purposes of this Paragraph 5(c), the Trustees, or the disinterested
Trustees, shall determine whether or not any proposed action adequately remedies
any irreconcilable material conflict. In the event of a determination of the
existence of an irreconcilable material conflict, the Trustees shall cause the
Fund to take such action, such as the establishment of one or more additional
Portfolios or classes, as they in their sole discretion determine to be in the
interest of all shareholders and Participants in view of all applicable factors,
such as cost, feasibility, tax, regulatory and other considerations. In no event
will the Fund be required by this Paragraph 5(c) to establish a new funding
medium for any variable contract or policy.
The Company shall not be required by this Paragraph 5(c) to establish a new
funding medium for any variable contract or policy if an offer to do so has been
declined by a vote of a majority of the Participants materially adversely
affected by the material irreconcilable conflict. The Company will recommend to
its Participants that they decline an offer to establish a new funding medium
only if the Company believes it is in the best interest of the Participants.
(d) The Trustees' determination of the existence of an irreconcilable
material conflict and its implications promptly shall be communicated to all
Participating Insurance Companies by written notice thereof delivered or mailed,
first class postage prepaid.
6. Voting Privileges.
The Company shall be responsible for assuring that its separate account or
accounts participating in the Fund shall use a calculation method of voting
procedures substantially the same as the following: those Participants permitted
to give instructions and the number of Shares for which instructions may be
given will be determined as of the record date for the Fund shareholders'
meeting, which shall not be more than 60 days before the date of the meeting.
Whether or not voting instructions are actually given by a particular
Participant, all Fund shares held in any separate account or sub-account thereof
and attributable to policies will be voted for, against, or withheld from voting
on any proposition in the same proportion as (i) the aggregate record date cash
value held in such sub-account for policies giving instructions, respectively,
to vote for, against, or withhold votes on such proposition, bears to (ii) the
aggregate record date cash value held in the sub-account for all policies for
which voting instructions are received. Participants continued in effect under
lapse options will not be permitted to give voting instructions. Shares held in
any other insurance company general or separate account or sub-account thereof
will be voted in the proportion specified in the second preceding sentence for
shares attributable to policies.
7. Duration and Termination.
This Agreement shall continue in effect for five (5) years from the date of
its execution. This Agreement may be terminated at any time, at the option of
either of the Company or the Fund, when neither the Company, any insurance
company nor the separate account or accounts of such insurance company which is
an affiliate thereof which is not a Participating Insurance Company own any
Shares of the Fund or may be terminated by either party to the Agreement upon a
determination by a majority of the Trustees of the Fund, or a majority of its
disinterested Trustees, following certification thereof by a Participating
Insurance Company given in accordance with Paragraph 9 that an irreconcilable
conflict exists among the interests of (i) all contract holders and policy
holders of Variable Insurance Products of all separate accounts or (ii) the
interests of the Participating Insurance Companies investing in the Fund. If
this Agreement is so terminated, the Fund may, at any time thereafter,
automatically redeem the Shares of any Portfolio held by a Participating
Shareholder.
8. Compliance.
The Fund will comply with the provisions of Section 4240(a) of the New York
Insurance Law.
Each Portfolio of the Fund will use its best efforts to comply with the
provisions of Section 817(h) of the Internal Revenue Code of 1986, as amended
(the "Code"), relating to diversification requirements for variable annuity,
endowment and life insurance contracts. Specifically, each Portfolio will comply
with the requirements of Subchapter M of the Code and either (i) the requirement
of Section 817(h)(1) of the Code that its assets be adequately diversified, or
(ii) the "Safe Harbor for Diversification" specified in Section 817(h)(2) of the
Code, or (iii) in the case of variable life insurance contracts only, the
diversification requirement of Section 817(h)(1) of the Code by having all or
part of its assets invested in U.S. Treasury securities which qualify for the
"Special Rule for Investments in United States Obligations" specified in Section
817(h)(3) of the Code. The Fund will notify the Company immediately upon having
a reasonable basis for believing that a Portfolio has ceased to comply with the
requirements of Section 817(h) of the Code or that the Portfolio might not so
comply in the future.
