THE AIM LIFETIME PLUS(sm) VARIABLE ANNUITY
Glenbrook Life and Annuity Company Prospectus dated May 1, 1999
P.O. Box 94039, Palatine, IL 60094-4039
Telephone Number: 1-800-776-6978
Glenbrook Life and Annuity Company ("Glenbrook") is offering the AIM Lifetime
Plus(sm) Variable Annuity, 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 currently offers 14 investment alternatives ("investment
alternatives"). The investment alternatives include a fixed account option
("Fixed Account") and 13 variable sub-accounts ("Variable Sub-Accounts") of the
Glenbrook Life and Annuity Company Separate Account A ("Variable Account"). Each
Variable Sub-Account invests exclusively in shares of one of the following funds
("Funds") of AIM Variable Insurance Funds, Inc.:
AIM V.I. Aggressive Growth Fund AIM V.I. Government Securities Fund
AIM V.I. Balanced Fund AIM V.I. Growth Fund
AIM V.I. Capital Appreciation Fund AIM V.I. Growth and Income Fund
AIM V.I. Capital Development Fund AIM V.I. High Yield Fund
AIM V.I. Diversified Income Fund AIM V.I. International Equity Fund
AIM V.I. Global Utilities Fund AIM V.I. Money Market Fund
AIM V.I. Value Fund
We (Glenbrook) have filed a Statement of Additional Information, dated May 1,
1999, with the Securities and Exchange Commission ("SEC"). It contains more
information about the Contract and is incorporated herein by reference, which
means it is legally a part of this prospectus. Its table of contents appears on
page C-1 of this prospectus. For a free copy, please write or call us at the
address or telephone number above, or go to the SEC's Web site
(http://www.sec.gov). You can find other information and documents about us,
including documents that are legally 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
prospectus. Anyone who tells you otherwise is committing a
federal crime.
IMPORTANT
NOTICES The Contracts may be distributed through broker-dealers that
have relationships with banks or other financial institutions
or by employees of such banks. However, the Contracts are not
deposits, or obligations of, or guaranteed by such institutions
or any federal regulatory agency. Investment in the Contracts
involves investment risks, including possible loss of
principal.
The Contracts are not FDIC insured.
<PAGE>
TABLE OF CONTENTS
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Page
Important Terms........................................... 3
Overview The Contract At A Glance.................................. 4
How the Contract Works.................................... 6
Expense Table............................................. 7
Financial Information..................................... 10
The Contract.............................................. 11
Purchases................................................. 13
Contract Value............................................ 14
Investment Alternatives................................... 15
The Variable Sub-Accounts........................ 15
The Fixed Account................................ 16
Transfers........................................ 19
Contract Expenses.................................................. 21
Access To Your Money...................................... 24
Income Payments........................................... 26
Death Benefits............................................ 29
More Information:......................................... 31
Glenbrook........................................ 31
The Variable Account............................. 31
The Funds........................................ 32
Other The Contract .................................... 32
Information Qualified Plans ................................. 33
Legal Matters.................................... 33
Year 2000........................................ 34
Taxes..................................................... 35
Annual Reports and Other Documents........................ 38
Performance Information................................... 39
Experts................................................... 39
Appendix A-Accumulation Unit Values....................... A-1
Appendix B-Market Value Adjustment ....................... B-1
Statement of Additional Information Table of Contents.... C-1
<PAGE>
IMPORTANT TERMS
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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................................................ 6
Accumulation Unit ................................................ 10,14
Accumulation Unit Value .......................................... 10,14
Anniversary Value................................................. 29
Annuitant......................................................... 11
Automatic Fund Rebalancing Program................................ 5,20
Automatic Additions Program....................................... 13
Beneficiary ...................................................... 6,11
Cancellation Period .............................................. 4
*Contract ........................................................ 1,11
Contract Anniversary.............................................. 5
Contract Owner ("You") ........................................... 11
Contract Value ................................................... 14
Contract Year.................................................... 5
Death Benefit Anniversary ........................................ 29
Dollar Cost Averaging Program..................................... 20
Due Proof of Death................................................ 29
Enhanced Death Benefit Options.................................... 29
Fixed Account..................................................... 1,16
Free Withdrawal Amount............................................ 22
Funds............................................................. 1,32
Glenbrook ("We").................................................. 1,31
Guarantee Periods................................................. 16
Income Plan ...................................................... 26
Investment Alternatives .......................................... 1,19
Issue Date ....................................................... 6
Market Value Adjustment .......................................... 18
Payout Phase...................................................... 6
Payout Start Date ............................................... 6,26
Qualified Contracts .............................................. 4
Right to Cancel .................................................. 4,13
SEC............................................................... 1
Settlement Value.................................................. 29
Systematic Withdrawal Program .................................... 24
Treasury Rate .................................................... 18
Valuation Date.................................................... 13
Variable Account ................................................. 1,31
Variable Sub-Account ............................................. 1
* In certain states the Contract is available only as a group Contract. In
these states, we will issue you a certificate that represents your
ownership and that summarizes the provisions of the group Contract.
