AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 1, 2000
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FILE NOS. 033-35412
811-6116
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
POST-EFFECTIVE AMENDMENT NO. 27 /X/
AND/OR
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY
ACT OF 1940
AMENDMENT NO. 31 /X/
NORTHBROOK VARIABLE ANNUITY ACCOUNT II
(Exact Name of Registrant)
NORTHBROOK LIFE INSURANCE COMPANY
(Name of Depositor)
NORTHBROOK LIFE INSURANCE COMPANY
3100 SANDERS ROAD
NORTHBROOK, ILLINOIS 60062
847/402-2400
(Address and Telephone Number of Depositor's Principal Offices)
MICHAEL J. VELOTTA
VICE PRESIDENT, SECRETARY AND GENERAL COUNSEL
NORTHBROOK LIFE INSURANCE COMPANY
3100 SANDERS ROAD
NORTHBROOK, ILLINOIS 60062
847/402-2400
(Name, Complete Address and Telephone Number of Agent for Service)
COPIES TO:
RICHARD T. CHOI, ESQUIRE DANIEL J. FITZPATRICK, ESQUIRE
FREEDMAN, LEVY, KROLL & SIMONDS DEAN WITTER REYNOLDS INC.
1050 CONNECTICUT AVENUE, N.W. TWO WORLD TRADE CENTER
SUITE 825 NEW YORK, NEW YORK 10048
WASHINGTON, D.C. 20036-5366
Approximate date of proposed public offering: Continuous.
/ / immediately upon filing pursuant to paragraph (b) of Rule 485
/X/ on May 1, 2000 pursuant to paragraph (b) of Rule 485
/ / 60 days after filing pursuant to paragraph (a)(1) of Rule 485
/ / on (date) pursuant to paragraph (a)(1) of Rule 485
Title of Securities Being Registered: Units of interest in the Northbrook
Variable Annuity Account II under deferred variable annuity contracts.
<PAGE>
Explanatory Note
Registrant is filing this post-effecitve amendment ("Amendment") for the purpose
of updating the prospectus and statement of additional information and adding
ten new variable sub-accounts that will be available under the Morgan Stanley
Dean Witter Variable Anuity II contracts described in the registration
statement, and for the purpose of updating the prospectus and statement of
additional information for the Morgan Stanley Dean Witter Variable Annuity II
AssetManager contracts described in the registration statement. This Amendment
is not intended to amend or delete any part of the registration statement,
except as specifically noted herein.
<PAGE>
Morgan Stanley Dean Witter
Variable Annuity II
Northbrook Life Insurance Company Prospectus dated May 1, 2000
P.O. Box 94040
Palatine, IL 60094
Telephone Number: 1-800-654-2397
Northbrook Life Insurance Company ("Northbrook") is offering the Morgan Stanley
Dean Witter Variable Annuity II, an individual and group flexible premium
deferred variable annuity contract ("Contract"). This prospectus contains
information about the Contract that you should know before investing. Please
keep it for future reference.
The Contract offers 35 investment alternatives ("investment alternatives"). The
investment alternatives include 4 fixed account options ("Fixed Account
Options") and 31 variable sub-accounts ("Variable Sub-Accounts") of the
Northbrook Variable Annuity Account II ("Variable Account"). Each Variable
Sub-Account invests exclusively in shares of portfolios ("Portfolios") of the
following mutual funds ("Funds"):
o Morgan Stanley Dean Witter Variable Investment Series
o The Universal Institutional Funds, Inc.*
o Van Kampen Life Investment Trust
o AIM Variable Insurance Funds
o Alliance Variable Products Series Fund (Class B Shares)
o Putnam Variable Trust (Class IB Shares)
* Effective May 1, 2000 (formerly known as Morgan Stanley Dean Witter Universal
Funds, Inc.)
We (Northbrook) have filed a Statement of Additional Information, dated May 1,
2000, with the Securities and Exchange Commission ("SEC "). It contains more
information about the Contract and is incorporated herein by reference, which
means that it is legally a part of this prospectus. Its table of contents
appears on page B-1 of this prospectus. For a free copy, please write or call us
at the address or telephone number above, or go to the SEC's Web site
(http://www.sec.gov). You can find other information and documents about us,
including documents that are legally a part of this prospectus, at the SEC's Web
site.
The Securities and Exchange Commission has not
IMPORTANT approved or disapproved the security described in
NOTICES this prospectus, nor has it passed on the accuracy or
the adequacy of this prospectus. Any one who tells
you otherwise is committing a federal crime.
Investment in the Contracts involves investment
risks, including possible loss of principal.
<PAGE>
Overview Page
Important Terms
The Contract At A Glance
How the Contract Works
Expense Table
Financial Information
Contract Features
The Contract
Purchases
Contract Value
Investment Alternatives
The Variable Sub-Accounts
The Fixed Account Options
Transfers
Expenses
Access To Your Money
Income Payments
Death Benefits
Longevity Reward Rider
Other Information
More Information:
Northbrook
The Variable Account
The Portfolios
The Contract
Qualified Plans
Legal Matters
Year 2000
Taxes
Performance Information
Appendix A - Accumulation Unit Values A-1
Statement of Additional Information Table of B-1
Contents
<PAGE>
Important Terms
This prospectus uses a number of important terms with which you may not be
familiar. . The index below identifies the page that describes each term. The
first use of each term in this prospectus appears in highlighted text.
Page
Accumulation Phase 6
Accumulation Unit 11
Accumulation Unit Value 11
Annuitant 12
Automatic Portfolio Rebalancing Program 18
Automatic Additions Program 13
Beneficiary 12
Cancellation Period 4
Contract* 1
Contract Anniversary 5
Contract Owner ("You") 12
Contract Value 14
Contract Year 5
Death Benefit Anniversary 23
Death Benefit Combination Option 24
Dollar Cost Averaging Program 18
Dollar Cost Averaging Fixed Account Options 16
Due Proof of Death 23
Enhanced Death Benefit Option 23
Fixed Account Options 16
Free Withdrawal Amount 19
Funds 1
Guarantee Periods 16
Income Plan 21
Investment Alternatives 1
Issue Date 6
Longevity Reward Rider
Northbrook ("We") 25
Payout Phase 6
Payout Start Date 6
Performance Benefit Combination Option 24
Performance Death Benefit Option 24
Performance Income Benefit Option 22
Portfolios 1
Qualified Contracts 12
Right to Cancel 4
SEC 1
Settlement Value 24
Systematic Withdrawal Program 20
Valuation Date 13
Variable Account 1
Variable Sub-Account 1
*If you purchase a group Contract we will issue you a certificate that
represents your ownership and that summarizes the provisions of the group
Contract. References to "Contract" in this prospectus include certificates
unless the context requires otherwise. In certain states the Contract is
available only as a group Contract.
<PAGE>
The Contract at a Glance
The following is a snapshot of the Contract. Please read the remainder of this
prospectus for more information.
Flexible Payments You can purchase a Contract
with an initial purchase payment as
little as $1,000 (we may increase this
minimum to as much as to $4,000). You
can add to your Contract as often and
as much as you like. Each payment must
be at least $25. You must maintain a
minimum account size of $500.
Right to Cancel You may cancel your Contract
within 20 days of receipt or any
longer period as your state may
require ("Cancellation Period "). Upon
cancellation, we will return your
purchase payments adjusted, to the
extent applicable law permits, to
reflect the investment experience
of any amounts allocated to the
Variable Account.
Expenses You will bear the following expenses:
o Total Variable Account annual fees
equal to 1.35% of average daily net
assets (1.48% if you select the
Enhanced Death Benefit Option, the
Performance Death Benefit Option, or
the Performance Income Benefit
Option, and 1.59% if you select
the Performance Benefit Combination
Option, or the Death Benefit
Combination Option). If you qualify
for and elect the Longevity Reward
Rider, the annual fees are reduced
by 0.07% under the basic policy or
any Option listed above. See the
description of each Option and the
Rider for the availability of each.
o Annual contract maintenance charge
of $30 (waived in certain cases)
o Withdrawal charges ranging from 0%
to 6% of purchase payment(s)
withdrawn (with certain exceptions)
o Transfer fee of $25 after 12th
transfer in any Contract Year (fee
currently waived)
o State premium tax (if your state
imposes one)
In addition, each Portfolio pays
expenses that you will bear indirectly
if you invest in a Variable
Sub-Account.
Investment Alternatives The Contract offers 35 investment
alternatives including:
o 4 Fixed Account Options (which
credit interest at rates we
guarantee)
o 31 Variable Sub-Accounts investing
in Portfolios offering professional
money management by these
investment advisers:
<TABLE>
<S> <C> <C>
o Morgan Stanley Dean Witter Advisors, Inc.
o Morgan Stanley Asset Management
o Van Kampen Asset Management Inc.
o AIM Advisors, Inc.
o Alliance Capital Management, L.P.
o Putnam Investment Management Inc.
</TABLE>
<PAGE>
To find out current rates being paid
on the Fixed Account Options, or to
find out how the Variable Sub-Accounts
have performed, call us at
1-800-654-2397.
Special Services For your convenience, we offer these
special services:
o Automatic Additions Program
o Automatic Portfolio Rebalancing
Program
o Dollar Cost Averaging Program
o Systematic Withdrawal Program
Income Payments You can choose fixed income
payments, variable income payments, or
a combination of the two. You can
receive your income payments in one of
the following ways:
o life income with payments
guaranteed for 10 years
o joint and survivor life income
o guaranteed payments for a specified
period
Death Benefits If you or the Annuitant dies
before the Payout Start Date, we will
pay the death benefit described in the
Contract. We also offer 3 Death
Benefit Options.
Transfers Before the Payout Start Date, you may
transfer your Contract value
("Contract Value") among the
investment alternatives, with certain
restrictions. Transfers must be at
least $100 or the entire amount in the
investment alternative, whichever is
less. Transfers to the Guarantee
Periods must be at least $500.
We do not currently impose a fee upon
transfers. However, we reserve the
right to charge $25 per transfer after
the 12th transfer in each "Contract
Year," which we measure from the date
we issue your contract or a Contract
anniversary ("Contract Anniversary").
Withdrawals You may withdraw some or all of your
Contract Value at anytime during the
Accumulation Phase. In general, you
must withdraw at least $100 at a time
or the total amount in the investment
alternative, if less. A 10% federal
tax penalty may apply if you withdraw
before you are 59 1/2 years old. A
withdrawal charge also may apply.
<PAGE>
How the Contract Works
The Contract basically works in two ways.
First, the Contract can help you (we assume you are the "Contract owner") save
for retirement because you can invest in up to 35 investment alternatives and
pay no federal income taxes on any earnings until you withdraw them. You do this
during what we call the "Accumulation Phase" of the Contract. The Accumulation
Phase begins on the date we issue your Contract (we call that date the "Issue
Date") and continues until the Payout Start Date, which is the date we apply
your money to provide income payments. During the Accumulation Phase, you may
allocate your purchase payments to any combination of the Variable Sub-Accounts
and/or the Fixed Account Options. If you invest in the Fixed Account Options,
you will earn a fixed rate of interest that we declare periodically. If you
invest in any of the Variable Sub-Accounts, your investment return will vary up
or down depending on the performance of the corresponding Portfolios.
Second, the Contract can help you plan for retirement because you can use it to
receive retirement income for life and/or for a pre-set number of years, by
selecting one of the income payment options (we call these "Income Plans")
described on page __. You receive income payments during what we call the
"Payout Phase" of the Contract, which begins on the Payout Start Date and
continues until we make the last payment required by the Income Plan you select.
During the Payout Phase, if you select a fixed income payment option, we
guarantee the amount of your payments, which will remain fixed. If you select a
variable income payment option, based on one or more of the Variable
Sub-Accounts, the amount of your payments will vary up or down depending on the
performance of the corresponding Portfolios. The amount of money you accumulate
under your Contract during the Accumulation Phase and apply to an Income Plan
will determine the amount of your income payments during the Payout Phase.
The timeline below illustrates how you might use your Contract.
<TABLE>
<S> <C> <C> <C>
Issue Accumulation Phase Payout Start Payout Phase
Date Date
- ----------------------------------------------------------------------------------
| | |
You buy You save for retirement You elect to You can Or you can
a Contract receive income receive receive income
payments or income payments for life
receive a lump payments
sum payment for a set
period
</TABLE>
As the Contract owner, you exercise all of the rights and privileges provided by
the Contract. If you die, any surviving Contract owner or, if there is none, the
Beneficiary will exercise the rights and privileges provided by the Contract.
See "The Contract." In addition, if you die before the Payout Start Date, we
will pay a death benefit to any surviving Contract owner, or if there is none,
to your Beneficiary. See "Death Benefits."
Please call us at 1-800-654-2397 if you have any question about how the Contract
works.
<PAGE>
Expense Table
The table below lists the expenses that you will bear directly or indirectly
when you buy a Contract. The table and the examples that follow do not reflect
premium taxes that may be imposed by the state where you reside. For more
information about Variable Account expenses, see "Expenses," below. For more
information about Portfolio expenses, please refer to the accompanying
prospectuses for the Funds.
Contract Owner Transaction Expenses
Withdrawal Charge (as a percentage of purchase payments withdrawn)*
(Without the Longevity Reward Rider)
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Number of Complete Years Since We Received
the Purchase Payment Being Withdrawn**: 0 1 2 3 4 5 6+
Applicable Charge: 6% 5% 4% 3% 2% 1% 0%
</TABLE>
Annual Contract Maintenance Charge $30.00 ***
Transfer Fee $25.00****
* During each Contract Year, you may withdraw up to 15% of the aggregate
amount of your purchase payments as of the beginning of the Contract Year
without incurring a withdrawal charge.
** If you qualify for and elect the Longevity Reward Rider, a withdrawal
charge of up to 3% will apply to purchase payments received before or
after the Rider date. See "Longevity Reward Rider" on page___for details.
*** If you qualify for and elect the Longevity Reward Rider, we will waive the
contract maintenance charge for the life of the Contract provided your
total Contract Value is $40,000 or more on or after the date we issue
the Rider ("Rider Date").
**** Applies solely to the thirteenth and subsequent transfers within a
Contract Year excluding transfers due to dollar cost averaging and
automaticportfolio rebalancing. We are currently waiving the transfer fee.
Variable Account Annual Expenses (as a percentage of average daily net asset
value deducted from each Variable Sub-Account)
Mortality and Expense Risk Charge 1.25%*
Administrative Expense Charge 0.10%
Total Variable Account Annual Expense 1.35%
*If you select the Enhanced Death Benefit Option, the Performance Death Benefit
Option, or the Performance Income Benefit Option, the mortality and expense
risk charge is 1.38%. If you select the Performance Benefit Combination
Option, or the Death Benefit Combination Option, the mortality and expense
risk charge is 1.49%. If you qualify for and elect the Longevity Reward
Rider, the mortality and expense risk charge is reduced by 0.07% under the
basic policy or any Option described above.
<PAGE>
Portfolio Annual Expenses (After Voluntary Reductions and Reimbursements)(as a
percentage of Portfolio average daily net assets) (1)
<TABLE>
<S> <C> <C> <C> <C> <C>
Portfolio Management Other Expenses Rule 12b-1 Total Portfolio
Fees Fees Annual
Expenses
Morgan Stanley Dean Witter Variable Investment Series
Aggressive Equity 0.42% 0.10% --- 0.52%
Capital Growth 0.65% 0.07% --- 0.72%
Competitive Edge "Best Ideas" 0.44% 0.12% --- 0.56%
Dividend Growth 0.51% 0.01% --- 0.52%
Equity 0.49% 0.02% --- 0.51%
European Growth 0.95% 0.09% --- 1.04%
Global Dividend Growth 0.75% 0.08% --- 0.83%
High Yield 0.50% 0.03% --- 0.53%
Income Builder 0.75% 0.06% --- 0.81%
Money Market 0.50% 0.02% --- 0.52%
Pacific Growth 0.95% 0.47% --- 1.42%
Quality Income Plus 0.50% 0.02% --- 0.52%
Short-Term Bond 0.45% 0.17% --- 0.62%
Strategist 0.50% 0.02% --- 0.52%
S&P 500 Index(2) 0.39% 0.09% --- 0.48%
Utilities 0.64% 0.03% --- 0.67%
The Universal Institutional Funds, Inc. (3)
Mid-Cap Value 0.43% 0.62% --- 1.05%
Emerging Markets Equity 0.42% 1.37% --- 1.79%
Equity Growth 0.29% 0.56% --- 0.85%
International Magnum 0.29% 0.87% --- 1.16%
U.S. Real Estate 0.00% 1.10% --- 1.10%
AIM Variable Insurance Funds
AIM V.I. Capital Appreciation Fund 0.62% 0.11% --- 0.73%
AIM V.I. Growth Fund 0.63% 0.10% --- 0.73%
AIM V.I. Value Fund 0.61% 0.15% --- 0.76%
Alliance Variable Products Series Fund (4)
Growth Portfolio 0.75% 0.12% 0.25% 1.12%
Growth and Income Portfolio 0.63% 0.09% 0.25% 0.97%
Premier Growth Portfolio 1.00% 0.04% 0.25% 1.29%
Putnam Variable Trust (Class IB Shares)
Putnam VT Growth and Income Fund 0.46% 0.04% 0.15% 0.65%
Putnam VT International Growth Fund 0.80% 0.22% 0.15% 1.17%
Putnam VT Voyager Fund 0.53% 0.04% 0.15% 0.72%
Van Kampen Life Investment Trust(5)
Emerging Growth 0.67% 0.18% -- 0.85%
</TABLE>
(1) Figures shown in the Table are for the year ended December 31, 1999,
unless otherwise noted.
(2) Morgan Stanley Dean Witter Advisors Inc. has permanently undertaken to
assume all expenses of the S&P 500 Index Portfolio (except for
brokerage fees) and to waive the compensation provided in its
management agreement with the Fund to the extent that such expenses and
compensation on an annualized basis exceed .050% of the daily net
assets of the S &P 500 Index Portfolio.
(3) Morgan Stanley Asset Management has voluntarily agreed to a
reduction in its management fees and to reimburse the Portfolios for
which it acts as investment advisor for certain expenses of the
Portfolios. The advisor may terminate this voluntary waiver at any
time. Absent such reductions, the management fees, other expenses, and
total annual Portfolio expenses would have been as follows:
Equity Growth 0.55% 0.56% 1.11%
U.S. Real Estate 0.80% 1.10% 1.90%
International Magnum 0.80% 0.87% 1.67%
Emerging Markets Equity 1.25% 1.37% 2.62%
Mid-Cap Value 0.75% 0.62% 1.37%
(4) Class B of the Alliance Variable Products Series Fund has a
distribution plan or "Rule 12b-1 plan" as described in that Fund's
prospectus. The Class B shares were first issued July 14, 1999.
(5) Van Kampen Asset Management Inc. has voluntarily agreed to a reduction
in its management fees and to reimburse the Emerging Growth Portfolio
for which it acts as investment adviser if such fees would cause "Total
Portfolio Annual Expenses" to exceed the amount set forth in the table
above. Absent such reductions, the management fees, other expenses, and
total annual Portfolio expenses would have been 0.70%, 0.18% and 0.88%,
respectively.
Example 1
The example below shows the dollar amount of expenses that you would bear
directly or indirectly if you:
o invested $1,000 in a Variable Sub-Account,
o earned a 5% annual return on your investment,
o surrendered your Contract, or you began receiving income payments for
a specified period of less than 120 months, at the end of each time
period, and
o elected the Performance Benefit Combination Option or the Income and
Death Benefit Combination Option.
<PAGE>
The example does not include any taxes or tax penalties you may be required to
pay if you surrender your Contract.
Sub-Account 1 Year 3 Years 5 Years 10 Years
Morgan Stanley Dean Witter Variable Investment Series
Aggressive Equity $65 $94 $126 $251
Capital Growth $67 $100 $136 $272
Competitive Edge "Best Ideas" $65 $95 $128 $255
Dividend Growth $65 $94 $126 $251
Equity $65 $94 $125 $250
European Growth $70 $110 $152 $304
Global Dividend Growth $68 $103 $141 $283
High Yield $65 $94 $126 $252
Income Builder $68 $103 $140 $281
Mid-Cap Value $70 $110 $153 $305
Money Market $65 $94 $126 $251
Pacific Growth $74 $121 $171 $341
Quality Income Plus $65 $94 $126 $251
Short-Term Bond $66 $97 $131 $261
Strategist $65 $94 $126 $251
S&P 500 Index $64 $93 $123 $247
Utilities $66 $98 $133 $267
The Universal Institutional Funds, Inc.
Emerging Markets Equity $78 $133 $190 $376
Equity Growth $68 $104 $143 $285
International Magnum $71 $113 $158 $316
U.S. Real Estate $71 $112 $155 $310
AIM Variable Insurance Funds
AIM V.I. Capital Appreciation $67 $100 $136 $273
AIM V.I. Growth $67 $100 $136 $273
AIM V.I. Value $67 $101 $138 $276
Alliance Variable Products Series Fund
Growth $71 $112 $156 $312
Growth and Income $69 $108 $149 $297
Premier Growth $73 $117 $165 $329
Putnam Variable Trust (Class IB Shares)
Putnam VT Growth and Income $66 $98 $132 $264
Putnam VT International Growth $71 $114 $159 $317
Putnam Voyager $67 $100 $136 $272
Van Kampen Life Investment Trust
Emerging Growth $68 $104 $143 $285
<PAGE>
Example 2
Same assumptions as Example 1 above, except that you decided not to surrender
your Contract, or you began receiving income payments (for at least 120 months
if under an Income Plan with a specified period), at the end of each period.
Sub-Account 1 Year 3 Years 5 Years 10 Years
Morgan Stanley Dean Witter Variable Investment Series
Aggressive Equity $22 $68 $117 $251
Capital Growth $24 $74 $127 $272
Competitive Edge "Best Ideas" $23 $70 $119 $255
Dividend Growth $22 $68 $117 $251
Equity $22 $68 $117 $250
European Growth $27 $84 $144 $304
Global Dividend Growth $25 $78 $133 $283
High Yield $22 $69 $118 $252
Income Builder $25 $77 $132 $281
Mid-Cap Value $28 $85 $144 $305
Money Market $22 $68 $117 $251
Pacific Growth $31 $96 $163 $341
Quality Income Plus $22 $68 $117 $251
Short-Term Bond $23 $71 $122 $261
Strategist $22 $68 $117 $251
S&P 500 Index $22 $67 $115 $247
Utilities $24 $73 $125 $267
The Universal Institutional Funds, Inc.
Emerging Markets Equity $35 $107 $181 $376
Equity Growth $26 $78 $134 $285
International Magnum $29 $88 $150 $316
U.S. Real Estate $28 $86 $147 $310
AIM Variable Products Series Fund
AIM V.I. Capital Appreciation $24 $75 $128 $273
AIM V.I. Growth $24 $75 $128 $273
AIM V.I. Value $25 $76 $129 $276
Alliance Variable Products Series Fund
Growth $28 $87 $148 $312
Growth and Income $27 $82 $140 $297
Premier Growth $30 $92 $156 $329
Putnam Variable Trust (Class IB Shares)
Putnam VT Growth and Income $23 $72 $124 $264
Putnam VT International Growth $29 $88 $150 $317
Putnam VT Voyager $26 $78 $134 $285
Van Kampen Life Investment Trust
Emerging Growth $26 $78 $134 $285
Please remember that you are looking at examples and not a representation of
past or future expenses. Your actual expenses may be lower or greater than those
shown above. Similarly, your rate of return may be lower or greater than 5%,
which is not guaranteed. The above examples assume the election of the
Performance Benefit Combination Option, or the Death Benefit Combination Option,
with a mortality and expense risk charge of 1.49%. If those options were not
elected, the expense figures shown above would be slightly lower. To reflect the
contract maintenance charge in the examples, we estimated an equivalent
percentage charge, based on an assumed average Contract size of $54,945.
<PAGE>
Financial Information
To measure the value of your investment in the Variable Sub-Accounts during the
Accumulation Phase, we use a unit of measure we call the "Accumulation Unit."
Each Variable Sub-Account has a separate value for its Accumulation Units we
call "Accumulation Unit Value." Accumulation Unit Value is similar to, but not
the same as, the share price of a mutual fund.
Attached as Appendix A to this prospectus are tables showing the Accumulation
Unit Values of each Variable Sub-Account since its inception. To obtain
additional detail on each Variable Sub-Account's finances, please refer to the
Variable Account's financial statements contained in the Statement of Additional
Information. The financial statements of Northbrook also appear in the Statement
of Additional Information.
<PAGE>
The Contract
CONTRACT OWNER
The Variable Annuity II is a contract between you, the Contract owner, and
Northbrook, a life insurance company. As the Contract owner, you may exercise
all of the rights and privileges provided to you by the Contract. That means it
is up to you to select or change (to the extent permitted):
o the investment alternatives during the Accumulation and Payout Phases,
o the amount and timing of your purchase payments and withdrawals,
o the programs you want to use to invest or withdraw money,
o the income payment plan you want to use to receive retirement income,
o the Annuitant (either yourself or someone else) on whose life the
income payments will be based,
o the Beneficiary or Beneficiaries who will receive the benefits
that the Contract provides when the last surviving Contract owner
dies, and
o any other rights that the Contract provides.
If you die, any surviving Contract owner, or, if none, the Beneficiary will
exercise the rights and privileges provided to them by the Contract. The
Contract cannot be jointly owned by both a non-natural person and a natural
person. The maximum issue age for the Contract, without any riders, is age 90.
You can use the Contract with or without a qualified plan. A "qualified plan" is
a retirement savings plan, such as an IRA or tax-sheltered annuity, that meets
the requirements of the Internal Revenue Code. Qualified plans may limit or
modify your rights and privileges under the Contract. We use the term "Qualified
Contract" to refer to a Contract used with a qualified plan. See "Qualified
Plans" on page __.
<PAGE>
ANNUITANT
The Annuitant is the individual whose life span we use to determine income
payments as well as the latest Payout Start Date. You initially designate an
Annuitant in your application. If the Contract owner is a natural person, you
may change the Annuitant before the Payout Start Date. Before the Payout Start
Date, you may also designate a joint Annuitant, who is a second person on whose
life income payments depend.
BENEFICIARY
The Beneficiary is the person who may elect to receive the death benefit or
become the new Contract owner if the sole surviving Contract owner dies before
the Payout Start Date. If the sole surviving Contract owner dies after the
Payout Start Date, the Beneficiary will receive any guaranteed income payments
scheduled to continue.
You may name one or more Beneficiaries when you apply for a Contract. You may
change or add Beneficiaries at any time while the Annuitant is living by writing
to us, unless you have designated an irrevocable Beneficiary. We will provide a
change of Beneficiary form to be signed and filed with us. Any change will be
effective at the time you sign the written notice, whether or not the Annuitant
is living when we receive the notice. Until we receive your written notice to
change a Beneficiary, we are entitled to rely on the most recent Beneficiary
information in our files. We will not be liable as to any payment or settlement
made prior to receiving the written notice. Accordingly, if you wish to change
your Beneficiary, you should deliver your written notice to us promptly.
If you did not name a Beneficiary or, if the named Beneficiary is no longer
living and there are no other surviving Beneficiaries, the new Beneficiary will
be:
o your spouse, if he or she is still alive, otherwise
o your surviving children equally, or if you have no surviving children,
o your estate.
If more than one Beneficiary survives you, (or the Annuitant, if the Contract
owner is not a natural person) we will divide the death benefit among your
Beneficiaries according to your most recent written instructions. If you have
not given us written instructions, we will pay the death benefit in equal
amounts to the surviving Beneficiaries.
MODIFICATION OF THE CONTRACT
Only a Northbrook officer may approve a change in or waive any provision of the
Contract. Any change or waiver must be in writing. None of our agents has the
authority to change or waive the provisions of the Contract. We may not change
the terms of the Contract without your consent, except to conform the Contract
to applicable law or changes in the law. If a provision of the Contract is
inconsistent with state law, we will follow state law.
ASSIGNMENT
We will not honor an assignment of an interest in a Contract as collateral or
security for a loan. However, you may assign periodic income payments under the
Contract prior to the Payout Start Date. No Beneficiary may assign benefits
under the Contract until they are payable to the Beneficiary. We will not be
bound by any assignment until you sign it and file it with us. We are not
responsible for the validity of any assignment. Federal law prohibits or
restricts the assignment of benefits under many types of retirement plans and
the terms of such plans may themselves contain restrictions on assignments. An
assignment may also result in taxes or tax penalties. You should consult with an
attorney before trying to assign your Contract.
<PAGE>
Purchases
MINIMUM PURCHASE PAYMENTS
Your initial purchase payment must be at least $1,000. However, we reserve the
right to raise that minimum to as much as $4,000. All subsequent purchase
payments must be $25 or more. You may make purchase payments at any time prior
to the Payout Start Date. We reserve the right to limit the maximum amount of
purchase payments we will accept. We also reserve the right to reject any
application.
AUTOMATIC ADDITIONS PROGRAM
You may make subsequent purchase payments of at least $25 by automatically
transferring amounts from your bank account or your Morgan Stanley Dean Witter
Active Assets (TM) Account. Please consult your Morgan Stanley Dean Witter
Financial Advisor for details.
ALLOCATION OF PURCHASE PAYMENTS
At the time you apply for a Contract, you must decide how to allocate your
purchase payments among the investment alternatives. The allocation you specify
on your application will be effective immediately. All allocations must be in
whole percentages that total 100% or in whole dollars. The minimum you may
allocate to any investment alternative is $100. The minimum amount that you may
allocate to the Guarantee Periods is $500. You can change your allocations by
notifying us in writing.
We will allocate your purchase payments to the investment alternatives according
to your most recent instructions on file with us. Unless you notify us in
writing otherwise, we will allocate subsequent purchase payments according to
the allocation for the previous purchase payment. We will effect any change in
allocation instructions at the time we receive written notice of the change in
good order.
We will credit the initial purchase payment that accompanies your completed
application to your Contract within 2 business days after we receive the payment
at our headquarters. If your application is incomplete, we will ask you to
complete your application within 5 business days. If you do so, we will credit
your initial purchase payment to your Contract within that 5 business day
period. If you do not, we will return your purchase payment at the end of the 5
business day period unless you expressly allow us to hold it until you complete
the application. We will credit subsequent purchase payments to the Contract on
the business day that we receive the purchase payment at our headquarters.
We use the term "business day" to refer to each day Monday through Friday that
the New York Stock Exchange is open for business. We also refer to these days as
"Valuation Dates." If we receive your purchase payment after 3 p.m. Central Time
on any Valuation Date, we will credit your purchase payment using the
Accumulation Unit Values computed on the next Valuation Date.
RIGHT TO CANCEL
You may cancel the Contract within the Cancellation Period, which is the 20-day
period after you receive the Contract or such longer period as your state may
require. If you exercise this Right to Cancel, the Contract terminates and we
will pay you the full amount of your purchase payments allocated to the Fixed
Account Options. We also will return your purchase payments allocated to the
Variable Account after an adjustment, to the extent applicable law permits, to
reflect investment gain or loss that occurred from the date of allocation
through the date of cancellation. Some states may require us to return a greater
amount to you.
<PAGE>
Contract Value
Your Contract Value at any time during the Accumulation Phase is equal to the
sum of the value of your Accumulation Units in the Variable Sub-Accounts you
have selected, plus the value of your investment in the Fixed Account Options.
ACCUMULATION UNITS
To determine the number of Accumulation Units of each Variable Sub-Account to
allocate to your Contract, we divide (i) the amount of the purchase payment or
transfer you have allocated to a Variable Sub-Account by (ii) the Accumulation
Unit Value of that Variable Sub-Account next computed after we receive your
payment or transfer. For example, if we receive a $10,000 purchase payment
allocated to a Variable Sub-Account when the Accumulation Unit Value for the
Sub-Account is $10, we would credit 1,000 Accumulation Units of that Variable
Sub-Account to your Contract. Withdrawals and transfers from a Variable
Sub-Account would, of course, reduce the number of Accumulation Units of that
Sub-Account allocated to your Contract.
ACCUMULATION UNIT VALUE
As a general matter, the Accumulation Unit Value for each Variable Sub-Account
will rise or fall to reflect:
o changes in the share price of the Portfolio in which the Variable
Sub-Account invests, and
o the deduction of amounts reflecting the mortality and expense risk charge,
administrative expense charge, and any provision for taxes that have
accrued since we last calculated the Accumulation Unit Value.
We determine contract maintenance charges, withdrawal charges, and transfer fees
(currently waived) separately for each Contract. They do not affect Accumulation
Unit Value. Instead, we obtain payment of those charges and fees by redeeming
Accumulation Units. For details on how we calculate Accumulation Unit Value,
please refer to the Statement of Additional Information.
We determine a separate Accumulation Unit Value for each Variable Sub-Account on
each Valuation Date. We also determine a separate set of Accumulation Unit
Values that reflect the cost of the Enhanced Death Benefit Option, the
Performance Death Benefit Option, or the Performance Income Benefit Option, and
a third set of Accumulation Unit Values that reflect the cost of the Performance
Benefit Combination Option and the Death Benefit Combination Option.
You should refer to the prospectuses for the Funds that accompany this
prospectus for a description of how the assets of each Portfolio are valued,
since that determination directly bears on the Accumulation Unit Value of the
corresponding Variable Sub-Account and, therefore, your Contract Value. We also
determine separate sets of Accumulation Unit Values that reflect the costs under
the Longevity Reward Rider with the basic policy and with each Option listed
above.
<PAGE>
Investment Alternatives: The Variable Sub-Accounts
You may allocate your purchase payments to up to 31 Variable Sub-Accounts. Each
Variable Sub-Account invests in the shares of a corresponding Portfolio. Each
Portfolio has its own investment objective(s) and policies. We briefly describe
the Portfolios below.
For more complete information about each Portfolio, including expenses and risks
associated with the Portfolio, please refer to the accompanying prospectuses for
the Funds. You should carefully review the Fund prospectuses before allocating
amounts to the Variable Sub-Accounts.
<TABLE>
<S> <C> <C> <C>
Portfolio: Each Portfolio Seeks: Investment Adviser:
Morgan Stanley Dean Witter Variable Investment Series
Aggressive Equity Portfolio Capital growth Morgan Stanley
Dean Witter
Advisors, Inc.
Capital Growth Portfolio Long-term capital growth
Competitive Edge "Best Ideas" Portfolio Long-term capital growth
Dividend Growth Portfolio Reasonable current income and
long-term growth of income and
capital
Equity Portfolio Growth of capital and, as a
secondary objective, income
when consistent with its
primary objective
European Growth Portfolio To maximize the capital
appreciation on its investments
Global Dividend Growth Portfolio Reasonable current income and
long-term growth of income and
capital
Income Builder Portfolio Reasonable income and, as a
secondary objective, growth of
capital
High Yield Portfolio High current income and, as a
secondary objective, capital
appreciation when consistent
with its primary objective
Mid-Cap Value Above-average total return over
a market cycle of three to five
years
Money Market Portfolio High current income, preservation
of capital, and liquidity
Pacific Growth Portfolio To maximize the capital
appreciation on its investments
Quality Income Plus Portfolio High
current income and, as a
secondary objective, capital
appreciation when consistent
with its primary objective
Short-Term Bond Portfolio High current income consistent
with preservation of capital
Strategist Portfolio High total investment return
S&P 500 Index Portfolio Investment results that, before
expenses, correspond to the total
return of the Standard and Poor's
500 Composite Stock Price Index
Utilities Portfolio Current income and long term
growth of income and capital
The Universal Institutional Funds, Inc.
Emerging Markets Equity Portfolio Long-term capital appreciation Morgan Stanley
Asset
Management
Equity Growth Portfolio Long-term capital appreciation
International Magnum Portfolio Long-term capital appreciation
U.S. Real Estate Portfolio Above-average current income and
long-term capital appreciation
Van Kampen Life Investment Trust
Emerging Growth Portfolio Capital appreciation Van Kampen Asset Management Inc.
AIM Variable Insurance Funds*
AIM V.I. Capital Appreciation Fund Growth of capital AIM Advisors, Inc.
AIM V.I. Growth Fund Growth of capital
AIM V.I. Value Fund Long-term growth of capital
Alliance Variable Products Series Fund
Growth Portfolio Long-term growth of capital. Alliance Capital Management,
Current income is incidental to L.P.
the Portfolio's objective
Growth and Income Portfolio Reasonable current income and
reasonable opportunity for
appreciation
Premier Growth Portfolio Growth of capital by pursuing
aggressive investment policies
Putnam Variable Trust
Putnam VT Growth and Income Fund Capital growth and current income Putnam Investment Management, Inc.
Putnam VT International Growth Fund Capital appreciation
Putnam VT Voyager Fund Capital appreciation
</TABLE>
* A portfolios' investment objective may be changed by the Funds' Board of
Directors without shareholder approval.
Amounts you allocate to Variable Sub-Accounts may grow in value, decline in
value, or grow less than you expect, depending on the investment performance of
the Portfolios in which those Variable Sub-Accounts invest. You bear the
investment risk that the Portfolios might not meet their investment objectives.
Shares of the Portfolios are not deposits, or obligations of, or guaranteed or
endorsed by any bank and are not insured by the Federal Deposit Insurance
Corporation, the Federal Reserve Board or any other agency.
<PAGE>
Investment Alternatives: The Fixed Account Options
You may allocate all or a portion of your purchase payments to the Fixed Account
Options. You may choose from among 4 Fixed Account Options including 3 dollar
cost averaging options ("Dollar Cost Averaging Fixed Account Options") and the
option to invest in one or more Guarantee Periods. The Fixed Account Options may
not be available in all states. Northbrook may also limit the availability of
the 6 and 12 Month Dollar Cost Averaging Options. Please consult with your
Morgan Stanley Dean Witter Financial Advisor for current information. The Fixed
Account supports our insurance and annuity obligations. The Fixed Account
consists of our general assets other than those in segregated asset accounts. We
have sole discretion to invest the assets of the Fixed Account, subject to
applicable law. Any money you allocate to a Fixed Account Option does not
entitle you to share in the investment experience of the Fixed Account.
DOLLAR COST AVERAGING FIXED ACCOUNT OPTIONS
Basic Dollar Cost Averaging Option. You may establish a Dollar Cost Averaging
Program, as described on page 18, by allocating purchase payments to the Basic
Dollar Cost Averaging Option. Purchase payments that you allocate to the Basic
Dollar Cost Averaging Option will earn interest for a 1 year period at the
current rate in effect at the time of allocation. We will credit interest daily
at a rate that will compound over the year to the annual interest rate we
guaranteed at the time of allocation. Rates may be different than those
available for the Guarantee Periods described below. After the one year period,
we will declare a renewal rate which we guarantee for a full year. Subsequent
renewal dates will be every twelve months for each purchase payment. Renewal
rates will not be less than the minimum guaranteed rate found in the Contract.
You may not transfer funds from other investment alternatives to the Basic
Dollar Cost Averaging Option.
6 and 12 Month Dollar Cost Averaging Options. You also may establish a Dollar
Cost Averaging Program by allocating purchase payments to the Fixed Account
either for 6 months (the "6 Month Dollar Cost Averaging Option") or for 12
months (the "12 Month Dollar Cost Averaging Option"). Your purchase payments
will earn interest for the period you select at the current rates in effect at
the time of allocation. Rates may differ from those available for the Guarantee
Periods described below. However, the crediting rates for the 6 and 12 Month
Dollar Cost Averaging Options will never be less than 3% annually.
You must transfer all of your money out of the 6 or 12 Month Dollar Cost
Averaging Options to the Variable Sub-Accounts in equal monthly installments. If
you discontinue a 6 or 12 Month Dollar Cost Averaging Option prior to last
scheduled transfer, we will transfer any remaining money immediately to the
Money Market Variable Sub-Account, unless you request a different Variable
Sub-Account.
You may not transfer funds from other investment alternatives to the 6 or 12
Month Dollar Cost Averaging Options.
Transfers out of the Dollar Cost Averaging Fixed Account Options do not count
towards the 12 transfers you can make without paying a transfer fee.
We may declare more than one interest rate for different monies based upon the
date of allocation to the Dollar Cost Averaging Fixed Account Options. For
current interest rate information, please contact your sales representative or
our customer support unit at 1-800-654-2397.
GUARANTEE PERIODS
You may allocate purchase payments or transfers to one or more Guarantee Periods
of the Fixed Account ("Guarantee Periods"). Each payment or transfer allocated
to a Guarantee Period earns interest at a specified rate that we guarantee for a
period of years. We will offer a 1 year Guarantee Period. We offer additional
Guarantee Periods at our sole discretion. We currently offer a 1 year and a 6
year Guarantee Period.
<PAGE>
Interest Rates. We will tell you what interest rates and Guarantee Periods we
are offering at a particular time. We will not change the interest rate that we
credit to a particular allocation until the end of the relevant Guarantee
Period. We may declare different interest rates for Guarantee Periods of the
same length that begin at different times.
We have no specific formula for determining the rate of interest that we will
declare initially or in the future. We will set those interest rates based on
investment returns available at the time of the determination. In addition, we
may consider various other factors in determining interest rates including
regulatory and tax requirements, our sales commission and administrative
expenses, general economic trends, and competitive factors. We determine the
interest rates to be declared in our sole discretion. We can neither predict nor
guarantee what those rates will be in the future. For current interest rate
information, please contact your sales representative or Northbrook at
1-800-654-2397. The interest rate will never be less than the minimum guaranteed
rate stated in the Contract.
After the Guarantee Period, we will declare a renewal rate. 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
Contract Year then starting.
<PAGE>
Investment Alternatives: Transfers
TRANSFERS DURING THE ACCUMULATION PHASE
During the Accumulation Phase, you may transfer Contract Value among the
investment alternatives. Transfers to any Guarantee Period must be at least
$500. You may not, however, transfer Contract Value into any of the Dollar Cost
Averaging Fixed Account Options. You may request transfers in writing on a form
that we provide or by telephone according to the procedure described below. The
minimum amount that you may transfer is $100 or the total amount in the
investment alternative, whichever is less. We currently do not assess, but
reserve the right to assess, a $25 charge on each transfer in excess of 12 per
Contract Year. We will notify you at least 30 days before we begin imposing the
transfer charge. We treat transfers to or from more than one Portfolio on the
same day as one transfer.
We limit the amount you may transfer from the Guarantee Periods to the Variable
Account in any Contract Year to the greater of:
1. 25% of the aggregate value in the Guarantee Periods as of the most recent
Contract Anniversary (if this amount is less than $1,000, then up to $1,00
may be transferred); or
2. 25% of the sum of all purchase payments and transfers to the Guarantee
Periods as of the most recent Contract Anniversary. These restrictions do
not apply to transfers pursuant to dollar cost averaging. 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 a Guarantee Period, we wil
waive the transfer restriction for that money and the accumulated
interest thereon during the 60-day period following the first renewal
date.
We will process transfer requests that we receive before 3:00 p.m. Central Time
on any Valuation Date using the Accumulation Unit Values for that Date. We will
process written requests completed after 3:00 p.m. on any Valuation Date using
the Accumulation Unit Values for the next Valuation Date. The Contract permits
us to defer transfers from the Fixed Account Options for up to six months from
the date we receive your request. If we decide to postpone transfers for 30 days
or more, we will pay interest as required by applicable law. Any interest would
be payable from the date we receive the transfer request to the date we make the
transfer.
EXCESSIVE TRADING LIMITS
For Contracts issued after May 2, 1999, we reserve the right to limit transfers
among the Variable Sub-Accounts if we determine, in our sole discretion, that
transfers by one or more Contract owners would be to the disadvantage of other
Contract owners. We may limit transfers by taking such steps as:
o imposing a minimum time period between each transfer,
o refusing to accept transfer requests of an agent acting under a
power of attorney on behalf of more than one Contract
owner, or
o limiting the dollar amount that a Contract owner may transfer between
the Variable Sub-Accounts and the Fixed Account Options at any one time.
We may apply the restrictions in any manner reasonably designed to prevent
transfers that we consider disadvantageous to other Contract owners.
We reserve the right to waive any transfer restrictions.
<PAGE>
TRANSFERS DURING THE PAYOUT PHASE
During the Payout Phase, you may make transfers among the Variable Sub-Accounts
so as to change the relative weighting of the Variable Sub-Accounts on which
your variable income payments will be based. In addition, you will have a
limited ability to make transfers from the Variable Sub-Accounts to increase the
proportion of your income payments consisting of fixed income payments. You may
not, however, convert any portion of your right to receive fixed income payments
into variable income payments.
You may not make any transfers for the first 6 months after the Payout Start
Date. Thereafter, you may make transfers among the Variable Sub-Accounts or make
transfers from the Variable Sub-Accounts to increase the proportion of your
income payments consisting of fixed income payments. Your transfers must be at
least 6 months apart.
TELEPHONE TRANSFERS
You may make transfers by telephone by calling 1-800-654-2397 if you have on
file a completed authorization form. The cut off time for telephone transfer
requests is 3:00 p.m. Central Time. In the event that the New York Stock
Exchange closes early, i.e., before 3:00 p.m. Central Time, or in the event that
the Exchange closes early for a period of time but then reopens for trading on
the same day, we will process telephone transfer requests as of the close of the
Exchange on that particular day. We will not accept telephone requests received
at any telephone number other than the number that appears in this paragraph or
received after the close of trading on the Exchange.
We may suspend, modify or terminate the telephone transfer privilege at any time
without notice.
We use procedures that we believe provide reasonable assurance that the
telephone transfers are genuine. For example, we tape telephone conversations
with persons purporting to authorize transfers and request identifying
information. Accordingly, we disclaim any liability for losses resulting from
allegedly unauthorized telephone transfers. However, if we do not take
reasonable steps to help ensure that a telephone authorization is valid, we may
be liable for such losses.
DOLLAR COST AVERAGING PROGRAM
Through our Dollar Cost Averaging Program, you may automatically transfer a set
amount every month (or other intervals we may offer) during the Accumulation
Phase from any Variable Sub-Account or the Dollar Cost Averaging Fixed Account
Option(s) to any Variable Sub-Account. Transfers made through dollar cost
averaging must be $100 or more.
The theory of dollar cost averaging is that if purchases of equal dollar amounts
are made at fluctuating prices, the aggregate average cost per unit will be less
than the average of the unit prices on the same purchase dates. However,
participation in this Program does not assure you of a greater profit from your
purchases under the Program nor will it prevent or necessarily reduce losses in
a declining market. Call or write us for information on how to enroll.
AUTOMATIC PORTFOLIO REBALANCING PROGRAM
Once you have allocated your money among the Variable Sub-Accounts, the
performance of each Sub-Account may cause a shift in the percentage you
allocated to each Sub-Account. If you select our Automatic Portfolio Rebalancing
Program, we will automatically rebalance the Contract Value in each Variable
Sub-Account and return it to the desired percentage allocations. We will not
include money you allocate to the Fixed Account Options in the Automatic
Portfolio Rebalancing Program.
We will rebalance your account each quarter (or other intervals that we may
offer) according to your instructions. We will transfer amounts among the
Variable Sub-Accounts to achieve the percentage allocations you specify. You can
change your allocations at any time by contacting us in writing or by telephone.
The new allocation will be effective with the first rebalancing that occurs
after we receive your request. We are not responsible for rebalancing that
occurs prior to receipt of your request.
<PAGE>
Example:
Assume that you want your initial purchase payment split among 2
Variable Sub-Accounts. You want 40% to be in the High Yield Variable
Sub-Account and 60% to be in the Equity Growth Variable Sub-Account.
Over the next 2 months the bond market does very well while the stock
market performs poorly. At the end of the first quarter, the High Yield
Variable Sub-Account now represents 50% of your holdings because of its
increase in value. If you choose to have your holdings rebalanced
quarterly, on the first day of the next quarter, we would sell some of
your units in the High Yield Variable Sub-Account and use the money to
buy more units in the Equity Growth Variable Sub-Account so that the
percentage allocations would again be 40% and 60% respectively.
The Automatic Portfolio Rebalancing Program is available only during the
Accumulation Phase. The transfers made under the Program do not count towards
the 12 transfers you can make without paying a transfer fee, and are not subject
to a transfer fee.
Portfolio rebalancing is consistent with maintaining your allocation of
investments among market segments, although it is accomplished by reducing your
Contract Value allocated to the better performing segments.
<PAGE>
Expenses
As a Contract owner, you will bear, directly or indirectly, the charges and
expenses described below.
CONTRACT MAINTENANCE CHARGE
During the Accumulation Phase, on each Contract Anniversary we will deduct a $30
contract maintenance charge from your Contract Value. This charge will be
deducted on a pro rata basis from each investment alternative in the proportion
that your investment in each bears to your Contract Value. We also will deduct a
full contract maintenance charge if you withdraw your entire Contract Value.
During the Payout Phase, we will deduct the charge proportionately from each
income payment.
The charge is to compensate us for the cost of administering the Contracts and
the Variable Account. Maintenance costs include expenses we incur in billing and
collecting purchase payments; keeping records; processing death claims, cash
withdrawals, and policy changes; proxy statements; calculating Accumulation Unit
Values and income payments; and issuing reports to Contract owners and
regulatory agencies. We cannot increase the charge.
The contract maintenance charge is waived under certain circumstances if you
qualify for and elect the Longevity Reward Rider. See "Longevity Reward Rider"
on page __ for details.
MORTALITY AND EXPENSE RISK CHARGE
We deduct a mortality and expense risk charge daily at an annual rate of 1.25%
of the average daily net assets you have invested in the Variable Sub-Accounts
(1.38% if you select either the Enhanced Death Benefit Option, the Performance
Death Benefit Option, or the Performance Income Benefit Option, and 1.49% if you
select the Performance Benefit Combination Option or the Death Benefit
Combination Option). The mortality and expense risk charge is for all the
insurance benefits available with your Contract (including our guarantee of
annuity rates and the death benefits), for certain expenses of the Contract, and
for assuming the risk (expense risk) that the current charges will not be
sufficient in the future to cover the cost of administering the Contract. If the
charges under the Contract are not sufficient, then we will bear the loss. We
charge an additional amount for the Death Benefit Options and the Performance
Income Benefit Option to compensate us for the additional risk that we accept by
providing these Options.
We guarantee the mortality and expense risk charge and we cannot increase it. We
assess the mortality and expense risk charge during both the Accumulation Phase
and the Payout Phase.
ADMINISTRATIVE EXPENSE CHARGE
We deduct an administrative expense charge daily at an annual rate of 0.10% of
the average daily net assets you have invested in the Variable Sub-Accounts. We
intend this charge to cover actual administrative expenses that exceed the
revenues from the contract maintenance charge. There is no necessary
relationship between the amount of administrative charge imposed on a given
Contract and the amount of expenses that may be attributed to that Contract. We
assess this charge each day during the Accumulation Phase and the Payout Phase.
TRANSFER FEE
We do not currently impose a fee upon transfers among the investment
alternatives. However, we reserve the right to charge $25 per transfer after the
12th transfer in each Contract Year. We will not charge a transfer fee on
transfers that are part of a Dollar Cost Averaging or Automatic Portfolio
Rebalancing Program.
WITHDRAWAL CHARGE
We may assess a withdrawal charge of up to 6% of the purchase payment(s) you
withdraw. This charge declines to 0% after the expiration of 6 years from the
day we receive the purchase payment being withdrawn. A schedule showing how the
withdrawal charge declines over the 6-year period is shown on page 7. During
each Contract Year, you can withdraw up to 15% of the aggregate amount of your
purchase payments as of the Issue Date or the most recent Contract Anniversary,
whichever is later without paying a withdrawal charge. Unused portions of this
Free Withdrawal Amount are not carried forward to future Contract Years.
<PAGE>
If you qualify for and elect the Longevity Reward Rider, a withdrawal charge of
up to 3% will apply to purchase payments received before or after the Rider
Date. See "Longevity Reward Rider" on page __ for details.
We will deduct withdrawal charges, if applicable, from the amount paid, unless
you instruct otherwise. For purposes of the withdrawal charge, we will treat
withdrawals as coming from the oldest purchase payments first. However, for
federal income tax purposes, please note that withdrawals are considered to have
come first from earnings, which means you pay taxes on the earnings portion of
your withdrawal.
We do not apply a withdrawal charge in the following situations:
o on the Payout Start Date (a withdrawal charge may apply if you elect to
receive income payments for a specified period of less than 120 months);
o the death of the Contract owner or Annuitant unless the Settlement Value is
used; and
o withdrawals taken to satisfy IRS minimum distribution rules for the Contract.
We use the amounts obtained from the withdrawal charge to pay sales commissions
and other promotional or distribution expenses associated with marketing the
Contracts. To the extent that the withdrawal charge does not cover all sales
commissions and other promotional or distribution expenses, we may use any of
our corporate assets, including potential profit which may arise from the
mortality and expense risk charge or any other charges or fee described above,
to make up any difference.
Withdrawals also may be subject to tax penalties or income tax. You should
consult your own tax counsel or other tax advisers regarding any withdrawals.
PREMIUM TAXES
Some states and other governmental entities (e.g., municipalities) charge
premium taxes or similar taxes. We are responsible for paying these taxes and
will deduct them from your Contract Value. Some of these taxes are due when the
Contract is issued, others are due when income payments begin or upon surrender.
Our current practice is not to charge anyone for these taxes until income
payments begin or when a total withdrawal occurs including payment upon death.
At our discretion, we may discontinue this practice and deduct premium taxes
from the purchase payments. Premium taxes generally range from 0% to 4%,
depending on the state.
At the Payout Start Date, if applicable, we deduct the charge for premium taxes
from each investment alternative in the proportion that the Contract owner's
value in the investment alternative bears to the total Contract Value.
DEDUCTION FOR VARIABLE ACCOUNT INCOME TAXES
We are not currently making a provision for taxes. In the future, however, we
may make a provision for taxes if we determine, in our sole discretion, that we
will incur a tax as a result of the operation of the Variable Account. We will
deduct for any taxes we incur as a result of the operation of the Variable
Account, whether or not we previously made a provision for taxes and whether or
not it was sufficient. Our status under the Internal Revenue Code is briefly
described in the Statement of Additional Information.
OTHER EXPENSES
Each Portfolio deducts advisory fees and other expenses from its assets. You
indirectly bear the charges and expenses of the Portfolios whose shares are held
by the Variable Sub-Accounts. These fees and expenses are described in the
accompanying prospectuses for the Funds. For a summary of current estimates of
those charges and expenses, see pages ____ above. We may receive compensation
from the investment advisers or administrators of the Portfolios for
administrative services we provide to the Portfolios.
<PAGE>
Access to Your Money
You can withdraw some or all of your Contract Value at any time during the
Accumulation Phase. Withdrawals also are available under limited circumstances
on or after the Payout Start Date. See "Income Plans" on page.
You can withdraw money from the Variable Account and/or the Fixed Account
Options. The amount payable upon withdrawal is the Contract Value (or portion
thereof) next computed after we receive the request for a withdrawal at our
headquarters, less any withdrawal charges, contract maintenance charges, income
tax withholding, penalty tax, and any premium taxes. To complete a partial
withdrawal from the Variable Account, we will cancel Accumulation Units in an
amount equal to the withdrawal and any applicable charges and taxes. We will pay
withdrawals from the Variable Account within 7 days of receipt of the request,
subject to postponement in certain circumstances.
You must name the investment alternative from which you are taking the
withdrawal. If none is named, then the withdrawal request is incomplete and
cannot be honored. In general, you must withdraw at least $100 at a time. You
also may withdraw a lesser amount if you are withdrawing your entire interest in
a Variable Sub-Account.
Withdrawals also may be subject to income tax and a 10% penalty tax, as
described below.
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.
POSTPONEMENT OF PAYMENTS
We may postpone the payment of any amounts due from the Variable Account under
the Contract if:
1. The New York Stock Exchange is closed for other than usual weekends or
holidays, or trading on the Exchange is otherwise restricted;
2. An emergency exists as defined by the SEC; or
3. The SEC permits delay for your protection.
In addition, we may delay payments or transfers from the Fixed Account Options
for up to 6 months or shorter period if required by law. If we delay payment or
transfer for 30 days or more, we will pay interest as required by law. Any
interest would be payable from the date we receive the withdrawal request to the
date we make the payment or transfer.
SYSTEMATIC WITHDRAWAL PROGRAM
You may choose to receive systematic withdrawal payments on a monthly basis at
any time prior to the Payout Start Date. The minimum amount of each systematic
withdrawal is $100. We will deposit systematic withdrawal payments into the
Contract owner's bank account or Morgan Stanley Dean Witter Active Assets(TM)
Account. Please consult with your Morgan Stanley Dean Witter Financial Advisor
for details.
Depending on fluctuations in the value of the Variable Sub-Accounts and the
value of the Fixed Account Options, systematic withdrawals may reduce or even
exhaust the Contract Value. Income taxes may apply to systematic withdrawals.
Please consult your tax advisor before taking any withdrawal.
We may modify or suspend the Systematic Withdrawal Program and charge a
processing fee for the service. If we modify or suspend the Systematic
Withdrawal Program, existing systematic withdrawal payments will not be
affected.
<PAGE>
MINIMUM CONTRACT VALUE
If your request for a partial withdrawal would reduce your Contract Value to
less than $500, we may treat it as a request to withdraw your entire Contract
Value. Your Contract will terminate if you withdraw all of your Contract Value.
We will, however, ask you to confirm your withdrawal request before terminating
your Contract. If we terminate your Contract, we will distribute to you its
Contract Value, less withdrawal and other applicable charges, and applicable
taxes.
<PAGE>
Income Payments
PAYOUT START DATE
The Payout Start Date is the day that money is applied to an Income Plan. The
Payout Start Date must be:
o at least 30 days after the Issue Date;
o the first day of a calendar month; and
o no later than the first day of the calendar month after the
Annuitant's 90th birthday, or the 10th Contract Anniversary, if later.
You may change the Payout Start Date at any time by notifying us in writing of
the change at least 30 days before the scheduled Payout Start Date. Absent a
change, we will use the Payout Start Date stated in your Contract.
INCOME PLANS
An "Income Plan" is a series of payments on a scheduled basis to you or to
another person designated by you. You may choose and change your choice of
Income Plan until 30 days before the Payout Start Date. If you do not select an
Income Plan, we will make income payments in accordance with Income Plan 1.
After the Payout Start Date, you may not make withdrawals (except as described
below) or change your choice of Income Plan.
Three Income Plans are available under the Contract. Each is available to
provide:
o fixed income payments;
o variable income payments; or
o a combination of the two.
The three Income Plans are:
Income Plan 1 - Life Income with Payments Guaranteed for 10 Years. Under this
plan, we make periodic income payments for at least as long as the Annuitant
lives. If the Annuitant dies before we have made all of the guaranteed income
payments, we will continue to pay the remainder of the guaranteed income
payments as required by the Contract.
Income Plan 2 - Joint and Survivor Life Income. Under this plan, we make
periodic income payments for as long as either the Annuitant or the joint
Annuitant is alive.
Income Plan 3 - Guaranteed Payments for a Specified Period. Under this plan, we
make periodic income payments for the period you have chosen. These payments do
not depend on the Annuitant's life. A withdrawal charge may apply if the
specified period is less than 10 years. We will deduct the mortality and expense
risk charge from the assets of the Variable Account supporting this Income Plan
even though we may not bear any mortality risk.
The length of any guaranteed payment period under your selected Income Plan
generally will affect the dollar amounts of each income payment. As a general
rule, longer guarantee periods result in lower income payments, all other things
being equal. For example, if you choose an Income Plan with payments that depend
on the life of the Annuitant but with no minimum specified period for guaranteed
payments, the income payments generally will be greater than the income payments
made under the same Income Plan with a minimum specified period for guaranteed
payments.
<PAGE>
We may make other Income Plans available including ones that you and we agree
upon. You may obtain information about them by writing or calling us.
If you choose Income Plan 1 or 2, or, if available, another Income Plan with
payments that continue for the life of the Annuitant or joint Annuitant, we may
require proof of age and sex of the Annuitant or joint Annuitant before starting
income payments, and proof that the Annuitant or joint Annuitant is still alive
before we make each payment. Please note that under such Income Plans, if you
elect to take no minimum guaranteed payments, it is possible that the payee
could receive only 1 income payment if the Annuitant and any joint Annuitant
both die before the second income payment, or only 2 income payments if they die
before the third income payment, and so on.
Generally, you may not make withdrawals after the Payout Start Date. One
exception to this rule applies if you are receiving variable income payments
that do not depend on the life of the Annuitant (such as under Income Plan 3).
In that case you may terminate all or part of the the Variable Account portion
of the income payments at any time and receive a lump sum equal to the present
value of the remaining variable payments associated with the amount withdrawn.
The minimum amount you may withdraw under this feature is $1,000. A withdrawal
charge may apply.
You may apply your Contract Value to an Income Plan. If you elected the
Performance Income Benefit Option, you may be able to apply an amount greater
than your Contract Value to an Income Plan. You must apply at least the Contract
Value in the Fixed Account Options on the Payout Start Date to fixed income
payments. If you wish to apply any portion of your Fixed Account Option balance
to provide variable income payments, you should plan ahead and transfer that
amount to the Variable Sub-Accounts prior to the Payout Start Date. If you do
not tell us how to allocate your Contract Value among fixed and variable income
payments, we will apply your Contract Value in the Variable Account to variable
income payments and your Contract Value in the Fixed Account Options to fixed
income payments. We deduct applicable premium taxes from the Contract
Value at the Payout Start Date.
We will apply your Contract Value, less applicable taxes, to your Income Plan on
the Payout Start Date. If the amount available to apply under an Income Plan is
less than $2,000, or not enough to provide an initial payment of at least $20,
and state law permits, we may:
o pay you the Contract Value, less any applicable taxes, in a lump sum
instead of the periodic payments you have chosen, or
o we may reduce the frequency of your payments so that each payment will
be at least $20.
VARIABLE INCOME PAYMENTS
The amount of your variable income payments depends upon the investment results
of the Variable Sub-Accounts you select, the premium taxes you pay, the age and
sex of the Annuitant, and the Income Plan you choose. We guarantee that the
payments will not be affected by (a) actual mortality experience and (b) the
amount of our administration expenses.
We cannot predict the total amount of your variable income payments. Your
variable income payments may be more or less than your total purchase payments
because (a) variable income payments vary with the investment results of the
underlying Portfolios, and (b) the Annuitant could live longer or shorter than
we expect based on the tables we use.
In calculating the amount of the periodic payments in the annuity tables in the
Contract, we assumed an annual investment rate of 3%. If the actual net
investment return of the Variable Sub-Accounts you choose is less than this
assumed investment rate, then the dollar amount of your variable income payments
will decrease. The dollar amount of your variable income payments will increase,
however, if the actual net investment return exceeds the assumed investment
rate. The dollar amount of the variable income payments stays level if the net
investment return equals the assumed investment rate. Please refer to the
Statement of Additional Information for more detailed information as to how we
determine variable income payments.
<PAGE>
FIXED INCOME PAYMENTS
We guarantee income payment amounts derived from any Fixed Account Option for
the duration of the Income Plan. We calculate the fixed income payments by:
1. deducting any applicable premium tax; and
2. applying the resulting amount to the greater of (a) the appropriate value
from the income payment table in your Contract or (b) such other value as we
are offering at that time.
We may defer making fixed income payments for a period of up to 6 months or such
shorter time state law may require. If we defer payments for 30 days or more, we
will pay interest as required by law from the date we receive the withdrawal
request to the date we make payment.
PERFORMANCE INCOME BENEFIT
The Performance Income Benefit is an optional benefit that you may elect. On the
date we issue the rider for this benefit ("Rider Date"), the Performance Income
Benefit is equal to the Contract Value. On each Contract Anniversary, we will
recalculate your Performance Income Benefit to equal the greater of your
Contract Value on that date or the most recently calculated Performance Income
Benefit. We will also recalculate your Performance Income Benefit whenever you
make an additional purchase payment or a partial withdrawal. Additional purchase
payments will increase the Performance Income Benefit dollar-for-dollar.
Withdrawals will reduce the Performance Income Benefit by an amount equal to:
(i) the Performance Income Benefit just before the withdrawal, multiplied by
(ii) the ratio of the withdrawal amount to the Contract Value just before the
withdrawal.
In the absence of any withdrawals or purchase payments, the Performance Income
Benefit will be the greatest of the Contract Value on the Rider Date and all
Contract Anniversary Contract Values on or prior to the Payout Start Date.
We will recalculate the Performance Income Benefit as described above until the
oldest Contract owner or Annuitant (if the Contract owner is not a natural
person) attains age 85. After age 85, we will only recalculate the Performance
Income Benefit to reflect additional purchase payments and withdrawals.