The provisions of Paragraphs 5 and 6 of this Agreement shall be interpreted
in a manner consistent with any Rule or order of the Securities and Exchange
Commission under the Investment Company Act of 1940, as amended, applicable to
the parties hereto.
No Shares of any Portfolio of the Fund may be sold to the general public.
9. Notices.
Any notice shall be sufficiently given when sent by registered or certified
mail to the other party at the address of such party set forth below or at such
other address as such party may from time to time specify in writing to the
other party.
If to the Fund:
Scudder Variable Life Investment Fund
Two International Place
Boston, Massachusetts 02110
(617) 295-4548
Attn: William M. Thomas
If to the Company:
Glenbrook Life and Annuity Company
3100 Sanders Road
Northbrook, Illinois 60062
(847) (xxx-xxxx)
Attn: Michael J. Velotta
With a copy to:
Glenbrook Lie and Annuity Company
3100 Sanders Road
Northbrook, Illinois 60062
(847) (xxx-xxxx)
Attn: John Hunter
10. Massachusetts Law to Apply.
This Agreement shall be construed and the provisions hereof interpreted
under and in accordance with the laws of The Commonwealth of Massachusetts.
11. Miscellaneous.
The name "Scudder Variable Life Investment Fund" is the designation of the
Trustees for the time being under a Declaration of Trust dated March 15, 1985,
as amended, and all persons dealing with the Fund must look solely to the
property of the Fund for the enforcement of any claims against the Fund as
neither the Trustees, officers, agents or shareholders assume any personal
liability for obligations entered into on behalf of the Fund. No Portfolio shall
be liable for any obligations properly attributable to any other Portfolio.
The captions in this Agreement are included for convenience of reference
only and in no way define or delineate any of the provisions hereof or otherwise
affect their construction or effect. This Agreement may be executed
simultaneously in two or more counterparts, each of which taken together shall
constitute one and the same instrument.
12. Entire Agreement.
This Agreement incorporates the entire understanding and agreement among
the parties hereto, and supersedes any and all prior understandings and
agreements between the parties hereto with respect to the subject matter hereof.
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to
be executed in its name and behalf by its duly authorized representative and its
seal to be hereunder affixed hereto as of the ____ day of __________, 1998.
SEAL SCUDDER VARIABLE LIFE
INVESTMENT FUND
By:________________________________
William M. Thomas
President
<PAGE>
SEAL GLENBROOK LIFE AND ANNUITY COMPANY
By:________________________________
Peter H. Heckman
President
GLENBROOK LIFE AND ANNUITY COMPANY
LAW AND REGULATION DEPARTMENT
3100 Sanders Road, J5B
Northbrook, Illinois 60062
Direct Dial Number 847-402-2400
Facsimile 847-402-4371
Michael J. Velotta Please direct reply to:
Vice President, Secretary Post Office Box 3005
and General Counsel Northbrook, Illinois
60065-3005
April 14, 1998
TO: GLENBROOK LIFE AND ANNUITY COMPANY
NORTHBROOK, ILLINOIS 60062
FROM: MICHAEL J. VELOTTA
VICE PRESIDENT, SECRETARY AND GENERAL COUNSEL
RE: FORM N-4 REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933 AND THE INVESTMENT COMPANY ACT OF
1940
FILE NO. 333-60337, 811-08911
With reference to the Registration Statement on Form N-4 filed by
Glenbrook Life and Annuity Company (the "Company"), as depositor, and Glenbrook
Life Scudder Variable Account (A), as registrant, with the Securities and
Exchange Commission covering the Flexible Premium Deferred Variable Annuity
Contracts, I have examined such documents and such law as I have considered
necessary and appropriate, and on the basis of such examination, it is my
opinion that as of December 28, 1998:
1. The Company is duly organized and existing under the laws of the State
of Arizona and has been duly authorized to do business by the Director
of Insurance of the State of Arizona.