References to "Contract" in this prospectus include certificates, unless
the context requires otherwise.
<PAGE>
THE CONTRACT AT A GLANCE
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The following is a snapshot of the Contract. Please read the remainder of this
prospectus for more information.
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Flexible Payments
You can purchase a Contract with as little as $5,000
($2,000 for "Qualified Contracts," which are Contracts
issued with qualified plans). You can add to your
Contract as often and as much as you like, but each
payment must be at least $500 ($100 for automatic
purchase payments to the variable investment options).
You must maintain a minimum account size of $2,000.
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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 law permits, to reflect the investment
experience of any amounts allocated to the Variable
Account.
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Expenses You will bear the following expenses:
o Total Variable Account annual fees equal to
1.45% of average daily net assets
o Annual contract maintenance charge of $35 (with
certain exceptions)
o Withdrawal charges ranging from 0% to 6% of
payments withdrawn (with certain exceptions)
o Transfer fee of $10 after 12th transfer in any
Contract Year (fee currently waived)
o State premium tax (if your state imposes one)
In addition, each Fund pays expenses that you will bear
indirectly if you invest in a Variable Sub-Account.
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Investment
Alternatives The Contract offers 14 investment alternatives
including:
o The Fixed Account (which credits interest at
rates we guarantee), and
o 13 Variable Sub-Accounts investing in Funds
offering professional money management by
A I M Advisors, Inc.
To find out current rates being paid on the Fixed
Account, or to find out how the Variable Sub-Accounts
have performed, please call us at
1-800-776-6978.
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<PAGE>
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Special Services For your convenience, we offer these special
services:
o Automatic Fund Rebalancing Program
o Automatic Additions Program
o Dollar Cost Averaging Program
o Systematic Withdrawal Program
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Income Payments You can choose fixed income payments, variable
income payments, or a combination of the two. You can
receive your income payments in one of the following
ways:
o life income with guaranteed payments
o a joint and survivor life income with guaranteed
payments
o guaranteed payments for a specified period
(5 to 30 years)
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Death Benefits If you die before the Payout Start Date, we will pay
the death benefit described in the Contract. We also
offer 2 Enhanced Death Benefit Options.
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Transfers Before the Payout Start Date, you may transfer your
Contract value ("Contract Value") among the investment
alternatives, with certain restrictions. Transfers to
the Fixed Account must
be at least $500.
We do not currently impose a fee upon transfers.
However, we reserve the right to charge $10 per
transfer after the 12th transfer in each "Contract
Year," which we measure from the date we issue your
Contract or a Contract anniversary ("Contract
Anniversary").
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Withdrawals You may withdraw some or all of your Contract Value at
any time during the Accumulation Phase. In general,
you must withdraw at least $50 at a time. A 10%
federal tax penalty may apply if you withdraw before
you are 59 1/2 years old. A withdrawal charge and
Market Value Adjustment also may apply.
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<PAGE>
HOW THE CONTRACT WORKS
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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 14 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. If you invest in the Fixed Account, 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 Funds.
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 26. You receive income payments during what we call the
"Payout Phase" of the Contract, which begins on the Payout Start Date and
continues until we make the last payment required by the Income Plan you select.
During the Payout Phase, if you select a fixed income payment option, we
guarantee the amount of your payments, which will remain fixed. If you select a
variable income payment option, based on one or more of the Variable
Sub-Accounts, the amount of your payments will vary up or down depending on the
performance of the corresponding Funds. The amount of money you accumulate under
your Contract during the Accumulation Phase and apply to an Income Plan will
determine the amount of your income payments during the Payout Phase.
The timeline below illustrates how you might use your Contract.
<TABLE>
<CAPTION>
Effective Payout Start
Date Accumulation Phase Date Payout Phase
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You save for retirement
| | | >?
<S> <C> <C> <C>
You buy You elect to receive You can Or you can
a Contract income payments or receive receive
receive a lump sum income income
payment payments payments for
for a set life
period
</TABLE>
As the Contract owner, you exercise all of the rights and privileges
provided by the Contract. If you die, any surviving Contract owner or, if 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, your Beneficiary. See "Death Benefits."
Please call us at 1-800-776-6978 if you have any questions about how the
Contract works.
<PAGE>
EXPENSE TABLE
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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 Fund expenses, please refer to the accompanying prospectus for
the Funds.