To exercise your Performance Income Benefit, you must apply it to an Income
Plan. The Payout Start Date you select must begin on or after your tenth
Contract Anniversary, after electing the benefit, and within 30 days after a
Contract Anniversary. In addition, you must apply your Performance Income
Benefit to an Income Plan that provides guaranteed payments for either a single
or joint life for at least:
1. 10 years, if the youngest Annuitant's age is 80 or less on the date you
apply the Benefit, or
2. 5 years, if the youngest Annuitant's age is greater than 80 on the date
you apply the Benefit.
If your current Contract Value is higher than the Performance Income Benefit,
you can apply the Contract Value to any Income Plan. The Performance Income
Benefit may not be available in all states.
At present, we do not permit you to simultaneously elect the Performance Income
Benefit and the Death Benefit Combination Option. We do, however, reserve the
right to do so in the future.
<PAGE>
CERTAIN EMPLOYEE BENEFIT PLANS
The Contracts offered by this prospectus contain income payment tables that
provide for different payments to men and women of the same age, except in
states that require unisex tables. We reserve the right to use income payment
tables that do not distinguish on the basis of sex to the extent permitted by
law. In certain employment-related situations, employers are required by law to
use the same income payment tables for men and women. Accordingly, if the
Contract is to be used in connection with an employment-related retirement or
benefit plan and we do not offer unisex annuity tables in your state, you should
consult with legal counsel as to whether the purchase of a Contract is
appropriate.
Death Benefits
We will pay a death benefit if, prior to the Payout Start Date:
1. any Contract owner dies, or
2. the Annuitant dies.
We will pay the death benefit to the new Contract owner as determined
immediately after the death. The new Contract owner would be a surviving
Contract owner(s) or, if none, the Beneficiary(ies). In the case of the death of
an Annuitant, we will pay the death benefit to the current Contract owner.
A request for payment of the death benefit must include "Due Proof of Death." We
will accept the following documentation as Due Proof of Death:
o a certified copy of a death certificate,
o a certified copy of a decree of a court of competent jurisdiction as
to the finding of death, or
o any other proof acceptable to us.
DEATH BENEFIT AMOUNT
Prior to the Payout Start Date, the death benefit is equal to the greatest of:
1. the Contract Value as of the date we determine the death benefit, or
2. the sum of all purchase payments made less any amounts deducted in
connection with partial withdrawals (including any applicable withdrawal
charges or premium taxes), or
3. the Contract Value on the most recent Death Benefit Anniversary prior to
the date we determine the death benefit, plus any purchase payments and
less any amounts deducted in connection with any partial withdrawals
since that Death Benefit Anniversary.
A "Death Benefit Anniversary" is every 6th Contract Anniversary beginning with
the 6th Contract Anniversary. For example, the 6th, 12th and 18th Contract
Anniversaries are the first three Death Benefit Anniversaries.
We will determine the value of the death benefit as of the end of the Valuation
Date on which we receive a complete request for payment of the death benefit. If
we receive a request after 3 p.m. Central Time on a Valuation Date, we will
process the request as of the end of the following Valuation Date.
DEATH BENEFIT OPTIONS
The Enhanced Death Benefit, the Performance Death Benefit, the Performance
Benefit Combination, and the Death Benefit Combination Options are optional
benefits that you may elect. If the Contract owner is a natural person, these
Options apply only on the death of the Contract owner. If the Contract owner is
not a natural person, these Options apply only on the death of the Annuitant.
For Contracts with a death benefit option, the death benefit will be the greater
of (1) through (3) above, or (4) the death benefit option you selected. The
death benefit options may not be available in all states.
<PAGE>
Enhanced Death Benefit Option. The Enhanced Death Benefit on the date we issue
the rider for this option ("Rider Date") is equal to the Contract Value. On the
first Contract anniversary after the Rider Date, the Enhanced Death Benefit is
equal to the Contract Value on the Rider Date plus interest at an annual rate of
5% per year for the portion of a year since the Rider Date. On each subsequent
Contract Anniversary, but not beyond the Contract Anniversary preceding the
oldest Contract owners' 75th birthdays, we will recalculate the Enhanced Death
Benefit as follows:
First, we multiply the Enhanced Death Benefit as of the prior Contract
Anniversary by 1.05. This results in an increase of 5% annually. Further, for
all ages, we will adjust the Enhanced Death Benefit on each Contract
Anniversary, or upon receipt of a death claim, as follows:
o We will reduce the Enhanced Death Benefit by the percentage of any Contract
Value withdrawn since the prior Contract Anniversary; and
o We will increase the Enhanced Death Benefit by any additional
purchase payments since the prior Contract Anniversary.
If you select the Enhanced Death Benefit Option, the maximum age of any owner on
the date we issue the Contract Rider is 70.
Performance Death Benefit Option. The Performance Death Benefit on the date we
issue the rider for this option ("Rider Date") is equal to the Contract Value.
On each Contract Anniversary, we will recalculate your Performance Death Benefit
to equal the greater of your Contract Value on that date, or the most recently
calculated Performance Death Benefit. We also will recalculate your Performance
Death Benefit whenever you make an additional purchase payment or a partial
withdrawal. Additional purchase payments will increase the Performance Death
Benefit dollar- for-dollar. Withdrawals will reduce the Performance Death
Benefit by an amount equal to: (i) the Performance Death Benefit immediately
before the withdrawal, multiplied by (ii) the ratio of the withdrawal amount to
the Contract Value just before the withdrawal. In the absence of any withdrawals
or purchase payments, the Performance Death Benefit will be the greatest of the
Contract Value on the Rider Date and all Contract Anniversary Contract Values on
or before the date we calculate the death benefit.
We will recalculate the Performance Death Benefit as described above until the
oldest Contract owner (the Annuitant, if the owner is not a natural person),
attains age 85. After age 85, we will recalculate the Performance Death Benefit
only to reflect additional purchase payments and withdrawals.
If you select the Performance Death Benefit Option, the maximum age of any owner
on the date we issue the Contract Rider is 80.
Death Benefit Combination Option. If you select the Death Benefit Combination
Option, the death benefit payable will be the greater of the death benefits
provided by the Enhanced Death Benefit or the Performance Death Benefit (both
calculated until the oldest Contract owner, or Annuitant if the Contract owner
is a non-natural person, attains age 85). After age 85, the death benefit
payable will be adjusted to reflect purchase payments and withdrawals to the
extent described under "Enhanced Death Benefit Option" and "Performance Death
Benefit Option" above. We sometimes refer to the Death Benefit Combination
Option as the "Best of the Best" death benefit option.
If you select the Death Benefit Combination Option, the maximum age of any owner
on the date we issue the Contract rider is 80.
Performance Benefit Combination Option. You may elect the Performance Death
Benefit in combination with the Performance Income Benefit. We call this the
"Performance Benefit Combination Option."
If you select the Performance Benefit Combination Option, the maximum age of any
owner on the date we issue the Contract rider is 75.
None of the death benefits under the Enhanced Death Benefit, the Performance
Death Benefit, the Performance Benefit Combination, or the Death Benefit
Combination Option will ever be greater than the maximum death benefit allowed
by any nonforfeiture laws which govern the Contract.
<PAGE>
DEATH BENEFIT PAYMENTS
If the new Contract owner is a natural person, the new Contract owner may elect
to:
1. receive the death benefit in a lump sum, or
2. apply the death benefit to an Income Plan. Payments from the Income
Plan must begin within 1 year of the date of death and must be payable
throughout:
o the life of the new Contract owner; or
o for a guaranteed number of payments from 5 to 30 years, but not to
exceed the life expectancy of the Contract owner.
Options 1 and 2 above are only available if the new Contract owner elects one of
these options within 180 days of the date of death. Otherwise, the new Contract
owner will receive the Settlement Value. The "Settlement Value" is the Contract
Value, less any applicable withdrawal charge and premium tax. The Settlement
Value paid will be the Settlement Value next computed on or after the requested
distribution date for payment, or on the mandatory distribution date of 5 years
after the date of your death, whichever is earlier. We are currently waiving the
180 day limit, but we reserve the right to enforce the limitation in the future.
In any event, the entire value of the Contract must be distributed within 5
years after the date of death unless an Income Plan is elected or a surviving
spouse continues the Contract in accordance with the provisions described below.
If the new Contract owner is your spouse, then he or she may elect one of the
options listed above or may continue the Contract in the Accumulation Phase as
if the death had not occurred. The Contract may only be continued once. If the
surviving spouse continues the Contract in the Accumulation Phase, the surviving
spouse may make a single withdrawal of any amount within 1 year of the date of
death without incurring a withdrawal charge. If the surviving spouse is under
age 59 1/2, a 10% penalty tax may apply to the withdrawal. If you qualify for
and elect (before the date of death) the Longevity Reward Rider, on the date the
Contract is continued, the Contract Value will equal the amount of the death
benefit. See "Longevity Reward Rider" on page __ for details.
If the new Contract owner is corporation, trust, or other non-natural person,
then the new Contract owner may elect, within 180 days of your death, to receive
the death benefit in lump sum or may elect to receive the Settlement Value in a
lump sum within 5 years of death. We are currently waiving the 180 day limit,
but we reserve the right to enforce the limitation in the future.
Death of Annuitant. If any Annuitant who is not also the Contract owner dies
prior to the Payout Start Date, the Contract owner must elect one of the
applicable options described below.
If the Contract owner is a natural person, the Contract owner may elect to
continue the Contract as if the death had not occurred, or, if we receive Due
Proof of Death within 180 days of the date of the Annuitant's death, the
Contract owner may choose to:
1. receive the death benefit in a lump sum; or
2. apply the death benefit to an Income Plan that must begin within 1 year of
the date of death and must be for a guaranteed number of payments for a
period from 5 to 30 years but not to exceed the life expectancy of the
Contract owner.
If the Contract owner elects to continue the Contract or to apply the death
benefit to an Income Plan, the new Annuitant will be the youngest Contract
owner, unless the Contract owner names a different Annuitant.
If the Contract owner is a non-natural person, the non-natural Contract owner
may elect, within 180 days of the Annuitant's date of death, to receive the
death benefit in a lump sum or may elect to receive the Settlement Value payable
in a lump sum within 5 years of the Annuitant's date of death. If the
non-natural Contract owner does not make one of the above described elections,
the Settlement Value must be withdrawn by the non-natural Contract owner on or
before the mandatory distribution date 5 years after the Annuitant's death.
We are currently waiving the 180 day limit, but we reserve the right to enforce
the limitation in the future.
<PAGE>
LONGEVITY REWARD RIDER
The Longevity Reward Rider, which is currently pending regulatory approval, is
not yet available so please check with your Morgan Stanley Dean Witter Financial
Advisor. In some states, the Longevity Reward Rider will be called the Long-Term
Retention Rider. The Rider may not be appropriate for you if you expect to make
a withdrawal within the first three years of the Rider Date.
ELIGIBILITY
You may elect the Longevity Reward Rider at any time during the Accumulation
Phase if all purchase payments have a 0% early withdrawal charge.
MORTALITY AND EXPENSE RISK CHARGE
If you elect the Rider, then commencing on the Rider Date, we will reduce the
maximum mortality and expense risk charge ("M&E charge") by 0.07%. That means
your M&E charge will never be greater than 1.18% (1.31% if you select the
Enhanced Death Benefit Option, the Performance Death Benefit Option, or the
Performance Income Benefit Option, and 1.42% if you select the Performance
Benefit Combination Option, or the Death Benefit Combination Otpion). The 0.10%
administrative expense charge remains unchanged under the Rider.
CONTRACT MAINTENANCE CHARGE
If you elect the Rider, we will waive the contract maintenance charge for the
life of the Contract, provided your total Contract Value is $40,000 or more on
or after the Rider Date.
CONTRACT CONTINUATION BY A SURVIVING SPOUSE
If the surviving spouse continues the Contract as described under "Death Benefit
Payments" on page __, the following provision applies:
On the date the Contract is continued, the Contract Value will equal the amount
of the death benefit as determined as of the Valuation Date on which we received
Due Proof of Death (the next Valuation Date, if we receive Due Proof of Death
after 3:00 p.m. Central Time). All ownership rights under the Contract will then
be available to your spouse as the new Contract owner.
NEW WITHDRAWAL CHARGE
If you elect the Rider, we will apply the new withdrawal charge schedule set
forth below. That means that we may assess a withdrawal charge of up to 3% of
the amount of purchase payments you withdraw after the Rider Date. The
withdrawal charge applies to purchase payments made both before the Rider Date
("existing payments"), as well as payments made on or after the Rider Date ("new
purchase payments"). The withdrawal charge declines to 0% according to the
following schedule:
<TABLE>
<S> <C> <C> <C>
Existing Purchase Payments New Purchase Payments
Number of Complete Years Since Withdrawal Charge
Number of Complete Years We Received the New Purchase (as a Percentage of New or
Since the Rider Date Payment Being Withdrawn Existing Purchase
Payments Withdrawn)
0 0 3%
1 1 2%
2 2 1%
3+ 3+ 0%
</TABLE>
Once all purchase payments have been withdrawn, additional withdrawals will not
be assessed a withdrawal charge. The maximum aggregate early withdrawal charge
on existing and new purchase payments withdrawn after the Rider Date is 3% of
your purchase payments.
FREE WITHDRAWAL AMOUNT
If you elect the Rider, you will continue to have the option to make withdrawals
of up to 15% of your purchase payments without paying a withdrawal charge.
However, under the Rider, the Free Withdrawal Amount is 15% of the amount of
purchase payments as of the Rider Date or the most recent Contract Year,
whichever is later. As with all withdrawals, we will treat withdrwawals as
coming from the oldest purchase payments first. Unused poritons of the Free
Withdrawal Amount do not carry forward to future Contract Years.
More Information
NORTHBROOK
Northbrook is the issuer of the Contract. Northbrook is a stock life insurance
company organized in under the laws of the State of Arizona in 1998. Previously,
from 1978 to 1998, Northbrook was organized under the laws of the State of
Illinois. Northbrook is currently licensed to operate in all states (except New
York), the District of Columbia, and Puerto Rico. We intend to offer the
Contract in those jurisdictions in which we are licensed. Our headquarters are
located at 3100 Sanders Road, Northbrook, Illinois, 60062.
Northbrook is a wholly owned subsidiary of Allstate Life Insurance Company
("Allstate Life"), an Illinois stock life insurance company. Allstate Life is a
wholly owned subsidiary of Allstate Insurance Company, an Illinois stock
property-liability insurance company. All of the outstanding capital stock of
Allstate Insurance Company is owned by The Allstate Corporation.
Northbrook and Allstate Life entered into a reinsurance agreement effective
December 31, 1987. Under the reinsurance agreement, Allstate Life reinsures all
of Northbrook's liabilities under the Contracts. The reinsurance agreement
provides us with financial backing from Allstate Life. However, it does not
create a direct contractual relationship between Allstate Life and you. In other
words, the obligations of Allstate Life under the reinsurance agreement are to
Northbrook; Northbrook remains the sole obligor under the Contract to you.
Several independent rating agencies regularly evaluate life insurers'
claims-paying ability, quality of investments, and overall stability. A.M. Best
Company assigns A+ (Superior) to Allstate Life which automatically reinsures all
net business of Northbrook. A.M. Best Company also assigns Northbrook the rating
of A+(r) because Northbrook automatically reinsures all net business with
Allstate Life. Standard & Poor's Insurance Rating Services assigns an AA+ (Very
Strong) financial strength rating and Moody's assigns an Aa2 (Excellent)
financial strength rating to Northbrook. Northbrook shares the same ratings of
its parent, Allstate Life. These ratings do not reflect the investment
performance of the Variable Account. We may from time to time advertise these
ratings in our sales literature.
THE VARIABLE ACCOUNT
Northbrook established the Northbrook Variable Annuity Account II on May 8,
1990. We have registered the Variable Account with the SEC as a unit investment
trust. The SEC does not supervise the management of the Variable Account or
Northbrook.
We own the assets of the Variable Account. The Variable Account is a segregated
asset account under Arizona insurance law. That means we account for the
Variable Account's income, gains, and losses separately from the results of our
other operations. It also means that only the assets of the Variable Account
that are in excess of the reserves and other Contract liabilities with respect
to the Variable Account are subject to liabilities relating to our other
operations. Our obligations arising under the Contracts are general corporate
obligations of Northbrook.
The Variable Account consists of 31 Variable Sub-Accounts, 21 of which are
available under the Contract. We may add new Variable Sub-Accounts or eliminate
one or more of them, if we believe marketing, tax, or investment conditions so
warrant. We do not guarantee the investment performance of the Variable Account,
its Sub-Accounts or the Portfolios. We may use the Variable Account to fund our
other annuity contracts. We will account separately for each type of annuity
contract funded by the Variable Account.
THE PORTFOLIOS
Dividends and Capital Gain Distributions. We automatically reinvest all
dividends and capital gains distributions from the Portfolios in shares of the
distributing Portfolio at their net asset value.
Voting Privileges. As a general matter, you do not have a direct right to vote
the shares of the Portfolios held by the Variable Sub-Accounts to which you have
allocated your Contract Value. Under current law, however, you are entitled to
give us instructions on how to vote those shares on certain matters. Based on
our present view of the law, we will vote the shares of the Portfolios that we
hold directly or indirectly through the Variable Account in accordance with
instructions that we receive from Contract owners entitled to give such
instructions.
<PAGE>
As a general rule, before the Payout Start Date, the Contract owner or anyone
with a voting interest is the person entitled to give voting instructions. The
number of shares that a person has a right to instruct will be determined by
dividing the Contract Value allocated to the applicable Variable Sub-Account by
the net asset value per share of the corresponding Portfolio as of the record
date of the meeting. After the Payout Start Date the person receiving income
payments has the voting interest. The payee's number of votes will be determined
by dividing the reserves for such Contract allocated to the applicable Variable
Sub-Account by the net asset value per share of the corresponding Portfolio as
of the record date of the meeting. The votes decrease as income payments are
made and as the reserves for the Contract decrease.
We will vote shares attributable to Contracts for which we have not received
instructions, as well as shares attributable to us, in the same proportion as we
vote shares for which we have received instructions, unless we determine that we
may vote such shares in our own discretion. We will apply voting instructions to
abstain on any item to be voted upon on a pro rata basis to reduce the votes
eligible to be cast.
We reserve the right to vote Portfolio shares as we see fit without regard to
voting instructions to the extent permitted by law. If we disregard voting
instructions, we will include a summary of that action and our reasons for that
action in the next semi-annual financial report we send to you.
Changes in Portfolios. We reserve the right, subject to any applicable law, to
make additions to, deletions from or substitutions for the Portfolio shares held
by any Variable Sub-Account. If the shares of any of the Portfolios are no
longer available for investment by the Variable Account or if, in our judgment,
further investment in such shares is no longer desirable in view of the purposes
of the Contract, we may eliminate that Portfolio and substitute shares of
another eligible investment fund. Any substitution of securities will comply
with the requirements of the Investment Company Act of 1940. We also may add new
Variable Sub-Accounts that invest in additional mutual funds. We will notify you
in advance of any change.
Conflicts of Interest. Certain of the Portfolios sell their shares to separate
accounts underlying both variable life insurance and variable annuity contracts.
It is conceivable that in the future it may be unfavorable for variable life
insurance separate accounts and variable annuity separate accounts to invest in
the same Portfolio. The boards of directors or trustees of these Portfolios
monitor for possible conflicts among separate accounts buying shares of the
Portfolios. Conflicts could develop for a variety of reasons. For example,
differences in treatment under tax and other laws or the failure by a separate
account to comply with such laws could cause a conflict. To eliminate a
conflict, a Portfolio's board of directors or trustees may require a separate
account to withdraw its participation in a Portfolio. A Portfolio's net asset
value could decrease if it had to sell investment securities to pay redemption
proceeds to a separate account withdrawing because of a conflict.
THE CONTRACT
The Contracts are distributed exclusively by their principal underwriter, Dean
Witter Reynolds Inc. ("Dean Witter"). Dean Witter, a wholly owned subsidiary of
Morgan Stanley Dean Witter & Co., 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.
We may pay up to a maximum sales commission of 6.0% of purchase payments and an
annual sales administration expense of up to 0.125% of the average net assets of
the Fixed Account to Dean Witter. In addition, Dean Witter may pay annually to
its representatives, from its profits, a persistency bonus that will take into
account, among other things, the length of time purchase payments have been held
under the Contract and Contract Values.
<PAGE>
Administration. We have primary responsibility for all administration of the
Contracts and the Variable Account. We provide the following administrative
services, among others:
o issuance of the Contracts;
o maintenance of Contract owner records;
o Contract owner services;
o calculation of unit values;
o maintenance of the Variable Account; and
o preparation of Contract owner reports.
We will send you Contract statements at least annually prior to the Payout Start
Date. Contract statements are currently mailed on a quarterly basis. You should
notify us promptly in writing of any address change. You should read your
statements and confirmations carefully and verify their accuracy. You should
contact us promptly if you have a question about a periodic statement. We will
investigate all complaints and make any necessary adjustments retroactively, but
you must notify us of a potential error within a reasonable time after the date
of the questioned statement. If you wait too long, we will make the adjustment
as of the date that we receive notice of the potential error.
We also will provide you with additional periodic and other reports, information
and prospectuses as may be required by federal securities laws.
QUALIFIED PLANS
If you use the Contract with a qualified plan, the plan may impose different or
additional conditions or limitations on withdrawals, waivers of withdrawal
charges, death benefits, Payout Start Dates, income payments, and other Contract
features. In addition, adverse tax consequences may result if qualified plan
limits on distributions and other conditions are not met. Please consult your
qualified plan administrator for more information.
YEAR 2000
Northbrook is heavily dependent upon complex computer systems for all phases of
its operations, including customer service, and policy and contract
administration. Since many of Northbrook's older computer software programs
recognized only the last two digits of the year in any date, some software may
have failed to operate properly after the year 1999 if the software had not been
reprogrammed or replaced ("Year 2000 Issue"). Northbrook believes that many of
its countrerparties and suppliers also had potential Year 2000 Issues which
could have affected Northbrook. In 1995, Allstate Insurance Company commenced a
four phase plan intended to mitigate and/or prevent the adverse effects of Year
2000 Issues. These strategies included normal development and enhancement of new
and existing systems, to make them Year 2000 compliant. The plan also included
Northbrook actively working with its major external counterparties and suppliers
to assess their compliance efforts and Northbrook's exposure to them. As of the
date of this prospectus, Northbrook believes that the Year 2000 Issue was
successfully resolved and that such resolution will not materially affect its
results of operations, liquidity or financial position.
LEGAL MATTERS
Freedman, Levy, Kroll & Simonds, Washington, D.C., has advised Northbrook on
certain federal securities law matters. All matters of state law pertaining to
the Contracts, including the validity of the Contracts and Northbrook's right to
issue such Contracts under state insurance law, have been passed upon by Michael
J. Velotta, General Counsel of Northbrook.
<PAGE>
Taxes
The following discussion is general and is not intended as tax advice.
Northbrook makes no guarantee regarding the tax treatment of any Contract or
transaction involving a Contract.
Federal, state, local and other tax consequences of ownership or receipt of
distributions under an annuity contract depend on your individual circumstances.
If you are concerned about any tax consequences with regard to your individual
circumstances, you should consult a competent tax adviser.
TAXATION OF ANNUITIES IN GENERAL
Tax Deferral. Generally, you are not taxed on increases in the Contract Value
until a distribution occurs. This rule applies only
where:
1. the Contract owner is a natural person,
2. the investments of the Variable Account are "adequately
diversified" according to Treasury Department regulations, and
3. Northbrook is considered the owner of the Variable Account assets for
federal income tax purposes.
Non-natural Owners. As a general rule, annuity contracts owned by non-natural
persons such as corporations, trusts, or other entities are not treated as
annuity contracts for federal income tax purposes. The income on such contracts
is taxed as ordinary income received or accrued by the owner during the taxable
year. Please see the Statement of Additional Information for a discussion of
several exceptions to the general rule for Contracts owned by non-natural
persons.
Diversification Requirements. For a Contract to be treated as an annuity for
federal income tax purposes, the investments in the Variable Account must be
"adequately diversified" consistent with standards under Treasury Department
regulations. If the investments in the Variable Account are not adequately
diversified, the Contract will not be treated as an annuity contract for federal
income tax purposes. As a result, the income on the Contract will be taxed as
ordinary income received or accrued by the Contract owner during the taxable
year. Although Northbrook does not have control over the Portfolios or their
investments, we expect the Portfolios to meet the diversification requirements.
Ownership Treatment. The IRS has stated that you will be considered the owner of
Variable Account assets if you possess incidents of ownership in those assets,
such as the ability to exercise investment control over the assets. At the time
the diversification regulations were issued, the Treasury Department announced
that the regulations do not provide guidance concerning circumstances in which
investor control of separate account investments may cause an investor to be
treated as the owner of the separate account. The Treasury Department also
stated that future guidance would be issued regarding the extent that owners
could direct sub-account investments without being treated as owners of the
underlying assets of the separate account.
<PAGE>
Your rights under the Contract are different than those described by the IRS in
rulings in which it found that contract owners were not owners of separate
account assets. For example, you have the choice to allocate premiums and
Contract Values among more investment alternatives. Also, you may be able to
transfer among investment alternatives more frequently than in such rulings.
These differences could result in you being treated as the owner of the Variable
Account. If this occurs, income and gain from the Variable Account assets would
be includible in your gross income. Northbrook does not know what standards will
be set forth in any regulations or rulings which the Treasury Department may
issue. It is possible that future standards announced by the Treasury Department
could adversely affect the tax treatment of your Contract. We reserve the right
to modify the Contract as necessary to attempt to prevent you from being
considered the federal tax owner of the assets of the Variable Account. However,
we make no guarantee that such modification to the Contract will be successful.
Taxation of Partial and Full Withdrawals. If you make a partial withdrawal under
a non-Qualified Contract, amounts received are taxable to the extent the
Contract Value, without regard to surrender charges, exceeds the investment in
the Contract. The investment in the Contract is the gross premium paid for the
Contract minus any amounts previously received from the Contract if such amounts
were properly excluded from your gross income. If you make a partial withdrawal
under a Qualified Contract, the portion of the payment that bears the same ratio
to the total payment that the investment in the Contract (i.e., nondeductible
IRA contributions, after tax contributions to qualified plans) bears to the
Contract Value, is excluded from your income. If you make a full withdrawal
under a non-Qualified Contract or a Qualified Contract, the amount received will
be taxable only to the extent it exceeds the investment in the Contract.
"Nonqualified distributions" from Roth IRAs are treated as made from
contributions first and are included in gross income only to the extent that
distributions exceed contributions. "Qualified distributions" from Roth IRAs are
not included in gross income. "Qualified distributions" are any distributions
made more than 5 taxable years after the taxable year of the first contribution
to any Roth IRA and which are:
o made on or after the date the individual attains age 59 1/2,
o made to a Beneficiary after the Contract owner's death,
o attributable to the Contract owner being disabled, or
o for a first time home purchase (first time home purchases are
subject to a lifetime limit of $10,000).
If you transfer a non-Qualified Contract without full and adequate consideration
to a person other than your spouse (or to a former spouse incident to a
divorce), you will be taxed on the difference between the Contract Value and the
investment in the Contract at the time of transfer. Except for certain Qualified
Contracts, any amount you receive as a loan under a Contract, and any assignment
or pledge (or agreement to assign or pledge) of the Contract Value is treated as
a withdrawal of such amount or portion.
Taxation of Annuity Payments. Generally, the rule for income taxation of annuity
payments received from a non-Qualified Contract provides for the return of your
investment in the Contract in equal tax-free amounts over the payment period.
The balance of each payment received is taxable. For fixed annuity payments, the
amount excluded from income is determined by multiplying the payment by the
ratio of the investment in the Contract (adjusted for any refund feature or
period certain) to the total expected value of annuity payments for the term of
the Contract. If you elect variable annuity payments, the amount excluded from
taxable income is determined by dividing the investment in the Contract by the
total number of expected payments. The annuity payments will be fully taxable
after the total amount of the investment in the Contract is excluded using these
ratios. If you die, and annuity payments cease before the total amount of the
investment in the Contract is recovered, the unrecovered amount will be allowed
as a deduction for your last taxable year.
Taxation of Annuity Death Benefits. Death of a Contract owner, or death of the
Annuitant if the Contract is owned by a non-natural person, will cause a
distribution of death benefits from a Contract. Generally, such amounts are
included in income as follows:
1. if distributed in a lump sum, the amounts are taxed in the same manner as a
full withdrawal, or
2. if distributed under an annuity option, the amounts are taxed in the same
manner as an annuity payment. Please see the Statement of Additional
Information for more detail on distribution at death requirements.
<PAGE>
Penalty Tax on Premature Distributions. A 10% penalty tax applies to the taxable
amount of any premature distribution from a non-Qualified Contract. The penalty
tax generally applies to any distribution made prior to the date you attain age
59 1/2. However, no penalty tax is incurred on distributions:
1. made on or after the date the Contract owner attains age 59 1/2;
2. made as a result of the Contract owner's death or disability;
3. made in substantially equal periodic payments over the Contract owner's
life or life expectancy,
4. made under an immediate annuity, or
5. attributable to investment in the Contract before August 14, 1982.
You should consult a competent tax advisor to determine if any other exceptions
to the penalty apply to your situation. Similar exceptions may apply to
distributions from Qualified Contracts.
Aggregation of Annuity Contracts. All non-qualified deferred annuity contracts
issued by Northbrook (or its affiliates) to the same Contract owner during any
calendar year will be aggregated and treated as one annuity contract for
purposes of determining the taxable amount of a distribution.
TAX QUALIFIED CONTRACTS
The income on qualified plan and IRA investments is tax deferred and variable
annuities held by such plans do not receive any additional tax deferral. You
should review the annuity features, including all benefits and expenses, prior
to purchasing a variable annuity in a qualified plan or IRA. Northbrook reserves
the right to limit the availability of the Contract for use with any of the
Qualified Plans listed below.
Contracts may be used as investments with certain qualified plans such as:
o Individual Retirement Annuities or Accounts (IRAs) under Section 408
of the Internal Revenue Code ("Code");
o Roth IRAs under Section 408A of the Code;
o Simplified Employee Pension Plans under Section 408(k) of the Code;
o Savings Incentive Match Plans for Employees (SIMPLE) Plans under
Section 408(p) of the Code;
o Tax Sheltered Annuities under Section 403(b) of the Code;
o Corporate and Self Employed Pension and Profit Sharing Plans; and
o State and Local Government and Tax-Exempt Organization Deferred
Compensation Plans.
In the case of certain qualified plans, the terms of the plans may govern the
right to benefits, regardless of the terms of the Contract.
<PAGE>
Restrictions Under Section 403(b) Plans. Section 403(b) of the Code provides
tax-deferred retirement savings plans for employees of certain non-profit and
educational organizations. Under Section 403(b), any Contract used for a 403(b)
plan must provide that distributions attributable to salary reduction
contributions made after 12/31/88, and all earnings on salary reduction
contributions, may be made only:
1. on or after the date of employee
o attains age 59 1/2,
o separates from service,
o dies,
o becomes disabled, or
2. on account of hardship (earnings on salary reduction contributions may not be
distributed on the account of hardship).
These limitations do not apply to withdrawals where Northbrook is directed to
transfer some or all of the Contract Value to another 403(b) plan.
INCOME TAX WITHHOLDING
Northbrook is required to withhold federal income tax at a rate of 20% on all
"eligible rollover distributions" unless you elect to make a "direct rollover"
of such amounts to an IRA or eligible retirement plan. Eligible rollover
distributions generally include all distributions from Qualified Contracts,
excluding IRAs, with the exception of:
1. required minimum distributions, or
2. a series of substantially equal periodic payments made over a period of at
least 10 years, or, over the life (joint lives) of the participant (and
beneficiary).
Northbrook may be required to withhold federal and state income taxes on any
distributions from non-Qualified Contracts or Qualified Contracts that are not
eligible rollover distributions, unless you notify us of your election to not
have taxes withheld.
<PAGE>
Performance Information
We may advertise the performance of the Variable Sub-Accounts, including yield
and total return information. Yield refers to the income generated by an
investment in a Variable Sub-Account over a specified period. Total return
represents the change, over a specified period of time, in the value of an
investment in a Variable Sub-Account after reinvesting all income distributions.
All performance advertisements will include, as applicable, standardized yield
and total return figures that reflect the deduction of insurance charges, the
contract maintenance charge, and withdrawal charge. Performance advertisements
also may include total return figures that reflect the deduction of insurance
charges, but not the contract maintenance or withdrawal charges. The deduction
of such charges would reduce the performance shown. In addition, performance
advertisements may include aggregate, average, year-by-year, or other types of
total return figures.
Performance information for periods prior to the inception date of the Variable
Sub- Accounts will be based on the historical performance of the corresponding
Portfolios for the periods beginning with the inception dates of the Portfolios
and adjusted to reflect current Contract expenses. You should not interpret
these figures to reflect actual historical performance of the Variable Account.
We may include in advertising and sales materials tax deferred compounding
charts and other hypothetical illustrations that compare currently taxable and
tax deferred investment programs based on selected tax brackets. Our
advertisements also may compare the performance of our Variable Sub-Accounts
with: (a) certain unmanaged market indices, including but not limited to the Dow
Jones Industrial Average, the Standard & Poor's 500, and the Shearson Lehman
Bond Index; and/or (b) other management investment companies with investment
objectives similar to the underlying funds being compared. In addition, our
advertisements may include the performance ranking assigned by various
publications, including the Wall Street Journal, Forbes, Fortune, Money,
Barron's, Business Week, USA Today, and statistical services, including Lipper
Analytical Services Mutual Fund Survey, Lipper Annuity and Closed End Survey,
the Variable Annuity Research Data Survey, and SEI.
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Appendix A
Accumulation Unit Values and Number of Accumulation Units
Outstanding for Each Variable Sub-Account Since Inception
VARIABLE SUB-ACCOUNT 1990 1991 1992 1993 1994 1995
For the Years Beginning January 1* and Ending December 31,
- --------------------------------------------------------------------------------------------------------------------------------
AGGRESSIVE EQUITY
Accumulation Unit Value, Beginning - - - - - -
of Period
Accumulation Unit Value, End of - - - - - -
Period
Number of Units Outstanding, End of - - - - - -
Period
- --------------------------------------------------------------------------------------------------------------------------------
CAPITAL GROWTH
Accumulation Unit Value, Beginning - $10.000 $12.697 $12.731 $11.682 $11.379
of Period
Accumulation Unit Value, End of - $12.697 $12.731 $11.682 $11.379 $14.923
Period
Number of Units Outstanding, End of - 901,617 2,655,336 3,556,779 3,411,788 3,917,752
Period
- --------------------------------------------------------------------------------------------------------------------------------
COMPETITIVE EDGE "BEST IDEAS"
Accumulation Unit Value, Beginning - - - - - -
of Period
Accumulation Unit Value, End of - - - - - -
Period
Number of Units Outstanding, End of - - - - - -
Period
- --------------------------------------------------------------------------------------------------------------------------------
DIVIDEND GROWTH
Accumulation Unit Value, Beginning $10.000 $11.037 $13.911 $14.844 $16.746 $15.981
of Period
Accumulation Unit Value, End of $11.037 $13.911 $14.844 $16.746 $15.981 $21.505
Period
Number of Units Outstanding, End of 159,555 2,004,718 7,123,073 21,941,369 28,980,558 33,515,201
Period
- --------------------------------------------------------------------------------------------------------------------------------
EMERGING GROWTH
Accumulation Unit Value, Beginning - - - - - -
of Period
Accumulation Unit Value, End of - - - - - -
Period
Number of Units Outstanding, End of - - - - - -
Period
- --------------------------------------------------------------------------------------------------------------------------------
EMERGING MARKETS EQUITY
Accumulation Unit Value, Beginning - - - - - -
of Period
Accumulation Unit Value, End of - - - - - -
Period
Number of Units Outstanding, End of - - - - - -
Period
- --------------------------------------------------------------------------------------------------------------------------------
EQUITY
Accumulation Unit Value, Beginning $10.000 $10.706 $16.799 $16.599 $19.604 $18.392
of Period
Accumulation Unit Value, End of $10.706 $16.799 $16.599 $19.604 $18.392 $25.864
Period
Number of Units Outstanding, End of 15,701 369,133 1,417,732 5,917,819 8,914,107 10,835,413
Period
- --------------------------------------------------------------------------------------------------------------------------------
EQUITY GROWTH
Accumulation Unit Value, Beginning - - - - - -
of Period
Accumulation Unit Value, End of - - - - - -
Period
Number of Units Outstanding, End of - - - - - -
Period
- --------------------------------------------------------------------------------------------------------------------------------
EUROPEAN GROWTH
Accumulation Unit Value, Beginning - $10.000 $10.020 $10.280 $14.290 $15.278
of Period
Accumulation Unit Value, End of - $10.020 $10.280 $14.290 $15.278 $18.976
Period
Number of Units Outstanding, End of - 248,922 719,495 4,448,126 8,491,681 8,587,679
Period
- --------------------------------------------------------------------------------------------------------------------------------
GLOBAL DIVIDEND GROWTH
Accumulation Unit Value, Beginning - - - - $10.000 $9.912
of Period
Accumulation Unit Value, End of - - - - $9.912 $11.935
Period
Number of Units Outstanding, End of - - - - 12,306,690 15,325,898
Period
- --------------------------------------------------------------------------------------------------------------------------------
HIGH YIELD
Accumulation Unit Value, Beginning $10.000 $8.932 $13.982 $16.336 $20.022 $19.264
of Period
Accumulation Unit Value, End of $8.932 $13.982 $16.336 $20.022 $19.264 $21.859
Period
Number of Units Outstanding, End of 1,574 64,097 377,434 2,451,231 4,082,485 5,536,230
Period
- --------------------------------------------------------------------------------------------------------------------------------
INCOME BUILDER
Accumulation Unit Value, Beginning - - - - - -
of Period
Accumulation Unit Value, End of - - - - - -
Period
Number of Units Outstanding, End of - - - - - -
Period
- --------------------------------------------------------------------------------------------------------------------------------
INTERNATIONAL MAGNUM
Accumulation Unit Value, Beginning - - - - - -
of Period
Accumulation Unit Value, End of - - - - - -
Period
Number of Units Outstanding, End of - - - - - -
Period
- --------------------------------------------------------------------------------------------------------------------------------
MONEY MARKET
Accumulation Unit Value, Beginning $10.000 $10.111 $10.549 $10.765 $10.913 $11.178
of Period
Accumulation Unit Value, End of $10.111 $10.549 $10.765 $10.913 $11.178 $11.653
Period
Number of Units Outstanding, End of 345,667 1,864,548 3,481,984 7,643,579 19,047,342 17,483,665
Period
- --------------------------------------------------------------------------------------------------------------------------------
PACIFIC GROWTH
Accumulation Unit Value, Beginning - - - - $10.000 $9.221
of Period
Accumulation Unit Value, End of - - - - $9.221 $9.619
Period
Number of Units Outstanding, End of - - - - 7,080,863 8,865,898
Period
- --------------------------------------------------------------------------------------------------------------------------------
QUALITY INCOME PLUS
Accumulation Unit Value, Beginning $10.000 $10.403 $12.163 $12.993 $14.487 $13.344
of Period
Accumulation Unit Value, End of $10.403 $12.163 $12.993 $14.487 $13.344 $16.373
Period
Number of Units Outstanding, End of 175,839 1,221,348 6,701,534 26,314,453 25,348,646 26,735,500
Period
- --------------------------------------------------------------------------------------------------------------------------------
SHORT TERM BOND
Accumulation Unit Value, Beginning - - - - - -
of Period
Accumulation Unit Value, End of - - - - - -
Period
Number of Units Outstanding, End of - - - - - -
Period
- --------------------------------------------------------------------------------------------------------------------------------
STRATEGIST
Accumulation Unit Value, Beginning $10.000 $10.483 $13.266 $14.035 $15.286 $15.675
of Period
Accumulation Unit Value, End of $10.483 $13.266 $14.035 $15.286 $15.675 $16.919
Period
Number of Units Outstanding, End of 5,854 778,440 3,385,842 11,837,077 18,218,900 17,717,645
Period
- --------------------------------------------------------------------------------------------------------------------------------
S&P 500 INDEX
Accumulation Unit Value, Beginning - - - - - -
of Period
Accumulation Unit Value, End of - - - - - -
Period
Number of Units Outstanding, End of - - - - - -
Period
- --------------------------------------------------------------------------------------------------------------------------------
U.S. REAL ESTATE
Accumulation Unit Value, Beginning - - - - - -
of Period
Accumulation Unit Value, End of - - - - - -
Period
Number of Units Outstanding, End of - - - - - -
Period
- --------------------------------------------------------------------------------------------------------------------------------
UTILITIES
Accumulation Unit Value, Beginning $10.000 $10.471 $12.454 $13.840 $15.798 $14.180
of Period
Accumulation Unit Value, End of $10.471 $12.454 $13.840 $15.798 $14.180 $17.999
Period
Number of Units Outstanding, End of 130,114 1,615,460 6,626,508 25,354,331 22,552,568 22,626,178
Period
<PAGE>
Continued 1996 through 1999
VARIABLE SUB-ACCOUNT 1996 1997 1998 1999
For the Years Beginning January 1* and Ending December 31,
AGGRESSIVE EQUITY
Accumulation Unit Value, Beginning - - - $10.000
of Period
Accumulation Unit Value, End of - - - $14.447
Period
Number of Units Outstanding, End of - - N/A 924,675
Period
- ------------------------------------------------------------------------------------------------------
CAPITAL GROWTH
Accumulation Unit Value, Beginning $14.923 $16.421 $20.177 $23.806
of Period
Accumulation Unit Value, End of $16.421 $20.177 $23.806 $31.319
Period
Number of Units Outstanding, End of 4,277,823 4,469,790 3,662,958 3,251,167
Period
- ------------------------------------------------------------------------------------------------------
COMPETITIVE EDGE "BEST IDEAS"
Accumulation Unit Value, Beginning - - $10.000 $9.728
of Period
Accumulation Unit Value, End of - - $9.728 $12.177
Period
Number of Units Outstanding, End of - - 1,432,745 1,766,647
Period
- ------------------------------------------------------------------------------------------------------
DIVIDEND GROWTH
Accumulation Unit Value, Beginning $21.505 $26.298 $32.590 $36.725
of Period
Accumulation Unit Value, End of $26.298 $32.590 $36.725 $35.384
Period
Number of Units Outstanding, End of 38,902,776 39,673,542 36,334,173 31,771,950
Period
- ------------------------------------------------------------------------------------------------------
EMERGING GROWTH
Accumulation Unit Value, Beginning - - $10.000 $11.997
of Period
Accumulation Unit Value, End of - - $11.997 $24.191
Period
Number of Units Outstanding, End of - - 254,704 1,761,875
Period
- ------------------------------------------------------------------------------------------------------
EMERGING MARKETS EQUITY
Accumulation Unit Value, Beginning - - $10.000 $7.102
of Period
Accumulation Unit Value, End of - - $7.102 $13.643
Period
Number of Units Outstanding, End of - - 82,002 609,573
Period
- ------------------------------------------------------------------------------------------------------
EQUITY
Accumulation Unit Value, Beginning $25.864 $28.669 $38.873 $50.025
of Period
Accumulation Unit Value, End of $28.669 $38.873 $50.025 $78.284
Period
Number of Units Outstanding, End of 13,438,192 13,511,972 12,608,741 13,033,466
Period
- ------------------------------------------------------------------------------------------------------
EQUITY GROWTH
Accumulation Unit Value, Beginning - - $10.000 $10.104
of Period
Accumulation Unit Value, End of - - $10.104 $13.901
Period
Number of Units Outstanding, End of - - 822,038 1,653,843
Period
- ------------------------------------------------------------------------------------------------------
EUROPEAN GROWTH
Accumulation Unit Value, Beginning $18.976 $24.335 $27.870 $34.083
of Period
Accumulation Unit Value, End of $24.335 $27.870 $34.083 $43.419
Period
Number of Units Outstanding, End of 10,006,937 9,765,284 8,967,887 7,442,535
Period
- ------------------------------------------------------------------------------------------------------
GLOBAL DIVIDEND GROWTH
Accumulation Unit Value, Beginning $11.935 $13.845 $15.304 $16.991
of Period
Accumulation Unit Value, End of $13.845 $15.304 $16.991 $19.219
Period
Number of Units Outstanding, End of 19,847,332 21,662,482 17,634,472 15,377,323
Period
- ------------------------------------------------------------------------------------------------------
HIGH YIELD
Accumulation Unit Value, Beginning $21.859 $24.148 $26.652 $24.658
of Period
Accumulation Unit Value, End of $24.148 $26.652 $24.658 $24.009
Period
Number of Units Outstanding, End of 7,988,916 8,797,892 8,199,142 6,186,696
Period
- ------------------------------------------------------------------------------------------------------
INCOME BUILDER
Accumulation Unit Value, Beginning - $10.000 $12.084 $12.297
of Period
Accumulation Unit Value, End of - $12.084 $12.297 $12.997
Period
Number of Units Outstanding, End of - 2,364,583 2,979,980 2,557,977
Period
- ------------------------------------------------------------------------------------------------------
INTERNATIONAL MAGNUM
Accumulation Unit Value, Beginning - - $10.000 $9.790
of Period
Accumulation Unit Value, End of - - $9.790 $12.092
Period
Number of Units Outstanding, End of - - 136,628 281,569
Period
- ------------------------------------------------------------------------------------------------------
MONEY MARKET
Accumulation Unit Value, Beginning $11.653 $12.084 $12.546 $12.979
of Period
Accumulation Unit Value, End of $12.084 $12.546 $12.979 $13.46
Period
Number of Units Outstanding, End of 21,476,904 18,625,330 21,159,031 17,541,394
Period
- ------------------------------------------------------------------------------------------------------
QUALITY INCOME PLUS
Accumulation Unit Value, Beginning $16.373 $16.404 $17.983 $19.265
of Period
Accumulation Unit Value, End of $16.404 $17.983 $19.265 $18.200
Period
Number of Units Outstanding, End of 24,233,104 20,839,536 20,312,197 16,872,144
Period
- ------------------------------------------------------------------------------------------------------
SHORT TERM BOND
Accumulation Unit Value, Beginning - - - $10.000
of Period
Accumulation Unit Value, End of - - - $10.065
Period
Number of Units Outstanding, End of - - - 127,159
Period
- ------------------------------------------------------------------------------------------------------
STRATEGIST
Accumulation Unit Value, Beginning $16.919 $19.199 $21.540 $26.875
of Period
Accumulation Unit Value, End of $19.199 $21.540 $26.875 $31.136
Period
Number of Units Outstanding, End of 17,132,441 16,153,105 14,574,012 13,273,409
Period
- ------------------------------------------------------------------------------------------------------
S&P 500 INDEX
Accumulation Unit Value, Beginning - - $10.000 $11.126
of Period
Accumulation Unit Value, End of - (Y) $11.126 $13.198
Period
Number of Units Outstanding, End of - - 1,722,709 4,729,418
Period
- ------------------------------------------------------------------------------------------------------
U.S. REAL ESTATE
Accumulation Unit Value, Beginning - - $10.000 $9.062
of Period
Accumulation Unit Value, End of - - $9.062 $8.808
Period
Number of Units Outstanding, End of - - 79,729 230,000
Period
- ------------------------------------------------------------------------------------------------------
UTILITIES
Accumulation Unit Value, Beginning $17.999 $19.298 $24.208 $29.461
of Period
Accumulation Unit Value, End of $19.298 $24.208 $29.461 $32.870
Period
Number of Units Outstanding, End of 19,259,329 15,172,387 13,541,542 11,688,649
Period
</TABLE>
*The Money Market, Quality Income Plus, High Yield, Utilities, Dividend Growth,
Equity and Strategist Sub-Accounts commenced operations on October 25, 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 the former Capital
Appreciation Sub-Accounts commenced operations on January 21, 1997. The Equity
Growth, International Magnum, Emerging Markets, and Emerging Growth Sub-Accounts
commenced operations on March 16, 1998. The U.S. Real Estate, S&P 500 Index, and
Competitive Edge "Best Ideas' Sub-Accounts commenced operations on May 18, 1998.
The Short-Term Bond and Aggressive Equity Variable Sub-Accounts commenced
operations on May 3, 1999. The Mid-Cap Value, Capital Appreciation, Growth (AIM
Fund), Value, Growth (Alliance Fund), Growth and Income Alliance Fund), Premier
Growth, Growth and Income (Putnam Fund), International Growth, and Voyager
Variable Sub-Accounts ("New Sub-Accounts") commenced operations on January 31,
2000. No Accumulation Unit data is shown for the New Sub-Accounts. The
Accumulation Unit Value for each of these Sub-Accounts was initially set at
$10.000. The Accumulation UnitValues in this table reflect a mortality and
expense risk charge of 1.25% and an administrative expense charge of 0.10%.
<PAGE>
Accumulation Unit Values and Number of Accumulation Units
Outstanding for Each Sub-Account Since Inception for
Contracts withn the Enhanced Death Benefit Option, the Performance Death Benefit
Option or the Performance Income Benefit Option
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
VARIABLE SUB-ACCOUNT 1995 1996 1997 1998 1999
For the Years Beginning January 1* and Ending December 31,
AGGRESSIVE EQUITY
Accumulation Unit Value, Beginning of Period - - - - $10.000
Accumulation Unit Value, End of Period - - - - $14.465
Number of Units Outstanding, End of Period - - - - 1,122,012
- ------------------------------------------------------------------------------------------------------------------------------------
CAPITAL GROWTH
Accumulation Unit Value, Beginning of Period $13.895 $14.920 $16.397 $20.121 $23.717
Accumulation Unit Value, End of Period $14.920 $16.397 $20.121 $23.717 $31.150
Number of Units Outstanding, End of Period 36,005 509,094 1,365,427 1,687,847 1,636,053
- -----------------------------------------------------------------------------------------------------------------------------------
COMPETITIVE EDGE "BEST IDEAS"
Accumulation Unit Value, Beginning of Period - - - $10.000 $9.720
Accumulation Unit Value, End of Period - - - $9.720 $12.152
Number of Units Outstanding, End of Period - - - 1,965,368 2,481,411
- -----------------------------------------------------------------------------------------------------------------------------------
DIVIDEND GROWTH
Accumulation Unit Value, Beginning of Period $20.068 $21.500 $26.259 $32.498 $36.593
Accumulation Unit Value, End of Period $21.500 $26.259 $32.498 $36.593 $35.192
Number of Units Outstanding, End of Period 366,928 4,586,699 13,973,141 19,936,437 20,053,835
- -----------------------------------------------------------------------------------------------------------------------------------
EMERGING GROWTH
Accumulation Unit Value, Beginning of Period - - - $10.000 $11.985
Accumulation Unit Value, End of Period - - - $11.985 $24.135
Number of Units Outstanding, End of Period - - - 402,082 2,522,689
- -----------------------------------------------------------------------------------------------------------------------------------
EMERGING MARKETS EQUITY
Accumulation Unit Value, Beginning of Period - - - $10,000 $7.095
Accumulation Unit Value, End of Period - - - $7.095 $13.679
Number of Units Outstanding, End of Period - - - 94,600 689,216
- ----------------------------------------------------------------------------------------------------------------------------------
EQUITY
Accumulation Unit Value, Beginning of Period $24.677 $25.858 $28.626 $38.764 $49.825
Accumulation Unit Value, End of Period $25.858 $28.626 $38.764 $49.825 $77.861
Number of Units Outstanding, End of Period 215,961 2,302,720 5,454,409 7,931,260 10,374,793
- -----------------------------------------------------------------------------------------------------------------------------------
EQUITY GROWTH
Accumulation Unit Value, Beginning of Period - - - $10.000 $10.094
Accumulation Unit Value, End of Period - - - $10.094 $13.869
Number of Units Outstanding, End of Period - - - 1,530,819 2,952,648
- -----------------------------------------------------------------------------------------------------------------------------------
EUROPEAN GROWTH
Accumulation Unit Value, Beginning of Period $18.486 $18.972 $24.298 $27.792 $33.944
Accumulation Unit Value, End of Period $18.972 $24.298 $27.792 $33.944 $43.185
Number of Units Outstanding, End of Period 62,011 1,143,635 3,091,981 4,668,539 4,444,148
- -----------------------------------------------------------------------------------------------------------------------------------
GLOBAL DIVIDEND GROWTH
Accumulation Unit Value, Beginning of Period $11.250 $11.932 $13.824 $15.260 $16.291
Accumulation Unit Value, End of Period $11.932 $13.824 $15.260 $16.921 $19.115
Number of Units Outstanding, End of Period 155,023 2,364,163 7,789,952 8,929,904 8,775,455
- -----------------------------------------------------------------------------------------------------------------------------------
HIGH YIELD
Accumulation Unit Value, Beginning of Period $21.462 $21.855 $24.112 $26.577 $24.563
Accumulation Unit Value, End of Period $21.855 $24.112 $26.577 $24.563 $23.879
Number of Units Outstanding, End of Period 66,987 1,462,866 8,797,892 5,304,510 4,203,079
- -----------------------------------------------------------------------------------------------------------------------------------
INCOME BUILDER
Accumulation Unit Value, Beginning of Period - - $10.000 $12.069 $12.274
Accumulation Unit Value, End of Period - - $12.069 $12.274 $12.947
Number of Units Outstanding, End of Period - - 2,024,851 3,652,211 3,113,231
- -----------------------------------------------------------------------------------------------------------------------------------
INTERNATIONAL MAGNUM
Accumulation Unit Value, Beginning of Period - - - $10.000 $9.780
Accumulation Unit Value, End of Period - - - $9.780 $12.063
Number of Units Outstanding, End of Period - - - 170,897 416,818
- -----------------------------------------------------------------------------------------------------------------------------------
MONEY MARKET
Accumulation Unit Value, Beginning of Period $11.579 $11.651 $12.065 $12.511 $12.963
Accumulation Unit Value, End of Period $11.651 $12.065 $12.511 $12.963 $13.390
Number of Units Outstanding, End of Period 511,096 3,424,292 5,406,175 8,938,860 10,276,270
- -----------------------------------------------------------------------------------------------------------------------------------
PACIFIC GROWTH
Accumulation Unit Value, Beginning of Period $9.352 $9.617 $9.843 $6.042 $5.334
Accumulation Unit Value, End of Period $9.617 $9.843 $6.042 $5.334 $8.730
Number of Units Outstanding, End of Period 97,952 1,411,508 2,105,514 2,456,851 4,058,485
- -----------------------------------------------------------------------------------------------------------------------------------
QUALITY INCOME PLUS
Accumulation Unit Value, Beginning of Period $15.746 $16.370 $16.379 $17.932 $19.200
Accumulation Unit Value, End of Period $16.370 $16.379 $17.932 $19.200 $18.101
Number of Units Outstanding, End of Period 142,004 1,095,796 3,843,253 5,109,593 5,167,349
- -----------------------------------------------------------------------------------------------------------------------------------
SHORT TERM BOND
Accumulation Unit Value, Beginning of Period - - - - $10.000
Accumulation Unit Value, End of Period - - - - $10.056
Number of Units Outstanding, End of Period - - - - 121,549
- -----------------------------------------------------------------------------------------------------------------------------------
STRATEGIST
Accumulation Unit Value, Beginning of Period $16.490 $16.915 $19.170 $21.479 $26.783
Accumulation Unit Value, End of Period $16.915 $19.170 $21.479 $26.783 $30.968
Number of Units Outstanding, End of Period 91,983 903,817 3,529,096 6,559,093
- -----------------------------------------------------------------------------------------------------------------------------------
S&P 500 INDEX
Accumulation Unit Value, Beginning of Period - - - $10.000 $11.117
Accumulation Unit Value, End of Period - - - $11.117 $13.170
Number of Units Outstanding, End of Period - - - 2,003,301 6,209,831
- -----------------------------------------------------------------------------------------------------------------------------------
U.S. REAL ESTATE
Accumulation Unit Value, Beginning of Period - - - $10.000 $9.054
Accumulation Unit Value, End of Period - - - $9.054 $8.790
Number of Units Outstanding, End of Period - - - 80,782 194,964
- -----------------------------------------------------------------------------------------------------------------------------------
UTILITIES
Accumulation Unit Value, Beginning of Period $16.972 $17.995 $19.268 $24.140 $29.438
Accumulation Unit Value, End of Period $17.995 $19.268 $24.140 $29.438 $32.693
Number of Units Outstanding, End of Period 165,046 822,723 1,753,743 3,510,503 4,016,659
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
*Contracts with the Enhanced Death Benefit Option, the Performance Death Benefit
Option, or the Performance Income Benefit Option were first made available for
all of the above Variable Sub-Accounts on October 30, 1995, except that they
became available for the Income Builder Variable Sub-Account on January 21,
1997, and for the Equity Growth, International Magnum, Emerging Markets,
Emerging Growth, U.S. Real Estate, S&P 500 Index, Competitive Edge "Best
Ideas" , Short-Term Bond and Aggressive Equity Variable Sub- Accounts on the
day those Variable
Sub-Accounts commenced operations. The Accumulation Unit Value for each of these
Variable Sub-Accounts was initially set at $10.000. The Accumulation Unit Values
in this table reflect a mortality and expense risk charge of 1.38% and an
administrative expense charge of .10%. The additional .13% mortality and expense
risk charge is applicable to Contract owners who selected the Enhanced Death
Benefit Option, the Performance Death Benefit Option or the Performance Income
Benefit Option. No Accumulation Unit data is shown for the new Sub-Accounts
which commenced operations as of the date of this prospectus.
<PAGE>
Accumulation Unit Values and Number of Accumulation Units
Outstanding for Each Sub-Account Since Inception for Contracts with
the Performance Benefit Combination Option or the Death Benefit Combination
Option
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
VARIABLE SUB-ACCOUNT 1998 1999
For the Period Beginning January 20 and Ending December 31,
- -----------------------------------------------------------------------------------------------------------------------------------
AGGRESSIVE EQUITY
Accumulation Unit Value, Beginning of Period - $10.000
Accumulation Unit Value, End of Period - $14.454
Number of Units Outstanding, End of Period - 458,487
- -----------------------------------------------------------------------------------------------------------------------------------
CAPITAL GROWTH
Accumulation Unit Value, Beginning of Period $19.356 $23.373
Accumulation Unit Value, End of Period $23.373 $30.663
Number of Units Outstanding, End of Period 41,885 128,657
- -----------------------------------------------------------------------------------------------------------------------------------
COMPETITIVE EDGE "BEST IDEAS"
Accumulation Unit Value, Beginning of Period $10.000 $9.714
Accumulation Unit Value, End of Period $9.714 $12.130
Number of Units Outstanding, End of Period 178,762 489,657
- -----------------------------------------------------------------------------------------------------------------------------------
DIVIDEND GROWTH
Accumulation Unit Value, Beginning of Period $32.096 $36.031
Accumulation Unit Value, End of Period $36.031 $34.614
Number of Units Outstanding, End of Period 528,141 1,434,477
- -----------------------------------------------------------------------------------------------------------------------------------
EMERGING GROWTH
Accumulation Unit Value, Beginning of Period $10.000 $12.590
Accumulation Unit Value, End of Period $12.590 $24.088
Number of Units Outstanding, End of Period 82,427 818,855
- -----------------------------------------------------------------------------------------------------------------------------------
EMERGING MARKETS EQUITY
Accumulation Unit Value, Beginning of Period $10.000 $7.089
Accumulation Unit Value, End of Period $7.089 $13.584
Number of Units Outstanding, End of Period 19,500 210,592
- ------------------------------------------------------------------------------------------------------------------------------------
EQUITY
Accumulation Unit Value, Beginning of Period $38.177 $49.060
Accumulation Unit Value, End of Period $49.060 $76.581
Number of Units Outstanding, End of Period 221,631 950,293
- ------------------------------------------------------------------------------------------------------------------------------------
EQUITY GROWTH
Accumulation Unit Value, Beginning of Period $10.000 $10.370
Accumulation Unit Value, End of Period $10.370 $13.842
Number of Units Outstanding, End of Period 154,201 495,861
- -----------------------------------------------------------------------------------------------------------------------------------
EUROPEAN GROWTH
Accumulation Unit Value, Beginning of Period $27.627 $33.452
Accumulation Unit Value, End of Period $33.452 $42.510
Number of Units Outstanding, End of Period 175,357 392,050
- ----------------------------------------------------------------------------------------------------------------------------------
GLOBAL DIVIDEND GROWTH
Accumulation Unit Value, Beginning of Period $15.193 $16.794
Accumulation Unit Value, End of Period $16.794 $18.951
Number of Units Outstanding, End of Period 156,429 488,336
- ------------------------------------------------------------------------------------------------------------------------------------
HIGH YIELD
Accumulation Unit Value, Beginning of Period $26.463 $24.176
Accumulation Unit Value, End of Period $24.176 $23.477
Number of Units Outstanding, End of Period 137,884 290,136
- ----------------------------------------------------------------------------------------------------------------------------------
INCOME BUILDER
Accumulation Unit Value, Beginning of Period $12.036 $12.248
Accumulation Unit Value, End of Period $12.248 $12.906
Number of Units Outstanding, End of Period 164,457 270,771
- -----------------------------------------------------------------------------------------------------------------------------------
INTERNATIONAL MAGNUM
Accumulation Unit Value, Beginning of Period $10.000 $9.771
Accumulation Unit Value, End of Period $9.771 $12.040
Number of Units Outstanding, End of Period 31,933 172,588
- -----------------------------------------------------------------------------------------------------------------------------------
MONEY MARKET
Accumulation Unit Value, Beginning of Period $12.355 $12.766
Accumulation Unit Value, End of Period $12.766 $13.166
Number of Units Outstanding, End of Period 673,034 1,263,421
- -----------------------------------------------------------------------------------------------------------------------------------
PACIFIC GROWTH
Accumulation Unit Value, Beginning of Period $5.587 $5.294
Accumulation Unit Value, End of Period $5.294 $8.655
Number of Units Outstanding, End of Period 52,484 390,608
- -----------------------------------------------------------------------------------------------------------------------------------
QUALITY INCOME PLUS
Accumulation Unit Value, Beginning of Period $17.841 $18.906
Accumulation Unit Value, End of Period $18.906 $17.804
Number of Units Outstanding, End of Period 169,761 328,139
- ---------------------------------------------------------------------------------------------------------------------------------
SHORT TERM BOND
Accumulation Unit Value, Beginning of Period - $10.000
Accumulation Unit Value, End of Period - $10.049
Number of Units Outstanding, End of Period - 34,942
- ----------------------------------------------------------------------------------------------------------------------------------
STRATEGIST
Accumulation Unit Value, Beginning of Period $21.497 $26.371
Accumulation Unit Value, End of Period $26.371 $30.459
Number of Units Outstanding, End of Period 472,816 1,004,838
- ----------------------------------------------------------------------------------------------------------------------------------
S&P 500 INDEX
Accumulation Unit Value, Beginning of Period $10.000 $11.110
Accumulation Unit Value, End of Period $11.110 $13.146
Number of Units Outstanding, End of Period 283,511 1,877,442
- ----------------------------------------------------------------------------------------------------------------------------------
U.S. REAL ESTATE
Accumulation Unit Value, Beginning of Period $10.000 $9.048
Accumulation Unit Value, End of Period $9.048 $8.774
Number of Units Outstanding, End of Period 37,193 93,827
- ----------------------------------------------------------------------------------------------------------------------------------
UTILITIES
Accumulation Unit Value, Beginning of Period $23.622 $28.985
Accumulation Unit Value, End of Period $28.985 $32.155
Number of Units Outstanding, End of Period 159,860 340,744
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
*Contracts with the Performance Benefit Combination Option were first made
available for all of the above Variable Sub-Accounts on December 7, 1998,
except that they first became available for the Short-Term Bond and Aggressive
Equity Variable Sub-Accounts on May 2, 1999, and for the Equity Growth,
International Magnum, Emerging Markets, Emerging Growth, U.S. Real Estate, S&P
500 Index, and Competitive Edge "Best Ideas" Variable Sub-Accounts on the day
those Variable Sub-Accounts commenced operations. Contracts with the Death
Benefit Combination Option were first made available for all of the above
Variable Sub-Accounts on May 2, 1999. The Accumulation Unit Values in this
table reflect a mortality and expense risk charge of 1.49% and an
administrative expense Charge of .10%. The additional 24% mortality and
expense risk charge is applicable to Contract owners who selected either the
Performance Benefit Combination Option or the Death Benefit Combination
Option.
