As filed with the Securities and Exchange Commission on March 2, 2000
--------------------------------------------------------------------------
FILE NOS. 33-35412
811-6116
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
PRE-EFFECTIVE AMENDMENT NO. __
POST-EFFECTIVE AMENDMENT NO. 24 /X/
AND/OR
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY
ACT OF 1940
AMENDMENT NO. 26 /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:
BRUCE A. TEICHNER, ESQ. DANIEL J. FITZPATRICK, ESQ.
ALLSTATE LIFE INSURANCE COMPANY MORGAN STANLEY DEAN WITTER
3100 SANDERS ROAD, SUITE J5B TWO WORLD TRADE CENTER
NORTHBROOK, ILLINOIS 60062 NEW YORK, NEW YORK 10048
Approximate date of proposed public offering: continuous
It is proposed that this filing will become effective (check appropriate box):
[ ] immediately upon filing pursuant to paragraph (b) of Rule 485
[ ] on (date) pursuant to paragraph (b) of Rule 485
[X] 60 days after filing pursuant to paragraph (a)(1) of Rule 485
[ ] on (date) pursuant to paragraph (a)(1) of Rule 485
If appropriate, check the following box:
[ ] this post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
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-effective amendment (Amendment) for the purpose
of adding a new prospectus, a new statement of additional information, and
additional exhibits related to Morgan Stanley Dean Witter Variable Annuity 3, a
new form of contact (new Contract) that the Registrant intends to offer. The
new Contract is an enhanced version of the Morgan Stanley Dean Witter Variable
Annuity II contract (existing Contract) described in the Registration
Statement. Following the receipt of state insurance department approvals, the
new Contract will be offered in lieu of the existing Contract. The 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 3
NORTHBROOK LIFE INSURANCE COMPANY PROSPECTUS DATED
P.O. BOX 94040 May 1, 2000
PALATINE, IL 60094
TELEPHONE NUMBER: 1-800-654-2397
- --------------------------------------------------------------------------------
Northbrook Life Insurance Company ("Northbrook") is offering the Morgan Stanley
Dean Witter Variable Annuity 3, 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"):
- MORGAN STANLEY DEAN WITTER VARIABLE INVESTMENT SERIES (CLASS Y SHARES)
- THE UNIVERSAL INVESTMENT FUND, INC.
- VAN KAMPEN LIFE INVESTMENT TRUST
- AIM VARIABLE INSURANCE FUNDS
- ALLIANCE VARIABLE PRODUCTS SERIES FUND (CLASS B SHARES)
- PUTNAM VARIABLE TRUST (CLASS IB SHARES)
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 __ 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 APPROVED
OR DISAPPROVED THE SECURITIES DESCRIBED IN THIS
PROSPECTUS, NOR HAS IT PASSED ON THE ACCURACY OR THE
ADEQUACY OF THIS IMPORTANT PROSPECTUS. ANY ONE WHO TELLS
YOU OTHERWISE IS COMMITTING A FEDERAL CRIME.
IMPORTANT
NOTICE
INVESTMENT IN THE CONTRACTS INVOLVES INVESTMENT RISKS,
INCLUDING POSSIBLE LOSS OF PRINCIPAL.
<PAGE>
TABLE OF CONTENTS
PAGE
- ----------------------------------------------------------------------------
OVERVIEW
- ----------------------------------------------------------------------------
Important Terms
- ----------------------------------------------------------------------------
The Contract At A Glance
- ----------------------------------------------------------------------------
How the Contract Works
- ----------------------------------------------------------------------------
Expense Table
- ----------------------------------------------------------------------------
Financial Information
- ----------------------------------------------------------------------------
CONTRACT FEATURES
- ----------------------------------------------------------------------------
The Contract
- ----------------------------------------------------------------------------
Purchase of Contracts
- ----------------------------------------------------------------------------
Contract Value
- ----------------------------------------------------------------------------
Investment Alternatives
- ----------------------------------------------------------------------------
The Variable Sub-Accounts
- ----------------------------------------------------------------------------
The Fixed Account Options
- ----------------------------------------------------------------------------
Transfers
- ----------------------------------------------------------------------------
Expenses
- ----------------------------------------------------------------------------
Access to Your Money
- ----------------------------------------------------------------------------
Income Payments
- ----------------------------------------------------------------------------
Death Benefits
- ----------------------------------------------------------------------------
OTHER INFORMATION
- ----------------------------------------------------------------------------
More Information:
- ----------------------------------------------------------------------------
Northbrook
- ----------------------------------------------------------------------------
The Variable Account
- ----------------------------------------------------------------------------
The Portfolios
- ----------------------------------------------------------------------------
The Contract
- ----------------------------------------------------------------------------
Qualified Plans
- ----------------------------------------------------------------------------
Legal Matters
- ----------------------------------------------------------------------------
Taxes
- ----------------------------------------------------------------------------
Performance Information
- ----------------------------------------------------------------------------
STATEMENT OF ADDITIONAL INFORMATION
TABLE OF CONTENTS
<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
- ---------------------------------------------------------
Dollar Cost Averaging Fixed Account Options
- ---------------------------------------------------------
Due Proof of Death
- ---------------------------------------------------------
Enhanced Death Benefit
- ---------------------------------------------------------
Fixed Account Options
- ---------------------------------------------------------
Funds
- ---------------------------------------------------------
Income and Death Benefit Combination Option 2
- ---------------------------------------------------------
Income Benefit Combination Option 2
- ---------------------------------------------------------
Income Plan
- ---------------------------------------------------------
Investment Alternatives
- ---------------------------------------------------------
Issue Date
- ---------------------------------------------------------
Northbrook ("We")
- ---------------------------------------------------------
Payout Phase
- ---------------------------------------------------------
Payout Start Date
- ---------------------------------------------------------
Performance Death Benefit Option
- ---------------------------------------------------------
Portfolios
- ---------------------------------------------------------
Qualified Contracts
- ---------------------------------------------------------
Right to Cancel
- ---------------------------------------------------------
SEC
- ---------------------------------------------------------
Settlement Value
- ---------------------------------------------------------
Systematic Withdrawal Program
- ---------------------------------------------------------
Valuation Date
- ---------------------------------------------------------
Variable Account
- ---------------------------------------------------------
Variable Sub-Account
- ---------------------------------------------------------
* 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 of $1,000
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 state and federal
law permit, to reflect the
investment experience of
any amounts allocated to
the Variable Account.
- --------------------------------------------------------------------------------
EXPENSES You will bear the following expenses:
- Total Variable Account annual fees equal
to 1.35% of average daily net assets
(1.48% if you select the Performance
Death Benefit Option or 1.59% if you select
the Death Benefit Combination Option 2, or
1.65% if you select the Income Benefit
Combination Option 2 or 1.85% if you
select the Income and Death Benefit Combination
Option 2)
- Annual contract maintenance charge of
$35 (currently waived in certain cases)
- Withdrawal charges ranging from 0% to 6%
of purchase payment(s) withdrawn (with certain
exceptions)
- Transfer fee of $25 after the 12th transfer
in any Contract Year (fee currently waived)
- State premium tax (if your state imposes
one)
In addition, each Portfolio pays expenses that you
will bear indirectly if you invest in a Variable
Sub-Account.
<PAGE>
- -------------------------------------------------------------------------------
INVESTMENT ALTERNATIVES The Contract offers 35 investment
alternatives including:
- 4 Fixed Account Options (which credit
interest at rates we guarantee)
- 31 Variable Sub-Accounts investing in
Portfolios offering professional money
management by these investment advisers:
- A I M ADVISORS, INC.
- ALLIANCE CAPITAL MANAGEMENT, L.P.
- MORGAN STANLEY DEAN WITTER
ADVISORS INC.
- MORGAN STANLEY DEAN WITTER
ASSET MANAGEMENT INC.
- PUTNAM INVESTMENT MANAGEMENT, INC.
- VAN KAMPEN ASSET MANAGEMENT INC.
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:
- AUTOMATIC ADDITIONS PROGRAM
- AUTOMATIC PORTFOLIO REBALANCING
PROGRAM
- DOLLAR COST AVERAGING PROGRAM
- SYSTEMATIC WITHDRAWAL PROGRAM
- --------------------------------------------------------------------------------
INCOME PAYMENTS You can choose fixed amount income
payments, variable amount income payments
or a combination of the two.
You can receive your income payments in one of
the following ways:
- life income with guaranteed payments
- joint and survivor life income
- guaranteed payments for a specified period
<PAGE>
- --------------------------------------------------------------------------------
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 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.
Transfers to an Guarantee
Period of the Standard
Fixed Account Option must be at
least $500.
We do not currently impose
a fee upon transfers. We,
however, 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 any time during the
Accumulation Phase and during
the Payout Phase in certain cases.
In general, you must withdraw
at least $500 at a time or
the total amount in the
investment alternative, if
less. A 10% federal tax
penalty may apply if you
make a withdrawal before you
are 59 1/2 years old.
<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 any of 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 amount income payment option, we
guarantee the amount of your payments, which will remain fixed. If you select a
variable amount 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.
ISSUE ACCUMULATION PHASE PAYOUT START PAYOUT
DATE DATE PHASE
You buy You save for You elect to You can receive
a Contract retirement receive payments income payments for
or receive a a set period or you
lump sum payment can receive income
payments for life
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)*
Number of Complete Years
Since We Received the
Purchase Payment
Being Withdrawn: 0 1 2 3 4 5 6+
Applicable Charge: 6% 5% 5% 4% 3% 2% 0%
- -------------------------------------------------------------------------
Annual Contract Maintenance Charge $35**
- -------------------------------------------------------------------------
Transfer Fee $25***
- -------------------------------------------------------------------------
* During each Contract Year you may withdraw up to 15% of the aggregate amount
of purchase payments as of the beginning of the Contract Year without incurring
a withdrawal charge.
** If your Contract Value equals or exceeds $40,000, we currrently waiving
the charge for the remaining time your Contract is in force.
*** Applies solely to the thirteenth and all 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 1.25%*
- -------------------------------------------------------
Administrative Expense Charge 0.10%
- -------------------------------------------------------
Total Variable Account Annual Expenses 1.35%
- -------------------------------------------------------
* If you select the Performance Death Benefit Option, the mortality and
expense risk charge is 1.38%. If you select the Death Benefit Combination
Option, the mortality and expense risk charge is 1.49%. If you select the
Income Benefit Combination Option 2, the mortality and expense risk charge
is 1.55%. If you select the Income and Death Benefit Combination Option 2,
the mortality and expense risk charge is 1.75%.
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C>
PORTFOLIO ANNUAL EXPENSES (After Voluntary
Reductions and Reimbursements) (as a
percentage of Portfolio average daily net
assets)(1)
Management Other Total Portfolio
Portfolio Fees Rule 12b-1 Fees Expenses Annual Expenses
- --------------------------------------------------------------------------------------------------------------------------------
MORGAN STANLEY DEAN WITTER VARIABLE INVESTMENT
SERIES (CLASS Y SHARES)(2)
- --------------------------------------------------------------------------------------------------------------------------------
Money Market 0.50% 0.25% 0.02% 0.77%
- --------------------------------------------------------------------------------------------------------------------------------
Quality Income Plus 0.50% 0.25% 0.02% 0.77%
- --------------------------------------------------------------------------------------------------------------------------------
Short-Term Bond 0.45% 0.25% 0.17% 0.87%
- --------------------------------------------------------------------------------------------------------------------------------
High Yield 0.50% 0.25% 0.03% 0.78%
- --------------------------------------------------------------------------------------------------------------------------------
Utilities 0.64% 0.25% 0.03% 0.92%
- --------------------------------------------------------------------------------------------------------------------------------
Income Builder 0.75% 0.25% 0.06% 1.06%
- --------------------------------------------------------------------------------------------------------------------------------
Dividend Growth 0.51% 0.25% 0.01% 0.77%
- --------------------------------------------------------------------------------------------------------------------------------
Aggressive Equity 0.42% 0.25% 0.10% 0.77%
- --------------------------------------------------------------------------------------------------------------------------------
Capital Growth 0.65% 0.25% 0.07% 0.97%
- --------------------------------------------------------------------------------------------------------------------------------
Global Dividend Growth 0.75% 0.25% 0.08% 1.08%
- --------------------------------------------------------------------------------------------------------------------------------
European Growth 0.95% 0.25% 0.09% 1.29%
- --------------------------------------------------------------------------------------------------------------------------------
Pacific Growth 0.95% 0.25% 0.47% 1.67%
- --------------------------------------------------------------------------------------------------------------------------------
Equity 0.49% 0.25% 0.02% 0.76%
- --------------------------------------------------------------------------------------------------------------------------------
S&P 500 Index(3) 0.39% 0.25% 0.09% 0.73%
- --------------------------------------------------------------------------------------------------------------------------------
Competitive Edge "Best Ideas" 0.44% 0.25% 0.12% 0.81%
- --------------------------------------------------------------------------------------------------------------------------------
Strategist 0.50% 0.25% 0.02% 0.77%
- --------------------------------------------------------------------------------------------------------------------------------
THE UNIVERSAL INSTITUTIONAL FUND, INC.(4)
- --------------------------------------------------------------------------------------------------------------------------------
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%
- --------------------------------------------------------------------------------------------------------------------------------
Mid-Cap Value 0.43% -- 0.62% 1.05%
- --------------------------------------------------------------------------------------------------------------------------------
U.S. Real Estate 0.00% -- 1.10% 1.10%
- --------------------------------------------------------------------------------------------------------------------------------
VAN KAMPEN LIFE INVESTMENT TRUST(5)
- --------------------------------------------------------------------------------------------------------------------------------
Emerging Growth 0.67% -- 0.18% 0.85%
- --------------------------------------------------------------------------------------------------------------------------------
AIM VARIABLE INSURANCE FUNDS INC.
- --------------------------------------------------------------------------------------------------------------------------------
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(6)
- --------------------------------------------------------------------------------------------------------------------------------
Growth Portfolio 0.75% 0.25% 0.12% 1.12%
- --------------------------------------------------------------------------------------------------------------------------------
Growth and Income Portfolio 0.63% 0.25% 0.09% 0.97%
- --------------------------------------------------------------------------------------------------------------------------------
Premier Growth Portfolio 1.00% 0.25% 0.04% 1.29%
- --------------------------------------------------------------------------------------------------------------------------------
PUTNAM VARIABLE TRUST (CLASS IB SHARES) (7)
- --------------------------------------------------------------------------------------------------------------------------------
Putnam VT Growth and Income Fund 0.46% 0.15% 0.04% 0.65%
- --------------------------------------------------------------------------------------------------------------------------------
Putnam VT International Growth Fund 0.80% 0.15% 0.22% 1.17%
- --------------------------------------------------------------------------------------------------------------------------------
Putnam VT Voyager Fund 0.53% 0.15% 0.04% 0.72%
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Figures shown in the Table are for the year ended December 31, 1999, unless
otherwise noted.