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CONTRACT OWNER TRANSACTION EXPENSES
Withdrawal Charge (as a percentage of purchase payments)*
Number of Complete Years
Since We Received the Purchase
Payment Being Withdrawn: 0 1 2 3 4 5 6
7+
Applicable Charge: 6% 6% 5% 5% 4% 4% 3%
0%
Annual Contract Maintenance Charge.........................$35.00**
Transfer Fee...............................................$10.00***
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* Each Contract Year, you may withdraw up to 10% of your aggregate
purchase payments without incurring a withdrawal charge or a Market Value
Adjustment.
** We will waive this charge in certain cases. See "Expenses."
***Applies solely to the thirteenth and subsequent transfers within a
Contract Year. We are currently waiving the transfer fee.
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VARIABLE ACCOUNT ANNUAL EXPENSES
(as a percentage of average daily net asset value deducted from each
Variable Sub-Account)
Mortality and Expense Risk Charge..........................1.35%
Administrative Expense Charge..............................0.10%
-----
Total Variable Account Annual Expenses.....................1.45%
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<PAGE>
<TABLE>
<CAPTION>
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FUND ANNUAL EXPENSES (After Voluntary Reductions and Reimbursements)
(as a percentage of Fund average daily net assets)(1)
Total Annual
Management Other Fund
Fund Fee Expenses Expenses
---- ---------- -------- -------------
<S> <C> <C> <C>
AIM V.I. Aggressive Growth Fund(1) 0.10% 1.06% 1.16%
AIM V.I. Balanced Fund(1) 0.00% 1.18% 1.18%
AIM V.I. Capital Appreciation Fund 0.62% 0.05% 0.67%
AIM V.I. Capital Development Fund(1) 0.00% 1.21% 1.21%
AIM V.I. Diversified Income Fund 0.60% 0.17% 0.77%
AIM V.I. Global Utilities Fund 0.65% 0.46% 1.11%
AIM V.I. Government Securities Fund 0.50% 0.26% 0.76%
AIM V.I. Growth Fund 0.64% 0.08% 0.72%
AIM V.I. Growth and Income Fund 0.61% 0.04% 0.65%
AIM V.I. High Yield Fund(1) 0.00% 1.13% 1.13%
AIM V.I. International Equity Fund 0.75% 0.16% 0.91%
AIM V.I. Money Market Fund 0.40% 0.18% 0.58%
AIM V.I. Value Fund 0.61% 0.05% 0.66%
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(1) Figures shown in the table are for the year ended December 31, 1998.
Absent voluntary reductions and reimbursements for certain Funds,
management fees, other expenses, and total annual fund expenses
expressed as a percentage of average net assets of the Funds would
have been as follows:
AIM V.I. Aggressive Growth Fund 0.80% 3.82% 4.62%
AIM V.I. Balanced Fund 0.75% 2.08% 2.83%
AIM V.I. Capital Development Fund 0.75% 5.05% 5.80%
AIM V.I. High Yield Fund 0.63% 1.87% 2.50%
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</TABLE>
<PAGE>
EXAMPLE 1
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The example below shows the dollar amount of expenses that you would bear
directly or indirectly if you:
o invested $1,000 in a Variable Sub-Account,
o earned a 5% annual return on your investment, and
o surrendered your Contract, or you began receiving income payments for
a specified period of less than 120 months, at the end of each time
period.
The example does not include any taxes or tax penalties you may be required to
pay if you surrender your Contract.
SUB-ACCOUNT 1 YEAR 3 YEARS 5 YEARS 10 YEARS
----------- ------ ------- ------- --------
AIM V.I. Aggressive Growth $81 $129 $179 $303
AIM V.I. Balanced $82 $130 $180 $305
AIM V.I. Capital Appreciation $76 $114 $154 $253
AIM V.I. Capital Development $82 $130 $182 $308
AIM V.I. Diversified Income $77 $117 $159 $263
AIM V.I. Global Utilities $81 $127 $176 $298
AIM V.I. Government Securities $77 $117 $158 $262
AIM V.I. Growth $77 $115 $156 $258
AIM V.I. Growth and Income $76 $113 $153 $250
AIM V.I. High Yield $81 $128 $177 $300
AIM V.I. International Equity $79 $121 $166 $277
AIM V.I. Money Market $75 $111 $149 $243
AIM V.I. Value $76 $114 $153 $251
EXAMPLE 2
- ---------
Same assumptions as Example 1 above, except that you decided not to surrender
your Contract, or you began receiving income payments (for at least 120 months
if under an Income Plan with a specified period), at the end of each period.