<PAGE>
Statement of Additional Information
Table of Contents
Description Page
Additions, Deletions or Substitutions of Investments 2
The Contract 3
Purchases 3
Tax-free Exchanges (1035 Exchanges, Rollovers and Transfers) 3
Performance Information 4
Calculation of Accumulation Unit Values 17
Calculation of Variable Income Payments 18
General Matters 19
Incontestability 19
Settlements 19
Safekeeping of the Variable Account's Assets 19
Premium Taxes 19
Tax Reserves 19
Federal Tax Matters 20
Qualified Plans 21
Experts 22
Financial Statements 23
-----------
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING IN ANY JURISDICTION IN WHICH
SUCH OFFERING MAY NOT LAWFULLY BE MADE. WE DO NOT AUTHORIZE ANYONE TO PROVIDE
ANY INFORMATION OR REPRESENTATIONS REGARDING THE OFFERING DESCRIBED IN THIS
PROSPECTUS OTHER THAN AS CONTAINED IN THIS PROSPECTUS.
<PAGE>
Morgan Stanley Dean Witter
Variable Annuity II AssetManager
Northbrook Life Insurance Company Prospectus dated May 1, 2000
P.O. Box 94040
Palatine, IL 60094
Telephone Number: 1-800-654-2397
Northbrook Life Insurance Company ("Northbrook") is offering the Morgan Stanley
Dean Witter Variable Annuity II AssetManager, an individual and group flexible
premium deferred variable annuity contract ("Contract"). This prospectus
contains information about the Contract that you should know before investing.
Please keep it for future reference.
The Contract offers 24 investment alternatives ("investment alternatives"). The
investment alternatives include 3 fixed account options ("Fixed Account
Options") and 21 variable sub-accounts ("Variable Sub-Accounts") of the
Northbrook Variable Annuity Account II ("Variable Account"). Each Variable
Sub-Account invests exclusively in shares of portfolios ("Portfolios") of the
following mutual funds ("Funds"):
o Morgan Stanley Dean Witter Variable Investment Series
o The Universal Institutional Funds, Inc.*
o Van Kampen Life Investment Trust
*Effective May 1, 2000 (formerly know as Morgan Stanley Dean Witter Universal
Funds, Inc.)
We (Northbrook) have filed a Statement of Additional Information, dated May
1, 2000, with the Securities and Exchange Commission ("SEC"). It contains more
information about the Contract and is incorporated herein by reference, which
means that it is legally a part of this prospectus. Its table of contents
appears on page B-1 of this prospectus. For a free copy, please write or call us
at the address or telephone number above, or go to the SEC's Web site
(http://www.sec.gov). You can find other information and documents about us,
including documents that are legally a part of this prospectus, at the SEC's Web
site.
IMPORTANT The Securities and Exchange Commission has not approved or
NOTICES disapproved the securities described in this prospectus, nor has
it passed on the accuracy or the adequacy of this prospectus.
Any one who tells you otherwise is committing a federal crime.
Investment in the Contracts involves investment risks,
including possible loss of principal.
<PAGE>
<TABLE>
<CAPTION>
Table of Contents
Page Page
<S> <C> <C> <C>
Overview
Important Terms Income Payments
The Contract at a Glance Death Benefits
How the Contract Works
Expense Table Other Information
Financial Information
More Information:
Northbrook
The Variable Account
Contract Features The Portfolios
The Contract
The Contract Qualified Plans
Purchases Legal Matters
Contract Value Year 2000
Investment Alternatives Taxes
The Variable Sub-Accounts Performance Information
The Fixed Account Options Appendix A - Accumulation Unit Values
Transfers Statement of Additional Information Table of Contents
Expenses
Access To Your Money
</TABLE>
<PAGE>
Important Terms
This prospectus uses a number of important terms that you may not be familiar
with. The index below identifies the page that describes each term. The first
use of each term in this prospectus appears in highlights.
Page
Accumulation Phase
Accumulation Unit
Accumulation Unit Value
Annuitant
Automatic Additions Program
Automatic Portfolio Rebalancing Program
Beneficiary
Cancellation Period
*Contract
Contract Anniversary
Contract Owner ("You")
Contract Value
Contract Year
Death Benefit Anniversary
Death Benefit Combination Option
Dollar Cost Averaging Fixed Account Options
Dollar Cost Averaging Program
Due Proof of Death
Enhanced Death Benefit Option
Fixed Account Options
Free Withdrawal Amount
Funds
Income Plan
Investment Alternatives
Issue Date
Northbrook ("We")
Payout Phase
Payout Start Date
Performance Benefit Combination Option
Performance Death Benefit Option
Performance Income Benefit Option
Portfolios
Qualified Contracts
Right to Cancel
SEC
Settlement Value
Systematic Withdrawal Program
Valuation Date
Variable Account
Variable Sub-Account
* In certain states the Contract is available only as a group Contract. In these
states, we will issue you a certificate that represents your ownership and that
summarizes the provisions of the group Contract. References to "Contract" in
this prospectus include certificates, unless the context requires otherwise.
<PAGE>
<TABLE>
<CAPTION>
The Contract at a Glance
The following is a snapshot of the Contract. Please read the remainder of this
prospectus for more information.
<S> <C>
Flexible Payments You can purchase a Contract with an
initial purchase payment of $10,000
or more. You can add to your Contract
as often and as much as you like,
but each payment must be at
least $100. You must maintain a
minimum account size of $500.
Right to Cancel You may cancel your Contract
within 20 days of receipt or any
longer period as your state may
require ("Cancellation Period"). Upon
cancellation, we will return your
purchase payments adjusted, to the
extent applicable law permits, to
reflect the investment experience
of any amounts allocated to the
Variable Account.
Expenses o You will bear the following
expenses:
o Total Variable Account annual
fees equal to 1.59% of average
daily net assets (1.72% if you
select the Enhanced Death Benefit
Option, the Performance Death
Benefit Option, or the
Performance Income Benefit
Option, and 1.83% if you select
the Performance Benefit
Combination Option, or the Death
Benefit Combination Option)
o Annual contract maintenance
charge of $35(waived in certain
cases)
o Withdrawal charges not to exceed
1% of purchase payment(s)
withdrawn (with certain
exceptions)
o Transfer fee of $10 after 12th
transfer in any Contract Year
(fee currently waived)
o State premium tax (if your state
imposes one)
In addition, each Portfolio pays
expenses that you will bear indirectly
if you invest in a Variable
Sub-Account.
<PAGE>
Investment Alternatives The Contract offers 24 investment
alternatives including:
o 3 Fixed Account Options (which
credit interest at rates we
guarantee)
o 21 Variable Sub-Accounts
investing in Portfolios offering
professional money management by
these investment advisers:
o Morgan Stanley Dean Witter Advisors, Inc.
o Morgan Stanley Asset Management
o Van Kampen Asset ManagementInc.
To find out current rates being paid
on the Fixed Account Options, or to
find out how the Variable Sub-Accounts
have performed, call us at
1-800-654-2397.
Special Services For your convenience, we offer these special services:
o Automatic Additions Program
o Automatic Portfolio Rebalancing Program
o Dollar Cost Averaging Program
o Systematic Withdrawal Program
Income Payments You can choose fixed income
payments, variable income payments, or
a combination of the two. You can
receive your income payments in one of
the following ways:
o life income with payments guaranteed for 10 years
o joint and survivor life income
o guaranteed payments for a specified period
Death Benefits If you or the Annuitant dies
before the Payout Start Date, we will
pay the death benefit described in the
Contract. We also offer 3 Death
Benefit Options.
Transfers Before the Payout Start Date, you may
transfer your Contract value
("Contract Value") among the
investment alternatives, with certain
restrictions. Transfers must be at
least $100 or the total amount in the
investment alternative, whichever is
less.
We do not currently impose a fee upon
transfers. However, we reserve the
right to charge $10 per transfer after
the 12th transfer in each "Contract
Year," which we measure from the date
we issue your contract or a Contract
anniversary ("Contract Anniversary").
Withdrawals You may withdraw some or all of your
Contract Value at anytime during the
Accumulation Phase. In general, you
must withdraw at least $100 at a time
or the total amount in the investment
alternative, if less. A 10% federal
tax penalty may apply if you withdraw
before you are 59 1/2 years old. A
withdrawal charge also may apply.
</TABLE>
<PAGE>
How the Contract Works
The Contract basically works in two ways.
First, the Contract can help you (we assume you are the "Contract owner") save
for retirement because you can invest in up to 24 investment alternatives and
pay no federal income taxes on any earnings until you withdraw them. You do this
during what we call the "Accumulation Phase" of the Contract. The Accumulation
Phase begins on the date we issue your Contract (we call that date the "Issue
Date") and continues until the Payout Start Date, which is the date we apply
your money to provide income payments. During the Accumulation Phase, you may
allocate your purchase payments to any combination of the Variable Sub-Accounts
and/or the Fixed Account Options. If you invest in the Fixed Account Options,
you will earn a fixed rate of interest that we declare periodically. If you
invest in any of the Variable Sub-Accounts, your investment return will vary up
or down depending on the performance of the corresponding Portfolios.
Second, the Contract can help you plan for retirement because you can use it to
receive retirement income for life and/or for a pre-set number of years, by
selecting one of the income payment options (we call these "Income Plans")
described on page __. You receive income payments during what we call the
"Payout Phase" of the Contract, which begins on the Payout Start Date and
continues until we make the last payment required by the Income Plan you select.
During the Payout Phase, if you select a fixed income payment option, we
guarantee the amount of your payments, which will remain fixed. If you select a
variable income payment option, based on one or more of the Variable
Sub-Accounts, the amount of your payments will vary up or down depending on the
performance of the corresponding Portfolios. The amount of money you accumulate
under your Contract during the Accumulation Phase and apply to an Income Plan
will determine the amount of your income payments during the Payout Phase.
The timeline below illustrates how you might use your Contract.
<TABLE>
<CAPTION>
<S> <C> <C> <C>
ISSUE ACCUMULATION PHASE PAYOUT START PAYOUT PHASE
DATE DATE
- ----------------------------------------------------------------------------------------------------------------------------------
| | |
You buy You save for retirement You elect to You can receive Or you can
a Contract receive income income payments receive income
payments or for a set period payments for life
receive a lump
sum payment
</TABLE>
As the Contract owner, you exercise all of the rights and privileges provided by
the Contract. If you die, any surviving Contract owner or, if there is none, the
Beneficiary will exercise the rights and privileges provided by the Contract.
See "The Contract." In addition, if you die before the Payout Start Date, we
will pay a death benefit to any surviving Contract owner, or if there is none,
to your Beneficiary. See "Death Benefits."
Please call us at 1-800-654-2397 if you have any question about how the Contract
works.
<PAGE>
Expense Table
The table below lists the expenses that you will bear directly or indirectly
when you buy a Contract. The table and the examples that follow do not reflect
premium taxes that may be imposed by the state where you reside. For more
information about Variable Account expenses, see "Expenses," below. For more
information about Portfolio expenses, please refer to the accompanying
prospectuses for the Funds.
Contract Owner Transaction Expenses
Withdrawal Charge (as a percentage of purchase payments withdrawn)*
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Number of Complete Years Since We Received
the Purchase Payment Being Withdrawn: 0 1
Applicable Charge: 1% 0%
Annual Contract Maintenance Charge $35.00**
Transfer Fee $10.00***
</TABLE>
* Each Contract Year, you may withdraw up to 15% of the aggregate amount of
your purchase payments as of the beginning of the Contract Year without
incurring a withdrawal charge.
** We will waive this charge in certain cases. See "Expenses."
*** Applies solely to the thirteenth and subsequent transfers within a Contract
Year excluding transfers due to dollar cost averaging and automatic
portfolio rebalancing. We are currently waiving the transfer fee.
Variable Account Annual Expenses (as a percentage of average daily net asset
value deducted from each Variable Sub-Account)
Mortality and Expense Risk Charge 1.49%*
Administrative Expense Charge 0.10%
Total Variable Account Annual Expenses 1.59%
* If you select the Enhanced Death Benefit Option, the Performance Death
Benefit Option or the Performance Income Benefit Option, the mortality and
expense risk charge is 1.62%. If you select the Performance Benefit
Combination Option, or the Death Benefit Combination Option, the mortality
and expense risk charge is 1.73%.
<PAGE>
Portfolio Annual Expenses (After Voluntary Reductions and Reimbursements) (as a
percentage of Portfolio average daily net assets)
<TABLE>
<CAPTION>
Portfolio Management Other Total Portfolio
Fees Expenses Annual Expenses
Morgan Stanley Dean Witter Variable Investment Series
<S> <C> <C> <C>
Aggressive Equity 0.42% 0.10% 0.52%
Capital Growth 0.65% 0.07% 0.72%
Competitive Edge "Best Ideas" 0.44% 0.12% 0.56%
Dividend Growth 0.51% 0.10% 0.52%
Equity 0.49% 0.02% 0.51%
European Growth 0.95% 0.09% 1.04%
Global Dividend Growth 0.75% 0.08% 0.83%
High Yield 0.50% 0.03% 0.53%
Income Builder 0.75% 0.06% 0.81%
Money Market 0.50% 0.02% 0.52%
Pacific Growth 0.95% 0.47% 1.42%
Quality Income Plus 0.50% 0.02% 0.52%
Short-Term Bond 0.45% 0.17% 0.62%
Strategist 0.50% 0.02% 0.52%
S&P 500 Index(2) 0.39% 0.09% 0.48%
Utilities 0.64% 0.03% 0.67%
The Universal Institutional Fund, Inc.(3)
Emerging Markets Equity 0.42% 1.37% 1.79%
Equity Growth 0.29% 0.56% 0.85%
International Magnum 0.29% 0.87% 1.16%
U.S. Real Estate 0.00% 1.10% 1.10%
Van Kampen Life Investment Trust(4)
Emerging Growth 0.32% 0.53% 0.85%
(1) Figures shown in the Table are for the year ended December 31, 1999, unless
otherwise noted.
(2) Morgan Stanley Dean Witter Advisors Inc. has permanently undertaken to
assume all expenses of the S&P 500 Index Portfolio (except for brokerage
fees) and to waive the compensation provided in its management agreement
with the Fund to the extent that such expenses and compensation on an
annualized basis exceed .050% of the daily net assets of the S&P 500 Index
Portfolio.
(3) Morgan Stanley Asset Management has voluntarily agreed to a reduction
in its management fees and to reimburse the Portfolios for which it acts as
investment adviser if such fees would cause "Total Portfolio Annual
Expenses" to exceed the amount set forth in the table above. Absent such
reductions, the management fees, other expenses, and total annual Portfolio
expenses would have been as follows:
Equity Growth 0.55% 0.56% 1.11%
U.S. Real Estate 0.80% 1.10% 1.90%
International Magnum 0.80% 0.87% 1.67%
Emerging Markets Equity 1.25% 1.10% 2.62%
(4) Van Kampen Asset Management Inc. has voluntarily agreed to a reduction in
its management fees and to reimburse the Emerging Growth Portfolio for
which it acts as investment adviser if such fees would cause "Total
Portfolio Annual Expenses" to exceed the amount set forth in the table
above. Absent such reductions, the management fees, other expenses, and
total annual Portfolio expenses would have been 0.70%, 0.18, and 0.88%,
respectively.
</TABLE>
Example 1
The example below shows the dollar amount of expenses that you would bear
directly or indirectly if you:
o invested $1,000 in a Variable Sub-Account,
o earned a 5% annual return on your investment,
o surrendered your Contract, or you began receiving income payments for a
specified period of less than 120 months, at the end of each time period,
and
o elected the Performance Benefit Combination Option or the Death Benefit
Combination Option.
The example does not include any taxes or tax penalties you may be required to
pay if you surrender your Contract.
<TABLE>
<CAPTION>
Sub-Account 1 Year 3 Years 5 Years 10 Years
<S> <C> <C> <C> <C>
Aggressive Equity $25 $76 $129 $276
Capital Growth $27 $82 $140 $296
Competitive Edge "Best Ideas" $25 $77 $131 $280
Dividend Growth $25 $76 $129 $276
Emerging Growth $28 $86 $146 $309
Emerging Markets Equity $38 $114 $193 $398
Equity Growth $28 $86 $146 $309
Equity $25 $75 $129 $275
European Growth $31 $94 $160 $335
Global Dividend Growth $28 $85 $145 $307
High Yield $25 $76 $130 $277
Income Builder $28 $85 $144 $305
International Magnum $31 $95 $162 $339
Money Market $25 $76 $129 $276
Pacific Growth $34 $103 $175 $364
Quality Income Plus $25 $76 $129 $276
Short-Term Bond $26 $79 $135 $286
Strategist $25 $76 $129 $276
S&P 500 Index $24 $74 $127 $272
U.S. Real Estate $31 $93 $159 $333
Utilities $26 $80 $137 $291
</TABLE>
<PAGE>
Example 2
Same assumptions as Example 1 above, except that you decided not to surrender
your Contract, or you began receiving income payments (for at least 120 months
if under an Income Plan with a specified period), at the end of each period.
<TABLE>
<CAPTION>
Sub-Account 1 Year 3 Years 5 Years 10 Years
<S> <C> <C> <C> <C>
Aggressive Equity $25 $76 $129 $276
Capital Growth $27 $82 $140 $296
Competitive Edge "Best Ideas" $25 $77 $131 $280
Dividend Growth $25 $76 $129 $276
Emerging Growth $28 $86 $146 $309
Emerging Markets Equity $38 $114 $193 $398
Equity Growth $28 $86 $146 $309
Equity $25 $75 $129 $275
European Growth $30 $92 $156 $328
Global Dividend Growth $28 $85 $145 $307
High Yield $25 $76 $130 $277
Income Builder $28 $85 $144 $305
International Magnum $31 $95 $162 $339
Money Market $25 $76 $129 $276
Pacific Growth $34 $103 $175 $364
Quality Income Plus $25 $76 $129 $276
Short-Term Bond $26 $79 $135 $286
Strategist $25 $76 $129 $276
S&P 500 Index $24 $74 $127 $272
U.S. Real Estate $31 $93 $159 $334
Utilities $26 $80 $137 $291
</TABLE>
Please remember that you are looking at examples and not a representation of
past or future expenses. Your actual expenses may be lower or greater than those
shown above. Similarly, your rate of return may be lower or greater than 5%,
which is not guaranteed. The above examples assume the election of the
Performance Benefit Combination Option, or the Death Benefit Combination Option,
with a mortality and expense risk charge of 1.73%. If those options were not
elected, the expense figures shown above would be slightly lower. To reflect the
contract maintenance charge in the examples, we estimated an equivalent
percentage charge, based on an assumed average Contract size of $54,945.
<PAGE>
Financial Information
To measure the value of your investment in the Variable Sub-Accounts during the
Accumulation Phase, we use a unit of measure we call the "Accumulation Unit."
Each Variable Sub-Account has a separate value for its Accumulation Units we
call the "Accumulation Unit Value." Accumulation Unit Value is similar to, but
not the same as, the share price of a mutual fund.
Attached as Appendix A to this prospectus are tables showing the Accumulation
Unit Values of each Variable Sub-Account since the date we first offered the
Contracts. To obtain additional detail on each Variable Sub-Account's finances,
please refer to the Variable Account's financial statements contained in the
Statement of Additional Information. The financial statements of Northbrook also
appear in the Statement of Additional Information.
<PAGE>
The Contract
CONTRACT OWNER
The Variable Annuity II AssetManager is a contract between you, the Contract
owner, and Northbrook, a life insurance company. As the Contract owner, you may
exercise all of the rights and privileges provided to you by the Contract. That
means it is up to you to select or change (to the extent permitted):
o the investment alternatives during the Accumulation and Payout Phases,
o the amount and timing of your purchase payments and withdrawals,
o the programs you want to use to invest or withdraw money,
o the income payment plan you want to use to receive retirement income,
o the Annuitant (either yourself or someone else) on whose life the income
payments will be based,
o the Beneficiary or Beneficiaries who will receive the benefits that the
Contract provides when the last surviving Contract owner dies, and
o any other rights that the Contract provides.
If you die, any surviving Contract owner, or , if none, the Beneficiary will
exercise the rights and privileges provided to them by the Contract. The
Contract cannot be jointly owned by both a non-natural person and a natural
person. The maximum issue age for the Contract without any rider is age 90.
You can use the Contract with or without a qualified plan. A "qualified plan" is
a retirement savings plan, such as an IRA or tax-sheltered annuity, that meets
the requirements of the Internal Revenue Code. Qualified plans may limit or
modify your rights and privileges under the Contract. We use the term "Qualified
Contract" to refer to a Contract used with a qualified plan. See "Qualified
Plans" on page __.
ANNUITANT
The Annuitant is the individual whose life determines the amount and duration of
income payments (other than under Income Plans with guaranteed payments for a
specified period). The Annuitant must be a natural person.
You initially designate an Annuitant in your application. If the Contract owner
is a natural person, you may change the Annuitant at any time prior to the
Payout Start Date. Once we receive your change request, any change will be
effective at the time you sign the written notice. We are not liable for any
payment we make or other action we take before receiving any written request
from you. Before the Payout Start Date, you may designate a joint Annuitant, who
is a second person on whose life income payments depend. If the Annuitant dies
prior to the Payout Start Date, the new Annuitant will be the youngest Contract
owner, otherwise, the youngest Beneficiary, unless the Contract owner names a
different Annuitant.
BENEFICIARY
The Beneficiary is the person who may elect to receive the death benefit or
become the new Contract owner if the sole surviving Contract owner dies before
the Payout Start Date. If the sole surviving Contract owner dies after the
Payout Start Date, the Beneficiary will receive any guaranteed income payments
scheduled to continue.
You may name one or more Beneficiaries when you apply for a Contract. You may
change or add Beneficiaries at any time by writing to us, unless you have
designated an irrevocable Beneficiary. We will provide a change of Beneficiary
form to be signed and filed with us. Any change will be effective at the time
you sign the written notice, whether or not the Annuitant is living when we
receive the notice. Until we receive your written notice to change a
Beneficiary, we are entitled to rely on the most recent Beneficiary information
in our files. We will not be liable as to any payment or settlement made prior
to receiving the written notice. Accordingly, if you wish to change your
Beneficiary, you should deliver your written notice to us promptly.
If you did not name a Beneficiary or, if the named Beneficiary is no longer
living and there are no other surviving Beneficiaries, the new Beneficiary will
be:
o your spouse, if he or she is still alive, otherwise
o your surviving children equally, or if you have no surviving children,
o your estate.
If more than one Beneficiary survives you, (or the Annuitant, if the Contract
owner is not a natural person) we will divide the death benefit among your
Beneficiaries according to your most recent written instructions. If you have
not given us written instructions, we will pay the death benefit in equal
amounts to the surviving Beneficiaries.
MODIFICATION OF THE CONTRACT
Only a Northbrook officer may approve a change in or waive any provision of the
Contract. Any change or waiver must be in writing. None of our agents has the
authority to change or waive the provisions of the Contract. We may not change
the terms of the Contract without your consent, except to conform the Contract
to applicable law or changes in the law. If a provision of the Contract is
inconsistent with state law, we will follow state law.
ASSIGNMENT
We will not honor an assignment of an interest in a Contract as collateral or
security for a loan. However, you may assign periodic income payments under the
Contract prior to the Payout Start Date. No Beneficiary may assign benefits
under the Contract until they are payable to the Beneficiary. We will not be
bound by any assignment until the assignor signs it and files it with us. We are
not responsible for the validity of any assignment. Federal law prohibits or
restricts the assignment of benefits under many types of retirement plans and
the terms of such plans may themselves contain restrictions on assignments. An
assignment may also result in taxes or tax penalties. You should consult with an
attorney before trying to assign your Contract.
Purchases
MINIMUM PURCHASE PAYMENTS
Your initial purchase payment must be at least $10,000. We may increase or
decrease this minimum in the future. You may make additional purchase payments
of at least $100 at any time prior to the Payout Start Date. We reserve the
right to limit the maximum amount of purchase payments we will accept. We also
reserve the right to reject any application.
AUTOMATIC ADDITIONS PROGRAM
You may make subsequent purchase payments of at least $100 by automatically
transferring amounts from your bank account or your Morgan Stanley Dean Witter
Active Assets Account. Please consult your Morgan Stanley Dean Witter Financial
Advisor for details.
<PAGE>
ALLOCATION OF PURCHASE PAYMENTS
At the time you apply for a Contract, you must decide how to allocate your
purchase payments among the investment alternatives. The allocation you specify
on your application will be effective immediately. All allocations must be in
whole percentages that total 100% or in whole dollars. The minimum you may
allocate to any investment alternative is $100. You can change your allocations
by notifying us in writing.
We will allocate your purchase payments to the investment alternatives according
to your most recent instructions on file with us. Unless you notify us in
writing otherwise, we will allocate subsequent purchase payments according to
the allocation for the previous purchase payment. We will effect any change in
allocation instructions at the time we receive written notice of the change in
good order.
We will credit the initial purchase payment that accompanies your completed
application to your Contract within 2 business days after we receive the payment
at our headquarters. If your application is incomplete, we will ask you to
complete your application within 5 business days. If you do so, we will credit
your initial purchase payment to your Contract within that 5 business day
period. If you do not, we will return your purchase payment at the end of the 5
business day period unless you expressly allow us to hold it until you complete
the application. We will credit subsequent purchase payments to the Contract on
the business day that we receive the purchase payment at our headquarters.
We use the term "business day" to refer to each day Monday through Friday that
the New York Stock Exchange is open for business. We also refer to these days as
"Valuation Dates." If we receive your purchase payment after 3 p.m. Central Time
on any Valuation Date, we will credit your purchase payment using the
Accumulation Unit Values computed on the next Valuation Date.
RIGHT TO CANCEL
You may cancel the Contract within the Cancellation Period, which is the 20-day
period after you receive the Contract or such longer period as your state may
require. If you exercise this Right to Cancel, the Contract terminates and we
will pay you the full amount of your purchase payments allocated to the Fixed
Account Options. We also will return your purchase payments allocated to the
Variable Account after an adjustment, to the extent applicable law permits, to
reflect investment gain or loss that occurred from the date of allocation
through the date of cancellation. Some states may require us to return a greater
amount to you.
<PAGE>
Contract Value
Your Contract Value at any time during the Accumulation Phase is equal to the
sum of the value of your Accumulation Units in the Variable Sub-Accounts you
have selected, plus the value of your investment in the Fixed Account Options.
ACCUMULATION UNITS
To determine the number of Accumulation Units of each Variable Sub-Account to
allocate to your Contract, we divide (i) the amount of the purchase payment or
transfer you have allocated to a Variable Sub-Account by (ii) the Accumulation
Unit Value of that Variable Sub-Account next computed after we receive your
payment or transfer. For example, if we receive a $10,000 purchase payment
allocated to a Variable Sub-Account when the Accumulation Unit Value for the
Sub-Account is $10, we would credit 1,000 Accumulation Units of that Variable
Sub-Account to your Contract. Withdrawals and transfers from a Variable
Sub-Account would, of course, reduce the number of Accumulation Units of that
Sub-Account allocated to your Contract.
ACCUMULATION UNIT VALUE
As a general matter, the Accumulation Unit Value for each Variable Sub-Account
will rise or fall to reflect:
o changes in the share price of the Portfolio in which the Variable
Sub-Account invests, and
o the deduction of amounts reflecting the mortality and expense risk charge,
administrative expense charge, and any provision for taxes that have
accrued since we last calculated the Accumulation Unit Value.
We determine contract maintenance charges, withdrawal charges, and transfer fees
(currently waived) separately for each Contract. They do not affect Accumulation
Unit Value. Instead, we obtain payment of those charges and fees by redeeming
Accumulation Units. For details on how we calculate Accumulation Unit Value,
please refer to the Statement of Additional Information.
We determine a separate Accumulation Unit Value for each Variable Sub-Account on
each Valuation Date. We also determine a second set of Accumulation Unit Values
that reflect the cost of the Enhanced Death Benefit Option, the Performance
Death Benefit Option, or the Performance Income Benefit Option, and a third set
of Accumulation Unit Values that reflect the cost of the Performance Benefit
Combination Option and Death Benefit Combination Option.
You should refer to the prospectuses for the Funds that accompany this
prospectus for a description of how the assets of each Portfolio are valued,
since that determination directly bears on the Accumulation Unit Value of the
corresponding Variable Sub-Account and, therefore, your Contract Value.
<PAGE>
Investment Alternatives: The Variable Sub-Accounts
You may allocate your purchase payments to up to 21 Variable Sub-Accounts. Each
Variable Sub-Account invests in the shares of a corresponding Portfolio. Each
Portfolio has its own investment objective(s) and policies. We briefly describe
the Portfolios below.
For more complete information about each Portfolio, including expenses and risks
associated with the Portfolio, please refer to the accompanying prospectuses for
the Funds. You should carefully review the Fund prospectuses before allocating
amounts to the Variable Sub-Accounts.
<TABLE>
<CAPTION>
Portfolio: Each Portfolio Seeks: Investment Adviser:
Morgan Stanley Dean Witter Variable Investment Series
<S> <C> <C>
Aggressive Equity Portfolio Capital growth Morgan Stanley Dean Witter
Advisors, Inc.
Capital Growth Portfolio Long-term capital growth
Competitive Edge "Best Ideas" Long-term capital growth
Portfolio
Dividend Growth Portfolio Reasonable current income and long-term growth of income and
capital
Equity Portfolio Growth of capital and, as a
secondary objective, income when consistent
with its primary objective.
European Growth Portfolio Maximum capital appreciation on its investments
Global Dividend Growth Portfolio Reasonable current income and long-term growth of income and
capital
High Yield Portfolio High current income and, as
a secondary objective, capital appreciation
when consistent with its primary objective
Income Builder Portfolio Reasonable income and, as a secondary objective, growth of capital
Money Market Portfolio High current income, preservation of capital, and liquidity
Pacific Growth Portfolio Maximum capital appreciation on its investments
Quality Income Plus Portfolio High current income
and, as a secondary objective, capital
appreciation when consistent with its
primary objective
Short-Term Bond Portfolio High current income consistent with preservation of capital
Strategist Portfolio High total investment return
S&P 500 Index Portfolio Investment results
that, before expenses, correspond to the
total return of the Standard and Poor's 500
Composite Stock Price Index
Utilities Portfolio Current income and long-term growth of income and capital
The Universal Institutional Fund, Inc.
Emerging Markets Equity Portfolio Long-term capital appreciation Morgan Stanley Asset
Management
Equity Growth Portfolio Long-term capital appreciation
International Magnum Portfolio Long-term capital appreciation
U.S. Real Estate Portfolio Above-average current income and long-term capital appreciation
Van Kampen Life Investment Trust
Emerging Growth Portfolio Capital appreciation Van Kampen Asset Management
Inc.
</TABLE>
Amounts you allocate to Variable Sub-Accounts may grow in value, decline in
value, or grow less than you expect, depending on the investment performance of
the Portfolios in which those Variable Sub-Accounts invest. You bear the
investment risk that the Portfolios might not meet their investment objectives.
Shares of the Portfolios are not deposits, or obligations of, or guaranteed or
endorsed by any bank and are not insured by the Federal Deposit Insurance
Corporation, the Federal Reserve Board or any other agency.
Investment Alternatives: The Fixed Account
You may allocate all or a portion of your purchase payments to the Fixed Account
Options. We currently offer 3 dollar cost averaging options ("Dollar Cost
Averaging Fixed Account Options"). The Fixed Account Options may not be
available in all states. Northbrook may also limit the availability of the 6 and
12 Month Dollar Cost Averaging Options. Please consult with your Morgan Stanley
Dean Witter Financial Advisor for current information. The Fixed Account
supports our insurance and annuity obligations. The Fixed Account consists of
our general assets other than those in segregated asset accounts. We have sole
discretion to invest the assets of the Fixed Account, subject to applicable law.
Any money you allocate to a Fixed Account Option does not entitle you to share
in the investment experience of the Fixed Account.
DOLLAR COST AVERAGING FIXED ACCOUNT OPTIONS
Basic Dollar Cost Averaging Option. You may establish a Dollar Cost Averaging
Program, as described on page __, by allocating purchase payments to the Basic
Dollar Cost Averaging Option. Purchase payments that you allocate to the Basic
Dollar Cost Averaging Option will earn interest for a 1 year period at the
current rate in effect at the time of allocation. We will credit interest daily
at a rate that will compound over the year to the annual interest rate we
guaranteed at the time of allocation. After the one year period, we will declare
a renewal rate which we guarantee for a full year. Subsequent renewal dates will
be every twelve months for each purchase payment. Renewal rates will not be less
than the minimum guaranteed rate found in the Contract.
You may not transfer funds from other investment alternatives to the Basic
Dollar Cost Averaging Option.
6 and 12 Month Dollar Cost Averaging Options. You also may establish a Dollar
Cost Averaging Program by allocating purchase payments to the Fixed Account
either for 6 months (the "6 Month Dollar Cost Averaging Option") or for 12
months (the "12 Month Dollar Cost Averaging Option"). Your purchase payments
will earn interest for the period you select at the current rates in effect at
the time of allocation. The crediting rates for the 6 and 12 Month Dollar Cost
Averaging Options will never be less than 3% annually.
You must transfer all of your money out of the 6 or 12 Month Dollar Cost
Averaging Options to the Variable Sub-Accounts in equal monthly installments. If
you discontinue a 6 or 12 Month Dollar Cost Averaging Option prior to last
scheduled transfer, we will transfer any remaining money immediately to the
Money Market Variable Sub-Account, unless you request a different Variable
Sub-Account.
You may not transfer funds from other investment alternatives to the 6 or 12
Month Dollar Cost Averaging Options.
Transfers out of the Dollar Cost Averaging Fixed Account Options do not count
towards the 12 transfers you can make without paying a transfer fee.
<PAGE>
We may declare more than one interest rate for different monies based upon the
date of allocation to the Dollar Cost Averaging Fixed Account Options. For
current interest rate information, please contact your Morgan Stanley Dean
Witter Financial Advisor or our customer support unit at 1-800-654-2397.
Investment Alternatives: Transfers
TRANSFERS DURING THE ACCUMULATION PHASE
During the Accumulation Phase, you may transfer the Contract Value among the
investment alternatives. You may not transfer Contract Value into any of the
Dollar Cost Averaging Fixed Account Options. You may request transfers in
writing on a form that we provide or by telephone according to the procedure
described below. The minimum amount that you may transfer is $100 or the total
amount in the investment alternative, whichever is less. We currently do not
assess, but reserve the right to assess, a $10 charge on each transfer in excess
of 12 per Contract Year. We will notify you at least 30 days before we begin
imposing the transfer charge. We treat transfers to or from more than one
Portfolio on the same day as one transfer.
We will process transfer requests that we receive before 3:00 p.m. Central Time
on any Valuation Date using the Accumulation Unit Values for that Date. We will
process requests completed after 3:00 p.m. on any Valuation Date using the
Accumulation Unit Values for the next Valuation Date. The Contract permits us to
defer transfers from the Fixed Account Options for up to 6 months from the date
we receive your request. If we decide to postpone transfers for 30 days or more,
we will pay interest as required by applicable law. Any interest would be
payable from the date we receive the transfer request to the date we make the
transfer.
EXCESSIVE TRADING LIMITS
For Contracts issued after May 2, 1999, we reserve the right to limit transfers
among the Variable Sub-Accounts if we determine, in our sole discretion, that
transfers by one or more Contract owners would be to the disadvantage of other
Contract owners. We may limit transfers by taking such steps as:
o imposing a minimum time period between each transfer,
o refusing to accept transfer requests of an agent acting under a power
of attorney on behalf of more than one Contract owner, or
o limiting the dollar amount that a Contract owner may transfer
between the Variable Sub-Accounts and the Fixed Account Options at
any one time.
We may apply the restrictions in any manner reasonably designed to prevent
transfers that we consider disadvantageous to other Contract owners.
We reserve the right to waive any transfer restrictions.
TRANSFERS DURING THE PAYOUT PHASE
During the Payout Phase, you may make transfers among the Variable Sub-Accounts
so as to change the relative weighting of the Variable Sub-Accounts on which
your variable income payments will be based. In addition, you will have a
limited ability to make transfers from the Variable Sub-Accounts to increase the
proportion of your income payments consisting of fixed income payments. You may
not, however, convert any portion of your right to receive fixed income payments
into variable income payments.
You may not make any transfers for the first 6 months after the Payout Start
Date. Thereafter, you may make transfers among the Variable Sub-Accounts or make
transfers from the Variable Sub-Accounts to increase the proportion of your
income payments consisting of fixed income payments. Your transfers must be at
least 6 months apart.
<PAGE>
TELEPHONE TRANSFERS
You may make transfers by telephone by calling 1-800-654-2397 if you have on
file a completed authorization form. The cut off time for telephone transfer
requests is 3:00 p.m. Central Time. In the event that the New York Stock
Exchange closes early, i.e., before 3:00 p.m. Central Time. In the event that
the Exchange closes early for a period of time but then reopens for trading on
the same day, we will process telephone transfer requests as of the close of the
Exchange on that particular day. We will not accept telephone requests received
at any telephone number other than the number that appears in this paragraph or
received after the close of trading on the Exchange.
We may suspend, modify or terminate the telephone transfer privilege at any time
without notice.
We use procedures that we believe provide reasonable assurance that the
telephone transfers are genuine. For example, we tape telephone conversations
with persons purporting to authorize transfers and request identifying
information. Accordingly, we disclaim any liability for losses resulting from
allegedly unauthorized telephone transfers. However, if we do not take
reasonable steps to help ensure that a telephone authorization is valid, we may
be liable for such losses.
DOLLAR COST AVERAGING PROGRAM
Through our Dollar Cost Averaging Program, you may automatically transfer a set
amount every month (or other intervals we may offer) during the Accumulation
Phase from any Variable Sub-Account or the Dollar Cost Averaging Fixed Account
Options to any Variable Sub-Account. Transfers made through dollar cost
averaging must be $100 or more.
We will not charge a transfer fee for transfers made under this Program, nor
will such transfers count against the 12 transfers you can make each Contract
Year without paying a transfer fee.
The theory of dollar cost averaging is that if purchases of equal dollar amounts
are made at fluctuating prices, the aggregate average cost per unit will be less
than the average of the unit prices on the same purchase dates. However,
participation in this Program does not assure you of a greater profit from your
purchases under the Program nor will it prevent or necessarily reduce losses in
a declining market. Call or write us for information on how to enroll.
AUTOMATIC PORTFOLIO REBALANCING PROGRAM
Once you have allocated your money among the Variable Sub-Accounts, the
performance of each Sub-Account may cause a shift in the percentage you
allocated to each Sub- Account. If you select our Automatic Portfolio
Rebalancing Program, we will automatically rebalance the Contract Value in each
Variable Sub-Account and return it to the desired percentage allocations. We
will not include money you allocate to the Fixed Account Options in the
Automatic Portfolio Rebalancing Program.
We will rebalance your account each quarter (or other intervals that we may
offer) according to your instructions. We will transfer amounts among the
Variable Sub- Accounts to achieve the percentage allocations you specify. You
can change your allocations at any time by contacting us in writing or by
telephone. The new allocation will be effective with the first rebalancing that
occurs after we receive your request. We are not responsible for rebalancing
that occurs prior to receipt of your request.
<PAGE>
Example:
Assume that you want your initial purchase payment split among 2
Variable Sub- Accounts. You want 40% to be in the High Yield Variable
Sub-Account and 60% to be in the Equity Growth Variable Sub-Account.
Over the next 2 months the bond market does very well while the stock
market performs poorly. At the end of the first quarter, the High Yield
Variable Sub-Account now represents 50% of your holdings because of its
increase in value. If you choose to have your holdings rebalanced
quarterly, on the first day of the next quarter, we would sell some of
your units in the High Yield Variable Sub-Account and use the money to
buy more units in the Equity Growth Variable Sub-Account so that the
percentage allocations would again be 40% and 60% respectively.
The Automatic Portfolio Rebalancing Program is available only during the
Accumulation Phase. The transfers made under the Program do not count towards
the 12 transfers you can make without paying a transfer fee, and are not subject
to a transfer fee.
Portfolio rebalancing is consistent with maintaining your allocation of
investments among market segments, although it is accomplished by reducing your
Contract Value allocated to the better performing segments.
Expenses
As a Contract owner, you will bear, directly or indirectly, the charges and
expenses described below.
CONTRACT MAINTENANCE CHARGE
During the Accumulation Phase, on each Contract Anniversary, we will deduct a
$35 contract maintenance charge from your Contract Value. This charge will be
deducted on a pro-rata basis from each investment alternative in the proportion
that your investment in each bears to your Contract Value. We also will deduct a
full contract maintenance charge if you withdraw your entire Contract Value.
During the Payout Phase, we will deduct the charge proportionately from each
income payment.
The charge is to compensate us for the cost of administering the Contracts and
the Variable Account. Maintenance costs include expenses we incur in billing and
collecting purchase payments; keeping records; processing death claims, cash
withdrawals, and policy changes; proxy statements; calculating Accumulation Unit
Values and income payments; and issuing reports to Contract owners and
regulatory agencies. We cannot increase the charge. We will waive this charge
if:
o total purchase payments equal $50,000 or more, or
o all of your money is allocated to the Fixed Account Options, as of the
Contract Anniversary.
o After the Payout Start Date, we will waive this charge if:
o the Contract Value is $50,000 or more as of the Payout Start Date, or
o all income payments are fixed amount income payments.
MORTALITY AND EXPENSE RISK CHARGE
We deduct a mortality and expense risk charge daily at an annual rate of 1.49%
of the average daily net assets you have invested in the Variable Sub-Accounts
(1.62% if you select either the Enhanced Death Benefit Option, the Performance
Death Benefit Option or the Performance Income Benefit Option, and 1.73% if you
select the Performance Benefit Combination Option or the Death Benefit
Combination Option). The mortality and expense risk charge is for all the
insurance benefits available with your Contract (including our guarantee of
annuity rates and the death benefits), for certain expenses of the Contract, and
for assuming the risk (expense risk) that the current charges will not be
sufficient in the future to cover the cost of administering the Contract. If the
charges under the Contract are not sufficient, then we will bear the loss. We
charge an additional amount for the Death Benefit Options and the Income Benefit
Options to compensate us for the additional risk that we accept by providing
these Options.
<PAGE>
We guarantee the mortality and expense risk charge and we cannot increase it. We
assess the mortality and expense risk charge during both the Accumulation Phase
and the Payout Phase.
ADMINISTRATIVE EXPENSE CHARGE
We deduct an administrative expense charge daily at an annual rate of 0.10% of
the average daily net assets you have invested in the Variable Sub-Accounts. We
intend this charge to cover actual administrative expenses that exceed the
revenues from the contract maintenance charge. There is no necessary
relationship between the amount of administrative charge imposed on a given
Contract and the amount of expenses that may be attributed to that Contract. We
assess this charge each day during the Accumulation Phase and the Payout Phase.
TRANSFER FEE
We do not currently impose a fee upon transfers among the investment
alternatives. However, we reserve the right to charge $10 per transfer after the
12th transfer in each Contract Year. We will not charge a transfer fee on
transfers that are part of a Dollar Cost Averaging or Automatic Portfolio
Rebalancing Program.
WITHDRAWAL CHARGE
We may assess a withdrawal charge of 1% of the purchase payment(s) you withdraw
if the amount being withdrawn has been invested in the Contract for less than 1
year. However, during each Contract Year, you can withdraw up to 15% of the
aggregate amount of your purchase payments as of the beginning of the Contract
Year without paying the charge. Unused portions of this Free Withdrawal Amount
are not carried forward to future Contract Years.
We will deduct withdrawal charges, if applicable, from the amount paid, unless
you instruct otherwise. For purposes of the withdrawal charge, we will treat
withdrawals as coming from the oldest purchase payments first. However, for
federal income tax purposes, please note that withdrawals are considered to have
come first from earnings, which means you pay taxes on the earnings portion of
your withdrawal.
We do not apply a withdrawal charge in the following situations:
o on the Payout Start Date (a withdrawal charge may apply if you elect to
receive income payments for a specified period of less than 120 months);
o the death of the Contract owner or Annuitant(unless the Settlement Value
is used); and
o withdrawals taken to satisfy IRS minimum distribution rules for the
Contract. This waiver does not apply to Contracts owned by an Individual
Retirement Account.
We use the amounts obtained from the withdrawal charge to pay sales commissions
and other promotional or distribution expenses associated with marketing the
Contracts. To the extent that the withdrawal charge does not cover all sales
commissions and other promotional or distribution expenses, we may use any of
our corporate assets, including potential profit which may arise from the
mortality and expense risk charge or any other charges or fee described above,
to make up any difference.
Withdrawals also may be subject to tax penalties or income tax. You should
consult your own tax counsel or other tax advisers regarding any withdrawals.
<PAGE>
PREMIUM TAXES
Some states and other governmental entities (e.g., municipalities) charge
premium taxes or similar taxes. We are responsible for paying these taxes and
will deduct them from your Contract Value. Some of these taxes are due when the
Contract is issued, others are due when income payments begin or upon surrender.
Our current practice is not to charge anyone for these taxes until income
payments begin or when a total withdrawal occurs including payment upon death.
At our discretion, we may discontinue this practice and deduct premium taxes
from the purchase payments. Premium taxes generally range from 0% to 4%,
depending on the state.
At the Payout Start Date, if applicable, we deduct the charge for premium taxes
from each investment alternative in the proportion that the Contract owner's
value in the investment alternative bears to the total Contract Value.
DEDUCTION FOR VARIABLE ACCOUNT INCOME TAXES
We are not currently making a provision for taxes. In the future, however, we
may make a provision for taxes if we determine, in our sole discretion, that we
will incur a tax as a result of the operation of the Variable Account. We will
deduct for any taxes we incur as a result of the operation of the Variable
Account, whether or not we previously made a provision for taxes and whether or
not it was sufficient. Our status under the Internal Revenue Code is briefly
described in the Statement of Additional Information.
OTHER EXPENSES
Each Portfolio deducts advisory fees and other expenses from its assets. You
indirectly bear the charges and expenses of the Portfolios whose shares are held
by the Variable Sub-Accounts. These fees and expenses are described in the
accompanying prospectuses for the Funds. For a summary of current estimates of
those charges and expenses, see pages above. We may receive compensation from
the investment advisers or administrators of the Portfolios for administrative
services we provide to the Portfolios.
Access to Your Money
You can withdraw some or all of your Contract Value at any time during the
Accumulation Phase. Withdrawals also are available under limited circumstances
on or after the Payout Start Date. See "Income Plans" on page __.
You can withdraw money from the Variable Account and/or the Fixed Account
Options. The amount payable upon withdrawal is the Contract Value (or portion
thereof) next computed after we receive the request for a withdrawal at our
headquarters, less any withdrawal charges, contract maintenance charges, income
tax withholding, penalty tax, and any premium taxes. To complete a partial
withdrawal from the Variable Account, we will cancel Accumulation Units in an
amount equal to the withdrawal and any applicable charges and taxes. We will pay
withdrawals from the Variable Account within 7 days of receipt of the request,
subject to postponement in certain circumstances.
You must name the investment alternative from which you are taking the
withdrawal. If none is named, then the withdrawal request is incomplete and
cannot be honored. In general, you must withdraw at least $100 at a time. You
also may withdraw a lesser amount if you are withdrawing your entire interest in
a Variable Sub-Account.
Withdrawals also may be subject to income tax and a 10% penalty tax, as
described below.
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.
<PAGE>
POSTPONEMENT OF PAYMENTS
We may postpone the payment of any amounts due from the Variable Account under
the Contract if:
1. The New York Stock Exchange is closed for other than usual
weekends or holidays, or trading on the Exchange is otherwise
restricted;
2. An emergency exists as defined by the SEC; or
3. The SEC permits delay for your protection.
In addition, we may delay payments or transfers from the Fixed Account Options
for up to 6 months or shorter period if required by law. If we delay payment or
transfer for 30 days or more, we will pay interest as required by law. Any
interest would be payable from the date we receive the withdrawal request to the
date we make the payment or transfer.
SYSTEMATIC WITHDRAWAL PROGRAM
You may choose to receive systematic withdrawal payments on a monthly basis at
any time prior to the Payout Start Date. The minimum amount of each systematic
withdrawal is $100. We will deposit systematic withdrawal payments into the
Contract owner's bank account or Morgan Stanley Dean Witter Active Assets
Account. Please consult with your Morgan Stanley Dean Witter Financial Advisor
for details.
Depending on fluctuations in the value of the Variable Sub-Accounts and the
value of the Fixed Account Options, systematic withdrawals may reduce or even
exhaust the Contract Value. Income taxes may apply to systematic withdrawals.
Please consult your tax advisor before taking any withdrawal.
We may modify or suspend the Systematic Withdrawal Program and charge a
processing fee for the service. If we modify or suspend the Systematic
Withdrawal Program, existing systematic withdrawal payments will not be
affected.
MINIMUM CONTRACT VALUE
If your request for a partial withdrawal would reduce your Contract Value to
less than $500, we may treat it as a request to withdraw your entire Contract
Value. Your Contract will terminate if you withdraw all of your Contract Value.
We will, however, ask you to confirm your withdrawal request before terminating
your Contract. If we terminate your Contract, we will distribute to you its
Contract Value, less withdrawal and other applicable charges, and applicable
taxes.
<PAGE>
Income Payments
PAYOUT START DATE
The Payout Start Date is the day that money is applied to an Income Plan. The
Payout Start Date must be:
o at least 30 days after the Issue Date;
o the first day of a calendar month; and
o no later than the first day of the calendar month after the Annuitant's
90th birthday, or the 10th Contract Anniversary, if later.
You may change the Payout Start Date at any time by notifying us in writing of
the change at least 30 days before the scheduled Payout Start Date. Absent a
change, we will use the Payout Start Date stated in your Contract.
INCOME PLANS
An "Income Plan" is a series of payments on a scheduled basis to you or to
another person designated by you. You may choose and change your choice of
Income Plan until 30 days before the Payout Start Date. If you do not select an
Income Plan, we will make income payments in accordance with Income Plan 1.
After the Payout Start Date, you may not make withdrawals (except as described
below) or change your choice of Income Plan.
Three Income Plans are available under the Contract. Each is available to
provide:
o fixed income payments;
o variable income payments; or
o a combination of the two.
The three Income Plans are:
Income Plan 1 Life. Income with Payments Guaranteed for 10 Years. Under
this plan, we make periodic income payments for at least as long as the
Annuitant lives. If the Annuitant dies before we have made all of the guaranteed
income payments, we will continue to pay the remainder of the guaranteed income
payments as required by the Contract.
Income Plan 2. Joint and Survivor Life Income. Under this plan, we make
periodic income payments for as long as either the Annuitant or the joint
Annuitant is alive.
Income Plan . Guaranteed Payments for a Specified Period. Under this plan,
we make periodic income payments for the period you have chosen. These payments
do not depend on the Annuitant's life. A withdrawal charge may apply if the
specified period is less than 10 years. We will deduct the mortality and expense
risk charge from the assets of the Variable Account supporting this Income Plan
even though we may not bear any mortality risk.
The length of any guaranteed payment period under your selected Income Plan
generally will affect the dollar amounts of each income payment. As a general
rule, longer guarantee periods result in lower income payments, all other things
being equal. For example, if you choose an Income Plan with payments that depend
on the life of the Annuitant but with no minimum specified period for guaranteed
payments, the income payments generally will be greater than the income payments
made under the same Income Plan with a minimum specified period for guaranteed
payments.
<PAGE>
We may make other Income Plans available including ones that you and we agree
upon. You may obtain information about them by writing or calling us.
If you choose Income Plan 1 or 2, or, if available, another Income Plan with
payments that continue for the life of the Annuitant or joint Annuitant, we may
require proof of age and sex of the Annuitant or joint Annuitant before starting
income payments, and proof that the Annuitant or joint Annuitant is still alive
before we make each payment. Please note that under such Income Plans, if you
elect to take no minimum guaranteed payments, it is possible that the payee
could receive only 1 income payment if the Annuitant and any joint Annuitant
both die before the second income payment, or only 2 income payments if they die
before the third income payment, and so on.
Generally, you may not make withdrawals after the Payout Start Date. One
exception to this rule applies if you are receiving variable income payments
that do not depend on the life of the Annuitant (such as under Income Plan 3).
In that case you may terminate all or part of the Variable Account portion of
the income payments at any time and receive a lump sum equal to the present
value of the remaining variable payments associated with the amount withdrawn.
The minimum amount you may withdraw under this feature is $1,000. A withdrawal
charge may apply.
You may apply your Contract Value to an Income Plan. If you elected the
Performance Income Benefit Option or the Performance Benefit Combination Option,
you may be able to apply an amount greater than your Contract Value to an Income
Plan. You must apply at least the Contract Value in the Fixed Account Options on
the Payout Start Date to fixed income payments. If you wish to apply any portion
of your Fixed Account Options balance to provide variable income payments, you
should plan ahead and transfer that amount to the Variable Sub-Accounts prior to
the Payout Start Date. If you do not tell us how to allocate your Contract Value
among fixed and variable income payments, we will apply your Contract Value in
the Variable Account to variable income payments and your Contract Value in the
Fixed Account Options to fixed income payments. We deduct applicable premium
taxes from the Contract Value at the Payout Start Date.
We will apply your Contract Value, less applicable taxes, to your Income Plan on
the Payout Start Date. If the amount available to apply under an Income Plan is
less than $2,000, or not enough to provide an initial payment of at least $20,
and state law permits, we may:
o pay you the Contract Value, less any applicable taxes, in a lump sum
instead of the periodic payments you have chosen, or
o we may reduce the frequency of your payments so that each payment will
be at least $20.
VARIABLE INCOME PAYMENTS
The amount of your variable income payments depends upon the investment results
of the Variable Sub-Accounts you select, the premium taxes you pay, the age and
sex of the Annuitant, and the Income Plan you choose. We guarantee that the
payments will not be affected by (a) actual mortality experience, and (b) the
amount of our administration expenses.
We cannot predict the total amount of your variable income payments. Your
variable income payments may be more or less than your total purchase payments
because (a) variable income payments vary with the investment results of the
underlying Portfolios, and (b) the Annuitant could live longer or shorter than
we expect based on the tables we use.
In calculating the amount of the periodic payments in the annuity tables in the
Contract, we assumed an annual investment rate of 3%. If the actual net
investment return of the Variable Sub-Accounts you choose is less than this
assumed investment rate, then the dollar amount of your variable income payments
will decrease. The dollar amount of your variable income payments will increase,
however, if the actual net investment return exceeds the assumed investment
rate. The dollar amount of the variable income payments stays level if the net
investment return equals the assumed investment rate. Please refer to the
Statement of Additional Information for more detailed information as to how we
determine variable income payments. We reserve the right to make other annual
investment rates available under the Contract.
<PAGE>
FIXED INCOME PAYMENTS
We guarantee income payment amounts derived from any Fixed Account Option for
the duration of the Income Plan. We calculate the fixed income payments by:
1. deducting any applicable premium tax; and
2. applying the resulting amount to the greater of (a) the appropriate
value from the income payment table in your Contract, or (b) such other
value as we are offering at that time.
We may defer making fixed income payments for a period of up to 6 months or such
shorter time state law may require. If we defer payments for 30 days or more, we
will pay interest as required by law from the date we receive the withdrawal
request to the date we make payment.
PERFORMANCE INCOME BENEFIT
The Performance Income Benefit is an optional benefit that you may elect. On the
date we issue the rider for this benefit ("Rider Date"), the Performance Income
Benefit is equal to the Contract Value. On each Contract Anniversary, we will
recalculate your Performance Income Benefit to equal the greater of your
Contract Value on that date or the most recently calculated Performance Income
Benefit. We will also recalculate your Performance Income Benefit whenever you
make an additional purchase payment or a partial withdrawal. Additional purchase
payments will increase the Performance Income Benefit dollar-for-dollar.
Withdrawals will reduce the Performance Income Benefit by an amount equal to:
(i) the Performance Income Benefit just before the withdrawal, multiplied by
(ii) the ratio of the withdrawal amount to the Contract Value just before the
withdrawal.
In the absence of any withdrawals or purchase payments, the Performance Income
Benefit will be the greatest of the Contract Value on the Rider Date and all
Contract Anniversary Contract Values on or prior to the Payout Start Date.
We will recalculate the Performance Income Benefit as described above until the
oldest Contract owner or Annuitant (if the Contract owner is not a natural
person) attains age 85. After age 85, we will only recalculate the Performance
Income Benefit to reflect additional purchase payments and withdrawals.
To exercise your Performance Income Benefit, you must apply it to an Income
Plan. The Payout Start Date you select must begin on or after your tenth
Contract Anniversary, after electing the benefit, and within 30 days after a
Contract Anniversary. In addition, you must apply your Performance Income
Benefit to an Income Plan that provides guaranteed payments for either a single
or joint life for at least:
1. 10 years, if the youngest Annuitant's age is 80 or less on the date you
apply the Benefit, or
2. 5 years, if the youngest Annuitant's age is greater than 80 on the
date you apply the Benefit.
If your current Contract Value is higher than the Performance Income Benefit,
you can apply the Contract Value to any Income Plan. The Performance Income
Benefit may not be available in all states.
At present, we do not permit you to simultaneously elect the Performance Income
Benefit and the Death Benefit Combination Option. We do, however, reserve the
right to do so in the future.
<PAGE>
CERTAIN EMPLOYEE BENEFIT PLANS
The Contracts offered by this prospectus contain income payment tables that
provide for different payments to men and women of the same age, except in
states that require unisex tables. We reserve the right to use income payment
tables that do not distinguish on the basis of sex to the extent permitted by
law. In certain employment-related situations, employers are required by law to
use the same income payment tables for men and women. Accordingly, if the
Contract is to be used in connection with an employment-related retirement or
benefit plan and we do not offer unisex annuity tables in your state, you should
consult with legal counsel as to whether the purchase of a Contract is
appropriate.
<PAGE>
Death Benefits
We will pay a death benefit if, prior to the Payout Start Date:
1. any Contract owner dies, or
2. the Annuitant dies.
We will pay the death benefit to the new Contract owner as determined
immediately after the death. The new Contract owner would be a surviving
Contract owner(s)or, if none, the Beneficiary(ies). In the case of the death of
an Annuitant, we will pay the death benefit to the current Contract owner.
A request for payment of the death benefit must include "Due Proof of Death." We
will accept the following documentation as Due Proof of Death:
o a certified copy of a death certificate,
o a certified copy of a decree of a court of competent jurisdiction
as to the finding of death, or
o any other proof acceptable to us.
DEATH BENEFIT AMOUNT
Prior to the Payout Start Date, the death benefit is equal to the greatest of:
1. the Contract Value as of the date we determine the death benefit, or
2. the sum of all purchase payments made less any amounts deducted in
connection with partial withdrawals (including any applicable
withdrawal charges or premium taxes), or
3. the Contract Value on the most recent Death Benefit Anniversary
prior to the date we determine the death benefit, plus any
purchase payments and less any amounts deducted in connection
with any partial withdrawals since that Death Benefit Anniversary.
A "Death Benefit Anniversary" is every 6th Contract Anniversary beginning with
the 6th Contract Anniversary. For example, the 6th, 12th and 18th Contract
Anniversaries are the first three Death Benefit Anniversaries.
We will determine the value of the death benefit as of the end of the Valuation
Date on which we receive a complete request for payment of the death benefit. If
we receive a request after 3 p.m. Central Time on a Valuation Date, we will
process the request as of the end of the following Valuation Date.
DEATH BENEFIT OPTIONS
The Enhanced Death Benefit, the Performance Death Benefit, the Performance
Benefit Combination, and the Death Benefit Combination Options are optional
benefits that you may elect. If the Contract owner is a natural person, these
Options apply only on the death of the Contract owner. If the Contract owner is
not a natural person, these Options apply only on the death of the Annuitant.
For Contracts with a death benefit option, the death benefit will be the greater
of (1) through (3) above, or (4) the death benefit option you selected. The
death benefit options may not be available in all states.
<PAGE>
Enhanced Death Benefit Option. The Enhanced Death Benefit on the date we issue
the rider for this option ("Rider Date") is equal to the Contract Value. On the
first Contract anniversary after the Rider Date, the Enhanced Death Benefit is
equal to the Contract Value on the Rider Date plus interest at an annual rate of
5% per year for the portion of the year since the Rider Date. On each subsequent
Contract Anniversary, but not beyond the Contract Anniversary preceding the
oldest Contract owners' 75th birthdays, we will recalculate the Enhanced Death
Benefit as follows:
First, we multiply the Enhanced Death Benefit as of the prior Contract
Anniversary by 1.05. This results in an increase of 5% annually. Further, for
all ages, we will adjust the Enhanced Death Benefit on each Contract
Anniversary, or upon receipt of a death claim, as follows:
o We will reduce the Enhanced Death Benefit by the percentage of any Contract
Value withdrawn since the prior Contract Anniversary; and
o We will increase the Enhanced Death Benefit by any additional
purchase payments since the prior Contract Anniversary.
If you select the Enhanced Death Benefit Option, the maximum age of any owner on
the date we issue the Contract rider is 70.
Performance Death Benefit Option. The Performance Death Benefit on the date we
issue the rider for this option ("Rider Date") is equal to the Contract Value.
On each Contract Anniversary, we will recalculate your Performance Death Benefit
to equal the greater of your Contract Value on that date, or the most recently
calculated Performance Death Benefit. We also will recalculate your Performance
Death Benefit whenever you make an additional purchase payment or a partial
withdrawal. Additional purchase payments will increase the Performance Death
Benefit dollar- for-dollar. Withdrawals will reduce the Performance Death
Benefit by an amount equal to: (i) the Performance Death Benefit immediately
before the withdrawal, multiplied by (ii) the ratio of the withdrawal amount to
the Contract Value just before the withdrawal. In the absence of any withdrawals
or purchase payments, the Performance Death Benefit will be the greatest of the
Contract Value on the Rider Date and all Contract Anniversary Contract Values on
or before the date we calculate the death benefit.
We will recalculate the Performance Death Benefit as described above until the
oldest Contract owner (the Annuitant, if the owner is not a natural person),
attains age 85. After age 85, we will recalculate the Performance Death Benefit
only to reflect additional purchase payments and withdrawals.
If you select the Performance Death Benefit Option, the maximum age of any owner
on the date we issue the Contract rider is 80.
Death Benefit Combination Option. If you select the Death Benefit Combination
Option, the death benefit payable will be the greater of the death benefits
provided by the Enhanced Death Benefit or the Performance Death Benefit (both
calculated until the oldest Contract owner, or Annuitant if the Contract owner
is a non-natural person, attains age 85). After age 85, the death benefit
payable will be adjusted to reflect purchase payments and withdrawals to the
extent described under "Enhanced Death Benefit Option" and "Performance Death
Benefit Option" above. We sometimes refer to the Death Benefit Combination
Option as the "Best of the Best" death benefit option.
If you select the Death Benefit Combination Option, the maximum age of any owner
on the date we issue the Contract rider is 80.
Performance Benefit Combination Option. You may elect the Performance Death
Benefit in combination with the Performance Income Benefit. We call this the
"Performance Benefit Combination Option."
If you select the Performance Benefit Combination Option, the maximum age of any
owner on the date we issue the Contract rider is 75.
None of the death benefits under the Enhanced Death Benefit, the Performance
Death Benefit, the Performance Benefit Combination, or the Death Benefit
Combination Option will ever be greater than the maximum death benefit allowed
by any nonforfeiture laws which govern the Contract.
DEATH BENEFIT PAYMENTS
If the new Contract owner is a natural person, the new Contract owner may elect
to:
1. receive the death benefit in a lump sum, or
2. apply the death benefit to an Income Plan. Payments from the Income Plan must
begin within 1 year of the date of death and must be payable throughout:
o the life of the new Contract owner; or
o for a guaranteed number of payments from 5 to 30 years, but not to
exceed the life expectancy of the Contract owner.
<PAGE>
Options 1 and 2 above are only available if the new Contract owner elects one of
these options within 180 days of the date of death. Otherwise, the new Contract
owner will receive the Settlement Value. The "Settlement Value" is the Contract
Value, less any applicable withdrawal charge and premium tax. The Settlement
Value paid will be the Settlement Value next computed on or after the requested
distribution date for payment, or on the mandatory distribution date of 5 years
after the date of your death, whichever is earlier. We are currently waiving the
180 day limit, but we reserve the right to enforce the limitation in the future.
In any event, the entire value of the Contract must be distributed within 5
years after the date of death unless an Income Plan is elected or a surviving
spouse continues the Contract in accordance with the provisions described below.
If the new Contract owner is your spouse, then he or she may elect one of the
options listed above or may continue the Contract in the Accumulation Phase as
if the death had not occurred. The Contract may only be continued once. If the
surviving spouse continues the Contract in the Accumulation Phase, the surviving
spouse may make a single withdrawal of any amount within 1 year of the date of
death without incurring a withdrawal charge. If the surviving spouse is under
age 59 1/2, a 10% penalty tax may apply to the withdrawal.