(2) Class Y of the Morgan Stanley Dean Witter Variable Investment Series has a
distribution plan or "Rule 12b-1" plan as described in that Fund's prospectus.
Because no Class Y shares were issued as of December 31, 1999, figures (other
than "12b-1 fees") are based on the expenses of the Fund's Class X shares for
the fiscal year ended December 31, 1999, plus Class Y's maximum annual Rule
12b-1 fee of 0.25%.
(3) 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.
(4) 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 for certain expenses of the Portfolios. Absent such
reductions, the management fees, other expenses, and total annual Portfolio
expenses would have been as follows:
<TABLE>
<S> <C> <C> <C> <C>
Management Fees Other Expenses Total Annual
Portfolio Expenses
Emerging Markets Equity 1.25% 1.37% 2.62%
--------------------------------------------------------------------------------------------
Equity Growth 0.55% 0.56% 1.11%
--------------------------------------------------------------------------------------------
International Magnum 0.80% 0.87% 1.67%
--------------------------------------------------------------------------------------------
Mid-Cap Value 0.75% 0.62% 1.37%
--------------------------------------------------------------------------------------------
U.S. Real Estate 0.80% 1.10% 1.90%
(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%, 0.53%, and 1.23%, respectively.
(6) 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 _______, 1999. Fees are stated net of waivers
and/or reimbursements. Absent fee waivers and/or reimbursements, the
estimated management fees, Rule 12b-1 fees, other expenses, and total
annual Portfolio expenses paid to Alliance by the Premier Growth Portfolio
as a percentage of net assets, would have been: 1.00%, 0.25%, 0.09%, and
1.34, respectively.]
(7) Figures shown in the table include amounts paid through expense offset and
brokerage service arrangements.
</TABLE>
<PAGE>
EXAMPLE 1
The example below shows the dollar amount of expenses that you would bear
directly or indirectly if you:
- - invested $1,000 in a Variable Sub-Account,
- - earned a 5% annual return on your
investment,
- - surrendered your Contract or you began receiving income payments
for a specified period of less than 120 months at the end of each time
period, and
- - elected the Income and Death Benefit Combination Option 2.
The Example Does Not Include Any Taxes or Tax Penalties You May Be Required To
Pay If You Surrender Your Contract.
<TABLE>
<S> <C> <C> <C> <C>
Variable Sub-Account 1 Year 3 Years 5 Years 10 Years
- ------------------------------------------------------------------------------------------------------------------------------
AIM VARIABLE INSURANCE FUNDS INC.
- ------------------------------------------------------------------------------------------------------------------------------
AIM V.I. Capital Appreciation
- ------------------------------------------------------------------------------------------------------------------------------
AIM V.I. Growth
- ------------------------------------------------------------------------------------------------------------------------------
AIM V.I. Value
- ------------------------------------------------------------------------------------------------------------------------------
ALLIANCE VARIABLE PRODUCTS SERIES FUNDS
- ------------------------------------------------------------------------------------------------------------------------------
Alliance Growth
- ------------------------------------------------------------------------------------------------------------------------------
Alliance Growth and Income
- ------------------------------------------------------------------------------------------------------------------------------
Alliance Premier Growth
- ------------------------------------------------------------------------------------------------------------------------------
MORGAN STANLEY DEAN WITTER V.I.S
- ------------------------------------------------------------------------------------------------------------------------------
Money Market
- ------------------------------------------------------------------------------------------------------------------------------
Quality Income Plus
- ------------------------------------------------------------------------------------------------------------------------------
Short-Term Bond
- ------------------------------------------------------------------------------------------------------------------------------
High Yield
- ------------------------------------------------------------------------------------------------------------------------------
Utilities
- ------------------------------------------------------------------------------------------------------------------------------
Income Builder
- ------------------------------------------------------------------------------------------------------------------------------
Dividend Growth
- ------------------------------------------------------------------------------------------------------------------------------
Capital Growth
- ------------------------------------------------------------------------------------------------------------------------------
Global Dividend Growth
- ------------------------------------------------------------------------------------------------------------------------------
European Growth
- ------------------------------------------------------------------------------------------------------------------------------
Pacific Growth
- ------------------------------------------------------------------------------------------------------------------------------
Equity
- ------------------------------------------------------------------------------------------------------------------------------
S&P 500 Index
- ------------------------------------------------------------------------------------------------------------------------------
Competitive Edge "Best Ideas"
- ------------------------------------------------------------------------------------------------------------------------------
Strategist
- ------------------------------------------------------------------------------------------------------------------------------
Aggressive Equity
- ------------------------------------------------------------------------------------------------------------------------------
MORGAN STANLEY DEAN WITTER UNIVERSAL FUNDS
- ------------------------------------------------------------------------------------------------------------------------------
U.S. Real Estate
- ------------------------------------------------------------------------------------------------------------------------------
International Magnum
- ------------------------------------------------------------------------------------------------------------------------------
Equity Growth
- ------------------------------------------------------------------------------------------------------------------------------
Emerging Markets Equity
- ------------------------------------------------------------------------------------------------------------------------------
Mid-Cap Value
- ------------------------------------------------------------------------------------------------------------------------------
PUTNAM VARIABLE TRUST
- ------------------------------------------------------------------------------------------------------------------------------
Putnam VT Growth and Income
- ------------------------------------------------------------------------------------------------------------------------------
Putnam VT International Growth
- ------------------------------------------------------------------------------------------------------------------------------
Putnam VT Voyager
- ------------------------------------------------------------------------------------------------------------------------------
VAN KAMPEN LIFE INVESTMENT TRUST
- ------------------------------------------------------------------------------------------------------------------------------
Emerging Growth
- ------------------------------------------------------------------------------------------------------------------------------
</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>
<S> <C> <C> <C> <C>
Variable Sub-Account 1 Year 3 Years 5 Years 10 Years
- ------------------------------------------------------------------------------------------------------------------------------
AIM VARIABLE INSURANCE FUNDS INC.
- ------------------------------------------------------------------------------------------------------------------------------
AIM V.I. Capital Appreciation
- ------------------------------------------------------------------------------------------------------------------------------
AIM V.I. Growth
- ------------------------------------------------------------------------------------------------------------------------------
AIM V.I. Value
- ------------------------------------------------------------------------------------------------------------------------------
ALLIANCE VARIABLE PRODUCTS SERIES FUNDS
- ------------------------------------------------------------------------------------------------------------------------------
Alliance Growth
- ------------------------------------------------------------------------------------------------------------------------------
Alliance Growth and Income
- ------------------------------------------------------------------------------------------------------------------------------
Alliance Premier Growth
- ------------------------------------------------------------------------------------------------------------------------------
MORGAN STANLEY DEAN WITTER V.I.S
- ------------------------------------------------------------------------------------------------------------------------------
Money Market
- ------------------------------------------------------------------------------------------------------------------------------
Quality Income Plus
- ------------------------------------------------------------------------------------------------------------------------------
Short-Term Bond
- ------------------------------------------------------------------------------------------------------------------------------
High Yield
- ------------------------------------------------------------------------------------------------------------------------------
Utilities
- ------------------------------------------------------------------------------------------------------------------------------
Income Builder
- ------------------------------------------------------------------------------------------------------------------------------
Dividend Growth
- ------------------------------------------------------------------------------------------------------------------------------
Capital Growth
- ------------------------------------------------------------------------------------------------------------------------------
Global Dividend Growth
- ------------------------------------------------------------------------------------------------------------------------------
European Growth
- ------------------------------------------------------------------------------------------------------------------------------
Pacific Growth
- ------------------------------------------------------------------------------------------------------------------------------
Equity
- ------------------------------------------------------------------------------------------------------------------------------
S&P 500 Index
- ------------------------------------------------------------------------------------------------------------------------------
Competitive Edge "Best Ideas"
- ------------------------------------------------------------------------------------------------------------------------------
Strategist
- ------------------------------------------------------------------------------------------------------------------------------
Aggressive Equity
- ------------------------------------------------------------------------------------------------------------------------------
MORGAN STANLEY DEAN WITTER UNIVERSAL FUNDS
- ------------------------------------------------------------------------------------------------------------------------------
U.S. Real Estate
- ------------------------------------------------------------------------------------------------------------------------------
International Magnum
- ------------------------------------------------------------------------------------------------------------------------------
Equity Growth
- ------------------------------------------------------------------------------------------------------------------------------
Emerging Markets Equity
- ------------------------------------------------------------------------------------------------------------------------------
Mid-Cap Value
- ------------------------------------------------------------------------------------------------------------------------------
PUTNAM VARIABLE TRUST
- ------------------------------------------------------------------------------------------------------------------------------
Putnam VT Growth and Income
- ------------------------------------------------------------------------------------------------------------------------------
Putnam VT International Growth
- ------------------------------------------------------------------------------------------------------------------------------
Putnam VT Voyager
- ------------------------------------------------------------------------------------------------------------------------------
VAN KAMPEN LIFE INVESTMENT TRUST
- ------------------------------------------------------------------------------------------------------------------------------
Emerging Growth
- ------------------------------------------------------------------------------------------------------------------------------
</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 Income
and Death Benefit Combination Option 2, with a mortality and expense risk charge
of 1.75%. If that option 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 $45,000.
<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 analogous to, but
not the same as, the share price of a mutual fund.
There are no Accumulation Unit Values to report because the Contracts were first
offered as of the date of this prospectus.
The financial statements of the Variable Account and Northbrook appear in the
Statement of Additional Information.
<PAGE>
THE CONTRACT
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CONTRACT OWNER
The Variable Annuity 3 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):
- the investment alternatives during the Accumulation and Payout Phases,
- the amount and timing of your purchase payments and withdrawals,
- the programs you want to use to invest or withdraw money,
- the income payment plan you want to use to receive retirement income,
- the Annuitant (either yourself or someone else) on whose life the
income payments will be based,
- the Beneficiary or Beneficiaries who will receive the benefits that
the Contract provides when the last surviving Contract owner or
Annuitant dies, and
- any other rights that the Contract provides.
If you die, any surviving Contract owner or, if none, the Beneficiar, 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.
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.
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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:
- your spouse, if he or she is still alive, otherwise
- your surviving children equally, or if you have no surviving children,
- 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.
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PURCHASES
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MINIMUM PURCHASE PAYMENTS
Your initial purchase payment must be at least $1,000. 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 lower the minimum and 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 state or federal law permit,
to reflect the 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.
CONTRACT VALUE
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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:
- changes in the share price of the Portfolio in which the Variable
Sub-Account invests, and
- the deduction of amounts reflecting the mortality and expense risk
charge, administrative expense charge, and any provision for taxes
that have accrued since we last calculated the Accumulation Unit
Value.
We determine contract maintenance charges, withdrawal charges and transfer fees
(currently waived) separately for each Contract. They do not affect Accumulation
Unit Value. Instead, we obtain payment of those charges and fees by redeeming
Accumulation Units. For details on how we calculate Accumulation Unit Value,
please refer to the Statement of Additional Information.
We determine a separate Accumulation Unit Value for each Variable Sub-Account on
each Valuation Date. We also determine a separate set of Accumulation Unit
Values that reflect the cost of the Performance Death Benefit Option, a third
set of Accumulation Unit Values that reflect the cost of the Death Benefit
Combination Option, a fourth set of Accumulation Unit Values that reflect the
cost of the Income Benefit Combination Option 2 and a fifth set of Accumulation
Unit Values that reflect the cost of the Income and Death Benefit Combination
Option 2.
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.
INVESTMENT ALTERNATIVES: THE VARIABLE SUB-ACCOUNTS
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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 the investment
objective(s), 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.
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<S> <C> <C>
Portfolio: Each Portfolio Seeks: Investment Adviser:
AIM VARIABLE INSURANCE FUNDS
AIM V.I. Capital Appreciation Fund Growth of capital
AIM V.I. Growth Fund Growth of capital
AIM V.I. Value Fund Long-term growth of capital
A I M Advisors, Inc.
ALLIANCE VARIABLE PRODUCTS SERIES FUND
Growth Portfolio Long-term growth of capital.
Current income is incidental to 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
Alliance Capital
Management, L.P.
MORGAN STANLEY DEAN WITTER VARIABLE INVESTMENT SERIES
Money Market Portfolio High current income, preservation
of capital, and liquidity
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
High Yield Portfolio High current income and, as a secondary
objective, capital appreciation
when consistent with its primary objective
Utilities Portfolio Capital appreciation and current
income
Income Builder Portfolio Reasonable income and, as a
secondary objective, growth of
capital
Dividend Growth Portfolio Reasonable current income and
long-term growth of income and
capital
Capital Growth Portfolio Long-term capital growth
Global Dividend Growth Portfolio Reasonable current income and
long-term growth of income and
capital
European Growth Portfolio To maximize the capital
appreciation on its investments
Pacific Growth Portfolio To maximize the capital
appreciation on its investments
Aggressive Equity Portfolio Capital Growth
Equity Portfolio Growth of capital and, as a
secondary objective, income when
consistent with its primary
objective.
S&P 500 Index Investment results that, before
expenses, correspond to the total
return of the Standard and Poor's
500 Composite Stock Price Index
Competitive Edge "Best Ideas"
Portfolio Long-term capital growth
Strategist Portfolio High total investment return
Morgan Stanley Dean
Witter Advisors, Inc.
THE UNIVERSAL INSTITUTIONAL FUND, INC.
Equity Growth Portfolio Long-term capital appreciation
U.S. Real Estate Portfolio Above-average current income and
long-term capital appreciation
International Magnum Portfolio Long-term capital appreciation
Emerging Markets Equity Portfolio Long-term capital appreciation
Morgan Stanley Asset
Management
Mid-Cap Value Above-average total return over a Miller Anderson &
market cycle of three to five years Sherrerd
PUTNAM VARIABLE TRUST
Putnam VT Growth and Income Fund Capital growth and current income
Putnam VT International Growth Fund Capital appreciation
Putnam VT Voyager Fund Capital appreciation
Putnam Investment
Management, Inc.
VAN KAMPEN LIFE INVESTMENT TRUST
Emerging Growth Portfolio Capital appreciation Van Kampen Asset
Management Inc.
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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.
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INVESTMENT ALTERNATIVES: THE FIXED ACCOUNT OPTIONS
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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 of the Standard Fixed Account
Option. The Fixed Account Options may not be available in all states. Northbrook
may also limit the availability of the 3 Dollar Cost Averaging Fixed Account
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. 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 the minimum guaranteed.
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. If we do not receive an allocation from you within one month of the
date of payment, the payment plus associated interest will be transferred to the
Money Market Variable Sub-Account in equal monthly installments using the
longest transfer period being offered at the time the purchase payment is made.
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.
STANDARD FIXED ACCOUNT OPTION
You may allocate purchase payments or transfers to one or more Guarantee Periods
of the Standard Fixed Account Option. Each payment or transfer allocated to a
Guarantee Period earns interest at a specified rate that we guarantee for a
period of years. We currently offer a 6 year Guarantee Period. We offer
additional Guarantee Periods at our sole discretion.