SUB-ACCOUNT 1 YEAR 3 YEARS 5 YEARS 10 YEARS
----------- ------ ------- ------- --------
AIM V.I. Aggressive Growth $27 $84 $143 $303
AIM V.I. Balanced $28 $85 $144 $305
AIM V.I. Capital Appreciation $22 $69 $118 $263
AIM V.I. Capital Development $28 $85 $146 $308
AIM V.I. Diversified Income $23 $72 $123 $263
AIM V.I. Global Utilities $27 $82 $140 $298
AIM V.I. Government Securities $23 $72 $122 $262
AIM V.I. Growth $23 $70 $120 $258
AIM V.I. Growth and Income $22 $68 $117 $250
AIM V.I. High Yield $27 $83 $141 $300
AIM V.I. International Equity $25 $76 $130 $277
AIM V.I. Money Market $21 $66 $113 $243
AIM V.I. Value $22 $69 $117 $251
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. To reflect the contract maintenance charge in the
examples, we estimated an equivalent percentage charge, based on an assumed
average Contract size of $57,476.
<PAGE>
FINANCIAL INFORMATION
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To measure the value of your investment in the Variable Sub-Accounts during the
Accumulation Phase, we use a unit of measure we call the "Accumulation Unit."
Each Variable Sub-Account has a separate value for its Accumulation Units we
call "Accumulation Unit Value." Accumulation Unit Value is analogous to, but not
the same as, the share price of a mutual fund.
Attached as Appendix A to this prospectus are tables showing the Accumulation
Unit Values of each Variable Sub-Account since its inception. To obtain a fuller
picture of each Variable Sub-Account's finances, please refer to the Variable
Account's financial statements contained in the Statement of Additional
Information. The financial statements of Glenbrook also appear in the Statement
of Additional Information.
<PAGE>
THE CONTRACT
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CONTRACT OWNER
The AIM Lifetime Plus(sm) Variable Annuity is a contract between you, the
Contract owner, and Glenbrook, a life insurance company. As the Contract owner,
you may exercise all of the rights and privileges provided to you by the
Contract. That means it is up to you to select or change (to the extent
permitted):
o the investment alternatives during the Accumulation and Payout Phases,
o the amount and timing of your purchase payments and withdrawals,
o the programs you want to use to invest or withdraw money,
o the income payment plan you want to use to receive retirement income,
o the Annuitant (either yourself or someone else) on whose life the
income payments will be based,
o the Beneficiary or Beneficiaries who will receive the benefits that
the Contract provides when you die, and
o any other rights that the Contract provides.
If you die, any surviving Contract owner, or, if none, the Beneficiary may
exercise the rights and privileges provided 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
personal 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 issued with a qualified plan. See
"Qualified Plans" on page 33.
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). You initially designate an Annuitant in your application. If
the Contract owner is a natural person, you may change the Annuitant prior to
the Payout Start Date. In our discretion , we may permit you to designate a
joint Annuitant, who is a second person on whose life income payments depend, on
or after the Payout Start Date.
If the Annuitant dies prior to the Payout Start Date, the new Annuitant will be:
o the youngest Contract owner, otherwise
o the youngest Beneficiary.
BENEFICIARY
The Beneficiary is the person who may elect to receive the death benefit or
become the new Contract owner if the sole surviving Contract owner dies before
the Payout Start Date. If the sole surviving Contract owner dies after the
Payout Start Date, the Beneficiary will receive any guaranteed income payments
scheduled to continue.
You may name one or more Beneficiaries when you apply for a Contract. You may
change or add Beneficiaries at any time by writing to us, unless you have
designated an irrevocable Beneficiary. We will provide a change of Beneficiary
form to be signed and filed with us. Any change will be effective at the time
you sign the written notice, whether or not the Annuitant is living when we
receive the notice. Until we receive your written notice to change a
Beneficiary, we are entitled to rely on the most recent Beneficiary information
in our files. We will not be liable as to any payment or settlement made prior
to receiving the written notice. Accordingly, if you wish to change your
Beneficiary, you should deliver your written notice to us promptly.
If you did not name a Beneficiary or if the named Beneficiary is no longer
living and there are no other surviving Beneficiaries, the new Beneficiary will
be:
o your spouse or, if he or she is no longer alive,
o your surviving children equally, or if you have no surviving children,
o your estate.
If more than one Beneficiary survives you (or the Annuitant if the Contract
owner is not a natural person), we will divide the death benefit among your
Beneficiaries according to your most recent written instructions. If you have
not given us written instructions, we will pay the death benefit in equal
amounts to the surviving Beneficiaries.
MODIFICATION OF THE CONTRACT
Only a Glenbrook 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 due. We will not be bound by any assignment
until you sign it and file it with us. We are not responsible for the validity
of any assignment. Federal law prohibits or restricts the assignment of benefits
under many types of retirement plans and the terms of such plans may themselves
contain restrictions on assignments. An assignment may also result in taxes or
tax penalties. You should consult with an attorney before trying to assign your
Contract.