If the new Contract owner is corporation, trust, or other non-natural person,
then the new Contract owner may elect, within 180 days of your death, to receive
the death benefit in lump sum or may elect to receive the Settlement Value in a
lump sum within 5 years of death. We are currently waiving the 180 day limit,
but we reserve the right to enforce the limitation in the future.
Death of Annuitant. If any Annuitant who is not also the Contract owner dies
prior to the Payout Start Date, the Contract owner must elect one of the
applicable options described below.
If the Contract owner is a natural person, the Contract owner may elect to
continue the Contract as if the death had not occurred, or, if we receive Due
Proof of Death within 180 days of the date of the Annuitant's death, the
Contract owner may choose to:
1. receive the death benefit in a lump sum; or
2. apply the death benefit to an Income Plan that must begin within 1 year of
the date of death and must be for a guaranteed number of payments for a
period from 5 to 30 years but not to exceed the life expectancy of the
Contract owner.
If the Contract owner elects to continue the Contract or to apply the death
benefit to an Income Plan, the new Annuitant will be the youngest Contract
owner, unless the Contract owner names a different Annuitant.
If the Contract owner is a non-natural person, the non-natural Contract owner
may elect, within 180 days of the Annuitant's date of death, to receive the
death benefit in a lump sum or may elect to receive the Settlement Value payable
in a lump sum within 5 years of the Annuitant's date of death. If the
non-natural Contract owner does not make one of the above described elections,
the Settlement Value must be withdrawn by the non-natural Contract owner on or
before the mandatory distribution date 5 years after the Annuitant's death.
<PAGE>
We are currently waiving the 180 day limit, but we reserve the right to enforce
the limitation in the future.
<PAGE>
More Information
NORTHBROOK
Northbrook is the issuer of the Contract. Northbrook is a stock life insurance
company organized under the laws of the State of Arizona in 1998. Previously,
from 1978 to 1998, Northbrook was organized under the laws of the State of
Illinois. Northbrook is currently licensed to operate in all states (except New
York), the District of Columbia, and Puerto Rico. We intend to offer the
Contract in those jurisdictions in which we are licensed. Our headquarters are
located at 3100 Sanders Road, Northbrook, Illinois, 60062.
Northbrook is a wholly owned subsidiary of Allstate Life Insurance Company
("Allstate Life"), an Illinois stock life insurance company. Allstate Life is a
wholly owned subsidiary of Allstate Insurance Company, an Illinois stock
property- liability insurance company. All of the outstanding capital stock of
Allstate Insurance Company is owned by The Allstate Corporation.
Northbrook and Allstate Life entered into a reinsurance agreement effective
December 31, 1987. Under the reinsurance agreement, Allstate Life reinsures all
of Northbrook's liabilities under the Contracts. The reinsurance agreement
provides us with financial backing from Allstate Life. However, it does not
create a direct contractual relationship between Allstate Life and you. In other
words, the obligations of Allstate Life under the reinsurance agreement are to
Northbrook; Northbrook remains the sole obligor under the Contract to you.
Several independent rating agencies regularly evaluate life insurers'
claims-paying ability, quality of investments, and overall stability. A.M. Best
Company assigns A+ (Superior) to Allstate Life which automatically reinsures all
net business of Northbrook. A.M. Best Company also assigns Northbrook the rating
of A+(r) because Northbrook automatically reinsures all net business with
Allstate Life. Standard & Poor's Insurance Rating Services assigns an AA+ (Very
Strong) financial strength rating and Moody's assigns an Aa2 (Excellent)
financial strength rating to Northbrook. Northbrook shares the same ratings of
its parent, Allstate Life. These ratings do not reflect the investment
performance of the Variable Account. We may from time to time advertise these
ratings in our sales literature.
THE VARIABLE ACCOUNT
Northbrook established the Northbrook Variable Annuity Account II on May 8,
1990. We have registered the Variable Account with the SEC as a unit investment
trust. The SEC does not supervise the management of the Variable Account or
Northbrook.
We own the assets of the Variable Account. The Variable Account is a segregated
asset account under Arizona insurance law. That means we account for the
Variable Account's income, gains, and losses separately from the results of our
other operations. It also means that only the assets of the Variable Account
that are in excess of the reserves and other Contract liabilities with respect
to the Variable Account are subject to liabilities relating to our other
operations. Our obligations arising under the Contracts are general corporate
obligations of Northbrook.
The Variable Account consists of 31 Variable Sub-Accounts, 21 of which are
available under the Contract. We may add new Variable Sub-Accounts or eliminate
one or more of them, if we believe marketing, tax, or investment conditions so
warrant. We do not guarantee the investment performance of the Variable Account,
its Sub-Accounts or the Portfolios. We may use the Variable Account to fund our
other annuity contracts. We will account separately for each type of annuity
contract funded by the Variable Account.
<PAGE>
THE PORTFOLIOS
Dividends and Capital Gain Distributions. We automatically reinvest all
dividends and capital gains distributions from the Portfolios in shares of the
distributing Portfolio at their net asset value.
Voting Privileges. As a general matter, you do not have a direct right to vote
the shares of the Portfolios held by the Variable Sub-Accounts to which you have
allocated your Contract Value. Under current law, however, you are entitled to
give us instructions on how to vote those shares on certain matters. Based on
our present view of the law, we will vote the shares of the Portfolios that we
hold directly or indirectly through the Variable Account in accordance with
instructions that we receive from Contract owners entitled to give such
instructions.
As a general rule, before the Payout Start Date, the Contract owner or anyone
with a voting interest is the person entitled to give voting instructions. The
number of shares that a person has a right to instruct will be determined by
dividing the Contract Value allocated to the applicable Variable Sub-Account by
the net asset value per share of the corresponding Portfolio as of the record
date of the meeting. After the Payout Start Date the person receiving income
payments has the voting interest. The payee's number of votes will be determined
by dividing the reserves for such Contract allocated to the applicable Variable
Sub-Account by the net asset value per share of the corresponding Portfolio as
of the record date of the meeting. The votes decrease as income payments are
made and as the reserves for the Contract decrease.
We will vote shares attributable to Contracts for which we have not received
instructions, as well as shares attributable to us, in the same proportion as we
vote shares for which we have received instructions, unless we determine that we
may vote such shares in our own discretion. We will apply voting instructions to
abstain on any item to be voted upon on a pro rata basis to reduce the votes
eligible to be cast.
We reserve the right to vote Portfolio shares as we see fit without regard to
voting instructions to the extent permitted by law. If we disregard voting
instructions, we will include a summary of that action and our reasons for that
action in the next semi-annual financial report we send to you.
Changes in Portfolios. We reserve the right, subject to any applicable law, to
make additions to, deletions from or substitutions for the Portfolio shares held
by any Variable Sub-Account. If the shares of any of the Portfolios are no
longer available for investment by the Variable Account or if, in our judgment,
further investment in such shares is no longer desirable in view of the purposes
of the Contract, we may eliminate that Portfolio and substitute shares of
another eligible investment fund. Any substitution of securities will comply
with the requirements of the Investment Company Act of 1940. We also may add new
Variable Sub-Accounts that invest in additional mutual funds. We will notify you
in advance of any change.
Conflicts of Interest. Certain of the Portfolios sell their shares to separate
accounts underlying both variable life insurance and variable annuity contracts.
It is conceivable that in the future it may be unfavorable for variable life
insurance separate accounts and variable annuity separate accounts to invest in
the same Portfolio. The boards of directors or trustees of these Portfolios
monitor for possible conflicts among separate accounts buying shares of the
Portfolios. Conflicts could develop for a variety of reasons. For example,
differences in treatment under tax and other laws or the failure by a separate
account to comply with such laws could cause a conflict. To eliminate a
conflict, a Portfolio's board of directors or trustees may require a separate
account to withdraw its participation in a Portfolio. A Portfolio's net asset
value could decrease if it had to sell investment securities to pay redemption
proceeds to a separate account withdrawing because of a conflict.
THE CONTRACT
The Contracts are distributed exclusively by their principal underwriter, Dean
Witter Reynolds Inc. ("Dean Witter"). Dean Witter, a wholly owned subsidiary of
Morgan Stanley Dean Witter & Co., 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.
<PAGE>
We may pay up to a maximum sales commission of 2.0% of purchase payments and an
annual sales administration expense of up to 1.5% of the average net assets of
the Contracts to Dean Witter. In addition, Dean Witter may pay annually to its
representatives, from its profits a persistency bonus that will take into
account among other things, the length of time purchase payments have been held
under the Contract and Contract Values.
Administration. We have primary responsibility for all administration of the
Contracts and the Variable Account.
We provide the following administrative services, among others:
o issuance of the Contracts;
o maintenance of Contract owner records;
o Contract owner services;
o calculation of unit values;
o maintenance of the Variable Account; and
o preparation of Contract owner reports.
We will send you Contract statements at least annually prior to the Payout Start
Date. Contract statements are currently being sent on a quarterly basis. You
should notify us promptly in writing of any address change. You should read your
statements and confirmations carefully and verify their accuracy. You should
contact us promptly if you have a question about a periodic statement. We will
investigate all complaints and make any necessary adjustments retroactively, but
you must notify us of a potential error within a reasonable time after the date
of the questioned statement. If you wait too long, we will make the adjustment
as of the date that we receive notice of the potential error.
We also will also provide you with additional periodic and other reports,
information and prospectuses as may be required by federal securities laws.
QUALIFIED PLANS
If you use the Contract with a qualified plan, the plan may impose different or
additional conditions or limitations on withdrawals, waivers of withdrawal
charges, death benefits, Payout Start Dates, income payments, and other Contract
features. In addition, adverse tax consequences may result if qualified plan
limits on distributions and other conditions are not met. Please consult your
qualified plan administrator for more information.
LEGAL MATTERS
Freedman, Levy, Kroll & Simonds, Washington, D.C., has advised Northbrook on
certain federal securities law matters. All matters of state law pertaining to
the Contracts, including the validity of the Contracts and Northbrook's right to
issue such Contracts under state insurance law, have been passed upon by Michael
J. Velotta, General Counsel of Northbrook.
YEAR 2000
Northbrook is heavily dependent upon complex computer systems for all phases of
its operations, including customer service, and policy and contract
administration. Since many of Northbrook's older computer software programs
recognized only the last two digits of the year in any date, some software may
have failed to operate properly after the year 1999 if the software had not been
reprogrammed or replaced ("Year 2000 Issue"). Northbrook believes that many of
its counterparties and suppliers also had potential Year 2000 Issues which could
have affected Northbrook. In 1995, Allstate Insurance Company commenced a four
phase plan intended to mitigate and/or prevent the adverse effects of Year 2000
Issues. These strategies included normal development and enhancement of new and
existing systems, to make them Year 2000 compliant. The plan also included
Northbrook actively working with its major external counterparties and suppliers
to assess their compliance efforts and Northbrook's exposure to them. As of the
date of this prospectus, Northbrook believes that the Year 2000 Issue was
successfully resolved and that such resolution will not materially affect its
results of operations, liquidity or financial position.
<PAGE>
Taxes
The following discussion is general and is not intended as tax advice.
Northbrook makes no guarantee regarding the tax treatment of any Contract or
transaction involving a Contract.
Federal, state, local and other tax consequences of ownership or receipt of
distributions under an annuity contract depend on your individual circumstances.
If you are concerned about any tax consequences with regard to your individual
circumstances, you should consult a competent tax adviser.
TAXATION OF ANNUITIES IN GENERAL
Tax Deferral. Generally, you are not taxed on increases in the Contract Value
until a distribution occurs. This rule applies only where:
1. the Contract owner is a natural person,
2. the investments of the Variable Account are "adequately diversified"
according to Treasury Department regulations, and
3. Northbrook is considered the owner of the Variable Account assets for
federal income tax purposes.
Non-natural Owners. As a general rule, annuity contracts owned by non-natural
persons such as corporations, trusts, or other entities are not treated as
annuity contracts for federal income tax purposes. The income on such contracts
is taxed as ordinary income received or accrued by the owner during the taxable
year. Please see the Statement of Additional Information for a discussion of
several exceptions to the general rule for Contracts owned by non-natural
persons.
Diversification Requirements. For a Contract to be treated as an annuity for
federal income tax purposes, the investments in the Variable Account must be
"adequately diversified" consistent with standards under Treasury Department
regulations. If the investments in the Variable Account are not adequately
diversified, the Contract will not be treated as an annuity contract for federal
income tax purposes. As a result, the income on the Contract will be taxed as
ordinary income received or accrued by the Contract owner during the taxable
year. Although Northbrook does not have control over the Portfolios or their
investments, we expect the Portfolios to meet the diversification requirements.
Ownership Treatment. The IRS has stated that you will be considered the owner of
Variable Account assets if you possess incidents of ownership in those assets,
such as the ability to exercise investment control over the assets. At the time
the diversification regulations were issued, the Treasury Department announced
that the regulations do not provide guidance concerning circumstances in which
investor control of separate account investments may cause an investor to be
treated as the owner of the separate account. The Treasury Department also
stated that future guidance would be issued regarding the extent that owners
could direct sub-account investments without being treated as owners of the
underlying assets of the separate account.
Your rights under the Contract are different than those described by the IRS in
rulings in which it found that contract owners were not owners of separate
account assets. For example, you have the choice to allocate premiums and
Contract Values among more investment alternatives. Also, you may be able to
transfer among investment alternatives more frequently than in such rulings.
These differences could result in you being treated as the owner of the Variable
Account. If this occurs, income and gain from the Variable Account assets would
be includible in your gross income. Northbrook does not know what standards will
be set forth in any regulations or rulings which the Treasury Department may
issue. It is possible that future standards announced by the Treasury Department
could adversely affect the tax treatment of your Contract. We reserve the right
to modify the Contract as necessary to attempt to prevent you from being
considered the federal tax owner of the assets of the Variable Account. However,
we make no guarantee that such modification to the Contract will be successful.
<PAGE>
Taxation of Partial and Full Withdrawals. If you make a partial withdrawal under
a non-Qualified Contract, amounts received are taxable to the extent the
Contract Value, without regard to surrender charges, exceeds the investment in
the Contract. The investment in the Contract is the gross premium paid for the
Contract minus any amounts previously received from the Contract if such amounts
were properly excluded from your gross income. If you make a partial withdrawal
under a Qualified Contract, the portion of the payment that bears the same ratio
to the total payment that the investment in the Contract (i.e., nondeductible
IRA contributions, after tax contributions to qualified plans) bears to the
Contract Value, is excluded from your income. If you make a full withdrawal
under a non-Qualified Contract or a Qualified Contract, the amount received will
be taxable only to the extent it exceeds the investment in the Contract.
"Nonqualified distributions" from Roth IRAs are treated as made from
contributions first and are included in gross income only to the extent that
distributions exceed contributions. "Qualified distributions" from Roth IRAs are
not included in gross income. "Qualified distributions" are any distributions
made more than 5 taxable years after the taxable year of the first contribution
to any Roth IRA and which are:
o made on or after the date the individual attains age 59 1/2,
o made to a Beneficiary after the Contract owner's death,
o attributable to the Contract owner being disabled, or
o for a first time home purchase (first time home purchases are
subject to a lifetime limit of $10,000).
If you transfer a non-Qualified Contract without full and adequate consideration
to a person other than your spouse (or to a former spouse incident to a
divorce), you will be taxed on the difference between the Contract Value and the
investment in the Contract at the time of transfer. Except for certain Qualified
Contracts, any amount you receive as a loan under a Contract, and any assignment
or pledge (or agreement to assign or pledge) of the Contract Value is treated as
a withdrawal of such amount or portion.
Taxation of Annuity Payments. Generally, the rule for income taxation of annuity
payments received from a non-Qualified Contract provides for the return of your
investment in the Contract in equal tax-free amounts over the payment period.
The balance of each payment received is taxable. For fixed annuity payments, the
amount excluded from income is determined by multiplying the payment by the
ratio of the investment in the Contract (adjusted for any refund feature or
period certain) to the total expected value of annuity payments for the term of
the Contract. If you elect variable annuity payments, the amount excluded from
taxable income is determined by dividing the investment in the Contract by the
total number of expected payments. The annuity payments will be fully taxable
after the total amount of the investment in the Contract is excluded using these
ratios. If you die, and annuity payments cease before the total amount of the
investment in the Contract is recovered, the unrecovered amount will be allowed
as a deduction for your last taxable year.
Taxation of Annuity Death Benefits. Death of a Contract owner, or death of the
Annuitant if the Contract is owned by a non-natural person, will cause a
distribution of death benefits from a Contract. Generally, such amounts are
included in income as follows:
1. if distributed in a lump sum, the amounts are taxed in the same
manner as a full withdrawal, or
2. if distributed under an annuity option, the amounts are taxed in the
same manner as an annuity payment. Please see the Statement of
ditional Information for more detail on distribution at death
requirements.
<PAGE>
Penalty Tax on Premature Distributions. A 10% penalty tax applies to the taxable
amount of any premature distribution from a non-Qualified Contract. The penalty
tax generally applies to any distribution made prior to the date you attain age
59 1/2. However, no penalty tax is incurred on distributions:
1. made on or after the date the Contract owner attains age 59 1/2,
2. made as a result of the Contract owner's death or disability;
3. made in substantially equal periodic payments over the Contract
owner's life or life expectancy,
4. made under an immediate annuity, or
5. attributable to investment in the Contract before August 14, 1982.
You should consult a competent tax advisor to determine if any other exceptions
to the penalty apply to your situation. Similar exceptions may apply to
distributions from Qualified Contracts.
Aggregation of Annuity Contracts. All non-qualified deferred annuity contracts
issued by Northbrook (or its affiliates) to the same Contract owner during any
calendar year will be aggregated and treated as one annuity contract for
purposes of determining the taxable amount of a distribution.
TAX QUALIFIED CONTRACTS
Contracts may be used as investments with certain qualified plans such as:
o Individual Retirement Annuities or Accounts (IRAs) under Section 408
of the Internal Revenue Code ("Code");
o Roth IRAs under Section 408A of the Code;
o Simplified Employee Pension Plans under Section 408(k) of the Code;
o Savings Incentive Match Plans for Employees (SIMPLE) Plans under Section
408(p) of the Code;
o Tax Sheltered Annuities under Section 403(b) of the Code;
o Corporate and Self Employed Pension and Profit Sharing Plans; and
o State and Local Government and Tax-Exempt Organization Deferred
Compensation Plans.
The income on qualified plan and IRA investments is tax deferred and variable
annuities held by such plans do not receive any additional tax deferral. You
should review the annuity features, including all benefits and expenses, prior
to purchasing a variable annuity in a qualified plan or IRA. Northbrook reserves
the right to limit the availability of the Contract for use with any of the
Qualified Plans listed above.
In the case of certain qualified plans, the terms of the plans may govern the
right to benefits, regardless of the terms of the Contract.
<PAGE>
Restrictions Under Section 403(b) Plans. Section 403(b) of the Code provides
tax-deferred retirement savings plans for employees of certain non-profit and
educational organizations. Under Section 403(b), any Contract used for a 403(b)
plan must provide that distributions attributable to salary reduction
contributions made after 12/31/88, and all earnings on salary reduction
contributions, may be made only:
1. on or after the date of employee
o 1/3ttains age 59 1/2,
o separates from service,
o dies,
o becomes disabled, or
2. on account of hardship (earnings on salary reduction contributions may
be distributed on the account of hardship).
These limitations do not apply to withdrawals where Northbrook is directed to
transfer some or all of the Contract Value to another 403(b) plan.
INCOME TAX WITHHOLDING
Northbrook is required to withhold federal income tax at a rate of 20% on all
"eligible rollover distributions" unless you elect to make a "direct rollover"
of such amounts to an IRA or eligible retirement plan. Eligible rollover
distributions generally include all distributions from Qualified Contracts,
excluding IRAs, with the exception of:
1. required minimum distributions, or
2. a series of substantially equal periodic payments made over a period of at
least 10 years, or, over the life (joint lives) of the participant (and
beneficiary).
Northbrook may be required to withhold federal and state income taxes on any
distributions from non-Qualified Contracts or Qualified Contracts that are not
eligible rollover distributions, unless you notify us of your election to not
have taxes withheld.
<PAGE>
Performance Information
We may advertise the performance of the Variable Sub-Accounts, including yield
and total return information. Yield refers to the income generated by an
investment in a Variable Sub-Account over a specified period. Total return
represents the change, over a specified period of time, in the value of an
investment in a Variable Sub- Account after reinvesting all income
distributions.
All performance advertisements will include, as applicable, standardized yield
and total return figures that reflect the deduction of insurance charges, the
contract maintenance charge, and withdrawal charge. Performance advertisements
also may include total return figures that reflect the deduction of insurance
charges, but not the contract maintenance or withdrawal charges. The deduction
of such charges would reduce the performance shown. In addition, performance
advertisements may include aggregate, average, year-by-year, or other types of
total return figures.
Performance information for periods prior to the inception date of the Variable
Sub- Accounts will be based on the historical performance of the corresponding
Portfolios for the periods beginning with the inception dates of the Portfolios
and adjusted to reflect current Contract expenses. You should not interpret
these figures to reflect actual historical performance of the Variable Account.
We may include in advertising and sales materials tax deferred compounding
charts and other hypothetical illustrations that compare currently taxable and
tax deferred investment programs based on selected tax brackets. Our
advertisements also may compare the performance of our Variable Sub-Accounts
with: (a) certain unmanaged market indices, including but not limited to the Dow
Jones Industrial Average, the Standard & Poor's 500, and the Shearson Lehman
Bond Index; and/or (b) other management investment companies with investment
objectives similar to the underlying funds being compared. In addition, our
advertisements may include the performance ranking assigned by various
publications, including the Wall Street Journal, Forbes, Fortune, Money,
Barron's, Business Week, USA Today, and statistical services, including Lipper
Analytical Services Mutual Fund Survey, Lipper Annuity and Closed End Survey,
the Variable Annuity Research Data Survey, and SEI.
<PAGE>
Appendix A
<TABLE>
<CAPTION>
Accumulation Unit Value and Number of Accumulation Units Outstanding for Each Variable Sub-Account
Since Contracts Were First Offered
Base Policy
For the Years Beginning January *1, and Ending December 31.
<S> <C> <C> <C>
Sub-Account 1998 1999
AGGRESSIVE EQUITY VARIABLE SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period --- $10.000
Accumulation Unit Value, End of Period --- $14.450
Number of Units Outstanding, End of Period --- 11,455
CAPITAL GROWTH SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period $10.000 $9.710
Accumulation Unit Value, End of Period $9.710 $12.738
Number of Units Outstanding, End of Period 6,192 27,471
COMPETITIVE EDGE "BEST IDEAS" SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period $10.000 $9.568
Accumulation Unit Value, End of Period $9.568 $11.948
Number of Units Outstanding, End of Period 17,570 59,367
EMERGING GROWTH SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period $10.000 $10.510
Accumulation Unit Value, End of Period $10.510 $21.141
Number of Units Outstanding, End of Period 10,947 90,139
EMERGING MARKETS EQUITY SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period $10.000 $8.119
Accumulation Unit Value, End of Period $8.119 $15.558
Number of Units Outstanding, End of Period 123 8,933
EQUITY GROWTH SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period $10.000 $9.883
Accumulation Unit Value, End of Period $9.883 $13.564
Number of Units Outstanding, End of Period 14,358 48,641
EQUITY SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period $10.000 $10.273
Accumulation Unit Value, End of Period $10.273 $16.035
Number of Units Outstanding, End of Period 34,510 277,235
EUROPEAN GROWTH SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period $10.000 $9.014
Accumulation Unit Value, End of Period $9.014 $11.454
Number of Units Outstanding, End of Period 22,053 84,846
GLOBAL DIVIDEND GROWTH SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period $10.000 $9.886
Accumulation Unit Value, End of Period $9.886 $11.156
Number of Units Outstanding, End of Period 15,232 80,482
INCOME BUILDER SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period $10.000 $9.685
Accumulation Unit Value, End of Period $9.685 $10.205
Number of Units Outstanding, End of Period 18,227 38,046
INTERNATIONAL MAGNUM SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period $10.000 $8.763
Accumulation Unit Value, End of Period $8.763 $10.797
Number of Units Outstanding, End of Period 6,589 25,209
MONEY MARKET SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period $10.000 $10.153
Accumulation Unit Value, End of Period $10.153 $10.470
Number of Units Outstanding, End of Period 81,705 326,539
PACIFIC GROWTH SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period $10.000 $10.994
Accumulation Unit Value, End of Period $10.994 $17.972
Number of Units Outstanding, End of Period 1,450 16,849
QUALITY INCOME PLUS SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period $10.000 $10.359
Accumulation Unit Value, End of Period $10.359 $9.755
Number of Units Outstanding, End of Period 178,028 353,126
SHORT-TERM BOND SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period --- $10.000
Accumulation Unit Value, End of Period --- $10.050
Number of Units Outstanding, End of Period --- 11,170
STRATEGIST SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period $10.000 $10.343
Accumulation Unit Value, End of Period $10.343 $11.946
Number of Units Outstanding, End of Period 70,036 198,638
S&P 500 INDEX SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period $10.000 $10.382
Accumulation Unit Value, End of Period $10.382 $12.286
Number of Units Outstanding, End of Period 35,394 167,065
U.S. REAL ESTATE SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period $10.000 $9.115
Accumulation Unit Value, End of Period $9.115 $8.839
Number of Units Outstanding, End of Period 3,294 13,344
UTILITIES SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period $10.000 $10.904
Accumulation Unit Value, End of Period $10.904 $12.096
Number of Units Outstanding, End of Period 46,349 137,439
* The Contracts were first offered on July 20, 1998. The Accumulation
Unit Values in this table reflect a mortality and expense risk charge of 1.49%
and an administrative expense charge of 0.10%. All of the Variable Sub-Accounts
commenced operations on or before July 20, 1998, except the Short-Term Bond and
Aggressive Equity Variable Sub-Accounts, which commenced operations on May 3,
1999.
<PAGE>
Appendix A
Accumulation Unit Value and Number of Accumulation Units Outstanding for
Each Variable Sub-Account Since Contracts Were First Offered
With the Enhanced or Performance Death Benefit Option or the Performance Income
Benefit For the Years Beginning January 1*, and Ending December 31.
Sub-Account 1998 1999
AGGRESSIVE EQUITY VARIABLE
SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period --- $10.000
Accumulation Unit Value, End of Period --- $14.440
Number of Units Outstanding, End of Period --- 40,515
CAPITAL GROWTH SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period $10.000 $9.704
Accumulation Unit Value, End of Period $9.704 $12.714
Number of Units Outstanding, End of Period 5,153 30,798
COMPETITIVE EDGE "BEST IDEAS" SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period $10.000 $9.562
Accumulation Unit Value, End of Period $9.562 $11.926
Number of Units Outstanding, End of Period 24,807 72,820
DIVIDEND GROWTH SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period $10.000 $10.095
Accumulation Unit Value, End of Period $10.095 $9.685
Number of Units Outstanding, End of Period 165,990 662,841
EMERGING GROWTH SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period $10.000 $10.504
Accumulation Unit Value, End of Period $10.504 $21.101
Number of Units Outstanding, End of Period 31,051 108,684
EMERGING MARKETS EQUITY SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period $10.000 $8.114
Accumulation Unit Value, End of Period $8.114 $15.529
Number of Units Outstanding, End of Period 3,925 16,698
EQUITY GROWTH SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period $10.000 $9.877
Accumulation Unit Value, End of Period $9.877 $13.539
Number of Units Outstanding, End of Period 17,925 104,259
EQUITY SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period $10.000 $10.267
Accumulation Unit Value, End of Period $10.267 $16.005
Number of Units Outstanding, End of Period 80,117 471,331
EUROPEAN GROWTH SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period $10.000 $9.008
Accumulation Unit Value, End of Period $9.008 $11.432
Number of Units Outstanding, End of Period 206,430 194,903
GLOBAL DIVIDEND GROWTH SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period $10.000 $9.881
Accumulation Unit Value, End of Period $9.881 $11.135
Number of Units Outstanding, End of Period 39,311 128,434
HIGH YIELD SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period $10.000 $8.861
Accumulation Unit Value, End of Period $8.861 $8.593
Number of Units Outstanding, End of Period 38,215 123,235
INCOME BUILDER SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period $10.000 $9.679
Accumulation Unit Value, End of Period $9.679 $10.186
Number of Units Outstanding, End of Period 16,832 52,500
INTERNATIONAL MAGNUM SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period $10.000 $8.758
Accumulation Unit Value, End of Period $8.758 $10.777
Number of Units Outstanding, End of Period 9,575 30,807
MONEY MARKET SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period $10.000 $10.147
Accumulation Unit Value, End of Period $10.147 $10.450
Number of Units Outstanding, End of Period 85,827 436,501
QUALITY INCOME PLUS SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period $10.000 $10.353
Accumulation Unit Value, End of Period $10.353 $9.737
Number of Units Outstanding, End of Period 52,778 249,824
PACIFIC GROWTH SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period $10.000 $10.987
Accumulation Unit Value, End of Period $10.987 $17.938
Number of Units Outstanding, End of Period 1,623 38,449
S&P 500 INDEX SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period $10.000 $10.376
Accumulation Unit Value, End of Period $10.376 $12.263
Number of Units Outstanding, End of Period 104,952 349,707
SHORT-TERM BOND SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period --- $10.000
Accumulation Unit Value, End of Period --- $10.040
Number of Units Outstanding, End of Period --- 11,485
STRATEGIST SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period $10.000 $10.337
Accumulation Unit Value, End of Period $10.337 $11.920
Number of Units Outstanding, End of Period 24,056 162,824
U.S. REAL ESTATE SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period $10.000 $9.110
Accumulation Unit Value, End of Period $9.110 $8.822
Number of Units Outstanding, End of Period 17,463 33,042
UTILITIES SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period $10.000 $10.898
Accumulation Unit Value, End of Period $10.898 $12.073
Number of Units Outstanding, End of Period 33,289 165,102
* The Contracts including the Enhanced Death Benefit Option, the Performance
Death Benefit Option, and the Performance Income Benefit Option were first
offered on July 20, 1998. The Accumulation Unit Values in this table reflect a
mortality and expense risk charge of 1.62% and an administrative expense charge
of 0.10%.
<PAGE>
Appendix A
Accumulation Unit Value and Number of Accumulation Units Outstanding for Each Variable Sub-Account
Since Contracts Were First Offered
With the Performance Benefit Combination Option or the Death Benefit Combination
Option For the Years Beginning January 1*, and Ending December 31.
Sub-Account 1998 1999
AGGRESSIVE EQUITY VARIABLE
SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period --- $10.000
Accumulation Unit Value, End of Period --- $14.430
Number of Units Outstanding, End of Period --- 44,292
CAPITAL GROWTH SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period $10.000 $9.699
Accumulation Unit Value, End of Period $9.699 $12.694
Number of Units Outstanding, End of Period 12,464 27,483
COMPETITIVE EDGE "BEST IDEAS" SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period $10.000 $9.557
Accumulation Unit Value, End of Period $9.557 $11.906
Number of Units Outstanding, End of Period 12,369 23,894
DIVIDEND GROWTH SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period $10.000 $10.090
Accumulation Unit Value, End of Period $10.090 $9.670
Number of Units Outstanding, End of Period 58,954 256,374
EMERGING GROWTH SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period $10.000 $10.498
Accumulation Unit Value, End of Period $10.498 $21.066
Number of Units Outstanding, End of Period 27,030 129,629
EMERGING MARKETS EQUITY SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period $10.000 $8.109
Accumulation Unit Value, End of Period $8.109 $15.503
Number of Units Outstanding, End of Period 4,235 51,240
EQUITY GROWTH SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period $10.000 $9.872
Accumulation Unit Value, End of Period $9.872 $13.516
Number of Units Outstanding, End of Period --- 16,474
EQUITY SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period $10.000 $10.262
Accumulation Unit Value, End of Period $10.262 $15.980
Number of Units Outstanding, End of Period 30,606 323,544
EUROPEAN GROWTH SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period $10.000 $9.004
Accumulation Unit Value, End of Period $9.004 $11.414
Number of Units Outstanding, End of Period 10,221 75,890
GLOBAL DIVIDEND GROWTH SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period $10.000 $9.876
Accumulation Unit Value, End of Period $9.876 $11.117
Number of Units Outstanding, End of Period 14,652 62,965
HIGH YIELD SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period $10.000 $8.857
Accumulation Unit Value, End of Period $8.857 $8.580
Number of Units Outstanding, End of Period 11,399 38,054
INCOME BUILDER SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period $10.000 $9.674
Accumulation Unit Value, End of Period $9.674 $10.169
Number of Units Outstanding, End of Period 3,158 20,223
INTERNATIONAL MAGNUM SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period $10.000 $8.753
Accumulation Unit Value, End of Period $8.753 $10.759
Number of Units Outstanding, End of Period --- 21,796
MONEY MARKET SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period $10.000 $10.142
Accumulation Unit Value, End of Period $10.142 $10.440
Number of Units Outstanding, End of Period 15,056 123,921
PACIFIC GROWTH SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period $10.000 $10.982
Accumulation Unit Value, End of Period $10.982 $17.910
Number of Units Outstanding, End of Period 4,550 73,243
QUALITY INCOME PLUS SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period $10.000 $10.348
Accumulation Unit Value, End of Period $10.348 $9.721
Number of Units Outstanding, End of Period 81,071 172,419
SHORT-TERM BOND SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period --- $10.000
Accumulation Unit Value, End of Period --- $10.030
Number of Units Outstanding, End of Period --- 5,436
STRATEGIST SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period $10.000 $10.332
Accumulation Unit Value, End of Period $10.332 $11.904
Number of Units Outstanding, End of Period 18,089 68,969
S&P 500 INDEX SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period $10.000 $10.371
Accumulation Unit Value, End of Period $10.371 $12.242
Number of Units Outstanding, End of Period 41,697 168,103
U.S. REAL ESTATE SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period $10.000 $9.105
Accumulation Unit Value, End of Period $9.105 $8.807
Number of Units Outstanding, End of Period --- 30,211
UTILITIES SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period $10.000 $10.892
Accumulation Unit Value, End of Period $10.892 $12.054
Number of Units Outstanding, End of Period 19,644 100,464
* The Contracts including the Death Benefit Combination Option were first
offered on May 3, 1999. The Accumulation Unit Values in this table reflect a
mortality and expense risk charge of 1.73% and an administrative expense charge
of 0.10%.
</TABLE>
<PAGE>
Statement of Additional Information
Table of Contents
Description Page
Additions, Deletions or Substitutions of Investments
The Contract
Purchases
Tax-free Exchanges (1035 Exchanges, Rollovers and Transfers)
Performance Information
Calculation of Accumulation Unit Values
Calculation of Variable Income Payments
General Matters
Incontestability
Settlements
Safekeeping of the Variable Account's Assets
Premium Taxes
Tax Reserves
Federal Tax Matters
Qualified Plans
Experts
Financial Statements
-----------
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING IN ANY JURISDICTION IN
WHICH SUCH OFFERING MAY NOT LAWFULLY BE MADE. WE DO NOT AUTHORIZE ANYONE TO
PROVIDE ANY INFORMATION OR REPRESENTATIONS REGARDING THE OFFERING DESCRIBED IN
THIS PROSPECTUS OTHER THAN AS CONTAINED IN THIS PROSPECTUS.
<PAGE>
THE MORGAN STANLEY DEAN WITTER VARIABLE ANNUITY II
Northbrook Life and Annuity Company Statement of Additional Information
Northbrook Variable Annuity Account II dated May 1, 2000
Post Office Box 94040
Palatine, IL 60094-4040
1 (800) 654 - 2397
This Statement of Additional Information supplements the information in the
prospectus for the Morgan Stanley Dean Witter Variable Annuity II Contracts
("VAII Contracts") and the Morgan Stanley Dean Witter Variable Annuity II
AssetManager Contracts ("AssetManager Contracts"). This Statement of Additional
Information is not a prospectus. You should read it in conjunction with the
prospectus, dated May 1, 2000, for each form of Contract. You may obtain a
prospectus by calling or writing us at the address or telephone number listed
above, or by calling or writing your Morgan Stanley Dean Witter Financial
Advisor.
Except as otherwise noted, this Statement of Additional Information uses the
same defined terms as the prospectus for each form of Contract desribed above.
TABLE OF CONTENTS
Description Page
Additions, Deletions or Substitutions of Investments
The Contract
Purchases
Tax-free Exchanges (1035 Exchanges, Rollovers and
Transfers)
Performance Information
Calculation of Accumulation Unit Values
Calculation of Variable Income Payments
General Matters
Incontestability
Settlements
Safekeeping of the Variable Account's Assets
Premium Taxes
Tax Reserves
Federal Tax Matters
Qualified Plans
Experts
Financial Statements
<PAGE>
ADDITIONS, DELETIONS OR SUBSTITUTIONS OF INVESTMENTS
We may add, delete, or substitute the Portfolio shares held by any Variable
Sub-Account to the extent the law permits. We may substitute shares of any
Portfolio with those of another Portfolio of the same or different mutual
Portfolio if the shares of the Portfolio are no longer available for investment,
or if we believe investment in any Portfolio would become inappropriate in view
of the purposes of the Variable Account.
We will not substitute shares attributable to a Contract owner's interest in a
Variable Sub-Account until we have notified the Contract owner of the change,
and until the Securities and Exchange Commission has approved the change, to the
extent such notification and approval are required by law. Nothing contained in
this Statement of Additional Information shall prevent the Variable Account from
purchasing other securities for other series or classes of contracts, or from
effecting a conversion between series or classes of contracts on the basis of
requests made by Contract owners.
We also may establish additional Variable Sub-Accounts or series of Variable
Sub-Accounts. Each additional Variable Sub-Account would purchase shares in a
new Portfolio of the same or different mutual fund. We may establish new
Variable Sub-Accounts when we believe marketing needs or investment conditions
warrant. We determine the basis on which we will offer any new Variable
Sub-Accounts in conjunction with the Contract to existing Contract owners. We
may eliminate one or more Variable Sub-Accounts if, in our sole discretion,
marketing, tax or investment conditions so warrant.
We may, by appropriate endorsement, change the Contract as we believe necessary
or appropriate to reflect any substitution or change in the Portfolios. If we
believe the best interests of persons having voting rights under the Contracts
would be served, we may operate the Variable Account as a management company
under the Investment Company Act of 1940 or we may withdraw its registration
under such Act if such registration is no longer required.
<PAGE>
THE CONTRACT
The Contract is primarily designed to aid individuals in long-term financial
planning. You can use it for retirement planning regardless of whether the
retirement plan qualifies for special federal income tax treatment.
PURCHASES
Dean Witter Reynolds Inc., is the principal underwriter and distributor of the
Contracts. The offering of the Contracts is continuous. We reserve the right to
stop offering the Contracts at any time.
TAX-FREE EXCHANGES (1035 EXCHANGES, ROLLOVERS AND TRANSFERS)
We accept purchase payments that are the proceeds of a Contract in a transaction
qualifying for a tax-free exchange under Section 1035 of the Internal Revenue
Code ("Code"). Except as required by federal law in calculating the basis of the
Contract, we do not differentiate between Section 1035 purchase payments and
non-Section 1035 purchase payments.
We also accept "rollovers" and transfers from Contracts qualifying as
tax-sheltered annuities ("TSAs"), individual retirement annuities or accounts
("IRAs"), or any other Qualified Contract that is eligible to "rollover" into an
IRA. We differentiate among non-Qualified Contracts, TSAs, IRAs and other
Qualified Contracts to the extent necessary to comply with federal tax laws. For
example, we restrict the assignment, transfer, or pledge of TSAs and IRAs so the
Contracts will continue to qualify for special tax treatment. A Contract owner
contemplating any such exchange, rollover or transfer of a Contract should
contact a competent tax adviser with respect to the potential effects of such a
transaction.
<PAGE>
PERFORMANCE INFORMATION
From time to time we may advertise the "standardized," "non-standardized," and
"adjusted historical" total returns of the Variable Sub-Accounts, as described
below. Please remember that past performance is not an estimate or guarantee of
future performance and does not necessarily represent the actual experience of
amounts invested by a particular Contract owner. Also, please note that the
performance figures do not reflect any applicable taxes.
STANDARDIZED TOTAL RETURNS
A Variable Sub-Account's standardized total return represents the average annual
total return of that Sub-Account over a particular period. We compute
standardized total return by finding the annual percentage rate that, when
compounded annually, will accumulate a hypothetical $1,000 purchase payment to
the redeemable value at the end of the one, five or ten year period, or for a
period from the date of commencement of the Variable Sub-Account's operations,
if shorter than any of the foregoing. We use the following formula prescribed by
the SEC for computing standardized total return:
1000(1 + T)n = ERV
where:
T = average annual total return
ERV = ending redeemable value of a hypothetical $1,000
payment made at the beginning of 1, 5, or 10 year
periods or shorter period
n = number of years in the period
$1000 = hypothetical $1,000 investment
When factoring in the withdrawal charge assessed upon redemption, we exclude the
Free Withdrawal Amount, which is the amount you can withdraw from the Contract
without paying a withdrawal charge. We also use the withdrawal charge that would
apply upon redemption at the end of each period. Thus, for example, when
factoring in the withdrawal charge for a one year standardized total return
calculation, we would use the withdrawal charge that applies to a withdrawal of
a purchase payment made one year prior.
When factoring in the contract maintenance charge, we pro rate the charge by
dividing (i) the contract maintenance charge by (ii) the average contract size
of $54,945. We then multiply the resulting percentage by a hypothetical $1,000
investment.
The standardized total returns for the Variable Sub-Accounts available under
each form of Contract for the periods ended December 31, 1999 are set out below.
No standardized total returns are shown for Money Market Variable Sub-Account.
The AssetManager Contracts were first offered to the public on July 20, 1998.
Accordingly, performance figures for certain Variable Sub-Accounts prior to
those dates reflect the historical performance of the Variable Sub-Accounts,
adjusted to reflect the current level of charges that apply to the Variable
Sub-Accounts under the AssetManager Contracts, as well as the withdrawal and
contract maintenance charges described above. In addition, performance figures
for periods prior to the availability of an optional death benefit, the
Performance Income Benefit Option, the Performance Benefit Combination Option,
or the Death Benefit Combination Option, have been adjusted to reflect the
current charge for such features as if they had been available throughout the
periods shown.
Variable Sub-Account Inception Dates: The Money Market, Quality Income Plus,
High Yield, Utilities, Dividend Growth, Equity and Strategist Variable
Sub-Accounts commenced operations on October 25, 1990. The Capital Growth and
European Growth Variable Sub-Accounts commenced operations on March 1, 1991. The
Global Dividend Growth and Pacific Growth Variable Sub-Accounts commenced
operations on February 23, 1994. The Income Builder Variable Sub-Account
commenced operation on January 21, 1997. The Equity Growth, , International
Magnum, Emerging Markets Equity, and Emerging Growth Variable Sub-Accounts
commenced operation on March 16, 1998. The S&P 500 Index, Competitive Edge
("Best Ideas") and U.S. Real Estate Variable Sub-Accounts commenced operations
of May 18, 1998. The Short-Term Bond and Aggressive Equity Variable Sub-Accounts
commenced operations on May 3, 1999. The Mid-Cap Value Sub-Account, the AIM V.I.
Capital Appreciation, Growth and Value Variable Sub-Accounts, the Alliance
Growth, Growth and Income, and Premier Growth Variable Sub-Accounts, and the
Putnam VT Growth and Income, International Growth and Voyager Variable
Sub-Accounts which are available under Variable Annuity II Contracts only
commenced operations on January 31, 2000.
<TABLE>
<CAPTION>
VARIABLE ANNUITY II CONTRACTS
(WITHOUT AN OPTIONAL DEATH BENEFIT PROVISION OR PERFORMANCE INCOME BENEFIT OPTION )
<C>
<S> <C> <C> <C> 10 Years or
Variable Sub-Account One Year Five Years Since Inception
-------- ---------- ---------------
Aggressive Equity* N/A N/A 39.62%
Capital Growth 27.21% 22.45% 13.75%
Competitive Edge ("Best 20.88% N/A 10.41%
Ideas")
Dividend Growth -8.00% 16.98% 14.72%
Emerging Growth 97.34% N/A 61.99%
Emerging Markets Equity 88.76% N/A 17.10%
Equity 52.17% 33.81% 25.09%
Equity Growth 33.28% N/A 18.04%
European Growth 23.08% 23.09% 18.04%
Global Dividend Growth 8.81% 14.06% 11.68%
High Yield -6.96% 4.26% 9.98%
Income Builder 1.32% N/A 8.29%
International Magnum 19.21% N/A 8.92%
Pacific Growth 59.57% -1.03% -2.44%
Quality Income Plus -9.90% 6.28% 6.70%
Short Term Bond* N/A N/A -4.50%
Strategist 11.47% 14.55% 13.13%
S&P 500 Index 14.32% N/A 16.24%
U.S. Real Estate -7.10% N/A -10.38%
Utilities 6.90% 18.17% 13.80%
*Performance shown is not annualized.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
(WITH AN OPTIONAL DEATH BENEFIT PROVISION OR THE PERFORMANCE INCOME BENEFIT OPTION)
<S> <C> <C> <C> <C>
10 Years or
Variable Sub-Account One Year Five Years Since Inception
-------- ---------- ---------------
Aggressive Equity* 27.03% 22.29% 13.61%
Competitive Edge ("Best 20.72% N/A 10.26%
Ideas")
Dividend Growth -8.13% 16.82% 14.57%
Emerging Growth 97.08% N/A 38.36%
Emerging Markets Equity 88.51% N/A 9.89%
Equity 51.96% 33.63% 24.93%
Equity Growth 33.10% N/A 27.75%
European Growth 22.91% 22.93% 17.89%
Global Dividend Growth 8.66% 13.91% 11.53%
High Yield -7.09% 4.12% 9.83%
Income Builder 1.19% N/A 8.15%
International Magnum 19.05% N/A 10.95%
Pacific Growth 59.35% -1.16% -2.57%
Quality Income Plus -10.03% 6.14% 6.56%
Short Term Bond* N/A N/A -4.59%
Strategist 11.32% 14.40% 12.98%
S&P 500 Index 14.16% N/A 16.08%
U.S. Real Estate -7.22% N/A -1.50%
Utilities 6.76% 18.01% 13.66%
*Performance shown is not annualized.
<PAGE>
(WITH PERFORMANCE BENEFIT COMBINATION OPTION OR DEATH BENEFIT COMBINATION OPTION)
10 Years or
Variable Sub-Account One Year Five Years Since Inception
-------- ---------- ---------------
Aggressive Equity* N/A N/A 39.39%
Capital Growth 26.89% 22.16% 13.48%
Competitive Edge 20.58% N/A 10.13%
("Best Ideas")
Dividend Growth -8.24% 16.69% 14.45%
Emerging Growth 96.86% N/A 38.20%
Emerging Markets 88.30% N/A 9.77%
Equity 51.79% 33.48% 24.79%
Equity Growth 32.95% N/A 27.61%
European Growth 22.77% 22.79% 17.76%
Global Dividend Growth 8.54% 13.78% 11.41%
High Yield -7.19% 4.00% 9.71%
Income Builder 1.07% N/A 8.03%
International Magnum 18.91% N/A 10.82%
Pacific Growth 59.18% -1.27% -2.67%
Quality Income Plus -10.13% 6.02% 6.44%
Short Term Bond* N/A N/A -4.66%
Strategist 11.20% 14.27% 12.86%
S&P 500 Index 14.03% N/A 15.95%
U.S. Real Estate -7.33% N/A -1.61%
Utilities 6.63% 17.88% 13.53%
* Performance shown is not annualized.
<PAGE>
ASSETMANAGER CONTRACTS
(WITHOUT AN OPTIONAL DEATH BENEFIT PROVISION OR PERFORMANCE INCOME BENEFIT OPTION )
10 Years or
Variable Sub-Account One Year Five Years Since Inception*
-------- ---------- ----------------
Aggressive Equity* N/A N/A 43.64%
Capital Growth 31.14% 22.23% 13.48%
Competitive Edge ("Best 24.83% N/A 12.59%
Ideas")
Dividend Growth -3.99% 16.78% 14.45%
Emerging Growth 101.11% N/A 63.21%
Emerging Markets Equity 92.55% N/A 18.89%
Equity 56.04% 33.54% 24.79%
Equity Growth 37.20% N/A 19.82%
European Growth 27.02% 22.87% 17.76%
Global Dividend Growth 12.79% 13.88% 11.49%
High Yield -2.94% 4.15% 9.71%
Income Builder 5.32% N/A 9.01%
International Magnum 23.16% N/A 10.85%
Pacific Growth 63.43% -1.09% -2.51%
Quality Income Plus -5.88% 6.15% 6.44%
Short Term Bond* N/A N/A -0.41%
Strategist 15.45% 14.37% 12.86%
S&P 500 Index 18.28% N/A 18.33%
U.S. Real Estate -3.08% N/A -7.82%
Utilities 10.88% 17.97% 13.53%
*Performance shown is not annualized.
(WITH AN OPTIONAL DEATH BENEFIT OR THE PERFORMANCE INCOME BENEFIT OPTION)
10 Years or
Variable Sub-Account One Year Five Years Since Inception
-------- ---------- ---------------
Aggressive Equity* N/A N/A 43.52%
Capital Growth 30.97% 22.07% 13.33%
Competitive Edge ("Best 24.67% N/A 12.44%
Ideas")
Dividend Growth -4.11% 16.63% 14.30%
Emerging Growth 100.85% N/A 63.00%
Emerging Markets Equity 92.30% N/A 18.73%
Equity 55.84% 33.36% 24.63%
Equity Growth 37.02% N/A 19.66%
European Growth 26.86% 22.71% 17.61%
Global Dividend Growth 12.64% 13.74% 11.35%
High Yield -3.07% 4.01% 9.56%
Income Builder 5.18% N/A 8.87%
International Magnum 23.01% N/A 10.70%
Pacific Growth 63.21% -1.22% -2.64%
Quality Income Plus -6.00% 6.02% 6.30%
Short Term Bond* N/A N/A -5.09%
Strategist 15.30% 14.22% 12.71%
S&P 500 Index 18.13% N/A 18.17%
U.S. Real Estate -3.21% N/A -7.94%
Utilities 10.74% 17.82% 13.38%
*Performance shown is not annualized.
<PAGE>
(WITH PERFORMANCE BENEFIT COMBINATION OPTION OR DEATH BENEFIT COMBINATION OPTION)
10 Years or
Variable Sub-Account One Year Five Years Since Inception
Aggressive Equity* N/A N/A 43.41%
Capital Growth 30.83% 21.94% 13.21%
Competitive Edge ("Best 24.52% N/A 12.31%
Ideas")
Dividend Growth -4.22% 16.50% 14.17%
Emerging Growth 100.62% N/A 62.81%
Emerging Markets Equity 92.08% N/A 18.60%
Equity 55.67% 33.22% 24.49%
Equity Growth 36.86% N/A 19.52%
European Growth 26.72% 22.57% 17.48%
Global Dividend Growth 12.52% 13.61% 11.23%
High Yield -3.18% 3.90% 9.44%
Income Builder 5.07% N/A 8.75%
International Magnum 22.86% N/A 10.57%
Pacific Growth 63.03% -1.33% -2.74%
Quality Income Plus -6.11% 5.90% 6.18%
Short Term Bond* N/A N/A -0.57%
S&P 500 Index 17.99% N/A 18.04%
Strategist 15.17% 14.10% 12.59%
U.S. Real Estate -3.32% N/A -8.04%
Utilities 10.62% 17.69% 13.25%
*Performance shown is not annualized.
</TABLE>
<PAGE>
NON-STANDARDIZED TOTAL RETURNS
From time to time, we also may quote rates of return that reflect changes in the
values of each Variable Sub-Account's accumulation units. We may quote these
"non-standardized total returns" on an annualized, cumulative, year-by-year, or
other basis. These rates of return take into account asset-based charges, such
as the mortality and expense risk charge and administration charge. However,
these rates of return do not reflect withdrawal charges, contract maintenance
charges, or any taxes. Such charges, if reflected, would reduce the performance
shown.
Annualized returns reflect the rate of return that, when compounded annually,
would equal the cumulative rate of return for the period shown. We compute
annualized returns according to the following formula:
Annualized Return = (1 = r)1/n - 1 where r = cumulative rate of return for the
period shown, and n = number of years in period.
The method of computing annualized rates of return is similar to that for
computing standardized performance, described above, except that rather than
using a hypothetical $1,000 investment and the ending redeemable value thereof,
we use the changes in value of an accumulation unit.
Cumulative rates of return reflect the cumulative change in value of an
accumulation unit over a period shown. Year-by-year rates of return reflect the
change in value of accumulation unit during the course of each year shown. We
compute these returns by dividing the accumulation unit value at the end of each
period shown, by the accumulation unit value at the beginning of that period,
and subtracting one. We compute other total returns on a similar basis.
We may quote non-standardized total returns for 1, 3, 5 and 10 year periods, or
period since inception of the Variable Sub-Account's operations, as well as
other periods, such as "year-to-date" (prior calendar year end to the day stated
in the advertisement); "year to most recent quarter" (prior calendar year end to
the end of the most recent quarter); the prior calendar year; and the "n" most
recent calendar years.
The non-standardized annualized total returns for the Variable Sub-Accounts for
the period ended December 31, 1999 are set out below. The AssetManager Contracts
were first offered to the public on July 20, 1998. Accordingly, performance
figures for certain Variable Sub-Accounts prior to those dates reflect the
historical performance of the Variable Sub-Accounts, adjusted to reflect the
current asset-based charges (but not the withdrawal charge, contract maintenance
charge, or taxes) under the AssetManager Contracts that would have applied had
it been available during the period shown. In addition, performance figures for
periods prior to the availability of an optional death benefit, the Performance
Income Benefit Option, the Performance Benefit Combination Option or the Death
Benefit Combination Option have been adjusted to reflect the current charge for
such features as if they had been available throughout the periods shown.
The inception date of each Variable Sub-Account appears under "Standardized
Total Returns," above.
<PAGE>
VARIABLE ANNUITY II CONTRACTS
<TABLE>
<CAPTION>
(WITHOUT AN OPTIONAL DEATH BENEFIT PROVISION OR THE PERFORMANCE INCOME BENEFIT OPTION)
<S> <C> <C> <C> <C>
10 Years or
Variable Sub-Account One Year Five Years Since Inception
-------- ---------- ---------------
Aggressive Equity* N/A N/A 44.78%
Capital Growth 31.51% 22.57% 13.78%
Competitive Edge 25.18% N/A 12.92%
("Best Ideas")
Dividend Growth -3.70% 17.10% 14.74%
Emerging Growth 101.64% N/A 63.61%
Emerging Markets Equity 93.07% N/A 19.23%
Equity 56.47% 33.90% 25.10%
Equity Growth 37.58% N/A 20.15%
European Growth 27.38% 23.20% 18.07%
Global Dividend Growth 13.12% 14.20% 11.80%
High Yield -2.65% 4.45% 10.00%
Income Builder 5.63% N/A 9.32%
International Magnum 23.52% N/A 11.17%
Pacific Growth 63.87% -0.78% -2.20%
Quality Income Plus -5.60% 6.46% 6.73%
Short Term Bond* N/A N/A 0.56%
Strategist 15.78% 14.69% 13.16%
S&P 500 Index 18.62% N/A 18.66%
U.S. Real Estate -2.79% N/A -7.52%
Utilities 11.20% 18.29% 13.83%
*Performance shown is not annualized.
(WITH AN OPTIONAL DEATH BENEFIT PROVISION OR THE PERFORMANCE INCOME BENEFIT OPTION)
10 Years or
Variable Sub-Account One Year Five Years Since Inception
-------- ---------- ---------------
Aggressive Equity* N/A N/A 44.65%
Capital Growth 31.34% 22.41% 13.64%
Competitive Edge 25.02% N/A 12.77%
("Best Ideas")
Dividend Growth -3.83% 16.95% 14.59%
Emerging Growth 101.38% N/A 38.49%
Emerging Markets Equity 92.82% N/A 10.60%
Equity 56.72% 33.72% 24.94%
Equity Growth 37.40% N/A 28.47%
European Growth 27.22% 23.04% 17.91%
Global Dividend Growth 12.97% 14.05% 11.65%
High Yield -2.78% 4.31% 9.85%
Income Builder 5.49% N/A 9.18%
International Magnum 23.35% N/A 11.91%
Pacific Growth 63.66% -0.91% -2.33%
Quality Income Plus -5.72% 6.32% 6.60%
Short Term Bond* N/A N/A 0.56%
Strategist 15.63% 14.54% 13.01%
S&P 500 Index 18.47% N/A 18.51%
U.S. Real Estate -2.92% N/A -0.22%
Utilities 11.06% 18.14% 13.68%
*Performance shown is not annualized.
<PAGE>
(WITH PERFORMANCE BENEFIT COMBINATION OPTION OR DEATH BENEFIT COMBINATION OPTION)
10 Years or
Variable Sub-Account One Year Five Years Since Inception
-------- ---------- ---------------
Aggressive Equity* N/A N/A 44.55%
Capital Growth 31.20% 22.27% 13.51%
Competitive Edge 24.88% N/A 12.65%
("Best Ideas")
Dividend Growth -3.93% 16.82% 14.47%
Emerging Growth 101.16% N/A 38.34%
Emerging Markets Equity 92.60% N/A 10.48%
Equity 56.10% 33.57% 24.80%
Equity Growth 37.25% N/A 28.33%
European Growth 27.08% 22.91% 17.78%
Global Dividend Growth 12.84% 13.93% 11.53%
High Yield -2.89% 4.19% 9.73%
Income Builder 5.37% N/A 9.06%
International Magnum 23.22% N/A 11.78%
Pacific Growth 63.48% -1.02% -2.44%
Quality Income Plus -5.83% 6.20% 6.48%
Short Term Bond* N/A N/A 0.49%
Strategist 15.50% 14.42% 12.89%
S&P 500 Index 18.34% N/A 18.38%
U.S. Real Estate -3.03% N/A -0.33%
Utilities 10.94% 18.01% 13.55%
*Performance shown is not annualized.
ASSETMANAGER CONTRACTS
(WITHOUT AN OPTIONAL DEATH BENEFIT PROVISION OR PERFORMANCE INCOME BENEFIT OPTION )
10 Years or
Variable Sub-Account One Year Five Years Since Inception
-------- ---------- ---------------
Aggressive Equity* N/A N/A 44.55%
Capital Growth 31.20% 22.27% 13.51%
Competitive Edge 24.88% N/A 12.65%
("Best Ideas")
Dividend Growth -3.93% 16.82% 14.47%
Emerging Growth 101.16% N/A 63.22%
Emerging Markets Equity 92.60% N/A 18.95%
Equity 56.10% 33.57% 24.80%
Equity Growth 37.25% N/A 19.86%
European Growth 27.08% 22.91% 17.78%
Global Dividend Growth 12.84% 13.93% 11.53%
High Yield -2.89% 4.19% 9.73%
Income Builder 5.37% N/A 9.06%
International Magnum 23.22% N/A 10.90%
Pacific Growth 63.48% -1.02% -2.44%
Quality Income Plus -5.83% 6.20% 6.48%
Short Term Bond* N/A N/A 0.49%
Strategist 15.50% 14.42% 12.89%
S&P 500 Index 18.34% N/A 18.38%
U.S. Real Estate -3.03% N/A -7.75%
Utilities 10.94% 18.01% 13.55%
*Performance shown is not annualized.
<PAGE>
(WITH AN OPTIONAL DEATH BENEFIT PROVISION OR THE PERFORMANCE INCOME BENEFIT OPTION )
10 Years or
Variable Sub-Account One Year Five Years Since Inception
-------- ---------- ---------------
Aggressive Equity* N/A N/A 44.42%
Capital Growth 31.03% 22.11% 13.36%
Competitive Edge 24.72% N/A 12.50%
("Best Ideas")
Dividend Growth -4.06% 16.67% 14.32%
Emerging Growth 100.90% N/A 63.00%
Emerging Markets Equity 92.36% N/A 18.79%
Equity 55.90% 33.40% 24.64%
Equity Growth 37.07% N/A 19.71%
European Growth 26.91% 22.75% 17.63%
Global Dividend Growth 12.70% 13.78% 11.39%
High Yield -3.01% 4.06% 9.59%
Income Builder 5.24% N/A 8.92%
International Magnum 23.06% N/A 10.76%
Pacific Growth 63.27% -1.15% -2.56%
Quality Income Plus -5.95% 6.06% 6.34%
Short Term Bond* N/A N/A 0.40%
Strategist 15.35% 14.27% 12.74%
S&P 500 Index 18.18% N/A 18.22%
U.S. Real Estate -3.15% N/A -7.87%
Utilities 10.79% 17.86% 13.41%
*Performance shown is not annulaized.
(WITH PERFORMANCE BENEFIT COMBINATION OPTION OR DEATH BENEFIT COMBINATION OPTION)
10 Years or
Variable Sub-Account One Year Five Years Since Inception
-------- ---------- ---------------
Aggressive Equity* N/A N/A 44.32%
Capital Growth 30.88% 21.98% 13.24%
Competitive Edge 24.58% N/A 12.37%
("Best Ideas")
Dividend Growth -4.16% 16.54% 14.19%
Emerging Growth 100.67% N/A 62.82%
Emerging Markets Equity 92.14% N/A 18.66%
Equity 55.72% 33.25% 24.50%
Equity Growth 36.92% N/A 19.57%
European Growth 26.77% 22.61% 17.50%
Global Dividend Growth 12.57% 13.65% 11.26%
High Yield -3.12% 3.95% 9.47%
Income Builder 5.12% N/A 8.80%
International Magnum 22.92% N/A 10.63%
Pacific Growth 63.09% -1.26% -2.67%
Quality Income Plus -6.05% 5.94% 6.22%
Short Term Bond* N/A N/A 0.33%
Strategist 15.22% 14.14% 12.62%
S&P 500 Index 18.05% N/A 18.09%
U.S. Real Estate -3.26% N/A -7.97%
Utilities 10.67% 17.73% 13.28%
*Performance shown is not annualized.
</TABLE>
ADJUSTED HISTORICAL TOTAL RETURNS
We may advertise the total return for periods prior to the date that the
Variable Sub-Accounts commenced operations. We will calculate such "adjusted
historical total returns" using the historical performance of the underlying
Portfolios and adjusting such performance to reflect the current level of
charges that apply to the Variable Sub-Accounts under the Contract as well as
the contract maintenance charge and the withdrawal charge.
The adjusted historical total returns for the Variable Sub-Accounts for the
periods ended December 31, 1999 are set out below. No adjusted historical total
returns are shown for the Money Market Variable Sub-Account. Where the returns
included in the following tables give effect to one or more of the optional
death benefit provisions, the Performance Income Benefit Option, the
Performance Benefit Combination Option, or the Death Benefit Combination
Option, the performance figures have been adjusted to reflect the current charge
for the feature as if that feature had been available throughout the periods
shown.
The following list provides the inception date for the Portfolio corresponding
to each of the Variable Sub-Accounts included in the tables.
Variable Annuity II and AssetManager Variable Annuity II Contracts
Inception Date of
Corresponding
Variable Sub-Account Portfolio
High Yield March 9, 1984
Equity March 9, 1984
Quality Income Plus March 1, 1987
Strategist March 1, 1987
Dividend Growth March 1, 1990
Utilities March 1, 1990
European Growth March 1, 1991
Capital Growth March 1, 1991
Pacific Growth February 24, 1994
Global Dividend Growth February 24, 1994
Income Builder January 21, 1997
Equity Growth January 2, 1997
International Magnum January 2, 1997
Emerging Markets Equity October 1,1996
Emerging Growth July 3, 1995
U.S. Real Estate March 4, 1997
Competitive Edge May 18, 1998
("Best Ideas")
S&P 500 Index May 18, 1998
Short Term Bond May 2, 1999
Aggressive Equity May 1, 1999
Variable Annuity II Contracts Only
Mid-Cap Value January 2, 1997
AIM V.I. Capital Appreciation May 5, 1993
AIM V.I. Growth May 5, 1993
AIM V.I Value May 5, 1993
Alliance Growth* September 15, 1994
Alliance Growth and Income ** January 14, 1991
Alliance Premier Growth* July 14, 1999
Putnam VT Growth and Income** February 1, 1988
Putnam VT International Growth** January 2, 1997
Putnam VT Voyager** February 1, 1988
* The Portfolios' Class B shares ("12b-1 class") corresponding to the Alliance
Growth and Alliance Growth and Income Variable Sub-Accounts were first offered
on May 3, 1999. For periods prior to these dates, the performance shown is based
on the historical performance of the Portfolios' Class A shares ("non-12b-1
class"), adjusted to reflect the current expenses of the Portfolios' 12b-1
class. The inception dates for the Portfolios are as shown above.