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.
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INVESTMENT ALTERNATIVES: TRANSFERS
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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. Transfers to any
Guarantee Period of the Standard Fixed Account Option must be at least $500. 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 Standard Fixed Account Option to
the Variable Account or between Guarantee Periods of the Standard Fixed Account
Option in any Contract Year to the greater of:
1 25% of the aggregate value in the Standard Fixed Account Option as of
the most recent Contract Anniversary (if the amount is less than
$1,000, then up to $1,000 may be transferred); or
2 25% of the sum of all purchase payments and transfers allocated to the
Standard Fixed Account Option 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 rate that was in effect at
the time money was allocated or transferred to the Standard Fixed Accoun Option,
we will 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 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
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:
- imposing a minimum time period between each transfer,
- refusing to accept transfer requests of an agent acting under a power
of attorney on behalf of more than one Contract owner, or
- limiting the dollar amount that a Contract owner may transfer among
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 amount 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 amount income payments.
You may not, however, convert any portion of your right to receive fixed amount
income payments into variable amount 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 amount 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
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.
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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 requests. We are not responsible for rebalancing that
occurs prior to receipt of your request.
Example:
Assume that you want your initial purchase payment split among 2 Variable
Sub-Accounts. You want 40% to be in the 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.
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EXPENSES
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As a Contract owner, you will bear, directly or indirectly, the charges and
expenses described below.
CONTRACT MAINTENANCE CHARGE
During the Accumulation Phase, on each Contract Anniversary, we will deduct a
$35 contract maintenance charge from your Contract Value. The charge will be
deducted from each Variable Sub-Account 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 variable income
payment. We are currently waiving the charge if the Contract Value is $40,000 or
more on or after the Issue Date.
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.
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 the Performance Death Benefit Option, 1.55% if you select
the Income Benefit Combination Option 2, 1.49% if you select the Death Benefit
Combination Option, and 1.75% if you select the Income and Death Benefit
Combination Option 2). 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 and the Income and Death Benefit Combination Option 2 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
guarantee the administrative expense charge and we cannot increase it. 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 __. 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); and
o the death of the Contract owner or Annuitant (unless the settlement
value is used)
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 form 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
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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.
Withdrawals also may be subject to income tax and a 10% penalty tax, as
described below.
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 $500 at a time. You
may also withdraw a lesser amount if you are withdrawing your entire interest in
a Variable Sub-Account.
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 applicable
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 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 any applicable charges and taxes.
<PAGE>
INCOME PAYMENTS
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PAYOUT START DATE
The Payout Start Date is the day that we apply your Contract Value to an Income
Plan. The Payout Start Date must be no later than:
- 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.
Generally, you may not make withdrawals after the Payout Start Date. One
exception to this rule applies if you are receiving income payments that do not
depend on the life of the annuitant. In that case, you may terminate the receipt
of income payments at any time and receive a lump sum equal to the present value
of the remaining payments due. A withdrawal charge may apply. We also assess
applicable premium taxes against all income payments.
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 with
guaranteed payment for 10 years unless changed by the Contract owner. 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:
- fixed amount income payments;
- variable amount income payments; or
- a combination of the two.
The three Income Plans are:
INCOME PLAN 1 -- LIFE INCOME WITH GUARANTEED PAYMENTS. Under this plan,
we make periodic income payments for at least as long as the Annuitant
lives. If the Annuitant dies before we have made all of the guaranteed
income payments, we will continue to pay the remainder of the guaranteed
income payments as required by the Contract.
INCOME PLAN 2 -- JOINT AND SURVIVOR LIFE INCOME. 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 guaranteed periods result in lower income payments, all other
things being equal. For example, if 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.
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 income payments that do not
depend on the life of the Annuitant (such as under Income Plan 3). In that case
you may terminate the receipt of income payments at any time and receive a lump
sum equal to the present value of the remaining payments due. A withdrawal
charge may apply. We also assess applicable premium taxes against all income
payments.
You may apply your Contract Value to an Income Plan. If you elected the Income
Benefit Combination Option 2 or the Income and Death Benefit Combination Option
2 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 amount income payments. If you wish to
apply any portion of your Fixed Account Options balance to provide variable
amount 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 amount income payments,
we will apply your Contract Value in the Variable Account to variable amount
income payments and your Contract Value in the Fixed Account Options to fixed
amount income payments.
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:
- terminate the Contract and pay you the Contract Value, less any
applicable taxes, in a lump sum instead of the periodic payments you have
chosen, or
- we may reduce the frequency of your payments so that each payment will
be at least $20.
VARIABLE AMOUNT INCOME PAYMENTS
The amount of your variable amount 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 amount income payments. Your
variable amount income payments may be more or less than your total purchase
payments because (a) variable amount 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 amount income
payments will decrease. The dollar amount of your variable amount income
payments will increase, however, if the actual net investment return exceeds the
assumed investment rate. The dollar amount of the variable amount 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 amount income payments.
FIXED AMOUNT INCOME PAYMENTS
We guarantee income payment amounts derived from any Fixed Account Option for
the duration of the Income Plan. We calculate the fixed amount 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 amount 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.
You have the option to add Income Benefit Combination Option 2 to your Contract.
This Option guarantees that the amount you apply to an Income Plan will not be
less than the income base ("Income Base") (which is the greater of Income Base
A or Income Base B), described below. The Option may not be available in all
states.
Eligibility. To qualify for this benefit, you must meet the following conditions
as of the Payout Start Date:
- You must elect a payout Start Date that is on or after the 10th
anniversary of the date we issued the rider for this Option (the
"Rider Date");
- The Payout Start Date must occur during the 30 day period following a
Contract Anniversary; and
- The Income Plan you have selected must provide for payments guaranteed
for either a single life or joint lives with a specified period of
at least:
1. 10 years, if the youngest Annuitant's age is 80 or less on the date
the amount is applied;
2. 5 years, if the youngest Annuitant's age is greater than 80 on the
date the amount is applied.
If your current Contract Value is higher than the value calculated under Income
Benefit, you can apply the Contract Value to any Income Plan. The Income Benefit
Combination Options 2 may not be available in all states.
INCOME BASE
The Income Base is the greater of Income Base A or Income Base B.
Income Base is used solely for the purpose of calculating the guaranteed income
benefit under this Option and does not provide a Contract Value or guarantee
performance of any investment option.
Income Base A
- On the Rider Dat, Income Base A is equal to the Contract Value
- After the Rider Date, Income Base A is recalculated as follows on the
Contract Anniversary and when a purchase payment or withdrawal is made
- For purchase payments, Income Base A is equal to the most recently
calculated Income Base A plus the purchase payment
- For withdrawals, Income Base A is equal to the most recently
calculated Income Base A reduced by a withdrawal adjustment
(described below)
- On each Contract Anniversary, Income Base A is equal to the greater of
the Contract Value or the most recently calculuated Income Base A.
In the absence of any withdrawals or purchase payments, Income Base A will be
the greatest of the Contract Value on the Rider Date and all Contract
Anniversary Contract Values between the Rider Date and the Payout Start Date.
We will recalculate Income Base A as described above until the first Contract
Anniversary after the 85th birthday of the oldest Contract owner or Annuitant
(if the Contract owner is not a natural person). After age 85, we will only
recalculate the Income Base A to reflect additional purchase payments and
withdrawals.
Income Base B
On the Rider Date, Income Base B is equal to the Contract Value. After the
Rider Date, Income Base B plus any subsequent purchase payments and less a
withdrawal adjustment (described below) for any subsequent withdrawals will
accumulate daily at a rate equivalent to 5% per year until the first Contract
Anniversay after the 85th birthday of the oldest owner or Annuitant (if the
Contract owner is not a natural person).
Withdrawal Adjustment
The adjustment is equal to (1) divided by (2), with the result multiplied by (3)
where:
(1) = the withdrawal amount
(2) = the Contract
(3) = the most recently calculated Income Base
The guaranteed income benefit amount is determined by applying the Income Base
less any applicable taxes to the guaranteed rates for the Income Plan you elect.
The Income Plan you elect must satisfy the conditions described above.
You may also elect the Income and Death Benefit combination Option which
combines the features of the Income Benefit Combination Option 2 with the
features of the Death Benefit Combination Option (described below).
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
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We will pay a death benefit if, prior to the Payout Start Date, any Contract
owner dies.
We will pay the death benefit to the new Contract owner as determined
immediately after the death. The new Contract owner would be the surviving
Contract owner(s) or, if none, the Beneficiary(ies).
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:
- a certified copy of a death certificate,
- a certified copy of a decree of a court of competent jurisdiction as
to the finding of death, or
- any other proof acceptable to us.
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 withdrawal charges or
applicable 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 Performance Death Benefit Option and Death Benefit Combination Option are
optional benefits that you may elect. If the Contract owner is a natural person,
these death benefit 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.
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.
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 Death Benefit A or Death
Benefit B. Death Benefit B is the Perforamnce Death Benefit Option described
above. DEATH BENEFIT A IS ONLY AVAILABLE THROUGH THE DEATH BENEFIT
COMBINATION OPTION. We sometimes refer to the Death Benefit Combination Option
as the "Best of the Best" death benefit option.
DEATH BENEFIT A. Death Benefit A 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, Death Benefit A 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, we will
multiply Death Benefit A as of the prior Contract Anniversary by 1.05. This
results in an increase of 5% annually.
We will recalculate Death Benefit Aas described above, but not beyond the
Contract Anniversary preceding the oldest Contract owner's (the Annuitant, if
the owner is not a natural person), 85th birthday. For all ages, we will
recalculate Death Benefit A on each Contract Anniversary, or upon receipt of a
death claim, as follows:
- We will reduce the Death Benefit A by a withdrawal adjustment
(as described above under Performance Death Benefit Option) for any
withdrawals since the prior Contract Anniversary; and
- We will increase Death Benefit Aby any additional
purchase payments since the prior Contract Anniversary.
INCOME AND DEATH BENEFIT COMBINATION OPTION 2
You may also elect the Income and Death Benefit Combination Option 2 which
combines the features of the Income Benefit Combination (described on page __)
with the features of the Death Benefit Combination Option 2.
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:
- the life of the new Contract owner; or
- for a guaranteed number of payments from 5 to 30 years, but not
to exceed the life expectancy of the (new) 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 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 the death unless an Income Plan is elected or a
surviving spouse continues the Contract in accordance with the provisions
described below.
If the sole new Contract owner is your spouse, within 180 days after the date of
your death, 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. 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 p.m. Central Time). If the Contract is continued in the Accumulation Phase,
the surviving spouse may make a single withdrawal of any amount within one year
of the date of death without incurring a withdrawal charge. The Contract may
only be continued once.
If the new Contract owner is a 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.
MORE INFORMATION
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NORTHBROOK
Northbrook is the issuer of the Contract. Northbrook is an Arizona stock life
insurance company organized in 1978. 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 Life 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, each of which invests
in a corresponding Portfolio. We may add new Variable Sub-Accounts or eliminate
one or more of them, if we believe marketing, tax, or investment conditions so
warrant. We do not guarantee the investment performance of the Variable Account,
its Sub-Accounts or the Portfolios. We may use the Variable Account to fund our
other annuity contracts. We will account separately for each type of annuity
contract funded by the Variable Account.
THE PORTFOLIOS
DIVIDENDS AND CAPITAL GAIN DISTRIBUTIONS. We automatically reinvest all
dividends and capital gains distributions from the Portfolios in shares of the
distributing Portfolio at their net asset value.
VOTING PRIVILEGES. As a general matter, you do not have a direct right to vote
the shares of the Portfolios held by the Variable Sub-Accounts to which you have
allocated your Contract Value. Under current law, however, you are entitled to
give us instructions on how to vote those shares on certain matters. Based on
our present view of the law, we will vote the shares of the Portfolios that we
hold directly or indirectly through the Variable Account in accordance with
instructions that we receive from Contract owners entitled to give such
instructions.
As a general rule, before the Payout Start Date, the Contract owner or anyone
with a voting interest is the person entitled to give voting instructions. The
number of shares that a person has a right to instruct will be determined by
dividing the Contract Value allocated to the applicable Variable Sub-Account by
the net asset value per share of the corresponding Portfolio as of the record
date of the meeting. After the Payout Start Date the person receiving income
payments has the voting interest. The payee's number of votes will be determined
by dividing the 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 0.20% of the average net assets of the Fixed Account Options
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 Value.
ADMINISTRATION. We have primary responsibility for all administration of the
Contracts and the Variable Account. We provide the following administrative
services, among others:
- issuance of the Contracts;
- maintenance of Contract owner records;
- Contract owner services;
- calculation of unit values;
- maintenance of the Variable Account; and
- preparation of Contract owner reports.
We will send you Contract statements at least annually prior to the Payout Start
Date. 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.
<PAGE>
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.
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.
TAXATION OF PARTIAL AND FULL WITHDRAWALS. If you make a partial withdrawal under
a non-Qualified Contract, amounts received are taxable to the extent the
Contract Value, without regard to surrender charges, exceeds the investment in
the Contract. The investment in the Contract is the gross premium paid for the
Contract minus any amounts previously received from the Contract if such amounts
were properly excluded from your gross income. If you make a partial withdrawal
under a Qualified Contract, the portion of the payment that bears the same ratio
to the total payment that the investment in the Contract (i.e., nondeductible
IRA contributions, after tax contributions to qualified plans) bears to the
Contract Value, is excluded from your income. If you make a full withdrawal
under a non-Qualified Contract or a Qualified Contract, the amount received will
be taxable only to the extent it exceeds the investment in the Contract.
"Nonqualified distributions" from Roth IRAs are treated as made from
contributions first and are included in gross income only to the extent that
distributions exceed contributions. "Qualified distributions" from Roth IRAs are
not included in gross income. "Qualified distributions" are any distributions
made more than 5 taxable years after the taxable year of the first contribution
to any Roth IRA and which are:
- made on or after the date the individual attains age 59 1/2,
- made to a Beneficiary after the Contract owner's death,
- attributable to the Contract owner being disabled, or
- for a first time home purchase (first time home purchases are subject
to a lifetime limit of $10,000).
If you transfer a non-Qualified Contract without full and adequate consideration
to a person other than your spouse (or to a former spouse incident to a
divorce), you will be taxed on the difference between the Contract Value and the
investment in the Contract at the time of transfer. Except for certain Qualified
Contracts, any amount you receive as a loan under a Contract, and any assignment
or pledge (or agreement to assign or pledge) of the Contract Value is treated as
a withdrawal of such amount or portion.
TAXATION OF ANNUITY PAYMENTS. Generally, the rule for income taxation of annuity
payments received from a non-Qualified Contract provides for the return of your
investment in the Contract in equal tax-free amounts over the payment period.