<PAGE>
PURCHASES
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MINIMUM PURCHASE PAYMENTS
Your initial purchase payment must be at least $5,000 ($2,000 for a Qualified
Contract). All subsequent purchase payments must be $500 or more. You may make
purchase payments at any time prior to the Payout Start Date. We reserve the
right to limit the maximum amount of purchase payments we will accept.
We also reserve the right to reject any application.
AUTOMATIC ADDITIONS PROGRAM
You may make subsequent purchase payments of at least $100 ($500 for allocation
to the Fixed Account) by automatically transferring amounts from your bank
account. Consult your sales representative for more detailed information.
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 percents that total 100% or in whole dollars. 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 at
the close of the business day on which we receive the purchase payment at our
headquarters.
We are open for business each day Monday through Friday that the New York Stock
Exchange is open for business. We also refer to these days as "Valuation Dates."
Our business day closes when the New York Stock Exchange closes, usually 4 p.m.
Eastern Time (3 p.m. Central Time). 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 by returning it to us within the Cancellation
Period, which is the 20-day period after you receive the Contract or such longer
period as your state may require. You may return it by delivering it or mailing
it to us. 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. We also will return your purchase payments allocated to the Variable
Account after an adjustment, to the extent state law permits, to reflect
investment gain or loss that occurred from the date of allocation through the
date of cancellation. Some states may require us to return a greater amount to
you.
<PAGE>
CONTRACT VALUE
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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 interest in the Fixed Account.
ACCUMULATION UNITS
To determine the number of Accumulation Units of each Variable Sub-Account to
credit to your Contract, we divide (i) the amount of the purchase payment 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. 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.
ACCUMULATION UNIT VALUE
As a general matter, the Accumulation Unit Value for each Variable Sub-Account
will rise or fall to reflect:
o changes in the share price of the Fund in which the Variable
Sub-Account invests, and
o the deduction of amounts reflecting the mortality and expense risk
charge, administrative expense charge, and any provision for taxes
that have accrued since we last calculated the Accumulation Unit
Value.
We determine contract maintenance charges, withdrawal charges, and transfer fees
(currently waived) separately for each Contract. They do not affect Accumulation
Unit Value. Instead, we obtain payment of those charges and fees by redeeming
Accumulation Units. For details on how we calculate Accumulation Unit Value,
please refer to the Statement of Additional Information.
We determine a separate Accumulation Unit Value for each Variable Sub-Account on
each Valuation Date.
You should refer to the prospectus for the Funds that accompanies this
prospectus for a description of how the assets of each Fund are valued, since
that determination directly bears on the Accumulation Unit Value of the
corresponding Variable Sub-Account and, therefore, your Contract Value.
<PAGE>
INVESTMENT ALTERNATIVES: The Variable Sub-Accounts
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You may allocate your purchase payments to up to 13 Variable Sub-Accounts. Each
Variable Sub-Account invests in the shares of a corresponding Fund. Each Fund
has its own investment objective(s) and policies. We briefly describe the Funds
below.
For more complete information about each Fund, including expenses and risks
associated with the Fund, please refer to the accompanying prospectus for the
Fund. You should carefully review the prospectus for the Funds before allocating
amounts to the Variable Sub-Accounts. A I M Advisors, Inc. serves as the
investment advisor to each Fund.
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Fund: Each Fund Seeks:
- --------------------------------------------------------------------------------
AIM V.I. Aggressive Growth Fund* Long-term growth of capital
- --------------------------------------------------------------------------------
AIM V.I. Balanced Fund As high a total return as possible,
consistent with preservation of capital
- --------------------------------------------------------------------------------
AIM V.I. Capital Appreciation Fund Growth of capital
- --------------------------------------------------------------------------------
AIM V.I. Capital Development Fund Long-term growth of capital
- --------------------------------------------------------------------------------
AIM V.I. Diversified Income Fund High level of current income
- --------------------------------------------------------------------------------
AIM V.I. Global Utilities Fund High level of current income and a
secondary objective of growth of capital
- --------------------------------------------------------------------------------
AIM V.I. Government Securities Fund High level of current income consistent
with reasonable concern for safety of
principal
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AIM V.I. Growth Fund Growth of capital
- --------------------------------------------------------------------------------
AIM V.I. Growth and Income Fund Growth of capital with a secondary
objective of current income
- --------------------------------------------------------------------------------
AIM V.I. High Yield Fund High level of current income
- --------------------------------------------------------------------------------
AIM V.I. International Equity Fund Long-term growth of capital
- --------------------------------------------------------------------------------
AIM V.I. Money Market Fund As high a level of current income as is
consistent with the preservation of
capital and liquidity
- --------------------------------------------------------------------------------
AIM V.I. Value Fund Long-term growth of capital
- --------------------------------------------------------------------------------
* Due to the sometime limited availability of common stocks of small-cap
companies that meet the investment criteria for AIM V.I. Aggressive Growth
Fund, the Fund may periodically suspend or limit the offering of its shares.