** The Portfolios' Class IB shares ("12b-1 class") corresponding to the Putnam
VT Growth and Income, International Growth, and voyager Variable Sub-Accounts
ere first offered on April 6, 1998, April 30, 198 and April 30, 1998
respectively. For periods prior to these dates, the performance shown is based
on the historical performance of the Portfolios' Class IA shares ("non-12-b-1
class"), adjusted to reflect the current expenses of the Portfolios' 12b-1
class. The inception dates for the Portfolios are shown as above.
VARIABLE ANNUITY II CONTRACTS
(WITHOUT AN OPTIONAL DEATH BENEFIT PROVISION OR PERFORMANCE INCOME BENEFIT
OPTION )
<TABLE>
<CAPTION>
<S> <C>
10 Years or
Variable Sub-Account One Year Five Years Since Inception+
-------- ---------- -----------------
Aggressive Equity** N/A N/A 39.62%
AIM V.I. Capital Appreciation 38.37% 23.07% 20.13%
AIM V.I. Growth 29.12% 26.02% 19.98%
AIM V.I Value 23.85% 24.18% 20.49%
Alliance Growth* 28.36% 29.51% 28.82%
Alliance Growth and Income* 5.57% 22.15% 13.90%
Alliance Premier Growth* N/A N/A 16.20%
Capital Growth 27.21% 22.45% 13.77%
Competitive Edge
("Best Ideas") 20.88% N/A 10.41%
Dividend Growth -8.00% 16.98% 11.48%
Emerging Growth 97.34% N/A 38.54%
Emerging Markets Equity 88.76% N/A 10.04%
Equity 52.17% 33.81% 21.21%
Equity Growth 33.28% N/A 27.92%
European Growth 23.08% 23.09% 18.04%
Global Dividend Growth 8.81% 14.06% 11.68%
High Yield -6.96% 4.26% 6.80%
Income Builder 1.32% N/A 8.29%
International Magnum 19.21% N/A 11.09%
Mid-Cap Value 14.67% N/A 21.84%
Pacific Growth 59.57% -1.03% -2.44%
Putnam VT Growth and Income* -4.20% 17.51% 12.27%
Putnam VT International Growth* 53.59% N/A 27.63%
Putnam VT Voyager* 51.60% 29.61% 20.46%
Quality Income Plus -9.90% 6.28% 6.30%
Short Term Bond** N/A N/A -4.50%
Strategist 11.47% 14.55% 11.43%
S&P 500 Index 14.32% N/A 16.24%
U.S. Real Estate -7.10% N/A -1.37%
Utilities 6.90% 18.17% 12.68%
+ Please refer to the table at the beginning of this section for the inception
dates of the Portfolios.
* The performance shown for the Portfolios' 12b-1 class is based on the
performance of the non 12b-1 class, as described in the table at the beginning
of this section.
** Performance shown is not annualized.
(WITH AN OPTIONAL DEATH BENEFIT PROVISION OR THE PERFORMANCE INCOME BENEFIT OPTION)
10 Years or
Variable Sub-Account One Year Five Years Since Inception+
-------- ---------- -----------------
Aggressive Equity** N/A N/A 39.50%
AIM V.I. Capital Appreciation 38.19% 22.91% 19.98%
AIM V.I. Growth 28.95% 25.86% 19.82%
AIM V.I Value 23.69% 24.02% 20.33%
Alliance Growth* 28.19% 29.34% 28.65%
Alliance Growth and Income * 5.43% 21.99% 13.75%
Alliance Premier Growth* N/A N/A 16.02%
Capital Growth 27.03% 22.29% 13.61%
Competitive Edge 20.72% N/A 10.26%
("Best Ideas")
Dividend Growth -8.13% 16.82% 11.41%
Emerging Growth 97.08% N/A 38.36%
Emerging Markets Equity 88.51% N/A 9.89%
Equity 51.96% 33.63% 21.13%
Equity Growth 33.10% N/A 27.75%
European Growth 22.91% 22.93% 17.89%
Global Dividend Growth 8.66% 13.91% 11.53%
High Yield -7.09% 4.12% 6.73%
Income Builder 1.19% N/A 8.15%
International Magnum 19.05% N/A 10.95%
Mid-Cap Value 14.52% N/A 21.68%
Pacific Growth 59.35% -1.16% -2.57%
Putnam VT Growth and Income* -4.33% 17.36% 12.12%
Putnam VT International Growth* 53.59% N/A 27.46%
Putnam VT Voyager* 51.39% 29.44% 20.30%
Quality Income Plus -10.03% 6.14% 6.23%
Short Term Bond** N/A N/A -4.59%
Strategist 11.32% 14.40% 11.36%
S&P 500 Index 14.16% N/A 16.08%
U.S. Real Estate -7.22% N/A -1.50%
Utilities 6.76% 18.01% 12.60%
+ Please refer to the table at the beginning of this section for the inception
dates of the Portfolios.
* The performance shown for the Portfolios' 12b-1 class is based on the
performance of the non 12b-1 class, as described in the table at the beginning
of this section.
**Performance shown is not annualized.
<PAGE>
(WITH PERFORMANCE BENEFIT COMBINATION OPTION OR DEATH BENEFIT COMBINATION OPTION)
10 Years or
Variable Sub-Account One Year Five Years Since Inception+
-------- ---------- -----------------
Aggressive Equity** N/A N/A 39.39%
AIM V.I. Capital Appreciation 38.03% 22.77% 19.84%
AIM V.I. Growth 28.80% 25.72% 19.69%
AIM V.I Value 23.55% 23.88% 20.20%
Alliance Growth* 28.05% 29.20% 28.52%
Alliance Growth and Income * 5.31% 21.85% 13.63%
Alliance Premier Growth* N/A N/A 15.91%
Capital Growth 26.89% 22.16% 13.48%
Competitive Edge 20.58% N/A 10.13%
("Best Ideas")
Dividend Growth -8.24% 16.69% 11.22%
Emerging Growth 96.86% N/A 38.20%
Emerging Markets Equity 88.30% N/A 9.77%
Equity 51.79% 33.48% 20.92%
Equity Growth 32.95% N/A 27.61%
European Growth 22.77% 22.79% 17.76%
Global Dividend Growth 8.54% 13.78% 11.41%
High Yield -7.19% 4.00% 6.54%
Income Builder 1.07% N/A 8.03%
International Magnum 18.91% N/A 10.82%
Mid-Cap Value 14.39% N/A 21.54%
Pacific Growth 59.18% -1.27% -2.67%
Putnam VT Growth and Income* -4.44% 17.23% 12.00%
Putnam VT International Growth* 53.21% N/A 27.32%
Putnam VT Voyager* 51.22% 29.30% 20.17%
Quality Income Plus -10.13% 6.02% 6.04%
Short Term Bond** N/A N/A -4.66%
Strategist 11.20% 14.27% 11.16%
S&P 500 Index 14.03% N/A 15.95%
U.S. Real Estate -7.33% N/A -1.61%
Utilities 6.63% 17.88% 12.41%
+ Please refer to the table at the beginning of this section for the inception
dates of the Portfolios.
* The performance shown for the Portfolios' 12b-1 class is based on the
performance of the non 12b-1 class, as described in the table at the beginning
of this section.
**Performance shown is not annualized.
ASSETMANAGER CONTRACTS
(WITHOUT AN OPTIONAL DEATH BENEFIT PROVISION OR PERFORMANCE INCOME BENEFIT OPTION )
10 Years or
Variable Sub-Account One Year Five Years Since Inception +
-------- ---------- -----------------
Aggressive Equity* N/A N/A 43.64%
Capital Growth 31.14% 22.23% 13.48%
Competitive Edge 24.83% N/A 12.59%
("Best Ideas")
Dividend Growth -3.99% 16.78% 11.22%
European Growth 27.02% 22.87% 17.76%
Emerging Growth 101.11% N/A 38.33%
Emerging Markets Equity 92.55% N/A 10.40%
Equity 56.04% 33.54% 20.92%
Equity Growth 37.20% N/A 28.31%
Global Dividend Growth 12.79% 13.88% 11.49%
High Yield -2.94% 4.15% 6.54%
Income Builder 5.32% N/A 9.01%
International Magnum 23.16% N/A 11.74%
Pacific Growth 63.43% -1.09% -2.51%
Quality Income Plus -5.88% 6.15% 6.04%
Short Term Bond* N/A N/A -0.41%
Strategist 15.45% 14.37% 11.16%
S&P 500 Index 18.28% N/A 18.33%
U.S. Real Estate -3.08% N/A -0.39%
Utilities 10.88% 17.97% 12.41%
*Performance shown is not annualized.
+Please refer to the table at the beginning of this section for the inception
dates of the Portfolios.
(WITH AN OPTIONAL DEATH BENEFIT PROVISION OR THE PERFORMANCE INCOME BENEFIT OPTION)
10 Years or
Variable Sub-Account One Year Five Years Since Inception+
-------- ---------- -----------------
Aggressive Equity* N/A N/A 43.41%
Capital Growth 30.97% 22.07% 13.33%
Competitive Edge 24.67% N/A 6.96%
("Best Ideas")
Dividend Growth -4.11% 16.63% 11.07%
Emerging Growth 100.85% N/A 38.15%
Emerging Markets Equity 92.30% N/A 10.26%
Equity 55.84% 33.36% 16.84%
Equity Growth 37.02% N/A 28.14%
European Growth 26.86% 22.71% 17.61%
Global Dividend Growth 12.64% 13.74% 11.35%
High Yield -3.07% 4.01% 6.17%
Income Builder 5.18% N/A 8.87%
International Magnum 23.01% N/A 11.59%
Pacific Growth 63.21% -1.22% -2.64%
Quality Income Plus -6.00% 6.02% 5.94%
Short Term Bond* N/A N/A 0.57%
Strategist 15.30% 14.22% 10.10%
S&P 500 Index 18.13% N/A 10.05%
U.S. Real Estate -3.21% N/A -0.52%
Utilities 10.74% 17.82% 12.26%
+ Please refer to the table at the beginning of this section for the inception
dates of the Portfolios.
* Performance shown is not annualized.
<PAGE>
(WITH PERFORMANCE BENEFIT COMBINATION OPTION OR DEATH BENEFIT COMBINATION OPTION)
10 Years or
Variable Sub-Account One Year Five Years Since
Inception+
-------- ---------- -----------------
Aggressive Equity* N/A N/A 43.41%
Capital Growth 30.83% 21.94% 13.21%
Competitive Edge 24.52% N/A 6.89%
("Best Ideas")
Dividend Growth -4.22% 16.50% 10.95%
Emerging Growth 100.62% N/A 37.99%
Emerging Markets Equity 92.08% N/A 10.14%
Equity 55.67% 33.22% 20.63%
Equity Growth 36.86% N/A 28.00%
European Growth 26.72% 22.57% 17.48%
Global Dividend Growth 12.52% 13.61% 11.23%
High Yield -3.18% 3.90% 6.29%
Income Builder 5.07% N/A 8.75%
International Magnum 22.86% N/A 11.47%
Pacific Growth 63.03% -1.33% -2.74%
Quality Income Plus -6.11% 5.90% 5.79%
Strategist 15.17% 14.10% 10.90%
S&P 500 Index 17.99% N/A 9.98%
U.S. Real Estate -3.32% N/A -0.63%
Utilities 10.62% 17.69% 12.14%
Short Term Bond* N/A N/A 0.57%
</TABLE>
+ Please refer to the table at the beginning of this section for the inception
dates of the Portfolios.
* Performance shown is not annualized.
<PAGE>
CALCULATION OF ACCUMULATION VALUES
The value of Accumulation Units will change each Valuation Period according to
the investment performance of the Portfolio shares purchased by each Variable
Sub-Account and the deduction of certain expenses and charges. A "Valuation
Period" is the period from the end of one Valuation Date and continues to the
end of the next Valuation Date. A Valuation Date ends at the close of regular
trading on the New York Stock Exchange (currently 3:00 p.m. Central Time).
The Accumulation Unit Value of a Variable Sub-Account for any Valuation Period
equals the Accumulation Unit Value as of the immediately preceding Valuation
Period, multiplied by the Net Investment Factor (described below) for that
Variable Sub-Account for the current Valuation Period.
NET INVESTMENT FACTOR
The Net Investment Factor for a Valuation Period is a number representing the
change, since the last Valuation Period, in the value of Variable Sub-Account
assets per Accumulation Unit due to investment income, realized or unrealized
capital gain or loss, deductions for taxes, if any, and deductions for the
mortality and expense risk charge and administrative expense charge. We
determine the Net Investment Factor for each Variable Sub-Account for any
Valuation Period by dividing (A) by (B) and subtracting (C) from the result,
where:
(A) is the sum of:
(1) the net asset value per share of the Portfolio underlying the
Variable Sub-Account determined at the end of the current
Valuation Period; plus,
(2) the per share amount of any dividend or capital gain distributions
made by the Portfolio underlying the Variable Sub-Account
during the current Valuation Period;
(B) is the net asset value per share of the Portfolio underlying the
Variable Sub-Account determined as of the end of the immediately
preceding Valuation Period; and
(C) is the annualized mortality and expense risk and administrative
expense charges divided by 365 and then multiplied by the number of
calendar days in the current Valuation Period.
<PAGE>
CALCULATION OF VARIABLE INCOME PAYMENTS
We calculate the amount of the first variable income payment under an Income
Plan by applying the Contract Value allocated to each Variable Sub-Account less
any applicable premium tax charge deducted at the time, to the income payment
tables in the Contract. We divide the amount of the first variable annuity
income payment by the Variable Sub-Account's then current Annuity Unit value to
determine the number of annuity units ("Annuity Units") upon which later income
payments will be based. To determine income payments after the first, we simply
multiply the number of Annuity Units determined in this manner for each Variable
Sub-Account by the then current Annuity Unit value ("Annuity Unit Value") for
that Variable Sub-Account.
CALCULATION OF ANNUITY UNIT VALUES
Annuity Units in each Variable Sub-Account are valued separately and Annuity
Unit Values will depend upon the investment experience of the particular
Portfolio in which the Variable Sub-Account invests. We calculate the Annuity
Unit Value for each Variable Sub-Account at the end of any Valuation Period by:
o multiplying the Annuity Unit Value at the end of the immediately
preceding Valuation Period by the Variable Sub-Account's Net
Investment Factor (described in the preceding section) for the
Period; and then
o dividing the product by the sum of 1.0 plus the assumed investment
rate for the Valuation Period.
The assumed investment rate adjusts for the interest rate assumed in the income
payment tables used to determine the dollar amount of the first variable income
payment, and is at an effective annual rate which is disclosed in the Contract.
We determine the amount of the first variable income payment paid under an
Income Plan using the income payment tables set out in the Contracts. The
Contracts include tables that differentiate on the basis of sex, except in
states that require the use of unisex tables.
<PAGE>
GENERAL MATTERS
INCONTESTABILITY
We will not contest the Contract after we issue it.
SETTLEMENTS
The Contract must be returned to us prior to any settlement. We must receive due
proof of the Contract owner(s) death (or Annuitant's death if there is a
non-natural Contract owner) before we will settle a death claim.
SAFEKEEPING OF THE VARIABLE ACCOUNT'S ASSETS
We hold title to the assets of the Variable Account. We keep the assets
physically segregated and separate and apart from our general corporate assets.
We maintain records of all purchases and redemptions of the Portfolio shares
held by each of the Variable Sub-Accounts.
The Portfolios do not issue stock certificates. Therefore, we hold the Variable
Account's assets in open account in lieu of stock certificates. See the
Portfolios' prospectuses for a more complete description of the custodian of the
Portfolios.
PREMIUM TAXES
Applicable premium tax rates depend on the Contract owner's state of residency
and the insurance laws and our status in those states where premium taxes are
incurred. Premium tax rates may be changed by legislation, administrative
interpretations, or judicial acts.
TAX RESERVES
We do not establish capital gains tax reserves for any Variable Sub-Account nor
do we deduct charges for tax reserves because we believe that capital gains
attributable to the Variable Account will not be taxable. However, we reserve
the right to deduct charges to establish tax reserves for potential taxes on
realized or unrealized capital gains.
<PAGE>
FEDERAL TAX MATTERS
THE FOLLOWING DISCUSSION IS GENERAL AND IS NOT INTENDED AS TAX ADVICE. WE MAKE
NO GUARANTEE REGARDING THE TAX TREATMENT OF ANY CONTRACT OR TRANSACTION
INVOLVING A CONTRACT.
Federal, state, local and other tax consequences of ownership or receipt of
distributions under an annuity contract depend on the individual circumstances
of each person. If you are concerned about any tax consequences with regard to
your individual circumstances, you should consult a competent tax adviser.
TAXATION OF NORTHBROOK LIFE INSURANCE COMPANY
Northbrook is taxed as a life insurance company under Part I of Subchapter L of
the Internal Revenue Code. Since the Variable Account is not an entity separate
from Northbrook, and its operations form a part of Northbrook, it will not be
taxed separately as a "Regulated Investment Company" under Subchapter M of the
Code. Investment income and realized capital gains of the Variable Account are
automatically applied to increase reserves under the contract. Under existing
federal income tax law, Northbrook believes that the Variable Account investment
income and capital gains will not be taxed to the extent that such income and
gains are applied to increase the reserves under the contract. Accordingly,
Northbrook does not anticipate that it will incur any federal income tax
liability attributable to the Variable Account, and therefore Northbrook does
not intend to make provisions for any such taxes. If Northbrook is taxed on
investment income or capital gains of the Variable Account, then Northbrook may
impose a charge against the Variable Account in order to make provision for such
taxes.
EXCEPTIONS TO THE NON-NATURAL OWNER RULE
There are several exceptions to the general rule that annuity contracts held by
a non-natural owner are not treated as annuity contracts for federal income tax
purposes. Contracts will generally be treated as held by a natural person if the
nominal owner is a trust or other entity which holds the Contract as agent for a
natural person. However, this special exception will not apply in the case of an
employer who is the nominal owner of an annuity contract under a non-qualified
deferred compensation arrangement for its employees. Other exceptions to the
non-natural owner rule are: (1) contracts acquired by an estate of a decedent by
reason of the death of the decedent; (2) certain qualified contracts; (3)
contracts purchased by employers upon the termination of certain qualified
plans; (4) certain contracts used in connection with structured settlement
agreements, and (5) contracts purchased with a single premium when the annuity
starting date is no later than a year from purchase of the annuity and
substantially equal periodic payments are made, not less frequently than
annually, during the annuity period.
IRS REQUIRED DISTRIBUTION AT DEATH RULES
In order to be considered an annuity contract for federal income tax purposes,
an annuity contract must provide: (1) if any owner dies on or after the annuity
start date but before the entire interest in the contract has been distributed,
the remaining portion of such interest must be distributed at least as rapidly
as under 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.
<PAGE>
QUALIFIED PLANS
The 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. Contract owners and
participants under the plan and annuitants and beneficiaries under the Contract
may be subject to the terms and conditions of the plan regardless of the terms
of the Contract.
INDIVIDUAL RETIREMENT ANNUITIES
Section 408 of the Code permits eligible individuals to contribute to an
individual retirement program known as an Individual Retirement Annuity (IRA).
Individual Retirement Annuities are subject to limitations on the amount that
can be contributed and on the time when distributions may commence. Certain
distributions from other types of qualified plans may be "rolled over" on a
tax-deferred basis into an Individual Retirement Annuity. An IRA generally may
not provide life insurance, but it may provide a death benefit that equals the
greater of the premiums paid and the Contract's Cash Value. The Contract
provides a death benefit that in certain circumstances may exceed the greater of
the payments and the Contract Value. It is possible that the death benefit could
be viewed as violating the prohibition on investment in life insurance contracts
with the result that the Contract would not be viewed as satisfying the
requirements of an IRA.
ROTH INDIVIDUAL RETIREMENT ANNUITIES
Section 408A of the Code permits eligible individuals to make nondeductible
contributions to an individual retirement program known as a Roth Individual
Retirement Annuity. Roth Individual Retirement Annuities are subject to
limitations on the amount that can be contributed and on the time when
distributions may commence. "Qualified distributions" from Roth Individual
Retirement Annuities are not includible in gross income. "Qualified
distributions" are any distributions made more than five taxable years after the
taxable year of the first contribution to the Roth Individual Retirement
Annuity, and which are made on or after the date the individual attains age 59
1/2, made to a beneficiary after the owner's death, attributable to the owner
being disabled or for a first time home purchase (first time home purchases are
subject to a lifetime limit of $10,000). "Nonqualified distributions" are
treated as made from contributions first and are includible in gross income to
the extent such distributions exceed the contributions made to the Roth
Individual Retirement Annuity. The taxable portion of a "nonqualified
distribution" may be subject to the 10% penalty tax on premature distributions.
Subject to certain limitations, a traditional Individual Retirement Account or
Annuity may be converted or "rolled over" to a Roth Individual Retirement
Annuity. The taxable portion of a conversion or rollover distribution is
includible in gross income, but is exempted from the 10% penalty tax on
premature distributions.
SIMPLIFIED EMPLOYEE PENSION PLANS
Section 408(k) of the Code allows employers to establish simplified employee
pension plans for their employees using the employees' individual retirement
annuities if certain criteria are met. Under these plans the employer may,
within specified limits, make deductible contributions on behalf of the
employees to their individual retirement annuities. Employers intending to use
the Contract in connection with such plans should seek competent advice. In
particular, employers should consider that an IRA generally may not provide life
insurance, but it may provide a death benefit that equals the greater of the
premiums paid and the contract's cash value. The Contract provides a death
benefit that in certain circumstances may exceed the greater of the payments and
the Contract Value.
SAVINGS INCENTIVE MATCH PLANS FOR EMPLOYEES (SIMPLE PLANS)
Sections 408(p) and 401(k) of the Code allow employers with 100 or fewer
employees to establish SIMPLE retirement plans for their employees. SIMPLE plans
may be structured as a SIMPLE retirement account using an employee's IRA to hold
the assets or as a Section 401(k) qualified cash or deferred arrangement. In
general, a SIMPLE plan consists of a salary deferral program for eligible
employees and matching or nonelective contributions made by employers. Employers
intending to use the Contract in conjunction with SIMPLE plans should seek
competent tax and legal advice.
TAX SHELTERED ANNUITIES
Section 403(b) of the Code permits public school employees and employees of
certain types of tax-exempt organizations (specified in Section 501(c)(3) of the
Code) to have their employers purchase annuity contracts for them, and subject
to certain limitations, to exclude the purchase payments from the employees'
gross income. An annuity contract used for a Section 403(b) plan must provide
that distributions attributable to salary reduction contributions made after
12/31/88, and all earnings on salary reduction contributions, may be made only
on or after the date the employee attains age 59 1/2, separates from service,
dies, becomes disabled or on the account of hardship (earnings on salary
reduction contributions may not be distributed for hardship). These limitations
do not apply to withdrawals where Northbrook is directed to transfer some or all
of the Contract Value to another 403(b) plan.
CORPORATE AND SELF-EMPLOYED PENSION AND PROFIT SHARING PLANS
Sections 401(a) and 403(a) of the Code permit corporate employers to establish
various types of tax favored retirement plans for employees. The Self-Employed
Individuals Retirement Act of 1962, as amended, (commonly referred to as "H.R.
10" or "Keogh") permits self-employed individuals to establish tax favored
retirement plans for themselves and their employees. Such retirement plans may
permit the purchase of annuity contracts in order to provide benefits under the
plans.
STATE AND LOCAL GOVERNMENT AND TAX-EXEMPT ORGANIZATION DEFERRED
COMPENSATION PLANS
Section 457 of the Code permits employees of state and local governments and
tax-exempt organizations to defer a portion of their compensation without paying
current taxes. The employees must be participants in an eligible deferred
compensation plan. To the extent the Contracts are used in connection with an
eligible plan, employees are considered general creditors of the employer and
the employer as owner of the contract has the sole right to the proceeds of the
contract. Generally, under the non-natural owner rules, such Contracts are not
treated as annuity contracts for federal income tax purposes. Under these plans,
contributions made for the benefit of the employees will not be includible in
the employees' gross income until distributed from the plan. However, under a
Section 457 plan all the compensation deferred under the plan must remain solely
the property of the employer, subject only to the claims of the employer's
general creditors, until such time as made available to the employee or a
beneficiary.
<PAGE>
EXPERTS
The financial statements of Northbrook as of December 31, 1999 and 1998 and for
each of the three years in the period ended December 31, 1999 and the related
financial statement schedule that appear in this Statement of Additional
Information have been audited by Deloitte & Touche LLP, independent auditors, as
stated in their report appearing herein, and are included in reliance upon the
report of such firm given upon their authority as experts in accounting and
auditing.
The financial statements of the Variable Account as of December 31, 1999 and for
each of the periods in the two years then ended that appear in this Statement of
Additional Information have been audited by Deloitte & Touche LLP, independent
auditors, as stated in their report appearing herein, and are included in
reliance upon the report of such firm given upon their authority as experts in
accounting and auditing.
FINANCIAL STATEMENTS
The financial statements of the Variable Account as of December 31, 1999 and for
each of the periods in the two years then ended, the financial statements of
Northbrook as of December 31, 1999 and 1998 and for each of the three years in
the period ended December 31, 1999 and related financial statement schedule and
the accompanying Independent Auditors' Reports appear in the pages that follow.
The financial statements and schedule of Northbrook included herein should be
considered only as bearing upon the ability of Northbrook to meet its
obligations under the Contracts.
<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", an affiliate of The Allstate Corporation)
as of December 31, 1999 and 1998, and the related Statements of Operations and
Comprehensive Income, Shareholder's Equity and Cash Flows for each of the three
years in the period ended December 31, 1999. Our audits also included Schedule
IV -Reinsurance. These financial statements and financial statement schedule are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements and financial statement schedule based
on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all material
respects, the financial position of the Company as of December 31, 1999 and
1998, and the results of its operations and its cash flows for each of the three
years in the period ended December 31, 1999 in conformity with generally
accepted accounting principles. Also, in our opinion, Schedule IV - Reinsurance,
when considered in relation to the basic financial statements taken as a whole,
presents fairly, in all material respects, the information set forth therein.
/s/ Deloitte & Touche LLP
Chicago, Illinois
February 25, 2000
<PAGE>
<TABLE>
<CAPTION>
NORTHBROOK LIFE INSURANCE COMPANY
STATEMENTS OF FINANCIAL POSITION
December 31,
-----------------------------
1999 1998
------------- ------------
($ in thousands, except par value data)
<S> <C> <C>
ASSETS
Investments
Fixed income securities, at fair value
(amortized cost $89,205 and $81,156) $ 86,998 $ 86,336
Short-term 3,170 5,083
------------ ------------
Total investments 90,168 91,419
Cash 21 --
Reinsurance recoverable from
Allstate Life Insurance Company 2,022,502 2,148,091
Other assets 5,997 6,705
Separate Accounts 8,211,996 7,031,083
------------ ------------
TOTAL ASSETS $ 10,330,684 $ 9,277,298
============ ============
LIABILITIES
Reserve for life-contingent contract benefits $ 150,587 $ 145,055
Contractholder funds 1,871,933 2,003,122
Current income taxes payable 2,171 1,830
Deferred income taxes 746 3,316
Payable to affiliates, net 5,990 5,085
Separate Accounts 8,211,996 7,031,083
------------ ------------
TOTAL LIABILITIES 10,243,423 9,189,491
============ ============
Commitments and Contingent Liabilities (Note 12)
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
Retained income 29,596 25,340
Accumulated other comprehensive (loss) income:
Unrealized net capital (losses) gains (1,435) 3,367
------------ ------------
TOTAL ACCUMULATED OTHER COMPREHENSIVE (LOSS) INCOME (1,435) 3,367
------------ ------------
TOTAL SHAREHOLDER'S EQUITY 87,261 87,807
------------ ------------
TOTAL LIABILITIES AND SHAREHOLDER'S EQUITY $ 10,330,684 $ 9,277,298
============ ============
</TABLE>
See notes to financial statements.
2
<PAGE>
NORTHBROOK LIFE INSURANCE COMPANY
STATEMENTS OF OPERATIONS
AND COMPREHENSIVE INCOME
<TABLE>
<CAPTION>
Year Ended December 31,
----------------------------
($ in thousands) 1999 1998 1997
------- ------- -------
<S> <C> <C> <C>
REVENUES
Net investment income $ 6,010 $ 5,691 $ 5,146
Realized capital gains and losses 510 2 (68)
------- ------- -------
Income from operations
before income tax expense 6,520 5,693 5,078
Income tax expense 2,264 1,995 1,756
------- ------- -------
NET INCOME 4,256 3,698 3,322
------- ------- -------
Other comprehensive (loss) income, after-tax
Change in unrealized net capital gains and losses (4,802) 825 1,256
------- ------- -------
COMPREHENSIVE (LOSS) INCOME $ (546) $ 4,523 $ 4,578
======= ======= =======
</TABLE>
See notes to financial statements.
3
<PAGE>
NORTHBROOK LIFE INSURANCE COMPANY
STATEMENTS OF SHAREHOLDER'S EQUITY
<TABLE>
<CAPTION>
December 31,
--------------------------------
1999 1998 1997
--------- --------- ----------
<S> <C> <C> <C>
($ in thousands)
COMMON STOCK $ 2,500 $ 2,500 $ 2,500
-------- -------- --------
ADDITIONAL CAPITAL PAID-IN $ 56,600 $ 56,600 $ 56,600
-------- -------- --------
RETAINED INCOME
Balance, beginning of year $ 25,340 $ 21,642 $ 18,320
Net income 4,256 3,698 3,322
-------- -------- --------
Balance, end of year 29,596 25,340 21,642
-------- -------- --------
ACCUMULATED OTHER COMPREHENSIVE (LOSS) INCOME
Balance, beginning of year $ 3,367 $ 2,542 $ 1,286
Change in unrealized net capital gains
and losses (4,802) 825 1,256
-------- -------- --------
Balance, end of year (1,435) 3,367 2,542
-------- -------- --------
TOTAL SHAREHOLDER'S EQUITY $ 87,261 $ 87,807 $ 83,284
======== ======== ========
</TABLE>
See notes to financial statements.
4
<PAGE>
NORTHBROOK LIFE INSURANCE COMPANY
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Year Ended December 31,
--------------------------------
($ in thousands) 1999 1998 1997
-------- -------- --------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 4,256 $ 3,698 $ 3,322
Adjustments to reconcile net income to net cash
provided by operating activities
Amortization and other non-cash items 559 518 516
Realized capital gains and losses (510) (2) 68
Changes in:
Life-contingent contract benefits and
contractholder funds (68) 273 205
Income taxes payable 355 1,866 (480)
Other operating assets and liabilities 924 4,126 (264)
-------- -------- --------
Net cash provided by operating activities 5,516 10,479 3,367
-------- -------- --------
CASH FLOWS FROM INVESTING ACTIVITIES
Fixed income securities
Proceeds from sales 17,992 1,922 1,606
Investment collections 6,555 10,253 10,036
Investment purchases (32,050) (20,690) (18,568)
Change in short-term investments, net 2,008 (1,964) 3,559
-------- -------- --------
Net cash used in investing activities (5,495) (10,479) (3,367)
-------- -------- --------
NET INCREASE IN CASH 21 -- --
CASH AT THE BEGINNING OF YEAR -- -- --
-------- -------- --------
CASH AT END OF YEAR $ 21 $ -- $ --
======== ======== ========
</TABLE>
See notes to financial statements.
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"). These financial statements have been prepared in conformity with
generally accepted accounting principles.
To conform with the 1999 presentation, certain amounts in the prior years'
financial statements and notes have been reclassified.
NATURE OF OPERATIONS
The Company markets savings and life insurance products exclusively through Dean
Witter Reynolds, Inc. ("Dean Witter") (see Note 4), a wholly owned subsidiary of
Morgan Stanley Dean Witter & Co. Savings products include deferred annuities and
immediate annuities without life contingencies. Deferred annuities include fixed
rate, market value adjusted, and variable annuities. Life insurance consists of
interest-sensitive life, immediate annuities with life contingencies, and
variable life insurance. In 1999, substantially all of the Company's statutory
premiums and deposits were from annuities.
Annuity contracts and life insurance policies issued by the Company are subject
to discretionary surrender or withdrawal by customers, subject to applicable
surrender charges. These policies and contracts are reinsured primarily with
ALIC (see Note 3), which invests premiums and deposits to provide cash flows
that will be used to fund future benefits and expenses.
The Company monitors economic and regulatory developments which have the
potential to impact its business. Recently enacted federal legislation will
allow for banks and other financial organizations to have greater participation
in the securities and insurance businesses. This legislation may present an
increased level of competition for sales of the Company's products. Furthermore,
the market for deferred annuities and interest-sensitive life insurance is
enhanced by the tax incentives available under current law. Any legislative
changes which lessen these incentives are likely to negatively impact the demand
for these products.
Additionally, traditional demutualizations of mutual insurance companies and
enacted and pending state legislation to permit mutual insurance companies to
convert to a hybrid structure known as a mutual holding company could have a
number of significant effects on the Company by (1) increasing industry
competition through consolidation caused by mergers and acquisitions related to
the new corporate form of business; and (2) increasing competition in the
capital markets.
The Company is authorized to sell life and savings products in all states except
New York, as well as in the District of Columbia and Puerto Rico. The top
geographic locations for statutory premiums and deposits for the Company were
California, Florida, and Texas for the year ended December 31, 1999. No other
jurisdiction accounted for more than 5% of statutory premiums and deposits.
Substantially all premiums and deposits are ceded to ALIC under reinsurance
agreements.
6
<PAGE>
NORTHBROOK LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS
($ in thousands)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
INVESTMENTS
Fixed income securities include bonds and mortgage-backed securities. All fixed
income securities are carried at fair value and may be sold prior to their
contractual maturity ("available for sale"). The difference between amortized
cost and fair value, net of deferred income taxes, is reflected as a component
of shareholder's equity. Provisions are recognized for declines in the value of
fixed income securities that are other than temporary. Such writedowns are
included in realized capital gains and losses. Short-term investments are
carried at cost or amortized cost, which approximates fair value.
Investment income consists primarily of interest and short-term investment
dividends. Interest is recognized on an accrual basis and dividends are recorded
at the ex-dividend date. Interest income on mortgage-backed securities is
determined on the effective yield method, based on the estimated principal
repayments. Accrual of income is suspended for fixed income securities that are
in default or when the receipt of interest payments is in doubt. Realized
capital gains and losses are determined on a specific identification basis.
REINSURANCE RECOVERABLE
The Company has reinsurance agreements whereby substantially all premiums,
contract charges, credited interest, policy benefits and certain expenses are
ceded to ALIC. Such amounts are reflected net of such reinsurance in the
statements of operations and comprehensive income. Investment income earned on
the assets which support contractholder funds and the reserve for
life-contingent contract benefits is not included in the Company's financial
statements as those assets are owned and managed under terms of reinsurance
agreements. Reinsurance recoverable and the related reserve for life-contingent
contract benefits and contractholder funds are reported separately in the
statements of financial position. The Company continues to have primary
liability as the direct insurer for risks reinsured.
RECOGNITION OF INSURANCE REVENUE AND RELATED BENEFITS AND INTEREST CREDITED
Interest-sensitive life contracts are insurance contracts whose terms are not
fixed and guaranteed. The terms that may be changed include premiums paid by the
contractholder, interest credited to the contractholder account balance and one
or more amounts assessed against the contractholder. Premiums from these
contracts are reported as deposits to contractholder funds. Contract charge
revenue consists of fees assessed against the contractholder account balance for
cost of insurance (mortality risk), contract administration and surrender
charges. Contract benefits include interest credited to contracts and claims
incurred in excess of the related contractholder account balance.
Contracts that do not subject the Company to significant risk arising from
mortality or morbidity are referred to as investment contracts. Fixed rate
annuities, market value adjusted annuities and immediate annuities without life
contingencies are considered investment contracts. Deposits received for such
contracts are reported as deposits to contractholder funds. Contract charge
revenue for investment contracts consists of charges assessed against the
contractholder account balance for contract
7
<PAGE>
NORTHBROOK LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS
($ in thousands)
administration and surrender charges. Contract benefits include interest
credited and claims incurred in excess of the related contractholder account
balance.
Crediting rates for fixed rate annuities and interest-sensitive life contracts
are adjusted periodically by the Company to reflect current market conditions.
Investment contracts also include variable annuity and variable life contracts
which are sold as Separate Accounts products. The assets supporting these
products are legally segregated and available only to settle Separate Accounts
contract obligations. Deposits received are reported as Separate Accounts
liabilities. The Company's contract charge revenue for these contracts consists
of charges assessed against the Separate Accounts fund balances for contract
maintenance, administration, mortality, expense and surrenders.
All premiums, contract charges, contract benefits and interest credited are
reinsured.
INCOME TAXES
The income tax provision is calculated under the liability method and presented
net of reinsurance. Deferred tax assets and liabilities are recorded based on
the difference between the financial statement and tax bases of assets and
liabilities at the enacted tax rates. Deferred income taxes arise primarily from
unrealized capital gains and losses on fixed income securities carried at fair
value and differences in the tax bases of investments.
SEPARATE ACCOUNTS
The Company issues deferred variable annuity and variable life contracts, the
assets and liabilities of which are legally segregated and recorded as assets
and liabilities of the Separate Accounts. Absent any contract provisions wherein
the Company contractually guarantees either a minimum return or account value to
the beneficiaries of the contractholders in the form of a death benefit, the
contractholders bear the investment risk that the Separate Accounts' funds may
not meet their stated investment objectives.
The assets of the Separate Accounts are carried at fair value. Separate Accounts
liabilities represent the contractholders' claims to the related assets and are
carried at the fair value of the assets. In the event that the asset value of
certain contractholder accounts are projected to be below the value guaranteed
by the Company, a liability is established through a charge to earnings.
Investment income and realized capital gains and losses of the Separate Accounts
accrue directly to the contractholders and therefore, are not included in the
Company's statements of operations and comprehensive income. Revenues to the
Company from Separate Accounts consist of contract maintenance and
administration fees, and mortality, surrender and expense charges.
RESERVE FOR LIFE-CONTINGENT CONTRACT BENEFITS
The reserve for life-contingent contract benefits, which relates to immediate
annuities with life contingencies and certain variable annuity contract
guarantees, is computed on the basis of assumptions as to mortality, future
investment yields, terminations and expenses at the time the policy is issued.
These assumptions include provisions for adverse deviation and generally vary by
such characteristics as type of coverage, year
8
<PAGE>
NORTHBROOK LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS
($ in thousands)
of issue and policy duration. Detailed reserve assumptions and reserve interest
rates are outlined in Note 7.
CONTRACTHOLDER FUNDS
Contractholder funds arise from the issuance of interest-sensitive life and
certain investment contracts. Deposits received are recorded as interest-bearing
liabilities. Contractholder funds are equal to deposits received, net of
commissions, and interest credited to the benefit of the contractholder less
withdrawals, mortality charges and administrative expenses. Detailed information
on crediting rates and surrender and withdrawal protection on contractholder
funds are outlined in Note 7.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the amounts reported in the financial statements and accompanying notes.
Actual results could differ from those estimates.
NEW ACCOUNTING STANDARDS
In 1999, the Company adopted Statement of Position ("SOP") 97-3, "Accounting by
Insurance and Other Enterprises for Insurance-Related Assessments." The SOP
provides guidance concerning when to recognize a liability for insurance-related
assessments and how those liabilities should be measured. Specifically,
insurance-related assessments should be recognized as liabilities when all of
the following criteria have been met: 1) an assessment has been imposed or it is
probable that an assessment will be imposed, 2) the event obligating an entity
to pay an assessment has occurred and 3) the amount of the assessment can be
reasonably estimated. Adoption of this statement was not material to the
Company's results of operations or financial position.
3. RELATED PARTY TRANSACTIONS
REINSURANCE
The Company has reinsurance agreements whereby substantially all premiums,
contract charges, credited interest, policy benefits and certain expenses are
ceded to ALIC and reflected net of such reinsurance in the statements of
operations and comprehensive income. Reinsurance recoverable and the related
reserve for life-contingent contract benefits and contracholder funds are
reported separately in the statements of financial position. The Company
continues to have primary liability as the direct insurer for risks reinsured.
Investment income earned on the assets which support contractholder funds and
the reserve for life-contingent contract benefits is not included in the
Company's financial statements as those assets are owned and managed under the
terms of the reinsurance agreements. The following amounts were ceded to ALIC
under reinsurance agreements.
9
<PAGE>
NORTHBROOK LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS
($ in thousands)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Premiums $ 2,966 $ 2,528 $ 1,979
Contract charges 118,290 102,218 83,559
Credited interest, policy benefits, and certain
expenses 222,513 217,428 201,526
</TABLE>
BUSINESS OPERATIONS
The Company utilizes services provided by AIC and ALIC and business facilities
owned or leased, and operated by AIC in conducting its business activities. The
Company reimburses AIC and ALIC for the operating expenses incurred on behalf of
the Company. The Company is charged for the cost of these operating expenses
based on the level of services provided. Operating expenses, including
compensation and retirement and other benefit programs, allocated to the Company
were $33,892, $26,230 and $23,978 in 1999, 1998 and 1997, respectively. Of these
costs, the Company retains investment related expenses. All other costs are
ceded to ALIC under reinsurance agreements.
4. EXCLUSIVE DISTRIBUTION AGREEMENT
The Company has a strategic alliance with Dean Witter to develop, market and
distribute proprietary savings and life insurance products through Morgan
Stanley Dean Witter Financial Advisors. Affiliates of Dean Witter are the
investment managers for the Morgan Stanley Dean Witter Variable Investment
Series, Morgan Stanley Universal Funds, Inc. and the Van Kampen American Capital
Life Investment Trust, the funds in which certain assets of the Separate
Accounts products are invested. Under the terms of the alliance, the Company has
agreed to use Dean Witter as an exclusive distribution channel for the Company's
products. In addition to the Company's products, Dean Witter markets other
products which compete with those of the Company.
Pursuant to the alliance agreement, Dean Witter provides approximately half of
the statutory capital necessary to maintain these products on the Company's
books through loans to a subsidiary of AIC. AIC unconditionally guarantees the
repayment of these loans. The Company shares approximately half the net profits
with Dean Witter on contracts written under the alliance.
The strategic alliance is cancelable for new business by either party by giving
30 days written notice, however, the Company believes the benefits derived by
Dean Witter will preserve the alliance.
10
<PAGE>
NORTHBROOK LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS
($ in thousands)
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
COST GAINS LOSSES VALUE
--------------- ----------- ------------- -------------
<S> <C> <C> <C> <C>
AT DECEMBER 31, 1999
U.S. government and agencies $ 8,660 $ 131 $ (57) $ 8,734
Municipal 1,155 6 (108) 1,053
Corporate 61,049 26 (2,541) 58,534
Mortgage-backed securities 18,341 822 (486) 18,677
------- ------- ------- -------
Total fixed income securities $89,205 $ 985 $(3,192) $86,998
======= ======= ======= =======
AT DECEMBER 31, 1998
U.S. government and agencies $ 8,648 $ 1,469 $ -- $10,117
Municipal 590 11 -- 601
Corporate 33,958 1,634 (16) 35,576
Mortgage-backed securities 37,960 2,250 (168) 40,042
------- ------- ------- -------
Total fixed income securities $81,156 $ 5,364 $ (184) $86,336
======= ======= ======= =======
</TABLE>
SCHEDULED MATURITIES
The scheduled maturities for fixed income securities are as follows at December
31, 1999:
<TABLE>
<CAPTION>
AMORTIZED FAIR
COST VALUE
---- -----
<S> <C> <C>
Due in one year or less $ 50 $ 50
Due after one year through five years 16,690 16,538
Due after five years through ten years 46,933 44,542
Due after ten years 7,191 7,191
------- ------
70,864 68,321
Mortgage-backed securities 18,341 18,677
------- -------
Total $89,205 $86,998
======= =======
</TABLE>
Actual maturities may differ from those scheduled as a result of prepayments by
the issuers.
11
<PAGE>
NORTHBROOK LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS
($ in thousands)
<TABLE>
<CAPTION>
NET INVESTMENT INCOME
YEAR ENDED DECEMBER 31, 1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Fixed income securities $ 5,881 $ 5,616 $ 5,364
Short-term investments 261 190 84
------- ------- -------
Investment income, before expense 6,142 5,806 5,448
Investment expense 132 115 302
------- ------- -------
Net investment income $ 6,010 $ 5,691 $ 5,146
======= ======= =======
REALIZED CAPITAL GAINS AND LOSSES
YEAR ENDED DECEMBER 31, 1999 1998 1997
------- ------- -------
Fixed income securities $ 510 $ 2 $ (70)
Short-term investments -- -- 2
------- ------- -------
Realized capital gains and losses 510 2 (68)
Income taxes (178) (1) 24
------- ------- -------
Realized capital gains and losses, after tax $ 332 $ 1 $ (44)
======= ======= =======
</TABLE>
Excluding calls and prepayments, gross gains of $629 were realized on sales of
fixed income securities during 1999 and gross losses of $119, $9 and $70 were
realized on sales of fixed income securities during 1999, 1998 and 1997,
respectively. There were no gross gains realized on sales of fixed income
securities during 1998 and 1997.
UNREALIZED NET CAPITAL GAINS AND LOSSES
Unrealized net capital gains on fixed income securities included in
shareholder's equity at December 31, 1999 are as follows:
<TABLE>
<CAPTION>
COST/ FAIR GROSS UNREALIZED UNREALIZED
AMORTIZED COST VALUE GAINS LOSSES NET LOSSES
-------------- ----- ----- ------ ----------
<S> <C> <C> <C> <C> <C>
Fixed income securities $ 89,205 $ 86,998 $ 985 $ (3,192) $ (2,207)
======== ======== ======== ========
Deferred income taxes 772
--------
Unrealized net capital losses $ (1,435)
========
CHANGE IN UNREALIZED NET CAPITAL GAINS
YEAR ENDED DECEMBER 31, 1999 1998 1997
-------- -------- --------
Fixed income securities $ (7,387) $ 1,269 $ 1,932
Deferred income taxes 2,585 (444) (676)
-------- -------- --------
(Decrease) increase in unrealized net
capital gains $ (4,802) $ 825 $ 1,256
======== ======== ========
</TABLE>
SECURITIES ON DEPOSIT
At December 31, 1999, fixed income securities with a carrying value of $7,856
were on deposit with regulatory authorities as required by law.
12
<PAGE>
NORTHBROOK LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS
($ in thousands)
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 presented below are not necessarily indicative of the
amounts the Company might pay or receive in actual market transactions.
Potential taxes and other transaction costs have not been considered in
estimating fair value. The disclosures that follow do not reflect the fair value
of the Company as a whole since a number of the Company's significant assets
(including reinsurance recoverable) and liabilities (including
interest-sensitive life insurance reserves and deferred income taxes) are not
considered financial instruments and are not carried at fair value. Other assets
and liabilities considered financial instruments, such as accrued investment
income and cash are generally of a short-term nature. Their carrying values are
assumed to approximate fair value.
FINANCIAL ASSETS
The carrying value and fair value of financial assets at December 31, are as
follows:
<TABLE>
<CAPTION>
1999 1998
---- ----
CARRYING FAIR CARRYING FAIR
VALUE VALUE VALUE VALUE
----- ----- ----- -----
<S> <C> <C> <C> <C>
Fixed income securities $ 86,998 $ 86,998 $ 86,336 $ 86,336
Short-term investments 3,170 3,170 5,083 5,083
Separate Accounts 8,211,996 8,211,996 7,031,083 7,031,083
</TABLE>
Fair values for fixed income securities are based on quoted market prices where
available. Non-quoted securities are valued based on discounted cash flows using
current interest rates for similar securities. Short-term investments are highly
liquid investments with maturities of less than one year whose carrying value
are deemed to approximate fair value. Separate Accounts assets are carried in
the statements of financial position at fair value based on quoted market
prices.
FINANCIAL LIABILITIES
The carrying value and fair value of financial liabilities at December 31, are
as follows:
<TABLE>
<CAPTION>
1999 1998
---- ----
CARRYING FAIR CARRYING FAIR
VALUE VALUE VALUE VALUE
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Contractholder funds on
investment contracts $1,735,843 $1,675,910 $1,839,114 $1,814,684
Separate Accounts 8,211,996 8,211,996 7,031,083 7,031,083
</TABLE>
The fair value of contractholder funds on investment contracts is based on the
terms of the underlying contracts. Reserves on investment contracts with no
stated maturities (single premium and flexible premium deferred annuities) are
valued at the account balance less surrender charges. The fair value of
immediate annuities and annuities without life contingencies with fixed terms is
estimated using discounted cash flow calculations based on interest rates
currently offered for contracts with similar terms and durations. Separate
Accounts liabilities are carried at the fair value of the underlying assets.
13
<PAGE>
NORTHBROOK LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS
($ in thousands)
7. RESERVE FOR LIFE-CONTINGENT CONTRACT BENEFITS AND CONTRACTHOLDER FUNDS
At December 31, the reserve for life-contingent contract benefits consists of
the following:
<TABLE>
<CAPTION>
1999 1998
---- ----
<S> <C> <C>
Immediate annuities:
Structured settlement annuities $109,907 $108,215
Other immediate annuities 40,680 36,840
-------- --------
Total life-contingent contract benefits $150,587 $145,055
======== ========
</TABLE>
The assumptions for mortality generally utilized in calculating reserves
include, the U.S. population with projected calendar year improvements and age
setbacks for impaired lives for structured settlement annuities; and the 1983
group annuity mortality table for other immediate annuities. Interest rate
assumptions vary from 3.5% to 10.0% for immediate annuities. Other estimation
methods used include the present value of contractually fixed future benefits
for structured settlement annuities and other immediate annuities.
Premium deficiency reserves are established, if necessary, for the structured
settlement annuity business, to the extent the unrealized gains on fixed income
securities would result in a premium deficiency had those gains actually been
realized. The Company did not have a premium deficiency reserve at December 31,
1999 and 1998.
At December 31, contractholder funds consists of the following:
<TABLE>
<CAPTION>
1999 1998
---- ----
<S> <C> <C>
Interest-sensitive life $ 173,867 $ 178,589
Fixed annuities:
Immediate annuities 78,197 77,291
Deferred annuities 1,619,869 1,747,242
---------- ----------
Total contractholder funds $1,871,933 $2,003,122
========== ==========
</TABLE>
Contractholder funds are equal to deposits received net of commissions and
interest credited to the benefit of the contractholder less withdrawals,
mortality charges and administrative expenses. Interest rates credited range
from 4.0% to 7.2% for interest-sensitive life contracts; 3.5% to 10.2% for
immediate annuities and 3.4% to 8.0% for deferred annuities. Withdrawal and
surrender charge protection includes: i) for interest- sensitive life, either a
percentage of account balance or dollar amount grading off generally over 20
years; and, ii) for deferred annuities not subject to a market value adjustment,
either a declining or a level percentage charge generally over nine years or
less. Approximately 25% of deferred annuities are subject to a market value
adjustment.
14
<PAGE>
NORTHBROOK LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS
($ in thousands)
8. CORPORATION RESTRUCTURING
On November 10, 1999, the Corporation announced a series of strategic
initiatives to aggressively expand its selling and service capabilities. The
Corporation also announced that it is implementing a program to reduce expenses
by approximately $600 million. The reduction will result in the elimination of
approximately 4,000 current non-agent positions, across all employment grades
and categories by the end of 2000, or approximately 10% of the Corporation's
non-agent work force. The impact of the reduction in employee positions is not
expected to materially impact the results of operations of the Company.
These cost reductions are part of a larger initiative to redeploy the cost
savings to finance new initiatives including investments in direct access and
internet channels for new sales and service capabilities, new competitive
pricing and underwriting techniques, new agent and claim technology and enhanced
marketing and advertising. As a result of the cost reduction program, the
Corporation recorded restructuring and related charges of $81 million pretax
during the fourth quarter of 1999. The Corporation anticipates that additional
pretax restructuring related charges of approximately $100 million will be
expensed as incurred throughout 2000. The Company's allocable share of these
expenses were immaterial in 1999 and are expected to be immaterial in 2000.
9. INCOME TAXES
The Company joins the Corporation and its other eligible domestic subsidiaries
(the "Allstate Group") in the filing of a consolidated federal income tax return
and is party to a federal income tax allocation agreement (the "Allstate Tax
Sharing Agreement"). Under the Allstate Tax Sharing Agreement, the Company pays
to or receives from the Corporation the amount, if any, by which the Allstate
Group's federal income tax liability is affected by virtue of inclusion of the
Company in the consolidated federal income tax return. Effectively, this results
in the Company's annual income tax provision being computed, with adjustments,
as if the Company filed a separate return.
Prior to June 30, 1995, the Corporation was a subsidiary of Sears Roebuck & Co.
("Sears") and, with its eligible domestic subsidiaries, was included in the
Sears consolidated federal income tax return and federal income tax allocation
agreement. Effective June 30, 1995, the Corporation and Sears entered into a new
tax sharing agreement, which governs their respective rights and obligations
with respect to federal income taxes for all periods during which the
Corporation was a subsidiary of Sears, including the treatment of audits of tax
returns for such periods.
The Internal Revenue Service ("IRS") has completed its review of the Allstate
Group's federal income tax returns through the 1993 tax year. Any adjustments
that may result from IRS examinations of tax returns are not expected to have a
material impact on the financial position, liquidity or results of operations of
the Company.
15
<PAGE>
NORTHBROOK LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS
($ in thousands)
The components of the deferred income tax assets and liabilities at December 31,
are as follows:
<TABLE>
<CAPTION>
1999 1998
---- ----
<S> <C> <C>
DEFERRED ASSETS
Unrealized net capital losses $ 772 $ --
------- -------
Total deferred assets 772 --
DEFERRED LIABILITIES
Difference in tax bases of investments (1,518) (1,503)
Unrealized net capital gains -- (1,813)
------- -------
Total deferred liabilities (1,518) (3,316)
------- -------
Net deferred liability $ (746) $(3,316)
======= =======
</TABLE>
The components of income tax expense for the year ended December 31, are as
follows:
<TABLE>
<CAPTION>
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Current $ 2,249 $ 1,797 $ 1,843
Deferred 15 198 (87)
------- ------- -------
Total income tax expense $ 2,264 $ 1,995 $ 1,756
======= ======= =======
</TABLE>
The Company paid income taxes of $1,908, $129 and $2,236 in 1999, 1998 and 1997,
respectively.
A reconciliation of the statutory federal income tax rate to the effective
income tax rate on income from operations for the year ended December 31, is as
follows:
<TABLE>
<CAPTION>
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Statutory federal income tax rate 35.0% 35.0% 35.0%
Tax-exempt income (0.1) (0.2) (0.4)
Other (0.2) 0.2 --
----- ----- -----
Effective income tax rate 34.7% 35.0% 34.6%
===== ===== =====
</TABLE>
Prior to January 1, 1984, the Company was entitled to exclude certain amounts
from taxable income and accumulate such amounts in a "policyholder surplus"
account. The balance in this account at December 31, 1999, approximately $16,
will result in federal income taxes payable of $6 if distributed by the Company.
No provision for taxes has been made as the Company has no plan to distribute
amounts from this account. No further additions to the account have been
permitted since the Tax Reform Act of 1984.
10. STATUTORY FINANCIAL INFORMATION
The Company's statutory capital and surplus was $83,746 and $68,883 at December
31, 1999 and 1998, respectively. The Company's statutory net income was $4,840,
$3,518 and $2,908 for the years ended December 31, 1999, 1998 and 1997,
respectively.
16
<PAGE>
NORTHBROOK LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS
($ in thousands)
PERMITTED STATUTORY ACCOUNTING PRACTICES
The Company prepares its statutory financial statements in accordance with
accounting practices prescribed or permitted by the Arizona Department of
Insurance. Prescribed statutory accounting practices include a variety of
publications of the National Association of Insurance Commissioners ("NAIC"), as
well as state laws, regulations and general administrative rules. Permitted
statutory accounting practices encompass all accounting practices not so
prescribed. The Company does not follow any permitted statutory accounting
practices that have a significant impact on statutory surplus or statutory net
income.
The NAIC's codification initiative has produced a comprehensive guide of
statutory accounting principles, which the Company will implement in January
2001. The Company's state of domicile, Arizona, has passed legislation revising
various statutory accounting requirements to conform to codification. These
requirements are not expected to have a material impact on the statutory surplus
of the Company.
DIVIDENDS
The ability of the Company to pay dividends is dependent on business conditions,
income, cash requirements of the Company and other relevant factors. The payment
of shareholder dividends by the Company without the prior approval of the state
insurance regulator is limited to formula amounts based on net income and
capital and surplus, determined in accordance with statutory accounting
practices, as well as the timing and amount of dividends paid in the preceding
twelve months. The maximum amount of dividends that the Company can distribute
during 2000 without prior approval of the Arizona Department of Insurance is
$4,840.
RISKED-BASED CAPITAL
The NAIC has a standard for assessing the solvency of insurance companies, which
is referred to as risk-based capital ("RBC"). The requirement consists of a
formula for determining each insurer's RBC and a model law specifying regulatory
actions if an insurer's RBC falls below specified levels. The RBC formula for
life insurance companies establishes capital requirements relating to insurance,
business, asset and interest rate risks. At December 31, 1999, RBC for the
Company was significantly above levels that would require regulatory action.
17
<PAGE>
NORTHBROOK LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS
($ in thousands)
11. OTHER COMPREHENSIVE INCOME
The components of other comprehensive income on a pretax and after-tax basis for
the year ended December 31, are as follows:
<TABLE>
<CAPTION>
1999 1998 1997
-------------------------- ---------------------------- -----------------------------
After- After- After-
PRETAX TAX TAX PRETAX TAX TAX PRETAX TAX TAX
------- ------- ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
UNREALIZED CAPITAL GAINS
AND LOSSES:
- --------------------------------
Unrealized holding (losses)
gains arising during
the period $(6,877) $ 2,407 $(4,470) $ 1,271 $ (445) $ 826 $ 1,862 $ (652) $ 1,210
Less: reclassification
adjustments 510 (178) 332 2 (1) 1 (70) 24 (46)
------- ------- ------- ------- ------- ------- ------- ------- -------
Unrealized net capital
(losses) gains (7,387) 2,585 (4,802) 1,269 (444) 825 1,932 (676) 1,256
------- ------- ------- ------- ------- ------- ------- ------- -------
Other comprehensive
(loss) income $(7,387) $ 2,585 $(4,802) $ 1,269 $ (444) $ 825 $ 1,932 $ (676) $ 1,256
======= ======= ======= ======= ======= ======= ======= ======= =======
</TABLE>
12. COMMITMENTS AND CONTINGENT LIABILITIES
REGULATION AND LEGAL PROCEEDINGS
The Company's business is subject to the effects of a changing social, economic
and regulatory environment. Public and regulatory initiatives have varied and
have included employee benefit regulations, removal of barriers preventing banks
from engaging in the securities and insurance business, tax law changes
affecting the taxation of insurance companies, the tax treatment of insurance
products and its impact on the relative desirability of various personal
investment vehicles, and proposed legislation to prohibit the use of gender in
determining insurance rates and benefits. The ultimate changes and eventual
effects, if any, of these initiatives are uncertain.
From time to time the Company is involved in pending and threatened litigation
in the normal course of its business in which claims for monetary damages are
asserted. In the opinion of management, the ultimate liability, if any, arising
from such pending or threatened litigation is not expected to have a material
effect on the results of operations, liquidity or financial position of the
Company.
GUARANTY FUNDS
Under state insurance guaranty fund laws, insurers doing business in a state can
be assessed, up to prescribed limits, for certain obligations of insolvent
insurance companies to policyholders and claimants. The Company's expenses
related to these funds have been immaterial. These expenses are ceded to ALIC
under reinsurance agreements.
MARKETING AND COMPLIANCE ISSUES
Companies operating in the insurance and financial services markets have come
under the scrutiny of regulators with respect to market conduct and compliance
issues. Under certain circumstances, companies have been held responsible for
providing incomplete or misleading sales materials and for replacing existing
policies with policies that were less advantageous to the policyholder. The
Company monitors its sales materials and
18
<PAGE>
NORTHBROOK LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS
($ IN THOUSANDS)
enforces compliance procedures to mitigate any exposure to potential litigation.
The Company is a member of the Insurance Marketplace Standards Association, an
organization which advocates ethical market conduct.
19
<PAGE>
NORTHBROOK LIFE INSURANCE COMPANY
SCHEDULE IV--REINSURANCE
($ IN THOUSANDS)
<TABLE>
<CAPTION>
GROSS NET
YEAR ENDED DECEMBER 31, 1999 AMOUNT CEDED AMOUNT
- ---------------------------- ------ ----- ------
<S> <C> <C> <C>
Life insurance in force $ 474,824 $ 474,824 $ -
========= ========= =======
Premiums and contract charges:
Life and annuities $ 121,351 $ 121,351 $ -
========= ========= =======
GROSS NET
YEAR ENDED DECEMBER 31, 1998 AMOUNT CEDED AMOUNT
- ---------------------------- ------ ----- ------
Life insurance in force $ 494,256 $494,256 $ -
========== ======== =======
Premiums and contract charges:
Life and annuities $ 104,746 $ 104,746 $ -
========= ========= =======
GROSS NET
YEAR ENDED DECEMBER 31, 1997 AMOUNT CEDED AMOUNT
- ---------------------------- ------ ----- ------
Life insurance in force $ 515,890 $515,890 $ -
========= ======== =======
Premiums and contract charges:
Life and annuities $ 85,538 $ 85,538 $ -
========= ======== =======
</TABLE>
20
<PAGE>
-------------------------------------------------
NORTHBROOK VARIABLE ANNUITY ACCOUNT II
FINANCIAL STATEMENTS AS OF DECEMBER 31, 1999
AND FOR THE PERIODS ENDED DECEMBER 31, 1999 AND
DECEMBER 31, 1998, AND INDEPENDENT AUDITORS'
REPORT
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Shareholder of
Northbrook Life Insurance Company:
We have audited the accompanying statement of net assets of Northbrook Variable
Annuity Account II as of December 31, 1999 (including the assets of each of the
individual sub-accounts which comprise the Account as disclosed in Note 1), and
the related statements of operations for the period then ended and the
statements of changes in net assets for each of the periods in the two year
period then ended for each of the individual sub-accounts which comprise the
Account. These financial statements are the responsibility of management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. Our procedures included
confirmation of securities owned at December 31, 1999 by correspondence with the
account custodians. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all material
respects, the financial position of Northbrook Variable Annuity Account II as of
December 31, 1999 (including the assets of each of the individual sub-accounts
which comprise the Account), and the results of operations for each of the
individual sub-accounts for the period then ended and the changes in their net
assets for each of the periods in the two year period then ended in conformity
with generally accepted accounting principles.
/s/ Deloitte & Touche LLP
Chicago, Illinois
March 27, 2000
<PAGE>
NORTHBROOK VARIABLE ANNUITY ACCOUNT II
<TABLE>
<CAPTION>
STATEMENT OF NET ASSETS
DECEMBER 31, 1999
- -----------------------------------------------------------------------------------------------------------------
ASSETS
<S> <C>
Allocation to Sub-Accounts investing in the Morgan Stanley Dean Witter Variable Investment Series:
Money Market, 399,687,085 shares (cost $399,687,085) $ 399,687,085
Quality Income Plus, 41,997,297 shares (cost $446,990,830) 414,093,354
Short-term Bond, 317,419 shares (cost $3,155,163) 3,136,095
High Yield, 59,754,185 shares (cost $345,269,007) 258,735,614
Utilities, 23,208,039 shares (cost $363,178,521) 531,464,073
Income Builder, 6,835,266 shares (cost $78,259,417) 78,195,436
Dividend Growth, 103,340,027 shares (cost $1,935,635,044) 1,893,189,362
Aggressive Equity, 2,583,544 shares (cost $31,052,866) 37,642,241
Capital Growth, 6,653,311 shares (cost $111,603,872) 157,855,670
Global Dividend Growth, 32,940,470 shares (cost $415,892,581) 475,660,390
European Growth, 17,029,397 shares (cost $373,802,190) 535,915,110
Pacific Growth, 12,523,323 shares (cost $90,737,991) 106,197,769
Equity, 35,605,525 shares (cost $1,143,964,322) 1,918,425,656
S&P 500 Index, 13,203,522 shares (cost $152,388,943) 177,323,303
Competitive Edge, "Best Ideas", 4,808,606 shares (cost $47,697,008) 59,482,451
Strategist, 34,150,688 shares (cost $483,599,787) 652,278,152
Allocation to Sub-Accounts investing in the Morgan Stanley Dean Witter Universal Funds, Inc.:
Equity Growth, 3,599,965 shares (cost $58,801,975) 73,115,278
U.S. Real Estate, 575,145 shares (cost $5,616,194) 5,239,570
International Magnum, 817,294 shares (cost $10,124,267) 11,352,212
Emerging Markets Equity, 1,571,876 shares (cost $16,495,581) 21,754,769
Allocation to Sub-Accounts investing in the Van Kampen Life Investment Trust:
Emerging Growth, 2,816,146 shares (cost $82,270,389) 130,190,408
------------------
Total Assets 7,940,933,998
LIABILITIES
Payable to Northbrook Life Insurance Company:
Accrued contract maintenance charges 1,585,863
------------------
Net Assets $7,939,348,135
==================
</TABLE>
See notes to financial statements.