The balance of each payment received is taxable. For fixed annuity payments, the
amount excluded from income is determined by multiplying the payment by the
ratio of the investment in the Contract (adjusted for any refund feature or
period certain) to the total expected value of annuity payments for the term of
the Contract. If you elect variable annuity payments, the amount excluded from
taxable income is determined by dividing the investment in the Contract by the
total number of expected payments. The annuity payments will be fully taxable
after the total amount of the investment in the Contract is excluded using these
ratios. If you die, and annuity payments cease before the total amount of the
investment in the Contract is recovered, the unrecovered amount will be allowed
as a deduction for your last taxable year.
TAXATION OF ANNUITY DEATH BENEFITS. Death of a Contract owner, or death of the
Annuitant if the Contract is owned by a non-natural person, will cause a
distribution of death benefits from a Contract. Generally, such amounts are
included in income as follows:
1. if distributed in a lump sum, the amounts are taxed in the same
manner as a full withdrawal, or
2. if distributed under an annuity option, the amounts are taxed in
the same manner as an annuity payment. Please see the Statement of
Additional Information for more detail on distribution at death
requirements.
PENALTY TAX ON PREMATURE DISTRIBUTIONS. A 10% penalty tax applies to the taxable
amount of any premature distribution from a non-Qualified Contract. The penalty
tax generally applies to any distribution made prior to the date you attain age
59 1/2. However, no penalty tax is incurred on distributions:
1. made on or after the date the Contract owner attains age 59 1/2;
2. made as a result of the Contract owner's death or disability;
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 the income
on variable annuities held by such plans does 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.
Contracts may be used as investments with certain qualified plans such as:
- Individual Retirement Annuities or Accounts (IRAs) under Section 408 of
the Internal Revenue Code ("Code");
- Roth IRAs under Section 408A of the Code;
- Simplified Employee Pension Plans under Section 408(k) of the Code;
- Savings Incentive Match Plans for Employees (SIMPLE) Plans under Section
408(p) of the Code;
- Tax Sheltered Annuities under Section 403(b) of the Code;
- Corporate and Self Employed Pension and Profit Sharing Plans; and
- State and Local Government and Tax-Exempt Organization Deferred
Compensation Plans.
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.
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 December 31, 1988, and all earnings on salary reduction
contributions, may be made only:
1. on or after the date of employee
- attains age 59 1/2,
- separates from service,
- dies,
- becomes disabled, or
2. on account of hardship (earnings on salary reduction contributions may
not be distributed on the account of hardship).
These limitations do not apply to withdrawals where 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,
3. 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.
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. 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>
STATEMENT OF ADDITIONAL INFORMATION
TABLE OF CONTENTS
- -------------------------------------------------------------------
DESCRIPTION
- ----------------------------------------------------------------------------
Additions, Deletions or Substitutions of Investments
- ----------------------------------------------------------------------------
The Contract
- ----------------------------------------------------------------------------
Purchase of Contracts
- ----------------------------------------------------------------------------
Tax-free Exchanges (1035 Exchanges, Rollovers and Transfers)
- ----------------------------------------------------------------------------
Performance Information
- ----------------------------------------------------------------------------
Calculation of Accumulation Unit Values
- ----------------------------------------------------------------------------
Calculation of Variable Amount Income Payments
- ----------------------------------------------------------------------------
General Matters
- ----------------------------------------------------------------------------
Incontestability
- ----------------------------------------------------------------------------
Settlements
- ----------------------------------------------------------------------------
Safekeeping of the Variable Account's Assets
- ----------------------------------------------------------------------------
Premium Taxes
- ----------------------------------------------------------------------------
Tax Reserves
- ----------------------------------------------------------------------------
Federal Tax Matters
- ----------------------------------------------------------------------------
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>
MORGAN STANLEY DEAN WITTER VARIABLE ANNUITY 3
Northbrook Life Insurance 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 Variable Annuity 3 Contracts that we offer. This Statement
of Additional Information is not a prospectus. You should read it with the
prospectus, dated May 1, 2000, for the 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 the Morgan Stanley Dean Witter Variable
Annuity 3 Contracts.
<PAGE>
TABLE OF CONTENTS
Description Page
Additions, Deletions or Substitutions of Investments
The Contract
Purchase of Contracts
Tax-free Exchanges (1035 Exchanges, Rollovers and
Transfers)
Performance Information
Calculation of Accumulation Unit Values
Calculation of Variable Amount Income Payments
Net Investment Factor
Calculation of Variable Amount Income Payments
Calculation of Annuity Unit Values
General Matters
Incontestability
Settlements
Safekeeping of the Variable Account's Assets
Premium Taxes
Tax Reserves
Federal Tax Matters
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 fund 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.
THE CONTRACT
The Contract is primarily designed to aid individuals in long-term financial
planning. You can use it for retirement planning regardless of whether the
retirement plan qualifies for special federal income tax treatment.
PURCHASE OF CONTRACTS
Dean Witter Reynolds Inc., is the principal underwriter and distributor of the
Contracts. The offering of the Contracts is continuous. We do not anticipate
discontinuing the offering of the Contracts but we reserve the right to do so at
any time.
TAX-FREE EXCHANGES (1035 EXCHANGES, ROLLOVERS AND TRANSFERS)
We accept purchase payments that are the proceeds of a Contract in a transaction
qualifying for a tax-free exchange under Section 1035 of the Internal Revenue
Code ("Code"). Except as required by federal law in calculating the basis of the
Contract, we do not differentiate between Section 1035 purchase payments and
non-Section 1035 purchase payments.
We also accept "rollovers" and transfers from Contracts qualifying as
tax-sheltered annuities ("TSAs"), individual retirement annuities or accounts
("IRAs"), or any other Qualified Contract that is eligible to "rollover" into an
IRA. We differentiate among non-Qualified Contracts, TSAs, IRAs and other
Qualified Contracts to the extent necessary to comply with federal tax laws. For
example, we restrict the assignment, transfer, or pledge of TSAs and IRAs so the
Contracts will continue to qualify for special tax treatment. A Contract owner
contemplating any such exchange, rollover or transfer of a Contract should
contact a competent tax adviser with respect to the potential effects of such a
transaction.
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.
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 the contract maintenance charge, we pro rate the charge by
dividing (a) the contract maintenance charge by (b) an annual contract size of
$45,000. We then multiply the resulting percentage by a hypothetical $1,000
investment.
The standardized average annual total returns for the Variable
Sub-Accounts available under the Contract for the periods ended December 31,
1999 are set out below. No standardized total returns are shown for the Money
Market Variable Sub-Account. No standardized total returns are shown for the
Variable Sub-Accounts marked with an asterisk (*) below which commenced
operations on January 31, 2000, or on May 1, 2000, as indicated below.
The Variable Annuity 3 Contracts were first offered to the public as of the date
of this Statement of Additional Information. Accordingly, performance figures
for 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 Variable Annuity 3
Contracts as well as the withdrawal and contract maintenance charges described
above.
Variable Sub-Account Inception Dates:
Morgan Stanley Dean Witter Variable Investment Series:
Variable Sub-Account Date
Quality Income Plus* May 1, 2000
High Yield* May 1, 2000
Utilities* May 1, 2000
Dividend Growth* May 1, 2000
Equity* May 1, 2000
Strategist* May 1, 2000
Capital Growth* May 1, 2000
European Growth* May 1, 2000
Global Dividend Growth* May 1, 2000
Pacific Growth* May 1, 2000
Income Builder* May 1, 2000
Short-Term Bond* May 1, 2000
Aggressive Equity* May 1, 2000
S&P 500 Index* May 1, 2000
Competitive Edge ("Best Ideas")* May 1, 2000
The Universal Institutional Funds, Inc.:
Variable Sub-Account Date
Equity Growth March 16, 1998
International Magnum March 16, 1998
Emerging Markets Equity March 16, 1998
U.S. Real Estate May 18, 1998
Mid-Cap Value* January 31, 2000
<PAGE>
Van Kampen Life Investment Trust:
Variable Sub-Account Date
Emerging Growth March 16, 1998
AIM Variable Insurance Funds, Inc.:
Variable Sub-Account Date
Capital Appreciation* January 31, 2000
Growth* January 31, 2000
Value* January 31, 2000
Alliance Variable Products Series Fund:
Variable Sub-Account Date
Growth* January 31, 2000
Growth and Income* January 31, 2000
Premier Growth* January 31, 2000
Putnam Variable Trust:
Variable Sub-Account Date
Growth and Income* January 31, 2000
International Growth* January 31, 2000
Voyager* January 31, 2000
<PAGE>
(PERFORMANCE DATA TO BE PROVIDED BY AMENDMENT)
<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 charg as well as the
contract maintenance charge. However, these rates of return do not reflect,
withdrawal 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 the 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 the 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 accmulation unit value at the end of
each period shown, by accumulation unit vaslue 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 average annual total returns for the Variable Sub-Accounts
for the periods ended December 31, 1999 are set out below. No non-standardized
total returns are shown for the Money Market Variable Sub-Account. In addition,
no non-standardized total returns are shown for the Variable Sub-Accounts marked
with an asterisk (*) below, which commenced operations on January 31, 2000 and
May 1, 2000, respectively.
The Variable Annuity 3 Contracts were first offered to the public as of the date
of this Statement of Additional Information. Accordingly, performance figures
for 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 Variable Annuity 3
Contracts, excluding the withdrawal charge but including the contract
maintenance charges.
The inception dates of each Variable Sub-Account appears under "Standardized
Total Returns" above.
(PERFORMANCE DATA TO BE PROVIDED BY AMENDMENT)
<PAGE>
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.
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.
The following list provides the inception date for the Portfolio corresponding
to each of the Variable Sub-Accounts included in the tables.
Inception Date of
Variable Sub-Account Corresponding 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, 1990
Capital Growth* March 1, 1991
Pacific Growth* March 1, 1991
Global Dividend Growth* February 24, 1997
Income Builder* February 24, 1997
Equity Growth January 2, 1997
International Magnum January 2, 1997
Emerging Markets Equity January 21, 1997
Mid-Cap Value January 2, 1997
U.S. Real Estate March 4, 1997
Competitive Edge ("Best Ideas")* May 18, 1998
S&P 500 Index* May 18, 1998
Short-Term Bond* May 2, 1999
Aggressive Equity* May 1, 1999
Van Kampen Emerging Growth July 3, 1995
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 Portfoilios' Class __ sahres ("12b-1 class") corresponding to these
Variable Sub-Accounts were first offered on [May 1, 2000]. For periods prior to
[May 1, 2000], the performance shown is based on the historical performance of
the Portfolios' Calss __ shares ("non-12b-1 class"), adjsuted to reflect the
current expenses of the Portfolios' 12b-1 class. The inception dates for the
Portfolios are shown above.
** 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 __ and __ respectively. For periods prior to these dates, the performance
shown is based on the historical performance of the Portfolios' Calss A shares
("non-12b-1 class"), adjsuted 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 tot he Putnam
VT Growth and Income, International Growth, and Voyager Variable Sub-Accounts
were first offered on April 6, 1998, April 30, 1998 and April 30, 1998
respectivley. For periods prior to these dates, the perforamnce shown is based
on teh historical performance of the Portfolios' Class 1A shares ("non 12b-1
claas"), adjsuted to reflect the current expenses of the Portfolios' 12b-1
class. The inception dates fore teh Portfolios are as shown above.
(PERFORMANCE DATA TO BE PROVIDED BY AMENDMENT)
<PAGE>
CALCULATION OF ACCUMULATION UNIT VALUES
The value of Accumulation Units will change each Valuation Period according to
the investment performance of the Portfolio shares purchased by each Variable
Sub-Account and the deduction of certain expenses and charges. A "Valuation
Period" is the period from the end of one Valuation Date and continues to the
end of the next Valuation Date. A Valuation Date ends at the close of regular
trading on the New York Stock Exchange (currently 3:00 p.m. Central Time).
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 the number of days in the current calendar year and then
multiplied by the number of calendar days in the current Valuation Period.
CALCULATION OF VARIABLE AMOUNT INCOME PAYMENTS
We calculate the amount of the first variable income payment under an Income
Plan by applying the Contract Value allocated to each Variable Sub-Account less
any applicable premium tax charge deducted at the time, to the income payment
tables in the Contract. We divide the amount of the first variable annuity
income payment by the Variable Sub-Account's then current Annuity Unit value to
determine the number of annuity units ("Annuity Units") upon which later income
payments will be based. To determine income payments after the first, we simply
multiply the number of Annuity Units determined in this manner for each Variable
Sub-Account by the then current Annuity Unit value ("Annuity Unit Value") for
that Variable Sub-Account.
CALCULATION OF ANNUITY UNIT VALUES
Annuity Units in each Variable Sub-Account are valued separately and Annuity
Unit Values will depend upon the investment experience of the particular
Portfolio in which the Variable Sub-Account invests. We calculate the Annuity
Unit Value for each Variable Sub-Account at the end of any Valuation Period by:
o multiplying the Annuity Unit Value at the end of the immediately
preceding Valuation Period by the Variable Sub-Account's Net
Investment Factor (described in the preceding section) for the
Period; and then
o dividing the product by the sum of 1.0 plus the assumed investment
rate for the Valuation Period.
The assumed investment rate adjusts for the interest rate assumed in the income
payment tables used to determine the dollar amount of the first variable income
payment, and is at an effective annual rate which is disclosed in the Contract.
We determine the amount of the first variable income payment paid under an
Income Plan using the income payment tables set out in the Contracts. The
Contracts include tables that differentiate on the basis of sex, except in
states that require the use of unisex tables.
GENERAL MATTERS
INCONTESTABILITY
We will not contest the Contract after we issue it.
SETTLEMENTS
The Contract must be returned to us prior to any settlement. We must receive due
proof of the Contract owner(s) death (or Annuitant's death if there is a
non-natural Contract owner) before we will settle a death claim.
SAFEKEEPING OF THE VARIABLE ACCOUNT'S ASSETS
We hold title to the assets of the Variable Account. We keep the assets
physically segregated and separate and apart from our general corporate assets.
We maintain records of all purchases and redemptions of the Portfolio shares
held by each of the Variable Sub-Accounts.
The Portfolios do not issue stock certificates. Therefore, we hold the Variable
Account's assets in open account in lieu of stock certificates. See the
Portfolios' prospectuses for a more complete description of the custodian of the
Portfolios.
PREMIUM TAXES
Applicable premium tax rates depend on the Contract owner's state of residency
and the insurance laws and our status in those states where premium taxes are
incurred. Premium tax rates may be changed by legislation, administrative
interpretations, or judicial acts.
TAX RESERVES
We do not establish capital gains tax reserves for any Variable Sub-Account nor
do we deduct charges for tax reserves because we believe that capital gains
attributable to the Variable Account will not be taxable. However, we reserve
the right to deduct charges to establish tax reserves for potential taxes on
realized or unrealized capital gains.
FEDERAL TAX MATTERS
THE FOLLOWING DISCUSSION IS GENERAL AND IS NOT INTENDED AS TAX ADVICE. WE MAKE
NO GUARANTEE REGARDING THE TAX TREATMENT OF ANY CONTRACT OR TRANSACTION
INVOLVING A CONTRACT.
