<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 15, 1997
FILE NO.: 2-82511
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- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM N-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
POST-EFFECTIVE AMENDMENT NO. 22 /X/
AND/OR
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
AMENDMENT NO. 19 /X/
------------------------
NORTHBROOK VARIABLE ANNUITY ACCOUNT
(EXACT NAME OF REGISTRANT)
NORTHBROOK LIFE INSURANCE COMPANY
(NAME OF DEPOSITOR)
MICHAEL J. VELOTTA
VICE PRESIDENT, SECRETARY AND GENERAL COUNSEL
NORTHBROOK LIFE INSURANCE COMPANY
3100 SANDERS ROAD
NORTHBROOK, ILLINOIS 60062
(847) 402-2400
(NAME AND COMPLETE ADDRESS OF AGENT FOR SERVICE)
COPIES TO:
GREGOR B. MCCURDY, ESQUIRE CHRISTINE A. EDWARDS, ESQUIRE
ROUTIER AND JOHNSON, P.C. DEAN WITTER REYNOLDS INC.
1700 K STREET, N.W., SUITE 1003 TWO WORLD TRADE CENTER
WASHINGTON, D.C. 20006 NEW YORK, NEW YORK 10048
------------------------
STATEMENT PURSUANT TO RULE 24F-2
Pursuant to Rule 24f-2 under the Investment Company Act of 1940, the Registrant
hereby states that, pursuant to paragraph (b)(1), it filed its Rule 24f-2 Notice
for the fiscal year ending December 31, 1996 on February 28, 1997.
------------------------
IT IS PROPOSED THAT THIS FILING WILL BECOME EFFECTIVE (CHECK APPROPRIATE BOX)
___ immediately upon filing pursuant to paragraph (b) of Rule 485
_X_ on May 1, 1997 pursuant to paragraph (b) of Rule 485
___ 60 days after filing pursuant to paragraph (a)(i) of Rule 485
___ on (date) pursuant to paragraph (a)(i) of Rule 485
IF APPROPRIATE, CHECK THE FOLLOWING BOX:
___ This post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
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<PAGE>
CROSS REFERENCE SHEET
Showing Location in Part A (Prospectus) and Part B of Registration Statement of
Information Required by Form N-4
<TABLE>
<CAPTION>
ITEM OF
FORM N-4 PROSPECTUS CAPTION
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<S> <C> <C> <C> <C>
1. Cover Page.......................................................... Cover Page
2. Definitions......................................................... Glossary
3. Synopsis............................................................ Introduction: Summary of Separate Account
Expenses
4. Condensed Financials................................................ --
(a) Chart.................................................... Condensed Financial Statements
(b) Performance Data......................................... Performance Data
(c) Location of Others....................................... Financial Statements
5. General............................................................. --
(a) Depositor................................................ Northbrook Life Insurance Company
(b) Registrant............................................... The Variable Account
(c) Portfolio Company........................................ Dean Witter Variable Investment Series
(d) Fund Prospectus.......................................... Dean Witter Variable Investment Series
(e) Voting Rights............................................ Voting Rights
(f) Administrators........................................... Charges & Other Deductions -- Contract
Maintenance Charge
6. Deductions & Expenses............................................... Charges & Other Deductions
(a) General.................................................. Charges & Other Deductions
(b) Sales Load %............................................. Surrender Charge
(c) Special Purchase Plans................................... N/A
(d) Commissions.............................................. Sales Commission
(e) Fund Expenses............................................ Summary of Expenses; Dean Witter Variable
Investment Series Expenses
(f) Organizational Expenses.................................. N/A
7. Contracts
(a) Persons with Rights...................................... The Contracts; Benefits; Income Payments;
Voting Rights; Assignments; Beneficiaries
Contract Owners
(b) (i) Allocation of Purchase Payments............... Allocation of Purchase Payments
(ii) Transfers..................................... Transfers
(iii) Exchanges..................................... N/A
(c) Changes.................................................. Modification
(d) Inquiries................................................ Customer Inquiries
8. Annuity Period...................................................... Income Payments
(a) Material Factors......................................... Amount of Variable Annuity Income Payments
(b) Dates.................................................... Income Starting Date
(c) Frequency, duration & level.............................. Amount of Variable Annuity Income Payments
(d) AIR...................................................... Amount of Variable Annuity Income Payments
(e) Minimum.................................................. Amount of Variable Annuity Income Payments
(f) -- Change Options........................................ Income Plans
-- Transfer.............................................. ------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ITEM OF
FORM N-4 PROSPECTUS CAPTION
- -------------------- ----------------------------------------------
<S> <C> <C> <C> <C>
9. Death Benefit....................................................... Benefits Under the Contract
10. Purchases & Contract Value
(a) Purchases................................................ Purchase of the Contract; Crediting of
Purchase Payments
(b) Valuation................................................ Value of Variable Account Accumulation Units
(c) Daily Calculation........................................ Value of Variable Account Accumulation Units;
Allocation of Purchase Payments
(d) Underwriter.............................................. Dean Witter Reynolds Inc.
11. Redemptions
(a) -- By Owners............................................. Surrender & Withdrawals
(b) -- By Annuitant.......................................... Annuity Options
(c) Texas ORP................................................ N/A
(d) Lapse.................................................... Default
(e) Free Look................................................ Introduction
12. Taxes............................................................... Federal Tax Matters
13. Legal Proceedings................................................... N/A
14. SAI Contents........................................................ SAI Table of Contents
15. Cover Page.......................................................... SAI: Cover Page
16. Table of Contents................................................... SAI: Table of Contents
17. General Information & History
(a) Depositor's Name......................................... Northbrook Life Insurance Company
(b) Assets of Sub-Account.................................... The Variable Account
(c) Control of Depositor..................................... Northbrook Life Insurance Company
18. Services
(a) Fees & Expenses of Registrant............................ Contract Maintenance Charge
(b) Management Contracts..................................... Contract Maintenance Charge; Sales Commissions
(c) Custodian SAI: Safekeeping of the Variable Account's
Assets
Independent Public Accountant............................ SAI: Experts
(d) Assets of Registrant..................................... SAI: Safekeeping of the Variable Account
Assets
(e) Affiliated Persons....................................... N/A
(f) Principal Underwriter.................................... Dean Witter Reynolds Inc.
19. Purchase of Securities Being Offered
(a) Offering................................................. SAI: Purchase of Contracts
(b) Sales load............................................... SAI: Sales Commissions
20. Underwriters
(a) Principal Underwriter.................................... N/A
(b) Continuous offering...................................... SAI: Purchase of Contracts
(c) Commissions.............................................. SAI: Sales Commissions; Dean Witter Reynolds
Inc.
(d) Unaffiliated Underwriters................................ N/A
21. Calculation of Performance Data..................................... SAI: Performance Data
22. Annuity Payments.................................................... SAI; Income Payments
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ITEM OF
FORM N-4 PROSPECTUS CAPTION
- -------------------- ----------------------------------------------
<S> <C> <C> <C> <C>
23. Financial Statements
(a) Financial Statements of Registrant....................... SAI; Northbrook Variable Annuity Account
Financial Statements
(b) Financial Statements of Depositor........................ SAI; Northbrook Life Insurance Company
Financial Statements
24a. Financial Statements................................................ Part C. Financial Statements
24b. Exhibits............................................................ Part C. Exhibits
25. Directors and Officers.............................................. Part C. Directors & Officers of Depositor
26. Persons Controlled By or Under Common Control
with Depositor or Registrant........................................ Part C. Persons Controlled by or Under Common
Control with Depositor or Registrant
27. Number of Contract Owners........................................... Part C. Number of Contract Owners
28. Indemnification..................................................... Part C. Indemnification
29a. Relationship of Principal Underwriter to Other
Investment Companies................................................ Part C. Relationship of Principal Underwriter
to Other Investment Companies
29b. Principal Underwriters.............................................. Part C. Principal Underwriters
29c. Compensation of Underwriter......................................... Part C. Compensation of Dean Witter
30. Location of Accounts and Records.................................... Part C. Location of Accounts and Records
31. Management Services................................................. Part C. Management Services
32. Undertakings........................................................ Part C. Undertakings
</TABLE>
<PAGE>
NORTHBROOK VARIABLE ANNUITY ACCOUNT
OF
NORTHBROOK LIFE INSURANCE COMPANY
P.O. BOX 94040
PALATINE, ILLINOIS 60094-4040
INDIVIDUAL VARIABLE ANNUITY CONTRACTS
DISTRIBUTED BY
DEAN WITTER REYNOLDS INC.
TWO WORLD TRADE CENTER
NEW YORK, NEW YORK 10048
-------------------
This Prospectus describes the Flexible Premium Deferred Variable Annuity
Contract ("Contract") offered by Northbrook Life Insurance
Company ("Company"), a wholly owned subsidiary of Allstate Life Insurance
Company. Dean Witter Reynolds Inc. ("Dean Witter") is the principal underwriter
and distributor of the Contracts.
The Contract has the flexibility to allow you to shape an annuity to fit your
particular needs. It is primarily designed to aid you in long-term financial
planning and can be used for retirement planning regardless of whether the plan
qualifies for special federal income tax treatment.
This Prospectus is a concise statement of the relevant information about the
Northbrook Variable Annuity Account ("Variable Account") which you should know
before making a decision to purchase the Contract. This Prospectus generally
describes only the variable portion of the Contract. For a brief summary of the
fixed portion of the Contract, see "The Fixed Account" on page 17.
The Variable Account invests exclusively in shares of the Dean Witter Variable
Investment Series (the "Fund"), a mutual fund managed by Dean Witter
InterCapital Inc., a wholly owned subsidiary of Dean Witter, Discover & Co.
The Company has prepared and filed a Statement of Additional Information dated
May 1, 1997 with the U.S. Securities and Exchange Commission. If you wish to
receive the Statement of Additional Information, you may obtain a free copy by
calling or writing the Company at the address below. For your convenience, an
order form for the Statement of Additional Information may be found on page 23
of this Prospectus. Before ordering, you may wish to review the Table of
Contents of the Statement of Additional Information on page 22 of this
Prospectus. The Statement of Additional Information has been incorporated by
reference into this Prospectus.
NORTHBROOK LIFE INSURANCE COMPANY
P.O. BOX 94040
PALATINE, ILLINOIS 60094-4040
(800) 654-2397
THIS PROSPECTUS IS VALID ONLY WHEN ACCOMPANIED
OR PRECEDED BY A CURRENT PROSPECTUS FOR THE
DEAN WITTER VARIABLE INVESTMENT SERIES
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION, NOR HAS THE COMMISSION PASSED UPON THE ACCURACY
OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
PLEASE READ THIS PROSPECTUS CAREFULLY AND RETAIN IT FOR FUTURE REFERENCE
THE DATE OF THIS PROSPECTUS IS MAY 1, 1997.
<PAGE>
THE CONTRACTS ARE AVAILABLE IN ALL STATES (EXCEPT NEW YORK), PUERTO RICO AND THE
DISTRICT OF COLUMBIA.
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING IN ANY JURISDICTION IN WHICH
SUCH OFFERING MAY NOT LAWFULLY BE MADE. NO DEALER, SALESMAN, OR OTHER PERSON IS
AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY REPRESENTATIONS IN CONNECTION
WITH THIS OFFERING OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN
OR MADE, SUCH OTHER INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON.
TABLE OF CONTENTS
Glossary.................................................... 3
Introduction................................................ 5
Summary of Separate Account Expenses........................ 7
Condensed Financial Information............................. 9
Performance Data............................................ 10
Financial Statements........................................ 10
Northbrook Life Insurance Company and the Variable
Account.................................................... 10
Northbrook Life Insurance Company......................... 10
Dean Witter Reynolds Inc.................................. 10
The Variable Account...................................... 11
The Dean Witter Variable Investment Series................ 11
The Contracts............................................... 12
Purchase of the Contracts................................. 12
Crediting of Purchase Payments............................ 12
Allocation of Purchase Payments........................... 13
Value of Variable Account Accumulation Units.............. 13
Transfers................................................. 13
Surrender and Withdrawals................................. 14
Default................................................... 14
Charges and Other Deductions................................ 14
Deductions from Purchase Payments......................... 14
Contract Maintenance Charge............................... 14
Mortality and Expense Risk Charge......................... 15
Surrender Charge.......................................... 15
Taxes..................................................... 15
Dean Witter Variable Investment Series Expenses........... 15
Benefits Under the Contract................................. 16
Death Benefits Prior to the Income Starting Date.......... 16
Death Benefits After the Income Starting Date............. 16
Income Payments............................................. 16
Income Starting Date...................................... 16
Amount of Variable Annuity Income Payments................ 16
Annuity Options........................................... 17
The Fixed Account........................................... 17
General Description....................................... 17
Transfers, Surrenders, and Withdrawals.................... 18
General Matters............................................. 18
Owner..................................................... 18
Beneficiary............................................... 18
Delay of Payments......................................... 19
Assignments............................................... 19
Modification.............................................. 19
Customer Inquiries........................................ 19
Federal Tax Matters......................................... 19
Introduction.............................................. 19
Taxation of Annuities in General.......................... 19
Tax Deferral............................................ 19
Non-Natural Owners...................................... 19
Diversification Requirements............................ 19
Ownership Treatment..................................... 20
Delayed Maturity Date................................... 20
Taxation of Partial and Full Withdrawals................ 20
Taxation of Annuity Payments............................ 20
Taxation of Annuity Death Benefits...................... 20
Penalty Tax on Premature Distributions.................. 20
Aggregation of Annuity Contracts........................ 20
Tax Qualified Contracts................................... 20
Restrictions Under Section 403(b) Plans................. 21
Income Tax Withholding.................................... 21
Voting Rights............................................... 21
Sales Commission............................................ 21
Statement of Additional Information: Table of Contents...... 22
Order Form.................................................. 23
2
<PAGE>
GLOSSARY
- -----------------------------------------------------------
ACCUMULATION UNIT--An accounting unit used to calculate the Contract Value
in the Variable Account prior to the Income Starting Date. Each Sub-Account of
the Variable Account has its own distinct Accumulation Unit value.
AGE--Age on last birthday.
ANNUITANT--A person whose life determines the duration of annuity payments
involving life contingencies. "Annuitant" may include a Joint Annuitant, if
named prior to January 19, 1985.
ANNUITANT'S BENEFICIARY--The person(s) designated in the Contract who will
receive the Death Benefit when the Annuitant is not an Owner, the Owner is a
natural person, and the Annuitant dies prior to the Income Starting Date. An
irrevocable Annuitant's Beneficiary is an Annuitant's Beneficiary whose written
consent is required before you may change the Annuitant's Beneficiary, make the
Annuitant an Owner, or make an assignment.*
ANNUITY UNIT--An accounting unit used to calculate Variable Annuity
payments. Each Sub-Account has a distinct Annuity Unit value.
AUTOMATIC ADDITIONS--Additional Purchase Payments of $25 or more which are
made automatically from the Owner's bank account or Dean Witter Active
Assets-TM- Account.
AUTOMATIC INCOME--Partial withdrawals of $100 or more may be taken
automatically from the Contract Value and sent to the Owner or deposited in the
Owner's bank account or Dean Witter Active Assets-TM- Account or sent directly
to the Owner.
BENEFICIARY--The person to whom benefits will be paid upon the earlier of
the Owner's or Annuitant's death, including any contingent beneficiary. In the
event a Beneficiary is not named, the Company will treat the Contract Owner or
the estate of the Contract Owner as the Beneficiary. Under the revised Contract
(see footnote below), the Beneficiary may be either the Owner's Beneficiary or
the Annuitant's Beneficiary.*
COMPANY--The issuer of the Contract, Northbrook Life Insurance Company,
which is a wholly owned subsidiary of Allstate Life Insurance Company.
CONTINGENT ANNUITANT--The person who will become the Annuitant, if the
Annuitant and Joint Annuitant, if applicable, die prior to the Income Starting
Date. A Contingent Annuitant must be named prior to the death of the Annuitant
or the Income Starting Date, whichever occurs first.*
CONTINGENT OWNER--The person who will become Owner of the Contract upon the
death(s) of the Owner and any Joint Owner, so long as the Annuitant or Joint
Annuitant, if applicable, is still living.*
CONTRACT--The Flexible Premium Deferred Variable Annuity Contract known as
the "Dean Witter Variable Annuity," that is described in this prospectus (in
Oregon, Pennsylvania and Texas, the Contract is known as the "Northbrook
Variable Annuity").
CONTRACT ANNIVERSARY--An anniversary of the date that the Contract was
issued to the Contract Owner.*
CONTRACT VALUE--The sum of the value of all Accumulation Units for the
Variable Account plus the value in the Fixed Account.
CONTRACT YEAR--The year commencing on either the Issue Date or a Contract
Anniversary.
DATE OF DEATH--The Date that an Owner and/or Annuitant dies causing a Death
Benefit to be due.*
DEATH BENEFIT--The amount payable to the Beneficiary on the death of the
Annuitant (and Joint Annuitant, if named prior to January 19, 1985) so long as
no Contingent Annuitant is living, and so long as the death occurs on or before
the date the IRS Required Distribution must be made or the Income Starting Date,
whichever is earlier.
DOLLAR COST AVERAGING--A method to transfer $100 or more of the Contract
Value in the Money Market Sub-Account automatically to the other Sub-Accounts on
a monthly basis.
DUE PROOF OF DEATH--One of the following
(a) A copy of a certified death certificate.
(b) A copy of a certified decree of a court of competent jurisdiction as
to the finding of death.
(c) Any other proof satisfactory to the Company.
FIXED ACCOUNT--All of the assets of the Company that are not in separate
accounts.
3
<PAGE>
FIXED ANNUITY--An annuity with payments having a guaranteed amount.
FREE WITHDRAWAL AMOUNT--A portion of the Contract Value which may be
withdrawn without incurring a Surrender Charge, i.e., 10% of all Purchase
Payments made at least one year before the date of withdrawal.
FUND--The Dean Witter Variable Investment Series.
INCOME PAYMENTS--A series of periodic annuity payments made by the Company
to the Contract Owner or Beneficiary.
INCOME STARTING DATE--The date Income Payments are to begin under the
Contract.
INVESTMENT ALTERNATIVE--The Fixed Account and the thirteen Sub-Accounts of
the Variable Account constitute the fourteen Investment Alternatives.
JOINT ANNUITANT--The person, along with the Annuitant, whose life determines
the duration of annuity payments under a joint and last survivor annuity. If a
Joint Annuitant was named before January 19, 1985, the Joint Annuitant is the
person who will become the Annuitant if the Annuitant dies prior to the Income
Starting Date.
NET INVESTMENT FACTOR--The factor for a particular Sub-Account used to
determine the value of an Accumulation Unit and Annuity Unit in any Valuation
Period.
NON-QUALIFIED CONTRACTS--Contracts that do not qualify for special federal
income tax treatment.
OWNER--The person designated as the owner in the Contract or as subsequently
changed. If a Contract is jointly owned, rights and privileges under the
Contract must be exercised jointly by each Owner. If a Contract has been
absolutely assigned, the assignee is the Owner. A collateral assignee is not an
Owner.
OWNER'S BENEFICIARY--The person(s) designated in the Contract who, after the
death of all Owners, may elect to receive the Death Benefit or continue the
Contract as described in "Benefits Under the Contract" on page 16. An
irrevocable Owner's Beneficiary is an Owner's Beneficiary whose consent is
required before you may change the Owner's Beneficiary, add an Owner, or make an
assignment.*
PORTFOLIOS--The mutual fund portfolios of The Dean Witter Variable
Investment Series (formerly named Dean Witter Variable Annuity Investment
Series). The Dean Witter Variable Investment Series has thirteen separate
Portfolios: the Money Market Portfolio, the Quality Income Plus Portfolio, the
High Yield Portfolio, the Utilities Portfolio, the Income Builder Portfolio, the
Dividend Growth Portfolio, the Capital Growth Portfolio, the Global Dividend
Growth Portfolio, the European Growth Portfolio, the Pacific Growth Portfolio,
the Capital Appreciation Portfolio, the Equity Portfolio and the Strategist
Portfolio.
PURCHASE PAYMENTS--The premiums paid by the Owner to the Company.
QUALIFIED CONTRACTS--Contracts issued under plans that qualify for special
federal income tax treatment.
REQUIRED MINIMUM DISTRIBUTION--For Qualified Contracts, withdrawals equal to
the IRS Required Minimum Distribution may be taken from the Cash Value and sent
to the Owner or deposited in the Owner's bank account or Dean Witter Active
Assets-TM- Account.
SUB-ACCOUNT--A sub-division of the Variable Account. Each Sub-Account
invests exclusively in shares of a specified Portfolio.
SURRENDER CHARGE--The charge that may be assessed by the Company on full or
partial withdrawals of the Contract Value in excess of the Free Withdrawal
Amount.
VALUATION DATE--Each day that the New York Stock Exchange is open for
business, and any other day in which there is sufficient degree of trading in
the Variable Account's portfolio securities that the value of Accumulation or
Annuity Units might be materially affected by changes in the value of the
portfolio securities. The Valuation Date does not include such other Federal and
non-Federal holidays as are observed by the New York Stock Exchange.
VALUATION PERIOD--The period between successive Valuation Dates, commencing
at the close of business of each Valuation Date and ending at the close of
business of the next succeeding Valuation Date.
VARIABLE ACCOUNT--Northbrook Variable Annuity Account, a separate investment
account established by the Company to receive and invest the Purchase Payments
paid under the Contracts.
VARIABLE ANNUITY--An annuity with payments that have no predetermined or
guaranteed dollar amounts. The payments will vary in amounts depending upon the
investment experience of one or more of the Portfolios.
*The Company revised the Contract on March 1, 1990. These designations have been
modified in the revised Contract for clarification.
4
<PAGE>
INTRODUCTION
- -----------------------------------------------------------
1. WHAT IS THE PURPOSE OF THE CONTRACT?
The Contract seeks to allow you to accumulate funds and to receive Income
Payments which reflect changes in the cost of living before and after
retirement. THERE IS NO ASSURANCE THAT THIS GOAL WILL BE ACHIEVED. In attempting
to achieve this goal, the Owner can allocate Purchase Payments to one or more of
the Variable Account Portfolios.
Because Contract Values and Income Payments depend on the investment experience
of the selected Portfolios, the Owner bears the entire investment risk for
amounts allocated to the Variable Account. See "Value of Variable Account
Accumulation Units," pg. 13 and "Income Payments," pg. 16.
2. WHAT TYPES OF INVESTMENTS UNDERLIE THE VARIABLE ACCOUNT?
The Variable Account invests exclusively in shares of the Dean Witter
Variable Investment Series (the "Fund"), a mutual fund managed by Dean Witter
InterCapital Inc., a wholly owned subsidiary of Dean Witter Reynolds Inc. The
Fund has thirteen Portfolios: the Money Market Portfolio, the Quality Income
Plus Portfolio, the High Yield Portfolio, the Utilities Portfolio, the Income
Builder Portfolio, the Dividend Growth Portfolio, the Capital Growth Portfolio,
the Global Dividend Growth Portfolio, the European Growth Portfolio, the Pacific
Growth Portfolio, the Capital Appreciation Portfolio, the Equity Portfolio and
the Strategist Portfolio. The assets of each Portfolio are held separately from
the other Portfolios and each has distinct investment objectives and policies
which are described in the accompanying Prospectus for the Fund.
3. HOW DO I PURCHASE A CONTRACT?
The Company has discontinued the offering of new Contracts. Additional
Purchase Payments to existing Contracts are accepted by the Company.
Automatic Additions allow you to systematically build toward your long-term
financial plan on a monthly basis by making subsequent Purchase Payments from
your bank account or your Dean Witter Active Assets-TM- Account. Subsequent
Purchase Payments must be $25 or more and may be made at any time prior to the
Income Starting Date.
The Company may limit the total Purchase Payments in any year to three times the
Purchase Payments made during the first Contract Year. See "Purchase of the
Contracts," pg. 12 and "Crediting of Purchase Payments," pg. 12.
4. HOW DO I ALLOCATE PURCHASE PAYMENTS?
On your application, you will allocate your Purchase Payment among the
Sub-Accounts and the Fixed Account. All allocations must be in whole percents
from 0% to 100% and must total 100%. Allocations may be changed by notifying the
Company in writing. See "Allocation of Purchase Payments," pg. 13.
5. CAN I TRANSFER AMOUNTS AMONG THE SUB-ACCOUNTS?
Transfers can be made among the thirteen Sub-Accounts and the Fixed Account
without charge. Transfers must be at least $100 or the entire amount in the
Investment Alternative whichever is less.
Dollar Cost Averaging automatically moves funds from the Money Market
Sub-Account on a monthly basis to other Sub-Accounts of your choice.
Certain transfers may be restricted. See "Transfers," pg. 13.
6. CAN I GET MY MONEY IF I NEED IT?
All or part of the Contract Value can be withdrawn before the earliest of
the Income Starting Date, the death of any Owner or the death of the last
surviving Annuitant. Partial withdrawals may also be taken automatically through
monthly Automatic Income withdrawals. See "Surrender and Withdrawals," pg. 14.
No Surrender Charges will be deducted from the first withdrawal in a Contract
Year on amounts up to the Free Withdrawal Amount. Amounts withdrawn in excess of
the Free Withdrawal Amount may be subject to a Surrender Charge of 0% to 6%
depending on how long the withdrawn Purchase Payments have been invested in the
Contract. THE COMPANY GUARANTEES THAT THE AGGREGATE SURRENDER CHARGES WILL NEVER
EXCEED 7% OF THE PURCHASE PAYMENTS.
5
<PAGE>
For Non-Qualified Contracts, i.e. Contracts not qualifying for special tax
treatment, a penalty tax may be imposed on withdrawals. Federal and state income
tax may be withheld from withdrawal and surrender amounts. Qualified Contracts
may also have certain restrictions and penalties on withdrawals. See "Surrender
and Withdrawals," pg. 14, and "Taxation of Annuities in General," pg. 19.
7. WHAT ARE THE CHARGES AND DEDUCTIONS UNDER THE CONTRACT?
To allow you to invest the entire Purchase Payment, the Company currently
does not deduct sales charges at the time of investment. Annually, however, the
Company deducts $30 for maintaining the Contract ("Contract Maintenance
Charge"). THIS AMOUNT IS GUARANTEED NOT TO INCREASE. See "Contract Maintenance
Charge," pg. 14, for how and when this charge is deducted.