2
<PAGE>
NORTHBROOK VARIABLE ANNUITY ACCOUNT II
<TABLE>
<CAPTION>
STATEMENTS OF OPERATIONS
- -----------------------------------------------------------------------------------------------------------------------------------
Morgan Stanley Dean Witter Variable Investment Series Sub-Accounts
------------------------------------------------------------------------------
For the Period Ended December 31, 1999
------------------------------------------------------------------------------
Quality
Money Income Short-term High
Market Plus Bond (a) Yield Utilities
------------- -------------- ------------ -------------- -------------
<S> <C> <C> <C> <C> <C>
INVESTMENT INCOME
Dividends $18,792,485 $29,581,022 $ 57,480 $43,293,002 $23,117,286
Charges from Northbrook Life Insurance Company:
Mortality and expense risk (5,174,278) (5,889,185) (16,208) (4,018,180) (6,616,560)
Administrative expense (397,391) (458,506) (1,199) (307,202) (514,744)
------------- -------------- ------------ -------------- -------------
Net investment income (loss) 13,220,816 23,233,331 40,073 38,967,620 15,985,982
------------- -------------- ------------ -------------- -------------
REALIZED AND UNREALIZED GAINS
(LOSSES) ON INVESTMENTS
Realized gains (losses) from sales of investments:
Proceeds from sales 450,473,606 91,452,155 2,359,119 120,337,868 77,317,835
Cost of investments sold 450,473,606 93,902,304 2,359,900 151,639,171 53,406,420
------------- -------------- ------------ -------------- -------------
Net realized gains (losses) - (2,450,149) (781) (31,301,303) 23,911,415
------------- -------------- ------------ -------------- -------------
Change in unrealized gains (losses) - (47,274,110) (19,068) (15,834,237) 14,087,560
------------- -------------- ------------ -------------- -------------
Net gains (losses) on investments - (49,724,259) (19,849) (47,135,540) 37,998,975
------------- -------------- ------------ -------------- -------------
CHANGE IN NET ASSETS
RESULTING FROM OPERATIONS $13,220,816 $(26,490,928) $ 20,224 $ (8,167,920) $53,984,957
============= ============== ============ ============== =============
</TABLE>
(a) For the Period Beginning May 3, 1999 and Ending December 31, 1999
See notes to financial statements.
3
<PAGE>
NORTHBROOK VARIABLE ANNUITY ACCOUNT II
<TABLE>
<CAPTION>
STATEMENTS OF OPERATIONS
- ------------------------------------------------------------------------------------------------------------------------------------
Morgan Stanley Dean Witter Variable Investment Series Sub-Accounts
------------------------------------------------------------------------------
For the Period Ended December 31, 1999
------------------------------------------------------------------------------
Global
Income Dividend Aggressive Capital Dividend
Builder Growth Equity (a) Growth Growth
------------- -------------- ------------ -------------- -------------
<S> <C> <C> <C> <C> <C>
INVESTMENT INCOME
Dividends $5,656,529 $ 344,715,375 $ 8,016 $16,465,625 $42,276,039
Charges from Northbrook Life Insurance Company:
Mortality and expense risk (1,074,813) (27,635,413) (90,882) (1,704,240) (5,962,699)
Administrative expense (80,797) (2,120,551) (6,625) (131,437) (459,161)
------------- -------------- ------------ -------------- -------------
Net investment income (loss) 4,500,919 314,959,411 (89,491) 14,629,948 35,854,179
------------- -------------- ------------ -------------- -------------
REALIZED AND UNREALIZED GAINS
(LOSSES) ON INVESTMENTS
Realized gains (losses) from sales of investments:
Proceeds from sales 22,078,410 271,852,893 9,380,824 25,783,061 67,497,277
Cost of investments sold 21,966,313 143,156,159 8,818,400 20,761,201 58,495,694
------------- -------------- ------------ -------------- -------------
Net realized gains (losses) 112,097 128,696,734 562,424 5,021,860 9,001,583
------------- -------------- ------------ -------------- -------------
Change in unrealized gains (losses) (428,270) (523,069,735) 6,589,375 18,225,024 11,267,752
------------- -------------- ------------ -------------- -------------
Net gains (losses) on investments (316,173) (394,373,001) 7,151,799 23,246,884 20,269,335
------------- -------------- ------------ -------------- -------------
CHANGE IN NET ASSETS
RESULTING FROM OPERATIONS $4,184,746 $ (79,413,590) $7,062,308 $37,876,832 $56,123,514
============= ============== ============ ============== =============
</TABLE>
(a) For the Period Beginning May 3, 1999 and Ended December 31, 1999
See notes to financial statements.
4
<PAGE>
NORTHBROOK VARIABLE ANNUITY ACCOUNT II
<TABLE>
<CAPTION>
STATEMENTS OF OPERATIONS
- ---------------------------------------------------------------------------------------------------------------------------------
Morgan Stanley Dean Witter Variable Investment Series Sub-Accounts
----------------------------------------------------------------------------
For the Period Ended December 31, 1999
----------------------------------------------------------------------------
Competitive
European Pacific S&P 500 Edge
Growth Growth Equity Index "Best Ideas"
-------------- ------------- --------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
INVESTMENT INCOME
Dividends $ 46,726,748 $ 708,269 $ 162,022,502 $ 505,872 $ 256,310
Charges from Northbrook Life Insurance Company:
Mortality and expense risk (6,021,308) (942,881) (17,504,413) (1,480,933) (571,765)
Administrative expense (462,358) (72,239) (1,335,632) (110,039) (42,508)
-------------- ------------- --------------- ------------- -------------
Net investment income (loss) 40,243,082 (306,851) 143,182,457 (1,085,100) (357,963)
-------------- ------------- --------------- ------------- -------------
REALIZED AND UNREALIZED GAINS
(LOSSES) ON INVESTMENTS
Realized gains (losses) from sales of investments:
Proceeds from sales 166,759,231 204,696,580 71,908,669 10,680,473 8,151,769
Cost of investments sold 134,216,170 199,030,079 51,120,136 9,714,922 7,482,882
-------------- ------------- --------------- ------------- -------------
Net realized gains (losses) 32,543,061 5,666,501 20,788,533 965,551 668,887
-------------- ------------- --------------- ------------- -------------
Change in unrealized gains (losses) 43,557,813 34,854,630 497,325,723 20,320,510 10,507,911
-------------- ------------- --------------- ------------- -------------
Net gains (losses) on investments 76,100,874 40,521,131 518,114,256 21,286,061 11,176,798
-------------- ------------- --------------- ------------- -------------
CHANGE IN NET ASSETS
RESULTING FROM OPERATIONS $116,343,956 $40,214,280 $ 661,296,713 $20,200,961 $10,818,835
============== ============= =============== ============= =============
</TABLE>
See notes to financial statements.
5
<PAGE>
NORTHBROOK VARIABLE ANNUITY ACCOUNT II
<TABLE>
<CAPTION>
STATEMENTS OF OPERATIONS
- -----------------------------------------------------------------------------------------------------------------------------
Morgan Stanley Dean Witter
Variable Investment Morgan Stanley Dean Witter
Series Sub-Accounts Universal Funds, Inc. Sub-Accounts
--------------------------- -------------------------------------------
For the Period Ended December 31, 1999
------------------------------------------------------------------------
Capital Equity U.S. Real International
Strategist Appreciation Growth Estate Magnum
------------- ------------ ------------- ------------ -------------
<S> <C> <C> <C> <C> <C>
INVESTMENT INCOME
Dividends $13,525,693 $ 431,345 $2,304,285 $ 268,634 $ 98,917
Charges from Northbrook Life Insurance Company:
Mortality and expense risk (7,823,773) (93,215) (554,937) (55,126) (80,070)
Administrative expense (602,540) (7,030) (40,931) (4,034) (5,870)
------------- ------------ ------------- ------------ -------------
Net investment income (loss) 5,099,380 331,100 1,708,417 209,474 12,977
------------- ------------ ------------- ------------ -------------
REALIZED AND UNREALIZED GAINS
(LOSSES) ON INVESTMENTS
Realized gains (losses) from sales of investments:
Proceeds from sales 65,492,020 36,005,812 5,611,630 3,634,072 9,573,057
Cost of investments sold 50,460,560 35,960,809 4,973,147 3,714,989 9,327,204
------------- ------------ ------------- ------------ -------------
Net realized gains (losses) 15,031,460 45,003 638,483 (80,917) 245,853
------------- ------------ ------------- ------------ -------------
Change in unrealized gains (losses) 68,404,657 1,824,853 12,913,775 (365,102) 1,391,382
------------- ------------ ------------- ------------ -------------
Net gains (losses) on investments 83,436,117 1,869,856 13,552,258 (446,019) 1,637,235
------------- ------------ ------------- ------------ -------------
CHANGE IN NET ASSETS
RESULTING FROM OPERATIONS $88,535,497 $2,200,956 $15,260,675 $ (236,545) $ 1,650,212
============= ============ ============= ============ =============
</TABLE>
See notes to financial statements.
6
<PAGE>
NORTHBROOK VARIABLE ANNUITY ACCOUNT II
<TABLE>
<CAPTION>
STATEMENTS OF OPERATIONS
- ------------------------------------------------------------------------------------------------------------
Morgan Stanley Van Kampen
Dean Witter Life
Universal Funds Investment
Inc. Sub-Accounts Trust Sub-Account
------------------- -------------------
For the Period Ended December 31, 1999
------------------------------------------
Emerging
Markets Emerging
Equity Growth
------------------- -------------------
<S> <C> <C>
INVESTMENT INCOME
Dividends $ 1,768 $ -
Charges from Northbrook Life Insurance Company:
Mortality and expense risk (116,835) (600,044)
Administrative expense (8,607) (43,889)
------------------- -------------------
Net investment income (loss) (123,674) (643,933)
------------------- -------------------
REALIZED AND UNREALIZED GAINS
(LOSSES) ON INVESTMENTS
Realized gains (losses) from sales of investments:
Proceeds from sales 24,519,251 8,038,290
Cost of investments sold 22,217,514 6,791,472
------------------- -------------------
Net realized gains (losses) 2,301,737 1,246,818
------------------- -------------------
Change in unrealized gains (losses) 5,429,367 46,420,306
------------------- -------------------
Net gains (losses) on investments 7,731,104 47,667,124
------------------- -------------------
CHANGE IN NET ASSETS
RESULTING FROM OPERATIONS $ 7,607,430 $ 47,023,191
=================== ===================
</TABLE>
See notes to financial statements.
7
<PAGE>
NORTHBROOK VARIABLE ANNUITY ACCOUNT II
<TABLE>
<CAPTION>
STATEMENT OF CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31,
- ---------------------------------------------------------------------------------------------------------------------------------
Morgan Stanley Dean Witter Variable Investment Series Sub-Accounts
-----------------------------------------------------------------------------
Money Quality Income Short-term
Market Plus Bond
------------------------------ ------------------------------ ------------
1999 1998 1999 1998 1999 (a)
-------------- -------------- -------------- -------------- ------------
<S> <C> <C> <C> <C> <C>
FROM OPERATIONS
Net investment income (loss) $ 13,220,816 $ 12,548,671 $ 23,233,331 $ 21,956,967 $ 40,073
Net realized gains (losses) - - (2,450,149) 882,678 (781)
Change in unrealized gains (losses) - - (47,274,110) 7,935,179 (19,068)
-------------- -------------- -------------- -------------- ------------
Change in net assets resulting from operations 13,220,816 12,548,671 (26,490,928) 30,774,824 20,224
-------------- -------------- -------------- -------------- ------------
FROM CAPITAL TRANSACTIONS
Deposits 75,959,488 129,304,408 29,984,131 61,783,024 930,037
Benefit payments (12,372,372) (10,995,208) (7,891,742) (7,284,535) -
Payments on termination (112,272,629) (87,146,553) (52,572,327) (51,273,025) (114,564)
Contract maintenance charges (128,006) (141,332) (161,057) (198,787) (754)
Transfers among the sub-accounts
and with the Fixed Account - net 34,266,127 56,130,115 (24,709,758) 38,983,496 2,300,526
-------------- -------------- -------------- -------------- ------------
Change in net assets resulting
from capital transactions (14,547,392) 87,151,430 (55,350,753) 42,010,173 3,115,245
-------------- -------------- -------------- -------------- ------------
INCREASE (DECREASE) IN NET ASSETS (1,326,576) 99,700,101 (81,841,681) 72,784,997 3,135,469
NET ASSETS AT BEGINNING OF PERIOD 400,933,840 301,233,739 495,852,338 423,067,341 -
-------------- -------------- -------------- -------------- ------------
NET ASSETS AT END OF PERIOD $399,607,264 $400,933,840 $414,010,657 $495,852,338 $3,135,469
============== ============== ============== ============== ============
</TABLE>
(a) For the Period Beginning May 3, 1999 and Ended December 31, 1999
See notes to financial statements
8
<PAGE>
NORTHBROOK VARIABLE ANNUITY ACCOUNT II
<TABLE>
<CAPTION>
STATEMENT OF CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31,
- ------------------------------------------------------------------------------------------------------------------------------------
Morgan Stanley Dean Witter Variable Investment Series Sub-Accounts
--------------------------------------------------------------------------------------------
High Income
Yield Utilities Builder
------------------------------ ------------------------------ ----------------------------
1999 1998 1999 1998 1999 1998
-------------- -------------- -------------- -------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
FROM OPERATIONS
Net investment income (loss) $ 38,967,620 $ 38,496,771 $ 15,985,982 $ 28,487,796 $ 4,500,919 $ 3,508,026
Net realized gains (losses) (31,301,303) (9,716,192) 23,911,415 19,386,662 112,097 (141,151)
Change in unrealized gains (losses) (15,834,237) (58,494,693) 14,087,560 41,968,561 (428,270) (3,233,777)
-------------- -------------- -------------- -------------- ------------- -------------
Change in net assets resulting from
operations (8,167,920) (29,714,114) 53,984,957 89,843,019 4,184,746 133,098
-------------- -------------- -------------- -------------- ------------- -------------
FROM CAPITAL TRANSACTIONS
Deposits 26,101,041 89,840,399 39,072,264 58,090,579 7,989,151 34,230,388
Benefit payments (4,009,045) (6,104,964) (8,484,832) (7,223,282) (1,104,145) (920,343)
Payments on termination (35,111,312) (37,590,732) (50,808,054) (56,602,582) (5,408,027) (5,562,637)
Contract maintenance charges (104,889) (129,431) (201,221) (207,332) (31,269) (31,038)
Transfers among the sub-accounts
and with the Fixed Account - net (57,088,792) (15,774,631) (10,204,178) 14,560,699 (11,305,739) 3,007,479
-------------- -------------- -------------- -------------- ------------- -------------
Change in net assets resulting
from capital transactions (70,212,997) 30,240,641 (30,626,021) 8,618,082 (9,860,029) 30,723,849
-------------- -------------- -------------- -------------- ------------- -------------
INCREASE (DECREASE) IN NET ASSETS (78,380,917) 526,527 23,358,936 98,461,101 (5,675,283) 30,856,947
NET ASSETS AT BEGINNING OF PERIOD 337,064,860 336,538,333 507,998,999 409,537,898 83,855,103 52,998,156
-------------- -------------- -------------- -------------- ------------- -------------
NET ASSETS AT END OF PERIOD $258,683,943 $337,064,860 $531,357,935 $507,998,999 $78,179,820 $83,855,103
============== ============== ============== ============== ============= =============
</TABLE>
See notes to financial statements
9
<PAGE>
NORTHBROOK VARIABLE ANNUITY ACCOUNT II
<TABLE>
<CAPTION>
STATEMENT OF CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31,
- ---------------------------------------------------------------------------------------------------------------------------------
Morgan Stanley Dean Witter Variable Investment Series Sub-Accounts
---------------------------------------------------------------------------------
Dividend Aggressive Capital
Growth Equity Growth
---------------------------------- ------------- ------------------------------
1999 1998 1999 (a) 1999 1998
---------------- ---------------- ------------- -------------- --------------
<S> <C> <C> <C> <C> <C>
FROM OPERATIONS
Net investment income (loss) $ 314,959,411 $ 182,347,531 $ (89,491) $ 14,629,948 $ 7,626,924
Net realized gains (losses) 128,696,734 50,981,189 562,424 5,021,860 4,423,808
Change in unrealized gains (losses) (523,069,735) (11,845,338) 6,589,375 18,225,024 6,984,723
---------------- ---------------- ------------- -------------- --------------
Change in net assets resulting from
operations (79,413,590) 221,483,382 7,062,308 37,876,832 19,035,455
---------------- ---------------- ------------- -------------- --------------
FROM CAPITAL TRANSACTIONS
Deposits 188,251,624 365,505,119 12,119,932 9,505,220 17,877,989
Benefit payments (22,608,692) (20,959,842) (8,280) (1,116,070) (964,822)
Payments on termination (178,336,682) (208,789,814) (180,619) (12,938,058) (15,020,571)
Contract maintenance charges (827,903) (877,968) (8,488) (54,380) (50,900)
Transfers among the sub-accounts
and with the Fixed Account - net (100,954,098) (16,303,049) 18,649,870 (3,891,813) (10,068,182)
---------------- ---------------- ------------- -------------- --------------
Change in net assets resulting
from capital transactions (114,475,751) 118,574,446 30,572,415 (8,495,101) (8,226,486)
---------------- ---------------- ------------- -------------- --------------
INCREASE (DECREASE) IN NET ASSETS (193,889,341) 340,057,828 37,634,723 29,381,731 10,808,969
NET ASSETS AT BEGINNING OF PERIOD 2,086,700,619 1,746,642,791 - 128,442,414 117,633,445
---------------- ---------------- ------------- -------------- --------------
NET ASSETS AT END OF PERIOD $1,892,811,278 $2,086,700,619 $37,634,723 $157,824,145 $128,442,414
================ ================ ============= ============== ==============
</TABLE>
(a) For the Period Beginning May 3, 1999 and Ended December 31, 1999
See notes to financial statements
10
<PAGE>
NORTHBROOK VARIABLE ANNUITY ACCOUNT II
<TABLE>
<CAPTION>
STATEMENT OF CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31,
- -----------------------------------------------------------------------------------------------------------------------------------
Morgan Stanley Dean Witter Variable Investment Series Sub-Accounts
-------------------------------------------------------------------------------------------------
Global Dividend European Pacific
Growth Growth Growth
------------------------------- -------------------------------- ------------------------------
1999 1998 1999 1998 1999 1998
-------------- --------------- --------------- --------------- --------------- -------------
<S> <C> <C> <C> <C> <C> <C>
FROM OPERATIONS
Net investment income (loss) $ 35,854,179 $ 50,158,952 $ 40,243,082 $ 26,853,320 $ (306,851) $1,965,499
Net realized gains (losses) 9,001,583 9,838,298 32,543,061 24,492,627 5,666,501 (23,716,625)
Change in unrealized gains (losses) 11,267,752 (15,619,557) 43,557,813 25,369,951 34,854,630 14,937,413
-------------- --------------- --------------- --------------- --------------- -------------
Change in net assets resulting
from operations 56,123,514 44,377,693 116,343,956 76,715,898 40,214,280 (6,813,713)
-------------- --------------- --------------- --------------- --------------- -------------
FROM CAPITAL TRANSACTIONS
Deposits 24,612,447 54,785,412 33,605,981 77,755,711 12,935,903 5,413,539
Benefit payments (5,520,386) (4,782,958) (3,672,213) (4,657,657) (522,120) (480,704)
Payments on termination (36,599,848) (45,079,876) (44,372,248) (44,010,271) (5,927,181) (5,342,736)
Contract maintenance charges (198,686) (209,379) (186,281) (196,986) (41,208) (24,050)
Transfers among the sub-accounts
and with the Fixed Account - net (16,822,685) (45,403,643) (38,047,377) 8,524,933 12,162,641 (7,740,250)
-------------- --------------- --------------- --------------- --------------- -------------
Change in net assets resulting
from capital transactions (34,529,158) (40,690,444) (52,672,138) 37,415,730 18,608,035 (8,174,201)
-------------- --------------- --------------- --------------- --------------- -------------
INCREASE (DECREASE) IN NET ASSETS 21,594,356 3,687,249 63,671,818 114,131,628 58,822,315 (14,987,914)
NET ASSETS AT BEGINNING OF PERIOD 453,971,041 450,283,792 472,136,266 358,004,638 47,354,245 62,342,159
-------------- --------------- --------------- --------------- --------------- -------------
NET ASSETS AT END OF PERIOD $475,565,397 $ 453,971,041 $ 535,808,084 $ 472,136,266 $ 106,176,560 $47,354,245
============== =============== =============== =============== =============== =============
</TABLE>
See notes to financial statements
11
<PAGE>
NORTHBROOK VARIABLE ANNUITY ACCOUNT II
<TABLE>
<CAPTION>
STATEMENT OF CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31,
- ------------------------------------------------------------------------------------------------------------------------------------
Morgan Stanley Dean Witter Variable Investment Series Sub-Accounts
-----------------------------------------------------------------------------------------------
S&P 500 Competitive Edge
Equity Index "Best Ideas"
---------------------------------- ----------------------------- ----------------------------
1999 1998 1999 1998 (b) 1999 1998 (b)
---------------- ---------------- -------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
FROM OPERATIONS
Net investment income (loss) $ 143,182,457 $ 97,599,586 $ (1,085,100) $ (170,910) $ (357,963) $ (214,440)
Net realized gains (losses) 20,788,533 21,891,916 965,551 (34,337) 668,887 (346,888)
Change in unrealized gains (losses) 497,325,723 101,407,443 20,320,510 4,613,850 10,507,911 1,277,534
---------------- ---------------- -------------- ------------- ------------- -------------
Change in net assets resulting from
operations 661,296,713 220,898,945 20,200,961 4,408,603 10,818,835 716,206
---------------- ---------------- -------------- ------------- ------------- -------------
FROM CAPITAL TRANSACTIONS
Deposits 167,149,976 172,405,792 62,363,357 20,590,308 14,308,748 19,126,765
Benefit payments (11,678,201) (8,143,648) (364,932) (59,990) (385,715) (167,624)
Payments on termination (109,621,629) (87,506,544) (6,958,805) (592,621) (3,208,126) (422,743)
Contract maintenance charges (626,104) (380,694) (52,042) (11,823) (20,818) (10,074)
Transfers among the sub-accounts
and with the Fixed Account - net 173,235,007 4,499,209 55,622,169 22,142,705 2,656,267 16,058,851
---------------- ---------------- -------------- ------------- ------------- -------------
Change in net assets resulting
from capital transactions 218,459,049 80,874,115 110,609,747 42,068,579 13,350,356 34,585,175
---------------- ---------------- -------------- ------------- ------------- -------------
INCREASE (DECREASE) IN NET ASSETS 879,755,762 301,773,060 130,810,708 46,477,182 24,169,191 35,301,381
NET ASSETS AT BEGINNING OF PERIOD 1,038,286,770 736,513,710 46,477,182 - 35,301,381 -
---------------- ---------------- -------------- ------------- ------------- -------------
NET ASSETS AT END OF PERIOD $1,918,042,532 $1,038,286,770 $177,287,890 $46,477,182 $59,470,572 $35,301,381
================ ================ ============== ============= ============= =============
</TABLE>
(b) For the Period Beginning May 18, 1998 and Ended December 31, 1998
See notes to financial statements
12
<PAGE>
NORTHBROOK VARIABLE ANNUITY ACCOUNT II
<TABLE>
<CAPTION>
STATEMENT OF CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31,
- ------------------------------------------------------------------------------------------------------------------------------------
Morgan Stanley Dean Witter
Morgan Stanley Dean Witter Variable Investment Universal Funds, Inc.
Series Sub-Accounts Sub-Accounts
------------------------------------------------------------ -----------------------------
Capital Equity
Strategist Appreciation Growth
------------------------------ ---------------------------- ----------------------------
1999 1998 1999 1998 1999 1998 (c)
-------------- -------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
FROM OPERATIONS
Net investment income (loss) $ 5,099,380 $ 49,765,425 $ 331,100 $ (251,058) $ 1,708,417 $ (78,711)
Net realized gains (losses) 15,031,460 9,013,062 45,003 (47,279) 638,483 (211,792)
Change in unrealized gains (losses) 68,404,657 48,207,735 1,824,853 (2,968,573) 12,913,775 1,399,530
-------------- -------------- ------------- ------------- ------------- -------------
Change in net assets resulting from
operations 88,535,497 106,986,222 2,200,956 (3,266,910) 15,260,675 1,109,027
-------------- -------------- ------------- ------------- ------------- -------------
FROM CAPITAL TRANSACTIONS
Deposits 53,336,082 73,192,883 1,292,309 12,585,227 18,427,169 21,346,469
Benefit payments (7,657,772) (6,681,194) (57,970) (277,813) (284,465) (354,060)
Payments on termination (54,083,482) (53,776,482) (647,504) (2,046,795) (3,119,435) (593,813)
Contract maintenance charges (236,109) (220,828) 3,365 (12,735) (21,923) (6,896)
Transfers among the sub-accounts
and with the Fixed Account - net 15,905,456 13,210,961 (34,073,925) (6,495,400) 17,161,540 4,176,388
-------------- -------------- ------------- ------------- ------------- -------------
Change in net assets resulting
from capital transactions 7,264,175 25,725,340 (33,483,725) 3,752,484 32,162,886 24,568,088
-------------- -------------- ------------- ------------- ------------- -------------
INCREASE (DECREASE) IN NET ASSETS 95,799,672 132,711,562 (31,282,769) 485,574 47,423,561 25,677,115
NET ASSETS AT BEGINNING OF PERIOD 556,348,215 423,636,653 31,282,769 30,797,195 25,677,115 -
-------------- -------------- ------------- ------------- ------------- -------------
NET ASSETS AT END OF PERIOD $652,147,887 $556,348,215 $ - $31,282,769 $73,100,676 $25,677,115
============== ============== ============= ============= ============= =============
</TABLE>
(c) For the Period Beginning March 16, 1998 and Ended December 31, 1998
See notes to financial statements
13
<PAGE>
NORTHBROOK VARIABLE ANNUITY ACCOUNT II
<TABLE>
<CAPTION>
STATEMENT OF CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31,
- ------------------------------------------------------------------------------------------------------------------------------------
Morgan Stanley Dean Witter Universal Funds, Inc. Sub-Accounts
------------------------------------------------------------------------------------
Emerging Markets
U.S. Real Estate International Magnum Equity
-------------------------- --------------------------- ---------------------------
1999 1998 (b) 1999 1998 (c) 1999 1998 (c)
------------ ------------ ------------- ------------ ------------- ------------
<S> <C> <C> <C> <C> <C> <C>
FROM OPERATIONS
Net investment income (loss) $ 209,474 $ 43,330 $ 12,977 $ (6,800) $ (123,674) $ (2,522)
Net realized gains (losses) (80,917) (29,879) 245,853 (74,905) 2,301,737 (66,221)
Change in unrealized gains (losses) (365,102) (56,788) 1,391,382 (175,857) 5,429,367 (177,275)
------------ ------------ ------------- ------------ ------------- ------------
Change in net assets resulting from operations (236,545) (43,337) 1,650,212 (257,562) 7,607,430 (246,018)
------------ ------------ ------------- ------------ ------------- ------------
FROM CAPITAL TRANSACTIONS
Deposits 2,256,539 1,559,058 4,195,250 2,610,252 5,860,089 1,113,998
Benefit payments (18,349) - (11,957) (11,092) (4,713) -
Payments on termination (219,432) (35,109) (236,057) (167,597) (593,151) (6,515)
Contract maintenance charges (1,904) (537) (3,349) (1,018) (6,183) (407)
Transfers among the sub-accounts
and with the Fixed Account - net 1,478,675 499,465 2,293,294 1,289,569 7,427,993 597,902
------------ ------------ ------------- ------------ ------------- ------------
Change in net assets resulting
from capital transactions 3,495,529 2,022,877 6,237,181 3,720,114 12,684,035 1,704,978
------------ ------------ ------------- ------------ ------------- ------------
INCREASE (DECREASE) IN NET ASSETS 3,258,984 1,979,540 7,887,393 3,462,552 20,291,465 1,458,960
NET ASSETS AT BEGINNING OF PERIOD 1,979,540 - 3,462,552 - 1,458,960 -
------------ ------------ ------------- ------------ ------------- ------------
NET ASSETS AT END OF PERIOD $5,238,524 $1,979,540 $11,349,945 $3,462,552 $21,750,425 $1,458,960
============ ============ ============= ============ ============= ============
</TABLE>
(b) For the Period Beginning May 18, 1998 and Ended December 31, 1998
(c) For the Period Beginning March 16, 1998 and Ended December 31, 1998
See notes to financial statements
14
<PAGE>
NORTHBROOK VARIABLE ANNUITY ACCOUNT II
<TABLE>
<CAPTION>
STATEMENT OF CHANGES IN NET ASSETS
For the Year Ended December 31,
- -----------------------------------------------------------------------------------------------------------
Van Kampen Life Investement
Trust Sub-Account
---------------------------------------------
Emerging Growth
---------------------------------------------
1999 1998 (a)
--------------------- ---------------------
<S> <C> <C>
FROM OPERATIONS
Net investment income (loss) $ (643,933) $ (47,552)
Net realized gains (losses) 1,246,818 (51,808)
Change in unrealized gains (losses) 46,420,306 1,499,714
--------------------- ---------------------
Change in net assets resulting from operations 47,023,191 1,400,354
--------------------- ---------------------
FROM CAPITAL TRANSACTIONS
Deposits 27,759,585 5,513,918
Benefit payments (201,304) -
Payments on termination (3,202,433) (271,704)
Contract maintenance charges (35,203) (2,526)
Transfers among the sub-accounts
and with the Fixed Account - net 49,182,955 2,997,575
--------------------- ---------------------
Change in net assets resulting
from capital transactions 73,503,600 8,237,263
--------------------- ---------------------
INCREASE (DECREASE) IN NET ASSETS 120,526,791 9,637,617
NET ASSETS AT BEGINNING OF PERIOD 9,637,617 -
--------------------- ---------------------
NET ASSETS AT END OF PERIOD $ 130,164,408 $ 9,637,617
===================== =====================
</TABLE>
(a) For the Period Beginning March 16, 1998 and Ended December 31, 1998
See notes to financial statements
15
<PAGE>
NORTHBROOK VARIABLE ANNUITY ACCOUNT II
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
1. ORGANIZATION
Northbrook Variable Annuity Account II (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, a wholly owned subsidiary of
Allstate Insurance Company, which is wholly owned by The Allstate
Corporation.
Northbrook Life issues the Morgan Stanley Dean Witter Variable Annuity II
and the Morgan Stanley Dean Witter Variable Annuity II AssetManager, the
deposits of which are invested at the direction of the contractholders in
the sub-accounts that comprise the Account. Absent any contract provisions
wherein Northbrook Life contractually guarantees either a minimum return
or account value to the beneficiaries of the contractholders in the form
of a death benefit, the contractholders bear the investment risk that the
sub-accounts may not meet their stated objectives. The sub-accounts invest
in the following underlying mutual fund portfolios (collectively the
"Funds"):
MORGAN STANLEY DEAN WITTER VARIABLE INVESTMENT SERIES
Money Market Capital Growth
Quality Income Plus Global Dividend Growth
Short-term Bond European Growth
High Yield Pacific Growth
Utilities Equity
Income Builder S&P 500 Index
Dividend Growth Competitive Edge "Best Ideas"
Aggressive Equity Strategist
MORGAN STANLEY DEAN WITTER UNIVERSAL FUNDS, INC.
Equity Growth International Magnum
U.S. Real Estate Emerging Markets Equity
VAN KAMPEN LIFE INVESTMENT TRUST
Emerging Growth
Northbrook Life provides insurance and administrative services to the
contractholders for a fee. Northbrook Life also maintains a fixed account
("Fixed Account"), to which contractholders may direct their deposits and
receive a fixed rate of return. Northbrook Life has sole discretion to
invest the assets of the Fixed Account, subject to applicable law.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
VALUATION OF INVESTMENTS - Investments consist of shares of the Funds and
are stated at fair value based on quoted market prices at December 31,
1999.
INVESTMENT INCOME - Investment income consists of dividends declared by the
Funds and is recognized on the ex-dividend date.
16
<PAGE>
REALIZED GAINS AND LOSSES - Realized gains and losses represent the
difference between the proceeds from sales of portfolio shares by the
Account and the cost of such shares, which is determined on a weighted
average basis.
FEDERAL INCOME TAXES - The Account intends to qualify as a segregated asset
account as defined in the Internal Revenue Code ("Code"). As such, the
operations of the Account are included in the tax return of Northbrook
Life. Northbrook Life is taxed as a life insurance company under the Code.
No federal income taxes are allocable to the Account as the Account did not
generate taxable income.
USE OF ESTIMATES - The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the amounts reported in the financial
statements and accompanying notes. Actual results could differ from those
estimates.
3. EXPENSES
ADMINISTRATIVE EXPENSE CHARGE - Northbrook Life deducts an administrative
expense charge daily at a rate equal to .10% per annum of the average daily
net assets of the Account for both Morgan Stanley Dean Witter Variable
Annuity II and Morgan Stanley Dean Witter Variable Annuity II AssetManager.
CONTRACT MAINTENANCE CHARGE - Northbrook Life deducts an annual contract
maintenance charge of $30 on each Morgan Stanley Dean Witter Variable
Annuity II and $35 on each Morgan Stanley Dean Witter Variable Annuity II
AssetManager contract anniversary and guarantees that this charge will not
increase over the life of the contract. If certain conditions are met, this
charge will be waived for Morgan Stanley Dean Witter Variable Annuity II
AssetManager.
MORTALITY AND EXPENSE RISK CHARGE - Northbrook Life assumes mortality and
expense risks related to the operations of the Account and deducts charges
daily based on the average daily net assets of the Account. The mortality
and expense risk charge covers insurance benefits available with the
contract and certain expenses of the contract. It also covers the risk that
the current charges will not be sufficient in the future to cover the cost
of administering the contract. Northbrook Life guarantees that the amount
of this charge will not increase over the life of the contract. At the
contractholder's discretion, additional options, primarily death benefits,
may be purchased for an additional charge.
17
<PAGE>
4. UNITS ISSUED AND REDEEMED
(Units in whole amounts)
<TABLE>
<CAPTION>
Morgan Stanley Dean Witter Variable Annuity II
-----------------------------------------------------------------------------------------
Unit activity during 1999:
------------------------------------------------
Accumulated
Units Outstanding Units Units Units Outstanding Unit Value
December 31, 1998 Issued Redeemed December 31, 1999 December 31,1999
------------------- ------------ ------------- ------------------- ------------------
<S> <C> <C> <C> <C> <C>
Investments in the Morgan Stanley Dean
Witter Variable Investment Series Sub-Accounts:
Money Market 21,159,031 14,889,251 (18,506,888) 17,541,394 $ 13.46
Quality Income Plus 20,312,197 1,033,305 (4,473,358) 16,872,144 18.20
Short-term Bond - 347,635 (220,476) 127,159 10.07
High Yield 8,199,142 636,275 (2,648,721) 6,186,696 24.01
Utilities 13,541,542 727,904 (2,580,797) 11,688,649 32.87
Income Builder 2,979,980 562,566 (984,569) 2,557,977 13.00
Dividend Growth 36,334,173 1,704,445 (6,266,668) 31,771,950 35.38
Aggressive Equity - 1,736,286 (811,611) 924,675 14.48
Capital Growth 3,662,958 327,971 (739,762) 3,251,167 31.32
Global Dividend Growth 17,634,472 913,941 (3,171,090) 15,377,323 19.22
European Growth 8,967,887 1,483,799 (3,009,151) 7,442,535 43.42
Pacific Growth 6,325,967 8,987,636 (7,901,427) 7,412,176 8.78
Equity 12,608,741 2,288,532 (1,863,807) 13,033,466 78.28
S&P 500 Index 1,722,709 3,752,288 (745,579) 4,729,418 13.20
Competitive Edge, "Best Ideas" 1,432,745 764,913 (431,011) 1,766,647 12.18
Strategist 14,574,012 1,101,779 (2,402,382) 13,273,409 31.14
Captial Appreciation 1,440,936 89,955 (1,530,891) - -
Investments in the Morgan Stanley Dean
Witter Universal Funds, Inc. Sub-Accounts:
Equity Growth 822,038 1,142,895 (311,090) 1,653,843 13.90
U.S. Real Estate 79,729 487,659 (337,388) 230,000 8.81
International Magnum 136,628 972,988 (828,047) 281,569 12.09
Emerging Markets Equity 82,002 2,454,699 (1,927,128) 609,573 13.64
Investments in the Van Kampen Life Investment Trust Sub-Account:
Emerging Growth 254,704 1,931,376 (424,205) 1,761,875 24.19
Units relating to accrued contract maintenance charges are included in units redeemed.
</TABLE>
18
<PAGE>
4. UNITS ISSUED AND REDEEMED
(Units in whole amounts)
<TABLE>
<CAPTION>
Morgan Stanley Dean Witter Variable Annuity II with
Enhanced Death Benefit Option, Performance
Death Benefit Option or Performance Income Benefit Option
-----------------------------------------------------------------------------------------
Unit activity during 1999:
------------------------------------------------
Accumulated
Units Outstanding Units Units Units Outstanding Unit Value
December 31, 1998 Issued Redeemed December 31, 1999 December 31,1999
------------------- ------------ ------------- ------------------- ------------------
<S> <C> <C> <C> <C> <C>
Investments in the Morgan Stanley Dean
Witter Variable Investment Series Sub-Accounts:
Money Market 8,938,860 19,548,212 (18,210,802) 10,276,270 $ 13.39
Quality Income Plus 5,109,593 1,234,183 (1,176,427) 5,167,349 18.10
Short-term Bond - 132,480 (10,931) 121,549 10.06
High Yield 5,304,510 1,595,314 (2,696,745) 4,203,079 23.88
Utilities 3,510,503 1,138,744 (632,588) 4,016,659 32.69
Income Builder 3,652,211 427,013 (965,993) 3,113,231 12.95
Dividend Growth 19,936,437 3,725,192 (3,607,794) 20,053,835 35.19
Aggressive Equity - 1,151,589 (29,577) 1,122,012 14.47
Capital Growth 1,687,847 394,284 (446,078) 1,636,053 31.15
Global Dividend Growth 8,929,904 1,233,435 (1,387,884) 8,775,455 19.12
European Growth 4,668,539 1,860,406 (2,084,797) 4,444,148 43.19
Pacific Growth 2,456,851 21,494,013 (19,892,379) 4,058,485 8.73
Equity 7,931,260 3,545,573 (1,102,040) 10,374,793 77.86
S&P 500 Index 2,003,301 4,944,770 (738,240) 6,209,831 13.17
Competitive Edge, "Best Ideas" 1,965,368 1,055,127 (539,084) 2,481,411 12.15
Strategist 5,639,152 1,686,811 (766,870) 6,559,093 30.97
Captial Appreciation 1,527,337 141,243 (1,668,580) - -
Investments in the Morgan Stanley Dean
Witter Universal Funds, Inc. Sub-Accounts:
Equity Growth 1,530,819 1,779,604 (357,775) 2,952,648 13.87
U.S. Real Estate 80,782 158,681 (44,499) 194,964 8.79
International Magnum 170,897 282,082 (36,161) 416,818 12.06
Emerging Markets Equity 94,600 1,011,314 (416,698) 689,216 13.61
Investments in the Van Kampen Life Investment Trust Sub-Account:
Emerging Growth 402,082 2,363,234 (242,627) 2,522,689 24.14
Units relating to accrued contract maintenance charges are included in units redeemed.
</TABLE>
19
<PAGE>
4. UNITS ISSUED AND REDEEMED
(Units in whole amounts)
<TABLE>
<CAPTION>
Morgan Stanley Dean Witter Variable Annuity II with Performance Benefit Combination
Option or the Death Benefit Combination Option
-----------------------------------------------------------------------------------------
Unit activity during 1999:
------------------------------------------------
Accumulated
Units Outstanding Units Units Units Outstanding Unit Value
December 31, 1998 Issued Redeemed December 31, 1999 December 31,1999
------------------- ------------ ------------- ------------------- ------------------
<S> <C> <C> <C> <C> <C>
Investments in the Morgan Stanley Dean
Witter Variable Investment Series Sub-Accounts:
Money Market 673,034 1,866,416 (1,276,029) 1,263,421 $ 13.17
Quality Income Plus 169,761 243,839 (85,461) 328,139 17.80
Short-term Bond - 41,250 (6,308) 34,942 10.05
High Yield 137,884 200,592 (48,340) 290,136 23.48
Utilities 159,860 243,466 (62,582) 340,744 32.16
Income Builder 164,457 165,256 (58,942) 270,771 12.91
Dividend Growth 528,141 1,129,219 (222,883) 1,434,477 34.61
Aggressive Equity - 478,757 (20,270) 458,487 14.45
Capital Growth 41,885 109,033 (22,261) 128,657 30.66
Global Dividend Growth 156,429 370,289 (38,382) 488,336 18.95
European Growth 175,357 306,278 (89,585) 392,050 42.51
Pacific Growth 52,484 567,553 (229,429) 390,608 8.66
Equity 221,631 797,425 (68,763) 950,293 76.58
S&P 500 Index 283,511 1,682,096 (88,165) 1,877,442 13.15
Competitive Edge, "Best Ideas" 178,762 367,543 (56,648) 489,657 12.13
Strategist 472,816 660,323 (128,301) 1,004,838 30.46
Captial Appreciation 77,885 24,001 (101,886) -
Investments in the Morgan Stanley Dean
Witter Universal Funds, Inc. Sub-Accounts:
Equity Growth 154,201 385,914 (44,254) 495,861 13.84
U.S. Real Estate 37,193 78,203 (21,569) 93,827 8.77
International Magnum 31,933 168,374 (27,719) 172,588 12.04
Emerging Markets Equity 19,500 262,216 (71,124) 210,592 13.58
Investments in the Van Kampen Life Investment Trust Sub-Account:
Emerging Growth 82,427 795,728 (59,300) 818,855 24.09
Units relating to accrued contract maintenance charges are included in units redeemed.
</TABLE>
20
<PAGE>
4. UNITS ISSUED AND REDEEMED
(Units in whole amounts)
<TABLE>
<CAPTION>
Morgan Stanley Dean Witter Variable Annuity II AssetManager
-----------------------------------------------------------------------------------------
Unit activity during 1999:
------------------------------------------------
Accumulated
Units Outstanding Units Units Units Outstanding Unit Value
December 31, 1998 Issued Redeemed December 31, 1999 December 31,1999
------------------- ------------ ------------- ------------------- ------------------
<S> <C> <C> <C> <C> <C>
Investments in the Morgan Stanley
Dean Witter Variable Investment Series Sub-Accounts:
Money Market 81,705 547,117 (302,283) 326,539 $ 10.47
Quality Income Plus 178,028 261,748 (86,650) 353,126 9.76
Short-term Bond - 12,183 (1,013) 11,170 10.05
High Yield 93,600 198,142 (108,204) 183,538 8.61
Utilities 46,349 126,846 (35,756) 137,439 12.10
Income Builder 18,227 26,379 (6,560) 38,046 10.21
Dividend Growth 147,314 407,993 (113,515) 441,792 9.70
Aggressive Equity - 12,092 (637) 11,455 14.45
Capital Growth 6,192 25,144 (3,865) 27,471 12.74
Global Dividend Growth 15,232 73,526 (8,276) 80,482 11.16
European Growth 22,053 76,602 (13,809) 84,846 11.45
Pacific Growth 1,450 15,964 (565) 16,849 17.97
Equity 34,510 315,147 (72,422) 277,235 16.04
S&P 500 Index 35,394 164,599 (32,928) 167,065 12.29
Competitive Edge, "Best Ideas" 17,570 57,902 (16,105) 59,367 11.95
Strategist 70,036 157,240 (28,638) 198,638 11.95
Captial Appreciation 7,593 2,639 (10,232) - -
Investments in the Morgan Stanley
Dean Witter Universal Funds, Inc. Sub-Accounts:
Equity Growth 14,358 48,936 (14,653) 48,641 13.56
U.S. Real Estate 3,294 12,931 (2,881) 13,344 8.84
International Magnum 6,589 31,388 (12,768) 25,209 10.80
Emerging Markets Equity 123 14,262 (5,452) 8,933 15.56
Investments in the Van Kampen Life Investment Trust Sub-Account:
Emerging Growth 10,947 108,275 (29,083) 90,139 21.14
Units relating to accrued contract maintenance charges are included in units redeemed.
</TABLE>
21
<PAGE>
4. UNITS ISSUED AND REDEEMED
(Units in whole amounts)
<TABLE>
<CAPTION>
Morgan Stanley Dean Witter Variable Annuity II AssetManager with Death Benefit Option,
Performance Death Benefit Option or Performance Income Benefit Option
-----------------------------------------------------------------------------------------
Unit activity during 1999:
------------------------------------------------
Accumulated
Units Outstanding Units Units Units Outstanding Unit Value
December 31, 1998 Issued Redeemed December 31, 1999 December 31,1999
------------------- ------------ ------------- ------------------- ------------------
<S> <C> <C> <C> <C> <C>
Investments in the Morgan Stanley
Dean Witter Variable Investment Series Sub-Accounts:
Money Market 85,827 3,539,643 (3,188,969) 436,501 $ 10.45
Quality Income Plus 52,778 231,640 (34,594) 249,824 9.74
Short-term Bond - 11,499 (14) 11,485 10.04
High Yield 38,215 483,447 (398,427) 123,235 8.59
Utilities 33,289 144,058 (12,245) 165,102 12.07
Income Builder 16,832 39,978 (4,310) 52,500 10.19
Dividend Growth 165,990 572,766 (75,915) 662,841 9.69
Aggressive Equity 43,817 (3,302) 40,515 14.44
Capital Growth 5,153 27,978 (2,333) 30,798 12.71
Global Dividend Growth 38,311 96,752 (6,629) 128,434 11.14
European Growth 206,430 1,082,402 (1,093,929) 194,903 11.43
Pacific Growth 1,623 1,984,601 (1,947,775) 38,449 17.94
Equity 80,117 413,296 (22,082) 471,331 16.01
S&P 500 Index 104,952 278,154 (33,399) 349,707 12.26
Competitive Edge, "Best Ideas" 24,807 53,580 (5,567) 72,820 11.93
Strategist 24,056 159,660 (20,892) 162,824 11.92
Captial Appreciation 28,412 7,569 (35,981) - -
Investments in the Morgan Stanley
Dean Witter Universal Funds, Inc. Sub-Accounts:
Equity Growth 17,925 101,942 (15,608) 104,259 13.54
U.S. Real Estate 17,463 15,867 (288) 33,042 8.82
International Magnum 9,575 21,239 (7) 30,807 10.78
Emerging Markets Equity 3,925 19,204 (6,431) 16,698 15.53
Investments in the Van Kampen Life Investment Trust Sub-Account:
Emerging Growth 31,051 92,816 (15,183) 108,684 21.10
Units relating to accrued contract maintenance charges are included in units redeemed.
</TABLE>
22
<PAGE>
4. UNITS ISSUED AND REDEEMED
(Units in whole amounts)
<TABLE>
<CAPTION>
Morgan Stanley Dean Witter Variable Annuity II AssetManager with Performance Benefit
Combination Option or the Death Benefit Combination Option
-----------------------------------------------------------------------------------------
Unit activity during 1999:
------------------------------------------------
Accumulated
Units Outstanding Units Units Units Outstanding Unit Value
December 31, 1998 Issued Redeemed December 31, 1999 December 31,1999
------------------- ------------ ------------- ------------------- ------------------
<S> <C> <C> <C> <C> <C>
Investments in the Morgan Stanley Dean Witter Variable
Investment Series Sub-Accounts:
Money Market 15,056 187,536 (78,671) 123,921 $ 10.44
Quality Income Plus 81,071 114,629 (23,281) 172,419 9.72
Short-term Bond - 5,437 (1) 5,436 10.03
High Yield 11,399 31,391 (4,736) 38,054 8.58
Utilities 19,644 89,175 (8,355) 100,464 12.05
Income Builder 3,158 17,284 (219) 20,223 10.17
Dividend Growth 58,954 239,272 (41,852) 256,374 9.67
Aggressive Equity 45,639 (1,347) 44,292 14.43
Capital Growth 12,464 22,290 (7,271) 27,483 12.69
Global Dividend Growth 14,652 49,253 (940) 62,965 11.12
European Growth 10,221 74,577 (8,908) 75,890 11.41
Pacific Growth 4,550 83,644 (14,951) 73,243 17.91
Equity 30,606 315,914 (22,976) 323,544 15.98
S&P 500 Index 41,697 154,928 (28,522) 168,103 12.24
Competitive Edge, "Best Ideas" 12,369 19,922 (8,397) 23,894 11.91
Strategist 18,089 60,405 (9,525) 68,969 11.90
Captial Appreciation 11,985 454 (12,439) - -
Investments in the Morgan Stanley Dean Witter Universal
Funds, Inc. Sub-Accounts:
Equity Growth - 16,478 (4) 16,474 13.52
U.S. Real Estate - 30,217 (6) 30,211 8.81
International Magnum - 21,800 (4) 21,796 10.76
Emerging Markets Equity 4,235 52,543 (5,538) 51,240 15.50
Investments in the Van Kampen Life Investment Trust Sub-Account:
Emerging Growth 27,030 125,530 (22,931) 129,629 21.07
Units relating to accrued contract maintenance charges are included in units redeemed.
</TABLE>
23
<PAGE>
PART C
OTHER INFORMATION
24. FINANCIAL STATEMENTS AND EXHIBITS
(a) FINANCIAL STATEMENTS
Northbrook Life Insurance Company Financial Statements and Northbrook Variable
Annuity Account II Financial Statements are included in the Part B of this
Registration Statement.
(b) EXHIBITS
(1) Resolution of the Board of Directors of Northbrook Life Insurance Company
authorizing establishment of the Variable Annuity Account II (Previously filed
in Post-Effective Amendment No. 13 to registrant's registration statement, File
No. 033-35412, dated December 31, 1996)
(2) Not applicable
(3)(a) Form of Underwriting Agreement (Previously filed in Post-Effective
Amendment No. 13 to registrant's registration statement, File No. 033-35412,
dated December 31, 1996)
(b) Form of General Agency Agreement (Previously filed in Post-Effective
Amendment No. 13 to registrant's registration statement, File No. 033-35412,
dated December 31, 1996)
(4)(a) Form of Contract, Riders and Amendments for the Morgan Stanley Dean
Witter Variable Annuity II (Previously filed in Post-Effective Amendment Nos.
13, 14, 20, 23 and 25 to this Registration Statement (File No. 033-35412) dated
December 31, 1996 and February 28, 1997, March 3, 1999, February 15, 2000 and
March 3, 2000 respectively.
(4)(b) Form of Contract and Certificate Amendments for the Morgan Stanley Dean
Witter Variable Annuity II Asset Manager (Previously filed in Post-Effective
Amendment Nos. 19, and 20 to this Registration Statement (File No. 033-35412)
dated June 5, 1998 and March 3, 1999 respectively.
(4)(c) Form of Contract and Amendments for the Morgan Stanley Dan Witter
Variable Annuity 3 (Previously filed in Post-Effective Amendment No. 24 to this
Registration Statement (File No. 033-35412) dated March 2, 2000.
(5))(a) Form of Application for the Morgan Stanley Dean Witter Variable Annuity
II(Previously filed in Post-Effective Amendment No. 13 to this Registration
Statement (File No. 033-35412) dated December 31, 1996)
(b) Form of Application for the Morgan Stanley Dean Witter Variable Annuity II
AssetManager (Previously filed in Post-Effective Amendment No. 19 to this
Registration Statement (File No. 033-35412) dated June 5, 1998)
(c) Form of Application for the Morgan Stanley Dean Witter Variable Annuity 3
(Previously filed in Post-Effective amendment No. 24 to this Registration
Statement (File No. 033-35412) dated March 2, 2000).
(6)(a) Amended and Restated Articles of Incorporation and Articles of
Redomestication of Northbrook Life Insurance Company (Incorporated herein by
reference to Depositor's Form 10-K dated March 30, 1999)
(b) Amended and Restated By-laws of Northbrook Life Insurance Company
(Incorporated herein by reference to Depositor's Form 10-K dated March 30, 1999)
(7) Not applicable
(8) Forms of Participation Agreements:
(a) Morgan Stanley Dean Witter Variable Investment Series (Previously filed in
Post-Effective Amendment No. 12 to registrant's registration statement, File No.
033-35412, dated April 29, 1996)
(b) Morgan Stanley Dean Witter Universal Funds, Inc. (Incorporated herein by
reference to Post-Effective Amendment No. 1 to registrant's registration
statement (File No. 333-93871 dated January 28, 2000)
(c) AIM Variable Insurance Funds (Incorporated herein by reference to
Post-Effective Amendment No. 1 to registrant's registration statement (File No.
333-93871 dated January 28, 2000)
(d) Alliance Variable Products Series Fund(Incorporated herein by reference to
Post-Effective Amendment No. 1 to registrant's registration statement (File No.
333-93871 dated January 28, 2000)
(e) Putnam Variable Trust(Incorporated herein by reference to Post-Effective
Amendment No. 1 to registrant's registration statement (File No. 333-93871 dated
January 28, 2000)
(f) Van Kampen Life Investment Trust (Incorporated herein by reference to
Post-Effective Amendment No. 1 to registrant's registration statement (File No.
333-93871 dated January 28, 2000)
(9)(a)Opinion and Consent of General Counsel (Previously filed in
Post-Effective Amendment Nos 19, 21 and 24 to this Registration Statement (File
No. 033-35412) dated June 5, 1998, April 30, 1999 and March 2, 2000.)
9(b) Opinion and Consent of General Counsel
(10)(a) Independent Auditors' Consent
(b) Consent of Attorneys
(11) Not applicable
(12) Not applicable
(13) Performance Data Calculations
(a) Morgan Stanley Dean Witter Variable Annuity II (previously filed in
Post effective amendment No. 17 to this Registration Statement (File
No. 033-3542) dated March 5, 1998)
(b) Morgan Stanley Dean Witter Variable Annuity II (Alliance, Puntam and
AIM Portfolios)
(14) Not applicable
(99) Powers of Attorney for Thomas J. Wilson, II, Michael J. Velotta, Sarah R.
Donahue, John R. Hunter, Kevin R. Slawin, Casey J. Sylla, Timothy N. Vander Pas
and Samuel H. Pilch.
<PAGE>
25. DIRECTORS AND OFFICERS OF THE DEPOSITOR, NORTHBROOK LIFE INSURANCE COMPANY
<TABLE>
<S> <C> <C>
NAME AND PRINCIPAL POSITION AND OFFICE WITH
BUSINESS ADDRESS DEPOSITOR OF THE ACCOUNT
Thomas J. Wilson, II Director, President and Chief Operating Officer
(Principal Executive Officer)
Michael J. Velotta Director, Vice President, Secretary and General Counsel
John R. Hunter Director and Vice President
Kevin R. Slawin Director and Vice President (Principal Financial Officer)
Timothy N. Vander Pas Director and Assistant Vice President
Sarah R. Donahue Director and Assistant Vice President
Casey J. Sylla Director and Chief Investment Officer
Marla G. Friedman Vice President
Karen C. Gardner Vice President
Samuel H. Pilch Controller (Principal Accounting Officer)
James P. Zils Treasurer
Ronald A. Johnson Assistant Vice President
Barry S. Paul Assistant Vice President and Assistant Treasurer
C. Nelson Strom Assistant Vice President and Corporate Actuary
Charles F. Thalheimer Assistant Vice President
Patricia W. Wilson Assistant Vice President, Assistant Secretary and
Assistant Treasurer
Joanne M. Derrig Assistant Secretary, Assistant General Counsel and
Chief Compliance Officer
Emma M. Kalaidjian Assistant Secretary
Paul N. Kierig Assistant Secretary
Mary J. McGinn Assistant Secretary
</TABLE>
The principal business address of the foregoing officers and directors is 3100
Sanders Road, Northbrook, Illinois 60062.
26. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH DEPOSITOR OR REGISTRANT
Incorporated herein by reference to Annual Report on Form 10-K, filed by the
Allstate Corporation on March 28, 2000 (File No. 1-11840).
27. NUMBER OF CONTRACT OWNERS
VARIABLE ANNUITY II
-------------------
As of February 15 ,2000 there were 87,973 non-qualified contracts and 15, 587
qualified contracts.
VARIABLE ANNUITY II ASSETMANAGER
- -------------------------------------
As of February 15 ,2000 there were 1,257 non-qualified contracts and 209
qualified contracts.
<PAGE>
28. INDEMNIFICATION
The General Agency Agreement (Exhibit 3(b)) contains 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 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 by such director, officer
or controlling person in connection with the securities being registered, the
registrant will, unless in the opinion of is counsel the matter has been settled
by controlling precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against public policy as
expressed in the Act and will be governed by the final adjudication of such
issue.
29. PRINCIPAL UNDERWRITERS
(a) Registrant's principal underwriter, Dean Witter Reynolds Inc., is the
principal underwriter for the following affiliated investment companies:
Northbrook Variable Annuity Account
Northbrook Life Variable Life Separate Account A
Allstate Life of New York Variable Annuity Account
Allstate Life of New York Variable Annuity Account II
(b) The directors and principal officers of the principal underwriter are:
Name and Principal Business Positions and Offices
Address* of Each Such Person with Underwriter
29. PRINCIPAL UNDERWRITERS
(a) Registrant's principal underwriter, Dean Witter Reynolds Inc., is also the
principal underwriter for the following investment companies: Northbrook
Variable Annuity Account II Northbrook Life Variable Life Separate Acount A
Allstate Life of New York Variable Annuity Account II Allstate Life of New York
Variable Annuity Account
(b) The directors and principal officers of the principal underwriter are:
<TABLE>
<CAPTION>
<S> <C> <C>
Name and Principal Business Positions and Officers
Address* of Each Such Person with Principal Underwriter
Bruce F. Alonso Director
Donald G. Kempf, Jr. Director
John J. Mack Director
Alan A. Schroder Director
Robert G. Scott Director
Philip J. Purcell Director, Chairman and Chief Executive Officer
Richard M. DeMartini Director, President and Chief Operating Officer,
Dean Witter Capital
James F. Higgins Director, President and Chief Operating Officer,
Dean Witter Financial
Stephen R. Miller Director, Senior Executive Vice President
Mitchell M. Merin Director, Executive Vice President and
Chief Administrative Officer
Michael H. Stone Executive Vice President, General Counsel and
Secretary
Raymond J. Drop Director, Executive Vice President
Frederick J. Frohne Executive Vice President
E. Davisson Hardman, Jr. Executive Vice President
Jeremiah A. Mullins Executive Vice President
John H. Schaefer Director, Executive Vice President
Thomas C. Schneider Director, Executive Vice President
Robert B. Sculthorpe Executive Vice President
William B. Smith Executive Vice President
Ronald T. Carman Senior Vice President, Associate General Counsel
and Assistant Secretary
Paul J. Dubow Senior Vice President and Deputy General Counsel
Alexander C. Frank Senior Vice President and Treasurer
Michael T. Gregg Senior Vice President, Deputy General Counsel
and Assistant Secretary
Kelly McNamara Corley Senior Vice President and Director of Governmental
Affairs
Charles F. Vadala, Jr. Senior Vice President and Chief Financial Officer
Anthony Basile Senior Vice President
Michael T. Cunningham Senior Vice President
Mary E. Curran Senior Vice President
Lorena J. Kern Senior Vice President
George R. Ross Senior Vice President
Debra M. Aaron Vice President
Darlene R. Lockhart Vice President
Harvey B. Mogenson Vice President
Kevin Mooney Vice President
Saul Rosen Vice President
Frank G. Skubic Vice President
Eileen S. Wallace Vice President
Michael D. Browne Assistant Secretary
Marilyn K. Cranney Assistant Secretary
Sabrina Hurley Assistant Secretary
Joyce L. Kramer Assistant Secretary
</TABLE>
* The principal business address of the above-named individuals is Two World
Trade Center, New York, New York 10048.
(c) Compensation of Dean Witter Reynolds Inc.
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>
<S> <C> <C> <C> <C>
Name of Principal Net Underwriting Compensation on Brokerage Compensation
Underwriter Discounts and Redemption Commissions
Commissions
- ----------------- ---------------- -------------- ----------- ------------
Dean Witter N/A N/A $49,299,644.67 N/A
Reynolds Inc.
</TABLE>
30. LOCATION OF ACCOUNTS AND RECORDS
The Depositor, Northbrook Life Insurance Company, is located at 3100 Sanders
Road, Northbrook, Illinois 60062. The Distributor, Dean Witter Reynolds Inc., is
located at Two World Trade Center, New York, New York 10048.
Each company maintains those accounts and records required to be maintained
pursuant to Section 31(a)of the Investment Company Act and the rules promulgated
thereunder.
31. MANAGEMENT SERVICES
None
32. UNDERTAKINGS
The Registrant undertakes to file a post-effective amendment to the 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 prospectus or
application to purchase a contract offered by the prospectus, a toll-free number
that an applicant can call to request a Statement of Additional Information or a
post card or similar written communication that the applicant can remove to send
for a Statement of Additional Information. Finally, the Registrant agrees to
deliver any Statement of Additional Information and any Financial Statements
required to be made available under this Form N-4 promptly upon written or oral
request.
REPRESENTATIONS PURSUANT TO SECTION 403(B) OF THE INTERNAL REVENUE CODE
The 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 and that the provisions of paragraphs 1-4 of the no-action letter have
been complied with.
REPRESENTATION REGARDING CONTRACT EXPENSES
Northbrook Life Insurance Company represents that the fees and charges deducted
under the Contracts described in 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 Insurance Compay under the
Contracts. Northbrook Life Insurance Company bases its representation on its
assessment of all of the facts and circumstances, including such relevant
factors as: the nature and extent of such services, expenses and risks; the need
for Northbrook Life Insurance Company to earn a profit; the degree to which the
Contracts include innovative features; and the regulatory standards for
exemptive relief under the Investment Company Act of 1940 used prior to October
1996, including the range of industry practice. This representation applies to
all Contracts sold pursuant to the Registraiton Statement, including those sold
on the terms specifically described in the prospectus(es) contained herein, or
any variations therein, based on supplements, endorsements, or riders to any
Contracts or prospectus(es), or otherwise.
<PAGE>
SIGNATURES
As required by the Securities Act of 1933 and the Investment Company Act of
1940, the Registrant, Northbrook Variable Annuity Account II, certifies that it
meets the requirements of Securities Act Rule 485(b) for effectiveness of this
amended Registration Statement and has caused this amended Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, all in the Township of Northfield, State of Illinois, on the 25th
day of April, 2000.
NORTHBROOK VARIABLE ANNUITY ACCOUNT II
(REGISTRANT)
BY: NORTHBROOK LIFE INSURANCE COMPANY
(DEPOSITOR)
By:/s/MICHAEL J. VELOTTA
--------------------------
MICHAEL J. VELOTTA
Vice President, Secretary and
General Counsel
As required by the Securities Act of 1933, this amended Registration Statement
has been duly signed below by the following Directors and Officers of Northbrook
Life Insurance Company on the 25th day of April, 2000.