Federal, state, local and other tax consequences of ownership or receipt of
distributions under an annuity contract depend on the individual circumstances
of each person. If you are concerned about any tax consequences with regard to
your individual circumstances, you should consult a competent tax adviser.
TAXATION OF 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.
<PAGE>
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.
QUALIFIED PLANS
The Contract may be used with several types of qualified plans. Northbrook
reserves the right to limit the availability of the contract for use with any of
the qualified plans listed below. The tax rules applicable to participants in
such qualified plans vary according to the type of plan and the terms and
conditions of the plan itself. Adverse tax consequences may result from excess
contributions, premature distributions, distributions that do not conform to
specified commencement and minimum distribution rules, excess distributions and
in other circumstances. Contract owners and participants under the plan and
annuitants and beneficiaries under the Contract may be subject to the terms and
conditions of the plan regardless of the terms of the Contract.
IRAs
Section 408 of the Code permits eligible individuals to contribute to an
individual retirement program known as an IRA. IRAs are subject to limitations
on the amount that can be contributed and on the time when distributions may
commence. Certain distributions from other types of qualified plans may be
"rolled over" on a tax-deferred basis into an IRA. An IRA generally may not
provide life insurance, but it may provide a death benefit that equals the
greater of the premiums paid 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 IRAs
Section 408A of the Code permits eligible individuals to make nondeductible
contributions to an individual retirement program known as a Roth IRA. Roth IRAs
are subject to limitations on the amount that can be contributed and on the time
when distributions may commence. "Qualified distributions" from Roth IRAs 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 IRA, 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 IRA. 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 IRA. 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' IRAs 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.
EXPERTS
The financial statements included in this Statement of Additional Information,
have been audited by ________________, 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 and Northbrook and the
accompanying Reports of Independent Auditors appear on the pages that follow.
The financial statements of Northbrook included herein should be considered only
as bearing upon the ability of Northbrook to meet its obligations under the
Contracts.
(To be filed by amendment)
<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 will be filed by subsequent amendment.
(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 and Amendments for the Morgan Stanley Dean Witter
Variable Annuity II (Previously filed in Post-Effective Amendment Nos. 13, 14
and 20 to this Registration Statement (File No. 033-35412) dated December 31,
1996 and February 28, 1997 and March 3, 1999 respectively)
(b) Form of Contract and Amendments for the Morgan Stanley Dean Witter Variable
Annuity II AssetManager (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)
(c) Form of Contract and Amendments for the Morgan Stanley Dean Witter Variable
Annuity III
(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.
(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, Inc.(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) Opinion and Consent of Michael J. Velotta, Vice President, Secretary and
General Counsel of Northbrook Life Insurance Company*
(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 3*
(14) Not applicable
(99) Powers of Attorney
(a) Powers of Attorney for Casey J. Sylla, Kevin R. Slawin, John R. Hunter,
and Samuel H. Pilch (Incorporated herein by reference to Post-Effective
Amendment No. 1 to this Registration Statement (File No. 333-93871) dated
January 28, 2000.
(b) power of Attorney for thomas J. Wilson, II
* To be filed by pre-effective amendment
<PAGE>
25. DIRECTORS AND OFFICERS OF THE DEPOSITOR
NAME AND PRINCIPAL POSITION AND OFFICE WITH
BUSINESS ADDRESS DEPOSITOR OF THE ACCOUNT
<TABLE>
<S> <C>
Thomas J. Wilson, II Director, President, and Chief Operating Officer
(Chief Executive Officer)
Michael J. Velotta Director, Vice President, Secretary and General Counsel
Sarah R. Donahue Director and Assistant Vice President
John R. Hunter Director and Vice President
Kevin R. Slawin Director and Vice President
Casey J. Sylla Director and Chief Investment Officer
Timothy N. Vander Pas Director and Assistant Vice President
Marla G. Friedman Vice President
Karen C. Gardner Vice President
James P. Zils Treasurer
Samuel H. Pilch Controller
Ronald 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
Timothy N. Vander Pas 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
The principal business address of the foregoing officers and directors is 3100
Sanders Road, Northbrook, Illinois 60062.
</TABLE>
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 26, 1999 (File No. 1-11840).
27. NUMBER OF CONTRACT OWNERS
As of the date of the filing of this Registration Statement, the offering of the
Variable Annuity 3 contract had not commenced.
<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
<TABLE>
<S> <C>
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 and Senior Executive Vice President
Mitchell M. Merin Director, Executive Vice President and Chief Administrative Officer
Michael H. Stone Executive Vice President and Secretary
Raymond J. Drop Director, Executive Vice President
Fredrick 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
Robert B. Sculthorpe Executive Vice President
Thomas C. Schneider Director, 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
Joseph G. Siniscalchi Senior Vice President and Controller, Dean Witter Financial
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
Bruce F. Alonso Director
John J. Mack Director
Alan A. Schroder Director
Robert G. Scott Director
</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 N/A 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 Individual and Group Variable Annuity Contracts hereby registered by
this Registration Statement, in the aggregate, are reasonable in relation to the
services rendered, the expenses expected to be incurred, and the risks assumed
by Northbrook Life Insurance Company.
<PAGE>
SIGNATURES
As required by the Securities Act of 1933 and the Investment Company Act of
1940, the Registrant, Northbrook Variable Annuity Account II, has caused this
amended Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, and its seal to be hereunto affixed, all
in the Township of Northfield, State of Illinois, on the 29th day of February,
2000.
NORTHBROOK VARIABLE ANNUITY ACCOUNT II
(REGISTRANT)
BY: NORTHBROOK LIFE INSURANCE COMPANY
(DEPOSITOR)
(SEAL)
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 29th day of February, 2000.
*/THOMAS J. WILSON, II Chairman of the Board, President,
Thomas J. Wilson, II Chief Operating Officer and Director
(Principal Executive Officer)
/s/MICHAEL J. VELOTTA Vice President, Secretary, General
Michael J. Velotta 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
Casey J. Sylla
**/SAMUEL H. PILCH Controller
Samuel H. Pilch (Principal Accounting Officer)
*/ By Michael J. Velotta, pursuant to Power of Attorney filed herewith.
**/ By Michael J. Velotta, pursuant to Powers of Attorney filed previously
By: /s/MICHAEL J. VELOTTA
-----------------------------
Michael J. Velotta
Vice President, Secretary and
General Counsel
<PAGE>
EXHIBIT INDEX
Exhibit Description
4(c) Form of Contract
5(c) Form of Application
99 Power of Attorney
Exhibit 4(c)
Page 2
NLU
Northbrook Life
Insurance Company
A Stock Company
Headquarters: 3100 Sanders Road Northbrook, IL 60062
Flexible Premium Deferred Variable Annuity Certificate
This Certificate is issued pursuant to the terms of Master Policy Number
64890022 issued by Northbrook Life Insurance Company to Dean Witter Reynolds
Inc., called the Master Policyholder. This Certificate is governed by Delaware
law.
Throughout this Certificate, "you" and "your" refer to the Certificate Owner(s).
"We", "us" and "our" refer to Northbrook Life Insurance Company.
Certificate Summary
This flexible premium deferred variable annuity provides a cash withdrawal
benefit and a death benefit during the accumulation phase and periodic income
payments beginning on the payout start date during the Payout Phase.
The dollar amount of income payments or other values provided by this
Certificate, when based on the investment experience of the variable account,
will vary to reflect the performance of the variable account. This Certificate
does not pay dividends.
The tax status of this Certificate as it applies to the Owner should be reviewed
each year.
PLEASE READ YOUR CERTIFICATE CAREFULLY.
This is a legal contract between the Certificate Owner and Northbrook Life
Insurance Company.
Return Privilege
If you are not satisfied with this Certificate for any reason, you may return it
to us or our agent within 20 days after you receive it. We will refund any
purchase payments allocated to the variable account, adjusted to reflect
investment gain or loss from the date of allocation to the date of cancellation,
plus any purchase payments allocated to the Fixed Account Options. If this
Certificate is qualified under Section 408 of the Internal Revenue Code, we will
refund the greater of any purchase payments or the Certificate Value.
If you have any questions about your Northbrook Life variable annuity, please
contact Northbrook Life at (800) 654-2397.
[GRAPHIC OMITTED][GRAPHIC OMITTED]
Michael J. Velotta Thomas J. Wilson
Vice President, Secretary Chairman and Chief
and General Counsel Executive Officer
<PAGE>
- -------------------------------------------------------------------------------
TABLE OF CONTENTS
- ------------------------------------------
THE PERSONS INVOLVED....................3
ACCUMULATION PHASE......................4
PAYOUT PHASE............................9
INCOME PAYMENT TABLES..................11
GENERAL PROVISIONS.....................12
<PAGE>
- ---------------------------------------------
ANNUITY DATA
- ---------------------------------------------
CERTIFICATE NUMBER:.................44444444
ISSUE DATE:......................May 7, 1996
INITIAL PURCHASE PAYMENT:.........$10,000.00
Non-Qualified
OWNER:..............................John Doe
ANNUITANT:..........................John Doe
AGE AT ISSUE:.....................35
SEX:............................Male
PAYOUT START DATE:..............July 1, 2046
(May be changed by notifying us no
later than 30 days prior to this date)
INCOME PLAN:...........Life with 10 years -
Unless Changed by Owner
ADMINISTRATOR:...........Northbrook Life Insurance Company
Annuity Services Division
P.O. Box 94040
Palatine, IL 60094-4040
INITIAL ALLOCATION OF PURCHASE PAYMENTS:
QUALITY INCOME PLUS:........................50%
DIVIDEND GROWTH:............................50%
- --------------------------------- ------------- -----------------------------
OWNER'S RELATIONSHIP
BENEFICIARY TO OWNER PERCENTAGE
- ----------- --------- ----------
- -----------------------------------------------------------------
- -----------------------------------------------------------------
Jeff Doe Son 100%
- -----------------------------------------------------------------
DPNvaiii
<PAGE>
THE PERSONS INVOLVED
Owner Unless changed, the person(s) named at the time of application is (are)
the owner(s) of this Certificate. The owner has all rights, title and interest
in this Certificate. As owner, you will receive any income payments made under
an income plan.
You may exercise all rights and options stated in this Certificate, subject to
the rights of any irrevocable beneficiary.
You may change the owner or beneficiary at any time. If you are a natural
person, you may change the annuitant prior to the Payout Start Date. Once we
have received a satisfactory written request for an owner, beneficiary or
annuitant change, the change will take effect as of the date you signed it. We
are not liable for any payment we make or other action we take before receiving
any written request from you. We are not responsible for the tax consequences of
an owner, beneficiary or annuitant change.
You may not assign an interest in this Certificate as collateral or security for
a loan. Otherwise, you may assign benefits under this Certificate prior to the
payout start date. No beneficiary may assign benefits under the Certificate
until they are due. No assignment will bind us unless it is signed by you and
filed with us. We are not responsible for the validity of an assignment.
If the owner is more than one person:
o "owner" as used in this Certificate means any and all persons named as the
owner, unless otherwise indicated;
o any assignment or request for a change must be signed by all the persons
named as the owner; and
o on the death of any one person named as owner, ownership rights, title and
interest shall be retained by the surviving person(s) named as the owners.
See the section titled Accumulation Phase for the details concerning the
death of an owner.
Annuitant The annuitant is the person whose life may affect the timing or amount
of the payout under this Certificate. The owner is the annuitant unless a
different annuitant has been designated.
Beneficiary The death benefit is payable to the beneficiary if the sole
surviving owner dies during the accumulation phase, subject to any prior claims.
Details, including the special treatment of a beneficiary who is the owner's
spouse, are stated in the section titled Accumulation Phase.
If the owner dies during the payout phase the surviving owner(s) will become the
payee of any income payments scheduled to continue after the owner's death. If
there are no surviving owners the beneficiary will become the payee of any such
payments.
The beneficiary is as named in the most recent written request we have received
from you. If you do not name a beneficiary or if the beneficiary named by you is
no longer living when the death benefit becomes payable, the beneficiary will
be:
o your spouse if living; otherwise
o your children equally if living; otherwise
o your estate.
ACCUMULATION PHASE
Accumulation Phase Defined The accumulation phase is the first of two phases in
the life of your Certificate. During this period your cash value results from
purchase payments made, investment experience of the variable account, interest
credited to the fixed accounts, and charges deducted. Any withdrawals you make
and associated charges, if any, will reduce your cash value.
The accumulation phase begins on the issue date stated on the Annuity Data page.
This phase will continue until the payout start date unless the Certificate is
terminated before that date. Time during the accumulation phase is measured in
certificate years. Certificate years are those years that begin with the issue
date or an anniversary of the issue date.
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Your certificate will stay in force until the payout start date, unless your
cash value is reduced to zero.
Purchase Payments Purchase payments may be made at any time during the
accumulation phase. While this certificate allows purchase payments after the
initial purchase payment, they are not required. We may limit the amount of
purchase payments we will accept. We will invest the purchase payments in the
investment alternatives you select. You may allocate any portion of your
purchase payment in whole percents from 0% to 100% to any of the investment
alternatives. The total allocation must equal 100%. For each purchase payment,
the minimum amount that may be allocated to the fixed account is $500.
Allocation of your purchase payments will be made as you requested at the time
of application. You may change the allocation of subsequent purchase payments at
any time, without charge, simply by giving us written notice. Any change will be
effective at the time we receive this notification.
Investment Alternatives Investment alternatives are the sub-accounts of the
variable account and the fixed accounts.
Variable Account The variable account for this Certificate is the Northbrook
Variable Annuity Account II. This variable account is our separate investment
account to which we allocate certain assets contributed under this and other
certificates. These assets remain our property but will not be charged with
liabilities arising from any other business we may have.
Sub-accounts The variable account is divided into sub-accounts. Each sub-account
invests solely in the shares of the mutual fund(s) underlying that sub-account.
Fixed Account Options The Fixed Account Options are the Standard Fixed Account
and the Dollar Cost Averaging Fixed Account.
Standard Fixed Account Money in the Standard Fixed Account will earn interest at
the current rate in effect at the time of allocation or transfer to the Standard
Fixed Account for the guarantee period. We will offer a six year guarantee
period. Other guarantee periods will be offered at our discretion. After the
guarantee period, a renewal rate will be declared. Subsequent renewal dates will
be on anniversaries of the first renewal date. The current rate and the renewal
rate(s) will never be less than 3%.
Interest is credited to the Standard Fixed Account daily during the accumulation
phase. The rates we quote when referring to interest credits are effective
annual interest rates. ?Effective annual rate? means the yield earned when
interest credits at the underlying daily rate have compounded for a full year.
Dollar Cost Averaging Fixed Account Money in the Dollar Cost Averaging Fixed
Account will earn interest at the current rate in effect at the time of
allocation to the Dollar Cost Averaging Fixed Account for a period of one year.