The Company deducts a daily charge equal on an annual basis to 1.0% of the
Contract's daily net assets of the Variable Account and will reflect this charge
in the net interest rate credited to amounts in the Fixed Account allocable to
the Contracts in order to pay the Death Benefit and expenses not covered by the
Contract Maintenance Charge. See "Mortality and Expense Risk Charge," pg. 15.
Additional deductions may be made for certain taxes. Ordinarily, premium taxes
will be deducted when money is withdrawn from the Contract or when Income
Payments under an Annuity Option begin. The Company reserves the right to deduct
such taxes from Purchase Payments at the time such taxes are incurred.
Currently, no deductions are made for capital gains tax reserve.
8. WHAT ANNUITY OPTIONS ARE AVAILABLE UNDER THE CONTRACT?
The Owner may receive Income Payments on a completely variable basis, a
completely fixed basis, or a variable and fixed basis. The Owner has some
flexibility in choosing when Income Payments begin. Payments must begin by the
later of the month following the Annuitant's 85th birthday or the 10th Contract
Anniversary. See "Income Payments," pg. 16 and "Income Starting Date," pg. 16.
Three Annuity Options are listed in the Contract: (1) payments for life of the
Annuitant, but with 120 monthly payments guaranteed; (2) payments for a
specified period; and (3) payments for the life of the Annuitant and Joint
Annuitant. Other options may be available at the Company's discretion; however,
Surrender Charges may apply if Income Payments are made for a specified period
of less than 120 months. See "Annuity Options," pg. 17.
Federal tax law may limit the availability of Annuity Options.
9. DOES THE CONTRACT PAY ANY GUARANTEED DEATH BENEFITS?
Death benefits will be paid to the Beneficiary if the Owner(s) or the
Annuitant(s) (and no Contingent Annuitant is still living), die before the
Income Starting Date. The Death Benefit will be the greater of (1) the sum of
all Purchase Payment(s) less any amounts deducted in connection with partial
withdrawals, including any Surrender Charges, or (2) the Contract Value. Death
benefits after the Income Starting Date, if any, will depend on the Annuity
Option chosen.
The Beneficiary has 180 days from the date of death of the Owner(s) or the
Annuitant(s) to either elect an Annuity Option or to take a lump sum payment.
See "Benefits Under the Contract," pg. 16.
10. IS THERE A FREE-LOOK PROVISION?
Owners may cancel a Contract anytime within 10 days after receipt of the
Contract and receive a full refund of Purchase Payments allocated to the Fixed
Account. Unless a refund of Purchase Payments is required by State or Federal
law, Purchase Payments allocated to the Variable Account will be returned after
an adjustment to reflect investment gain or loss that occurred from the date of
allocation through the date of cancellation.
11. DOES THE CONTRACT OWNER HAVE ANY VOTING RIGHTS UNDER THE CONTRACT?
The Owner can instruct the Company how to vote shares of any eligible
Portfolio attributable to the Contract. See "Voting Rights," pg. 21.
* * *
This prospectus describes only the variable aspects of the Contract, except
where fixed aspects are specifically mentioned. See pg. 17 for a brief summary
of the Fixed Account.
6
<PAGE>
SUMMARY OF SEPARATE ACCOUNT EXPENSES
- -----------------------------------------------------------
The following fee table illustrates all expenses and fees that the Owners will
incur. The expenses and fees set forth in the table are based on charges under
the Contracts and on the expenses of the separate account and the underlying
Fund for the fiscal year ended December 31, 1996.
OWNER TRANSACTION EXPENSES (ALL SUB-ACCOUNTS)
<TABLE>
<S> <C>
Sales Load Imposed on Purchases (as a percentage of Purchase Payments).............................. None
Contingent Deferred Sales Charge (as a percentage of amount surrendered)*
</TABLE>
<TABLE>
<CAPTION>
APPLICABLE SALES
CHARGE
ELAPSED TIME SINCE PURCHASE PAYMENT BEING WITHDRAWN WAS MADE PERCENTAGE
- -------------------------------------------------------------------------------------------------------------- ----------------
<S> <C>
Less than 1 year.............................................................................................. 6%
1 year, but less than 2 years................................................................................. 5%
2 years, but less than 3 years................................................................................ 4%
3 years, but less than 4 years................................................................................ 3%
4 years, but less than 5 years................................................................................ 2%
5 years, but less than 6 years................................................................................ 1%
6 years or more............................................................................................... 0%
</TABLE>
<TABLE>
<S> <C>
Exchange Fee........................................................................................ None
Annual Contract Fee................................................................................. $ 30
</TABLE>
SEPARATE ACCOUNT ANNUAL EXPENSES (AS A PERCENTAGE OF AVERAGE ACCOUNT VALUE)
<TABLE>
<S> <C>
Mortality and Expense Risk Charges:............................................................. 1%
Total Separate Account Annual Expenses:......................................................... 1%
</TABLE>
- ------------------------
* There are no Contingent Deferred Sales Charges on the first withdrawal of
each Contract Year on amounts up to the Free Withdrawal Amount.
DEAN WITTER VARIABLE INVESTMENT SERIES ("FUND") EXPENSES
(AS A PERCENTAGE OF FUND AVERAGE NET ASSETS)
<TABLE>
<CAPTION>
MANAGEMENT OTHER TOTAL FUND
PORTFOLIO FEES EXPENSES ANNUAL EXPENSES
- ------------------------------------------------------------------------------ ------------- ------------ -----------------
<S> <C> <C> <C>
Money Market.................................................................. .50% .02% .52%
Quality Income Plus........................................................... .50%(1) .03% .53%
High Yield.................................................................... .50% .01% .51%
Utilities..................................................................... .65%(2) .02% .67%
Income Builder................................................................ .75%(3) .07% .82%
Dividend Growth............................................................... .56%(4) .01% .57%
Capital Growth................................................................ .65% .08% .73%
Global Dividend Growth........................................................ .75% .10% .85%
European Growth............................................................... 1.00% .11% 1.11%
Pacific Growth................................................................ 1.00% .37% 1.37%
Capital Appreciation.......................................................... .75%(3) .07% .82%
Equity........................................................................ .50%(5) .04% .54%
Strategist.................................................................... .50% .02% .52%
</TABLE>
- ------------------------
(1) This percentage is applicable to Portfolio net assets of up to $500
million. For net assets which exceed $500 million, the management fee will
be 0.45%.
(2) This percentage is applicable to Portfolio net assets of up to $500
million. For net assets which exceed $500 million, the management fee will
be 0.55%.
(3) Dean Witter InterCapital Inc. has undertaken to assume all expenses for
both the Income Builder Portfolio and the Capital Appreciation Portfolio
until such time as the pertinent Portfolio has $50 million of net assets or
until six months from the date of the Portfolio's commencement of
operations, whichever occurs first.
(4) The management fee will be 0.625% for net assets of up to $500 million. For
net assets which exceed $500 million, but do not exceed $1 billion, the
management fee will be 0.50% and for net assets that exceed $1 billion, the
management fee will be 0.475%.
(5) This percentage is applicable to Portfolio net assets of up to $1 billion.
For net assets which exceed $1 billion, the management fee will be 0.475%.
7
<PAGE>
EXAMPLE
You (the Owner) would pay the following expenses on a $1,000 investment,
assuming a 5% annual return under the following circumstances:
If you surrender your Contract at the end of the applicable time period (or if
you annuitize for a specified period of less than 120 months):
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
----- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Money Market Sub-Account............................................... $ 63 $ 80 $ 97 $ 188
Quality Income Plus Sub-Account........................................ $ 63 $ 81 $ 98 $ 189
High Yield Sub-Account................................................. $ 63 $ 80 $ 97 $ 187
Utilities Sub-Account.................................................. $ 64 $ 85 $ 105 $ 205
Income Builder Sub-Account............................................. $ 66 $ 90 $ 113 $ 221
Dividend Growth Sub-Account............................................ $ 63 $ 82 $ 100 $ 194
Capital Growth Sub-Account............................................. $ 65 $ 87 $ 108 $ 211
Global Dividend Growth Sub-Account..................................... $ 66 $ 90 $ 114 $ 224
European Growth Sub-Account............................................ $ 69 $ 98 $ 128 $ 252
Pacific Growth Sub-Account............................................. $ 71 $ 106 $ 141 $ 279
Capital Appreciation Sub-Account....................................... $ 66 $ 90 $ 113 $ 221
Equity Sub-Account..................................................... $ 63 $ 81 $ 99 $ 191
Strategist Sub-Account................................................. $ 63 $ 81 $ 98 $ 189
</TABLE>
If you do not surrender your Contract or if you annuitize* for a specified
period of 120 months or more, at the end of the applicable time period:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
----- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Money Market Sub-Account............................................... $ 16 $ 50 $ 86 $ 188
Quality Income Plus Sub-Account........................................ $ 16 $ 51 $ 87 $ 189
High Yield Sub-Account................................................. $ 16 $ 50 $ 86 $ 187
Utilities Sub-Account.................................................. $ 18 $ 55 $ 94 $ 205
Income Builder Sub-Account............................................. $ 19 $ 60 $ 103 $ 221
Dividend Growth Sub-Account............................................ $ 17 $ 52 $ 89 $ 194
Capital Growth Sub-Account............................................. $ 18 $ 57 $ 98 $ 211
Global Dividend Growth Sub-Account..................................... $ 20 $ 61 $ 104 $ 224
European Growth Sub-Account............................................ $ 22 $ 69 $ 117 $ 252
Pacific Growth Sub-Account............................................. $ 25 $ 77 $ 131 $ 279
Capital Appreciation Sub-Account....................................... $ 19 $ 60 $ 103 $ 221
Equity Sub-Account..................................................... $ 16 $ 51 $ 88 $ 191
Strategist Sub-Account................................................. $ 16 $ 50 $ 87 $ 189
</TABLE>
The above example should not be considered a representation of past or future
expense or performance. Actual expenses of a Sub-Account may be greater or
lesser than those shown. The purpose of this summary is to assist the Owner in
understanding the various costs and expenses that Owners will bear directly and
indirectly. Premium taxes are not reflected in the example but may be
applicable.
- ------------------------
* Early Withdrawal Charges may be deducted from the Cash Value before it is
applied to an income plan with a specified period of less than 120 months.
8
<PAGE>
CONDENSED FINANCIAL INFORMATION
- -----------------------------------------------------------
<TABLE>
<CAPTION>
ACCUMULATION UNIT VALUES AND NUMBER
OF ACCUMULATION UNITS OUTSTANDING FOR
EACH SUB-ACCOUNT*
FOR THE PERIODS ENDING DECEMBER 31
------------------------------------------------------------------------------
1986 1987 1988 1989 1990 1991 1992
---------- ---------- ---------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
MONEY MARKET SUB-ACCOUNT
Accumulation Unit Value, Beginning of
Period................................. $11.430 $12.043 $12.669 $13.459 $14.532 $15.530 $16.260
Accumulation Unit Value, End of
Period................................. $12.043 $12.669 $13.459 $14.532 $15.530 $16.260 $16.651
Number of Units Outstanding, End of
Period................................. 3,501,808 5,479,058 5,743,470 5,269,945 7,300,227 4,993,305 3,142,381
QUALITY INCOME PLUS SUB-ACCOUNT
Accumulation Unit Value, Beginning of
Period................................. -- $10.000 $10.172 $10.828 $12.097 $12.798 $15.016
Accumulation Unit Value, End of
Period................................. -- $10.172 $10.828 $12.097 $12.798 $15.016 $16.096
Number of Units Outstanding, End of
Period................................. -- 2,366,834 2,589,488 4,028,103 4,292,424 4,272,603 4,167,157
HIGH YIELD SUB-ACCOUNT
Accumulation Unit Value, Beginning of
Period................................. $14.019 $16.407 $15.745 $17.324 $14.993 $10.864 $17.064
Accumulation Unit Value, End of
Period................................. $16.407 $15.745 $17.324 $14.993 $10.864 $17.064 $20.008
Number of Units Outstanding, End of
Period................................. 12,472,735 12,161,618 11,091,971 6,425,388 2,487,589 1,973,508 1,677,444
UTILITIES SUB-ACCOUNT
Accumulation Unit Value, Beginning of
Period................................. -- -- -- -- $10.000 $10.365 $12.372
Accumulation Unit Value, End of
Period................................. -- -- -- -- $10.365 $12.372 $13.797
Number of Units Outstanding, End of
Period................................. -- -- -- -- 3,364,215 3,655,014 3,883,303
INCOME BUILDER SUB-ACCOUNT
Accumulation Unit Value, Beginning of
Period................................. -- -- -- -- -- -- --
Accumulation Unit Value, End of
Period................................. -- -- -- -- -- -- --
Number of Units Outstanding, End of
Period................................. -- -- -- -- -- -- --
DIVIDEND GROWTH SUB-ACCOUNT
Accumulation Unit Value, Beginning of
Period................................. -- -- -- -- $10.000 $9.143 $11.564
Accumulation Unit Value, End of
Period................................. -- -- -- -- $9.143 $11.564 $12.383
Number of Units Outstanding, End of
Period................................. -- -- -- -- 5,838,210 5,646,884 6,048,975
CAPITAL GROWTH SUB-ACCOUNT
Accumulation Unit Value, Beginning of
Period................................. -- -- -- -- -- $10.000 $12.735
Accumulation Unit Value, End of
Period................................. -- -- -- -- -- $12.735 $12.814
Number of Units Outstanding, End of
Period................................. -- -- -- -- -- 468,488 681,326
GLOBAL DIVIDEND GROWTH SUB-ACCOUNT
Accumulation Unit Value, Beginning of
Period................................. -- -- -- -- -- -- --
Accumulation Unit Value, End of
Period................................. -- -- -- -- -- -- --
Number of Units Outstanding, End of
Period................................. -- -- -- -- -- -- --
EUROPEAN GROWTH SUB-ACCOUNT
Accumulation Unit Value, Beginning of
Period................................. -- -- -- -- -- $10.000 $10.050
Accumulation Unit Value, End of
Period................................. -- -- -- -- -- $10.050 $10.347
Number of Units Outstanding, End of
Period................................. -- -- -- -- -- 101,037 251,802
PACIFIC GROWTH SUB-ACCOUNT
Accumulation Unit Value, Beginning of
Period................................. -- -- -- -- -- -- --
Accumulation Unit Value, End of
Period................................. -- -- -- -- -- -- --
Number of Units Outstanding, End of
Period................................. -- -- -- -- -- -- --
CAPITAL APPRECIATION SUB-ACCOUNT
Accumulation Unit Value, Beginning of
Period................................. -- -- -- -- -- -- --
Accumulation Unit Value, End of
Period................................. -- -- -- -- -- -- --
Number of Units Outstanding, End of
Period................................. -- -- -- -- -- -- --
EQUITY SUB-ACCOUNT
Accumulation Unit Value, Beginning of
Period................................. $13.511 $15.623 $14.510 $15.786 $18.580 $17.728 $27.916
Accumulation Unit Value, End of
Period................................. $15.623 $14.510 $15.786 $18.580 $17.728 $27.916 $27.681
Number of Units Outstanding, End of
Period................................. 2,767,931 3,615,560 2,524,904 3,123,809 2,302,425 2,025,964 1,886,301
STRATEGIST SUB-ACCOUNT
Accumulation Unit Value, Beginning of
Period................................. -- $10.000 $10.036 $11.211 $12.284 $12.351 $15.684
Accumulation Unit Value, End of
Period................................. -- $10.036 $11.211 $12.284 $12.351 $15.684 $16.651
Number of Units Outstanding, End of
Period................................. -- 2,689,906 5,526,856 7,164,494 5,424,907 4,805,519 4,762,207
<CAPTION>
1993 1994 1995 1996
--------- --------- ---------- ----------
<S> <C> <C> <C> <C>
MONEY MARKET SUB-ACCOUNT
Accumulation Unit Value, Beginning of
Period................................. $16.651 $16.940 $17.411 $18.215
Accumulation Unit Value, End of
Period................................. $16.940 $17.411 $18.215 $18.955
Number of Units Outstanding, End of
Period................................. 2,402,295 2,408,602 1,486,360 1,225,023
QUALITY INCOME PLUS SUB-ACCOUNT
Accumulation Unit Value, Beginning of
Period................................. $16.096 $18.010 $16.648 $20.498
Accumulation Unit Value, End of
Period................................. $18.010 $16.648 $20.498 $20.608
Number of Units Outstanding, End of
Period................................. 3,998,449 2,779,045 2,159,205 1,301,162
HIGH YIELD SUB-ACCOUNT
Accumulation Unit Value, Beginning of
Period................................. $20.008 $24.609 $23.759 $27.055
Accumulation Unit Value, End of
Period................................. $24.609 $23.759 $27.055 $29.993
Number of Units Outstanding, End of
Period................................. 1,537,549 1,202,135 906,011 712,341
UTILITIES SUB-ACCOUNT
Accumulation Unit Value, Beginning of
Period................................. $13.797 $15.804 $14.235 $18.132
Accumulation Unit Value, End of
Period................................. $15.804 $14.235 $18.132 $19.509
Number of Units Outstanding, End of
Period................................. 3,932,991 2,814,866 2,298,190 1,419,955
INCOME BUILDER SUB-ACCOUNT
Accumulation Unit Value, Beginning of
Period................................. -- -- -- --
Accumulation Unit Value, End of
Period................................. -- -- -- --
Number of Units Outstanding, End of
Period................................. -- -- -- --
DIVIDEND GROWTH SUB-ACCOUNT
Accumulation Unit Value, Beginning of
Period................................. $12.383 $14.019 $13,425 $18.128
Accumulation Unit Value, End of
Period................................. $14.019 $13.425 $18.128 $22.248
Number of Units Outstanding, End of
Period................................. 5,878,916 5,229,279 4,402,940 3,144,203
CAPITAL GROWTH SUB-ACCOUNT
Accumulation Unit Value, Beginning of
Period................................. $12.814 $11.799 $11.533 $15.177
Accumulation Unit Value, End of
Period................................. $11.799 $11.533 $15.177 $16.760
Number of Units Outstanding, End of
Period................................. 457,147 321,342 256,312 192,504
GLOBAL DIVIDEND GROWTH SUB-ACCOUNT
Accumulation Unit Value, Beginning of
Period................................. -- $10.000 $9.942 $12.012
Accumulation Unit Value, End of
Period................................. -- $9.942 $12.012 $13.984
Number of Units Outstanding, End of
Period................................. -- 951,857 852,851 725,977
EUROPEAN GROWTH SUB-ACCOUNT
Accumulation Unit Value, Beginning of
Period................................. $10.347 $14.433 $15.484 $19.299
Accumulation Unit Value, End of
Period................................. $14.433 $15.484 $19.299 $24.837
Number of Units Outstanding, End of
Period................................. 767,814 868.638 649,852 545,184
PACIFIC GROWTH SUB-ACCOUNT
Accumulation Unit Value, Beginning of
Period................................. -- $10.000 $9.248 $9.682
Accumulation Unit Value, End of
Period................................. -- $9.248 $9.682 $9.957
Number of Units Outstanding, End of
Period................................. -- 644,451 608,464 523,417
CAPITAL APPRECIATION SUB-ACCOUNT
Accumulation Unit Value, Beginning of
Period................................. -- -- -- --
Accumulation Unit Value, End of
Period................................. -- -- -- --
Number of Units Outstanding, End of
Period................................. -- -- -- --
EQUITY SUB-ACCOUNT
Accumulation Unit Value, Beginning of
Period................................. $27.681 $32.807 $30.885 $43.585
Accumulation Unit Value, End of
Period................................. $32.807 $30.885 $43.585 $48.483
Number of Units Outstanding, End of
Period................................. 1,800,750 1,652,850 1,314,532 968,987
STRATEGIST SUB-ACCOUNT
Accumulation Unit Value, Beginning of
Period................................. $16.651 $18.199 $18.728 $20.284
Accumulation Unit Value, End of
Period................................. $18.199 $18.728 $20.284 $23.098
Number of Units Outstanding, End of
Period................................. 4,409,391 3,994,684 2,708,051 1,937,096
</TABLE>
- ----------------------------------
* The Money Market, High Yield and Equity Sub-Accounts commenced operations on
March 9, 1984. The Quality Income Plus and Strategist Sub-Accounts commenced
operations on March 1, 1987. The Utilities and Dividend Growth Sub-Accounts
commenced operations on March 1, 1990. The Capital Growth and European Growth
Sub-Accounts commenced operations on March 1, 1991. The Global Dividend
Growth and Pacific Growth Sub-Accounts commenced operations on February 23,
1994. The Income Builder and Capital Appreciation Sub-Accounts commenced
operations on January 21, 1997. The Accumulation Unit Value for each of these
Sub-Accounts was initially set at $10.000. The Accumulation Unit Values in
this table reflect a Mortality and Expense Risk Charge of 1%.
9
<PAGE>
PERFORMANCE DATA
- -----------------------------------------------------------
From time to time the Variable Account may publish advertisements containing
performance data relating to its Sub-Accounts. The performance data for the
Sub-Accounts (other than for the Money Market Sub-Account) will always be
accompanied by total return quotations for the most recent one, five or ten year
periods, or for a period from inception to date if the Sub-Account has not been
available for one of the prescribed periods. The total return quotations for
each period will be the average annual rates of return required for an initial
Purchase Payment of $1,000 to equal the amount Owners would receive on a
withdrawal of the Purchase Payment, after reflection of all recurring and
nonrecurring charges.
In addition, the Variable Account may advertise the total return over different
periods of time by means of aggregate, average, year-by-year or other types of
total return figures. Such calculations may or may not reflect the deduction of
some or all of the charges which may be imposed on the Contracts by the Variable
Account which, if reflected, would reduce the performance quoted. The Variable
Account from time to time may also advertise the performance of the Sub-Accounts
relative to certain performance rankings and indexes compiled by independent
organizations.
Performance figures used by the Variable Account are based on actual historical
performance of its Sub-Accounts for specified periods, and the figures are not
intended to indicate future performance. More detailed information on the
computation is set forth in the Statement of Additional Information.
FINANCIAL STATEMENTS
- -----------------------------------------------------------
The financial statements of the Northbrook Variable Annuity Account and
Northbrook Life Insurance Company may be found in the Statement of Additional
Information, which is
incorporated by reference into this Prospectus and which is available upon
request. (See Order Form on pg. 23.)
NORTHBROOK LIFE INSURANCE COMPANY AND
THE VARIABLE ACCOUNT
- -----------------------------------------------------------
NORTHBROOK LIFE INSURANCE COMPANY
The Company is the issuer of the Contract. Incorporated in 1978 as a stock life
insurance company under the laws of Illinois, the Company sells annuities and
individual life insurance. The Company is currently licensed to operate in the
District of Columbia, all states (except New York) and Puerto Rico. The
Company's home office is located at 3100 Sanders Road, Northbrook, Illinois,
60062.
The Company is a wholly owned subsidiary of Allstate Life Insurance Company
("Allstate Life"), which is a stock life insurance company incorporated under
the laws of Illinois. Allstate Life is a wholly owned subsidiary of Allstate
Insurance Company ("Allstate"), which is a stock insurance company incorporated
under the laws of Illinois. With the exception of directors' qualifying shares,
all of the outstanding capital stock of Allstate is owned by The Allstate
Corporation ("Corporation"). On June 30, 1995, Sears, Roebuck and Co. ("Sears")
distributed its 80.3% ownership in the Corporation to Sears common shareholders
through a tax-free dividend.
DEAN WITTER REYNOLDS INC.
Dean Witter Reynolds Inc. ("Dean Witter") is the principal underwriter of the
Contract. Dean Witter is a wholly owned subsidiary of Dean Witter, Discover &
Co. ("Dean Witter Discover"). Dean Witter is located at Two World Trade Center,
New York, New York, 10048. Dean Witter is a member of the New York Stock
Exchange and the National Association of Securities Dealers, Inc.
Dean Witter's wholly owned subsidiary, Dean Witter InterCapital Inc.
("InterCapital"), is the investment manager of the Dean Witter Variable
Investment Series. InterCapital is registered with the Securities and Exchange
Commission as an investment adviser. As compensation for investment management,
the Fund
10
<PAGE>
pays InterCapital a monthly advisory fee. These expenses are more fully
described in the Fund's prospectus attached to this prospectus.
On February 5, 1997, Dean Witter Discover and Morgan Stanley Group Inc.
announced that they had entered into an Agreement and Plan of Merger, with the
combined company to be named Morgan Stanley, Dean Witter, Discover & Co. The
business of Morgan Stanley Group Inc. and its affiliated companies is providing
a wide range of financial services for sovereign governments, corporations,
institutions and individuals throughout the world. Dean Witter Discover is the
direct parent of InterCapital and Dean Witter Distributors Inc., the Fund's
distributor. It is currently anticipated that the transaction will close in
mid-1997. Thereafter, InterCapital and Dean Witter Distributors Inc. will be
direct subsidiaries of Morgan Stanley, Dean Witter, Discover & Co.
In October, 1993, Allstate through Allstate Life and the Company, announced a
strategic alliance to develop, market and distribute proprietary annuity and
life insurance products through Dean Witter account executives.
THE VARIABLE ACCOUNT
Established on February 14, 1983, the Variable Account is a unit investment
trust registered with the Securities and Exchange Commission under the
Investment Company Act of 1940, but such registration does not signify that the
Commission supervises the management or investment practices or policies of the
Variable Account. The investment performance of the Variable Account is entirely
independent of both the investment performance of the Company's general account
and the performance of any other separate account.
The assets of the Variable Account are held separately from the other assets of
the Company. They are not chargeable with liabilities incurred in the Company's
other business operations. Accordingly, the income, capital gains and capital
losses, realized or unrealized, incurred on the assets of the Variable Account
are credited to or charged against the assets of the Variable Account, without
regard to the income, capital gains or capital losses arising out of any other
business the Company may conduct.
The Variable Account has been divided into thirteen Sub-Accounts, each of which
invests solely in its corresponding Portfolio of the Dean Witter Variable
Investment Series. Additional Sub-Accounts may be added at the discretion of the
Company.
THE DEAN WITTER VARIABLE INVESTMENT SERIES
The Variable Account will invest exclusively in the Dean Witter Variable
Investment Series (the "Fund"). Shares of the Fund are offered to separate
accounts of the Company which fund variable annuity and variable life contracts.