<TABLE>
<S> <C> <C>
*/THOMAS J. WILSON, II President, Chief Operating Officer
Thomas J. Wilson, II and Director, (Principal Executive Officer)
/s/MICHAEL J. VELOTTA Vice President, Secretary,
Michael J. Velotta General Counsel and Director
*/JOHN R. HUNTER Vice President and Director
John R. Hunter
*/KEVIN R. SLAWIN Vice President and Director
Kevin R. Slawin (Principal Financial Officer)
*/CASEY J. SYLLA Chief Investment Officer and Director
Case J. Sylla
*/SARAH R. DONAHUE Assistant Vice President and Director
Sarah R. Donahue
*/TIMOTHY N. VANDER PAS Assistant Vice President and Director
Timothy N. Vander Pas
*/SAMUEL H. PILCH Controller (Principal Accounting Officer)
Samuel H. Pilch
*/By Michael J. Velotta, pursuant to Powers of Attorney filed herewith
</TABLE>
<PAGE>
EXHIBIT INDEX
Exhibit Description
(9)(b) Opinion and Consent of General Counsel
(10)(a) Independent Auditors' Consent
(10)(b) Consent of Attorneys
(13)(b) Performance Data Calculations
(99)(b) Power of Attorney for Thomas J. Wilson, II
LIFE LAW AND REGULATION
3100 Sanders Road, J5B
Northbrook, Illinois 60062
Direct Dial Number 847-402-2400
Facsimile 847-402-4371
Michael J. Velotta
Vice President, Secretary
and General Counsel
May 1, 2000
TO: NORTHBROOK LIFE INSURANCE COMPANY
NORTHBROOK, ILLINOIS 60062
FROM: MICHAEL J. VELOTTA
VICE PRESIDENT, SECRETARY AND GENERAL COUNSEL
RE: FORM N-4 REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933 AND
THE INVESTMENT COMPANY ACT OF 1940
FILE NOS. 333-35412 and 811-06116
With reference to the above-mentioned Registration Statement on Form
N-4 ("Registration Statement") filed by Northbrook Life Insurance Company (the
"Company"), as depositor, and Northbrook Variable Annuity Account II, as
registrant, with the Securities and Exchange Commission covering the individual
and group Flexible Premium Deferred Variable Annuity Contracts described
therein, I have examined such documents and such law as I have considered
necessary and appropriate, and on the basis of such examination, it is my
opinion that as of May 1, 2000:
1. The Company is duly organized and existing under the laws of the State
of Arizona and has been duly authorized to do business by the Director of
Insurance of the State of Arizona.
2. The securities registered by the Registration Statement when issued
will be valid, legal and binding obligations of the Company.
I hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the use of my name under the caption "Legal
Matters" in the Prospectuses constituting a part of the Registration Statement.
Sincerely,
/s/ Michael J. Velotta
----------------------
Michael J. Velotta
Vice President, Secretary and
General Counsel
10(a) Consnet of Auditors
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Post-Effective Amendment No. 26 to Registration
Statement No. 033-35412 of Northbrook Variable Annuity Account II of Northbrook
Life Insurance Company on Form N-4 of our report dated February 25, 2000
relating to the financial statements and the related financial statement
schedule of Northbrook Life Insurance Company, and our report dated March 27,
2000 relating to the financial statements of Northbrook Variable Annuity Account
II, appearing in the Statement of Additional Information (which is incorporated
by reference in the Prospectus of Northbrook Variable Annuity Account II of
Northbrook Life Insurance Company), which is a part of such Registration
Statement, and to the reference to us under the heading "Experts" in such
Statement of Additional Information.
Chicago, Illinois
May 1, 2000
<PAGE>
10 (b)Consent of Attorneys
FREEDMAN, LEVY, KROLL & SIMONDS
CONSENT OF
FREEDMAN, LEVY, KROLL & SIMONDS
We hereby consent to the reference to our firm under the caption "Legal
Matters" in the prospectus contained in Post-Effective Amendment No. 26 to the
Form N-4 Registration Statement of Northbrook Variable Annuity Account II (File
No. 033-35412).
/s/ Freedman, Levy, Kroll & Simonds
- -----------------------------------
FREEDMAN, LEVY, KROLL & SIMONDS
Washington, D.C.
April 30, 2000
STANDARDIZED - BASE CONTRACT
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
NLIC VAII AGGRESSIVE EQUITY
03-May-99
TO NO. YEARS 0.663
31-Dec-99
TRANSACTION DATE $ VALUE UNIT VALUE NO. UNITS END VALUE SURRENDER CHARGES
0 INIT DEPOSIT 03-May-99 1000.00 10.000000 100.00000
1 FEE 31-Dec-99 0.546 14.477763 0.03771 0.06
2 FEE N/A 0 N/A 0.00000 0.05
3 FEE N/A 0 N/A 0.00000 0.04
4 N/A 0 N/A 0.00000 0.03
5 N/A 0 N/A 0.00000 0.02
6 N/A 0 N/A 0.00000 0.01
7 N/A 0 N/A 0.00000 0
8 N/A 0 N/A 0.00000 0
9 N/A 0 N/A 0.00000 0
10 N/A 0 N/A 0.00000 0
11 N/A 0 N/A 0.00000 0
12 N/A 0 N/A 0.00000 0
13 N/A 0 N/A 0.00000 0
14 FEE N/A 0 N/A 0.00000 0
15 FEE N/A 0 N/A 0.00000 0
RESULTING VALUE 31-Dec-99 14.477763 99.96229 1447.2303
0.663
FORMULA: 1000*(1+T)= 1447.2303
= 1396.2303
T = 65.49%
R = 39.62%
NLIC VAII SHORT TERM BOND
03-May-99
TO NO. YEARS 0.663
31-Dec-99
TRANSACTION DATE $ VALUE UNIT VALUE NO. UNITS END VALUE SURRENDER CHARGES
0 INIT DEPOSIT 03-May-99 1000.00 10.000000 100.00000
1 FEE 31-Dec-99 0.546 10.065113 0.05425 0.06
2 FEE N/A 0 N/A 0.00000 0.05
3 FEE N/A 0 N/A 0.00000 0.04
4 N/A 0 N/A 0.00000 0.03
5 N/A 0 N/A 0.00000 0.02
6 N/A 0 N/A 0.00000 0.01
7 N/A 0 N/A 0.00000 0
8 N/A 0 N/A 0.00000 0
9 N/A 0 N/A 0.00000 0
10 N/A 0 N/A 0.00000 0
11 N/A 0 N/A 0.00000 0
12 N/A 0 N/A 0.00000 0
13 N/A 0 N/A 0.00000 0
14 FEE N/A 0 N/A 0.00000 0
15 FEE N/A 0 N/A 0.00000 0
RESULTING VALUE 31-Dec-99 10.065113 99.94575 1005.9653
0.663
FORMULA: 1000*(1+T)= 1005.9653
= 954.9653
T = -6.72%
R = -4.50%
<PAGE>
NON-STANDARDIZED BASE CONTRACT
- -------------------------------------------------------------------------------
Dates:
Current: 12/31/99
3 Months Ago: 09/30/99
End of Last Year: 12/31/98
One Yr Ago: 12/31/98
Two Yrs Ago: 12/31/97
Three Yrs Ago: 12/31/96
Five Yrs Ago: 12/31/94
Ten Yrs Ago: 12/31/89
Inception Inception Ten Yr Five Yr Three Two One Yr YTD 3 Months Today's
Fund Date AUV AUV AUV AUV AUV AUV AUV AUV AUV
Aggressive Equity 05/03/99 10 N/A N/A N/A N/A N/A 10 10.309408 14.477763
Short Term Bond 05/03/99 10 N/A N/A N/A N/A N/A 10 10.037067 10.065113
<PAGE>
Non-Standardized Performance
Inception Ten Years Five Years Three Years Two Years One Year YTD Three Months
Total Average Total Average Total AverageTotal Average Total Average
44.78% 74.74% N/A N/A N/A N/A N/A N/A N/A N/A N/A 44.78% 40.43%
0.65% 0.98% N/A N/A N/A N/A N/A N/A N/A N/A N/A 0.65% 0.28%
<PAGE>
NBVA II Conract - ADJUSTED HISTORICAL BASE CONTRACT
- -------------------------------------------------------------------------------
NLIC VAII AGGRESSIVE EQUITY
03-May-99
TO NO. YEARS 0.663
31-Dec-99
TRANSACTION DATE $ VALUE UNIT VALUE NO. UNITS END VALUE SURRENDER CHARGES
0 INIT DEPOSIT 03-May-99 1000.00 10.000000 100.00000
1 FEE 31-Dec-99 0.546 14.477763 0.03771 0.06
2 FEE N/A 0 N/A 0.00000 0.05
3 FEE N/A 0 N/A 0.00000 0.04
4 N/A 0 N/A 0.00000 0.03
5 N/A 0 N/A 0.00000 0.02
6 N/A 0 N/A 0.00000 0.01
7 N/A 0 N/A 0.00000 0
8 N/A 0 N/A 0.00000 0
9 N/A 0 N/A 0.00000 0
10 N/A 0 N/A 0.00000 0
11 N/A 0 N/A 0.00000 0
12 N/A 0 N/A 0.00000 0
13 N/A 0 N/A 0.00000 0
14 FEE N/A 0 N/A 0.00000 0
15 FEE N/A 0 N/A 0.00000 0
RESULTING VALUE 31-Dec-99 14.477763 99.96229 1447.2303
0.663
FORMULA: 1000*(1+T)= 1447.2303
= 1396.2303
T = 65.49%
R = 39.62%
NLIC VAII SHORT TERM BOND
03-May-99
TO NO. YEARS 0.663
31-Dec-99
TRANSACTION DATE $ VALUE UNIT VALUE NO. UNITS END VALUE SURRENDER CHARGES
0 INIT DEPOSIT 03-May-99 1000.00 10.000000 100.00000
1 FEE 31-Dec-99 0.546 10.065113 0.05425 0.06
2 FEE N/A 0 N/A 0.00000 0.05
3 FEE N/A 0 N/A 0.00000 0.04
4 N/A 0 N/A 0.00000 0.03
5 N/A 0 N/A 0.00000 0.02
6 N/A 0 N/A 0.00000 0.01
7 N/A 0 N/A 0.00000 0
8 N/A 0 N/A 0.00000 0
9 N/A 0 N/A 0.00000 0
10 N/A 0 N/A 0.00000 0
11 N/A 0 N/A 0.00000 0
12 N/A 0 N/A 0.00000 0
13 N/A 0 N/A 0.00000 0
14 FEE N/A 0 N/A 0.00000 0
15 FEE N/A 0 N/A 0.00000 0
RESULTING VALUE 31-Dec-99 10.065113 99.94575 1005.9653
0.663
FORMULA: 1000*(1+T)= 1005.9653
= 954.9653
T = -6.72%
R = -4.50%
<PAGE>
STANDARDIZED
- -------------------------------------------------------------------------------
NLIC VAII AGGRESSIVE EQUITY
03-May-99
TO NO. YEARS 0.663
31-Dec-99
TRANSACTION DATE $ VALUE UNIT VALUENO. UNITS END VALUE SURRENDER CHARGES
0 INIT DEPOSIT 03-May-99 1000.00 10.000000 100.00000
1 FEE 31-Dec-99 0.546 14.454787 0.03777 0.06
2 FEE N/A 0 N/A 0.00000 0.05
3 FEE N/A 0 N/A 0.00000 0.04
4 N/A 0 N/A 0.00000 0.03
5 N/A 0 N/A 0.00000 0.02
6 N/A 0 N/A 0.00000 0.01
7 N/A 0 N/A 0.00000 0
8 N/A 0 N/A 0.00000 0
9 N/A 0 N/A 0.00000 0
10 N/A 0 N/A 0.00000 0
11 N/A 0 N/A 0.00000 0
12 N/A 0 N/A 0.00000 0
13 N/A 0 N/A 0.00000 0
14 FEE N/A 0 N/A 0.00000 0
15 FEE N/A 0 N/A 0.00000 0
RESULTING VALUE 31-Dec-99 14.454787 99.96223 1444.9327
0.663
FORMULA: 1000*(1+T)= 1444.9327
= 1393.9327
T = 65.08%
R = 39.39%
NLIC VAII SHORT TERM BOND
03-May-99
TO NO. YEARS 0.663
31-Dec-99
TRANSACTION DATE $ VALUE UNIT VALUENO. UNITS END VALUE SURRENDER CHARGES
0 INIT DEPOSIT 03-May-99 1000.00 10.000000 100.00000
1 FEE 31-Dec-99 0.546 10.049101 0.05433 0.06
2 FEE N/A 0 N/A 0.00000 0.05
3 FEE N/A 0 N/A 0.00000 0.04
4 N/A 0 N/A 0.00000 0.03
5 N/A 0 N/A 0.00000 0.02
6 N/A 0 N/A 0.00000 0.01
7 N/A 0 N/A 0.00000 0
8 N/A 0 N/A 0.00000 0
9 N/A 0 N/A 0.00000 0
10 N/A 0 N/A 0.00000 0
11 N/A 0 N/A 0.00000 0
12 N/A 0 N/A 0.00000 0
13 N/A 0 N/A 0.00000 0
14 FEE N/A 0 N/A 0.00000 0
15 FEE N/A 0 N/A 0.00000 0
RESULTING VALUE 31-Dec-99 10.049101 99.94567 1004.3641
0.663
FORMULA: 1000*(1+T)= 1004.3641
= 953.3641
T = -6.95%
R = -4.66%
<PAGE>
NON-STANDARDIZED
- -------------------------------------------------------------------------------
Non-Standardized Calculations
Dates:
Current: 12/31/99
3 Months Ago: 09/30/99
End of Last Year 12/31/98
One Yr Ago: 12/31/98
Two Yrs Ago: 12/31/97
Three Yrs Ago: 12/31/96
Five Yrs Ago: 12/31/94
Ten Yrs Ago: 12/31/89
InceptionInceptionTen Yr Five Yr Three Two One Yr YTD 3 Months Today's
Fund Date AUV AUV AUV AUV AUV AUV AUV AUV AUV
Aggressive Equity5/3/99 10 N/A N/A N/A N/A N/A 10 10.29925114.454787
Short Term Bond 5/3/99 10 N/A N/A N/A N/A N/A 10 10.02716310.049101
<PAGE>
Non-Standardized Performance
Inception Ten Years Five Years Three Years Two Years One Year YTD Three Months
Total Average Total Average Total Average Total Average Total Average
44.55% 74.32% N/A N/A N/A N/A N/A N/A N/A N/A N/A 44.55% 40.35%
0.49% 0.74% N/A N/A N/A N/A N/A N/A N/A N/A N/A 0.49% 0.22%
<PAGE>
ADJUSTED HISTORICAL
- -------------------------------------------------------------------------------
NLIC VAII AGGRESSIVE EQUITY
03-May-99
TO NO. YEARS 0.663
31-Dec-99
TRANSACTION DATE $ VALUE UNIT VALUENO. UNITS END VALUE SURRENDER CHARGES
0 INIT DEPOSIT 03-May-99 1000.00 10.000000 100.00000
1 FEE 31-Dec-99 0.546 14.454787 0.03777 0.06
2 FEE N/A 0 N/A 0.00000 0.05
3 FEE N/A 0 N/A 0.00000 0.04
4 N/A 0 N/A 0.00000 0.03
5 N/A 0 N/A 0.00000 0.02
6 N/A 0 N/A 0.00000 0.01
7 N/A 0 N/A 0.00000 0
8 N/A 0 N/A 0.00000 0
9 N/A 0 N/A 0.00000 0
10 N/A 0 N/A 0.00000 0
11 N/A 0 N/A 0.00000 0
12 N/A 0 N/A 0.00000 0
13 N/A 0 N/A 0.00000 0
14 FEE N/A 0 N/A 0.00000 0
15 FEE N/A 0 N/A 0.00000 0
RESULTING VALUE 31-Dec-99 14.454787 99.96223 1444.9327
0.663
FORMULA: 1000*(1+T)= 1444.9327
= 1393.9327
T = 65.08%
R = 39.39%
NLIC VAII SHORT TERM BOND
03-May-99
TO NO. YEARS 0.663
31-Dec-99
TRANSACTION DATE $ VALUE UNIT VALUENO. UNITS END VALUE SURRENDER CHARGES
0 INIT DEPOSIT 03-May-99 1000.00 10.000000 100.00000
1 FEE 31-Dec-99 0.546 10.049101 0.05433 0.06
2 FEE N/A 0 N/A 0.00000 0.05
3 FEE N/A 0 N/A 0.00000 0.04
4 N/A 0 N/A 0.00000 0.03
5 N/A 0 N/A 0.00000 0.02
6 N/A 0 N/A 0.00000 0.01
7 N/A 0 N/A 0.00000 0
8 N/A 0 N/A 0.00000 0
9 N/A 0 N/A 0.00000 0
10 N/A 0 N/A 0.00000 0
11 N/A 0 N/A 0.00000 0
12 N/A 0 N/A 0.00000 0
13 N/A 0 N/A 0.00000 0
14 FEE N/A 0 N/A 0.00000 0
15 FEE N/A 0 N/A 0.00000 0
RESULTING VALUE 31-Dec-99 10.049101 99.94567 1004.3641
0.663
FORMULA: 1000*(1+T)= 1004.3641
= 953.3641
T = -6.95%
R = -4.66%
<PAGE>
STANDARDIZED
- -------------------------------------------------------------------------------
NLIC VAII AGGRESSIVE EQUITY
03-May-99
TO NO. YEARS 0.663
31-Dec-99
TRANSACTION DATE $ VALUE UNIT VALUE NO. UNITS END VALUE SURRENDER CHARGES
0 INIT DEPOSIT 03-May-99 1000.00 10.000000 100.00000
1 FEE 31-Dec-99 0.546 14.465302 0.03775 0.06
2 FEE N/A 0 N/A 0.00000 0.05
3 FEE N/A 0 N/A 0.00000 0.04
4 N/A 0 N/A 0.00000 0.03
5 N/A 0 N/A 0.00000 0.02
6 N/A 0 N/A 0.00000 0.01
7 N/A 0 N/A 0.00000 0
8 N/A 0 N/A 0.00000 0
9 N/A 0 N/A 0.00000 0
10 N/A 0 N/A 0.00000 0
11 N/A 0 N/A 0.00000 0
12 N/A 0 N/A 0.00000 0
13 N/A 0 N/A 0.00000 0
14 FEE N/A 0 N/A 0.00000 0
15 FEE N/A 0 N/A 0.00000 0
RESULTING VALUE 31-Dec-99 14.465302 99.96225 1445.9842
0.663
FORMULA: 1000*(1+T)= 1445.9842
= 1394.9842
T = 65.27%
R = 39.50%
NLIC VAII SHORT TERM BOND
03-May-99
TO NO. YEARS 0.663
31-Dec-99
TRANSACTION DATE $ VALUE UNIT VALUE NO. UNITS END VALUE SURRENDER CHARGES
0 INIT DEPOSIT 03-May-99 1000.00 10.000000 100.00000
1 FEE 31-Dec-99 0.546 10.056436 0.05429 0.06
2 FEE N/A 0 N/A 0.00000 0.05
3 FEE N/A 0 N/A 0.00000 0.04
4 N/A 0 N/A 0.00000 0.03
5 N/A 0 N/A 0.00000 0.02
6 N/A 0 N/A 0.00000 0.01
7 N/A 0 N/A 0.00000 0
8 N/A 0 N/A 0.00000 0
9 N/A 0 N/A 0.00000 0
10 N/A 0 N/A 0.00000 0
11 N/A 0 N/A 0.00000 0
12 N/A 0 N/A 0.00000 0
13 N/A 0 N/A 0.00000 0
14 FEE N/A 0 N/A 0.00000 0
15 FEE N/A 0 N/A 0.00000 0
RESULTING VALUE 31-Dec-99 10.056436 99.94571 1005.0976
0.663
FORMULA: 1000*(1+T)= 1005.0976
= 954.0976
T = -6.85%
R = -4.59%
<PAGE>
NON-STANDARDIZED
- -------------------------------------------------------------------------------
Non-Standardized Calculations
Dates:
Current: 12/31/99
3 Months Ago: 09/30/99
End of Last Year 12/31/98
One Yr Ago: 12/31/98
Two Yrs Ago: 12/31/97
Three Yrs Ago: 12/31/96
Five Yrs Ago: 12/31/94
Ten Yrs Ago: 12/31/89
InceptionInceptionTen Yr Five Yr Three Two One Yr YTD 3 Months Today's
Fund Date AUV AUV AUV AUV AUV AUV AUV AUV AUV
Aggressive Equity 05/03/99 10 N/A N/A N/A N/A N/A 10 #VALUE! 14.465302
Short Term Bond 05/03/99 10 N/A N/A N/A N/A N/A 10 10.0317 10.056436
<PAGE>
Non-Standardized Performance
Inception Ten Years Five Years Three Years Two Years One Year YTD Three Months
Total Average Total Average Total Average Total Average Total Average
44.65% 74.51% N/A N/A N/A N/A N/A N/A N/A N/A N/A 44.65% #VALUE!
0.56% 0.85% N/A N/A N/A N/A N/A N/A N/A N/A N/A 0.56% 0.25%
<PAGE>
ADJUSTED HISTORICAL
- -------------------------------------------------------------------------------
NLIC VAII AGGRESSIVE EQUITY
03-May-99
TO NO. YEARS 0.663
31-Dec-99
TRANSACTION DATE $ VALUE UNIT VALUE NO. UNITS END VALUE SURRENDER CHARGES
0 INIT DEPOSIT 03-May-99 1000.00 10.000000 100.00000
1 FEE 31-Dec-99 0.546 14.465302 0.03775 0.06
2 FEE N/A 0 N/A 0.00000 0.05
3 FEE N/A 0 N/A 0.00000 0.04
4 N/A 0 N/A 0.00000 0.03
5 N/A 0 N/A 0.00000 0.02
6 N/A 0 N/A 0.00000 0.01
7 N/A 0 N/A 0.00000 0
8 N/A 0 N/A 0.00000 0
9 N/A 0 N/A 0.00000 0
10 N/A 0 N/A 0.00000 0
11 N/A 0 N/A 0.00000 0
12 N/A 0 N/A 0.00000 0
13 N/A 0 N/A 0.00000 0
14 FEE N/A 0 N/A 0.00000 0
15 FEE N/A 0 N/A 0.00000 0
RESULTING VALUE 31-Dec-99 14.465302 99.96225 1445.9842
0.663
FORMULA: 1000*(1+T)= 1445.9842
= 1394.9842
T = 65.27%
R = 39.50%
NLIC VAII SHORT TERM BOND
03-May-99
TO NO. YEARS 0.663
31-Dec-99
TRANSACTION DATE $ VALUE UNIT VALUE NO. UNITS END VALUE SURRENDER CHARGES
0 INIT DEPOSIT 03-May-99 1000.00 10.000000 100.00000
1 FEE 31-Dec-99 0.546 10.056436 0.05429 0.06
2 FEE N/A 0 N/A 0.00000 0.05
3 FEE N/A 0 N/A 0.00000 0.04
4 N/A 0 N/A 0.00000 0.03
5 N/A 0 N/A 0.00000 0.02
6 N/A 0 N/A 0.00000 0.01
7 N/A 0 N/A 0.00000 0
8 N/A 0 N/A 0.00000 0
9 N/A 0 N/A 0.00000 0
10 N/A 0 N/A 0.00000 0
11 N/A 0 N/A 0.00000 0
12 N/A 0 N/A 0.00000 0
13 N/A 0 N/A 0.00000 0
14 FEE N/A 0 N/A 0.00000 0
15 FEE N/A 0 N/A 0.00000 0
RESULTING VALUE 31-Dec-99 10.056436 99.94571 1005.0976
0.663
FORMULA: 1000*(1+T)= 1005.0976
= 954.0976
T = -6.85%
R = -4.59%
</TABLE>
Northbrook VA II
- -------------------------------------------------------------------------------
ONE YEAR
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Alliance Premier Growth
12/31/98 NO. YEARS 1
TO
12/31/99 TRANSACTION DATE $ VALUE UNIT VALUE NO. UNITS END VALUE
INIT DEPOSIT 12/31/98 1000 #VALUE! #VALUE!
FEE 12/31/99 0.546 10 0.0546
RESULTING VALUE 12/31/99 10 #VALUE! #VALUE!
1
FORMULA: 1000*(1+T)= #VALUE! - (0.85 * 1000 * 0.05)
= #VALUE!
T = N/A
R = N/A
Alliance Growth
12/31/98 NO. YEARS 1
TO
12/31/99 TRANSACTION DATE $ VALUE UNIT VALUE NO. UNITS END VALUE
INIT DEPOSIT 12/31/98 1000 7.555681 132.3507
FEE 12/31/99 0.546 10 0.0546
RESULTING VALUE 12/31/99 10 132.2961 1322.961
1
FORMULA: 1000*(1+T)= 1322.961 - (0.85 * 1000 * 0.05)
= 1280.461
T = 28.05%
R = 28.05%
Alliance Growth and Income
12/31/98 NO. YEARS 1
TO
12/31/99 TRANSACTION DATE $ VALUE UNIT VALUE NO. UNITS END VALUE
INIT DEPOSIT 12/31/98 1000 9.123075 109.6122
FEE 12/31/99 0.546 10 0.0546
RESULTING VALUE 12/31/99 10 109.5576 1095.576
1
FORMULA: 1000*(1+T)= 1095.576 - (0.85 * 1000 * 0.05)
= 1053.076
T = 5.31%
R = 5.31%
Aim Cap App
12/31/98 NO. YEARS 1
TO
12/31/99 TRANSACTION DATE $ VALUE UNIT VALUE NO. UNITS END VALUE
INIT DEPOSIT 12/31/98 1000 7.025639 142.3358
FEE 12/31/99 0.546 10 0.0546
RESULTING VALUE 12/31/99 10 142.2812 1422.812
1
FORMULA: 1000*(1+T)= 1422.812 - (0.85 * 1000 * 0.05)
= 1380.312
T = 38.03%
R = 38.03%
Aim Growth
12/31/98 NO. YEARS 1
TO
12/31/99 TRANSACTION DATE $ VALUE UNIT VALUE NO. UNITS END VALUE
INIT DEPOSIT 12/31/98 1000 7.512904 133.1043
FEE 12/31/99 0.546 10 0.0546
RESULTING VALUE 12/31/99 10 133.0497 1330.497
1
FORMULA: 1000*(1+T)= 1330.497 - (0.85 * 1000 * 0.05)
= 1287.997
T = 28.80%
R = 28.80%
Aim Value
12/31/98 NO. YEARS 1
TO
12/31/99 TRANSACTION DATE $ VALUE UNIT VALUE NO. UNITS END VALUE
INIT DEPOSIT 12/31/98 1000 7.821632 127.8506
FEE 12/31/99 0.546 10 0.0546
RESULTING VALUE 12/31/99 10 127.796 1277.96
1
FORMULA: 1000*(1+T)= 1277.96 - (0.85 * 1000 * 0.05)
= 1235.46
T = 23.55%
R = 23.55%
Putnam International Growth
12/31/98 NO. YEARS 1
TO
12/31/99 TRANSACTION DATE $ VALUE UNIT VALUE NO. UNITS END VALUE
INIT DEPOSIT 12/31/98 1000 6.348516 157.5171
FEE 12/31/99 0.546 10 0.0546
RESULTING VALUE 12/31/99 10 157.4625 1574.625
1
FORMULA: 1000*(1+T)= 1574.625 - (0.85 * 1000 * 0.05)
= 1532.125
T = 53.21%
R = 53.21%
Putnam Voyager
12/31/98 NO. YEARS 1
TO
12/31/99 TRANSACTION DATE $ VALUE UNIT VALUE NO. UNITS END VALUE
INIT DEPOSIT 12/31/98 1000 6.429676 155.5288
FEE 12/31/99 0.546 10 0.0546
RESULTING VALUE 12/31/99 10 155.4742 1554.742
1
FORMULA: 1000*(1+T)= 1554.742 - (0.85 * 1000 * 0.05)
= 1512.242
T = 51.22%
R = 51.22%
Putnam Growth & Income
12/31/98 NO. YEARS 1
TO
12/31/99 TRANSACTION DATE $ VALUE UNIT VALUE NO. UNITS END VALUE
INIT DEPOSIT 12/31/98 1000 10.01383 99.86187
FEE 12/31/99 0.546 10 0.0546
RESULTING VALUE 12/31/99 10 99.80727 998.0727
1
FORMULA: 1000*(1+T)= 998.0727 - (0.85 * 1000 * 0.05)
= 955.5727
T = -4.44%
R = -4.44%
MSDW Mid Cap
12/31/98 NO. YEARS 1
TO
12/31/99 TRANSACTION DATE $ VALUE UNIT VALUE NO. UNITS END VALUE
INIT DEPOSIT 12/31/98 1000 8.425122 118.6926
FEE 12/31/99 0.546 10 0.0546
RESULTING VALUE 12/31/99 10 118.638 1186.38
1
FORMULA: 1000*(1+T)= 1186.38 - (0.85 * 1000 * 0.05)
= 1143.88
T = 14.39%
R = 14.39%
<PAGE>
5 YEAR
Alliance Premier Growth
12/30/94
TO NO. YEARS 5
12/31/99
TRANSACTION DATE $ VALUE UNIT VALUE NO. UNITS END VALUE
INIT DEPOSIT 12/31/94 1000 #VALUE! #VALUE!
FEE 12/31/95 0.546 #VALUE! #VALUE!
FEE 12/31/96 0.546 #VALUE! #VALUE!
FEE 12/31/97 0.546 #VALUE! #VALUE!
FEE 12/31/98 0.546 #VALUE! #VALUE!
FEE 12/31/99 0.546 10 0.0546
RESULTING VALUE 12/31/99 10 #VALUE! #VALUE!
5
FORMULA: 1000*(1+T)= #VALUE! - (0.85 * 1000 * 0.01)
= #VALUE!
T = N/A
R = N/A
Alliance Growth
12/30/94
TO NO. YEARS 5
12/31/99
TRANSACTION DATE $ VALUE UNIT VALUE NO. UNITS END VALUE
INIT DEPOSIT 12/31/94 1000 2.767911 361.2833
FEE 12/31/95 0.546 3.685042 0.148167
FEE 12/31/96 0.546 4.660153 0.117164
FEE 12/31/97 0.546 5.96361 0.091555
FEE 12/31/98 0.546 7.555681 0.072264
FEE 12/31/99 0.546 10 0.0546
RESULTING VALUE 12/31/99 10 360.7995 3607.995
5
FORMULA: 1000*(1+T)= 3607.995 - (0.85 * 1000 * 0.01)
= 3599.495
T = 29.20%
R = 259.95%
Alliance Growth and Income
12/30/94
TO NO. YEARS 5
12/31/99
TRANSACTION DATE $ VALUE UNIT VALUE NO. UNITS END VALUE
INIT DEPOSIT 12/31/94 1000 3.705287 269.8846
FEE 12/31/95 0.546 4.952505 0.110247
FEE 12/31/96 0.546 6.048616 0.090269
FEE 12/31/97 0.546 7.667529 0.071209
FEE 12/31/98 0.546 9.123075 0.059848
FEE 12/31/99 0.546 10 0.0546
RESULTING VALUE 12/31/99 10 269.4984 2694.984
5
FORMULA: 1000*(1+T)= 2694.984 - (0.85 * 1000 * 0.01)
= 2686.484
T = 21.85%
R = 168.65%
Aim Cap App
12/30/94
TO NO. YEARS 5
12/31/99
TRANSACTION DATE $ VALUE UNIT VALUE NO. UNITS END VALUE
INIT DEPOSIT 12/31/94 1000 3.568503 280.2296
FEE 12/31/95 0.546 4.765839 0.114565
FEE 12/31/96 0.546 5.514873 0.099005
FEE 12/31/97 0.546 6.160931 0.088623
FEE 12/31/98 0.546 7.025639 0.077715
FEE 12/31/99 0.546 10 0.0546
RESULTING VALUE 12/31/99 10 279.795 2797.95
5
FORMULA: 1000*(1+T)= 2797.95 - (0.85 * 1000 * 0.01)
= 2789.45
T = 22.77%
R = 178.95%
Aim Growth
12/30/94
TO NO. YEARS 5
12/31/99
TRANSACTION DATE $ VALUE UNIT VALUE NO. UNITS END VALUE
INIT DEPOSIT 12/31/94 1000 3.170644 315.3933
FEE 12/31/95 0.546 4.205844 0.129819
FEE 12/31/96 0.546 4.887933 0.111704
FEE 12/31/97 0.546 6.103476 0.089457
FEE 12/31/98 0.546 7.512904 0.072675
FEE 12/31/99 0.546 10 0.0546
RESULTING VALUE 12/31/99 10 314.9351 3149.351
5
FORMULA: 1000*(1+T)= 3149.351 - (0.85 * 1000 * 0.01)
= 3140.851
T = 25.72%
R = 214.09%
Aim Value
12/30/94
TO NO. YEARS 5
12/31/99
TRANSACTION DATE $ VALUE UNIT VALUE NO. UNITS END VALUE
INIT DEPOSIT 12/31/94 1000 3.4122 293.0661
FEE 12/31/95 0.546 4.575979 0.119319
FEE 12/31/96 0.546 5.179983 0.105406
FEE 12/31/97 0.546 6.306036 0.086584
FEE 12/31/98 0.546 7.821632 0.069806
FEE 12/31/99 0.546 10 0.0546
RESULTING VALUE 12/31/99 10 292.6304 2926.304
5
FORMULA: 1000*(1+T)= 2926.304 - (0.85 * 1000 * 0.01)
= 2917.804
T = 23.88%
R = 191.78%
Putnam International Growth
12/30/94
TO NO. YEARS 5
12/31/99
TRANSACTION DATE $ VALUE UNIT VALUE NO. UNITS END VALUE
INIT DEPOSIT 12/31/94 1000 #VALUE! #VALUE!
FEE 12/31/95 0.546 #VALUE! #VALUE!
FEE 12/31/96 0.546 #VALUE! #VALUE!
FEE 12/31/97 0.546 5.444387 0.100287
FEE 12/31/98 0.546 6.348516 0.086004
FEE 12/31/99 0.546 10 0.0546
RESULTING VALUE 12/31/99 10 #VALUE! #VALUE!
5
FORMULA: 1000*(1+T)= #VALUE! - (0.85 * 1000 * 0.01)
= #VALUE!
T = N/A
R = N/A
Putnam Voyager
12/30/94
TO NO. YEARS 5
12/31/99
TRANSACTION DATE $ VALUE UNIT VALUE NO. UNITS END VALUE
INIT DEPOSIT 12/31/94 1000 2.756446 362.786
FEE 12/31/95 0.546 3.810702 0.143281
FEE 12/31/96 0.546 4.230652 0.129058
FEE 12/31/97 0.546 5.260125 0.1038
FEE 12/31/98 0.546 6.429676 0.084919
FEE 12/31/99 0.546 10 0.0546
RESULTING VALUE 12/31/99 10 362.2703 3622.703
5
FORMULA: 1000*(1+T)= 3622.703 - (0.85 * 1000 * 0.01)
= 3614.203
T = 29.30%
R = 261.42%
Putnam Growth & Income
12/30/94
TO NO. YEARS 5
12/31/99
TRANSACTION DATE $ VALUE UNIT VALUE NO. UNITS END VALUE
INIT DEPOSIT 12/31/94 1000 4.493022 222.5674
FEE 12/31/95 0.546 6.036663 0.090447
FEE 12/31/96 0.546 7.232874 0.075489
FEE 12/31/97 0.546 8.824721 0.061872
FEE 12/31/98 0.546 10.01383 0.054525
FEE 12/31/99 0.546 10 0.0546
RESULTING VALUE 12/31/99 10 222.2304 2222.304
5
FORMULA: 1000*(1+T)= 2222.304 - (0.85 * 1000 * 0.01)
= 2213.804
T = 17.23%
R = 121.38%
MSDW Mid Cap
12/30/94
TO NO. YEARS 5
12/31/99
TRANSACTION DATE $ VALUE UNIT VALUE NO. UNITS END VALUE
INIT DEPOSIT 12/31/94 1000 #VALUE! #VALUE!
FEE 12/31/95 0.546 #VALUE! #VALUE!
FEE 12/31/96 0.546 #VALUE! #VALUE!
FEE 12/31/97 0.546 7.585646 0.071978
FEE 12/31/98 0.546 8.425122 0.064806
FEE 12/31/99 0.546 10 0.0546
RESULTING VALUE 12/31/99 10 #VALUE! #VALUE!
5
FORMULA: 1000*(1+T)= #VALUE! - (0.85 * 1000 * 0.01)
= #VALUE!
T = N/A
R = N/A
NLIC VAII CAPITAL APPRECIATION
12/30/94
TO NO. YEARS 5
12/31/99
TRANSACTION DATE $ VALUE UNIT VALUE NO. UNITS END VALUE
INIT DEPOSIT 12/31/94 1000 #VALUE! #VALUE!
FEE 12/31/95 0.546 #VALUE! #VALUE!
FEE 12/31/96 0.546 #VALUE! #VALUE!
FEE 12/31/97 0.546 11.1517 0.048961
FEE 12/31/98 0.546 10.10222 0.054048
FEE 12/31/99 0.546 10.8153 0.050484
RESULTING VALUE 12/31/99 10.8153 #VALUE! #VALUE!
5
FORMULA: 1000*(1+T)= #VALUE! - (0.85 * 1000 * 0.01)
= #VALUE!
T = N/A
R = N/A
NLIC VAII INCOME BUILDER
12/30/94
TO NO. YEARS 5
12/31/99
TRANSACTION DATE $ VALUE UNIT VALUE NO. UNITS END VALUE
INIT DEPOSIT 12/31/94 1000 #VALUE! #VALUE!
FEE 12/31/95 0.546 #VALUE! #VALUE!
FEE 12/31/96 0.546 #VALUE! #VALUE!
FEE 12/31/97 0.546 12.05646 0.045287
FEE 12/31/98 0.546 12.24769 0.04458
FEE 12/31/99 0.546 12.90598 0.042306
RESULTING VALUE 12/31/99 12.90598 #VALUE! #VALUE!
5
FORMULA: 1000*(1+T)= #VALUE! - (0.85 * 1000 * 0.01)
= #VALUE!
T = N/A
R = N/A
NLIC VAII EQUITY GROWTH
12/30/94
TO NO. YEARS 5
12/31/99
TRANSACTION DATE $ VALUE UNIT VALUE NO. UNITS END VALUE
INIT DEPOSIT 12/31/94 1000 #VALUE! #VALUE!
FEE 12/31/95 0.546 #VALUE! #VALUE!
FEE 12/31/96 0.546 #VALUE! #VALUE!
FEE 12/31/97 0.546 8.589754 0.063564
FEE 12/31/98 0.546 10.08524 0.054139
FEE 12/31/99 0.546 13.84209 0.039445
RESULTING VALUE 12/31/99 13.84209 #VALUE! #VALUE!
5
FORMULA: 1000*(1+T)= #VALUE! - (0.85 * 1000 * 0.01)
= #VALUE!
T = N/A
R = N/A
NLIC VAII INTERNATIONAL MAGNUM
12/30/94
TO NO. YEARS 5
12/31/99
TRANSACTION DATE $ VALUE UNIT VALUE NO. UNITS END VALUE
INIT DEPOSIT 12/31/94 1000 #VALUE! #VALUE!
FEE 12/31/95 0.546 #VALUE! #VALUE!
FEE 12/31/96 0.546 #VALUE! #VALUE!
FEE 12/31/97 0.546 9.11102 0.059927
FEE 12/31/98 0.546 9.77135 0.055878
FEE 12/31/99 0.546 12.04019 0.045348
RESULTING VALUE 12/31/99 12.04019 #VALUE! #VALUE!
5
FORMULA: 1000*(1+T)= #VALUE! - (0.85 * 1000 * 0.01)
= #VALUE!
T = N/A
R = N/A
NLIC VAII EMERGING MARKETS
12/30/94
TO NO. YEARS 5
12/31/99
TRANSACTION DATE $ VALUE UNIT VALUE NO. UNITS END VALUE
INIT DEPOSIT 12/31/94 1000 #VALUE! #VALUE!
FEE 12/31/95 0.546 #VALUE! #VALUE!
FEE 12/31/96 0.546 9.621393 0.056749
FEE 12/31/97 0.546 9.498769 0.057481
FEE 12/31/98 0.546 7.088517 0.077026
FEE 12/31/99 0.546 13.5841 0.040194
RESULTING VALUE 12/31/99 13.5841 #VALUE! #VALUE!
5
FORMULA: 1000*(1+T)= #VALUE! - (0.85 * 1000 * 0.01)
= #VALUE!
T = N/A
R = N/A
NLIC VAII EMERGING GROWTH
12/30/94
TO NO. YEARS 5
12/31/99
TRANSACTION DATE $ VALUE UNIT VALUE NO. UNITS END VALUE
INIT DEPOSIT 12/31/94 1000 #VALUE! #VALUE!
FEE 12/31/95 0.546 6.50021 0.083997
FEE 12/31/96 0.546 7.462035 0.07317
FEE 12/31/97 0.546 8.844423 0.061734
FEE 12/31/98 0.546 11.97452 0.045597
FEE 12/31/99 0.546 24.08814 0.022667
RESULTING VALUE 12/31/99 24.08814 #VALUE! #VALUE!
5
FORMULA: 1000*(1+T)= #VALUE! - (0.85 * 1000 * 0.01)
= #VALUE!
T = N/A
R = N/A
NLIC VAII REAL ESTATE
12/30/94
TO NO. YEARS 5
12/31/99
TRANSACTION DATE $ VALUE UNIT VALUE NO. UNITS END VALUE
INIT DEPOSIT 12/31/94 1000 #VALUE! #VALUE!
FEE 12/31/95 0.546 #VALUE! #VALUE!
FEE 12/31/96 0.546 #VALUE! #VALUE!
FEE 12/31/97 0.546 10.31342 0.052941
FEE 12/31/98 0.546 9.048169 0.060344
FEE 12/31/99 0.546 8.77436 0.062227
RESULTING VALUE 12/31/99 8.77436 #VALUE! #VALUE!
5
FORMULA: 1000*(1+T)= #VALUE! - (0.85 * 1000 * 0.01)
= #VALUE!
T = N/A
R = N/A
NLIC VAII COMPETITIVE EDGE
12/30/94
TO NO. YEARS 5
12/31/99
TRANSACTION DATE $ VALUE UNIT VALUE NO. UNITS END VALUE
INIT DEPOSIT 12/31/94 1000 #VALUE! #VALUE!
FEE 12/31/95 0.546 #VALUE! #VALUE!
FEE 12/31/96 0.546 #VALUE! #VALUE!
FEE 12/31/97 0.546 #VALUE! #VALUE!
FEE 12/31/98 0.546 9.71351 0.05621
FEE 12/31/99 0.546 12.13055 0.04501
RESULTING VALUE 12/31/99 12.13055 #VALUE! #VALUE!
5
FORMULA: 1000*(1+T)= #VALUE! - (0.85 * 1000 * 0.01)
= #VALUE!
T = N/A
R = N/A
NLIC VAII S&P 500 INDEX
12/30/94
TO NO. YEARS 5
12/31/99
TRANSACTION DATE $ VALUE UNIT VALUE NO. UNITS END VALUE
INIT DEPOSIT 12/31/94 1000 #VALUE! #VALUE!
FEE 12/31/95 0.546 #VALUE! #VALUE!
FEE 12/31/96 0.546 #VALUE! #VALUE!
FEE 12/31/97 0.546 #VALUE! #VALUE!
FEE 12/31/98 0.546 11.10968 0.049146
FEE 12/31/99 0.546 13.14698 0.04153
RESULTING VALUE 12/31/99 13.14698 #VALUE! #VALUE!
5
FORMULA: 1000*(1+T)= #VALUE! - (0.85 * 1000 * 0.01)
= #VALUE!
T = N/A
R = N/A
NLIC VAII AGGRESSIVE EQUITY
12/30/94
TO NO. YEARS 5
12/31/99
TRANSACTION DATE $ VALUE UNIT VALUE NO. UNITS END VALUE
INIT DEPOSIT 12/31/94 1000 #VALUE! #VALUE!
FEE 12/31/95 0.546 #VALUE! #VALUE!
FEE 12/31/96 0.546 #VALUE! #VALUE!
FEE 12/31/97 0.546 #VALUE! #VALUE!
FEE 12/31/98 0.546 #VALUE! #VALUE!
FEE 12/31/99 0.546 14.45479 0.037773
RESULTING VALUE 12/31/99 14.45479 #VALUE! #VALUE!
5
FORMULA: 1000*(1+T)= #VALUE! - (0.85 * 1000 * 0.01)
= #VALUE!
T = N/A
R = N/A
NLIC VAII SHORT TERM BOND
12/30/94
TO NO. YEARS 5
12/31/99
TRANSACTION DATE $ VALUE UNIT VALUE NO. UNITS END VALUE
INIT DEPOSIT 12/31/94 1000 #VALUE! #VALUE!
FEE 12/31/95 0.546 #VALUE! #VALUE!
FEE 12/31/96 0.546 #VALUE! #VALUE!
FEE 12/31/97 0.546 #VALUE! #VALUE!
FEE 12/31/98 0.546 #VALUE! #VALUE!
FEE 12/31/99 0.546 10.0491 0.054333
RESULTING VALUE 12/31/99 10.0491 #VALUE! #VALUE!
5
FORMULA: 1000*(1+T)= #VALUE! - (0.85 * 1000 * 0.01)
= #VALUE!
T = N/A
R = N/A
Alliance Premier Growth
12/30/94
TO NO. YEARS 5
12/31/99
TRANSACTION DATE $ VALUE UNIT VALUE NO. UNITS END VALUE
INIT DEPOSIT 12/31/94 1000 #VALUE! #VALUE!
FEE 12/31/95 0.546 #VALUE! #VALUE!
FEE 12/31/96 0.546 #VALUE! #VALUE!
FEE 12/31/97 0.546 #VALUE! #VALUE!
FEE 12/31/98 0.546 #VALUE! #VALUE!
FEE 12/31/99 0.546 10 0.0546
RESULTING VALUE 12/31/99 10 #VALUE! #VALUE!
5
FORMULA: 1000*(1+T)= #VALUE! - (0.85 * 1000 * 0.01)
= #VALUE!
T = N/A
R = N/A
Alliance Growth
12/30/94
TO NO. YEARS 5
12/31/99
TRANSACTION DATE $ VALUE UNIT VALUE NO. UNITS END VALUE
INIT DEPOSIT 12/31/94 1000 2.767911 361.2833
FEE 12/31/95 0.546 3.685042 0.148167
FEE 12/31/96 0.546 4.660153 0.117164
FEE 12/31/97 0.546 5.96361 0.091555
FEE 12/31/98 0.546 7.555681 0.072264
FEE 12/31/99 0.546 10 0.0546
RESULTING VALUE 12/31/99 10 360.7995 3607.995
5
FORMULA: 1000*(1+T)= 3607.995 - (0.85 * 1000 * 0.01)
= 3599.495
T = 0.291958
R = 2.599495
Alliance Growth and Income
12/30/94
TO NO. YEARS 5
12/31/99
TRANSACTION DATE $ VALUE UNIT VALUE NO. UNITS END VALUE
INIT DEPOSIT 12/31/94 1000 3.705287 269.8846
FEE 12/31/95 0.546 4.952505 0.110247
FEE 12/31/96 0.546 6.048616 0.090269
FEE 12/31/97 0.546 7.667529 0.071209
FEE 12/31/98 0.546 9.123075 0.059848
FEE 12/31/99 0.546 10 0.0546
RESULTING VALUE 12/31/99 10 269.4984 2694.984
5
FORMULA: 1000*(1+T)= 2694.984 - (0.85 * 1000 * 0.01)
= 2686.484
T = 0.218532
R = 1.686484
Aim Cap App
12/30/94
TO NO. YEARS 5
12/31/99
TRANSACTION DATE $ VALUE UNIT VALUE NO. UNITS END VALUE
INIT DEPOSIT 12/31/94 1000 3.568503 280.2296
FEE 12/31/95 0.546 4.765839 0.114565
FEE 12/31/96 0.546 5.514873 0.099005
FEE 12/31/97 0.546 6.160931 0.088623
FEE 12/31/98 0.546 7.025639 0.077715
FEE 12/31/99 0.546 10 0.0546
RESULTING VALUE 12/31/99 10 279.795 2797.95
5
FORMULA: 1000*(1+T)= 2797.95 - (0.85 * 1000 * 0.01)
= 2789.45
T = 0.227732
R = 1.78945
Aim Growth
12/30/94
TO NO. YEARS 5
12/31/99
TRANSACTION DATE $ VALUE UNIT VALUE NO. UNITS END VALUE
INIT DEPOSIT 12/31/94 1000 3.170644 315.3933
FEE 12/31/95 0.546 4.205844 0.129819
FEE 12/31/96 0.546 4.887933 0.111704
FEE 12/31/97 0.546 6.103476 0.089457
FEE 12/31/98 0.546 7.512904 0.072675
FEE 12/31/99 0.546 10 0.0546
RESULTING VALUE 12/31/99 10 314.9351 3149.351
5
FORMULA: 1000*(1+T)= 3149.351 - (0.85 * 1000 * 0.01)
= 3140.851
T = 0.257215
R = 2.140851
Aim Value
12/30/94
TO NO. YEARS 5
12/31/99
TRANSACTION DATE $ VALUE UNIT VALUE NO. UNITS END VALUE
INIT DEPOSIT 12/31/94 1000 3.4122 293.0661
FEE 12/31/95 0.546 4.575979 0.119319
FEE 12/31/96 0.546 5.179983 0.105406
FEE 12/31/97 0.546 6.306036 0.086584
FEE 12/31/98 0.546 7.821632 0.069806
FEE 12/31/99 0.546 10 0.0546
RESULTING VALUE 12/31/99 10 292.6304 2926.304
5
FORMULA: 1000*(1+T)= 2926.304 - (0.85 * 1000 * 0.01)
= 2917.804
T = 0.238829
R = 1.917804
Putnam International Growth
12/30/94
TO NO. YEARS 5
12/31/99
TRANSACTION DATE $ VALUE UNIT VALUE NO. UNITS END VALUE
INIT DEPOSIT 12/31/94 1000 #VALUE! #VALUE!
FEE 12/31/95 0.546 #VALUE! #VALUE!
FEE 12/31/96 0.546 #VALUE! #VALUE!
FEE 12/31/97 0.546 5.444387 0.100287
FEE 12/31/98 0.546 6.348516 0.086004
FEE 12/31/99 0.546 10 0.0546
RESULTING VALUE 12/31/99 10 #VALUE! #VALUE!
5
FORMULA: 1000*(1+T)= #VALUE! - (0.85 * 1000 * 0.01)
= #VALUE!
T = N/A
R = N/A
Putnam Voyager
12/30/94
TO NO. YEARS 5
12/31/99
TRANSACTION DATE $ VALUE UNIT VALUE NO. UNITS END VALUE
INIT DEPOSIT 12/31/94 1000 2.756446 362.786
FEE 12/31/95 0.546 3.810702 0.143281
FEE 12/31/96 0.546 4.230652 0.129058
FEE 12/31/97 0.546 5.260125 0.1038
FEE 12/31/98 0.546 6.429676 0.084919
FEE 12/31/99 0.546 10 0.0546
RESULTING VALUE 12/31/99 10 362.2703 3622.703
5
FORMULA: 1000*(1+T)= 3622.703 - (0.85 * 1000 * 0.01)
= 3614.203
T = 0.293012
R = 2.614203
Putnam Growth & Income
12/30/94
TO NO. YEARS 5
12/31/99
TRANSACTION DATE $ VALUE UNIT VALUE NO. UNITS END VALUE
INIT DEPOSIT 12/31/94 1000 4.493022 222.5674
FEE 12/31/95 0.546 6.036663 0.090447
FEE 12/31/96 0.546 7.232874 0.075489
FEE 12/31/97 0.546 8.824721 0.061872
FEE 12/31/98 0.546 10.01383 0.054525
FEE 12/31/99 0.546 10 0.0546
RESULTING VALUE 12/31/99 10 222.2304 2222.304
5
FORMULA: 1000*(1+T)= 2222.304 - (0.85 * 1000 * 0.01)
= 2213.804
T = 0.172271
R = 1.213804
MSDW Mid Cap
12/30/94
TO NO. YEARS 5
12/31/99
TRANSACTION DATE $ VALUE UNIT VALUE NO. UNITS END VALUE
INIT DEPOSIT 12/31/94 1000 #VALUE! #VALUE!
FEE 12/31/95 0.546 #VALUE! #VALUE!
FEE 12/31/96 0.546 #VALUE! #VALUE!
FEE 12/31/97 0.546 7.585646 0.071978
FEE 12/31/98 0.546 8.425122 0.064806
FEE 12/31/99 0.546 10 0.0546
RESULTING VALUE 12/31/99 10 #VALUE! #VALUE!
5
FORMULA: 1000*(1+T)= #VALUE! - (0.85 * 1000 * 0.01)
= #VALUE!
T = N/A
R = N/A
<PAGE>
SINCE INCEPTION
Alliance Premier Growth
07/14/99
TO NO. YEARS 0.465435
12/31/99
TRANSACTION DATE $ VALUE UNIT VALUE NO. UNITS END VALUE SURRENDER CHARGES
0 INIT DEPOSIT 07/14/99 1000 8.907261 112.268
1 FEE 12/31/99 0.546 10 0.0546 0.06
2 FEE N/A 0 N/A 0 0.05
3 FEE N/A 0 N/A 0 0.04
4 N/A 0 N/A 0 0.03
5 N/A 0 N/A 0 0.02
6 N/A 0 N/A 0 0.01
7 N/A 0 N/A 0 0
8 N/A 0 N/A 0 0
9 N/A 0 N/A 0 0
10 N/A 0 N/A 0 0
11 N/A 0 N/A 0 0
12 N/A 0 N/A 0 0
13 N/A 0 N/A 0 0
14 FEE N/A 0 N/A 0 0
15 FEE N/A 0 N/A 0 0
RESULTING VALUE 12/31/99 10 112.2134 1122.134
0.465435
FORMULA: 1000*(1+T)= 1122.134
= 1071.134
T = 15.91%
R = 7.11%
Alliance Growth
09/15/94
TO NO. YEARS 5.292266
12/31/99
TRANSACTION DATE $ VALUE UNIT VALUE NO. UNITS END VALUE SURRENDER CHARGES
0 INIT DEPOSIT 09/15/94 1000 2.640709 378.6862
1 FEE 09/15/95 0.546 3.54837 0.153873 0.06
2 FEE 09/15/96 0.546 4.122737 0.132436 0.05
3 FEE 09/15/97 0.546 5.61198 0.097292 0.04
4 09/15/98 0.546 5.902797 0.092499 0.03
5 09/15/99 0.546 8.156346 0.066942 0.02
6 12/31/99 0.546 10 0.0546 0.01
7 N/A 0 N/A 0 0
8 N/A 0 N/A 0 0
9 N/A 0 N/A 0 0
10 N/A 0 N/A 0 0
11 N/A 0 N/A 0 0
12 N/A 0 N/A 0 0
13 N/A 0 N/A 0 0
14 FEE N/A 0 N/A 0 0
15 FEE N/A 0 N/A 0 0
RESULTING VALUE 12/31/99 10 378.0886 3780.886
5.292266
FORMULA: 1000*(1+T)= 3780.886
= 3772.386
T = 28.52%
R = 277.24%
Alliance Growth and Income
01/14/91
TO NO. YEARS 8.960986
12/31/99
TRANSACTION DATE $ VALUE UNIT VALUE NO. UNITS END VALUE SURRENDER CHARGES
0 INIT DEPOSIT 01/14/91 1000 3.173139 315.1453
1 FEE 01/14/92 0.546 3.234479 0.168806 0.06
2 FEE 01/14/93 0.546 3.436258 0.158894 0.05
3 FEE 01/14/94 0.546 3.777962 0.144522 0.04
4 01/14/95 0.546 3.705287 0.147357 0.03
5 01/14/96 0.546 4.802162 0.113699 0.02
6 01/14/97 0.546 6.192372 0.088173 0.01
7 01/14/98 0.546 7.489826 0.072899 0
8 01/14/99 0.546 8.979742 0.060804 0
9 12/31/99 0.546 10 0.0546 0
10 N/A 0 N/A 0 0
11 N/A 0 N/A 0 0
12 N/A 0 N/A 0 0
13 N/A 0 N/A 0 0
14 FEE N/A 0 N/A 0 0
15 FEE N/A 0 N/A 0 0
RESULTING VALUE 12/31/99 10 314.1355 3141.355
8.960986
FORMULA: 1000*(1+T)= 3141.355
= 3141.355
T = 13.63%
R = 214.14%
Aim Cap App
05/05/93
TO NO. YEARS 6.655715
12/31/99
TRANSACTION DATE $ VALUE UNIT VALUE NO. UNITS END VALUE SURRENDER CHARGES
0 INIT DEPOSIT 05/05/93 1000 2.991294 334.3035
1 FEE 05/05/94 0.546 3.520954 0.155072 0.06
2 FEE 05/05/95 0.546 3.918423 0.139342 0.05
3 FEE 05/05/96 0.546 5.292593 0.103163 0.04
4 05/05/97 0.546 5.538535 0.098582 0.03
5 05/05/98 0.546 6.978315 0.078242 0.02
6 05/05/99 0.546 7.209373 0.075735 0.01
7 12/31/99 0.546 10 0.0546 0
8 N/A 0 N/A 0 0
9 N/A 0 N/A 0 0
10 N/A 0 N/A 0 0
11 N/A 0 N/A 0 0
12 N/A 0 N/A 0 0
13 N/A 0 N/A 0 0
14 FEE N/A 0 N/A 0 0
15 FEE N/A 0 N/A 0 0
RESULTING VALUE 12/31/99 10 333.5987 3335.987
6.655715
FORMULA: 1000*(1+T)= 3335.987
= 3335.987
T = 19.84%
R = 233.60%
Aim Growth
05/05/93
TO NO. YEARS 6.655715
12/31/99
TRANSACTION DATE $ VALUE UNIT VALUE NO. UNITS END VALUE SURRENDER CHARGES
0 INIT DEPOSIT 05/05/93 1000 3.016282 331.534
1 FEE 05/05/94 0.546 3.163393 0.172599 0.06
2 FEE 05/05/95 0.546 3.529815 0.154682 0.05
3 FEE 05/05/96 0.546 4.449399 0.122713 0.04
4 05/05/97 0.546 5.229369 0.10441 0.03
5 05/05/98 0.546 7.028539 0.077683 0.02
6 05/05/99 0.546 8.008517 0.068177 0.01
7 12/31/99 0.546 10 0.0546 0
8 N/A 0 N/A 0 0
9 N/A 0 N/A 0 0
10 N/A 0 N/A 0 0
11 N/A 0 N/A 0 0
12 N/A 0 N/A 0 0
13 N/A 0 N/A 0 0
14 FEE N/A 0 N/A 0 0
15 FEE N/A 0 N/A 0 0
RESULTING VALUE 12/31/99 10 330.7791 3307.791
6.655715
FORMULA: 1000*(1+T)= 3307.791
= 3307.791
T = 19.69%
R = 230.78%
Aim Value
05/05/93
TO NO. YEARS 6.655715
12/31/99
TRANSACTION DATE $ VALUE UNIT VALUE NO. UNITS END VALUE SURRENDER CHARGES
0 INIT DEPOSIT 05/05/93 1000 2.932605 340.9937
1 FEE 05/05/94 0.546 3.400915 0.160545 0.06
2 FEE 05/05/95 0.546 3.838173 0.142255 0.05
3 FEE 05/05/96 0.546 4.615976 0.118285 0.04
4 05/05/97 0.546 5.54386 0.098487 0.03
5 05/05/98 0.546 7.117914 0.076708 0.02
6 05/05/99 0.546 8.502378 0.064217 0.01
7 12/31/99 0.546 10 0.0546 0
8 N/A 0 N/A 0 0
9 N/A 0 N/A 0 0
10 N/A 0 N/A 0 0
11 N/A 0 N/A 0 0
12 N/A 0 N/A 0 0
13 N/A 0 N/A 0 0
14 FEE N/A 0 N/A 0 0
15 FEE N/A 0 N/A 0 0
RESULTING VALUE 12/31/99 10 340.2786 3402.786
6.655715
FORMULA: 1000*(1+T)= 3402.786
= 3402.786
T = 20.20%
R = 240.28%
Putnam International Growth
01/02/97
TO NO. YEARS 2.992471
12/31/99
TRANSACTION DATE $ VALUE UNIT VALUE NO. UNITS END VALUE SURRENDER CHARGES
0 INIT DEPOSIT 01/02/97 1000 4.770193 209.6351
1 FEE 01/02/98 0.546 5.472447 0.099773 0.06
2 FEE 01/02/99 0.546 6.348516 0.086004 0.05
3 FEE 12/31/99 0.546 10 0.0546 0.04
4 N/A 0 N/A 0 0.03
5 N/A 0 N/A 0 0.02
6 N/A 0 N/A 0 0.01
7 N/A 0 N/A 0 0
8 N/A 0 N/A 0 0
9 N/A 0 N/A 0 0
10 N/A 0 N/A 0 0
11 N/A 0 N/A 0 0
12 N/A 0 N/A 0 0
13 N/A 0 N/A 0 0
14 FEE N/A 0 N/A 0 0
15 FEE N/A 0 N/A 0 0
RESULTING VALUE 12/31/99 10 209.3948 2093.948
2.992471
FORMULA: 1000*(1+T)= 2093.948
= 2059.948
T = 27.32%
R = 105.99%
Putnam Voyager
12/30/89
TO NO. YEARS 10
12/31/99
TRANSACTION DATE $ VALUE UNIT VALUE NO. UNITS END VALUE
INIT DEPOSIT 12/31/89 1000 1.587327 629.9899
FEE 12/31/90 0.546 1.528278 0.357265
FEE 12/31/91 0.546 2.194171 0.248841
FEE 12/31/92 0.546 2.379707 0.22944
FEE 12/31/93 0.546 2.776007 0.196685
FEE 12/31/94 0.546 2.756446 0.198081
FEE 12/31/95 0.546 3.810702 0.143281
FEE 12/31/96 0.546 4.230652 0.129058
FEE 12/31/97 0.546 5.260125 0.1038
FEE 12/31/98 0.546 6.429676 0.084919
FEE 12/31/99 0.546 10 0.0546
RESULTING VALUE 12/31/99 10 628.244 6282.44
10
FORMULA: 1000*(1+T)= 6282.44 - (0.85 * 1000 * 0)
= 6282.44
T = 20.17%
R = 528.24%
Putnam Growth & Income
12/30/89
TO NO. YEARS 10
12/31/99
TRANSACTION DATE $ VALUE UNIT VALUE NO. UNITS END VALUE
INIT DEPOSIT 12/31/89 1000 3.208666 311.656
FEE 12/31/90 0.546 3.215172 0.16982
FEE 12/31/91 0.546 3.761527 0.145154
FEE 12/31/92 0.546 4.05718 0.134576
FEE 12/31/93 0.546 4.555997 0.119842
FEE 12/31/94 0.546 4.493022 0.121522
FEE 12/31/95 0.546 6.036663 0.090447
FEE 12/31/96 0.546 7.232874 0.075489
FEE 12/31/97 0.546 8.824721 0.061872
FEE 12/31/98 0.546 10.01383 0.054525
FEE 12/31/99 0.546 10 0.0546
RESULTING VALUE 12/31/99 10 310.6281 3106.281
10
FORMULA: 1000*(1+T)= 3106.281 - (0.85 * 1000 * 0)
= 3106.281
T = 12.00%
R = 210.63%
MSDW Mid Cap
01/02/97
TO NO. YEARS 2.992471
12/31/99
TRANSACTION DATE $ VALUE UNIT VALUE NO. UNITS END VALUE SURRENDER CHARGES
0 INIT DEPOSIT 01/02/97 1000 5.468267 182.8733
1 FEE 01/02/98 0.546 7.550815 0.07231 0.06
2 FEE 01/02/99 0.546 8.385094 0.065116 0.05
3 FEE 12/31/99 0.546 10 0.0546 0.04
4 N/A 0 N/A 0 0.03
5 N/A 0 N/A 0 0.02
6 N/A 0 N/A 0 0.01
7 N/A 0 N/A 0 0
8 N/A 0 N/A 0 0
9 N/A 0 N/A 0 0
10 N/A 0 N/A 0 0
11 N/A 0 N/A 0 0
12 N/A 0 N/A 0 0
13 N/A 0 N/A 0 0
14 FEE N/A 0 N/A 0 0
15 FEE N/A 0 N/A 0 0
RESULTING VALUE 12/31/99 10 182.6813 1826.813
2.992471
FORMULA: 1000*(1+T)= 1826.813
= 1792.813
T = 21.54%
R = 79.28%
<PAGE>
ONE YEAR
Alliance Premier Growth
12/31/98 NO. YEARS 1
TO
12/31/99 TRANSACTION DATE $ VALUE UNIT VALUE NO. UNITS END VALUE
INIT DEPOSIT 12/31/98 1000 #VALUE! #VALUE!