After the first year, a renewal rate will be declared. The current rate and the
renewal rate(s) will never be less than 3%. Subsequent renewal dates will be on
anniversaries of the first renewal date.
Interest is credited to the Dollar Cost Averaging Fixed Account daily during the
accumulation phase. The rates we quote when referring to interest credits are
effective annual interest rates as defined in the Fixed Account provision of
your certificate.
Transfers are not allowed into the Dollar Cost Averaging Fixed Account. The
Dollar Cost Averaging Fixed Account will be offered at our discretion.
Six-Month Dollar Cost Averaging Fixed Account Money in the Six-Month Dollar Cost
Averaging Fixed Account will earn interest at the annual rate in effect at the
time of allocation to the Six-Month Dollar Cost Averaging Fixed Account.
Crediting rates for the Six-Month Dollar Cost Averaging Fixed Account will never
be less than 3% annually. Each purchase payment and associated interest in the
Six-Month Dollar Cost Averaging Fixed Account must be transferred to
sub-accounts of the variable account in equal monthly installments within the
six-month transfer period. If we do not receive an allocation from you within
one month of the date of payment, the payment plus associated interest will be
transferred to the money market sub-account in equal monthly installments using
the longest transfer period being offered at the time the purchase payment is
made. If the Six-Month Dollar Cost Averaging Fixed Account is discontinued prior
to the last scheduled transfer, the remaining balance in the Six-Month Dollar
Cost Averaging Fixed Account will immediately be transferred to the money market
sub-account unless a different variable sub-account is requested. No transfers
are permitted into the Six-Month Dollar Cost Averaging Fixed Account. The
Six-Month Dollar Cost Averaging Fixed Account will be offered at our discretion.
NLUxxx Page 4
<PAGE>
Twelve-Month Dollar Cost Averaging Fixed Account Money in the Twelve-Month
Dollar Cost Averaging Fixed Account will earn interest at the annual rate in
effect at the time of allocation to the Twelve-Month Dollar Cost Averaging Fixed
Account. Crediting rates for the Twelve-Month Dollar Cost Averaging Fixed
Account will never be less than 3% annually. Each purchase payment and
associated interest in the Twelve-Month Dollar Cost Averaging Fixed Account must
be transferred to sub-accounts of the variable account in equal monthly
installments within the twelve-month transfer period. If we do not receive an
allocation from you within one month of the date of payment, the payment plus
associated interest will be transferred to the money market sub-account in equal
monthly installments using the longest transfer period being offered at the time
the purchase payment is made. If the Twelve-Month Dollar Cost Averaging Fixed
Account is discontinued prior to the last scheduled transfer, the remaining
balance in the Twelve-Month Dollar Cost Averaging Fixed Account will immediately
be transferred to the money market sub-account unless a different variable
sub-account is requested. No transfers are permitted into the Twelve-Month
Dollar Cost Averaging Fixed Account. The Twelve-Month Dollar Cost Averaging
Fixed Account will be offered at our discretion.
Cash Value Your cash value is equal to the sum of:
o the number of accumulation units you hold in each sub-account of the
variable account multiplied by the accumulation unit value for that
sub-account on the most recent valuation date; plus
o the total value you have in the Fixed Account Options.
Accumulation Units Amounts which you allocate to a sub-account of the variable
account are used to purchase accumulation units in that sub-account. The
accumulation unit value for each sub-account at the end of any valuation period
is calculated by multiplying the prior value by the sub-account's net investment
factor for the valuation period. The accumulation unit values may go up or down.
Additions or transfers to sub-accounts of the variable account will increase the
number of accumulation units for that sub-account. Withdrawals or transfers from
sub-accounts of the variable account will result in cancellation of accumulation
units from that sub-account.
Valuation Period A valuation period is the time interval between the closing of
the New York Stock Exchange on consecutive valuation dates. A valuation date is
any date the New York Stock Exchange is open for trading except for days in
which there is insufficient trading in the variable account's portfolio
securities such that the value of accumulation or annuity units might not be
materially affected by changes in the value of the portfolio securities.
Net Investment Factor For each sub-account of the variable account, the net
investment factor for a valuation period is (A) divided by (B), minus (C) where:
(A) is the sum of:
(1) the net asset value per share of the mutual fund(s) underlying the
sub-account determined at the end of the current valuation period,
plus
(2) the per share amount of any dividend or capital gain distributions
made by the mutual fund(s) underlying the sub-account during the
current valuation period.
(B) is the net asset value per share of the mutual fund(s) underlying the
sub-account determined as of the end of the immediately preceding valuation
period.
(C) is the sum of the annualized administrative expense and the annualized
mortality and expense risk charges divided by 365 and then multiplied by
the number of calendar days in the current valuation period.
Transfers Prior to the payout start date, you may transfer amounts between
investment alternatives. You may make 12 transfers per certificate year without
charge. Each transfer after the 12th transfer in any certificate year, except
those from a dollar cost averaging fixed account, will be assessed a $25
transfer fee. Transfers are subject to the following restrictions:
o The minimum amount that may be transferred from an investment alternative
is $100; if the total amount in an investment alternative is less than
$100, the entire amount may be transferred.
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o The minimum transfer to any one guarantee period of the Standard Fixed
Account is $500. No transfers are allowed into any dollar cost averaging
fixed account.
o The following limits do not apply to transfers from any dollar cost
averaging fixed account. The maximum amount which may be transferred from
the Standard Fixed Account to the variable account or between guarantee
periods of the Standard Fixed Account in any certificate year is limited to
the greater of:
- 25% of the value in the fixed account on the most recent certificate
anniversary. If 25% of the most recent value is greater than zero but
less than $1,000, then up to $1,000 may be transferred; or
- 25% of the sum of purchase payments allocated to the Standard Fixed
Account and transfers to the Standard Fixed Account, all as of the most
recent certificate anniversary.
o If the first renewal interest rate is less than the current rate that was
in effect at the time money was allocated or transferred to the Standard
Fixed Account, the 25% transfer restriction for that money and the
accumulated interest thereon will be waived during the 60 day period
following the first renewal date.
We reserve the right to limit transfer amounts among sub-accounts if we
determine, in our sole discretion, that the exercise of that right by one or
more certificate owners is, or would be, to the disadvantage of other
certificate owners. Transfer limitations could be applied to transfers to or
from some or all of the sub-accounts and could include but not be limited to:
o The requirement of a minimum time period between each transfer;
o Not accepting transfer requests of an agent acting under a
power-of-attorney on behalf of more than one certificate owner; or,
o Limiting the dollar amount that may be transferred between the sub-accounts
and the fixed accounts by a certificate owner at any one time
Such restrictions may be applied in any manner reasonably designed to prevent
any use of the transfer right which is considered by us to be to the
disadvantage of other certificate owners.
We reserve the right to waive the transfer fees and/or restrictions contained in
this Certificate.
Charges The charges for this Certificate include taxes as defined below,
certificate maintenance charges, administrative expense charges, and mortality
and expense risk charges. If withdrawals are made, the Certificate may be
subject to early withdrawal charges.
Taxes Any premium taxes or other taxes imposed on amounts relating to this
Certificate may be deducted from purchase payments or cash values when the tax
is incurred or at a later time.
Certificate Maintenance Charge The certificate maintenance charge will be
deducted each year from your cash value to reimburse us for the expenses of
maintaining this Certificate. This charge will never be greater than $35 per
certificate year. The certificate maintenance charge of $35 will be waived for
the remainder of the life of the certificate when the Cash Value is $40,000 or
more on or after the issue date. Prior to the payout start date, the certificate
maintenance charge will be deducted from your cash value on each certificate
anniversary. The charge will be deducted on a pro-rata basis from each
sub-account in the proportion that your investment in each bears to your cash
value. The certificate maintenance charge will also be deducted in full if the
Certificate is surrendered on any date other than a certificate anniversary.
Administrative Expense Charge Both before and after the payout start date, we
will deduct an administrative expense charge from the assets in the variable
account on a daily basis. The administrative expense charge is to reimburse us
for administrative expenses incurred in maintaining this Certificate that are
not covered by the certificate maintenance charge. The annualized administrative
expense charge will never be greater than 0.10%. (See the calculation under Net
Investment Factor). This charge will also be reflected in the net interest rate
credited to assets in the Fixed Account Options.
Mortality and Expense Risk Charge Both before and after the payout start date,
we will deduct a mortality and expense risk charge from the assets in the
variable account on a daily basis. The annualized mortality and expense risk
charge will never be greater than 1.25%. (See the calculation under Net
Investment Factor). This charge will also be reflected in the net interest rate
credited to assets in the Fixed Account Options.
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Our expense and mortality experience will not adversely affect the dollar amount
of variable benefits or other contractual payments or values under this
Certificate.
Withdrawal and Surrender You have the right to make a partial withdrawal or full
surrender at any time during the accumulation phase. You must specify the
investment alternative(s) from which you wish to make a withdrawal. The amount
of any withdrawal you request, plus an early withdrawal charge and premium taxes
when applicable, will reduce your cash value.
Any withdrawal must be at least $500. If a withdrawal would leave a cash value
of less than $500, we will treat the request as a full surrender.
If you surrender your Certificate, we will pay you its cash value, less any
applicable early withdrawal charges and premium taxes, and the Certificate will
terminate.
Early Withdrawal Charge An early withdrawal charge may be applied to a full
surrender or partial withdrawal of cash value in excess of the free withdrawal
amount. For the purpose of assessing an early withdrawal charge, withdrawals are
assumed to come from purchase payments first, beginning with the oldest payment.
Early withdrawal charges will be based on the age(s) of the purchase payment(s)
associated with the withdrawal according to the following schedule:
Maximum
Complete Certificate Withdrawal
Years since Purchase Charge
Payment was made Percent
0 6%
1 5%
2 5%
3 4%
4 3%
5 2%
6 or more 0%
Once all purchase payments have been withdrawn, additional withdrawals will not
be assessed an early withdrawal charge. The maximum aggregate early withdrawal
charge is 6% of your purchase payments.
Free Withdrawal Amount A free withdrawal amount will be available in each
certificate year. This free withdrawal amount may be withdrawn over the course
of the certificate year without incurring early withdrawal charges. The free
withdrawal amount is 15% of the amount of purchase payments as of the issue date
or the most recent certificate anniversary, whichever is later.
As with all withdrawals, the free withdrawal amount will be assumed to come from
the oldest remaining purchase payments first. Free withdrawal amounts not
withdrawn in a certificate year are not carried over to increase the free
withdrawal amount in a subsequent certificate year.
Withdrawal charges will be waived on partial withdrawals taken to satisfy
qualified plan required minimum distribution rules as described in the Internal
Revenue Code. This waiver is permitted only for withdrawals which satisfy
distributions resulting from this Certificate.
Death of Owner or Annuitant If you die prior to the payout start date, the new
owner will be the surviving owner(s). If there is (are) no surviving owner(s),
the new owner will be the beneficiary(ies). The new owner will have the options
described in the Options of New Owner subsection below.
If you are owner and annuitant and you die, then the new annuitant will be the
oldest new owner. However, if the new owner is a corporation, trust, or other
non-natural person, the Certificate will terminate, the death benefit as
described below will be paid to the new owner, and the new owner will not have
the options described below.
If any annuitant dies who is not also an owner, the owner must elect an
applicable option listed below. If the option selected is 1(a) or 1(b)(ii)
below, the new annuitant will be the youngest owner, unless the owner names a
different annuitant.
1. If the owner is a natural person:
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a. The owner may choose to continue this Certificate as if the death had
not occurred; or
2. If we receive due proof of death within 180 days of the date of the
annuitant?s death, then the owner may alternatively choose to:
i. Receive the Death Benefit in a lump sum; or
ii. Apply the Death Benefit to an Income Plan which may begin within one
year of the date of death and must be for a period equal to or less
than the life expectancy of the owner.
2. If the owner is a non-natural person:
The owner must receive the Death Benefit in a lump sum.
Options of New Owner If the sole new owner is your spouse:
o Your spouse may elect, within 60 days of the date of your death, to receive
the death benefit described below.
o If your spouse does not make this election, then the accumulation phase
continues as if the death had not occurred. On the date the Certificate is
continued, the Cash 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 received Due Proof of Death after 3 p.m.
Central Time). If your Certificate is continued in the Accumulation Phase,
the surviving spouse may make a single withdrawal of any amount within one
year of the date of death without incurring a Withdrawal Charge.
All ownership rights under the Certificate are then available to your spouse as
the new owner.
If the new owner is not your spouse, then this new owner has the following
options:
o The new owner may elect, within 60 days of the date of your death, to
receive the death benefit described below.
o The new owner may elect, within 60 days of the date of your death, to
receive the settlement value payable in a lump sum within 5 years of your
date of death.
o The new owner may elect, within one year of the date of your death, to
receive the settlement value paid out under one of the income plans
described in the Payout Phase section. The payout start date must be within
one year of your date of death. Income payments must be over the life of
the new owner or over a period not to exceed the life expectancy of the new
owner.
o If the new owner does not make one of the above described elections, the
settlement value will be paid to the new owner on the mandatory
distribution date 5 years after your date of death.
Under any of these options, all ownership rights are available to the new owner
from the date of your death to the date on which the death benefit or settlement
value is paid.
Death Benefit The death benefit is the greater of:
o the sum of all purchase payments, less any withdrawals, applicable early
withdrawal charges and premium tax; or
o the cash value on the date we receive due proof of death; or
o the cash value on the most recent death benefit anniversary, less any
withdrawals, applicable early withdrawal charges and premium tax deducted
from the cash value since that anniversary.
The death benefit anniversaries are those certificate anniversaries that are
multiples of 6 certificate years, beginning with the 6th certificate
anniversary. For example, the 6th, 12th and 18th certificate anniversaries are
the first three death benefit anniversaries.
We will calculate the value of the death benefit at the end of the valuation
period coinciding with our receipt of a complete request for payment of the
death benefit. A complete request includes due proof of death.
Settlement Value The settlement value is the cash value less any applicable
early withdrawal charges and premium tax. We will calculate the settlement value
at the end of the valuation period coinciding with the receipt of a request for
payment or on the mandatory distribution date of 5 years after the date of
death.
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PAYOUT PHASE
Payout Phase Defined The payout phase is the second of the two phases in the
life of your Certificate. During this period the cash value is applied to the
income plan you choose and is paid out as provided under that plan.
The payout phase begins on the payout start date. It continues until we make the
last payment as provided by the income plan chosen.
Payout Start Date The anticipated payout start date is shown on the Annuity Data
page. You may change the payout start date by writing to us at least 30 days
prior to the payout start date.
The latest payout start date is the later of:
o the annuitant's 90th birthday; or
o the 10th anniversary of this Certificate's issue date.
Unless changed as described above, we will use the payout start date shown on
the Annuity Data page.