The Fund will be closed to new participants when Fund assets reach $200
million. If the Fund is closed, Contract owners maintaining an allocation of
Contract Value in that Fund will nevertheless be permitted to allocate
additional purchase payments to the Fund.
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 Funds in which those Variable Sub-Accounts invest. You bear the investment
risk that the Funds might not meet their investment objectives. Shares of the
Funds are not deposits, or obligations of, or guaranteed or endorsed by any bank
and are not insured by the Federal Deposit Insurance Corporation, the Federal
Reserve Board or any other agency.
<PAGE>
INVESTMENT ALTERNATIVES : The Fixed Account
- --------------------------------------------------------------------------------
You may allocate all or a portion of your purchase payments to the Fixed
Account. The Fixed Account may not be available in all states. Please consult
with your sales representative 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 the Fixed Account does not entitle you to share in the
investment experience of the Fixed Account.
GUARANTEE PERIODS
Each payment or transfer allocated to the Fixed Account earns interest at a
specified rate that we guarantee for a period of years we call a Guarantee
Period. Guarantee Periods may range from 1 to 10 years. We are currently
offering Guarantee Periods of 1, 3, 5, 7, and 10 years in length. In the future
we may offer Guarantee Periods of different lengths or stop offering some
Guarantee Periods. You select the Guarantee Period for each amount that you
allocate to the Fixed Account. If you do not select a Guarantee Period for a
purchase payment or transfer, we will assign the same period(s) as used for the
most recent purchase payment.
Each payment or transfer allocated to any one Guarantee Period must be at least
$500. We reserve the right to limit the number of additional purchase payments
that you may allocate to any one Guarantee Period.
INTEREST RATES
We will tell you what interest rates and Guarantee Periods we are offering at a
particular time. We may declare different interest rates for Guarantee Periods
of the same length that begin at different times. We will not change the
interest rate that we credit to a particular allocation until the end of the
relevant Guarantee Period.
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, sales commissions 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 Glenbrook at
1-800-776-6978.
The interest rate will never be less than the minimum guarantee rate stated in
the Contract.
HOW WE CREDIT INTEREST
We will credit interest daily to each amount allocated to a Guarantee Period at
a rate that compounds to the annual interest rate that we declared at the
beginning of the applicable Guarantee Period. The following example illustrates
how a purchase payment allocated to the Fixed Account would grow, given an
assumed Guarantee Period and annual interest rate:
Purchase Payment..........................$10,000
Guarantee Period..........................5 years
Annual Interest Rate......................4.50%
<PAGE>
<TABLE>
<CAPTION>
END OF CONTRACT YEAR
YEAR 1 YEAR 2 YEAR 3 YEAR 4 YEAR 5
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Beginning Contract Value $10,000.00
X (1 + Annual Interest Rate) X1.045
$10,450.00
Contract Value at end of Contract Year $10,450.00
X (1 + Annual Interest Rate) X1.045
$10,920.25
Contract Value at end of Contract Year $10,920.25
X (1 + Annual Interest Rate) X1.045
$11,411.66
Contract Value at end of Contract Year $11,411.66
X (1 + Annual Interest Rate) X1.045
$11,925.19
Contract Value at end of Contract Year $11,925.19
X (1 + Annual Interest Rate) X1.045
$12,461.82
Total Interest Credited During Guarantee Period = $2,461.82 ($12,461.82-$10,000)
</TABLE>
This example assumes no withdrawals during the entire 5 year Guarantee Period.
If you were to make a partial withdrawal, you may be required to pay a
withdrawal charge. In addition, the amount withdrawn may be increased or
decreased by a Market Value Adjustment that reflects changes in interest rates
since the time you invested the amount withdrawn. The hypothetical interest rate
is for illustrative purposes only and is not intended to predict future interest
rates to be declared under the Contract. Actual interest rates declared for any
given Guarantee Period may be more or less than shown above but will never be
less than the guaranteed minimum rate stated in the Contract.
RENEWALS
Prior to the end of each Guarantee Period, we will mail you a notice asking you
what to do with your money. During the 30-day period after the end of the
Guarantee Period, you may:
1) take no action. We will automatically apply your money to a new Guarantee
Period of the same length as the expired Guarantee Period. The new
Guarantee Period will begin on the day the previous Guarantee Period ends.