FEE 12/31/99 0.546 10 0.0546
RESULTING VALUE 12/31/99 10 #VALUE! #VALUE!
1
FORMULA: 1000*(1+T)= #VALUE! - (0.85 * 1000 * 0.05)
= #VALUE!
T = N/A
R = N/A
Alliance Growth
12/31/98 NO. YEARS 1
TO
12/31/99 TRANSACTION DATE $ VALUE UNIT VALUE NO. UNITS END VALUE
INIT DEPOSIT 12/31/98 1000 7.54738 132.4963
FEE 12/31/99 0.546 10 0.0546
RESULTING VALUE 12/31/99 10 132.4417 1324.417
1
FORMULA: 1000*(1+T)= 1324.417 - (0.85 * 1000 * 0.05)
= 1281.917
T = 28.19%
R = 28.19%
Alliance Growth and Income
12/31/98 NO. YEARS 1
TO
12/31/99 TRANSACTION DATE $ VALUE UNIT VALUE NO. UNITS END VALUE
INIT DEPOSIT 12/31/98 1000 9.113047 109.7328
FEE 12/31/99 0.546 10 0.0546
RESULTING VALUE 12/31/99 10 109.6782 1096.782
1
FORMULA: 1000*(1+T)= 1096.782 - (0.85 * 1000 * 0.05)
= 1054.282
T = 5.43%
R = 5.43%
Aim Cap App
12/31/98 NO. YEARS 1
TO
12/31/99 TRANSACTION DATE $ VALUE UNIT VALUE NO. UNITS END VALUE
INIT DEPOSIT 12/31/98 1000 7.017924 142.4923
FEE 12/31/99 0.546 10 0.0546
RESULTING VALUE 12/31/99 10 142.4377 1424.377
1
FORMULA: 1000*(1+T)= 1424.377 - (0.85 * 1000 * 0.05)
= 1381.877
T = 38.19%
R = 38.19%
Aim Growth
12/31/98 NO. YEARS 1
TO
12/31/99 TRANSACTION DATE $ VALUE UNIT VALUE NO. UNITS END VALUE
INIT DEPOSIT 12/31/98 1000 7.504654 133.2506
FEE 12/31/99 0.546 10 0.0546
RESULTING VALUE 12/31/99 10 133.196 1331.96
1
FORMULA: 1000*(1+T)= 1331.96 - (0.85 * 1000 * 0.05)
= 1289.46
T = 28.95%
R = 28.95%
Aim Value
12/31/98 NO. YEARS 1
TO
12/31/99 TRANSACTION DATE $ VALUE UNIT VALUE NO. UNITS END VALUE
INIT DEPOSIT 12/31/98 1000 7.813043 127.9911
FEE 12/31/99 0.546 10 0.0546
RESULTING VALUE 12/31/99 10 127.9365 1279.365
1
FORMULA: 1000*(1+T)= 1279.365 - (0.85 * 1000 * 0.05)
= 1236.865
T = 23.69%
R = 23.69%
Putnam International Growth
12/31/98 NO. YEARS 1
TO
12/31/99 TRANSACTION DATE $ VALUE UNIT VALUE NO. UNITS END VALUE
INIT DEPOSIT 12/31/98 1000 6.341568 157.6897
FEE 12/31/99 0.546 10 0.0546
RESULTING VALUE 12/31/99 10 157.6351 1576.351
1
FORMULA: 1000*(1+T)= 1576.351 - (0.85 * 1000 * 0.05)
= 1533.851
T = 53.39%
R = 53.39%
Putnam Voyager
12/31/98 NO. YEARS 1
TO
12/31/99 TRANSACTION DATE $ VALUE UNIT VALUE NO. UNITS END VALUE
INIT DEPOSIT 12/31/98 1000 6.422629 155.6995
FEE 12/31/99 0.546 10 0.0546
RESULTING VALUE 12/31/99 10 155.6449 1556.449
1
FORMULA: 1000*(1+T)= 1556.449 - (0.85 * 1000 * 0.05)
= 1513.949
T = 51.39%
R = 51.39%
Putnam Growth & Income
12/31/98 NO. YEARS 1
TO
12/31/99 TRANSACTION DATE $ VALUE UNIT VALUE NO. UNITS END VALUE
INIT DEPOSIT 12/31/98 1000 10.00282 99.97185
FEE 12/31/99 0.546 10 0.0546
RESULTING VALUE 12/31/99 10 99.91725 999.1725
1
FORMULA: 1000*(1+T)= 999.1725 - (0.85 * 1000 * 0.05)
= 956.6725
T = -4.33%
R = -4.33%
MSDW Mid Cap
12/31/98 NO. YEARS 1
TO
12/31/99 TRANSACTION DATE $ VALUE UNIT VALUE NO. UNITS END VALUE
INIT DEPOSIT 12/31/98 1000 8.415862 118.8232
FEE 12/31/99 0.546 10 0.0546
RESULTING VALUE 12/31/99 10 118.7686 1187.686
1
FORMULA: 1000*(1+T)= 1187.686 - (0.85 * 1000 * 0.05)
= 1145.186
T = 14.52%
R = 14.52%
<PAGE>
5 YEAR
Alliance Premier Growth
12/30/94
TO NO. YEARS 5
12/31/99
TRANSACTION DATE $ VALUE UNIT VALUE NO. UNITS END VALUE
INIT DEPOSIT 12/31/94 1000 #VALUE! #VALUE!
FEE 12/31/95 0.546 #VALUE! #VALUE!
FEE 12/31/96 0.546 #VALUE! #VALUE!
FEE 12/31/97 0.546 #VALUE! #VALUE!
FEE 12/31/98 0.546 #VALUE! #VALUE!
FEE 12/31/99 0.546 10 0.0546
RESULTING VALUE 12/31/99 10 #VALUE! #VALUE!
5
FORMULA: 1000*(1+T)= #VALUE! - (0.85 * 1000 * 0.01)
= #VALUE!
T = N/A
R = N/A
Alliance Growth
12/30/94
TO NO. YEARS 5
12/31/99
TRANSACTION DATE $ VALUE UNIT VALUE NO. UNITS END VALUE
INIT DEPOSIT 12/31/94 1000 2.752797 363.2669
FEE 12/31/95 0.546 3.669171 0.148807
FEE 12/31/96 0.546 4.64481 0.117551
FEE 12/31/97 0.546 5.950512 0.091757
FEE 12/31/98 0.546 7.54738 0.072343
FEE 12/31/99 0.546 10 0.0546
RESULTING VALUE 12/31/99 10 362.7818 3627.818
5
FORMULA: 1000*(1+T)= 3627.818 - (0.85 * 1000 * 0.01)
= 3619.318
T = 29.34%
R = 261.93%
Alliance Growth and Income
12/30/94
TO NO. YEARS 5
12/31/99
TRANSACTION DATE $ VALUE UNIT VALUE NO. UNITS END VALUE
INIT DEPOSIT 12/31/94 1000 3.68506 271.366
FEE 12/31/95 0.546 4.931171 0.110724
FEE 12/31/96 0.546 6.028697 0.090567
FEE 12/31/97 0.546 7.650684 0.071366
FEE 12/31/98 0.546 9.113047 0.059914
FEE 12/31/99 0.546 10 0.0546
RESULTING VALUE 12/31/99 10 270.9789 2709.789
5
FORMULA: 1000*(1+T)= 2709.789 - (0.85 * 1000 * 0.01)
= 2701.289
T = 21.99%
R = 170.13%
Aim Cap App
12/30/94
TO NO. YEARS 5
12/31/99
TRANSACTION DATE $ VALUE UNIT VALUE NO. UNITS END VALUE
INIT DEPOSIT 12/31/94 1000 3.548928 281.7752
FEE 12/31/95 0.546 4.744896 0.115071
FEE 12/31/96 0.546 5.496716 0.099332
FEE 12/31/97 0.546 6.147403 0.088818
FEE 12/31/98 0.546 7.017924 0.077801
FEE 12/31/99 0.546 10 0.0546
RESULTING VALUE 12/31/99 10 281.3396 2813.396
5
FORMULA: 1000*(1+T)= 2813.396 - (0.85 * 1000 * 0.01)
= 2804.896
T = 22.91%
R = 180.49%
Aim Growth
12/30/94
TO NO. YEARS 5
12/31/99
TRANSACTION DATE $ VALUE UNIT VALUE NO. UNITS END VALUE
INIT DEPOSIT 12/31/94 1000 3.153257 317.1324
FEE 12/31/95 0.546 4.187367 0.130392
FEE 12/31/96 0.546 4.871845 0.112073
FEE 12/31/97 0.546 6.090078 0.089654
FEE 12/31/98 0.546 7.504654 0.072755
FEE 12/31/99 0.546 10 0.0546
RESULTING VALUE 12/31/99 10 316.673 3166.73
5
FORMULA: 1000*(1+T)= 3166.73 - (0.85 * 1000 * 0.01)
= 3158.23
T = 25.86%
R = 215.82%
Aim Value
12/30/94
TO NO. YEARS 5
12/31/99
TRANSACTION DATE $ VALUE UNIT VALUE NO. UNITS END VALUE
INIT DEPOSIT 12/31/94 1000 3.393488 294.6821
FEE 12/31/95 0.546 4.555875 0.119845
FEE 12/31/96 0.546 5.162932 0.105754
FEE 12/31/97 0.546 6.292192 0.086774
FEE 12/31/98 0.546 7.813043 0.069883
FEE 12/31/99 0.546 10 0.0546
RESULTING VALUE 12/31/99 10 294.2452 2942.452
5
FORMULA: 1000*(1+T)= 2942.452 - (0.85 * 1000 * 0.01)
= 2933.952
T = 24.02%
R = 193.40%
Putnam International Growth
12/30/94
TO NO. YEARS 5
12/31/99
TRANSACTION DATE $ VALUE UNIT VALUE NO. UNITS END VALUE
INIT DEPOSIT 12/31/94 1000 #VALUE! #VALUE!
FEE 12/31/95 0.546 #VALUE! #VALUE!
FEE 12/31/96 0.546 #VALUE! #VALUE!
FEE 12/31/97 0.546 5.432455 0.100507
FEE 12/31/98 0.546 6.341568 0.086099
FEE 12/31/99 0.546 10 0.0546
RESULTING VALUE 12/31/99 10 #VALUE! #VALUE!
5
FORMULA: 1000*(1+T)= #VALUE! - (0.85 * 1000 * 0.01)
= #VALUE!
T = N/A
R = N/A
Putnam Voyager
12/30/94
TO NO. YEARS 5
12/31/99
TRANSACTION DATE $ VALUE UNIT VALUE NO. UNITS END VALUE
INIT DEPOSIT 12/31/94 1000 2.741342 364.7848
FEE 12/31/95 0.546 3.793988 0.143912
FEE 12/31/96 0.546 4.216733 0.129484
FEE 12/31/97 0.546 5.248587 0.104028
FEE 12/31/98 0.546 6.422629 0.085012
FEE 12/31/99 0.546 10 0.0546
RESULTING VALUE 12/31/99 10 364.2678 3642.678
5
FORMULA: 1000*(1+T)= 3642.678 - (0.85 * 1000 * 0.01)
= 3634.178
T = 29.44%
R = 263.42%
Putnam Growth & Income
12/30/94
TO NO. YEARS 5
12/31/99
TRANSACTION DATE $ VALUE UNIT VALUE NO. UNITS END VALUE
INIT DEPOSIT 12/31/94 1000 4.468389 223.7943
FEE 12/31/95 0.546 6.010169 0.090846
FEE 12/31/96 0.546 7.20905 0.075738
FEE 12/31/97 0.546 8.805326 0.062008
FEE 12/31/98 0.546 10.00282 0.054585
FEE 12/31/99 0.546 10 0.0546
RESULTING VALUE 12/31/99 10 223.4565 2234.565
5
FORMULA: 1000*(1+T)= 2234.565 - (0.85 * 1000 * 0.01)
= 2226.065
T = 17.36%
R = 122.61%
MSDW Mid Cap
12/30/94
TO NO. YEARS 5
12/31/99
TRANSACTION DATE $ VALUE UNIT VALUE NO. UNITS END VALUE
INIT DEPOSIT 12/31/94 1000 #VALUE! #VALUE!
FEE 12/31/95 0.546 #VALUE! #VALUE!
FEE 12/31/96 0.546 #VALUE! #VALUE!
FEE 12/31/97 0.546 7.568979 0.072137
FEE 12/31/98 0.546 8.415862 0.064877
FEE 12/31/99 0.546 10 0.0546
RESULTING VALUE 12/31/99 10 #VALUE! #VALUE!
5
FORMULA: 1000*(1+T)= #VALUE! - (0.85 * 1000 * 0.01)
= #VALUE!
T = N/A
R = N/A
<PAGE>
SINCE INCEPTION
Alliance Premier Growth
07/14/99
TO NO. YEARS 0.465435
12/31/99
TRANSACTION DATE $ VALUE UNIT VALUE NO. UNITS END VALUE SURRENDER CHARGES
0 INIT DEPOSIT 07/14/99 1000 8.90270155 112.32545
1 FEE 12/31/99 0.634 10 0.0634 0.06
2 FEE N/A 0 N/A 0 0.05
3 FEE N/A 0 N/A 0 0.04
4 N/A 0 N/A 0 0.03
5 N/A 0 N/A 0 0.02
6 N/A 0 N/A 0 0.01
7 N/A 0 N/A 0 0
8 N/A 0 N/A 0 0
9 N/A 0 N/A 0 0
10 N/A 0 N/A 0 0
11 N/A 0 N/A 0 0
12 N/A 0 N/A 0 0
13 N/A 0 N/A 0 0
14 FEE N/A 0 N/A 0 0
15 FEE N/A 0 N/A 0 0
RESULTING VALUE 12/31/99 10 112.26205 1122.6205
0.465435
FORMULA: 1000*(1+T)= 1122.62055
= 1071.62055
T = 16.02%
R= 7.16%
Alliance Growth
09/15/94
TO NO. YEARS 5.292266
12/31/99
TRANSACTION DATE $ VALUE UNIT VALUE NO. UNITS END VALUE SURRENDER CHARGES
0 INIT DEPOSIT 09/15/94 1000 2.62545345 380.88658
1 FEE 09/15/95 0.546 2.75279713 0.1983437 0.06
2 FEE 09/15/96 0.546 3.66917093 0.1488075 0.05
3 FEE 09/15/97 0.546 4.58222856 0.119156 0.04
4 09/15/98 0.546 5.95051237 0.0917568 0.03
5 09/15/99 0.546 8.78012814 0.0621859 0.02
6 12/31/99 0.546 10 0.0546 0.01
7 N/A 0 N/A 0 0
8 N/A 0 N/A 0 0
9 N/A 0 N/A 0 0
10 N/A 0 N/A 0 0
11 N/A 0 N/A 0 0
12 N/A 0 N/A 0 0
13 N/A 0 N/A 0 0
14 FEE N/A 0 N/A 0 0
15 FEE N/A 0 N/A 0 0
RESULTING VALUE 12/31/99 10 380.21173 3802.1173
5.292266
FORMULA: 1000*(1+T)= 3802.11735
= 3793.61735
T = 28.65%
R = 279.36%
Alliance Growth and Income
01/14/91
TO NO. YEARS 8.960986
12/31/99
TRANSACTION DATE $ VALUE UNIT VALUE NO. UNITS END VALUE SURRENDER CHARGES
0 INIT DEPOSIT 01/14/91 1000 3.14213348 318.2551
1 FEE 01/14/92 0.546 3.14213348 0.1737673 0.06
2 FEE 01/14/93 0.546 3.14213348 0.1737673 0.05
3 FEE 01/14/94 0.546 3.14213348 0.1737673 0.04
4 01/14/95 0.546 3.68505967 0.1481659 0.03
5 01/14/96 0.546 4.93117092 0.1107242 0.02
6 01/14/97 0.546 5.96939415 0.0914666 0.01
7 01/14/98 0.546 7.6506841 0.0713662 0
8 01/14/99 0.546 9.1130475 0.0599141 0
9 12/31/99 0.546 10 0.0546 0
10 N/A 0 N/A 0 0
11 N/A 0 N/A 0 0
12 N/A 0 N/A 0 0
13 N/A 0 N/A 0 0
14 FEE N/A 0 N/A 0 0
15 FEE N/A 0 N/A 0 0
RESULTING VALUE 12/31/99 10 317.19756 3171.9756
8.960986
FORMULA: 1000*(1+T)= 3171.9756
= 3171.9756
T = 13.75%
R = 217.20%
Aim Cap App
05/05/93
TO NO. YEARS 6.655715
12/31/99
TRANSACTION DATE $ VALUE UNIT VALUE NO. UNITS END VALUE SURRENDER CHARGES
0 INIT DEPOSIT 05/05/93 1000 2.96947751 336.75958
1 FEE 05/05/94 0.546 3.4991187 0.1560393 0.06
2 FEE 05/05/95 0.546 3.8984083 0.1400572 0.05
3 FEE 05/05/96 0.546 5.27132858 0.1035792 0.04
4 05/05/97 0.546 5.52238112 0.0988704 0.03
5 05/05/98 0.546 6.96561323 0.0783851 0.02
6 05/05/99 0.546 7.20416588 0.0757895 0.01
7 12/31/99 0.546 10 0.0546 0
8 N/A 0 N/A 0 0
9 N/A 0 N/A 0 0
10 N/A 0 N/A 0 0
11 N/A 0 N/A 0 0
12 N/A 0 N/A 0 0
13 N/A 0 N/A 0 0
14 FEE N/A 0 N/A 0 0
15 FEE N/A 0 N/A 0 0
RESULTING VALUE 12/31/99 10 336.05226 3360.5226
6.655715
FORMULA: 1000*(1+T)= 3360.52259
= 3360.52259
T = 19.98%
R = 236.05%
Aim Growth
05/05/93
TO NO. YEARS 6.655715
12/31/99
TRANSACTION DATE $ VALUE UNIT VALUE NO. UNITS END VALUE SURRENDER CHARGES
0 INIT DEPOSIT 05/05/93 1000 2.99428731 333.96929
1 FEE 05/05/94 0.546 3.1437802 0.1736763 0.06
2 FEE 05/05/95 0.546 3.51179051 0.1554762 0.05
3 FEE 05/05/96 0.546 4.43152952 0.123208 0.04
4 05/05/97 0.546 5.21412065 0.1047156 0.03
5 05/05/98 0.546 7.01574879 0.0778249 0.02
6 05/05/99 0.546 8.00272962 0.0682267 0.01
7 12/31/99 0.546 10 0.0546 0
8 N/A 0 N/A 0 0
9 N/A 0 N/A 0 0
10 N/A 0 N/A 0 0
11 N/A 0 N/A 0 0
12 N/A 0 N/A 0 0
13 N/A 0 N/A 0 0
14 FEE N/A 0 N/A 0 0
15 FEE N/A 0 N/A 0 0
RESULTING VALUE 12/31/99 10 333.21156 3332.1156
6.655715
FORMULA: 1000*(1+T)= 3332.1156
= 3332.1156
T = 19.82%
R = 233.21%
Aim Value
05/05/93
TO NO. YEARS 6.655715
12/31/99
TRANSACTION DATE $ VALUE UNIT VALUE NO. UNITS END VALUE SURRENDER CHARGES
0 INIT DEPOSIT 05/05/93 1000 2.91122158 343.49842
1 FEE 05/05/94 0.546 3.37983003 0.1615466 0.06
2 FEE 05/05/95 0.546 3.81857402 0.1429853 0.05
3 FEE 05/05/96 0.546 4.59743713 0.1187618 0.04
4 05/05/97 0.546 5.52769196 0.0987754 0.03
5 05/05/98 0.546 7.10495971 0.0768477 0.02
6 05/05/99 0.546 8.49623176 0.0642638 0.01
7 12/31/99 0.546 10 0.0546 0
8 N/A 0 N/A 0 0
9 N/A 0 N/A 0 0
10 N/A 0 N/A 0 0
11 N/A 0 N/A 0 0
12 N/A 0 N/A 0 0
13 N/A 0 N/A 0 0
14 FEE N/A 0 N/A 0 0
15 FEE N/A 0 N/A 0 0
RESULTING VALUE 12/31/99 10 342.78063 3427.8063
6.655715
FORMULA: 1000*(1+T)= 3427.80635
= 3427.80635
T = 20.33%
R = 242.78%
Putnam International Growth
01/02/97
TO NO. YEARS 2.992471
12/31/99
TRANSACTION DATE $ VALUE UNIT VALUE NO. UNITS END VALUE SURRENDER CHARGES
0 INIT DEPOSIT 01/02/97 1000 4.75453667 210.32544
1 FEE 01/02/98 0.546 5.46048674 0.0999911 0.06
2 FEE 01/02/99 0.546 6.3415682 0.0860986 0.05
3 FEE 12/31/99 0.546 10 0.0546 0.04
4 N/A 0 N/A 0 0.03
5 N/A 0 N/A 0 0.02
6 N/A 0 N/A 0 0.01
7 N/A 0 N/A 0 0
8 N/A 0 N/A 0 0
9 N/A 0 N/A 0 0
10 N/A 0 N/A 0 0
11 N/A 0 N/A 0 0
12 N/A 0 N/A 0 0
13 N/A 0 N/A 0 0
14 FEE N/A 0 N/A 0 0
15 FEE N/A 0 N/A 0 0
RESULTING VALUE 12/31/99 10 210.08475 2100.8475
2.992471
FORMULA: 1000*(1+T)= 2100.84747
= 2066.84747
T = 27.46%
R = 106.68%
Putnam Voyeger
14-Jul-99
TO NO. YEARS 10.000
31-Dec-99
TRANSACTION DATE $ VALUE UNIT VALUE NO. UNITS END VALUE
INIT DEPOSIT 31-Dec-89 1000.00 1.569972 636.95405
FEE 31-Dec-90 0.634 1.513232 0.41897
FEE 31-Dec-91 0.634 2.174958 0.29150
FEE 31-Dec-92 0.634 2.361466 0.26848
FEE 31-Dec-93 0.634 2.757761 0.22990
FEE 31-Dec-94 0.634 2.741342 0.23127
FEE 31-Dec-95 0.634 3.793988 0.16711
FEE 31-Dec-96 0.634 4.216733 0.15035
FEE 31-Dec-97 0.634 5.248587 0.12079
FEE 31-Dec-98 0.634 6.422629 0.09871
FEE 31-Dec-99 0.634 10.000000 0.06340
RESULTING VALUE 31-Dec-99 10.000000 634.91357 6349.1357
10.000
FORMULA: 1000*(1+T)= 6349.1357 - (0.85 * 1000 * 0)
= 6349.13567
T = 20.30%
R = 534.91%
Putnam Growth & Income
30-Dec-89
TO NO. YEARS 10.000
31-Dec-99
TRANSACTION DATE $ VALUE UNIT VALUE NO. UNITS END VALUE
INIT DEPOSIT 31-Dec-89 1000.00 3.173577 315.10182
FEE 31-Dec-90 0.634 3.183511 0.19915
FEE 31-Dec-91 0.634 3.728584 0.17004
FEE 31-Dec-92 0.634 4.026071 0.15747
FEE 31-Dec-93 0.634 4.526038 0.14008
FEE 31-Dec-94 0.634 4.468389 0.14189
FEE 31-Dec-95 0.634 6.010169 0.10549
FEE 31-Dec-96 0.634 7.209050 0.08795
FEE 31-Dec-97 0.634 8.805326 0.07200
FEE 31-Dec-98 0.634 10.002816 0.06338
FEE 31-Dec-99 0.634 10.000000 0.06340
RESULTING VALUE 31-Dec-99 10.000000 313.90098 3139.0098
10.000
FORMULA: 1000*(1+T)= 3139.0098 - (0.85 * 1000 * 0)
= 3139.00979
T = 12.12%
R = 213.90%
MSDW Mid Cap
01/02/97
TO NO. YEARS 2.992471
12/31/99
TRANSACTION DATE $ VALUE UNIT VALUE NO. UNITS END VALUE SURRENDER CHARGES
0 INIT DEPOSIT 01/02/97 1000 5.45029312 183.47637
1 FEE 01/02/98 0.546 7.53427098 0.0724689 0.06
2 FEE 01/02/99 0.546 8.37590321 0.065187 0.05
3 FEE 12/31/99 0.546 10 0.0546 0.04
4 N/A 0 N/A 0 0.03
5 N/A 0 N/A 0 0.02
6 N/A 0 N/A 0 0.01
7 N/A 0 N/A 0 0
8 N/A 0 N/A 0 0
9 N/A 0 N/A 0 0
10 N/A 0 N/A 0 0
11 N/A 0 N/A 0 0
12 N/A 0 N/A 0 0
13 N/A 0 N/A 0 0
14 FEE N/A 0 N/A 0 0
15 FEE N/A 0 N/A 0 0
RESULTING VALUE 12/31/99 10 183.28411 1832.8411
2.992471
FORMULA: 1000*(1+T)= 1832.84115
= 1798.84115
T = 21.68%
R = 79.88%
<PAGE>
ONE YEAR
Alliance Premier Growth
12/31/98 NO. YEARS 1
TO
12/31/99 TRANSACTION DATE $ VALUE UNIT VALUE NO. UNITS END VALUE
INIT DEPOSIT 12/31/98 1000 #VALUE! #VALUE!
FEE 12/31/99 0.546 10 0.0546
RESULTING VALUE 12/31/99 10 #VALUE! #VALUE!
1
FORMULA: 1000*(1+T)= #VALUE! - (0.85 * 1000 * 0.05)
= #VALUE!
T = N/A
R = N/A
Alliance Growth
12/31/98 NO. YEARS 1
TO
12/31/99 TRANSACTION DATE $ VALUE UNIT VALUE NO. UNITS END VALUE
INIT DEPOSIT 12/31/98 1000 7.537581791 132.6685438
FEE 12/31/99 0.546 10 0.0546
RESULTING VALUE 12/31/99 10 132.6139438 1326.139438
1
FORMULA: 1000*(1+T)= 1326.139438 - (0.85 * 1000 * 0.05)
= 1283.639438
T = 28.36%
R = 28.36%
Alliance Growth and Income
12/31/98 NO. YEARS 1
TO
12/31/99 TRANSACTION DATE $ VALUE UNIT VALUE NO. UNITS END VALUE
INIT DEPOSIT 12/31/98 1000 9.101210824 109.8754901
FEE 12/31/99 0.546 10 0.0546
RESULTING VALUE 12/31/99 10 109.8208901 1098.208901
1
FORMULA: 1000*(1+T)= 1098.208901 - (0.85 * 1000 * 0.05)
= 1055.708901
T = 5.57%
R = 5.57%
Aim Cap App
12/31/98 NO. YEARS 1
TO
12/31/99 TRANSACTION DATE $ VALUE UNIT VALUE NO. UNITS END VALUE
INIT DEPOSIT 12/31/98 1000 7.008818204 142.6774059
FEE 12/31/99 0.546 10 0.0546
RESULTING VALUE 12/31/99 10 142.6228059 1426.228059
1
FORMULA: 1000*(1+T)= 1426.228059 - (0.85 * 1000 * 0.05)
= 1383.728059
T = 38.37%
R = 38.37%
Aim Growth
12/31/98 NO. YEARS 1
TO
12/31/99 TRANSACTION DATE $ VALUE UNIT VALUE NO. UNITS END VALUE
INIT DEPOSIT 12/31/98 1000 7.494915855 133.4237794
FEE 12/31/99 0.546 10 0.0546
RESULTING VALUE 12/31/99 10 133.3691794 1333.691794
1
FORMULA: 1000*(1+T)= 1333.691794 - (0.85 * 1000 * 0.05)
= 1291.191794
T = 29.12%
R = 29.12%
Aim Value
12/31/98 NO. YEARS 1
TO
12/31/99 TRANSACTION DATE $ VALUE UNIT VALUE NO. UNITS END VALUE
INIT DEPOSIT 12/31/98 1000 7.802903822 128.1574171
FEE 12/31/99 0.546 10 0.0546
RESULTING VALUE 12/31/99 10 128.1028171 1281.028171
1
FORMULA: 1000*(1+T)= 1281.028171 - (0.85 * 1000 * 0.05)
= 1238.528171
T = 23.85%
R = 23.85%
Putnam International Growth
12/31/98 NO. YEARS 1
TO
12/31/99 TRANSACTION DATE $ VALUE UNIT VALUE NO. UNITS END VALUE
INIT DEPOSIT 12/31/98 1000 6.33336765 157.8938813
FEE 12/31/99 0.546 10 0.0546
RESULTING VALUE 12/31/99 10 157.8392813 1578.392813
1
FORMULA: 1000*(1+T)= 1578.392813 - (0.85 * 1000 * 0.05)
= 1535.892813
T = 53.59%
R = 53.59%
Putnam Voyager
12/31/98 NO. YEARS 1
TO
12/31/99 TRANSACTION DATE $ VALUE UNIT VALUE NO. UNITS END VALUE
INIT DEPOSIT 12/31/98 1000 6.41431081 155.9013945
FEE 12/31/99 0.546 10 0.0546
RESULTING VALUE 12/31/99 10 155.8467945 1558.467945
1
FORMULA: 1000*(1+T)= 1558.467945 - (0.85 * 1000 * 0.05)
= 1515.967945
T = 51.60%
R = 51.60%
Putnam Growth & Income
12/31/98 NO. YEARS 1
TO
12/31/99 TRANSACTION DATE $ VALUE UNIT VALUE NO. UNITS END VALUE
INIT DEPOSIT 12/31/98 1000 9.989812816 100.1019757
FEE 12/31/99 0.546 10 0.0546
RESULTING VALUE 12/31/99 10 100.0473757 1000.473757
1
FORMULA: 1000*(1+T)= 1000.473757 - (0.85 * 1000 * 0.05)
= 957.9737573
T = -4.20%
R = -4.20%
MSDW Mid Cap
12/31/98 NO. YEARS 1
TO
12/31/99 TRANSACTION DATE $ VALUE UNIT VALUE NO. UNITS END VALUE
INIT DEPOSIT 12/31/98 1000 8.40493129 118.9777722
FEE 12/31/99 0.546 10 0.0546
RESULTING VALUE 12/31/99 10 118.9231722 1189.231722
1
FORMULA: 1000*(1+T)= 1189.231722 - (0.85 * 1000 * 0.05)
= 1146.731722
T = 14.67%
R = 14.67%
<PAGE>
5 YEAR
Alliance Premier Growth
30-Dec-94
TO NO. YEARS 5.000
31-Dec-99
TRANSACTION DATE $ VALUE UNIT VALUE NO. UNITS END VALUE
INIT DEPOSIT 31-Dec-94 1000.00 #VALUE! #VALUE!
FEE 31-Dec-95 0.546 #VALUE! #VALUE!
FEE 31-Dec-96 0.546 #VALUE! #VALUE!
FEE 31-Dec-97 0.546 #VALUE! #VALUE!
FEE 31-Dec-98 0.546 #VALUE! #VALUE!
FEE 31-Dec-99 0.546 10.000000 0.05460
RESULTING VALUE 31-Dec-99 10.000000 #VALUE! #VALUE!
5.000
FORMULA: 1000*(1+T)= #VALUE! - (0.85 * 1000 * 0.01)
= #VALUE!
T = N/A
R = N/A
Alliance Growth
30-Dec-94
TO NO. YEARS 5.000
31-Dec-99
TRANSACTION DATE $ VALUE UNIT VALUE NO. UNITS END VALUE
INIT DEPOSIT 31-Dec-94 1000.00 2.735042 365.62512
FEE 31-Dec-95 0.546 3.649857 0.14959
FEE 31-Dec-96 0.546 4.626742 0.11801
FEE 31-Dec-97 0.546 5.935071 0.09200
FEE 31-Dec-98 0.546 7.537582 0.07244
FEE 31-Dec-99 0.546 10.000000 0.05460
RESULTING VALUE 31-Dec-99 10.000000 365.13848 3651.3848
5.000
FORMULA: 1000*(1+T)= 3651.3848 - (0.85 * 1000 * 0.01)
= 3642.884791
T = 29.51%
R = 264.29%
Alliance Growth and Income
30-Dec-94
TO NO. YEARS 5.000
31-Dec-99
TRANSACTION DATE $ VALUE UNIT VALUE NO. UNITS END VALUE
INIT DEPOSIT 31-Dec-94 1000.00 3.661297 273.12726
FEE 31-Dec-95 0.546 4.905209 0.11131
FEE 31-Dec-96 0.546 6.005241 0.09092
FEE 31-Dec-97 0.546 7.630825 0.07155
FEE 31-Dec-98 0.546 9.101211 0.05999
FEE 31-Dec-99 0.546 10.000000 0.05460
RESULTING VALUE 31-Dec-99 10.000000 272.73889 2727.3889
5.000
FORMULA: 1000*(1+T)= 2727.3889 - (0.85 * 1000 * 0.01)
= 2718.88889
T = 22.15%
R = 171.89%
Aim Cap App
30-Dec-94
TO NO. YEARS 5.000
31-Dec-99
TRANSACTION DATE $ VALUE UNIT VALUE NO. UNITS END VALUE
INIT DEPOSIT 31-Dec-94 1000.00 3.525933 283.61285
FEE 31-Dec-95 0.546 4.720264 0.11567
FEE 31-Dec-96 0.546 5.475334 0.09972
FEE 31-Dec-97 0.546 6.131454 0.08905
FEE 31-Dec-98 0.546 7.008818 0.07790
FEE 31-Dec-99 0.546 10.000000 0.05460
RESULTING VALUE 31-Dec-99 10.000000 283.17591 2831.7591
5.000
FORMULA: 1000*(1+T)= 2831.7591 - (0.85 * 1000 * 0.01)
= 2823.259071
T = 23.07%
R = 182.33%
Aim Growth
30-Dec-94
TO NO. YEARS 5.000
31-Dec-99
TRANSACTION DATE $ VALUE UNIT VALUE NO. UNITS END VALUE
INIT DEPOSIT 31-Dec-94 1000.00 3.132831 319.20010
FEE 31-Dec-95 0.546 4.165636 0.13107
FEE 31-Dec-96 0.546 4.852900 0.11251
FEE 31-Dec-97 0.546 6.074281 0.08989
FEE 31-Dec-98 0.546 7.494916 0.07285
FEE 31-Dec-99 0.546 10.000000 0.05460
RESULTING VALUE 31-Dec-99 10.000000 318.73918 3187.3918
5.000
FORMULA: 1000*(1+T)= 3187.3918 - (0.85 * 1000 * 0.01)
= 3178.891837
T = 26.02%
R = 217.89%
Aim Value
30-Dec-94
TO NO. YEARS 5.000
31-Dec-99
TRANSACTION DATE $ VALUE UNIT VALUE NO. UNITS END VALUE
INIT DEPOSIT 31-Dec-94 1000.00 3.371506 296.60333
FEE 31-Dec-95 0.546 4.532231 0.12047
FEE 31-Dec-96 0.546 5.142854 0.10617
FEE 31-Dec-97 0.546 6.275869 0.08700
FEE 31-Dec-98 0.546 7.802904 0.06997
FEE 31-Dec-99 0.546 10.000000 0.05460
RESULTING VALUE 31-Dec-99 10.000000 296.16512 2961.6512
5.000
FORMULA: 1000*(1+T)= 2961.6512 - (0.85 * 1000 * 0.01)
= 2953.151166
T = 24.18%
R = 195.32%
Putnam International Growth
30-Dec-94
TO NO. YEARS 5.000
31-Dec-99
TRANSACTION DATE $ VALUE UNIT VALUE NO. UNITS END VALUE
INIT DEPOSIT 31-Dec-94 1000.00 #VALUE! #VALUE!
FEE 31-Dec-95 0.546 #VALUE! #VALUE!
FEE 31-Dec-96 0.546 #VALUE! #VALUE!
FEE 31-Dec-97 0.546 5.418389 0.10077
FEE 31-Dec-98 0.546 6.333368 0.08621
FEE 31-Dec-99 0.546 10.000000 0.05460
RESULTING VALUE 31-Dec-99 10.000000 #VALUE! #VALUE!
5.000
FORMULA: 1000*(1+T)= #VALUE! - (0.85 * 1000 * 0.01)
= #VALUE!
T = N/A
R = N/A
Putnam Voyager
30-Dec-94
TO NO. YEARS 5.000
31-Dec-99
TRANSACTION DATE $ VALUE UNIT VALUE NO. UNITS END VALUE
INIT DEPOSIT 31-Dec-94 1000.00 2.723599 367.16131
FEE 31-Dec-95 0.546 3.774330 0.14466
FEE 31-Dec-96 0.546 4.200343 0.12999
FEE 31-Dec-97 0.546 5.234983 0.10430
FEE 31-Dec-98 0.546 6.414311 0.08512
FEE 31-Dec-99 0.546 10.000000 0.05460
RESULTING VALUE 31-Dec-99 10.000000 366.64264 3666.4264
5.000
FORMULA: 1000*(1+T)= 3666.4264 - (0.85 * 1000 * 0.01)
= 3657.926384
T = 29.61%
R = 265.79%
Putnam Growth & Income
30-Dec-94
TO NO. YEARS 5.000
31-Dec-99
TRANSACTION DATE $ VALUE UNIT VALUE NO. UNITS END VALUE
INIT DEPOSIT 31-Dec-94 1000.00 4.439453 225.25298
FEE 31-Dec-95 0.546 5.979007 0.09132
FEE 31-Dec-96 0.546 7.180996 0.07603
FEE 31-Dec-97 0.546 8.782460 0.06217
FEE 31-Dec-98 0.546 9.989813 0.05466
FEE 31-Dec-99 0.546 10.000000 0.05460
RESULTING VALUE 31-Dec-99 10.000000 224.91420 2249.1420
5.000
FORMULA: 1000*(1+T)= 2249.1420 - (0.85 * 1000 * 0.01)
= 2240.641967
T = 17.51%
R = 124.06%
MSDW Mid Cap
30-Dec-94
TO NO. YEARS 5.000
31-Dec-99
TRANSACTION DATE $ VALUE UNIT VALUE NO. UNITS END VALUE
INIT DEPOSIT 31-Dec-94 1000.00 #VALUE! #VALUE!
FEE 31-Dec-95 0.546 #VALUE! #VALUE!
FEE 31-Dec-96 0.546 #VALUE! #VALUE!
FEE 31-Dec-97 0.546 7.549330 0.07232
FEE 31-Dec-98 0.546 8.404931 0.06496
FEE 31-Dec-99 0.546 10.000000 0.05460
RESULTING VALUE 31-Dec-99 10.000000 #VALUE! #VALUE!
5.000
FORMULA: 1000*(1+T)= #VALUE! - (0.85 * 1000 * 0.01)
= #VALUE!
T = N/A
R = N/A
<PAGE>
SINCE INCEPTION
Alliance Premier Growth
14-Jul-99
TO NO. YEARS 0.465
31-Dec-99
TRANSACTION DATE $ VALUE UNIT VALUE NO. UNITS END VALUE SURRENDER
CHARGES
0 INIT DEPOSIT 14-Jul-99 1000.00 8.897316 112.39344
1 FEE 31-Dec-99 0.546 10.000000 0.05460 0.06
2 FEE N/A 0 N/A 0.00000 0.05
3 FEE N/A 0 N/A 0.00000 0.04
4 N/A 0 N/A 0.00000 0.03
5 N/A 0 N/A 0.00000 0.02
6 N/A 0 N/A 0.00000 0.01
7 N/A 0 N/A 0.00000 0
8 N/A 0 N/A 0.00000 0
9 N/A 0 N/A 0.00000 0
10 N/A 0 N/A 0.00000 0
11 N/A 0 N/A 0.00000 0
12 N/A 0 N/A 0.00000 0
13 N/A 0 N/A 0.00000 0
14 FEE N/A 0 N/A 0.00000 0
15 FEE N/A 0 N/A 0.00000 0
RESULTING VALUE 31-Dec-99 10.000000 112.33884 1123.3884
0.465
FORMULA: 1000*(1+T)= 1123.3884
= 1072.388436
T = 16.20%
R = 7.24%
Alliance Growth
09/15/94
TO NO. YEARS 5.292265572
12/31/99
TRANSACTION DATE $ VALUE UNIT VALUE NO. UNITS END VALUE SURRENDER CHARGES
0 INIT DEPOSIT 09/15/94 1000 2.607538715 383.5034142
1 FEE 09/15/95 0.546 3.511685966 0.155480873 0.06
2 FEE 09/15/96 0.546 4.09031 0.133486183 0.05
03-Jan-00 FEE 09/15/97 0.546 5.58120 0.097828458 0.04
4 09/15/98 0.546 5.884525312 0.092785734 0.03
05-Jan-00 09/15/99 0.546 8.15062 0.066988766 0.02
6 12/31/99 0.546 10.00000 0.0546 0.01
7 N/A 0 N/A 0 0
8 N/A 0.00 N/A 0.00000 0
9 N/A 0 N/A 0.00000 0
10 N/A 0 N/A 0.00000 0
11 N/A 0 N/A 0.00000 0
12 N/A 0 N/A 0.00000 0
13 N/A 0 N/A 0.00000 0
14 FEE N/A 0 N/A 0.00000 0
15 FEE N/A 0 N/A 0.00000 0
RESULTING VALUE 31-Dec-99 10.000000 382.90224 3829.022442
5.292265572
FORMULA: 1000*(1+T)= 3829.022442
= 3820.522442
T = 28.82%
R = 282.05%
Alliance Growth and Income
01/14/91
TO NO. YEARS 8.960985626
12/31/99
TRANSACTION DATE $ VALUE UNIT VALUE NO. UNITS END VALUE SURRENDER CHARGES
0 INIT DEPOSIT 01/14/91 1000 3.105882347 321.9696976
1 FEE 01/14/92 0.546 3.173224024 0.17206475 0.06
2 FEE 01/14/93 0.546 3.379247376 0.161574439 0.05
3 FEE 01/14/94 0.546 3.724152776 0.146610527 0.04
4 01/14/95 0.546 3.661296885 0.149127486 0.03
5 01/14/96 0.546 4.756739699 0.114784503 0.02
6 01/14/97 0.546 6.148530826 0.088801702 0.01
7 01/14/98 0.546 7.454660059 0.073242776 0
8 01/14/99 0.546 8.959046885 0.060943983 0
9 12/31/99 0.546 10 0.0546 0
10 N/A 0 N/A 0 0
11-Jan-00 N/A 0 N/A 0 0
12 N/A 0.000 N/A 0 0
13-Jan-00 N/A 0 N/A 0 0
14 FEE N/A 0 N/A 0 0
15 FEE N/A 0 N/A 0 0
RESULTING VALUE 12/31/99 10.000000 320.94795 3209.479474
8.960985626
FORMULA: 1000*(1+T)= 3209.479474
= 3209.479474
T = 13.90%
R = 220.95%
Aim Cap App
05/05/93
TO NO. YEARS 6.655715264
12/31/99
TRANSACTION DATE $ VALUE UNIT VALUE NO. UNITS END VALUE SURRENDER CHARGES
0 INIT DEPOSIT 05/05/93 1000 2.943899 339.6855093
1 FEE 05/05/94 0.546 3.473488 0.15719 0.06
2 FEE 05/05/95 0.546 3.87489 0.140907354 0.05
3 FEE 05/05/96 0.546 5.24631 0.104073176 0.04
4 05/05/97 0.546 5.5034 0.099212279 0.03
5 05/05/98 0.546 6.9506324 0.078554003 0.02
6 05/05/99 0.54600 719.80% 0.075854224 0.01
7 12/31/99 0.54600 1000.00% 0.0546 0
8 N/A 0 N/A 0 0
9 N/A 0 N/A 0 0
10 N/A 0 N/A 0 0
11 N/A 0 N/A 0 0
12 N/A 0 N/A 0 0
13 N/A 0 N/A 0 0
14 FEE N/A 0 N/A 0 0
15 FEE N/A 0 N/A 0 0
RESULTING VALUE 12/31/99 10 338.9751176 3389.751176
6.655715264
FORMULA: 1000*(1+T)= 3389.751176
= 3389.75118
T = 20.13%
R = 238.98%
Aim Growth
05/05/93
TO NO. YEARS 6.655715264
12/31/99
TRANSACTION DATE $ VALUE UNIT VALUE NO. UNITS END VALUE SURRENDER CHARGES
0 INIT DEPOSIT 05-May-93 1000 2.968500 336.87046
1 FEE 05-May-94 0.546 3.120758 0.17496 0.06
2 FEE 05-May-95 0.546 3.490607 0.15642 0.05
3 FEE 05-May-96 0.546 4.410503 0.12380 0.04
4 05-May-97 0.546 5.196157 0.10508 0.03
5 05-May-98 0.546 7.000663 0.07799 0.02
6 05-May-99 0.546 7.995896 0.06829 0.01
7 31-Dec-99 0.546 10.000000 0.05460 0
8 N/A 0 N/A 0 0
9 N/A 0 N/A 0.00000 0
10 N/A 0 N/A 0 0
11 N/A 0.000 N/A 0 0
12 N/A 0 N/A 0 0
13 N/A 0 N/A 0 0
14 FEE N/A 0.00000 N/A 0 0
15 FEE N/A 0.00000 N/A 0 0
RESULTING VALUE 12/31/99 10 336.10933 3361.0933
6.655715264
FORMULA: 1000*(1+T)= 3361.0933
= 3361.0933
T = 19.98%
R = 236.11%
Aim Value
05-May-93
TO NO. YEARS 6.656
31-Dec-99
TRANSACTION DATE $ VALUE UNIT VALUE NO. UNITS END VALUE SURRENDER
CHARGES
0 INIT DEPOSIT 05-May-93 1000.00 2.886151 346.48221
1 FEE 05-May-94 0.546 3.355080 0.16274 0.06
2 FEE 05-May-95 0.546 3.795540 0.14385 0.05
3 FEE 05-May-96 0.546 4.575624 0.11933 0.04
4 05-May-97 0.546 5.508646 0.09912 0.03
5 05-May-98 0.546 7.089681 0.07701 0.02
6 05-May-99 0.546 8.488974 0.06432 0.01
7 31-Dec-99 0.546 10.000000 0.05460 0
8 N/A 0 N/A 0.00000 0
9 N/A 0 N/A 0.00000 0
10 N/A 0 N/A 0.00000 0
11 N/A 0 N/A 0.00000 0
12 N/A 0 N/A 0.00000 0
13 N/A 0 N/A 0.00000 0
14 FEE N/A 0 N/A 0.00000 0
15 FEE N/A 0 N/A 0.00000 0
RESULTING VALUE 31-Dec-99 10.000000 345.76125 3457.6125
6.656
FORMULA: 1000*(1+T)= 3457.6125
= 3457.612453
T = 20.49%
R = 245.76%
Putnam International Growth
01/02/97
TO NO. YEARS 2.99247091
12/31/99
TRANSACTION DATE $ VALUE UNIT VALUE NO. UNITS END VALUE SURRENDER CHARGES
0 INIT DEPOSIT 01/02/97 1000 4.736100505 211.1441678
1 FEE 01/02/98 0.546 5.446386227 0.10024996 0.06
2 FEE 01/02/99 0.546 6.33337 0.086210059 0.05
03-Jan-00 FEE 12/31/99 0.546 10.00000 0.0546 0.04
4 N/A 0.000 N/A 0 0.03
05-Jan-00 N/A 0 N/A 0 0.02
6 N/A 0 N/A 0 0.01
7 N/A 0 N/A 0 0
8 N/A 0.00 N/A 0.00000 0
9 N/A 0 N/A 0.00000 0
10 N/A 0 N/A 0.00000 0
11 N/A 0 N/A 0.00000 0
12 N/A 0 N/A 0.00000 0
13 N/A 0 N/A 0.00000 0
14 FEE N/A 0 N/A 0.00000 0
15 FEE N/A 0 N/A 0.00000 0
RESULTING VALUE 31-Dec-99 10.000000 210.90311 2109.031078
2.99247091
FORMULA: 1000*(1+T)= 2109.031078
= 2075.031078
T = 27.63%
R = 107.50%
Putnam Voyager
12/30/89
TO NO. YEARS 10
12/31/99
TRANSACTION DATE $ VALUE UNIT VALUE NO. UNITS END VALUE
INIT DEPOSIT 12/31/89 1000 1.549706114 645.2836387
FEE 12/31/90 0.546 1.49564152 0.36506074
FEE 12/31/91 0.546 2.152468273 0.253662275
FEE 12/31/92 0.546 2.340088771 0.233324482
FEE 12/31/93 0.546 2.736351023 0.199535803
FEE 12/31/94 0.546 2.723598521 0.200470075
FEE 12/31/95 0.546 3.774329921 0.14466144
FEE 12/31/96 0.546 4.200342925 0.129989387
FEE 12/31/97 0.546 5.234983495 0.104298323
FEE 12/31/98 0.546 6.41431081 0.085122161
FEE 12/31/99 0.546 10.00000 0.0546
RESULTING VALUE 12/31/99 10 643.512914 6435.12914
10
FORMULA: 1000*(1+T)= 6435.12914 - (0.85 * 1000 * 0)
= 6435.129140
T = 20.46%
R = 543.51%
Putnam Growth & Income
12/30/89
TO NO. YEARS 10
12/31/99
TRANSACTION DATE $ VALUE UNIT VALUE NO. UNITS END VALUE
INIT DEPOSIT 12/31/89 1000 3.132603 319.2233242
FEE 12/31/90 0.546 3.146496 0.17353
FEE 12/31/91 0.546 3.69002 0.147966579
FEE 12/31/92 0.546 3.98961 0.136855333
FEE 12/31/93 0.546 4.4909 0.121579545
FEE 12/31/94 0.546 4.439453014 0.122988124
FEE 12/31/95 0.54600 597.90% 0.091319508
FEE 12/31/96 0.54600 718.10% 0.076034017
FEE 12/31/97 0.546 8.782460194 0.062169368
FEE 12/31/98 0.546 9.989812816 0.054655679
FEE 12/31/99 0.546 10 0.0546
RESULTING VALUE 12/31/99 10 318.1816297 3181.816297
10
FORMULA: 1000*(1+T)= 3181.816297 - (0.85 * 1000 * 0)
= 3181.816297
T = 12.27%
R = 218.18%
MSDW Mid Cap
01/02/97
TO NO. YEARS 2.99247091
12/31/99
TRANSACTION DATE $ VALUE UNIT VALUE NO. UNITS END VALUE SURRENDER
CHARGES
0 INIT DEPOSIT 02-Jan-97 1000 5.429128 184.19164
1 FEE 02-Jan-98 0.546 7.514766 0.07266 0.06
2 FEE 02-Jan-99 0.546 8.365055 0.06527 0.05
3 FEE 31-Dec-99 0.546 10.000000 0.05460 0.04
4 N/A 0 N/A 0.00000 0.03
5 N/A 0 N/A 0.00000 0.02
6 N/A 0 N/A 0.00000 0.01
7 N/A 0 N/A 0.00000 0
8 N/A 0 N/A 0 0
9 N/A 0 N/A 0.00000 0
10 N/A 0 N/A 0 0
11 N/A 0.000 N/A 0 0
12 N/A 0 N/A 0 0
13 N/A 0 N/A 0 0
14 FEE N/A 0.00000 N/A 0 0
15 FEE N/A 0.00000 N/A 0 0
RESULTING VALUE 12/31/99 10 183.9991135 1839.991135
2.99247091
FORMULA: 1000*(1+T)= 1839.991135
= 1805.991135
T = 21.84%
R = 80.60%
</TABLE>
- -------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
<PAGE>
AssetManager - Standardized
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Aggressive Equity
03-May-99
TO NO. YEARS 0.663
31-Dec-99
TRANSACTION DATE $ VALUE UNIT VALUE NO. UNITS END VALUE SURRENDER CHARGES
0 INIT DEPOSIT 03-May-99 1000.00 10.000000 100.00000
1 FEE 31-Dec-99 0.546 14.454787 0.03777 0.01
2 FEE N/A 0 N/A 0.00000 0
3 FEE N/A 0 N/A 0.00000 0
4 N/A 0 N/A 0.00000 0
5 N/A 0 N/A 0.00000 0
6 N/A 0 N/A 0.00000 0
7 N/A 0 N/A 0.00000 0
8 N/A 0 N/A 0.00000 0
9 N/A 0 N/A 0.00000 0
10 N/A 0 N/A 0.00000 0
11 N/A 0 N/A 0.00000 0
12 N/A 0 N/A 0.00000 0
13 N/A 0 N/A 0.00000 0
14 FEE N/A 0 N/A 0.00000 0
15 FEE N/A 0 N/A 0.00000 0
RESULTING VALUE 31-Dec-99 14.454787 99.96223 1444.9327
0.663
FORMULA: 1000*(1+T)= 1444.9327
= 1436.4327
T = 72.74%
R = 43.64%
Short Term Bond
03-May-99
TO NO. YEARS 0.663
31-Dec-99
TRANSACTION DATE $ VALUE UNIT VALUE NO. UNITS END VALUE SURRENDER CHARGES
0 INIT DEPOSIT 03-May-99 1000.00 10.000000 100.00000
1 FEE 31-Dec-99 0.546 10.049101 0.05433 0.01
2 FEE N/A 0 N/A 0.00000 0
3 FEE N/A 0 N/A 0.00000 0
4 N/A 0 N/A 0.00000 0
5 N/A 0 N/A 0.00000 0
6 N/A 0 N/A 0.00000 0
7 N/A 0 N/A 0.00000 0
8 N/A 0 N/A 0.00000 0
9 N/A 0 N/A 0.00000 0
10 N/A 0 N/A 0.00000 0
11 N/A 0 N/A 0.00000 0
12 N/A 0 N/A 0.00000 0
13 N/A 0 N/A 0.00000 0
14 FEE N/A 0 N/A 0.00000 0
15 FEE N/A 0 N/A 0.00000 0
RESULTING VALUE 31-Dec-99 10.049101 99.94567 1004.3641
0.663
FORMULA: 1000*(1+T)= 1004.3641
= 995.8641
T = -0.62%
R = -0.41%
<PAGE>
AssetManager - NON-Standardized
- -------------------------------------------------------------------------------
Non-Standardized Calculations
Dates:
Current: 12/31/99
3 Months Ago: 09/30/99
End of Last Year 12/31/98
One Yr Ago: 12/31/98
Two Yrs Ago: 12/31/97
Three Yrs Ago: 12/31/96
Five Yrs Ago: 12/31/94
Ten Yrs Ago: 12/31/89
InceptionInceptionTen Yr Five Yr Three Two One Yr YTD 3 Months Today's
Fund Date AUV AUV AUV AUV AUV AUV AUV AUV AUV
Aggressive Equity5/3/99 10 N/A N/A N/A N/A N/A 10 10.29925114.454787
Short Term Bond 5/3/99 10 N/A N/A N/A N/A N/A 10 10.02716310.049101
<PAGE>
Inception Ten Years Five Years Three Years Two Years One Year YTD Three Months
Fund Total Average Total Average Total Average Total Average Total Average
Aggressive Equity44.55% 74.32% N/A N/A N/A N/A N/A N/A N/A N/A N/A 44.55% 40.35%
Short Term Bond 0.49% 0.74% N/A N/A N/A N/A N/A N/A N/A N/A N/A 0.49% 0.22%
<PAGE>
AssetManager - Adjusted Historical
- -------------------------------------------------------------------------------
Aggressive Equity
03-May-99
TO NO. YEARS 0.663
31-Dec-99
TRANSACTION DATE $ VALUE UNIT VALUE NO. UNITS END VALUE SURRENDER CHARGES
0 INIT DEPOSIT 03-May-99 1000.00 10.000000 100.00000
1 FEE 31-Dec-99 0.546 14.454787 0.03777 0.01
2 FEE N/A 0 N/A 0.00000 0
3 FEE N/A 0 N/A 0.00000 0
4 N/A 0 N/A 0.00000 0
5 N/A 0 N/A 0.00000 0
6 N/A 0 N/A 0.00000 0
7 N/A 0 N/A 0.00000 0
8 N/A 0 N/A 0.00000 0
9 N/A 0 N/A 0.00000 0
10 N/A 0 N/A 0.00000 0
11 N/A 0 N/A 0.00000 0
12 N/A 0 N/A 0.00000 0
13 N/A 0 N/A 0.00000 0
14 FEE N/A 0 N/A 0.00000 0
15 FEE N/A 0 N/A 0.00000 0
RESULTING VALUE 31-Dec-99 14.454787 99.96223 1444.9327
0.663
FORMULA: 1000*(1+T)= 1444.9327
= 1436.4327
T = 72.74%
R = 43.64%
Short Term Bond
03-May-99
TO NO. YEARS 0.663
31-Dec-99
TRANSACTION DATE $ VALUE UNIT VALUE NO. UNITS END VALUE SURRENDER CHARGES
0 INIT DEPOSIT 03-May-99 1000.00 10.000000 100.00000
1 FEE 31-Dec-99 0.546 10.049101 0.05433 0.01
2 FEE N/A 0 N/A 0.00000 0
3 FEE N/A 0 N/A 0.00000 0
4 N/A 0 N/A 0.00000 0
5 N/A 0 N/A 0.00000 0
6 N/A 0 N/A 0.00000 0
7 N/A 0 N/A 0.00000 0
8 N/A 0 N/A 0.00000 0
9 N/A 0 N/A 0.00000 0
10 N/A 0 N/A 0.00000 0
11 N/A 0 N/A 0.00000 0
12 N/A 0 N/A 0.00000 0
13 N/A 0 N/A 0.00000 0
14 FEE N/A 0 N/A 0.00000 0
15 FEE N/A 0 N/A 0.00000 0
RESULTING VALUE 31-Dec-99 10.049101 99.94567 1004.3641
0.663
FORMULA: 1000*(1+T)= 1004.3641
= 995.8641
T = -0.62%
R = -0.41%
</TABLE>
POWER OF ATTORNEY
WITH RESPECT TO NORTHBROOK VARIABLE ANNUITY ACCOUNT II
(REGISTRANT)
Know all men by these presents that Thomas J. Wilson, II, whose
signature appears below, constitutes and appoints Michael J. Velotta, his
attorney-in-fact, with power of substitution in any and all capacities, to sign
any Form N-4 Registration Statements and amendments thereto for the Northbrook
Variable Annuity Account II (Registrant) and to file the same, with exhibits
thereto and other documents in connection therewith, with the Securities and
Exchange Commission, hereby ratifying and confirming all that said
attorney-in-fact, or his substitute or substitutes, may do or cause to be done
by virtue hereof.
April 25, 2000
Date
/s/THOMAS J. WILSON, II
Thomas J. Wilson, II
President, Chief Operating Officer,
(Principal Executive Officer) and Director
<PAGE>
POWER OF ATTORNEY
WITH RESPECT TO NORTHBROOK VARIABLE ANNUITY ACCOUNT II
(REGISTRANT)
Know all men by these presents that Michael J. Velotta, whose signature
appears below, constitutes and appoints Thomas J. Wilson, II, his
attorney-in-fact, with power of substitution in any and all capacities, to sign
any Form N-4 Registration Statements and amendments thereto for the Northbrook
Variable Annuity Account II (Registrant) and to file the same, with exhibits
thereto and other documents in connection therewith, with the Securities and
Exchange Commission, hereby ratifying and confirming all that said
attorney-in-fact, or his substitute or substitutes, may do or cause to be done
by virtue hereof.
April 25, 2000
Date
/s/MICHAEL J. VELOTTA
Michael J. Velotta
Vice President, Secretary,
General Counsel, and Director
<PAGE>
POWER OF ATTORNEY
WITH RESPECT TO NORTHBROOK VARIABLE ANNUITY ACCOUNT II
(REGISTRANT)
Know all men by these presents that John R. Hunter, whose signature
appears below, constitutes and appoints Thomas J. Wilson, II, and Michael J.
Velotta, and each of them, his attorney-in-fact, with power of substitution, and
him in any and all capacities, to sign any Form N-4 Registration Statements and
amendments thereto for the Northbrook Variable Annuity Account II (Registrant)
and to file the same, with exhibits thereto and other documents in connection
therewith, with the Securities and Exchange Commission, hereby ratifying and
confirming all that each of said attorney-in-fact, or his substitute or
substitutes, may do or cause to be done by virtue hereof.
April 25, 2000
Date
/s/JOHN R. HUNTER
John R. Hunter
Vice President and Director
<PAGE>
POWER OF ATTORNEY
WITH RESPECT TO NORTHBROOK VARIABLE ANNUITY ACCOUNT II
(REGISTRANT)
Know all men by these presents that Samuel H. Pilch, whose signature
appears below, constitutes and appoints Thomas J. Wilson, II, and Michael J.
Velotta, and each of them, his attorney-in-fact, with power of substitution, and
him in any and all capacities, to sign any Form N-4 Registration Statements and
amendments thereto for the Northbrook Variable Annuity Account II (Registrant)
and to file the same, with exhibits thereto and other documents in connection
therewith, with the Securities and Exchange Commission, hereby ratifying and
confirming all that each of said attorney-in-fact, or his substitute or
substitutes, may do or cause to be done by virtue hereof.
April 25, 2000
Date
/s/SAMUEL H. PILCH
Samuel H. Pilch
Controller
<PAGE>
POWER OF ATTORNEY
WITH RESPECT TO NORTHBROOK VARIABLE ANNUITY ACCOUNT II
(REGISTRANT)
Know all men by these presents that Kevin R. Slawin, whose signature
appears below, constitutes and appoints Thomas J. Wilson, II, and Michael J.
Velotta, and each of them, his attorney-in-fact, with power of substitution, and
him in any and all capacities, to sign any Form N-4 Registration Statements and
amendments thereto for the Northbrook Variable Annuity Account II (Registrant)
and to file the same, with exhibits thereto and other documents in connection
therewith, with the Securities and Exchange Commission, hereby ratifying and
confirming all that each of said attorney-in-fact, or his substitute or
substitutes, may do or cause to be done by virtue hereof.
April 25, 2000
Date
/s/KEVIN R. SLAWIN
Kevin R. Slawin
Vice President and Director
<PAGE>
POWER OF ATTORNEY
WITH RESPECT TO NORTHBROOK VARIABLE ANNUITY ACCOUNT II
(REGISTRANT)
Know all men by these presents that Casey J. Sylla, whose signature
appears below, constitutes and appoints Thomas J. Wilson, II, and Michael J.
Velotta, and each of them, his attorney-in-fact, with power of substitution, and
him in any and all capacities, to sign any Form N-4 Registration Statements and
amendments thereto for Northbrook Variable Annuity Account II (Registrant) and
to file the same, with exhibits thereto and other documents in connection
therewith, with the Securities and Exchange Commission, hereby ratifying and
confirming all that each of said attorney-in-fact, or his substitute or
substitutes, may do or cause to be done by virtue hereof.
April 25, 2000
Date
/s/CASEY J. SYLLA
Casey J. Sylla
Chief Investment Officer and Director
<PAGE>
POWER OF ATTORNEY
WITH RESPECT TO NORTHBROOK VARIABLE ANNUITY ACCOUNT II
(REGISTRANT)
Know all men by these presents that Sarah R. Donahue, whose signature
appears below, constitutes and appoints Thomas J. Wilson, II, and Michael J.
Velotta, and each of them, his attorney-in-fact, with power of substitution, and
him in any and all capacities, to sign any Form N-3 Registration Statements and
amendments thereto for the Northbrook Variable Annuity Account II (Registrant)
and to file the same, with exhibits thereto and other documents in connection
therewith, with the Securities and Exchange Commission, hereby ratifying and
confirming all that each of said attorney-in-fact, or his substitute or
substitutes, may do or cause to be done by virtue hereof.
April 25, 2000
Date
/s/SARAH R. DONAHUE
Sarah R. Donahue
Assistant Vice President and Director
<PAGE>
POWER OF ATTORNEY
WITH RESPECT TO NORTHBROOK VARIABLE ANNUITY ACCOUNT II
(REGISTRANT)
Know all men by these presents that Timothy N. Vander Pas, whose
signature appears below, constitutes and appoints Thomas J. Wilson, II, and
Michael J. Velotta, and each of them, his attorney-in-fact, with power of
substitution, and him in any and all capacities, to sign any Form N-4
Registration Statements and amendments thereto for the Northbrook Variable
Annuity Account II (Registrant) and to file the same, with exhibits thereto and
other documents in connection therewith, with the Securities and Exchange
Commission, hereby ratifying and confirming all that each of said
attorney-in-fact, or his substitute or substitutes, may do or cause to be done
by virtue hereof.
April 25, 2000
Date
/s/TIMOTHY N. VANDER PAS
Timothy N. Vander Pas
Assistant Vice President and Director