Generally, you may not make withdrawals after the Payout Start Date. One
exception to this rule applies if you are receiving income payments that do not
depend on the life of the annuitant. In that case, you may terminate the receipt
of income payments at any time and receive a lump sum equal to the present value
of the remaining payments due. A withdrawal charge may apply. We also assess
applicable premium taxes against all income payments.
Income Plans An income plan is an arrangement for disbursing the cash value in
installments. The cash value on the payout start date, less any applicable
premium tax, will be applied to your choice of income plan from the following
list:
1. Life Income with 120 Months Guaranteed We will make monthly payments for as
long as the annuitant lives. If the annuitant dies before 120 monthly
payments have been made, we will pay the remainder of the 120 guaranteed
monthly payments to the owner.
2. Joint and Survivor Life Income We will make monthly payments for as long as
either the annuitant or any joint annuitant named by you lives. No income
payments will be made after the deaths of both the annuitant and the joint
annuitant.
3. Payments for a Specified Period We will make monthly payments beginning on
the payout start date for a specified period. These payments do not depend
on the annuitant's life. Income payments for less than 120 months may be
subject to early withdrawal charges.
We reserve the right to accept other income plans.
Income Payments Income payments may be based on the variable account, the Fixed
Account Options or both. Your initial income payment will be based on the
division of your cash value between the investment alternatives on the payout
start date. Each income payment represents a sum of payments derived from each
investment alternative in which you have an interest.
A portion of the certificate maintenance charge will be deducted from each
sub-account.
Variable Amount Income Payments Income payments attributable to sub-accounts of
the variable account will vary in accordance with the investment results of the
mutual funds underlying the sub-accounts.
The amount of the first income payment from a sub-account of the variable
account is calculated by applying the portion of cash value allocated to the
sub-account, less any applicable premium tax, to the Income Payment Tables.
Subsequent income payments are based on the number of annuity units derived from
dividing the first income payment by the sub-account's annuity unit value on the
payout start date. The number of annuity units will remain the same unless a
transfer is made between sub-accounts or the fixed accounts.
Variable Amount Income Payments after the first will be equal to the number of
annuity units for each sub-account multiplied by the corresponding annuity unit
value on the date of payment.
Annuity Unit Value The annuity unit value for each sub-account of the variable
account at the end of any valuation period is calculated by:
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o multiplying the prior value by the sub-account's net investment factor
during the period; and then
o dividing the product by 1.000 plus the assumed investment rate for the
period. The assumed investment rate is an effective annual rate of 3%.
Fixed Amount Income Payments Income payment amounts derived from the Fixed
Account Options are guaranteed for the duration of the income plan. Cash value
from the Fixed Account Options, less any applicable premium tax, will be used to
purchase a Single Premium Immediate Annuity from us. Income payments from the
Fixed Account Options will at least be equal to an amount determined from the
Income Payment Tables.
Annuity Transfers After the payout start date, no transfers may be made from the
Fixed Amount Income Payment. Transfers between sub-accounts of the Variable
Amount Income Payment, or from the Variable Amount Income Payment to the Fixed
Amount Income Payment may not be made for six months subsequent to the payout
start date. Transfers may be made once every six months thereafter. Transfers
out of a sub-account of the Variable Amount Income Payment after the payout
start date will cancel annuity units from that sub-account.
Payout Terms and Conditions The income payments are subject to the following
terms and conditions:
o Income payments will start on the first day of the calendar month that
coincides with or next follows the payout start date.
o If we do not receive a written choice of income plan from you at least 30
days before the payout start date, we will use the income plan listed on
the Annuity Data page.
o If you choose an income plan which depends on any person's life, we may
require proof of age and sex before income payments begin.
o We may require proof that the annuitant or joint annuitant is still alive
before we make any payment that depends on their continued life.
o After the cash value has been applied to an income plan on the payout start
date, the income plan cannot be changed and no withdrawals can be made.
o Should the cash value be less than $2,000, or not be enough to provide an
initial payment of at least $20, we reserve the right to:
o change the payment frequency to make the payment at least $20, or
o terminate the Certificate and pay you the cash value in a lump sum.
GENERAL PROVISIONS
The Entire Certificate The entire Certificate consists of the Master Policy, the
Master Policy application, written enrollments, and any attached endorsements.
All statements made in written enrollments are representations and not
warranties. No statement will be used by us in defense of a claim or to void a
Certificate unless it is included in a written enrollment.
Only our officers may change the Master Policy or Certificate or waive a right
or requirement. No other individual may do this.
The Master Policy may be amended by us, terminated by us, or terminated by the
Master Policyholder without the consent of any other person. No termination
completed after the issue date of this Certificate will adversely affect your
rights under this Certificate.
We may not modify this Certificate without your consent, except to make it
comply with any changes in the Internal Revenue Code or as required by any other
applicable law.
Incontestable We will not contest the validity of this Certificate after the
issue date.
NLUxxx Page 10
<PAGE>
Misstatement of Age or Sex If any age or sex has been misstated, we will pay the
amounts which would have been provided at the correct age or sex.
If we find the misstatement of age or sex after the income payments begin, we
will:
o pay promptly the sum of all amounts that we underpaid plus due interest; or
o stop payments until the total of the omitted payments at the corrected
amount plus due interest is equal to the total of the overpayments plus due
interest.
For purposes of the Misstatement of Age or Sex provision, due interest will be
calculated at an effective annual rate of 6%.
Annual Statement At least once a year, prior to the payout start date, we will
send you a statement containing information required by any applicable law.
Settlements We may require that this Certificate be returned to us prior to any
settlement. We must receive due proof of death of the owner or annuitant prior
to settlement of a death claim. Due proof of death is one of the following:
o a copy of a certified death certificate; or
o a copy of a certified decree of a court of competent jurisdiction as to a
finding of death; or
o any other proof acceptable to us.
Any cash surrender or death benefit under this Certificate will not be less than
the minimum benefits required by any statute of the state in which the Master
Policy is issued.
Deferment of Payments We will pay any amounts due from the variable account
under this Certificate within seven days, unless:
o the New York Stock Exchange is closed for other than usual weekends or
holidays, or trading on such Exchange is restricted;
o an emergency exists as defined by the Securities and Exchange Commission;
or
o the Securities and Exchange Commission permits delay for the protection of
Certificate holders.
We reserve the right to postpone payments or transfers from the Fixed Account
Options for up to six months.
Variable Account Modifications We reserve the right, subject to applicable law,
to make additions to, deletions from, or substitutions for the mutual fund
shares underlying the sub-accounts of the variable account. We will not
substitute any shares attributable to your interest in a sub-account of the
variable account without notice to you and prior approval of the Securities and
Exchange Commission, to the extent required by the Investment Company Act of
1940.
We reserve the right to establish additional sub- accounts of the variable
account, each of which would invest in shares of another mutual fund. You may
then instruct us to allocate purchase payments to such sub-accounts, subject to
any terms set by us or the mutual fund.
In the event of any such substitution or change, we may by endorsement, make
such changes as may be necessary or appropriate to reflect such substitution or
change.
If we deem it to be in the best interests of persons having voting rights under
the certificates, the variable account may be operated as a management company
under the Investment Company Act of 1940 or it may be deregistered under such
Act in the event such registration is no longer required.
NLUxxx Page 11
<PAGE>
INCOME PAYMENT TABLES
The Income Payment Tables show the initial monthly income payment per $1,000 of
cash value applied for each of the income plans listed in the Payout section.
The Income Payment Tables are based on 3% interest and the 1983 Table a Annuity
Mortality Tables with the following age adjustment. The age(s) of the annuitant
and any joint annuitant at his or her last birthday on or prior to the payout
start date will be set back one year for each six full years between January 1,
1983 and the payout start date. Income payments for ages not shown in this
section will be determined on a basis consistent with that used to determine
those that are shown.
<TABLE>
<CAPTION>
Income Plan 1 - Life with 120 Months Guaranteed
- -----------------------------------------------------------------------------------------------------------------------
First Income Payment for Each $1,000 of Cash Value
- -----------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------
Annuitant's Age Annuitant's Annuitant's
Male Female Age Male Female Age Male Female
- -----------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
35 $ 3.43 $ 3.25 49 $ 4.15 $ 3.82 63 $5.52 $4.97
36 3.47 3.28 50 4.22 3.88 64 5.66 5.09
37 3.51 3.31 51 4.29 3.94 65 5.80 5.22
38 3.55 3.34 52 4.37 4.01 66 5.95 5.35
39 3.60 3.38 53 4.45 4.07 67 6.11 5.49
40 3.64 3.41 54 4.53 4.14 68 6.27 5.64
41 3.69 3.45 55 4.62 4.22 69 6.44 5.80
42 3.74 3.49 56 4.71 4.29 70 6.61 5.96
43 3.79 3.53 57 4.81 4.38 71 6.78 6.13
44 3.84 3.58 58 4.92 4.46 72 6.96 6.31
45 3.90 3.62 59 5.02 4.55 73 7.13 6.50
46 3.96 3.67 60 5.14 4.65 74 7.31 6.69
47 4.02 3.72 61 5.26 4.75 75 7.49 6.88
48 4.08 3.77 62 5.39 4.86
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Income Plan 2 - Joint and Survivor
- -----------------------------------------------------------------------------------------------------------------------
Male First Income Payment for Each $1,000 of Cash Value
Annuitant's
Age
-------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------
Female Annuitant's Age
35 40 45 50 55 60 65 70 75
- -----------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
35 $3.09 3.16 3.23 3.28 3.32 3.36 3.39 3.41 3.42
40 3.13 3.22 3.31 3.39 3.46 3.52 3.56 3.59 3.62
45 3.17 3.28 3.39 3.50 3.60 3.69 3.76 3.82 3.86
50 3.19 3.32 3.45 3.60 3.74 3.87 3.99 4.08 4.14
55 3.21 3.35 3.51 3.68 3.87 4.06 4.23 4.38 4.49
60 3.23 3.37 3.55 3.75 3.98 4.23 4.48 4.71 4.91
65 3.24 3.39 3.58 3.80 4.07 4.38 4.72 5.06 5.38
70 3.24 3.40 3.60 3.84 4.13 4.50 4.92 5.40 5.89
75 3.25 3.41 3.61 3.86 4.18 4.58 5.08 5.68 6.37
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
Income Plan 3 - Payments for a specified Period
- -----------------------------------------------------------------------------
First Income Payment for Each
Specified Period $1,000 of Cash Value
- -----------------------------------------------------------------------------
- -----------------------------------------------------------------------------
10 Years $9.61
11 Years 8.86
12 Years 8.24
13 Years 7.71
14 Years 7.26
15 Years 6.87
16 Years 6.53
17 Years 6.23
18 Years 5.96
19 Years 5.73
20 Years 5.51
- -----------------------------------------------------------------------------
NLUxxx Page 12
<PAGE>
Page 3
NLU919 (2/00)
NORTHBROOK LIFE INSURANCE COMPANY
(herein called "we" or "us")
Income Benefit Combination Rider 2
This rider was issued because you selected the Income Benefit Combination Rider
2.
As used in this rider, "Contract" means the Contract or Certificate to which
this rider is attached.
For purposes of this rider, "Rider Date" is the date this rider was issued as a
part of your Contract: xx/xx/xxxx
The following changes are made to your Contract.
Qualifications
On the Payout Start Date, the Owner may choose to receive income payments
defined in the Income Benefit Combination provision if all of the following
conditions are met.
o The Owner elects a Payout Start Date that is on or after the tenth
anniversary of the Rider Date;
o The Payout Start Date occurs during the 30 day period following a
Contract anniversary;
o The Income Base is applied to Fixed Amount Income Payments or Variable
Amount Income Payments as we may permit from time to time for all owners
who choose to receive Income Payments under this rider; and
o The selected Income Plan provides payments guaranteed for either single
or joint life with a period certain of at least:
o 10 years, if the youngest Annuitant's age is 80 or less on the date the
amount is applied, or
o 5 years, if the youngest Annuitant's age is greater than 80 on the date
the amount is applied.
Throughout the PAYOUT PHASE section of your Contract, the term "Cash Value" is
replaced with "the greater of the Cash Value or the Income Benefit Combination".
If the amount applied to an Income Plan is the Cash Value, then the Income Plan
may be any plan then offered by us.
Income Base
The Income Base is the greater of Income Base A or Income Base B.
Income Base is used solely for the purpose of calculating the Guaranteed Income
Benefit and does not provide a Cash Value or guarantee performance of any
investment option.
Income Base A.
o On the Rider Date, Income Base A is equal to the Cash Value.
o After the Rider Date, Income Base A is recalculated as follows on the
Contract anniversary and when a purchase payment or withdrawal is made.
<PAGE>
o For purchase payments, Income Base A is equal to the most recently
calculated Income Base A plus the purchase payment.
o For withdrawals, Income Base A is equal to the most recently calculated
Income Base A reduced by a withdrawal adjustment.
o On each Contract anniversary, Income Base A is equal to the greater of
the Cash Value or the most recently calculated Income Base A.
In the absence of any withdrawals or purchase payments, Income Base A will be
the greatest of the Cash Value on the Rider Date and all Contract anniversary
Cash Values between the Rider Date and the Payout Start Date.
Income Base A will be recalculated for purchase payments, for withdrawals and on
Contract anniversaries until the first Contract anniversary after the 85th
birthday of the oldest Owner or, if no Owner is a living individual, the oldest
Annuitant.
After that date, Income Base A will be recalculated only for purchase payments
and withdrawals.
Income Base B.
On the Rider Date, Income Base B is equal to the Cash Value. After the Rider
Date, Income Base B plus any subsequent purchase payments and less a withdrawal
adjustment for any subsequent withdrawals will accumulate daily at a rate
equivalent to 5% per year until the first Contract anniversary after the 85th
birthday of the oldest Owner, or, if the Owner is not a living individual, the
oldest Annuitant.
Withdrawal Adjustment
The adjustment is equal to (1) divided by (2), with the result multiplied by
(3), where:
(1) = the withdrawal amount.
(2) = the Cash Value
(3) = the most recently calculated Income Base.
Guaranteed Income Benefit
The Guaranteed Income Benefit amount is determined by applying the Income Base
less any applicable taxes to the guaranteed rates for the Income Plan elected by
the Owner. The Income Plan selected must satisfy the conditions defined in
Qualifications above. The rates are the guaranteed rates defined in the Income
Payment Tables section of the Contract for either a single or joint life with a
period certain.
On the Payout Start Date, the income payment will be the greater of the
Guaranteed Income Benefit and the income payment provided in the Payout Phase
section of the Contract.
<PAGE>
Page 3
NLU919 (2/00) Mortality and Expense Risk Charge The Mortality and Expense
Risk Charge provision of your Contract is modified as follows:
On and after the Rider Date, the maximum annualized Mortality and Expense Risk
Charge is increased by 0.30% for this rider.
Except as amended, the Contract remains unchanged.