2. The securities registered by the above Registration Statement when
issued will be valid, legal and binding obligations of the Company.
I hereby consent to the filing of this opinion as an exhibit to the
above referenced Registration Statement and to the use of my name under the
caption "Legal Matters" in the Prospectus constituting a part of the
Registration Statement.
Sincerely,
/s/ MICHAEL J. VELOTTA
- -------------------------
Michael J. Velotta
Vice President, Secretary and
General Counsel
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Post-Effective Amendment No. 2 to Registration
Statement No. 333-60337 of Glenbrook Life Scudder Variable Account (A) of
Glenbrook Life and Annuity Company on Form N-4 of our report dated February 19,
1999 relating to the financial statements and financial statement schedule of
Glenbrook Life and Annuity Company, and our report dated March 18, 1999 relating
to the financial statements of Glenbrook Life Scudder Variable Account (A)
contained in the Statement of Additional Information (which is incorporated by
reference in the Prospectus of Glenbrook Life Scudder Variable Account (A) of
Glenbrook Life and Annuity Company), which is part of such Registration
Statement, and to the reference to us under the heading "Experts" in such
Statement of Additional Information.
/s/ DELOITTE & TOUCHE LLP
- -------------------------
Deloitte & Touche LLP
Chicago, Illinois
April 26, 1999
[Letterhead of Sutherland Asbill & Brennan LLP]
April 28, 1999
VIA EDGARLINK
Board of Directors
Glenbrook Life and Annuity Company
3100 Sanders Road
Northbrook, IL 60062
Ladies and Gentlemen:
We hereby consent to the reference to our name under the caption "Legal
Matters" in the Scudder Horizon Advantage Variable Annuity Prospectus and in the
Statement of Additional Information filed as part of Post-Effective Amendment
No. 2 to the registration statement on Form N-4 for Glenbrook Life Scudder
Variable Account (A) (File No. 333-60337). In giving this consent, we do not
admit that we are in the category of persons whose consent is required under
Section 7 of the Securities Act of 1933.
Very truly yours,
Sutherland Asbill & Brennan LLP
By: /s/ Stephen E. Roth
--------------------
Stephen E. Roth
Power of Attorney
With Respect to the Glenbrook Life and Annuity Company Filing on Form N-4 for
The Glenbrook Life Scudder Variable Account (A)
Know all men by these presents that Sarah R. Donahue whose signature
appears below, constitutes and appoints Louis G. Lower, II, and Michael J.
Velotta, and each of them, her attorney-in-fact, with power of substitution, and
herein any and all capacities, to sign any reports and amendments thereto for
the Form N-4 for Glenbrook Life Scudder Variable Account (A) and to file the
same, with exhibits thereto and other documents, in connection therewith, with
the Securities and Exchange Commission, hereby ratifying and confirming all that
each of said attorneys-in-fact, or his substitute or substitutes, may do or
cause to be done by virtue hereof.
Date: February 26, 1999
/s/ Sarah R. Donahue
- ---------------------
Sarah R. Donahue
<PAGE>
Power of Attorney
With Respect to the Glenbrook Life and Annuity Company Filing on Form N-4 for
The Glenbrook Life Scudder Variable Account (A)
Know all men by these presents that Thomas J. Wilson, II, whose signature
appears below, constitutes and appoints Louis G. Lower, II, and Michael J.
Velotta, and each of them, his attorney-in-fact, with power of substitution, and
herein any and all capacities, to sign any reports and amendments thereto for
the Form N-4 for Glenbrook Life Scudder Variable Account (A) and to file the
same, with exhibits thereto and other documents, in connection therewith, with
the Securities and Exchange Commission, hereby ratifying and confirming all that
each of said attorneys-in-fact, or his substitute or substitutes, may do or
cause to be done by virtue hereof.
Date: February 28, 1999
/s/ Thomas J. Wilson, II
- -------------------------
Thomas J. Wilson, II