Shares of the Fund are also offered to separate accounts of a life insurance
company affiliated with the Company which fund variable annuity and variable
life contracts. Shares of the Fund may also be offered to separate accounts of
certain non-affiliated life insurance companies which fund variable life
insurance contracts. It is conceivable that in the future it may become
disadvantageous for both variable life and variable annuity contract separate
accounts to invest in the same underlying fund. Although neither the Company nor
the Fund currently foresees any such disadvantage, the Fund's Board of Trustees
intends to monitor events in order to identify any material irreconcilable
conflict between the interests of variable annuity contract owners and variable
life contract owners and to determine what action, if any, should be taken in
response thereto.
Investors in the High Yield Portfolio should carefully consider the relative
risks of investing in high yield securities, which are commonly known as junk
bonds. Bonds of this type are considered to be speculative with regard to the
payment of interest and return of principal. Investors in the High Yield
Portfolio should also be cognizant of the fact that such securities are not
generally made for short-term investing and should assess the risks associated
with an investment in the High Yield Portfolio.
Shares of the Portfolios of the Fund are not deposits, or obligations of, or
guaranteed or endorsed by any bank and the shares are not federally insured by
the Federal Deposit Insurance Corporation, the Federal Reserve Board or any
other agency.
The Fund has thirteen portfolios; the Money Market Portfolio, the Quality Income
Plus Portfolio, the High Yield Portfolio, the Utilities Portfolio, the Income
Builder Portfolio, the Dividend Growth Portfolio, the Capital Growth Portfolio,
the Global Dividend Growth Portfolio, the European Growth Portfolio, the Pacific
Growth Portfolio, the Capital Appreciation Portfolio, the Equity Portfolio and
the Strategist Portfolio. Each Portfolio has different investment objectives and
policies and operates as a separate investment fund.
The Money Market Portfolio seeks high current income, preservation of capital,
and liquidity by investing in certain money market instruments, principally U.S.
government securities, bank obligations, and high grade commercial paper.
The Quality Income Plus Portfolio seeks, as its primary objective, to earn a
high level of current income and, as a secondary objective, capital
appreciation, but only when consistent with its primary objective, by investing
primarily in debt securities issued by the U.S. Government, its agencies and
instrumentalities, including zero coupon securities and in fixed-income
securities rated A or higher by Moody's Investors Service, Inc. ("Moody's") or
Standard & Poor's Corporation ("Standard & Poor's") or non-rated securities of
comparable quality, and by writing covered call and put options against such
securities.
The High Yield Portfolio seeks, as its primary objective, to earn a high level
of current income by investing in a professionally managed diversified portfolio
consisting principally of fixed-income securities rated Baa or lower by Moody's
or BBB or lower by Standard & Poor's or non-rated securities of comparable
quality
11
<PAGE>
which are commonly known as junk bonds, and, as a secondary objective, capital
appreciation when consistent with its primary objective.
The Utilities Portfolio seeks to provide current income and long-term growth of
income and capital by investing primarily in equity and fixed-income securities
of companies engaged in the public utilities industry.
The Income Builder Portfolio seeks, as its primary objective, reasonable income
by investing primarily in common stock of large-cap companies which have a
record of paying dividends and the potential for maintaining dividends, in
preferred stock and in securities convertible into common stocks of small and
mid-cap companies and, as its secondary objective, growth of capital.
The Dividend Growth Portfolio seeks to provide reasonable current income and
long-term growth of income and capital by investing primarily in common stock of
companies with a record of paying dividends and the potential for increasing
dividends.
The Capital Growth Portfolio seeks to provide long-term capital growth by
investing principally in common stocks.
The Global Dividend Growth Portfolio seeks to provide reasonable current income
and long-term growth of income and capital by investing primarily in common
stock of companies, issued by issuers worldwide, with a record of paying
dividends and the potential for increasing dividends.
The European Growth Portfolio seeks to maximize the capital appreciation of its
investments by investing primarily in securities issued by issuers located in
Europe.
The Pacific Growth Portfolio seeks to maximize the capital appreciation of its
investments by investing primarily in securities issued by issuers located in
Asia, Australia and New Zealand.
The Capital Appreciation Portfolio seeks long-term capital appreciation by
investing primarily in common stocks of U.S. companies that offer the potential
for either superior earnings growth and/or appear to be undervalued.
The Equity Portfolio seeks, as its primary objective, growth of capital through
investments in common stock of companies believed by the Investment Manager to
have potential for superior growth and, as a secondary objective, income when
consistent with its primary objective.
The Strategist Portfolio seeks a high total investment return through a fully
managed investment policy utilizing equity securities, fixed-income securities
rated Baa or higher by Moody's or BBB or higher by Standard & Poor's (or
non-rated securities of comparable quality), and money market securities, and
the writing of covered options on such securities and the collateralized sale of
stock index options.
All dividends and capital gains distributions from the Portfolios are
automatically reinvested in shares of the distributing Portfolio at their Net
Asset Value.
THERE IS NO ASSURANCE THAT ANY OF THE PORTFOLIOS WILL ATTAIN THEIR RESPECTIVE
STATED OBJECTIVES. Additional information concerning the investment objectives
and policies of the Portfolios can be found in the current prospectus for the
Fund accompanying this Prospectus.
THE PROSPECTUS OF THE FUND SHOULD BE READ CAREFULLY BEFORE ANY DECISION IS MADE
CONCERNING THE ALLOCATION OF PURCHASE PAYMENTS TO A PARTICULAR PORTFOLIO.
THE CONTRACTS
- -----------------------------------------------------------
PURCHASE OF THE CONTRACTS
The Company has discontinued the offering of new Contracts. Additional Purchase
Payments to existing Contracts are accepted by the Company. All subsequent
Purchase Payments must be $25 or more and may be made at any time prior to the
Income Starting Date. Additional Purchase Payments may also be made from your
bank account or your Dean Witter Active Assets-TM- Account through Automatic
Additions. Please consult with your Dean Witter Account Executive for detailed
information about Automatic Additions.
The Company reserves the right to limit Purchase Payments in any Contract Year
to three times the initial Purchase Payment made in the first year.
CREDITING OF PURCHASE PAYMENTS
A Purchase Payment accompanied by a duly completed application will be credited
to the Contract within two business days of receipt by the Company at its home
office. If an application is not duly completed, the Company will credit the
Purchase Payments to the Contract within five business days or return it at that
time unless the applicant specifically consents to the Company holding the
Purchase Payment until the application is complete. The Company reserves the
right to reject any application. Subsequent Purchase Payments will be credited
to the Contract at the close of the Valuation Period during which the Purchase
Payment is received.
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<PAGE>
ALLOCATION OF PURCHASE PAYMENTS
On the application the Owner instructs the Company how to allocate the Purchase
Payment among the fourteen Investment Alternatives. Purchase Payments may be
allocated in whole percents, from 0% to 100%, to any Investment Alternative so
long as the total allocation equals 100%. Purchase Payments may be allocated in
amounts no less than $100. Unless the Owner notifies the Company otherwise,
subsequent Purchase Payments are allocated according to the instructions in the
application.
Each Purchase Payment will be credited to the Contract as Variable Account
Accumulation Units equal to the amount of Purchase Payment allocated to each
Sub-Account divided by the Accumulation Unit value for that Sub-Account next
computed after the Purchase Payment is credited to the Contract. For example, if
a $10,000 Purchase Payment is credited to the Contract when the Accumulation
Unit value equals $10, then 1,000 Accumulation Units would be credited to the
Contract. The Variable Account, in turn, purchases shares of the corresponding
Portfolio (see "Value of Variable Account Accumulation Units," pg. 13).
For a brief summary of how Purchase Payments allocated to the Fixed Account are
credited to the Contract, see "The Fixed Account" on pg. 17.
VALUE OF VARIABLE ACCOUNT ACCUMULATION UNITS
The Accumulation Units in each Sub-Account of the Variable Account are valued
separately. The value of Accumulation Units may change each Valuation Period
according to the investment performance of the shares purchased by each
Sub-Account and the deduction of certain expenses and charges.
A Valuation Period is the period between successive Valuation Dates. It begins
at the close of business of each Valuation Date and ends at the close of
business of the next succeeding Valuation Date. A Valuation Date is each day
that the New York Stock Exchange is open for business and any other day in which
there is a sufficient degree of trading in the Variable Account's portfolio
securities that the value of Accumulation or Annuity Units might be materially
affected by changes in the value of the portfolio securities. Valuation Dates do
not include such Federal and non-Federal holidays as are observed by the New
York Stock Exchange. The New York Stock Exchange currently observes the
following holidays: New Year's Day (January 1); President's Day (the third
Monday in February); Good Friday (the Friday before Easter); Memorial Day (the
last Monday in May); Independence Day (July 4); Labor Day (the first Monday in
September); Thanksgiving Day (the fourth Thursday in November); and Christmas
Day (December 25).
The value of an Accumulation Unit in a Sub-Account for any Valuation Period
equals the value of the Accumulation Unit as of the immediately preceding
Valuation Period, multiplied by the Net Investment Factor for that Sub-Account
for the current Valuation Period. The Net Investment Factor is a number
representing the change on successive Valuation Dates in value of Sub-Account
assets due to investment income, realized or unrealized capital gains or loss,
deductions for taxes, if any, and deductions for the Mortality and Expense Risk
Charge.
TRANSFERS
The Owner may transfer funds among the fourteen Investment Alternatives without
charge. THE COMPANY GUARANTEES THAT NO CHARGE WILL EVER BE IMPOSED FOR
TRANSFERS. Transfers must be at least $100 or the total amount in the Investment
Alternative, whichever is less.
Currently transfers out of any Sub-Account before the Income Starting Date may
be made at any time. The Company reserves the right to restrict such transfers
before the Income Starting Date to once every 30 days after the Contract is
issued. However, the Company will notify Owners at least 30 days prior to
restricting transfers.
After the Income Starting Date, transfers among Sub-Accounts of the Variable
Account, or from the Variable Account to the Fixed Account may be made only once
every six months and may not be made during the first six months following the
Income Starting Date.
Transfers may be made pursuant to telephone instructions if the Owner completes
the telephone authorization form on the application or another form provided by
the Company. Telephone transfer requests will be accepted by the Company if
received at (800) 654-2397 by 3:00 p.m. Central Time. Telephone transfer
requests received at any other telephone number or after 3:00 p.m. Central Time
will not be accepted by the Company. Telephone transfer requests received before
3:00 p.m. Central Time are effected at the next computed value. Otherwise,
transfer requests must be in writing, on a form provided by the Company.
Transfers may also be made automatically through Dollar Cost Averaging prior to
the Income Starting Date. Dollar Cost Averaging permits the Owner to transfer a
specified amount every month from the Money Market Sub-Account to any other
Sub-Account. Transfers made through Dollar Cost Averaging must be $100 or more.
Dollar Cost Averaging cannot be used to transfer amounts to the Fixed Account.
Please consult with your Dean Witter Account Executive for detailed information
about Dollar Cost Averaging.
Transfers from Sub-Accounts of the Variable Account will be made based on the
Accumulation Unit values next computed after the Company receives the transfer
request at its home office.
For transfers from the Fixed Account, see pg. 18.
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SURRENDER AND WITHDRAWALS
The Owner may withdraw all or part of the Contract Value at any time prior to
the earlier of the death of the Annuitant (and any Joint Annuitant), death of
any Owner or the Income Starting Date. The amount available for withdrawal is
the Contract Value next computed after the Company receives the request for a
withdrawal at its home office, less any Surrender Charges, Contract Maintenance
Charges or any remaining charge for premium taxes. Withdrawals from the Variable
Account will be paid within seven days of receipt of the request, subject to
postponement in certain circumstances. See "Delay of Payments," pg. 19. For
withdrawals from the Fixed Account, see pg. 18.
The minimum partial withdrawal is $100. If the Contract Value is less than $500,
or if the Contract Value after a partial withdrawal would be less than $500,
then the Company will treat the request as one for a total surrender of the
Contract and the entire Contract Value, less any charges and premium taxes, will
be paid out.
Partial withdrawals may also be taken automatically through monthly Automatic
Income withdrawals. Automatic Income withdrawals of $100 or more may be
requested at any time prior to the Income Starting Date. Please consult with
your Dean Witter Account Executive for detailed information about Automatic
Income withdrawals.
For Qualified Contracts, the Company will, at the request of the Owner,
automatically calculate and withdraw the IRS Required Minimum Distribution.
Withdrawals taken to satisfy IRS Required Minimum Distribution rules will have
any applicable withdrawal charges waived. This waiver is permitted only for
withdrawals which satisfy distributions resulting from this Contract. Please
consult with your Dean Witter Account Executive for detailed information about
the Required Minimum Distribution program.
Withdrawals and surrenders may be subject to income tax and a 10% tax penalty.
This tax and penalty is explained in "Federal Tax Matters" on pg. 19.
The full Contract Maintenance Charge will be deducted at the time of total
surrender should the surrender occur on any date other than a Contract
Anniversary. The total amount paid at surrender may be more or less than the
total Purchase Payments due to prior withdrawals, any deductions, and investment
performance.
To complete the partial withdrawals, the Company will cancel Accumulation Units
in an amount equal to the withdrawal and any Surrender Charge and premium taxes.
The Owner must name the Investment Alternative from which the withdrawal is to
be made. If none is named, then the withdrawal request is incomplete and cannot
be honored.
DEFAULT
So long as the Contract Value is not reduced to zero or a withdrawal does not
reduce it to less than $500, the Contract will stay in force until the Income
Starting Date even if no Purchase Payments are made after the first Purchase
Payment.
CHARGES AND OTHER DEDUCTIONS
- -----------------------------------------------------------
DEDUCTIONS FROM PURCHASE PAYMENTS
No deductions are currently made from Purchase Payments. Therefore the full
amount of every Purchase Payment is invested in the Investment Alternative(s) to
increase the potential for investment gain.
CONTRACT MAINTENANCE CHARGE
A Contract Maintenance Charge of $30 is deducted annually from the Contract
Value to reimburse the Company for its actual costs in maintaining each Contract
and the Variable Account. THE COMPANY GUARANTEES THAT THE AMOUNT OF THIS CHARGE
WILL NOT INCREASE OVER THE LIFE OF THE CONTRACT. Maintenance costs include but
are not limited to expenses incurred in billing and collecting Purchase
Payments; keeping records; processing death benefit claims and cash surrenders,
policy changes and proxy statements; calculating Accumulation Unit and Annuity
Unit values; and issuing reports to owners and regulatory agencies. The Company
does not expect to realize a profit from this charge.
On each Contract Anniversary, the Contract Maintenance Charge will be deducted
from the Investment Alternatives in the same proportion that the Owner's
interest in each bears to the total Contract Value. After the Income Starting
Date, a pro rata share of the annual Contract Maintenance Charge will be
deducted from each Income Payment. For example, 1/12 of the $30 or $2.50 will be
deducted if there are twelve Income Payments during the Contract Year. The
Contract Maintenance Charge will be deducted from the amount paid on a total
surrender.
Prior to October 4, 1993, Vantage Computer Systems, Inc. ("Vantage") was under
contract with the Company to provide Contract recordkeeping services. As of
October 4, 1993, the Company provides all Contract recordkeeping services.
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<PAGE>
MORTALITY AND EXPENSE RISK CHARGE
A Mortality and Expense Risk Charge will be deducted daily at a rate equal on an
annual basis to 1.0% of the daily net assets in the Variable Account and will be
reflected in the net interest rate credited to the assets in the Fixed Account
attributable to the Contracts. THE COMPANY GUARANTEES THAT THE AMOUNT OF THIS
CHARGE WILL NOT INCREASE OVER THE LIFE OF THE CONTRACT. If the Mortality and
Expense Risk Charge is insufficient to cover the Company's mortality costs and
excess expenses, the Company will bear the loss. If the charge is more than
sufficient, the Company will retain the balance as profit. The Company currently
expects a profit from this charge. Any such profit, as well as any other profit
realized by the Company and held in its general account (which supports
insurance and annuity obligations), would be available for any proper corporate
purpose, including, but not limited to, payment distribution expenses.
The mortality risk arises from the Company's guarantee to cover all death
benefits and to make Income Payments in accordance with the annuity tables,
thus, relieving the Annuitants of the risk of outliving funds accumulated for
retirement.
The expense risk arises from the possibility that the Contract Maintenance and
Surrender Charges, both of which are guaranteed not to increase, will be
insufficient to cover actual administrative expenses.
SURRENDER CHARGE (CONTINGENT DEFERRED SALES CHARGE)
The Owner may withdraw the Contract Value any time before the earliest of the
Income Start Date, the death of any Owner or the Annuitant's and any Joint
Annuitant's death.
There are no Surrender Charges on the first withdrawal of each Contract Year on
amounts up to the Free Withdrawal Amount. The Free Withdrawal Amount is 10% of
the amount of Purchase Payments, excluding those made less than one year before
the date of withdrawal. The maximum portion of the Free Withdrawal Amount which
may be withdrawn from the Fixed Account is limited to the proportion that your
value in the Fixed Account bears to your total Contract Value. Amounts
surrendered in excess of the Free Withdrawal Amount may be subject to a
Surrender Charge. Free Withdrawal Amounts not withdrawn in a Contract Year do
not increase the Free Withdrawal Amount in later Contract Years. Surrender
Charges, if applicable, will be deducted from the amount paid.
In certain cases, distributions required by federal tax law (see Statement of
Additional Information for "IRS Required Distribution at Death Rules") may be
subject to a Surrender Charge. Income Payments under Annuity Options with a
specified period of less than 120 months will be subject to a Surrender Charge.
Free Withdrawals and other partial withdrawals will be allocated on a first in,
first out basis to Purchase Payments. For purposes of calculating the amount of
the Surrender Charge, Purchase Payments shall include any earnings attributable
to those payments.
A Surrender Charge will be applied to amounts withdrawn in excess of a Free
Withdrawal Amount as set forth below:
<TABLE>
<CAPTION>
APPLICABLE
ELAPSED TIME SINCE SURRENDER
PURCHASE PAYMENT BEING CHARGE
WITHDRAWN WAS MADE PERCENTAGE
- ---------------------------------------------------- ------------
<S> <C>
Less than 1 year.................................... 6%
1 year, but less than 2 years....................... 5%
2 years, but less than 3 years...................... 4%
3 years, but less than 4 years...................... 3%
4 years, but less than 5 years...................... 2%
5 years, but less than 6 years...................... 1%
6 years or more..................................... 0%
</TABLE>
The cumulative total of all Surrender Charges is guaranteed never to exceed 7%
of an Owner's Purchase Payments (not including earnings attributable to those
payments).
Surrender Charges will be used to pay sales commissions and other promotional or
distribution expenses associated with the marketing of the Contracts. The
Company does not anticipate that the Surrender Charges will cover all
distribution expenses in connection with the Contract.
In addition, federal and state income tax may be withheld from withdrawal and
surrender amounts. Certain surrenders may also be subject to a federal tax
penalty. See "Federal Tax Matters," pg. 19.
TAXES
The Company will deduct any state premium taxes incurred or other taxes incurred
relative to the Contract (collectively referred to as "premium taxes") either
(1) at the Income Starting Date, or (2) when a partial surrender in excess of
the Free Withdrawal Amount occurs (in which case a pro rata portion of the
premium taxes will be deducted from the amount paid), or (3) when a total
surrender occurs. Current premium tax rates range from 0 to 3.5%. The Company
reserves the right to deduct any incurred premium taxes from the Purchase
Payments.
At the Income Starting Date, any charge for premium taxes will be deducted from
each Investment Alternative in the proportion that the Owner's interest in the
Investment Alternative bears to the total Contract Value.
DEAN WITTER VARIABLE INVESTMENT SERIES ("FUND") EXPENSES
A complete description of the expenses and deductions from the Portfolios are
found in the Fund's prospectus which is attached to this prospectus.
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<PAGE>
BENEFITS UNDER THE CONTRACT
- -----------------------------------------------------------
DEATH BENEFITS PRIOR TO THE INCOME STARTING DATE
If any Owner or the Annuitant dies prior to the Income Starting Date, and a
Death Benefit is elected, it will be paid to the Beneficiary. If a Contingent
Annuitant survives the Annuitant or Joint Annuitant, no Death Benefit will be
paid unless the Contingent Annuitant dies before the earlier of the Income
Starting Date or the day on which the Contract Value must be distributed under
the IRS Required Distribution Rules (see below). (For purposes of payment of the
Death Benefit, the Joint Annuitant must have been named prior to January 19,
1985). The Death Benefit will be the greater of: (a) the sum of all Purchase
Payments less any amounts deducted in connection with partial withdrawals,
including any Surrender Charges; or (b) the Contract Value.
The Company will not pay any Death Benefit until it receives Due Proof of Death.
Generally, the Beneficiary may elect an Annuity Option or a lump sum payment
within 180 days after the Company receives Due Proof of Death. If no election is
received within 180 days, a lump sum will be paid automatically.
The value of the Death Benefit will be determined at the end of the Valuation
Period during which the Company receives the later of Due Proof of Death and an
election for either a lump sum payment or an Annuity Option.
DEATH BENEFITS AFTER THE INCOME STARTING DATE
If any Owner, who is not the Annuitant, dies after the Income Starting Date,
payments will continue to be made under the particular income plan. The
Beneficiary will be the recipient of any such payments.
If the Annuitant and Joint Annuitant, if applicable, die after the Income
Starting Date, the Company will pay the Death Benefit, if any, contained in the
particular Annuity Option elected.
INCOME PAYMENTS
- -----------------------------------------------------------
INCOME STARTING DATE
The Income Starting Date is the day that Income Payments will start under the
Contract. The Owner may change the Income Starting Date at any time by notifying
the Company in writing of the change at least 30 days before the current Income
Starting Date. The Income Starting Date must be (a) at least a month after the
Issue Date; (b) the first day of a calendar month; and (c) no later than the
first day of the calendar month after the Annuitant reaches age 85, or the 10th
anniversary date, if later.
Unless the Owner notifies the Company in writing otherwise, the Income Starting
Date will be: for Non-Qualified Contracts the later of the first day of the
calendar month after the Annuitant reaches age 85 or the 10th anniversary date;
for Qualified Contracts, April first of the calendar year following the year in
which the Annuitant reaches age 70 1/2.
AMOUNT OF VARIABLE ANNUITY INCOME PAYMENTS
The amount of Variable Annuity Income Payments depends upon the investment
experience of the Portfolios selected by the Owner, any premium taxes, the age
and sex of the Annuitant(s), and the Annuity Option chosen. The Company
guarantees that the Income Payments will not be affected by (1) actual mortality
experience and (2) amount of the Company's administration expenses.
The Contracts offered by this prospectus (except in states which require unisex
annuity tables) contain life annuity tables that provide for different benefit
payments to men and women of the same age. 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 may be used. Accordingly, if the Contract is to be used in
connection with an employment-related retirement or benefit plan, consideration
should be given, in consultation with legal counsel, to the impact of NORRIS on
any such plan before making any contributions under these Contracts.
The sum of Income Payments may be more or less than the total Purchase Payments
made because (a) Variable Annuity Income Payments vary with the investment
results of the underlying Portfolios; (b) the Owner bears the investment risk
with respect to all amounts allocated to the Variable Account, and (c)
Annuitants may die before the actuarially expected date of death. As such, the
total amount of Income Payments cannot be predicted.
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<PAGE>
The duration of the Annuity Option may affect the dollar amounts of each Income
Payment. For example, if an Annuity Option guaranteed for life is chosen, the
Income Payments may be greater or lesser than Income Payments under an Annuity
Option for a specified period depending on the life expectancy of the Annuitant.
If the actual net investment experience is less than the assumed investment
rate, then the dollar amount of the annuity payments will decrease. The dollar
amount of the annuity payments will stay level if the net investment experience
equals the assumed investment rate and the dollar amount of the annuity payments
will increase if the net investment experience exceeds the assumed investment
rate. For purposes of the Variable Annuity Income Payments, the assumed
investment rate is 4%.
If the Contract Value to be applied to an Annuity Option is less than $2,000, or
if the monthly payments determined under the Annuity Option are less than $20,
the Company may pay the Contract Value in a lump sum or change the payment
frequency to an interval which results in Income Payments of at least $20.
ANNUITY OPTIONS
The Owner may elect a completely Fixed Annuity, a completely Variable Annuity or
a combination Fixed and Variable Annuity. Up to 30 days before the Income
Starting Date, the Owner may change the Annuity Option or request any other form
of annuity agreeable to both the Company and the Owner. Subsequent changes will
not be permitted. If an Annuity Option is chosen which depends on the Annuitant
or Joint Annuitant's life, proof of age will be required before Income Payments
begin. Premium taxes may be assessed. The Annuity Options include:
ANNUITY OPTION 1--LIFE WITH PAYMENTS GUARANTEED FOR 120 MONTHS.
Monthly payments will be made for as long as the Annuitant lives. If the
Annuitant dies before 120 monthly payments have been made, the remainder of the
120 guaranteed monthly payments will be paid to the Owner, or if deceased, to
the surviving Beneficiary.
ANNUITY OPTION 2--JOINT AND LAST SURVIVOR
Monthly payments beginning on the Income Starting Date will be made for as long
as either the Annuitant or Joint Annuitant is living. It is possible under this
option that only one monthly payment will be made if the Annuitant and Joint
Annuitant both die before the second payment is made, or only two monthly
payments will be made if they both die before the third payment, and so forth.
ANNUITY OPTION 3--PAYMENTS FOR A SPECIFIED PERIOD
Monthly payments beginning on the Income Starting Date will be made for any
specified period of at least 120 months. A Surrender Charge may apply if the
specified period is less than 120 months. Payments under this option do not
depend on the continuation of the Annuitant's life. If the Owner dies before the
end of the specified period, the remaining payments will be paid to the
surviving Beneficiary. The Mortality and Expense Risk Charge is deducted from
the Variable Account even though the Company does not bear any mortality risk.
If Annuity Option 3 is chosen and the proceeds are derived from the Variable
Account, the Owner or Beneficiary may surrender the Contract at any time by
notifying the Company in writing.
In the event that an Annuity Option is not selected, the Company will make
Income Payments in accordance with Annuity Option 1. At the Company's
discretion, other Annuity Options may be available upon request. The Company
currently uses sex-distinct annuity tables. However, if legislation is passed by
Congress or the states, the Company reserves the right to use annuity tables
which do not distinguish on the basis of sex.