The new interest rate will be our then current declared rate for a
Guarantee Period of that length; or
2) instruct us to apply your money to one or more new Guarantee Periods of
your choice. The new Guarantee Period(s) will begin on the day the
previous Guarantee Period ends. The new interest rate will be our then
current declared rate for those Guarantee Periods; or
3) instruct us to transfer all or a portion of your money to one or more
Variable Sub-Accounts of the Variable Account. We will effect the transfer
on the day we receive your instructions. We will not adjust the amount
transferred to include a Market Value Adjustment; or
4) withdraw all or a portion of your money. You may be required to pay a
withdrawal charge, but we will not adjust the amount withdrawn to include
a Market Value Adjustment. The amount withdrawn will be deemed to have
been withdrawn on the day the previous Guarantee Period ends. Unless you
specify otherwise, amounts not withdrawn will be applied to a new
Guarantee Period of the same length as the previous Guarantee Period. The
new Guarantee Period will begin on the day the previous Guarantee Period
ends.
MARKET VALUE ADJUSTMENT
All withdrawals in excess of the Free Withdrawal Amount, and transfers from a
Guarantee Period, other than those taken during the 30 day period after such
Guarantee Period expires, are subject to a Market Value Adjustment. A Market
Value Adjustment also may apply upon payment of a death benefit and when you
apply amounts currently invested in a Guarantee Period to an Income Plan (unless
paid or applied during the 30-day period after such Guarantee Period expires).
We will not apply a Market Value Adjustment to a withdrawal you make:
o within the Free Withdrawal Amount as described on page 22,
o as part of the Dollar Cost Averaging Program, or
o withdrawals taken to satisfy IRS required minimum distribution rules
for the Contract.
We apply the Market Value Adjustment to reflect changes in interest rates from
the time you first allocate money to a Guarantee Period to the time it is
removed it from that Guarantee Period. We calculate the Market Value Adjustment
by comparing the Treasury Rate for a period equal to the Guarantee Period at its
inception to the Treasury Rate for a period equal to the time remaining in the
Guarantee Period when you remove your money. "Treasury Rate" means the U.S.
Treasury Note Constant Maturity Yield as reported in Federal Reserve Bulletin
Release H.15.
The Market Value Adjustment may be positive or negative, depending on changes in
interest rates. As such, you bear the investment risk associated with changes in
interest rates. If interest rates increase significantly, the Market Value
Adjustment and any withdrawal charge, premium taxes, and income tax withholding
(if applicable) could reduce the amount you receive upon full withdrawal of your
Contract Value to an amount that is less than the purchase payment plus interest
at the minimum guaranteed interest rate under the Contract.
Generally, if the Treasury Rate at the time you allocate money to a Guarantee
Period is higher than the applicable current Treasury Rate for a period equal to
the time remaining in the Guarantee Period, then the Market Value Adjustment
will result in a higher amount payable to you or transferred. Conversely, if the
Treasury Rate at the time you allocate money to a Guarantee Period is lower than
the applicable Treasury Rate for a period equal to the time remaining in the
Guarantee Period, then the Market Value Adjustment will result in a lower amount
payable to you or transferred.
For example, assume that you purchase a Contract and you select an initial
Guarantee Period of 5 years and the 5 year Treasury Rate for that duration is
4.50%. Assume that at the end of 3 years, you make a partial withdrawal. If, at
that later time, the current 2 year Treasury Rate is 4.20%, then the Market
Value Adjustment will be positive, which will result in an increase in the
amount payable to you. Conversely, if the current 2 year Treasury Rate is 4.80%,
then the Market Value Adjustment will be negative, which will result in a
decrease in the amount payable to you.
The formula for calculating Market Value Adjustments is set forth in Appendix B
to this prospectus, which also contains additional examples of the application
of the Market Value Adjustment.
<PAGE>
INVESTMENT ALTERNATIVES: Transfers
- --------------------------------------------------------------------------------
TRANSFERS DURING THE ACCUMULATION PHASE
During the Accumulation Phase, you may transfer Contract Value among the
investment alternatives. 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 into a Guarantee Period is $500. We currently do
not assess, but reserve the right to assess, a $10 charge on each transfer in
excess of 12 per Contract Year. We treat transfers to or from more than one Fund
on the same day as one transfer.
We will process transfer requests that we receive before 3:00 p.m. Central Time
on any Valuation Date using the Accumulation Unit Values for that Date. We will
process requests completed after 3:00 p.m. on any Valuation Date using the
Accumulation Unit Values for the next Valuation Date. The Contract permits us to
defer transfers from the Fixed Account for up to 6 months from the date we
receive your request. If we decide to postpone transfers from any Guarantee
Period 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.
If you transfer an amount from a Guarantee Period other than during the 30 day
period after such Guarantee Period expires, we will increase or decrease the
amount by a Market Value Adjustment. If any transfer reduces the value in the
Fixed Account to less than $500, we will treat the request as a transfer of the
entire value.
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
to change the relative weighting of the Variable Sub-Accounts on which your
variable income payments will be based. In addition, you will have a limited
ability to make transfers from the Variable Sub-Accounts to increase the
proportion of your income payments consisting of fixed income payments. You may
not, however, convert any of your fixed income payments into variable income
payments.