Michael J. Velotta Thomas J. Wilson
[GRAPHIC OMITTED][GRAPHIC OMITTED]
Secretary Chairman and Chief Executive Officer
<PAGE>
Page 3
NLU922 (2/00)
NORTHBROOK LIFE INSURANCE COMPANY
(herein called "we" or "us")
Income and Death Benefit Combination Rider 2
This rider was issued because you selected the Death Benefit Combination and the
Income Benefit Combination.
As used in this rider, "Contract" means the Contract or Certificate to which
this rider is attached.
For purposes of this rider, "Rider Date" is the date this rider was issued as a
part of your Contract: xx/xx/xxxx
The following changes are made to your Contract.
Death Benefit Combination The Death Benefit provision of your Contract is
modified as follows:
If the Owner is a natural person, the Death Benefit Combination applies only to
the death of the Owner. If the Owner is not a natural person, the Death Benefit
Combination applies only to the death of the Annuitant. This is unlike the death
benefit defined in the Death Benefit provision of your Contract which may apply
to the death of the Annuitant even if the Owner is a natural person.
The Death Benefit will be the greatest of the values stated in your Contract, or
the value of the Death Benefit Combination.
The Death Benefit Combination is equal to the greater of two separately
calculated death benefits, Death Benefit A and Death Benefit B, as defined
below.
After the Rider Date, the Death Benefit Combination is recalculated when a
purchase payment or withdrawal is made or on a Contract anniversary as follows:
Death Benefit A
o On the Rider Date, Death Benefit A is equal to the Cash Value.
o After the Rider Date, Death Benefit A is recalculated when a
purchase payment or a withdrawal is made or on a Contract anniversary
as follows:
o For purchase payments for all ages, Death Benefit A is equal to the
most recently calculated Death Benefit A plus the purchase payment.
o For withdrawals for all ages, Death Benefit A is equal to the most
recently calculated Death Benefit A reduced by a withdrawal adjustment
defined below.
o Death Benefit A will be recalculated for purchase payments, for
withdrawals and on Contract anniversaries until the first Contract
anniversary after the 85th birthday of the oldest Owner or, if the
Owner is not a living individual, the oldest Annuitant.
In the absence of any withdrawals or purchase payments, Death Benefit A will be
the greater of the Cash Value on the Rider Date and all Contract anniversary
Cash Values between the Rider Date and the date we calculate the Death Benefit.
Death Benefit B
<PAGE>
On the Rider Date, Death Benefit B is equal to the Cash Value. After the Rider
Date, Death Benefit B plus any subsequent purchase payments and less a
withdrawal adjustment for any subsequent withdrawals will accumulate daily at a
rate equivalent to 5% per year until the first Contract anniversary after the
85th birthday of the oldest Owner or, if the Owner is not a living individual,
the oldest Annuitant.
Withdrawal Adjustment
The withdrawal adjustment is equal to (1) divided by (2) with the result
multiplied by (3) where:
(1) = the withdrawal amount.
(2) = the Cash Value immediately prior to the withdrawal.
(3) = the most recently calculated Death Benefit A or B, as applicable
Income Benefit Combination The following is added to your Contract:
Qualifications
On the Payout Start Date, the Owner may choose to receive income payments
defined in the Income Benefit Combination provision if all of the following
conditions are met.
o The Owner elects a Payout Start date that is on or after the Rider
Date;
o The Payout Start Date occurs during the 30 day period following the
Contract anniversary;
o The Income Base is applied to Fixed Account Income Payments or
Variable Amount Income Payments as we may permit from time to time for
all owners who choose to receive Income Payments under this rider; and
o The selected Income Plan provides payments guaranteed for either
single
or joint life with a period certain of at least:
o 10 years, if the youngest Annuitant's age is 80 or less on the date
the amount is applied, or
o 5 years, if the youngest Annuitant's age is greater than 80 on the
date the amount is applied.
Throughout the PAYOUT PHASE section of your Contract, the term "Cash Value" is
replaced with "The greater of the Cash Value or the Income Benefit Combination."
If the amount applied to an Income Plan is the Cash Value, then the Income Plan
may be any plan then offered by us.
Income Base
The Income Base is the greater of Income Base A or Income Base B.
Income base is used solely for the purpose of calculating the Income Benefit
Combination and does not provide a Cash Value or guarantee performance of any
investment option.
<PAGE>
Income Base A.
o On the Rider Date, Income Base A is equal to the Cash Value.
o After the Rider Date, Income Base A is recalculated as follows
on the Contract anniversary and when a purchase payment or
withdrawal is made.
o For the purchase payments, Income Base A is equal to the most
recently calculated Income Base A plus the purchase payment.
o For withdrawals, Income Base A is equal to the most recently
calculated Income Base A reduced by a withdrawal adjustment.
o On each Contract anniversary, Income Base A is equal to the greater
of the Cash Value or the most recently calculated Income Base A.
In the absence of any withdrawals or purchase payments, Income Base A will be
the greatest of the Cash Value on the Rider Date and all Contract anniversary
Cash Values between the Rider Date and the Payout Start Date.
Income Base A will be recalculated for purchase payments, for withdrawals and on
Contract anniversaries until the first Contract anniversary after the 85th
birthday of the oldest Owner or, if no Owner is a living individual, the oldest
Annuitant.
After that date, Income Base A will be recalculated only for purchase payments
and withdrawals.
Income Base B.
On the Rider Date, Income Base B is equal to the Cash Value. After the Rider
Date, Income Base B plus any subsequent purchase payments and less a withdrawal
adjustment for any subsequent withdrawals will accumulate daily at a rate
equivalent to 5% per year until the first Contract anniversary after the 85th
birthday of the oldest Owner or, if the Owner is not a living individual, the
oldest Annuitant.
Withdrawal Adjustment
The adjustment is equal to (1) divided by (2), with the result multiplied by (3)
where:
(1) = the withdrawal amount.
(2) = the Cash Value immediately prior to the withdrawal.
(3) = the most recently calculated Income Base.
Guaranteed Income Benefit
The Guaranteed Income Benefit amount is determined by applying the Income Base
less any applicable taxes to the guaranteed rates for the Income Plan elected by
the Owner. The Income Plan selected must satisfy the conditions defined in
Qualifications above. The rates are the guaranteed rates defined in the Income
Payment Tables section of the Contract for either a single or joint life with a
period certain.
On the Payout Start Date, the income payment will be the greater of the
Guaranteed Income Benefit and the income payment provided in the Payout Phase
section of the Contract.
<PAGE>
Mortality and Expense Risk Charge The Mortality and Expense Risk Charge
provision of your Contract is modified as follows:
On and after the Rider Date, the maximum annualized Mortality and Expense Risk
Charge is increased by 0.50% for this rider.
Except as amended by this rider, the Contract remains unchanged.
Michael J. Velotta
Thomas J. Wilson
[GRAPHIC OMITTED][GRAPHIC OMITTED]
Secretary
Chairman and Chief Executive Officer
MORGAN STANLEY DEAN WITTER VA3
FLEXIBLE PREMIUM DEFERRED VARIABLE ANNUITY
ISSUED BY: NORTHBROOK LIFE INSURANCE COMPANY, NORTHBROOK, ILLINOIS
PO Box 94040, Palatine, IL 60094-4040 Telephone: 1-800-654-2397
Overnight Address: 3100 Sanders Rd., M4A, Northbrook, IL 60062
OW N E R(S) Name _____________________________ (_)M ( )F Birthdate __/__/___
Address______________________________Soc. Sec. no. ____/___/____
Name _____________________________ (_)M ( )F Birthdate __/__/___
Address______________________________Soc. Sec. no. ____/___/____
AN N U I TA N T
Leave blank if Annuitant is the same as sole Owner; otherwise complete.
Name _____________________________ (_)M ( )F Birthdate __/__/___
Address______________________________Soc. Sec. no. ____/___/____
Relationship to Owner___________________________________________
BE N E F I C I A R Y(I E S)
Name _____________________________ Relationship to Owner _______
Name _____________________________ Relationship to Owner ______
PU R C H A S E PAY M E N T/PL A N OP T I O N S
Total Purchase Payment $________________________________________________________
VARIABLE PORTFOLIO SECTION MSDW Universal Funds
AIM Variable Ins. Funds
(_) Capital Appreciation __% (_) Equity Growth __%
(_) Growth __% (_) International Magnum __%
(_) Value __% (_) Emerging Markets Equity __%
(_) U.S. Real Estate __%
Alliance Variable Product Series Funds (_) Mid-Cap Value __%
(_) Premier Growth __%
(_) Growth __% Putnam Variable Trust
(_) Growth & Income __% (_) International Growth __%
(_)Growth & Income __%
MSDW Variable Investment Series (_) Voyager __%
(_) Money Market __%
(_) Quality Income Plus __% Van Kampen Life Investment Trust
(_) High Yield __% (_) Emerging Growth __%
(_) Utilities __%
(_) Income Builder __% Fixed Account (if available)
(_) Dividend Growth __% (_) DCA Fixed Account __%
(_) Capital Growth __% (_) Fixed __%
(_) Global Div. Growth __% (_) _____________________ __%
(_) European Growth __% Total 100%
(_) Pacific Growth __%
(_) Equity __% Plan Options (Choose one from options
(_) S & P 500 Index __% available in your state. If none is
(_) Competitive Edge __% selected, base policy will apply):
(_) Strategist __%
(_) Agressive Equity __% (_) Performance Death Benefit Option
(_) Short-Term Bond __% (Highest Anniversary Value); or
(_) Performance Income Benefit 2 Option
(GuMBI); or
(_) Performance Benefit Combination 2
Option
(_) Death Benefit Combination Option
Best of the Best)
RE P L A C E M E N T Will this annuity replace or change any
IN F O R M AT I O N existing annuity or life insurance? (_)Yes (_)No
(If Yes, complete the following.)
Company_______________________Policy No. ______
Cost basis ammount ___________Policy Date _____
TA X QU A L I F I E D PL A N (_)Yes (_)No (If Yes, complete the following.)
(_) Traditional IRA (_) Roth IRA (_)SEP (_)Other
(_) Rollover (_)4-1(a)(pension)
(_) Transfer (_)403(b)(TSA)
(_) Contribution $_______ Contribution Year ____
SP E C I A L IN S T R U C T I O N S _______________________________________
----------------------------------------
NLR738 41330
<PAGE>
MORGAN STANLEY DEAN WITTER VA3 FLEXIBLE PREMIUM DEFERRED VARIABLE ANNUITY
ISSUED BY: NORTHBROOK LIFE INSURANCE COMPANY, NORTHBROOK, ILLINOIS PO Box
94040, Palatine, IL 60094-4040 (_) Telephone: 1-800-654-2397 (_)Overnight
Address: 3100 Sanders Rd., M4A, Northbrook, IL
The following states require insurance applicants to acknowledge a fraud
warning/disclosure statement. Please refer to the fraud warning/disclosure
statement for your state as indicated below.
FOR APPLICANTS IN ARIZONA: Upon your written request we will provide you
within a reasonable period of time, reasonable, factual information
regarding the benefits and provisions of the annuity contract for which you
are applying. If for any reason you are not satisfied with the contract,
you may return the contract within twenty days after you receive it. If the
contract you are applying for is a variable annuity, you will receive an
amount equal to the sum of (i) the difference between the premiums paid and
the amounts allocated to any account under the contract and (ii) the
contract Value on the date the returned contract is received by our company
or our agent.
FOR APPLICANTS IN ARKANSAS, KENTUCKY, MAINE, NEW MEXICO, OHIO, OREGON &
PENNSYLVANA: Any person who knowingly and with intent to defraud any
insurance company or other person files an application for insurance or
statement of claim containing any materially false information or conceals,
for the purpose of misleading, information concerning any fact material
thereto commits a fraudulent insurance act, which may be a crime and
subjects such person to criminal and civil penalties.
FOR APPLICANTS IN COLORADO: It is unlawful to knowingly provide false,
incomplete, or misleading facts or information to an insurance company for
the purpose of defrauding or attempting to defraud the company. Penalties
may include imprisonment, fines, denial of insurance, and civil damages.
Any insurance company or agent of an insurance company who knowingly
provides false, incomplete, or misleading facts or information to a policy
holder or claimant for the purpose of defrauding or attempting to defraud
the policy holder or claimant with regard to a settlement or award payable
from insurance proceeds shall be reported to the Colorado Division of
Insurance within the Department of Regulatory Agencies.
FOR APPLICANTS IN FLORIDA: Any person who knowingly and with intent to
injure, defraud, or deceive any insurer files a statement of claim or an
application containing any false, incomplete, or misleading information is
guilty of a felony of the third degree.
FOR APPLICANTS IN LOUISIANA: Any person who knowingly presents a false or
fraudulent claim for payment of a loss or benefit or knowingly presents
false information in an application for insurance is guilty of a crime and
may be subject to fines and confinement in prison.
FOR APPLICANTS IN NEW JERSEY: Any person who includes any false or
misleading information on an application for an insurance policy is subject
to criminal and civil penalties.
FOR APPLICANTS IN WASHINGTON, D.C.: WARNING: It is a crime to provide false
or misleading information to an insurer for the purpose of defrauding the
insurer or any other person. Penalties include imprisonment and/or fines.
In addition, an insurer may deny insurance benefits if false information
materially related to a claim was provided by the applicant.
SIGNATURE(S)
(contract applications and certificate enrollments are referred to as
applications.)
A copy of this application signed by the Representative will be the receipt for
the first purchase payment. If Northbrook Life Insurance Company ("Northbrook
Life") declines this application, Northbrook Life will have no liability except
to return the first purchase payment.
I have read the above statements and represent that they are complete and true
to the best of my knowledge and belief. I agree that this application shall be a
part of the annuity issued by Northbrook Life. By accepting the annuity issued,
I agree to any additions or corrections to this application. Northbrook Life
will obtain written agreement from me for any change in the benefits, type of
plan, or birthdates.
I understand that annuity values and income payments based on the investment
experience of a separate account are variable and not guaranteed as to dollar
amount. I acknowledge receipt of the current prospectus for the Flexible Premium
Deferred Variable Annuity.
Signed at____________________________________________Date_____/_____/_____
City State
Owner(s)__________________________________________________________________
Annuitant_________________________________________________________________
FINANCIAL ADVISOR USE ONLY
Will the annuity applied for replace or change any existing annuity or
life insurance? (_) Yes (_) No
FA Name (Please print)_______________________ Phone No.(___)___-______
FA Signature_________________________________ Branch/FA No. __________
FL License No. _____________________________
POWER OF ATTORNEY
WITH RESPECT TO
NORTHBROOK LIFE INSURANCE COMPANY
REGISTRATION STATEMENT ON FORM N-4
NORTHBROOK VARIABLE ANNUITY ACCOUNT II
Known 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, and each of them in any and all
capacities to sign any registration statements and amendments thereto for
Northbrook Variable Annuity Account II and related contracts, 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.
February 29, 2000
/s/ __________________________
Thomas J. Wilson, II
Director, President,
and Chief Operating Officer
(Principal Executive Officer)
<PAGE>