THE FIXED ACCOUNT
- -----------------------------------------------------------
CONTRIBUTIONS UNDER THE FIXED PORTION OF THE ANNUITY CONTRACT AND TRANSFERS TO
THE FIXED PORTION BECOME PART OF THE GENERAL ACCOUNT OF THE COMPANY, WHICH
SUPPORTS INSURANCE AND ANNUITY OBLIGATIONS. BECAUSE OF EXEMPTIVE AND
EXCLUSIONARY PROVISIONS, INTERESTS IN THE GENERAL ACCOUNT HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933 ("1933 ACT"), NOR IS THE GENERAL
ACCOUNT REGISTERED AS AN INVESTMENT COMPANY UNDER THE INVESTMENT COMPANY ACT OF
1940 ("1940 ACT"). ACCORDINGLY, NEITHER THE GENERAL ACCOUNT NOR ANY INTERESTS
THEREIN ARE GENERALLY SUBJECT TO THE PROVISIONS OF THE 1933 OR 1940 ACTS AND THE
COMPANY HAS BEEN ADVISED THAT THE STAFF OF THE SECURITIES AND EXCHANGE
COMMISSION HAS NOT REVIEWED THE DISCLOSURES IN THIS PROSPECTUS WHICH RELATE TO
THE FIXED PORTION. DISCLOSURES REGARDING THE FIXED PORTION OF THE ANNUITY
CONTRACT AND THE GENERAL ACCOUNT, HOWEVER, MAY BE SUBJECT TO CERTAIN GENERALLY
APPLICABLE PROVISIONS OF THE FEDERAL SECURITIES LAWS RELATING TO THE ACCURACY
AND COMPLETENESS OF STATEMENTS MADE IN PROSPECTUSES.
GENERAL DESCRIPTION
The Fixed Account is made up of all of the general assets of the Company, other
than those in the Variable Account and any other segregated asset account.
Instead of the Owner bearing the investment risk as is the case for amounts in
the Variable Account, the Company bears the full investment risk for all amounts
in the Fixed Account. The Company has sole discretion to invest the
17
<PAGE>
assets of the Fixed Account, subject to applicable law. The Company guarantees
that the amounts allocated to the Fixed Account will be credited interest at a
net effective interest rate of at least 4.0% per year. Currently the amount of
investment income in excess of 4.0% allocated to contracts participating in the
Fixed Account will vary periodically in the sole discretion of the Company. Any
interest held in the Fixed Account does not entitle an Owner to share in the
investment experience of the Fixed Account.
The Company has revised the Fixed Account. Money deposited in the revised Fixed
Account earns interest at the current rate in effect at the time of allocation
or transfer until the first renewal date. The first renewal date is January 1
following the date of the allocation or transfer into the Fixed Account.
Subsequent renewal dates will be on anniversaries of the first renewal date. On
or about each renewal date, the Company will notify the Owner of the interest
rate(s) for the calendar year then starting. This interest rate will be
guaranteed by the Company for the calendar year and will not be less than 4%.
The Company may declare more than one interest rate for different monies based
upon the date of allocation or transfer to the Fixed Account.
ANY INTEREST CREDITED TO AMOUNTS ALLOCATED TO THE FIXED ACCOUNT IN EXCESS OF THE
GUARANTEED RATE OF 4.0% PER YEAR WILL BE DETERMINED IN THE SOLE DISCRETION OF
THE COMPANY.
TRANSFERS, SURRENDERS, AND WITHDRAWALS
Amounts may be transferred from the Sub-Accounts of the Variable Account to the
Fixed Account, and prior to the Income Starting Date amounts may also be
transferred from the Fixed Account to Sub-Accounts of the Variable Account. No
charge will ever be imposed for such transfers.
Prior to the Income Starting Date, amounts may not be transferred from the
Variable Account to the Fixed Account until thirty days after the Issue Date and
may be transferred thereafter only once every thirty days. However, amounts
invested in the Fixed Account prior to the date that the revised Fixed Account
became available may not be transferred from the Fixed Account until six months
after the Issue Date and those amounts may be transferred only every six months.
The maximum amount which may be transferred from the revised Fixed Account to
the Variable Account is limited to 25% of the value in the revised Fixed Account
as of December 31 of the prior calendar year (except with respect to amounts
which were allocated to the Fixed Account prior to the date of availability).
If the first renewal interest rate is less than the current rate that was in
effect at the time money was allocated or transferred to the revised Fixed
Account, the transfer restriction for that money will be waived during the
60-day period following the first renewal date.
After the Income Starting Date no transfers may be made from the Fixed Account.
Transfers from the Variable Account to the Fixed Account may not be made for six
months after the Income Starting Date and may be made thereafter only once every
six months. The Company reserves the right to waive restrictions on transfers
that are contained in the Contract.
Surrenders and withdrawals from the Fixed Account may be delayed for up to six
months. After the Income Starting Date, no surrenders or withdrawals may be made
from the Fixed Account.
GENERAL MATTERS
- -----------------------------------------------------------
OWNER
The Owner has the sole right to exercise all rights and privileges under the
Contract, except as otherwise provided in the Contract.
Generally, an Owner who is not a natural person is required to include in income
each year any increase in the cash value to the extent the increase is
attributable to contributions to the Contract made after February 28, 1986.
BENEFICIARY
The Beneficiary can mean either the Owner's Beneficiary or the Annuitant's
Beneficiary, but not both at the same time. Subject to the terms of any existing
assignment or the rights of any irrevocable Beneficiary, the Owner may change
the Owner's Beneficiary or Annuitant's Beneficiary while the Annuitant is living
by notifying the Company in writing. Any change will be effective at the time it
is signed by the Owner, whether or not the Annuitant is living when the change
is received by the Company. The Company will not, however, be liable as to any
payment or settlement made prior to receiving the written notice.
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<PAGE>
Unless otherwise provided in the Beneficiary designation, the rights of any
Beneficiary predeceasing the Annuitant will revert to the Owner or the Owner's
estate. Multiple Beneficiaries may be named. Unless otherwise provided in the
Beneficiary designation, if more than one Beneficiary survives the Annuitant,
the surviving Beneficiaries will share equally in any amounts due.
DELAY OF PAYMENTS
Payment of any amounts due from the Variable Account under the Contract will
occur within seven days, unless:
1. The New York Stock Exchange is closed for other than usual weekends or
holidays, or trading on the Exchange is otherwise restricted;
2. An emergency exists as defined by the Securities and Exchange
Commission; or
3. The Securities and Exchange Commission permits delay for the protection
of the security holders.
For payment or transfers from the Fixed Account, see pg. 18.
ASSIGNMENTS
The contract may be assigned prior to the Income Starting Date and during the
Annuitant's or, if applicable, Joint Annuitant's lifetime, subject to the rights
of any irrevocable Beneficiary. Any assignment will not be binding until
received in writing by the Company. The Company will not be responsible for
deciding if an assignment is valid or the extent of an assignee's interest. An
assignment may result in income tax liability to the owner.
No Beneficiary may assign benefits under the Contract until they are due and, to
the extent permitted by law, payments are not subject to the debts of any
Beneficiary or to any judicial process for payment of the Beneficiary's debts.
MODIFICATION
The Company may not modify the Contract without the consent of the Owner except
to make the Contract meet the requirements of the Investment Company Act of
1940, or to make the Contract comply with any changes in the Internal Revenue
Code or required by the Code or by any other applicable law in order to continue
treatment of the Contract as an annuity.
CUSTOMER INQUIRIES
The Owners or any persons interested in the Contract may make inquiries
regarding the Contract by calling or writing their Dean Witter Account
Executive.
FEDERAL TAX MATTERS
- -----------------------------------------------------------
INTRODUCTION
THE FOLLOWING DISCUSSION IS GENERAL AND IS NOT INTENDED AS TAX ADVICE. THE
COMPANY MAKES NO GUARANTEE REGARDING THE TAX TREATMENT OF ANY CONTRACT OR
TRANSACTION INVOLVING A CONTRACT. Federal, state, local and other tax
consequences of ownership or receipt of distributions under an annuity Contract
depend on the individual circumstances of each person. If you are concerned
about any tax consequences with regard to your individual circumstances, you
should consult a competent tax adviser.
TAXATION OF ANNUITIES IN GENERAL
TAX DEFERRAL. Generally, an annuity Contract Owner is not taxed on increases in
the Contract Value until a distribution occurs. This rule applies only where (1)
the Owner is a natural person, (2) the investments of the Variable Account are
"adequately diversified" in accordance with Treasury Department ("Treasury")
regulations and (3) the Company, instead of the annuity Owner, 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 are not treated as annuity Contracts for federal income tax purposes and
the income on such Contracts is taxed as ordinary income received or accrued by
the Owner during the taxable year. There are several exceptions to the general
rule for Contracts owned by non-natural persons which are discussed in the
Statement of Additional Information.
DIVERSIFICATION REQUIREMENTS. For a Contract to be treated as an annuity for
federal income tax purposes, the investments in the Variable Account must be
"adequately diversified" in accordance with the standards provided in the
Treasury regulations. If the investments in the Variable Account are not
adequately diversified, then the Contract will not be treated as an annuity
Contract for federal income tax purposes and the Contract Owner will be taxed on
the excess of the Contract Value over the
19
<PAGE>
investment in the Contract. Although the Company does not have control over the
Fund or its investments, the Company expects the Fund to meet the
diversification requirements.
OWNERSHIP TREATMENT. In connection with the issuance of the regulations on the
adequate diversification standards, the Department of the Treasury announced
that the regulations do not provide guidance concerning the extent to which
contract owners may direct their investments among sub-accounts of a Variable
Account. The Internal Revenue Service has previously stated in published rulings
that a variable contract owner will be considered the owner of separate account
assets if the owner possesses incidents of ownership in those assets such as the
ability to exercise investment control over the assets. At the time the
diversification regulations were issued, the Treasury Department announced that
guidance would be issued in the future regarding the extent that owners could
direct their investments among sub-accounts without being treated as owners of
the underlying assets of the Variable Account. As of the date of this
prospectus, no such guidance has been issued.
The ownership rights under this contract are similar to, but different in
certain respects from, those described by the Service in rulings in which it was
determined that contract owners were not owners of separate account assets. For
example, the owner of this contract has the choice of more investment options to
which to allocate premiums and contract values, and may be able to transfer
among investment options more frequently than in such rulings. These differences
could result in the contract owner being treated as the owner of the Variable
Account. In those circumstances, income and gain from the Variable Account
assets would be includible in the Contract Owner's gross income. In addition,
the Company does not know what standards will be set forth in the regulations or
rulings which the Treasury Department has stated it expects to issue. It is
possible that Treasury Department's position, when announced, may adversely
affect the tax treatment of existing contracts. The Company, therefore, reserves
the right to modify the contract as necessary to attempt to prevent the contract
owner from being considered the federal tax owner of the assets of the Variable
Account. However, the Company makes no guarantee that such modification to the
contract will be successful.
DELAYED MATURITY DATE. If the contract's scheduled maturity date is at a time
when the annuitant has reached an advanced age, e.g., past age 85, it is
possible that the contract would not be treated as an annuity. In that event,
the income and gains under the contract would be currently includible in the
owner's income.
TAXATION OF PARTIAL AND FULL WITHDRAWALS. In the case of a partial withdrawal
under a Non-Qualified Contract, amounts received are taxable to the extent the
Contract Value, without regard to surrender charges, exceeds the investment in
the Contract. In the case of a partial withdrawal under a Qualified Contract,
the portion of the payment that bears the same ratio to the total payment that
the investment in the Contract bears to the Contract Value, can be excluded from
income. In the case of a full withdrawal under a Non-Qualified Contract or a
Qualified Contract, the amount received will be taxable only to the extent it
exceeds the investment in the Contract. If an individual transfers an annuity
Contract without full and adequate consideration to a person other than the
individual's spouse (or to a former spouse incident to a divorce), the Owner
will be taxed on the difference between the Contract Value and the investment in
the Contract at the time of transfer. Other than in the case of certain
Qualified Contracts, any amount received as a loan under a Contract, and any
assignment or pledge (or agreement to assign or pledge) of the Contract Value is
treated as a withdrawal of such amount or portion.
TAXATION OF ANNUITY PAYMENTS. Generally, the rule for income taxation of
payments received from an annuity Contract provides for the return of the
Owner's investment in the Contract in equal tax-free amounts over the payment
period. The balance of each payment received is taxable. In the case of Variable
Annuity payments, the amount excluded from taxable income is determined by
dividing the investment in the Contract by the total number of expected
payments. In the case of fixed annuity payments, the amount excluded from income
is determined by multiplying the payment by the ratio of the investment in the
Contract (adjusted for any refund feature or period certain) to the total
expected value of annuity payments for the term of the Contract.
TAXATION OF ANNUITY DEATH BENEFITS. Amounts may be distributed from an annuity
Contract because of the death of an Owner or Annuitant. Generally, such amounts
are includible in income as follows: (1) if distributed in a lump sum, the
amounts are taxed in the same manner as a full withdrawal or (2) if distributed
under an annuity option, the amounts are taxed in the same manner as an annuity
payment.
PENALTY TAX ON PREMATURE DISTRIBUTIONS. There is a 10% penalty tax on the
taxable amount of any premature distribution from a Non-Qualified annuity
Contract. The penalty tax generally applies to any distribution made prior to
the Owner attaining age 59 1/2. However, there should be no penalty tax on
distributions to Owners (1) made on or after the Owner attains age 59 1/2; (2)
made as a result of the Owner's death or disability; (3) made in substantially
equal periodic payments over life or life expectancy; or (4) made under an
immediate annuity. Similar rules apply for distributions under certain Qualified
Contracts. Please see the Statement of Additional Information for a discussion
of other situations in which the penalty tax may not apply.
AGGREGATION OF ANNUITY CONTRACTS. All Non-Qualified annuity Contracts issued by
the Company (or its affiliates) to the same Owner during any calendar year will
be aggregated and treated as one annuity Contract for purposes of determining
the taxable amount of a distribution.
TAX QUALIFIED CONTRACTS
Annuity contracts may be used as investments with certain tax qualified plans
such as: (1) Individual Retirement Annuities
20
<PAGE>
under Section 408(b) of the Code; (2) Simplified Employee Pension Plans under
Section 408(k) of the Code; (3) Savings Incentive Match Plans for Employees
(SIMPLE) Plans under Section 408(p) of the Code; (4) Tax Sheltered Annuities
under Section 403(b) of the Code; (5) Corporate and Self Employed Pension and
Profit Sharing Plans; and (6) State and Local Government and Tax-Exempt
Organization Deferred Compensation Plans. In the case of certain tax qualified
plans, the terms of the plans may govern the right to benefits, regardless of
the terms of the contract.
RESTRICTIONS UNDER SECTION 403(b) PLANS. Section 403(b) of the Code provides for
tax-deferred retirement savings plans for employees of certain non-profit and
educational organizations. In accordance with the requirements of Section
403(b), any annuity Contract used for a 403(b) plan must provide that
distributions attributable to salary reduction contributions made after
12/31/88, and all earnings on salary reduction contributions, may be made only
after the employee attains age 59 1/2, separates from service, dies, becomes
disabled or on the account of hardship (earnings on salary reduction
contributions may not be distributed on the account of hardship).
INCOME TAX WITHHOLDING
The Company is required to withhold federal income tax at a rate of 20% on all
"eligible rollover distributions" unless an individual elects to make a "direct
rollover" of such amounts to another qualified plan or Individual Retirement
Account or Annuity ("IRA"). Eligible rollover distributions generally include
all distributions from Qualified Contracts, excluding IRAs, with the exception
of (1) required minimum distributions, or (2) a series of substantially equal
periodic payments made over a period of at least 10 years, or the life (joint
lives) of the participant (and beneficiary). For any distributions from
Non-Qualified annuity Contracts, or distributions from Qualified Contracts which
are not considered eligible rollover distributions, the Company may be required
to withhold federal and state income taxes unless the recipient elects not to
have taxes withheld and properly notifies the Company of such election.
VOTING RIGHTS
- -----------------------------------------------------------
The Owner or anyone with a voting interest in the Sub-Account of the Variable
Account may instruct the Company on how to vote at shareholder meetings of the
Fund. The Company will solicit and cast each vote according to the procedures
set up by the Fund and to the extent required by law. The Company reserves the
right to vote the eligible shares in its own right, if subsequently permitted by
the Investment Company Act of 1940, its regulations or interpretations thereof.
Before the Income Starting Date, the Owner holds the voting interest in the
Sub-Account. (The number of votes for the Owner will be determined by dividing
the Contract Value attributable to a Sub-Account by the net asset value per
share of the applicable eligible Portfolio.)
After the Income Starting Date, the person receiving Income Payments has the
voting interest. After the Income Starting Date, the votes decrease as Income
Payments are made and as the reserves for the Contract decrease. That person's
number of votes will be determined by dividing the reserve for such Contract
allocated to the applicable Sub-Account by the net asset value per share of the
corresponding eligible Portfolio.
SALES COMMISSION
- -----------------------------------------------------------
From its profits the Company may pay a maximum sales commission of 5.75% of
Purchase Payments and an annual sales administration expense allowance of up to
0.125% of the average net assets of the Fixed Account to Dean Witter Reynolds
Inc., the principal underwriter of the Contracts. Dean Witter will pay annually
to its Account Executives from its profits, an amount equal to .10% of the net
assets of the Variable Account attributable to Contracts issued and sold after
1984 and any subsequent additions thereon.
21
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
TABLE OF CONTENTS
Introduction................................................ 3
Northbrook Life Insurance Company......................... 3
Dean Witter Reynolds Inc.................................. 3
Additions, Deletions or Substitutions of Investments.... 3
Reinvestment............................................ 3
The Contract................................................ 3
Value of Variable Account Accumulation Units.............. 3
Performance Data.......................................... 4
Standardized Total Returns.................................. 5
Other Total Returns....................................... 5
Transfers................................................. 5
Tax-Free Exchanges (1035)................................. 6
General Matters............................................. 6
Incontestability.......................................... 6
Settlements............................................... 6
Safekeeping of the Variable Account's Assets.............. 6
Experts................................................... 6
Legal Matters............................................. 6
Federal Tax Matters......................................... 7
Introduction.............................................. 7
Taxation of Northbrook Life Insurance Company............. 7
Exceptions to the Non-Natural Owner Rule.................. 7
Penalty Tax on Premature Distributions.................... 7
IRS Required Distribution at Death Rules.................. 8
Qualified Plans........................................... 8
Types of Qualified Plans.................................... 8
Individual Retirement Annuities........................... 8
Simplified Employee Pension Plans......................... 8
Tax Sheltered Annuities................................... 8
Corporate and Self-Employed Pension and Profit Sharing
Plans.................................................... 8
State and Local Government and Tax-Exempt Organization
Deferred Compensation Plans.............................. 9
Voting Rights............................................... 9
Sales Commissions........................................... 9
Financial Statements........................................ F-1
22
<PAGE>
ORDER FORM
- -----------------------------------------------------------
/ / Please send me a copy of the most recent Statement of Additional Information
for the Northbrook Variable Annuity.
<TABLE>
<S> <C>
- ------------------------ ---------------------------------------------
(Date) (Name)
---------------------------------------------
(Street Address)
---------------------------------------------
(City) (State) (Zip
Code)
</TABLE>
Send to: Northbrook Life Insurance Company
P.O. Box 94040
Palatine, IL 60094-4040
Attn: Annuity Services
23
<PAGE>
(This Page Left Intentionally Blank)
24
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
NORTHBROOK VARIABLE ANNUITY ACCOUNT
OF
NORTHBROOK LIFE INSURANCE COMPANY
P.O. BOX 94040
PALATINE, IL 60094-4040
INDIVIDUAL VARIABLE ANNUITY CONTRACTS
DISTRIBUTED BY
DEAN WITTER REYNOLDS INC.
TWO WORLD TRADE CENTER
NEW YORK, NEW YORK 10048
-------------------
This Statement of Additional Information supplements the information in the
Prospectus for the Flexible Premium Deferred Variable Annuity Contract
("Contract") offered by Northbrook Life Insurance Company ("Company"), a wholly
owned subsidiary of Allstate Life Insurance Company. The Contract is primarily
designed to aid individuals in long-term financial planning and it can be used
for retirement planning regardless of whether the plan qualifies for special
federal income tax treatment.
THIS STATEMENT OF ADDITIONAL INFORMATION IS NOT A PROSPECTUS AND SHOULD BE READ
ONLY IN CONJUNCTION WITH THE PROSPECTUS FOR THE CONTRACT.
YOU MAY OBTAIN A COPY OF THE PROSPECTUS FROM DEAN WITTER REYNOLDS INC. ("DEAN
WITTER"), THE PRINCIPAL UNDERWRITER AND DISTRIBUTOR OF THE CONTRACT, BY
CALLING OR WRITING DEAN WITTER AT THE ADDRESS LISTED ABOVE.
The Prospectus, dated May 1, 1997, has been filed with the United States
Securities and Exchange Commission.
DATED MAY 1, 1997
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Introduction............................................................................................... 3
Northbrook Life Insurance Company........................................................................ 3
Dean Witter Reynolds Inc................................................................................. 3
Additions, Deletions or Substitutions of Investments................................................... 3
Reinvestment........................................................................................... 3
The Contract............................................................................................... 3
Value of Variable Account Accumulation Units............................................................. 3
Performance Data......................................................................................... 4
Standardized Total Returns................................................................................. 5
Other Total Returns...................................................................................... 5
Transfers................................................................................................ 6
Tax-Free Exchanges (1035)................................................................................ 6
General Matters............................................................................................ 7
Incontestability......................................................................................... 7
Settlements.............................................................................................. 7
Safekeeping of the Variable Account's Assets............................................................. 7
Experts.................................................................................................. 7
Legal Matters............................................................................................ 7
Federal Tax Matters........................................................................................ 7
Introduction............................................................................................. 7
Taxation of Northbrook Life Insurance Company............................................................ 7
Exceptions to the Non-Natural Owner Rule................................................................. 8
Penalty Tax on Premature Distributions................................................................... 8
IRS Required Distribution at Death Rules................................................................. 8
Qualified Plans.......................................................................................... 9
Types of Qualified Plans................................................................................... 9
Individual Retirement Annuities.......................................................................... 9
Simplified Employee Pension Plans........................................................................ 9
Savings Incentive Match Plans for Employees (SIMPLE Plans)............................................... 9
Tax Sheltered Annuities.................................................................................. 9
Corporate and Self-Employed Pension and Profit Sharing Plans............................................. 9
State and Local Government and Tax-Exempt Organization Deferred Compensation Plans....................... 10
Voting Rights.............................................................................................. 10
Sales Commissions.......................................................................................... 10
Financial Statements....................................................................................... F-1
</TABLE>
2
<PAGE>
INTRODUCTION
NORTHBROOK LIFE INSURANCE COMPANY
Incorporated in 1978 as a life insurance company under the laws of the State
of Illinois, Northbrook Life Insurance Company ("Company") has done business
continuously since that time as "Northbrook Life Insurance Company." The
Company's products, annuities and individual life insurance, have been approved
by the various states where offered.
DEAN WITTER REYNOLDS INC.
Dean Witter Reynolds Inc. ("Dean Witter") is the principal underwriter and
distributor of the Contracts. Dean Witter is a wholly-owned subsidiary of Dean
Witter, Discover & Co. Dean Witter is located at Two World Trade Center, New
York, New York Dean Witter is a member of the New York Stock Exchange and the
National Association of Securities Dealers, Inc., and its subsidiary, Dean
Witter InterCapital, Inc. ("InterCapital"), is registered with the Securities
and Exchange Commission as an investment advisor.
ADDITIONS, DELETIONS OR SUBSTITUTIONS OF INVESTMENTS
The Company retains the right, subject to any applicable law, to make
additions to, deletions from or substitutions for the Portfolio shares held by
any Sub-Account of the Variable Account. The Company reserves the right to
eliminate the shares of any of the Portfolios and to substitute shares of
another Portfolio of 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 the Company's judgment, investment in any Portfolio would become
inappropriate in view of the purposes of the Variable Account. Substitutions of
shares attributable to an Owner's interest in a Sub-Account will not be made
until the Owner has been notified of the change, and until the Securities and
Exchange Commission has approved the change, to the extent such notification and
approval is required by the Investment Company Act of 1940. Nothing contained in
this Statement of Additional Information shall prevent the Variable Account from
purchasing other securities for other series or classes of contracts, or from
effecting a conversion between series or classes of contracts on the basis of
requests made by Owners.
The Company may also establish additional Sub-Accounts of the Variable
Account. Each additional Sub-Account would purchase shares in a new Portfolio of
the Fund or in another mutual fund. New Sub-Accounts may be established when, in
the sole discretion of the Company, marketing needs or investment conditions
warrant. Any new Sub-Accounts will be made available to existing Contract Owners
on a basis to be determined by the Company. The Company may also eliminate one
or more Sub-Accounts if, in its sole discretion, marketing, tax or investment
conditions so warrant.
In the event of any such substitution or change, the Company may, by
appropriate endorsement, make such changes in the Contract as may be necessary
or appropriate to reflect such substitution or change. If deemed to be in the
best interests of persons having voting rights under the policies, the Variable
Account may be operated as a management company under the Investment Company Act
of 1940 or it may be deregistered under such Act in the event such registration
is no longer required.
REINVESTMENT
All dividends and capital gains distributions from the Portfolios are
automatically reinvested in shares of the distributing Portfolio at their net
asset value.
THE CONTRACT
VALUE OF VARIABLE ACCOUNT ACCUMULATION UNITS
The value of Variable Account Accumulation Units will vary in accordance
with investment experience of the Portfolio in which the Sub-Account invests.
The number of such Accumulation Units credited
3
<PAGE>
to a Contract will not, however, change as a result of any fluctuations in the
value of the Accumulation Unit.
The Accumulation Units in each Sub-Account of the Variable Account are
valued separately. The value of Accumulation Units in any Valuation Period will
depend upon the investment performance of the shares purchased by each
Sub-Account in a particular Portfolio.
The value of an Accumulation Unit in a Sub-Account for any Valuation Period
equals the value of such unit as of the immediately preceding Valuation Period,
multiplied by the "Net Investment Factor" for that Sub-Account for the current
Valuation Period. The Net Investment Factor for each Sub-Account for any
Valuation Period is determined by dividing (A) by (B) and subtracting (C),
where:
(A) is the sum of:
(1) the net asset value per share of the Portfolio(s) underlying the
Sub-Account determined at the end of the current valuation period; plus,
(2) the per share amount of any dividend or capital gain
distributions made by the Portfolio(s) underlying the Sub-Account during
the current valuation period.
(B) is the net asset value per share of the Portfolio(s) underlying the
Sub-Account determined as of the end of the immediately preceding valuation
period.
(C) is the annualized Mortality and Expense Risk Charges divided by 365
and then multiplied by the number of calendar days in the current valuation
period.
PERFORMANCE DATA
From time to time the Variable Account may publish advertisements containing
performance data relating to its Sub-Accounts. The performance data for the
Sub-Accounts (other than for the Money Market Sub-Account) will always be
accompanied by total return quotations.
A Sub-Account's "average annual total return" represents an annualization of
the Sub-Account's total return over a particular period and is computed by
finding the annual percentage rate which will result in the ending redeemable
value of a hypothetical $1,000 Purchase Payment made at the beginning of a one,
five or ten year period, or for a period from the date of commencement of the
Sub-Account's operations, if shorter than any of the foregoing. The formula for
computing the average annual total return involves a percentage obtained by
dividing the ending redeemable value, including deductions for any Surrender
Charges or Contract Maintenance Charges imposed on the Contracts by the Variable
Account, by the initial hypothetical $1,000 Purchase Payment, taking the "n"th
root of the quotient (where "n" is the number of years in the period) and
subtracting 1 from the result.
The Surrender Charges assessed on this redemption were computed as follows.
For Contracts that have passed their first Contract Anniversary, the Free
Withdrawal Amount is not assessed a Surrender Charge. Surrender Charges are
charged on the amount of redemption equal to the value of the Purchase Payment,
reduced by the Free Withdrawal Amount, if any. The Surrender Charge schedule
specifies one rate for less than one year and another rate for one year, but
less than two years, and another rate for two years, but less than three years,
and so on until six years or more. For a one year total return calculation the
second rate (i.e., one year, but less than two years) is assessed. The Contract
Maintenance Charge ($30 per contract) used in the total return calculation is
prorated using the following method: The total amount of annual contract fees
collected during the year is divided by the total average net assets of all the
Sub-Accounts. The resulting percentage is then multiplied by the initial
hypothetical $1,000 Purchase Payment.
In addition, the Variable Account may advertise the total return over
different periods of time by means of aggregate, average, year-by-year or other
types of total return figures. Such calculations may or may not reflect the
deductions of some or all of the charges which may be imposed on the Contracts
by the Variable Account which, if reflected, would reduce the performance
quoted. The formula for computing
4
<PAGE>
such total return quotations involves a percent unit change calculation. This
calculation is the Accumulation Unit value at the end of the defined period
divided by the Accumulation Unit value at the beginning of such period minus 1.
The periods included in such advertisements may include among others "year-to-
date" (prior calendar year end to the day of the advertisement); "year to most
recent quarter" (prior calendar year end to the end of the most recent quarter);
"the prior calendar year"; and "Inception (commencement of the Sub-Account's
operation) to-date" (day of the advertisement).
STANDARDIZED TOTAL RETURNS
The standardized average annual total returns for the Sub-Accounts for the
one-year, five-year and ten year or since inception periods ending December 31,
1996 are presented below:
<TABLE>
<CAPTION>
10-YEARS OR
SINCE
INCEPTION* (IF
SUB-ACCOUNT ONE-YEAR FIVE-YEAR LESS)
- ---------------------------------------------------------------------- ----------- ----------- ---------------
<S> <C> <C> <C>
Capital Growth........................................................ 5.34% 5.38% 9.02%
Dividend Growth....................................................... 17.02% 13.71% 12.35%
Equity................................................................ 6.11% 11.40% 11.93%
European Growth....................................................... 22.69% 19.55% 16.62%
Global Dividend Growth................................................ 11.02% N/A 10.92%
High Yield............................................................ 5.75% 11.67% 6.14%
Money Market.......................................................... N/A N/A N/A
Pacific Growth........................................................ -1.86% N/A -1.50%
Quality Income Plus................................................... -4.05% 6.28% 7.58%
Strategist............................................................ 8.61% 7.79% 8.83%
Utilities............................................................. 2.65% 9.27% 10.21%
</TABLE>
- ------------------------
* The Money Market, High Yield and Equity Sub-Accounts commenced operation on
March 9, 1984. The Quality Income Plus and Strategist Sub-Accounts commenced
operation on March 1, 1987. The Utilities and Dividend Growth Sub-Accounts
commenced operation on March 1, 1990. The Capital Growth and European Growth
Sub-Accounts commenced operation on March 1, 1991. The Global Dividend Growth
and Pacific Growth Sub-Accounts commenced operation on February 23, 1994. The
Income Builder and Capital Appreciation Sub-Accounts commenced operation on
January 21, 1997.
OTHER TOTAL RETURNS
From time to time, sales literature or advertisements may also quote average
annual total returns that do not reflect the Surrender Charge. These are
calculated in exactly the same way as the average annual total returns described
above, except that the ending redeemable value of the hypothetical account for
the period is replaced with an ending value for the period that does not take
into account any charges on amounts surrendered.
5
<PAGE>
Such average annual total return information for the Sub-Accounts (not
including deduction of the Surrender Charge) is as follows:
<TABLE>
<CAPTION>
10-YEARS OR
SINCE
INCEPTION* (IF
SUB-ACCOUNT ONE-YEAR FIVE-YEAR LESS)
- --------------------------------------------------------------------------- ----------- ----------- ---------------
<S> <C> <C> <C>
Capital Growth............................................................. 10.43% 5.65% 9.24%
Dividend Growth............................................................ 22.72% 13.98% 12.40%
Equity..................................................................... 11.24% 11.67% 11.98%
European Growth............................................................ 28.69% 19.84% 16.85%
Global Dividend Growth..................................................... 16.41% N/A 12.46%
High Yield................................................................. 10.86% 11.94% 6.21%
Money Market............................................................... N/A N/A N/A
Pacific Growth............................................................. 2.85% N/A -0.15%
Quality Income Plus........................................................ 0.54% 6.54% 7.62%
Strategist................................................................. 13.87% 8.05% 8.88%
Utilities.................................................................. 7.59% 9.54% 10.26%
</TABLE>
- ------------------------
* The Money Market, High Yield and Equity Sub-Accounts commenced operation on
March 9, 1984. The Quality Income Plus and Strategist Sub-Accounts commenced
operation on March 1, 1987. The Utilities and Dividend Growth Sub-Accounts
commenced operation on March 1, 1990. The Capital Growth and European Growth
Sub-Accounts commenced operation on March 1, 1991. The Global Dividend Growth
and Pacific Growth Sub-Accounts commenced operation on February 23, 1994. The
Income Builder and Capital Appreciation Sub-Accounts commenced operation on
January 21, 1997.
The Variable Account may also advertise the performance of the Sub-Accounts
relative to certain performance rankings and indexes compiled by independent
organizations.
TRANSFERS
Currently the Company is not enforcing certain restrictions on transfers
and, therefore, prior to the Income Starting Date amounts may be transferred out
of Sub-Accounts of the Variable Account at any time. The restrictions in the
Contracts, which could be enforced in the future, provide that transfers among
Sub-Accounts of the Variable Account, or from the Variable Account to the Fixed
Account, may not be made for the first 30 days after the Contract is issued and
thereafter such transfers may occur only once every 30 days. The Company
reserves the right to enforce these restrictions in the future. However, the
Company will notify Owners at least 30 days prior to enforcing these
restrictions.
TAX-FREE EXCHANGES (SECTION 1035)
The Company accepts Purchase Payments which are the proceeds of a Contract
in a transaction qualifying for a tax-free exchange under Section 1035 of the
Internal Revenue Code. Except as required by federal law in calculating the
basis of the Contract, the Company does not differentiate between Section 1035
Purchase Payments and non-1035 Purchase Payments.
The Company also accepts "rollovers" from Contracts qualifying as
tax-sheltered annuities (TSAs), individual retirement annuities or accounts,
(IRAs), or any other qualified contract which is eligible to "rollover" into an
IRA. The Company differentiates between non-qualified Contracts and TSAs and
IRAs to the extent necessary to comply with federal tax laws. For example, the
Company restricts the assignment, transfer or pledge of TSAs and IRAs so the
Contracts will continue to qualify for special tax treatment.
6
<PAGE>
GENERAL MATTERS
INCONTESTABILITY
The Contract will not be contested after it is issued.
SETTLEMENTS
The Contract must be returned to the Company prior to any settlement. Due
proof of any Owner's or Annuitant's (and any Joint Annuitant's) death must be
received prior to settlement of a death claim.
SAFEKEEPING OF THE VARIABLE ACCOUNT'S ASSETS
The Company holds title to the assets of the Variable Account. The assets
are kept physically segregated and held separate and apart from the Company's
general corporate assets. Records are maintained of all purchases and
redemptions of the Portfolio shares held by each of the Sub-Accounts.
The Dean Witter Variable Investment Series ("Fund") does not issue
certificates and, therefore, the Company holds the Account's assets in open
account in lieu of stock certificates. See the Fund's Prospectus for a more
complete description of the Fund's custodian.
EXPERTS
The financial statements of the Variable Account and the financial
statements and financial statement schedule of the Company appearing in this
Statement of Additional Information (which is incorporated by reference in the
prospectus of Northbrook Variable Annuity Account of Northbrook Life Insurance
Company) have been audited by Deloitte & Touche LLP, Two Prudential Plaza, 180
N. Stetson Avenue, Chicago, Illinois, 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.
LEGAL MATTERS
Certain legal matters relating to the federal securities laws applicable to
the issue and sale of the Contracts have been passed upon by Routier and
Johnson, P.C., of Washington, D.C. All matters of Illinois law pertaining to the
Contracts, including the validity of the Contracts and the Company's right to
issue such Contracts under Illinois insurance law, have been passed upon by
Michael J. Velotta, General Counsel of Northbrook Life Insurance Company.
FEDERAL TAX MATTERS
INTRODUCTION
THE FOLLOWING DISCUSSION IS GENERAL AND IS NOT INTENDED AS TAX ADVICE. THE
COMPANY MAKES NO GUARANTEE REGARDING THE TAX TREATMENT OF ANY CONTRACT OR
TRANSACTION INVOLVING A CONTRACT. Federal, state, local and other tax
consequences of ownership or receipt of distributions under an annuity contract
depend on the individual circumstances of each person. If you are concerned
about any tax consequences with regard to your individual circumstances, you
should consult a competent tax adviser.
TAXATION OF NORTHBROOK LIFE INSURANCE COMPANY
The Company is taxed as a life insurance company under Part I of Subchapter
L of the Internal Revenue Code. The following discussion assumes that the
Company is taxed as a life insurance company under Part I of Subchapter L. Since
the Variable Account is not an entity separate from the Company, and its
operations form a part of the Company, it will not be taxed separately as a
"regulated Investment Company" under Subchapter M of the Code. Investment income
and realized capital gains are automatically applied to increase reserves under
the contract. Under existing federal income tax law, the Company
7
<PAGE>
believes that the Variable Account investment income and realized net capital
gains will not be taxed to the extent that such income and gains are applied to
increase the reserves under the contract.
Accordingly, the Company does not anticipate that it will incur any federal
income tax liability attributable to the Variable Account, and therefore the
Company does not intend to make provisions for any such taxes. However, if
changes in the federal tax laws or interpretations thereof result in the Company
being taxed on income or gains attributable to the Variable Account, then the
Company may impose a charge against the Variable Account (with respect to some
or all contracts) in order to set aside provisions to pay such taxes.
EXCEPTIONS TO THE NON-NATURAL OWNER RULE
There are several exceptions to the general rule that contracts held by a
non-natural owner are not treated as annuity contracts for federal income tax
purposes. Contracts will generally be treated as held by a natural person if the
nominal owner is a trust or other entity which holds the contract as agent for a
natural person. However, this special exception will not apply in the case of an
employer who is the nominal owner of an annuity contract under a non-qualified
deferred compensation arrangement for its employees. Other exceptions to the
non-natural owner rule are: (1) contracts acquired by an estate of a decedent by
reason of the death of the decedent; (2) certain qualified contracts; (3)
contracts purchased by employers upon the termination of certain qualified
plans; (4) certain contracts used in connection with structured settlement
agreements, and (5) contracts purchased with a single premium when the annuity
starting date is no later than a year from purchase of the annuity and
substantially equal periodic payments are made, not less frequently than
annually, during the annuity period.
PENALTY TAX ON PREMATURE DISTRIBUTIONS
There is a 10% penalty tax on the taxable amount of any payment received
from a non-qualified annuity contract unless: (1) made after the owner reaches
59 1/2; (2) attributable to the owner's disability; (3) attributable to
investment before August 14, 1982, including earnings on pre-August 14, 1982
investment; (4) made from certain qualified contracts; (5) made after the death
of the owner; (6) made under an immediate annuity contract; (7) made from an
annuity purchased and held by an employer upon the termination of a qualified
retirement plan; (8) made under a qualified funding asset; (9) made as part of a
series of substantially equal periodic payments (not less frequently than
annually) for the life of or life expectancy of the owner or the joint lives of
joint life expectancies of the owner and designated beneficiary. Similar rules
apply in the case of qualified contracts.
IRS REQUIRED DISTRIBUTION AT DEATH RULES
In order to be considered an annuity contract for federal income tax
purposes, an annuity contract must provide: (1) if any owner dies on or after
the annuity start date but before the entire interest in the contract has been
distributed, the remaining portion of such interest must be distributed at least
as rapidly as under the method of distribution being used as of the date of the
owner's death; (2) if any owner dies prior to the annuity start date, the entire
interest in the contract will be distributed within five years after the date of
the owner's death. These requirements are satisfied if any portion of the
owner's interest which is payable to (or for the benefit of) a designated
beneficiary is distributed over the life of such beneficiary (or over a period
not extending beyond the life expectancy of the beneficiary) and the
distributions begin within one year of the owner's death. If the owner's
designated beneficiary is the surviving spouse of the owner, the contract may be
continued with the surviving spouse as the new owner. If the owner of the
contract is a non-natural person, then the annuitant will be treated as the
owner for purposes of applying the distribution at death rules. In addition, a
change in the annuitant on a contract owned by a non-natural person will be
treated as the death of the owner.
8
<PAGE>
QUALIFIED PLANS
This annuity contract may be used with several types of qualified plans. The
tax rules applicable to participants in such qualified plans vary according to
the type of plan and the terms and conditions of the plan itself. Adverse tax
consequences may result from excess contributions, premature distributions,
distributions that do not conform to specified commencement and minimum
distribution rules, excess distributions and in other circumstances. Owners and
participants under the plan and annuitants and beneficiaries under the contract
may be subject to the terms and conditions of the plan regardless of the terms
of the contract.
TYPES OF QUALIFIED PLANS
INDIVIDUAL RETIREMENT ANNUITIES
Section 408 of the Code permits eligible individuals to contribute to an
individual retirement program known as an Individual Retirement Annuity.
Individual Retirement Annuities are subject to limitations on the amount that
can be contributed and on the time when distributions may commence. Certain
distributions from other types of qualified plans may be "rolled over" on a
tax-deferred basis into an Individual Retirement Annuity.
SIMPLIFIED EMPLOYEE PENSION PLANS
Section 408(k) of the Code allows employers to establish simplified employee
pension plans for their employees using the employees' individual retirement
annuities if certain criteria are met. Under these plans the employer may,
within specified limits, make deductible contributions on behalf of the
employees to their individual retirement annuities.
SAVINGS INCENTIVE MATCH PLANS FOR EMPLOYEES (SIMPLE PLANS)
Sections 408(p) and 401(k) of the Code allow employers with 100 or fewer
employees to establish SIMPLE retirement plans for their employees. SIMPLE plans
may be structured as a SIMPLE retirement account using an employee's IRA to hold
the assets or as a Section 401(k) qualified cash or deferred arrangement. In
general, a SIMPLE plan consists of a salary deferral program for eligible
employees and matching or nonelective contributions made by employers. Employers
intending to use the contract in conjunction with SIMPLE plans should seek
competent tax and legal advice.
TAX SHELTERED ANNUITIES
Section 403(b) of the Code permits public school employees and employees of
certain types of tax-exempt organizations (specified in Section 501(c)(3) of the
Code) to have their employers purchase annuity contracts for them, and subject
to certain limitations, to exclude the purchase payments from the employees'
gross income. An annuity contract used for a Section 403(b) plan must provide
that distributions attributable to salary reduction contributions made after
12/31/88, and all earnings on salary reduction contributions, may be made only
after the employee attains age 59 1/2, separates from service, dies, becomes
disabled or in the case of hardship (earnings on salary reduction contributions
may not be distributed for hardship).
CORPORATE AND SELF-EMPLOYED PENSION AND PROFIT SHARING PLANS
Sections 401(a) and 403(a) of the Code permit corporate employers to
establish various types of tax favored retirement plans for employees. The
Self-Employed Individuals Retirement Act of 1962, as amended, (commonly referred
to as "H.R. 10" or "Keogh") permits self-employed individuals to establish tax
favored retirement plans for themselves and their employees. Such retirement
plans may permit the purchase of annuity contracts in order to provide benefits
under the plans.
9
<PAGE>
STATE AND LOCAL GOVERNMENT AND TAX-EXEMPT ORGANIZATION DEFERRED COMPENSATION
PLANS
Section 457 of the Code permits employees of state and local governments and
tax-exempt organizations to defer a portion of their compensation without paying
current taxes. The employees must be participants in an eligible deferred
compensation plan. Generally, under the non-natural owner rules, such contracts
are not treated as annuity contracts for federal income tax purposes.
VOTING RIGHTS
The number of votes which a person has the right to instruct will be
calculated separately for each Sub-Account. That number will be determined by
applying his/her percentage interest, if any, in a particular Sub-Account to the
total number of votes attributable to the Sub-Account.
The number of votes of the Portfolio which an Owner has a right to instruct
will be determined as of the date coincident with the date established by that
Portfolio for determining shareholders eligible to vote at the meeting of the
Fund. Voting instructions will be solicited by written communication prior to
such meeting in accordance with procedures established by the Fund.
Fund shares as to which no timely instructions are received will be voted in
proportion to the voting instructions which are received with respect to all
Contracts participating in that Sub-Account. Voting instructions to abstain on
any item to be voted upon will be applied on a pro rata basis to reduce the
votes eligible to be cast.
Each person having a voting interest in a Sub-Account will receive proxy
material, reports and other materials relating to the appropriate Portfolio.
SALES COMMISSIONS
The Company pays Dean Witter for its underwriting and general agent's
services a sales commission of up to 5.75% of the Purchase Payments and sales
administration expense allowance of up to 0.125% of the Average Net Assets of
the Fixed Account. These commissions are intended to cover Dean Witter's
expenses in distributing and selling the Contracts.
Under the Underwriting Agreement and Managing General Agent's Agreement
between Dean Witter and the Company, Dean Witter is responsible for paying costs
and expenses associated with licensing its agents, paying agent's commissions,
printing, mailing and distributing the Prospectus to prospective purchasers; and
preparing, printing and distributing sales literature. In the event the
commissions fail to adequately compensate Dean Witter for these expenses, Dean
Witter will pay these expenses from its own funds.
10
<PAGE>
INDEPENDENT AUDITORS' REPORT
TO THE BOARD OF DIRECTORS AND SHAREHOLDER OF
NORTHBROOK LIFE INSURANCE COMPANY:
We have audited the accompanying Statements of Financial Position of Northbrook
Life Insurance Company (the "Company") as of December 31, 1996 and 1995, and the
related Statements of Operations, Shareholder's Equity and Cash Flows for each
of the three years in the period ended December 31, 1996. 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 Northbrook Life Insurance Company as of
December 31, 1996 and 1995, and the results of its operations and its cash flows
for each of the three years in the period ended December 31, 1996 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 21, 1997
F-1
<PAGE>
NORTHBROOK LIFE INSURANCE COMPANY
STATEMENTS OF FINANCIAL POSITION
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------
1996 1995
------------ ------------
($ IN THOUSANDS)
<S> <C> <C>
ASSETS
Investments
Fixed income securities, at fair value (amortized cost $65,500 and $59,142)....... $ 67,479 $ 63,229
Short-term........................................................................ 6,590 8,049
------------ ------------
Total investments............................................................. 74,069 71,278
Reinsurance recoverable from Allstate Life Insurance Company........................ 2,480,034 2,636,981
Cash................................................................................ -- 87
Net receivable from Allstate Life Insurance Company................................. 4,505 6,183
Other assets........................................................................ 2,639 2,164
Separate Accounts................................................................... 4,354,783 3,354,910
------------ ------------
Total assets.................................................................. $ 6,916,030 $ 6,071,603
------------ ------------
------------ ------------
LIABILITIES
Reserve for life-contingent contract benefits....................................... $ 143,346 $ 139,509
Contractholder funds................................................................ 2,336,296 2,497,278
Income taxes payable................................................................ 814 233
Deferred income taxes............................................................... 2,085 2,798
Separate Accounts................................................................... 4,354,783 3,354,910
------------ ------------
Total liabilities............................................................. 6,837,324 5,994,728
------------ ------------
SHAREHOLDER'S EQUITY
Common stock, $100 par value, 25,000 shares authorized, issued and outstanding...... 2,500 2,500
Additional capital paid-in.......................................................... 56,600 56,600
Unrealized net capital gains........................................................ 1,286 2,657
Retained income..................................................................... 18,320 15,118
------------ ------------
Total shareholder's equity.................................................... 78,706 76,875
------------ ------------
Total liabilities and shareholder's equity.................................... $ 6,916,030 $ 6,071,603
------------ ------------
------------ ------------
</TABLE>
See notes to financial statements.
F-2
<PAGE>
NORTHBROOK LIFE INSURANCE COMPANY
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------
1996 1995 1994
--------- --------- ---------
($ IN THOUSANDS)
<S> <C> <C> <C>
REVENUES
Net investment income.............................................................. $ 4,888 $ 4,782 $ 2,881
Realized capital gains and losses.................................................. (20) 67 (193)
--------- --------- ---------
INCOME BEFORE INCOME TAX EXPENSE..................................................... 4,868 4,849 2,688
INCOME TAX EXPENSE................................................................... 1,666 1,686 955
--------- --------- ---------
NET INCOME........................................................................... $ 3,202 $ 3,163 $ 1,733
--------- --------- ---------
--------- --------- ---------
</TABLE>
See notes to financial statements.
F-3
<PAGE>
NORTHBROOK LIFE INSURANCE COMPANY
STATEMENTS OF SHAREHOLDER'S EQUITY
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------
1996 1995 1994
--------- --------- ---------
($ IN THOUSANDS)
<S> <C> <C> <C>
COMMON STOCK..................................................................... $ 2,500 $ 2,500 $ 2,500
--------- --------- ---------
ADDITIONAL CAPITAL PAID-IN
Balance, beginning of year..................................................... 56,600 56,600 31,600
Capital contribution......................................................... -- -- 25,000
--------- --------- ---------
Balance, end of year........................................................... 56,600 56,600 56,600
--------- --------- ---------
UNREALIZED NET CAPITAL GAINS
Balance, beginning of year..................................................... 2,657 (1,553) 747
Net (decrease) increase...................................................... (1,371) 4,210 (2,300)
--------- --------- ---------
Balance, end of year........................................................... 1,286 2,657 (1,553)
--------- --------- ---------
RETAINED INCOME
Balance, beginning of year..................................................... 15,118 11,955 10,222
Net income................................................................... 3,202 3,163 1,733
--------- --------- ---------
Balance, end of year........................................................... 18,320 15,118 11,955
--------- --------- ---------
Total shareholder's equity............................................... $ 78,706 $ 76,875 $ 69,502
--------- --------- ---------
--------- --------- ---------
</TABLE>
See notes to financial statements.
F-4
<PAGE>
NORTHBROOK LIFE INSURANCE COMPANY
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------
1996 1995 1994
---------- ---------- ----------
($ IN THOUSANDS)
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income.................................................................. $ 3,202 $ 3,163 $ 1,733
Adjustments to reconcile net income to net cash provided by (used in)
operating activities
Amortization and other non-cash items..................................... 782 903 640
Realized capital losses (gains)........................................... 20 (67) 193
(Decrease) increase in life-contingent contract benefits and
contractholder funds.................................................... (198) 113 (58)
Change in deferred income taxes........................................... 24 608 (114)
Changes in other operating assets and liabilities......................... 864 (2,705) (3,835)
---------- ---------- ----------
Net cash provided by (used in) operating activities................... 4,694 2,015 (1,441)
---------- ---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES
Fixed income securities
Proceeds from sales....................................................... 3,522 5,423 1,256
Investment collections.................................................... 5,770 7,108 7,626
Investment purchases...................................................... (15,532) (9,843) (36,071)
Change in short-term investments, net....................................... 1,459 (4,675) 3,475
---------- ---------- ----------
Net cash used in investing activities................................. (4,781) (1,987) (23,714)
---------- ---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES
Capital contribution........................................................ -- -- 25,000
---------- ---------- ----------
Net cash provided by financing activities............................... -- -- 25,000
---------- ---------- ----------
NET (DECREASE) INCREASE IN CASH............................................... (87) 28 (155)
CASH AT BEGINNING OF YEAR..................................................... 87 59 214
---------- ---------- ----------
CASH AT END OF YEAR........................................................... $ -- $ 87 $ 59
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
See notes to financial statements.
F-5
<PAGE>
NORTHBROOK LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS
($ IN THOUSANDS)
1. GENERAL
BASIS OF PRESENTATION
The accompanying financial statements include the accounts of Northbrook
Life Insurance Company (the "Company"), a wholly owned subsidiary of Allstate
Life Insurance Company ("ALIC"), which is wholly owned by Allstate Insurance
Company ("AIC"), a wholly owned subsidiary of The Allstate Corporation (the
"Corporation"). On June 30, 1995, Sears, Roebuck and Co. ("Sears") distributed
its 80.3% ownership in the Corporation to Sears common shareholders through a
tax-free dividend (the "Distribution"). These financial statements have been
prepared in conformity with generally accepted accounting principles.
To conform with the 1996 presentation, certain items in the prior years'
financial statements and notes have been reclassified.
NATURE OF OPERATIONS
The Company markets life insurance contracts and various annuity products in
the United States through Dean Witter Reynolds Inc. ("Dean Witter") (see Note
4), a wholly owned subsidiary of Dean Witter, Discover & Co. ("Dean Witter
Discover"). Life insurance contracts sold by the Company include universal life
and other interest-sensitive life products. Annuities include deferred
annuities, such as variable annuities and fixed rate single and flexible premium
annuities, and immediate annuities.
Annuity and life insurance contracts issued by the Company are subject to
discretionary withdrawal or surrender by the contractholder, subject to
applicable surrender charges. These contracts are reinsured with ALIC (see Note
3), which invests premiums and deposits to create cash flows that will fund
future benefits and expenses. In order to support competitive credited rates,
ALIC adheres to a basic philosophy of matching assets with related liabilities
to limit interest rate risk, while maintaining adequate liquidity and a prudent
and diversified level of credit risk.
The Company monitors economic and regulatory developments which have the
potential to impact its business. There continues to be proposed federal
legislation and regulation which would allow banks greater participation in
securities and insurance businesses, which could present an increased level of
competition for sales of the Company's annuity contracts. 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 market for these
products.
The Company is authorized to sell life and annuity products in all states
except New York, as well as the District of Columbia and Puerto Rico. The top
geographic locations for statutory premiums earned are California, Florida,
Texas and Pennsylvania for the year ended December 31, 1996. No other
jurisdiction accounted for more than 5% of statutory premiums. All premiums and
contract charges are ceded to ALIC under reinsurance agreements.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
INVESTMENTS
Fixed income securities include bonds and mortgage-backed securities. All
fixed income securities are carried at fair value and may be sold prior to their
contractual maturity ("available for sale"). The difference between amortized
cost and fair value, net of deferred income taxes, is reflected as a component
of shareholder's equity. Provisions are recognized for declines in the value of
fixed income securities that are other than temporary. Such writedowns are
included in realized capital gains and losses.
F-6
<PAGE>
NORTHBROOK LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
($ IN THOUSANDS)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Short-term investments are carried at cost which approximates fair value.
Investment income consists primarily of interest, which is recognized on an
accrual basis. Interest income on mortgage-backed securities is determined on
the effective yield method, based on the estimated principal repayments. Accrual
of income is suspended for fixed income securities that are in default or when
the receipt of interest payments is in doubt. Realized capital gains and losses
are determined on a specific identification basis.
RECOGNITION OF PREMIUM REVENUES AND CONTRACT CHARGES
Revenues on interest-sensitive life insurance contracts are comprised of
contract charges and fees, and are recognized when assessed against the
policyholder account balance. Revenues on annuities, which are considered
investment contracts, include contract charges and fees for contract
administration and surrenders. These revenues are recognized when levied against
the contract balances.
REINSURANCE
The Company and ALIC have reinsurance agreements under which all premiums
and deposits are transferred to ALIC. Premiums, contract charges, credited
interest and policy benefits are ceded and reflected net of such cessions in the
statements of operations. The amounts shown in the Company's statements of
operations relate to the investment of those assets of the Company that are not
transferred to ALIC under reinsurance agreements. Reinsurance recoverable and
the related reserve for life-contingent contract benefits and contractholder
funds are reported separately in the statements of financial position. The
Company continues to have primary liability as the direct insurer for risks
reinsured.
INCOME TAXES
The income tax provision is calculated under the liability method. Deferred
tax assets and liabilities are recorded based on the difference between the
financial statement and tax bases of assets and liabilities and the enacted tax
regulations. Deferred income taxes also arise from unrealized capital gains or
losses on fixed income securities carried at fair value.
SEPARATE ACCOUNTS
The Company issues flexible premium deferred variable annuity contracts, 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. Assets and liabilities of the Separate Accounts represent
funds of Northbrook Variable Annuity Account and Northbrook Variable Annuity
Account II ("Separate Accounts"), 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. Revenues to the Company from the Separate
Accounts consist of contract maintenance fees, administration fees and mortality
and expense risk charges, which are ceded to ALIC.
RESERVE FOR LIFE-CONTINGENT CONTRACT BENEFITS
The reserve for life-contingent contract benefits, which relates to
structured settlement annuities and supplemental contracts with life
contingencies, is computed on the basis of assumptions as to future investment
yields, mortality, morbidity, terminations and expenses. These assumptions,
which for traditional life are applied using the net level premium method,
include provisions for adverse deviation and
F-7
<PAGE>
NORTHBROOK LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
($ IN THOUSANDS)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
generally vary by such characteristics as type of coverage, year of issue and
policy duration. Reserve interest rates ranged from 3.96% to 11.00% during 1996.
CONTRACTHOLDER FUNDS
Contractholder funds arise from the issuance of individual or group
contracts that include an investment component, including most annuities and
interest-sensitive life insurance contracts. 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 1996,
credited interest rates on contractholder funds ranged from 3.10% to 9.51% for
those contracts with fixed interest rates and from 3.25% to 7.86% 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.
3. RELATED PARTY TRANSACTIONS
REINSURANCE
Premiums and contract charges ceded to ALIC were $3,024 and $60,744 in 1996,
$2,284 and $52,348 in 1995, and $1,886 and $38,306 in 1994. Credited interest,
policy benefits and expenses ceded to ALIC amounted to $207,752, $229,525 and
$243,326 in 1996, 1995 and 1994, respectively. Investment income earned on the
assets which support contractholder funds is not included in the Company's
financial statements as those assets are owned and managed by ALIC under the
terms of reinsurance agreements.
BUSINESS OPERATIONS
The Company utilizes services and business facilities owned or leased, and
operated by AIC in conducting its business activities. The Company reimburses
AIC for the operating expenses incurred by AIC on behalf of the Company. The
cost to the Company is determined by various allocation methods and is primarily
related to the level of services provided. Operating expenses, including
compensation and retirement and other benefit programs allocated to the Company
were $8,074, $5,341 and $5,483 in 1996, 1995 and 1994, respectively. Of these
costs, the Company retains investment related expenses. All other costs are
ceded to ALIC under reinsurance agreements.
4. EXCLUSIVE DISTRIBUTION AGREEMENT
The Company and ALIC have formed a strategic alliance with Dean Witter to
develop, market and distribute proprietary annuity and life insurance products
through Dean Witter account executives. Dean Witter provides a portion of the
funding for these products through loans to an affiliate of the Company.
Under the terms of the strategic alliance, which is cancelable by either
party, the Company has agreed to use Dean Witter as an exclusive distribution
channel for the Company's products. Dean Witter Discover's wholly owned
subsidiary, Dean Witter Intercapital Inc., is the investment manager for the
Dean Witter Variable Investment Series, the fund in which the assets of the
Separate Accounts are invested.
On February 5, 1997, Dean Witter Discover and Morgan Stanley Group Inc.
announced that they had entered into an agreement and plan of merger, with the
combined company to be named Morgan Stanley,
F-8
<PAGE>
NORTHBROOK LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
($ IN THOUSANDS)
4. EXCLUSIVE DISTRIBUTION AGREEMENT (CONTINUED)
Dean Witter, Discover & Co. The parties to the merger anticipate that the
transaction will close in mid-1997. The Company does not expect the merger to
have a significant impact on its business.
5. INVESTMENTS
FAIR VALUES
The amortized cost, gross unrealized gains and losses and fair value for
fixed income securities are as follows:
<TABLE>
<CAPTION>
GROSS UNREALIZED
AMORTIZED ---------------------- FAIR
AT DECEMBER 31, 1996 COST GAINS (LOSSES) VALUE
- ------------------------------------------------------- ----------- --------- ----------- ---------
<S> <C> <C> <C> <C>
U.S. government and agencies........................... $ 8,629 $ 193 $ (54) $ 8,768
Municipal.............................................. 873 48 -- 921
Corporate.............................................. 16,902 260 (69) 17,093
Mortgage-backed securities............................. 39,096 1,883 (282) 40,697
----------- --------- ----- ---------
Total fixed income securities...................... $ 65,500 $ 2,384 $ (405) $ 67,479
----------- --------- ----- ---------
----------- --------- ----- ---------
<CAPTION>
GROSS UNREALIZED
AMORTIZED ---------------------- FAIR
AT DECEMBER 31, 1995 COST GAINS (LOSSES) VALUE
- ------------------------------------------------------- ----------- --------- ----------- ---------
<S> <C> <C> <C> <C>
U.S. government and agencies........................... $ 8,619 $ 880 $ -- $ 9,499
Municipal.............................................. 1,583 83 -- 1,666
Corporate.............................................. 4,967 349 -- 5,316
Mortgage-backed securities............................. 43,973 3,003 (228) 46,748
----------- --------- ----- ---------
Total fixed income securities...................... $ 59,142 $ 4,315 $ (228) $ 63,229
----------- --------- ----- ---------
----------- --------- ----- ---------
</TABLE>
SCHEDULED MATURITIES
The scheduled maturities for fixed income securities are as follows at
December 31, 1996:
<TABLE>
<CAPTION>
AMORTIZED FAIR
COST VALUE
----------- ---------
<S> <C> <C>
Due in one year or less.................................................... $ 60 $ 60
Due after one year through five years...................................... 3,416 3,525
Due after five years through ten years..................................... 15,706 15,958
Due after ten years........................................................ 7,222 7,239
----------- ---------
26,404 26,782
Mortgage-backed securities................................................. 39,096 40,697
----------- ---------
Total.................................................................. $ 65,500 $ 67,479
----------- ---------
----------- ---------
</TABLE>
Actual maturities may differ from those scheduled as a result of prepayments
by the issuers.
F-9
<PAGE>
NORTHBROOK LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
($ IN THOUSANDS)
5. INVESTMENTS (CONTINUED)
NET INVESTMENT INCOME
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------
1996 1995 1994
--------- --------- ---------
<S> <C> <C> <C>
Fixed income securities.............................................. $ 4,675 $ 4,633 $ 2,735
Short-term........................................................... 390 215 192
--------- --------- ---------
Investment income, before expense................................ 5,065 4,848 2,927
Investment expense............................................... 177 66 46
--------- --------- ---------
Net investment income............................................ $ 4,888 $ 4,782 $ 2,881
--------- --------- ---------
--------- --------- ---------
</TABLE>
REALIZED CAPITAL GAINS AND LOSSES
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------
1996 1995 1994
--------- --------- ---------
<S> <C> <C> <C>
Fixed income securities.............................................. $ (20) $ 67 $ (193)
Income tax benefit (expense)......................................... 7 (23) 68
--------- --------- ---------
Realized capital losses and gains, after tax......................... $ (13) $ 44 $ (125)
--------- --------- ---------
--------- --------- ---------
</TABLE>
PROCEEDS FROM SALES OF FIXED INCOME SECURITIES
Proceeds from sales of investments in fixed income securities were $3,522,
$5,423 and $1,256 in 1996, 1995 and 1994, respectively. Gross losses of $32 and
$179 were realized on sales of fixed income securities during 1996 and 1994,
respectively, and gross gains of $67 were recognized during 1995.
UNREALIZED NET CAPITAL GAINS
Unrealized net capital gains on fixed income securities included in
shareholder's equity at December 31, 1996 are as follows:
<TABLE>
<CAPTION>
COST/
AMORTIZED FAIR UNREALIZED
COST VALUE NET GAINS
----------- --------- -----------
<S> <C> <C> <C>
Fixed income securities........................................ $ 65,500 $ 67,479 $ 1,979
----------- ---------
----------- ---------
Deferred income taxes.......................................... (693)
-----------
Unrealized net capital gains............................... $ 1,286
-----------
-----------
</TABLE>
CHANGE IN UNREALIZED NET CAPITAL GAINS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------
1996 1995 1994
--------- --------- ---------
<S> <C> <C> <C>
Fixed income securities........................................... $ (2,108) $ 6,477 $ (3,539)
Deferred income taxes............................................. 737 (2,267) 1,239
--------- --------- ---------
Change in unrealized net capital gains........................ $ (1,371) $ 4,210 $ (2,300)
--------- --------- ---------
--------- --------- ---------
</TABLE>
F-10
<PAGE>
NORTHBROOK LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
($ IN THOUSANDS)
5. INVESTMENTS (CONTINUED)
SECURITIES ON DEPOSIT
At December 31, 1996, fixed income securities with a carrying value of
$7,376 were on deposit with regulatory authorities as required by law.
6. 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 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 assets (including reinsurance recoverable) and
liabilities (including deferred income taxes and reserve for life-contingent
contract benefits) are not considered financial instruments and are not carried
at fair value. Other assets and liabilities considered financial instruments,
including accrued investment income and cash, are generally of a short-term
nature. It is assumed that their carrying value approximates fair value.
FINANCIAL ASSETS
<TABLE>
<CAPTION>
AT DECEMBER 31,
------------------------------------------------------
1996 1995
-------------------------- --------------------------
CARRYING CARRYING
VALUE FAIR VALUE VALUE FAIR VALUE
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Fixed income securities.................. $ 67,479 $ 67,479 $ 63,229 $ 63,229
Short-term investments................... 6,590 6,590 8,049 8,049
Separate Accounts........................ 4,354,783 4,354,783 3,354,910 3,354,910
</TABLE>
Fair values for fixed income securities are based on quoted market prices.
Short-term investments are highly liquid investments with maturities of less
than one year whose carrying value approximates fair value. Assets of the
Separate Accounts are carried in the statements of financial position at fair
value.
FINANCIAL LIABILITIES
<TABLE>
<CAPTION>
AT DECEMBER 31,
------------------------------------------------------
1996 1995
-------------------------- --------------------------
CARRYING CARRYING
VALUE FAIR VALUE VALUE FAIR VALUE
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Contractholder funds on investment
contracts............................... $ 2,143,482 $ 2,118,583 $ 2,294,536 $ 2,274,053
Separate Accounts........................ 4,354,783 4,354,783 3,354,910 3,354,910
</TABLE>
The fair value of contractholder funds on investment contracts is based on
the terms of the underlying contracts. Reserves on investment contracts with no
stated maturities (single premium and flexible premium deferred annuities) are
valued at the account balance less surrender charges. The fair value of
immediate annuities and annuities without life contingencies with fixed terms is
estimated using discounted cash flow calculations based on interest rates
currently offered for contracts with similar terms and durations. Separate
Account liabilities are carried at the fair value of the underlying assets.
F-11
<PAGE>
NORTHBROOK LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
($ IN THOUSANDS)
7. INCOME TAXES
Consolidated federal income tax returns are filed by the Corporation and its
eligible subsidiaries, including the Company. Tax liabilities and benefits
realized by the consolidated group are allocated as generated by the respective
entities.
Prior to the Distribution, the Corporation and all of its domestic
subsidiaries, including the Company (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. Effectively, this resulted in the
Company's annual income tax provision being computed as if the Company filed a
separate return, except that items such as net operating losses, capital losses
or similar items, which might not be recognized in a separate return, were
allocated according to the Tax Sharing Agreement.
The Allstate Group and Sears Group have entered into an agreement which
governs their respective rights and obligations with respect to federal income
taxes for all periods prior to the Distribution ("Consolidated Tax Years"). The
agreement provides that all Consolidated Tax Years will continue to be governed
by the Tax Sharing Agreement with respect to the Company's federal income tax
liability.
The components of the net deferred income tax liability at December 31, 1996
and 1995 are as follows:
<TABLE>
<CAPTION>
AT DECEMBER 31,
--------------------
1996 1995
--------- ---------
<S> <C> <C>
Difference in tax bases of investments....................................... $ (1,392) $ (1,368)
Unrealized net capital gains on fixed income securities...................... (693) (1,430)
--------- ---------
Total deferred liability................................................. $ (2,085) $ (2,798)
--------- ---------
--------- ---------
</TABLE>
The components of income tax expense are as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------
1996 1995 1994
--------- --------- ---------
<S> <C> <C> <C>
Current.............................................................. $ 1,642 $ 1,078 $ 1,069
Deferred............................................................. 24 608 (114)
--------- --------- ---------
Total income tax expense......................................... $ 1,666 $ 1,686 $ 955
--------- --------- ---------
--------- --------- ---------
</TABLE>
The Company paid income taxes of $2,308, $1,555 and $1,393 in 1996, 1995 and
1994, respectively, to ALIC. The Company had income taxes payable to ALIC of
$814 and $233 at December 31, 1996 and 1995, respectively.
F-12
<PAGE>
NORTHBROOK LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
($ IN THOUSANDS)
8. STATUTORY FINANCIAL INFORMATION
The following tables reconcile net income and shareholder's equity as
reported herein in conformity with generally accepted accounting principles with
statutory net income and capital and surplus, determined in accordance with
statutory accounting practices prescribed or permitted by insurance regulatory
authorities:
<TABLE>
<CAPTION>
NET INCOME
-------------------------------
YEAR ENDED DECEMBER 31,
-------------------------------
1996 1995 1994
--------- --------- ---------
<S> <C> <C> <C>
Balance per generally accepted accounting principles................. $ 3,202 $ 3,163 $ 1,733
Deferred income taxes............................................ 24 608 (114)
Non-admitted assets and statutory reserves....................... (661) (1,471) (27)
--------- --------- ---------
Balance per statutory accounting practices........................... $ 2,565 $ 2,300 $ 1,592
--------- --------- ---------
--------- --------- ---------
</TABLE>
<TABLE>
<CAPTION>
SHAREHOLDER'S EQUITY
--------------------
AT DECEMBER 31,
--------------------
1996 1995
--------- ---------
<S> <C> <C>
Balance per generally accepted accounting principles........................ $ 78,706 $ 76,875
Deferred income taxes................................................... 2,085 2,798
Unrealized gain/loss on fixed income securities......................... (1,979) (4,087)
Non-admitted assets and statutory reserves.............................. (2,503) (2,001)
Other................................................................... (1,211) (520)
--------- ---------
Balance per statutory accounting practices.................................. $ 75,098 $ 73,065
--------- ---------
--------- ---------
</TABLE>
PERMITTED STATUTORY ACCOUNTING PRACTICES
The Company prepares its statutory financial statements in accordance with
accounting principles and practices prescribed or permitted by the Illinois
Department of Insurance. Prescribed statutory accounting practices include a
variety of publications of the National Association of Insurance Commissioners,
as well as state laws, regulations and general administrative rules. Permitted
statutory accounting practices encompass all accounting practices not so
prescribed. The Company does not follow any permitted statutory accounting
practices that have a material effect on statutory surplus or risk-based
capital.
DIVIDENDS
The ability of the Company to pay dividends is dependent on business
conditions, income, cash requirements of the Company and other relevant factors.
The payment of shareholder dividends by insurance companies without the prior
approval of the state insurance regulator is limited to formula amounts based on
net income and capital and surplus, determined in accordance with statutory
accounting practices, as well as the timing and amount of dividends paid in the
preceding twelve months. The maximum amount of dividends that the Company can
distribute during 1997 without prior approval of both the Illinois and
California Departments of Insurance is $7,260.
F-13
<PAGE>
NORTHBROOK LIFE INSURANCE COMPANY
SCHEDULE IV--REINSURANCE
($ IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1996
<S> <C> <C> <C>
GROSS NET
AMOUNT CEDED AMOUNT
--------- --------- ---------
Life insurance in force....................................... $ 556,242 $ 556,242 $ --
--------- --------- ---------
--------- --------- ---------
Premiums and contract charges:
Life and annuities.......................................... $ 64,519 $ 64,519 $ --
--------- --------- ---------
--------- --------- ---------
<CAPTION>
YEAR ENDED DECEMBER 31, 1995
GROSS NET
AMOUNT CEDED AMOUNT
--------- --------- ---------
<S> <C> <C> <C>
Life insurance in force....................................... $ 610,478 $ 610,478 $ --
--------- --------- ---------
--------- --------- ---------
Premiums and contract charges:
Life and annuities.......................................... $ 54,632 $ 54,632 $ --
--------- --------- ---------
--------- --------- ---------
<CAPTION>
YEAR ENDED DECEMBER 31, 1994
GROSS NET
AMOUNT CEDED AMOUNT
--------- --------- ---------
<S> <C> <C> <C>
Life insurance in force....................................... $ 661,356 $ 661,356 $ --
--------- --------- ---------
--------- --------- ---------
Premiums and contract charges:
Life and annuities.......................................... $ 40,192 $ 40,192 $ --
--------- --------- ---------
--------- --------- ---------
</TABLE>
F-14
<PAGE>
(This page has been left blank intentionally.)
F-15
<PAGE>
INDEPENDENT AUDITORS' REPORT
TO THE BOARD OF DIRECTORS AND SHAREHOLDER OF
NORTHBROOK LIFE INSURANCE COMPANY:
We have audited the accompanying Statement of Net Assets of Northbrook Variable
Annuity Account (the "Account") as of December 31, 1996, and the related
Statement of Operations for the year then ended and the Statement of Changes in
Net Assets for each of the two years in the period ended December 31, 1996 of
the Money Market, High Yield, Equity, Quality Income Plus, Strategist, Dividend
Growth, Utilities, European Growth, Capital Growth, Global Dividend Growth and
Pacific Growth portfolios that comprise the Account. 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 audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. Our procedures included
confirmation of securities owned at December 31, 1996. 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 Account as of December 31, 1996, the
results of its operations for the year then ended, and the changes in its net
assets for each of the two years in the period then ended, of each of the
portfolios comprising the Account, in conformity with generally accepted
accounting principles.
/s/ DELOITTE & TOUCHE LLP
Chicago, Illinois
February 21, 1997
F-16
<PAGE>
NORTHBROOK VARIABLE ANNUITY ACCOUNT
STATEMENT OF NET ASSETS
DECEMBER 31, 1996
(Dollars and Shares in Thousands)
<TABLE>
<S> <C>
ASSETS
Investments in the Dean Witter Variable Investment Series:
Money Market Portfolio--23,228 shares (cost: $23,228)......................... $ 23,228
High Yield Portfolio--3,458 shares (cost: $26,192)............................ 21,372
Equity Portfolio--1,781 shares (cost: $35,557)................................ 46,996
Quality Income Plus Portfolio--2,587 shares (cost: $26,047)................... 26,825
Strategist Portfolio--3,262 shares (cost: $36,251)............................ 44,759
Dividend Growth Portfolio--3,803 shares (cost: $42,129)....................... 69,977
Utilities Portfolio--1,806 shares (cost: $20,431)............................. 27,711
European Growth Portfolio--628 shares (cost: $9,310).......................... 13,545
Capital Growth Portfolio--194 shares (cost: $2,484)........................... 3,228
Global Dividend Growth Portfolio--773 shares (cost: $8,183)................... 10,155
Pacific Growth Portfolio--523 shares (cost: $5,127)........................... 5,214
---------
Total assets.............................................................. 293,010
LIABILITIES
Payable to Northbrook Life Insurance Company:
Accrued contract maintenance charges.......................................... 103
---------
Net assets................................................................ $ 292,907
---------
---------
</TABLE>
See notes to financial statements.
F-17
<PAGE>
NORTHBROOK VARIABLE ANNUITY ACCOUNT
STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
DEAN WITTER VARIABLE INVESTMENT SERIES
---------------------------------------------------------------------
QUALITY
MONEY HIGH INCOME DIVIDEND
MARKET YIELD EQUITY PLUS STRATEGIST GROWTH
(Dollars in Thousands) PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
--------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
INVESTMENT INCOME
Dividends........................ $ 1,123 $ 3,344 $ 6,122 $ 2,335 $ 1,377 $ 4,008
Charges from Northbrook Life
Insurance Company:
Mortality and expense risk..... (250) (234) (536) (340) (505) (772)
--------- --------- --------- --------- --------- ---------
Net investment income............ 873 3,110 5,586 1,995 872 3,236
REALIZED AND UNREALIZED (LOSSES)
GAINS ON INVESTMENTS
Realized (losses) gains from
sales of investments
Proceeds from sales............ 17,704 6,914 22,315 17,824 18,150 27,068
Cost of investments sold....... (17,704) (8,696) (16,162) (17,311) (15,348) (17,365)
--------- --------- --------- --------- --------- ---------
Net realized (losses) gains........ -- (1,782) 6,153 513 2,802 9,703
--------- --------- --------- --------- --------- ---------
CHANGE IN UNREALIZED GAINS
(LOSSES)......................... -- 901 (7,155) (3,205) 1,949 2,544
--------- --------- --------- --------- --------- ---------
Net (losses) gains on
investments.................... -- (881) (1,002) (2,692) 4,751 12,247
--------- --------- --------- --------- --------- ---------
CHANGE IN NET ASSETS RESULTING FROM
OPERATIONS....................... $ 873 $ 2,229 $ 4,584 $ (697) $ 5,623 $ 15,483
--------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- ---------
</TABLE>
See notes to financial statements.
F-18
<PAGE>
<TABLE>
<CAPTION>
DEAN WITTER VARIABLE INVESTMENT SERIES
---------------------------------------------------------------------
GLOBAL
EUROPEAN CAPITAL DIVIDEND PACIFIC
UTILITIES GROWTH GROWTH GROWTH GROWTH
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO TOTAL
--------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
INVESTMENT INCOME
Dividends........................ $ 1,254 $ 832 $ 82 $ 567 $ 190 $ 21,234
Charges from Northbrook Life
Insurance Company:
Mortality and expense risk..... (351) (130) (38) (108) (69) (3,333)
--------- --------- --------- --------- --------- ---------
Net investment income............ 903 702 44 459 121 17,901
REALIZED AND UNREALIZED (LOSSES)
GAINS ON INVESTMENTS
Realized (losses) gains from
sales of investments
Proceeds from sales............ 16,559 4,294 1,797 3,496 4,158 140,279
Cost of investments sold....... (12,598) (3,242) (1,392) (2,948) (4,022) (116,788)
--------- --------- --------- --------- --------- ---------
Net realized (losses) gains........ 3,961 1,052 405 548 136 23,491
--------- --------- --------- --------- --------- ---------
CHANGE IN UNREALIZED GAINS
(LOSSES)........................... (2,983) 1,482 (68) 674 10 (5,851)
--------- --------- --------- --------- --------- ---------
Net (losses) gains on
investments.................... 978 2,534 337 1,222 146 17,640
--------- --------- --------- --------- --------- ---------
CHANGE IN NET ASSETS RESULTING FROM
OPERATIONS......................... $ 1,881 $ 3,236 $ 381 $ 1,681 $ 267 $ 35,541
--------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- ---------
</TABLE>
See notes to financial statements.
F-19
<PAGE>
NORTHBROOK VARIABLE ANNUITY ACCOUNT
STATEMENT OF CHANGES IN NET ASSETS
YEAR ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
DEAN WITTER VARIABLE INVESTMENT SERIES
----------------------------------------------------------------------------
QUALITY
MONEY HIGH INCOME DIVIDEND
(Dollars and Units in Thousands, Except Value per MARKET YIELD EQUITY PLUS STRATEGIST GROWTH
Unit) PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
FROM OPERATIONS
Net investment income........................... $ 873 $ 3,110 $ 5,586 $ 1,995 $ 872 $ 3,236
Net realized (losses) gains..................... -- (1,782) 6,153 513 2,802 9,703
Net change in unrealized gains (losses)......... -- 901 (7,155) (3,205) 1,949 2,544
----------- ----------- ----------- ----------- ----------- -----------
Change in net assets resulting from
operations.................................. 873 2,229 4,584 (697) 5,623 15,483
FROM CAPITAL TRANSACTIONS
Deposits........................................ 219 244 330 84 148 700
Benefit payments................................ (359) (426) (242) (599) (1,172) (344)
Payments on termination......................... (9,613) (5,277) (14,899) (13,628) (14,157) (26,968)
Contract maintenance charges.................... (14) (18) (29) (12) (32) (47)
Transfers among the portfolios and with the
Fixed Account--net............................ 5,038 101 (72) (2,586) (612) 1,315
----------- ----------- ----------- ----------- ----------- -----------
Change in net assets resulting from capital
transactions................................ (4,729) (5,376) (14,912) (16,741) (15,825) (25,344)
----------- ----------- ----------- ----------- ----------- -----------
(DECREASE) INCREASE IN NET ASSETS................. (3,856) (3,147) (10,328) (17,438) (10,202) (9,861)
Net assets at beginning of period................. 27,075 24,512 57,307 44,254 54,945 79,814
----------- ----------- ----------- ----------- ----------- -----------
Net assets at end of period....................... $ 23,219 $ 21,365 $ 46,979 $ 26,816 $ 44,743 $ 69,953
----------- ----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- ----------- -----------
Net asset value per unit at end of period......... $ 18.95 $ 29.99 $ 48.48 $ 20.61 $ 23.10 $ 22.25
----------- ----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- ----------- -----------
Units outstanding at end of period................ 1,225 712 969 1,301 1,937 3,144
----------- ----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- ----------- -----------
</TABLE>
See notes to financial statements.
F-20
<PAGE>
<TABLE>
<CAPTION>
DEAN WITTER VARIABLE INVESTMENT SERIES
--------------------------------------------------------------------------
GLOBAL
EUROPEAN CAPITAL DIVIDEND PACIFIC
(Dollars and Units in Thousands, Except UTILITIES GROWTH GROWTH GROWTH GROWTH
Value per Unit) PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO TOTAL
----------- ----------- ----------- ----------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C>
FROM OPERATIONS
Net investment income................. $ 903 $ 702 $ 44 $ 459 $ 121 $ 17,901
Net realized (losses) gains........... 3,961 1,052 405 548 136 23,491
Net change in unrealized gains
(losses)............................ (2,983) 1,482 (68) 674 10 (5,851)
----------- ----------- ----------- ----------- ----------- ---------
Change in net assets resulting from
operations........................ 1,881 3,236 381 1,681 267 35,541
FROM CAPITAL TRANSACTIONS
Deposits.............................. 40 307 55 267 124 2,518
Benefit payments...................... (264) (47) -- (50) (26) (3,529)
Payments on termination............... (11,314) (3,682) (1,175) (2,940) (2,548) (106,201)
Contract maintenance charges.......... (17) (7) (2) (5) (3) (186)
Transfers among the portfolios and
with the Fixed Account--net......... (4,294) 1,188 74 950 1,508 2,610
----------- ----------- ----------- ----------- ----------- ---------
Change in net assets resulting from
capital transactions.............. (15,849) (2,241) (1,048) (1,778) (945) (104,788)
----------- ----------- ----------- ----------- ----------- ---------
(DECREASE) INCREASE IN NET ASSETS....... (13,968) 995 (667) (97) (678) (69,247)
Net assets at beginning of period....... 41,668 12,547 3,893 10,249 5,890 362,154
----------- ----------- ----------- ----------- ----------- ---------
Net assets at end of period............. $ 27,700 $ 13,542 $ 3,226 $ 10,152 $ 5,212 $ 292,907
----------- ----------- ----------- ----------- ----------- ---------
----------- ----------- ----------- ----------- ----------- ---------
Net asset value per unit at end of
period.................................. $ 19.51 $ 24.84 $ 16.76 $ 13.98 $ 9.96
----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- -----------
Units outstanding at end of period...... 1,420 545 193 726 523
----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- -----------
</TABLE>
See notes to financial statements.
F-21
<PAGE>
NORTHBROOK VARIABLE ANNUITY ACCOUNT
STATEMENT OF CHANGES IN NET ASSETS
YEAR ENDED DECEMBER 31, 1995
<TABLE>
<CAPTION>
DEAN WITTER VARIABLE INVESTMENT SERIES
---------------------------------------------------------------------
QUALITY
MONEY HIGH INCOME DIVIDEND
(Dollars and Units in Thousands, MARKET YIELD EQUITY PLUS STRATEGIST GROWTH
Except Value per Unit) PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
--------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
FROM OPERATIONS
Net investment income............ $ 1,547 $ 2,871 $ 63 $ 2,488 $ 5,204 $ 2,902
Net realized (losses) gains...... -- (2,747) 3,990 442 2,986 3,912
Net change in unrealized gains
(losses)....................... -- 3,290 14,353 6,444 (3,230) 16,029
--------- --------- --------- --------- --------- ---------
Change in net assets resulting
from operations.............. 1,547 3,414 18,406 9,374 4,960 22,843
FROM CAPITAL TRANSACTIONS
Deposits......................... 250 207 307 317 160 768
Benefit payments................. (398) (749) (485) (698) (698) (648)
Payments on termination.......... (12,791) (6,897) (13,097) (12,503) (20,203) (15,665)
Contract maintenance charges..... (19) (24) (44) (27) (47) (62)
Transfers among the portfolios
and with the Fixed
Account--net................... (3,451) (1) 1,172 1,526 (4,038) 2,374
--------- --------- --------- --------- --------- ---------
Change in net assets resulting
from capital transactions.... (16,409) (7,464) (12,147) (11,385) (24,826) (13,233)
--------- --------- --------- --------- --------- ---------
(DECREASE) INCREASE IN NET
ASSETS........................... (14,862) (4,050) 6,259 (2,011) (19,866) 9,610
Net assets at beginning of
period........................... 41,937 28,562 51,048 46,265 74,811 70,204
--------- --------- --------- --------- --------- ---------
Net assets at end of period........ $ 27,075 $ 24,512 $ 57,307 $ 44,254 $ 54,945 $ 79,814
--------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- ---------
Net asset value per unit at end of
period........................... $ 18.22 $ 27.06 $ 43.59 $ 20.50 $ 20.28 $ 18.13
--------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- ---------
Units outstanding at end of
period........................... 1,486 906 1,315 2,159 2,708 4,403
--------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- ---------
</TABLE>
See notes to financial statements.
F-22
<PAGE>
<TABLE>
<CAPTION>
DEAN WITTER VARIABLE INVESTMENT SERIES
---------------------------------------------------------------------
GLOBAL
EUROPEAN CAPITAL DIVIDEND PACIFIC
(Dollars and Units in Thousands, UTILITIES GROWTH GROWTH GROWTH GROWTH
Except Value per Unit) PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO TOTAL
--------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
FROM OPERATIONS
Net investment income............ $ 1,370 $ 455 $ (15) $ 150 $ (6) $ 17,029
Net realized (losses) gains...... 1,970 965 233 148 (156) 11,743
Net change in unrealized gains
(losses)....................... 6,470 1,459 826 1,500 349 47,490
--------- --------- --------- --------- --------- ---------
Change in net assets resulting
from operations.............. 9,810 2,879 1,044 1,798 187 76,262
FROM CAPITAL TRANSACTIONS
Deposits......................... 228 142 58 240 122 2,799
Benefit payments................. (418) (51) (23) -- -- (4,168)
Payments on termination.......... (8,812) (3,042) (1,292) (2,452) (1,581) (98,335)
Contract maintenance charges..... (30) (8) (3) (7) (4) (275)
Transfers among the portfolios
and with the Fixed
Account--net................... 820 (823) 403 1,207 1,206 395
--------- --------- --------- --------- --------- ---------
Change in net assets resulting
from capital transactions.... (8,212) (3,782) (857) (1,012) (257) (99,584)
--------- --------- --------- --------- --------- ---------
(DECREASE) INCREASE IN NET
ASSETS............................. 1,598 (903) 187 786 (70) (23,322)
Net assets at beginning of
period............................. 40,070 13,450 3,706 9,463 5,960 385,476
--------- --------- --------- --------- --------- ---------
Net assets at end of period........ $ 41,668 $ 12,547 $ 3,893 $ 10,249 $ 5,890 $ 362,154
--------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- ---------
Net asset value per unit at end of
period............................. $ 18.13 $ 19.30 $ 15.18 $ 12.01 $ 9.68
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
Units outstanding at end of
period............................. 2,298 650 256 853 608
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
</TABLE>
See notes to financial statements.
F-23
<PAGE>
NORTHBROOK VARIABLE ANNUITY ACCOUNT
NOTES TO FINANCIAL STATEMENTS
YEAR ENDED DECEMBER 31, 1996
1. ORGANIZATION
Northbrook Variable Annuity Account (the "Account"), a unit investment trust
registered with the Securities and Exchange Commission under the Investment
Company Act of 1940, is a Separate Account of Northbrook Life Insurance Company
("Northbrook Life"). The assets of the Account are legally segregated from those
of Northbrook Life. Northbrook Life is wholly owned by Allstate Life Insurance
Company ("Allstate Life"), a wholly owned subsidiary of Allstate Insurance
Company ("Allstate"), which is wholly owned by The Allstate Corporation (the
"Corporation").
Northbrook Life writes certain annuity contracts, the proceeds of which are
invested at the direction of the contractholder. Contractholders primarily
invest in units of the portfolios comprising the Account, for which they bear
all of the investment risk, but may also invest in the general account of
Northbrook Life ("Fixed Account"). The Account, in turn, invests solely in
shares of the portfolios of the Dean Witter Variable Investment Series ("Fund").
The Account accepts additional deposits from existing contractholders, but is
closed to new customers. Northbrook Life provides administrative and insurance
services to the Account for a fee.
Dean Witter Reynolds, Inc. ("Dean Witter"), a wholly owned subsidiary of
Dean Witter, Discover and Co., is the sole distributor of Northbrook Life's
flexible premium deferred variable annuity contracts and certain single and
flexible premium annuities. Dean Witter InterCapital, Inc. ("InterCapital"), a
wholly owned subsidiary of Dean Witter, Discover and Co., is the investment
manager for the Fund. In October 1993, Allstate Life and Northbrook Life
announced a strategic alliance to develop, market and distribute proprietary
annuity and life insurance products through Dean Witter account executives.
InterCapital receives investment management fees from the Fund.
Effective September 1, 1995, the name of the Managed Assets Portfolio of the
Fund changed to the Strategist Portfolio. While certain of the investment
policies of the portfolio have changed, the overall investment strategy has
remained the same.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
VALUATION OF INVESTMENTS
Investments consist of shares in the portfolios of the Fund, and are stated
at fair value based on quoted market prices.
RECOGNITION OF INVESTMENT INCOME
Investment income consists of dividends declared by the portfolios of 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 shares by the Account and the cost of such shares, which is determined
on a weighted average basis.
CONTRACTHOLDER ACCOUNT ACTIVITY
Account activity is reflected in individual contractholder accounts on a
daily basis.
FEDERAL INCOME TAXES
Net Investment income and realized gains and losses on investments of the
Account are taxable to contractholders generally upon distribution. Accordingly,
no provision for income taxes has been recorded.
F-24
<PAGE>
NORTHBROOK VARIABLE ANNUITY ACCOUNT
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
YEAR ENDED DECEMBER 31, 1996
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
ACCOUNT VALUES
Certain calculations that could be made in the financial statements may
differ from published amounts due to truncation of actual Account values.
3. CONTRACT MAINTENANCE AND MORTALITY AND EXPENSE RISK CHARGES
For each year or portion of a year a contract is in effect, Northbrook Life
deducts a fixed annual contract maintenance charge of $30 as reimbursement for
expenses related to the maintenance of each contract and the Account. The amount
of this charge is guaranteed not to increase over the life of the contract.
Northbrook Life assumes mortality and expense risks related to the
operations of the Account and deducts charges daily at a rate, on an annual
basis, equal to 1.0% of the daily net assets of the Account. Northbrook Life
guarantees that the amount of this charge will not increase over the life of the
contract.
4. FINANCIAL INSTRUMENTS
The investments of the Separate Accounts are carried at fair value, based
upon quoted market prices. Accrued contract maintenance charges are of a short
term nature. It is assumed that their carrying value approximates fair value.
F-25
<PAGE>
NORTHBROOK VARIABLE ANNUITY ACCOUNT
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
YEAR ENDED DECEMBER 31, 1996
5. UNITS ISSUED AND REDEEMED
Units issued and redeemed by the Account during 1996 were as follows:
<TABLE>
<CAPTION>
DEAN WITTER VARIABLE INVESTMENT SERIES
---------------------------------------------------------------
MONEY QUALITY
MARKET HIGH YIELD EQUITY INCOME PLUS STRATEGIST
(Units in thousands) PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
UNITS OUTSTANDING AT BEGINNING OF PERIOD................. 1,486 906 1,315 2,159 2,708
Unit activity during 1996:
Issued................................................. 850 78 194 37 84
Redeemed............................................... (1,111) (272) (540) (895) (855)
----------- --- ----- ----- -----
UNITS OUTSTANDING AT END OF PERIOD....................... 1,225 712 969 1,301 1,937
----------- --- ----- ----- -----
----------- --- ----- ----- -----
</TABLE>
UNITS REDEEMED INCLUDES UNITS DEDUCTED FOR ACCRUED CONTRACT MAINTENANCE CHARGES.
F-26
<PAGE>
5. UNITS ISSUED AND REDEEMED (CONTINUED)
<TABLE>
<CAPTION>
DEAN WITTER VARIABLE INVESTMENT SERIES
----------------------------------------------------------------------------
GLOBAL
DIVIDEND EUROPEAN CAPITAL DIVIDEND PACIFIC
GROWTH UTILITIES GROWTH GROWTH GROWTH GROWTH
(Units in thousands) PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
UNITS OUTSTANDING AT BEGINNING OF PERIOD.......... 4,403 2,298 650 256 853 608
Unit activity during 1996:
Issued.......................................... 282 38 136 49 179 344
Redeemed........................................ (1,541) (916) (241) (112) (306) (429)
----------- ----- --- --- --- ---
UNITS OUTSTANDING AT END OF PERIOD................ 3,144 1,420 545 193 726 523
----------- ----- --- --- --- ---
----------- ----- --- --- --- ---
</TABLE>
UNITS REDEEMED INCLUDES UNITS DEDUCTED FOR ACCRUED CONTRACT MAINTENANCE CHARGES.
F-27
<PAGE>
PART C
OTHER INFORMATION
24A. FINANCIAL STATEMENTS
PART B: Northbrook Life Insurance Company Financial Schedules
Northbrook Variable Annuity Account
24B. EXHIBITS
The following exhibits, correspond to those required by paragraph (b) of
item 24 as to exhibits in Form N-4:
<TABLE>
<S> <C>
(1) Form of Resolution of the Board of Directors of Northbrook Life Insurance Company authorizing
establishment of the Variable Annuity Account*
(2) Not Applicable
(3)(a) Underwriting Agreement**
(b) Form of General Agency Agreement**
(4) Specimen Contract***
(5) Form of application for a Contract***
(6)(a) Articles of Incorporation of Northbrook Life Insurance Company**
(b) By-laws of Northbrook Life Insurance Company**
(7) Not applicable
(8) Participation Agreement****
(9) Opinion of Robert S. Seiler, Senior Vice President, Secretary and General Counsel of
Northbrook Life Insurance Company***
(10)(a) Consent of Accountants
(b) Consent of Attorneys**
(11) Not applicable
(12) Form of Agreement to Purchase Shares**
(13) Performance Data Calculations
(14) Financial Data Schedule*****
(99) Powers of Attorney*
</TABLE>
- ------------------------
* Previously filed in Form N-4 Registration Statement No. 2-82511 dated
December 31, 1996.
** Previously filed in Form N-4 Registration Statement No. 33-35412 dated
December 31, 1996 and incorporated by reference.
*** Previously filed in Form N-4 Registration Statement No. 2-82511, dated
June 15, 1990 and incorporated by reference.
**** Previously filed in Form N-4 Registration Statement No. 2-82511 dated
May 1, 1996 and incorporated by reference.
***** Previously filed in Depositor's Form 10-K filed March 31, 1997.
<PAGE>
25. DIRECTORS AND OFFICERS OF THE DEPOSITOR
<TABLE>
<CAPTION>
NAME AND PRINCIPAL BUSINESS
ADDRESS POSITION AND OFFICE WITH DEPOSITOR OF THE TRUST
- --------------------------- ------------------------------------------------------------------
<S> <C>
Louis G. Lower, II Chairman of the Board of Directors and Chief Executive Officer
Michael J. Velotta Director, Vice President, Secretary and General Counsel
Peter H. Heckman Director, President and Chief Operating Officer
Marla G. Friedman Vice President
John R. Hunter Director and Assistant Vice President
Kevin R. Slawin Director and Vice President
Casey J. Sylla Director and Chief Investment Officer
James P. Zils Treasurer
Keith Hauschildt Assistant Vice President and Controller
Sarah R. Donahue Assistant Vice President
Ronald Johnson Assistant Vice President
Barry S. Paul Assistant Vice President
Emma M. Kalaidjian Assistant Secretary
Paul N. Kierig Assistant Secretary
Mary J. McGinn Assistant Secretary
Robert N. Roeters Assistant Vice President
Theodore A. Schnell Assistant Vice President, Assistant Secretary and Assistant
Treasurer
Brenda D. Sneed Assistant Secretary and Assistant General Counsel
C. Nelson Strom Assistant Vice President and Corporate Actuary
Charles F. Thalheimer Assistant Vice President
Steven E. Shebik Assistant Treasurer
</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
See 10-K Commission File #1-11840, The Allstate Corporation.
27. NUMBER OF CONTRACT OWNERS
As of February 28, 1996 there were in force 596 qualified and 5,735
non-qualified contracts. The Registrant began operations on February 14, 1983.
28. INDEMNIFICATION
The General Agency Agreement (Exhibit 3(b)) has a provision in
which Northbrook Life agrees to indemnify Dean Witter Reynolds as Underwriter
for certain damages and expenses that may be caused by actions, statements or
omissions by Northbrook Life. The Agreement to Purchase Shares contains a
similar provision in paragraph 16 of Exhibit 12.
Insofar as indemnification for liability arising out of 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
<PAGE>
against such liabilities (other than payment by the registrant of expenses
incurred 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.
29A. RELATIONSHIP OF PRINCIPAL UNDERWRITER TO OTHER INVESTMENT COMPANIES
Dean Witter Distributors Inc. is the principal underwriter for the following
investment companies:
Dean Witter Liquid Asset Fund Inc.
Dean Witter Tax-Free Daily Income Trust
Dean Witter California Tax-Free Daily Income Trust
Dean Witter Retirement Series
Dean Witter Dividend Growth Securities Inc.
Dean Witter Natural Resource Development
Securities Inc.
Dean Witter World Wide Investment Trust
Dean Witter Capital Growth Securities
Dean Witter Convertible Securities Trust
Dean Witter Federal Securities Trust
Active Assets Tax-Free Trust
Active Assets Money Trust
Active Assets California Tax-Free Trust
Active Assets Government Securities Trust
Dean Witter Short-Term Bond Fund
Dean Witter Mid-Cap Growth Fund
Dean Witter U.S. Government Securities Trust
Dean Witter High Yield Securities Inc.
Dean Witter New York Tax-Free Income Fund
Dean Witter Tax-Exempt Securities Trust
Dean Witter California Tax-Free Income Fund
Dean Witter Limited Term Municipal Trust
Dean Witter World Wide Income Trust
Dean Witter Utilities Fund
Dean Witter Strategist Fund
Dean Witter New York Municipal Money Market
Trust
Dean Witter Intermediate Income Securities
Prime Income Trust
Dean Witter European Growth Fund Inc.
Dean Witter Developing Growth Securities Trust
Dean Witter Precious Metal and Minerals Trust
Dean Witter Pacific Growth Fund Inc.
Dean Witter Multi-State Municipal Series Trust
Dean Witter Federal Securities Trust
Dean Witter Short-Term U.S. Treasury Trust
Dean Witter Diversified Income Trust
Dean Witter Health Sciences Trust
Dean Witter Global Dividend Growth Securities
Dean Witter American Value Fund
Dean Witter U.S. Government Money Market
Trust
Dean Witter Short-Term Income Fund Inc.
Dean Witter Premier Income Trust
Dean Witter Value-Added Market Series
Dean Witter Global Utilities Fund
Dean Witter High Income Securities
Dean Witter National Municipal Trust
Dean Witter International SmallCap Fund
Dean Witter Global Asset Allocation
Dean Witter Balanced Income Fund
Dean Witter Balanced Growth Fund
Dean Witter Hawaii Municipal Trust
Dean Witter Capital Appreciation Fund
Dean Witter Intermediate Term U.S. Treasury
Trust
Dean Witter Information Fund
Dean Witter Japan Fund
Dean Witter Income Builder Fund
Dean Witter Special Value Fund
TCW/DW Core Equity Trust
TCW/DW North American Government Income
Trust
TCW/DW Latin American Growth Fund
TCW/DW Income and Growth Fund
TCW/DW Small Cap Growth Fund
TCW/DW Balanced Fund
TCW/DW Mid-Cap Equity Trust
TCW/DW Total Return Trust
TCW/DW Global Telecom Trust
TCW/DW Stategic Income Trust
<PAGE>
29B. PRINCIPAL UNDERWRITER
<TABLE>
<CAPTION>
NAME AND PRINCIPAL BUSINESS
ADDRESS OF EACH SUCH PERSON POSITIONS AND OFFICES WITH UNDERWRITER
- ---------------------------- ------------------------------------------------------------------------------------------
<S> <C>
Dean Witter Reynolds Inc. Underwriter
("Dean Witter")
Philip J. Purcell Chairman, Chief Executive Officer and Director
Richard M. DeMartini President and Chief Operating Officer, and Director, Dean Witter Capital
James F. Higgins President and Chief Operating Officer, and Director, Dean Witter Financial
Stephen R. Miller Senior Executive Vice President and Director
Raymond J. Drop Executive Vice President
Robert J. Dwyer Executive Vice President, National Sales Director and Director
Christine A. Edwards Executive Vice President, Secretary, General Counsel and Director
Charles A. Fiumefreddo Executive Vice President and Director
Frederick J. Frohne Executive Vice President
Alfred J. Golden Executive Vice President
E. Davisson Hardman, Jr. Executive Vice President
Mitchell M. Merin Executive Vice President, Chief Administrative Officer and Director
Laurence E. Mollner Executive Vice President
Jeremiah A. Mullins Executive Vice President
Richard F. Powers, III Executive Vice President and Director
John H. Schaefer Executive Vice President
Thomas C. Schneider Executive Vice President, Chief Financial Officer and Director
Robert B. Sculthorpe Executive Vice President
William B. Smith Executive Vice President and Director
Samuel H. Wolcott, III Executive Vice President
Anthony Basile Senior Vice President
Ronald T. Carman Senior Vice President, Associate General Counsel and Assistant Secretary
Michael T. Cunningham Senior Vice President
Mary E. Curran Senior Vice President
David Diaz Senior Vice President
Raymond P. Douglas Senior Vice President
Paul J. Dubow Senior Vice President and Deputy General Counsel
Michael T. Gregg Senior Vice President and Deputy General Counsel
Erick R. Holt Senior Vice President and Assistant Secretary
Birendra Kumar Senior Vice President and Treasurer
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
NAME AND PRINCIPAL BUSINESS
ADDRESS OF EACH SUCH PERSON POSITIONS AND OFFICES WITH UNDERWRITER
- ---------------------------- ------------------------------------------------------------------------------------------
<S> <C>
George R. Ross Senior Vice President
Robert P. Seass Senior Vice President
Joseph G. Siniscalchi Senior Vice President and Controller, Dean Witter Financial
Michael H. Stone Senior Vice President
Lawrence Volpe Senior Vice President and Controller, Dean Witter Reynolds Inc.
and Dean Witter Capital
Lorena J. Kern Senior Vice President
Kathryn M. McNamara Senior Vice President and Director of Governmental Affairs
Michael D. Browne Assistant Secretary
Linda M. Butler Assistant Secretary
Marilyn Cranney Assistant Secretary
Sheldon Curtis Assistant Secretary
Barry Fink Assistant Secretary
Sabrina Hurley Assistant Secretary
Barbara B. Kiley Assistant Secretary
</TABLE>
The principal address of Dean Witter is Two World Trade Center, New York,
New York 10048.
<PAGE>
29C. COMPENSATION OF DEAN WITTER
The following commissions and other compensation were received by each
principal underwriter, directly or indirectly, from the Registrant during the
Registrant's last fiscal year:
<TABLE>
<CAPTION>
(1) (2) (3) (4) (5)
NET COMPENSATION
UNDERWRITING OR REDEMPTION
NAME OF DISCOUNTS AND OR BROKERAGE
PRINCIPAL COMMISSIONS ANNUITIZATION COMMISSIONS COMPENSATION
- --------------- ------------- -------------- ------------- --------------
<S> <C> <C> <C> <C>
Dean Witter
Reynolds Inc. $ 149,521
</TABLE>
30. LOCATION OF ACCOUNTS AND RECORDS
Michael J. Velotta
Northbrook Life Insurance Company
3100 Sanders Road
Northbrook, Illinois 60062
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.
33. REPRESENTATIONS PURSUANT TO SECTION 403(B) OF THE INTERNAL REVENUE CODE
The Company represents that it is relying upon a November 28, 1988
Securities and Exchange Commission no-action letter issued to the American
Council of Life Insurance ("ACLI") and that the provisions of paragraphs 1-4 of
the no-action letter have been complied with.
34. REPRESENTATION REGARDING CONTRACT EXPENSES
Northbrook Life Insurance Company ("Northbrook Life") represents that the
fees and charges deducted under the Individual 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 Northbrook Life.
<PAGE>
SIGNATURES
As required by the Securities Act of 1933 and the Investment Company Act
of 1940, the Registrant, Northbrook Variable Annuity Account, 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 by the undersigned, thereunto duly authorized, and its
seal to be hereunto affixed and attested, all in the Township of Northfield,
State of Illinois, on this 10th day of April 1997.
NORTHBROOK VARIABLE ANNUITY ACCOUNT
(REGISTRANT)
BY: NORTHBROOK LIFE INSURANCE COMPANY
(DEPOSITOR)
(SEAL) /s/ BRENDA D. SNEED /s/ MICHAEL J. VELOTTA
Attest: ------------------------------ By: ----------------------------------
Brenda D. Sneed Michael J. Velotta
Assistant Secretary and Vice President, Secretary and
Assistant General Counsel General Counsel
As required by the Securities Act of 1933, this Registration
Statement has been duly signed below by the following Directors and
Officers of Northbrook Life Insurance Company on this 10th day of
April 1997.
Chairman of the Board of
*/LOUIS G. LOWER, II Directors and Chief
- ----------------------------------- Executive Officer
Louis G. Lower, II (Principal Executive
Officer)
/s/ MICHAEL J. VELOTTA Vice President,
- ----------------------------------- Secretary, General
Michael J. Velotta Counsel and Director
*/PETER H. HECKMAN President, Chief
- ----------------------------------- Operating Officer and
Peter H. Heckman Director
*/JOHN R. HUNTER Assistant Vice
- ----------------------------------- President and
John R. Hunter Director
*/KEVIN R. SLAWIN Vice President
- ----------------------------------- and Director, (Principal
Kevin R. Slawin Financial Officer)
*/CASEY J. SYLLA
- ----------------------------------- Chief Investment Officer
Casey J. Sylla and Director
*/MARLA G. FRIEDMAN Vice President
- -----------------------------------
Marla G. Friedman
*/KAREN C. GARDNER Vice President
- -----------------------------------
Karen C. Gardner
*/JAMES P. ZILS
- ----------------------------------- Treasurer
James P. Zils
*/KEITH A. HAUSCHILDT
- ----------------------------------- Assistant Vice President
Keith A. Hauschildt and Controller, (Principal
Accounting Officer)
*/ By Michael J. Velotta, pursuant to Power of Attorney, previously filed.
<PAGE>
EXHIBIT 10(a)
CONSENT OF ACCOUNTANTS
<PAGE>
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Post-Effective Amendment No. 22 to Registration
Statement No. 002-82511 of Northbrook Variable Annuity Account of Northbrook
Life Insurance Company on Form N-4 of our report dated February 21, 1997
relating to the financial statements and financial statement schedule of
Northbrook Life Insurance Company and our report dated February 21, 1997
relating to the financial statements of Northbrook Variable Annuity Account
contained in the Statement of Additional Information (which is incorporated
by reference in the Prospectus of Northbrook Variable Annuity Account of
Northbrook Life Insurance 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
Chicago, Illinois
April 15, 1997
<PAGE>
NLIC VAI HIGH YIELD
NO. YEARS 1.000
TRANSACTION DATE $ VALUE UNIT VALUE NO. UNITS END VALUE
INIT DEPOSIT 29-Dec-95 1000.00 27.054944 36.96182
FEE 31-Dec-96 0.692 29.993293 0.02307
RESULTING VALUE 31-Dec-96 29.993293 36.93875 1107.9147
1.000
FORMULA: 1000*(1+T)= 1107.9147
= 1057.5190
T=Std Avg Ann Tot Return= 5.75%
R = 5.75%
NLIC VAI EQUITY
NO. YEARS 1.000
TRANSACTION DATE $ VALUE UNIT VALUE NO. UNITS END VALUE
INIT DEPOSIT 29-Dec-95 1000.00 43.584604 22.94388
FEE 31-Dec-96 0.692 48.482659 0.01427
RESULTING VALUE 31-Dec-96 48.482659 22.92961 1111.6884
1.000
FORMULA: 1000*(1+T)= 1111.6884
= 1061.1040
T=Std Avg Ann Total Return= 6.11%
R = 6.11%
NLIC VAI QUALITY INCOME
NO. YEARS 1.000
TRANSACTION DATE $ VALUE UNIT VALUE NO. UNITS END VALUE
INIT DEPOSIT 29-Dec-95 1000.00 20.497516 48.78640
FEE 31-Dec-96 0.692 20.608465 0.03358
RESULTING VALUE 31-Dec-96 20.608465 48.75282 1004.7208
1.000
FORMULA: 1000*(1+T)= 1004.7208
= 959.4848
T=Std Avg Ann Total Return= -4.05%
R = -4.05%
<PAGE>
NLIC VAI STRATEGIST
NO. YEARS 1.000
TRANSACTION DATE $ VALUE UNIT VALUE NO. UNITS END VALUE
INIT DEPOSIT 29-Dec-95 1000.00 20.284229 49.29938
FEE 31-Dec-96 0.692 23.098424 0.02996
RESULTING VALUE 31-Dec-96 23.098424 49.26943 1138.0461
1.000
FORMULA: 1000*(1+T)= 1138.0461
= 1086.1438
T=Std Avg Ann Total Return= 8.61%
R = 8.61%
NLIC VAI DIVIDEND GROWTH
NO. YEARS 1.000
TRANSACTION DATE $ VALUE UNIT VALUE NO. UNITS END VALUE
INIT DEPOSIT 29-Dec-95 1000.00 18.128380 55.16213
FEE 31-Dec-96 0.692 22.247657 0.03110
RESULTING VALUE 31-Dec-96 22.247657 55.13102 1226.5361
1.000
FORMULA: 1000*(1+T)= 1226.5361
= 1170.2093
T=Std Avg Ann Total Return= 17.02%
R = 17.02%
NLIC VAI UTILITIES
NO. YEARS 1.000
TRANSACTION DATE $ VALUE UNIT VALUE NO. UNITS END VALUE
INIT DEPOSIT 29-Dec-95 1000.00 18.131828 55.15164
FEE 31-Dec-96 0.692 19.508713 0.03547
RESULTING VALUE 31-Dec-96 19.508713 55.11617 1075.2455
1.000
FORMULA: 1000*(1+T)= 1075.2455
= 1026.4832
T=Std Avg Ann Total Return= 2.65%
R = 2.65%
<PAGE>
NLIC VAI EUROPEAN GROWTH
NO. YEARS 1.000
TRANSACTION DATE $ VALUE UNIT VALUE NO. UNITS END VALUE
INIT DEPOSIT 29-Dec-95 1000.00 19.299488 51.81485
FEE 31-Dec-96 0.692 24.837037 0.02786
RESULTING VALUE 31-Dec-96 24.837037 51.78698 1286.2352
1.000
FORMULA: 1000*(1+T)= 1286.2352
= 1226.9235
T=Std Avg Ann Total Return= 22.69%
R = 22.69%
NLIC VAI CAPITAL GROWTH
NO. YEARS 1.000
TRANSACTION DATE $ VALUE UNIT VALUE NO. UNITS END VALUE
INIT DEPOSIT 29-Dec-95 1000.00 15.177296 65.88789
FEE 31-Dec-96 0.692 16.760477 0.04129
RESULTING VALUE 31-Dec-96 16.760477 65.84660 1103.6205
1.000
FORMULA: 1000*(1+T)= 1103.6205
= 1053.4394
T=Std Avg Ann Total Return= 5.34%
R = 5.34%
NLIC VAI PACIFIC GROWTH
NO. YEARS 1.000
TRANSACTION DATE $ VALUE UNIT VALUE NO. UNITS END VALUE
INIT DEPOSIT 29-Dec-95 1000.00 9.681504 103.28974
FEE 31-Dec-96 0.692 9.957264 0.06950
RESULTING VALUE 31-Dec-96 9.957264 103.22024 1027.7912
1.000
FORMULA: 1000*(1+T)= 1027.7912
= 981.4016
T=Std Avg Ann Total Return= -1.86%
R = -1.86%
<PAGE>
NLIC VAI GLOBAL DIVIDEND GROWTH
NO. YEARS 1.000
TRANSACTION DATE $ VALUE UNIT VALUE NO. UNITS END VALUE
INIT DEPOSIT 29-Dec-95 1000.00 12.012328 83.24781
FEE 31-Dec-96 0.692 13.983705 0.04949
RESULTING VALUE 31-Dec-96 13.983705 83.19832 1163.4208
1.000
FORMULA: 1000*(1+T)= 1163.4208
= 1110.2498
T=Std Avg Ann Total Return= 11.02%
R = 11.02%
<PAGE>
NLIC VAI HIGH YIELD
NO. YEARS 5.000
TRANSACTION DATE $ VALUE UNIT VALUE NO. UNITS END VALUE
INIT DEPOSIT 31-Dec-91 1000.00 17.064481 58.60125
FEE 31-Dec-92 0.692 20.007584 0.03459
FEE 31-Dec-93 0.692 24.608790 0.02812
FEE 31-Dec-94 0.692 23.823494 0.02905
FEE 31-Dec-95 0.692 27.054944 0.02558
FEE 31-Dec-96 0.692 29.993293 0.02307
RESULTING VALUE 31-Dec-96 29.993293 58.46085 1753.4335
5.000
FORMULA: 1000*(1+T)= 1753.4335
= 1736.899116
T=Std Avg Ann Tot Return= 11.67%
R = 73.69%
NLIC VAI EQUITY
NO. YEARS 5.000
TRANSACTION DATE $ VALUE UNIT VALUE NO. UNITS END VALUE
INIT DEPOSIT 31-Dec-91 1000.00 27.915861 35.82193
FEE 31-Dec-92 0.692 27.680533 0.02500
FEE 31-Dec-93 0.692 32.806752 0.02109
FEE 31-Dec-94 0.692 30.546323 0.02265
FEE 31-Dec-95 0.692 43.584604 0.01588
FEE 31-Dec-96 0.692 48.482659 0.01427
RESULTING VALUE 31-Dec-96 48.482659 35.72303 1731.9476
5.000
FORMULA: 1000*(1+T)= 1731.9476
= 1715.628111
T=Std Avg Ann Tot Return= 11.40%
R = 71.56%
<PAGE>
NLIC VAI QUALITY INCOME
NO. YEARS 5.000
TRANSACTION DATE $ VALUE UNIT VALUE NO. UNITS END VALUE
INIT DEPOSIT 31-Dec-91 1000.00 15.015700 66.59696
FEE 31-Dec-92 0.692 16.096488 0.04299
FEE 31-Dec-93 0.692 18.009977 0.03842
FEE 31-Dec-94 0.692 16.606829 0.04167
FEE 31-Dec-95 0.692 20.497516 0.03376
FEE 31-Dec-96 0.692 20.608465 0.03358
RESULTING VALUE 31-Dec-96 20.608465 66.40654 1368.5368
5.000
FORMULA: 1000*(1+T)= 1368.5368
= 1355.851481
T=Std Avg Ann Tot Return= 6.28%
R = 35.59%
NLIC VAI STRATEGIST
NO. YEARS 5.000
TRANSACTION DATE $ VALUE UNIT VALUE NO. UNITS END VALUE
INIT DEPOSIT 31-Dec-91 1000.00 15.683739 63.76031
FEE 31-Dec-92 0.692 16.650863 0.04156
FEE 31-Dec-93 0.692 18.198751 0.03802
FEE 31-Dec-94 0.692 18.742707 0.03692
FEE 31-Dec-95 0.692 20.284229 0.03412
FEE 31-Dec-96 0.692 23.098424 0.02996
RESULTING VALUE 31-Dec-96 23.098424 63.57973 1468.5915
5.000
FORMULA: 1000*(1+T)= 1468.5915
= 1454.905581
T=Std Avg Ann Tot Return= 7.79%
R = 45.49%
<PAGE>
NLIC VAI DIVIDEND GROWTH
NO. YEARS 5.000
TRANSACTION DATE $ VALUE UNIT VALUE NO. UNITS END VALUE
INIT DEPOSIT 31-Dec-91 1000.00 11.564074 86.47471
FEE 31-Dec-92 0.692 12.383233 0.05588
FEE 31-Dec-93 0.692 14.018720 0.04936
FEE 31-Dec-94 0.692 13.498745 0.05126
FEE 31-Dec-95 0.692 18.128380 0.03817
FEE 31-Dec-96 0.692 22.247657 0.03110
RESULTING VALUE 31-Dec-96 22.247657 86.24893 1918.8366
5.000
FORMULA: 1000*(1+T)= 1918.8366
= 1900.648234
T=Std Avg Ann Tot Return= 13.71%
R = 90.06%
NLIC VAI UTILITIES
NO. YEARS 5.000
TRANSACTION DATE $ VALUE UNIT VALUE NO. UNITS END VALUE
INIT DEPOSIT 31-Dec-91 1000.00 12.372150 80.82670
FEE 31-Dec-92 0.692 13.797394 0.05015
FEE 31-Dec-93 0.692 15.803852 0.04379
FEE 31-Dec-94 0.692 14.245641 0.04858
FEE 31-Dec-95 0.692 18.131828 0.03816
FEE 31-Dec-96 0.692 19.508713 0.03547
RESULTING VALUE 31-Dec-96 19.508713 80.61054 1572.6079
5.000
FORMULA: 1000*(1+T)= 1572.6079
= 1557.881844
T=Std Avg Ann Tot Return= 9.27%
R = 55.79%
<PAGE>
NLIC VAI EUROPEAN GROWTH
NO. YEARS 5.000
TRANSACTION DATE $ VALUE UNIT VALUE NO. UNITS END VALUE
INIT DEPOSIT 31-Dec-91 1000.00 10.049828 99.50419
FEE 31-Dec-92 0.692 10.346815 0.06688
FEE 31-Dec-93 0.692 14.432504 0.04795
FEE 31-Dec-94 0.692 15.503343 0.04464
FEE 31-Dec-95 0.692 19.299488 0.03586
FEE 31-Dec-96 0.692 24.837037 0.02786
RESULTING VALUE 31-Dec-96 24.837037 99.28101 2465.8461
5.000
FORMULA: 1000*(1+T)= 2465.8461
= 2442.18765
T=Std Avg Ann Tot Return= 19.55%
R = 144.22%
NLIC VAI CAPITAL GROWTH
NO. YEARS 5.000
TRANSACTION DATE $ VALUE UNIT VALUE NO. UNITS END VALUE
INIT DEPOSIT 31-Dec-91 1000.00 12.734508 78.52679
FEE 31-Dec-92 0.692 12.813629 0.05400
FEE 31-Dec-93 0.692 11.799106 0.05865
FEE 31-Dec-94 0.692 11.475754 0.06030
FEE 31-Dec-95 0.692 15.177296 0.04559
FEE 31-Dec-96 0.692 16.760477 0.04129
RESULTING VALUE 31-Dec-96 16.760477 78.26695 1311.7914
5.000
FORMULA: 1000*(1+T)= 1311.7914
= 1299.673512
T=Std Avg Ann Tot Return= 5.38%
R = 29.97%
<PAGE>
NLIC VAI HIGH YIELD
NO. YEARS 10.000
TRANSACTION DATE $ VALUE UNIT VALUE NO. UNITS END VALUE
INIT DEPOSIT 31-Dec-86 1000.00 16.419896 60.90173
FEE 31-Dec-87 0.692 15.761891 0.04390
FEE 31-Dec-88 0.692 17.324248 0.03994
FEE 31-Dec-89 0.692 14.992631 0.04616
FEE 31-Dec-90 0.692 10.863944 0.06370
FEE 31-Dec-91 0.692 17.064481 0.04055
FEE 31-Dec-92 0.692 20.007584 0.03459
FEE 31-Dec-93 0.692 24.608790 0.02812
FEE 31-Dec-94 0.692 23.823494 0.02905
FEE 31-Dec-95 0.692 27.054944 0.02558
FEE 31-Dec-96 0.692 29.993293 0.02307
RESULTING VALUE 31-Dec-96 29.993293 60.52707 1815.406142
10
FORMULA: 1000*(1+T)= 1815.406142
= 1815.406142
T=Std Avg Ann Tot Return= 6.14%
R = 81.54%
<PAGE>
NLIC VAI EQUITY
NO. YEARS 10.00000
TRANSACTION DATE $ VALUE UNIT VALUE NO. UNITS END VALUE
INIT DEPOSIT 31-Dec-86 1000 15.63450 63.96111574
FEE 31-Dec-87 0.692 14.51612 0.047671144
FEE 31-Dec-88 0.692 15.786104 0.043836022
FEE 31-Dec-89 0.692 18.57955 0.037245261
FEE 31-Dec-90 0.692 17.72823 0.039033787
FEE 31-Dec-91 0.692 27.91586 0.024788775
FEE 31-Dec-92 0.69 27.680533 0.02500
FEE 31-Dec-93 0.692 32.806752 0.02109
FEE 31-Dec-94 0.692 30.546323 0.02265
FEE 31-Dec-95 0.692 43.584604 0.01588
FEE 31-Dec-96 0.692 48.482659 0.01427
RESULTING VALUE 31-Dec-96 48.482659 63.66964 3086.873618
10
FORMULA: 1000*(1+T)= 3086.873618
= 3086.873618
T=Std Avg Ann Tot Return= 11.93%
R = 208.69%
<PAGE>
NLIC VAI QUALITY INCOME
NO. YEARS 9.837
TRANSACTION DATE $ VALUE UNIT VALUE NO. UNITS END VALUE
0 INIT DEPOSIT 01-Mar-87 1000.00 10.000000 100.00000
1 FEE 01-Mar-88 0.692 10.572454 0.06545
2 FEE 01-Mar-89 0.692 10.802647 0.06406
3 FEE 01-Mar-90 0.692 11.821703 0.05854
4 FEE 01-Mar-91 0.692 13.110273 0.05278
5 FEE 01-Mar-92 0.692 14.889654 0.04648
6 FEE 01-Mar-93 0.692 16.959219 0.04080
7 FEE 01-Mar-94 0.692 17.629095 0.03925
8 FEE 01-Mar-95 0.692 17.492449 0.03956
9 FEE 01-Mar-96 0.692 20.046927 0.03452
10 FEE 31-Dec-96 0.692 20.608465 0.03358
RESULTING VALUE 31-Dec-96 20.608465 99.52498 2051.0571
9.837
FORMULA: 1000*(1+T)= 2051.0571
= 2051.057055
T=Std Avg Ann Tot Return= 7.58%
R = 105.11%
<PAGE>
NLIC VAI STRATEGIST
NO. YEARS 9.837
TRANSACTION DATE $ VALUE UNIT VALUE NO. UNITS END VALUE
0 INIT DEPOSIT 01-Mar-87 1000.00 10.000000 100.00000
1 FEE 01-Mar-88 0.692 10.718726 0.06456
2 FEE 01-Mar-89 0.692 11.328647 0.06108
3 FEE 01-Mar-90 0.692 12.266483 0.05641
4 FEE 01-Mar-91 0.692 13.795925 0.05016
5 FEE 01-Mar-92 0.692 15.830227 0.04371
6 FEE 01-Mar-93 0.692 17.059340 0.04056
7 FEE 01-Mar-94 0.692 18.379823 0.03765
8 FEE 01-Mar-95 0.692 18.911245 0.03659
9 FEE 01-Mar-96 0.692 20.916732 0.03308
10 FEE 31-Dec-96 0.692 23.098424 0.02996
RESULTING VALUE 31-Dec-96 23.098424 99.54622 2299.3608
9.837
FORMULA: 1000*(1+T)= 2299.3608
= 2299.360796
T=Std Avg Ann Tot Return= 8.83%
R = 129.94%
NLIC VAI DIVIDEND GROWTH
NO. YEARS 6.836
TRANSACTION DATE $ VALUE UNIT VALUE NO. UNITS END VALUE
0 INIT DEPOSIT 01-Mar-90 1000.00 10.000000 100.00000
1 FEE 01-Mar-91 0.692 10.332453 0.06697
2 FEE 01-Mar-92 0.692 11.633340 0.05948
3 FEE 01-Mar-93 0.692 12.822116 0.05397
4 FEE 01-Mar-94 0.692 13.840125 0.05000
5 FEE 01-Mar-95 0.692 14.301718 0.04839
6 FEE 01-Mar-96 0.692 19.234847 0.03598
7 FEE 31-Dec-96 0.692 22.247657 0.03110
RESULTING VALUE 31-Dec-96 22.247657 99.65411 2217.0704
6.836
FORMULA: 1000*(1+T)= 2217.0704
= 2217.070391
T=Std Avg Ann Tot Return= 12.35%
R = 121.71%
<PAGE>
NLIC VAI UTILITIES
NO. YEARS 6.836
TRANSACTION DATE $ VALUE UNIT VALUE NO. UNITS END VALUE
0 INIT DEPOSIT 01-Mar-90 1000.00 10.000000 100.00000
1 FEE 01-Mar-91 0.692 10.708783 0.06462
2 FEE 01-Mar-92 0.692 11.931271 0.05800
3 FEE 01-Mar-93 0.692 14.841412 0.04663
4 FEE 01-Mar-94 0.692 15.018084 0.04608
5 FEE 01-Mar-95 0.692 14.804435 0.04674
6 FEE 01-Mar-96 0.692 18.260926 0.03790
7 FEE 31-Dec-96 0.692 19.508713 0.03547
RESULTING VALUE 31-Dec-96 19.508713 99.66457 1944.3275
6.836
FORMULA: 1000*(1+T)= 1944.3275
= 1944.327454
T=Std Avg Ann Tot Return= 10.21%
R = 94.43%
NLIC VAI EUROPEAN GROWTH
NO. YEARS 5.837
TRANSACTION DATE $ VALUE UNIT VALUE NO. UNITS END VALUE
0 INIT DEPOSIT 01-Mar-91 1000.00 10.000000 100.00000
1 FEE 01-Mar-92 0.692 10.342458 0.06691
2 FEE 01-Mar-93 0.692 10.819823 0.06396
3 FEE 01-Mar-94 0.692 14.932663 0.04634
4 FEE 01-Mar-95 0.692 15.889428 0.04355
5 FEE 01-Mar-96 0.692 20.288419 0.03411
6 FEE 31-Dec-96 0.692 24.837037 0.02786
RESULTING VALUE 31-Dec-96 24.837037 99.71727 2476.6816
5.837
FORMULA: 1000*(1+T)= 2476.6816
= 2452.914773
T=Std Avg Ann Tot Return= 16.62%
R = 145.29%
<PAGE>
NLIC VAI CAPITAL GROWTH
NO. YEARS 5.837
TRANSACTION DATE $ VALUE UNIT VALUE NO. UNITS END VALUE
0 INIT DEPOSIT 01-Mar-91 1000.00 10.000000 100.00000
1 FEE 01-Mar-92 0.692 12.184182 0.05679
2 FEE 01-Mar-93 0.692 11.927075 0.05802
3 FEE 01-Mar-94 0.692 11.869900 0.05830
4 FEE 01-Mar-95 0.692 12.323505 0.05615
5 FEE 01-Mar-96 0.692 16.017288 0.04320
6 FEE 31-Dec-96 0.692 16.760477 0.04129
RESULTING VALUE 31-Dec-96 16.760477 99.68624 1670.7890
5.837
FORMULA: 1000*(1+T)= 1670.7890
= 1655.081098
T=Std Avg Ann Tot Return= 9.02%
R = 65.51%
NLIC VAI PACIFIC GROWTH
NO. YEARS 2.853
TRANSACTION DATE $ VALUE UNIT VALUE NO. UNITS END VALUE
0 INIT DEPOSIT 23-Feb-94 1000.00 10.000000 100.00000
1 FEE 23-Feb-95 0.692 8.657681 0.07993
2 FEE 23-Feb-96 0.692 10.474231 0.06607
3 FEE 31-Dec-96 0.692 9.957264 0.06950
RESULTING VALUE 31-Dec-96 9.957264 99.78451 993.5807
2.853
FORMULA: 1000*(1+T)= 993.5807
= 957.8374528
T=Std Avg Ann Tot Return= -1.50%
R = -4.22%
<PAGE>
NLIC VAI GLOBAL DIVIDEND GROWTH
NO. YEARS 2.853
TRANSACTION DATE $ VALUE UNIT VALUE NO. UNITS END VALUE
0 INIT DEPOSIT 23-Feb-94 1000.00 10.000000 100.00000
1 FEE 23-Feb-95 0.692 10.011806 0.06912
2 FEE 23-Feb-96 0.692 12.363990 0.05597
3 FEE 31-Dec-96 0.692 13.983705 0.04949
RESULTING VALUE 31-Dec-96 13.983705 99.82543 1395.9293
2.853
FORMULA: 1000*(1+T)= 1395.9293
= 1344.092142
T=Std Avg Ann Tot Return= 10.92%
R = 34.41%
<PAGE>
NLIC VAI Non-standardized Performance
Dates:
Current: 12/31/96
3 Months Ago: 09/30/96
End of Last Year: 12/29/95
One Yr Ago: 12/29/95
Five Yrs Ago: 12/31/91
Ten Yrs Ago: 12/31/86
<TABLE>
<CAPTION>
Inception Inception Ten Yr Five Yr One Yr Today's Inception
Fund Date AUV AUV AUV AUV AUV Total
<S> <C> <C> <C> <C> <C> <C> <C>
High Yield 03/09/84 10.001774 16.419896 17.064481 27.054944 29.993293 199.88%
Equity 03/09/84 10.01 15.634499 27.915861 43.584604 48.482659 384.34%
Quality Income 03/01/87 10 N/A 15.0157 20.497516 20.608465 106.08%
Managed Assets 03/01/87 10 N/A 15.683739 20.284229 23.098424 130.98%
Dividend Growth 03/01/90 10 N/A 11.564074 18.12838 22.247657 122.48%
Utilities 03/01/90 10 N/A 12.37215 18.131828 19.508713 95.09%
European Growth 03/01/91 10 N/A 10.049828 19.299488 24.837037 148.37%
Capital Growth 03/01/91 10 N/A 12.734508 15.177296 16.760477 67.60%
Pacific Growth 02/23/94 10 N/A N/A 9.681504 9.957264 -0.43%
Global Div Growth 02/23/94 10 N/A N/A 12.012328 13.983705 39.84%
<CAPTION>
Inception Ten Years Ten Years Five Years Five Years One Year
Fund Average Total Average Total Average
<S> <C> <C> <C> <C> <C> <C>
High Yield 8.94% 82.66% 6.21% 75.76% 11.94% 10.86%
Equity 13.09% 210.10% 11.98% 73.67% 11.67% 11.24%
Quality Income 7.62% N/A N/A 37.25% 6.54% 0.54%
Managed Assets 8.88% N/A N/A 47.28% 8.05% 13.87%
Dividend Growth 12.40% N/A N/A 92.39% 13.98% 22.72%
Utilities 10.26% N/A N/A 57.68% 9.54% 7.59%
European Growth 16.85% N/A N/A 147.14% 19.84% 28.69%
Capital Growth 9.24% N/A N/A 31.61% 5.65% 10.43%
Pacific Growth -0.15% N/A N/A N/A N/A 2.85%
Global Div Growth 12.46% N/A N/A N/A N/A 16.41%
</TABLE>