You may not make any transfers for the first 6 months after the Payout Start
Date. Thereafter, you may make transfers among the Variable Sub-Accounts or make
transfers from the Variable Sub-Accounts to increase the proportion of your
income payments consisting of fixed income payments. Your transfers must be at
least 6 months apart.
TELEPHONE TRANSFERS
You may make transfers by telephone by calling 1-800-776-6978 if you first send
us 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
Under the Dollar Cost Averaging Program, you may automatically transfer a set
amount at regular intervals during the Accumulation Phase from any Variable
Sub-Account, or a 1 year Guarantee Period of the Fixed Account, to any other
Variable Sub-Account. The intervals between transfers, may be monthly,
quarterly, semi-annually, or annually. You may not use the Dollar Cost Averaging
Program to transfer amounts to the Fixed Account.
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. In addition, we will not apply the Market
Value Adjustment to these transfers.
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.
AUTOMATIC FUND 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 Fund Rebalancing
Program, we will automatically rebalance the Contract Value in each Variable
Sub-Account and return it to the desired percentage allocations.
We will rebalance your account each quarter according to your instructions. We
will transfer amounts among the Variable Sub-Accounts to achieve the percentage
allocations you specify. You can change your allocations at any time by
contacting us in writing or by telephone. The new allocation will be effective
with the first rebalancing that occurs after we receive your request. We are not
responsible for rebalancing that occurs prior to receipt of your request.
Example:
Assume that you want your initial purchase payment split among 2 Variable
Sub-Accounts. You want 40% to be in the AIM V.I. Diversified Income
Variable Sub-Account and 60% to be in the AIM V.I. 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 AIM
V.I. Diversified Income 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 AIM V.I. Diversified Income Variable
Sub-Account and use the money to buy more units in the AIM V.I. Growth
Variable Sub-Account so that the percentage allocations would again be 40%
and 60% respectively.
The Automatic Fund 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.
Fund rebalancing is consistent with maintaining your allocation of investments
among market segments, although it is accomplished by reducing your Contract
Value allocated to the better performing segments.
<PAGE>
EXPENSES
- --------------------------------------------------------------------------------
As a Contract owner, you will bear, directly or indirectly, the charges and
expenses described below.
CONTRACT MAINTENANCE CHARGE
During the Accumulation Phase, on each Contract Anniversary, we will deduct a
$35 contract maintenance charge from your Contract Value invested in each
Variable Sub-Account in proportion to the amount invested. During the Payout
Phase, we will deduct the charge proportionately from each income payment.
The charge is for the cost of maintaining each Contract and the Variable
Account. Maintenance costs include expenses we incur in billing and collecting
purchase payments; keeping records; processing death claims, cash withdrawals,
and policy changes; proxy statements; calculating Accumulation Unit Values and
income payments; and issuing reports to Contract owners and regulatory agencies.
We cannot increase the charge. We will waive this charge if:
o total purchase payments equal $50,000 or more, or
o all of your money is allocated to the Fixed Account as of the Contract
Anniversary.
If you surrender your Contract, we will deduct the full contract maintenance
charge unless your Contract qualifies for a waiver.
MORTALITY AND EXPENSE RISK CHARGE
We deduct a mortality and expense risk charge daily at an annual rate of 1.35%
of the daily net assets you have invested in the Variable Sub-Accounts. 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 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 guarantee the mortality and expense risk charge and we cannot increase it. We
assess the mortality and expense risk charge during both the Accumulation Phase
and the Payout Phase.
ADMINISTRATIVE EXPENSE CHARGE
We deduct an administrative expense charge daily at an annual rate of 0.10% of
the average daily net assets you have invested in the Variable Sub-Accounts. We
intend this charge to cover actual administrative expenses that exceed the
revenues from the contract maintenance charge. There is no necessary
relationship between the amount of administrative charge imposed on a given
Contract and the amount of expenses that may be attributed to that Contract. We
assess this charge each day during the Accumulation Phase and the Payout Phase.
We guarantee that we will not raise this charge.
TRANSFER FEE
We do not currently impose a fee upon transfers among the investment
alternatives. However, we reserve the right to charge $10 per transfer after the
12th transfer in each Contract Year. We will not charge a transfer fee on
transfers that are part of a Dollar Cost Averaging or Automatic Fund Rebalancing
Program.
WITHDRAWAL CHARGE
We may assess a withdrawal charge of up to 6% of the purchase payment(s) you
withdraw. The charge declines to 0% after 7 complete years from the day we
receive the purchase payment being withdrawn. A schedule showing how the charge
declines is shown on page 7, above. During each Contract Year, you can withdraw
up to 10% of purchase payments without paying the charge. Unused portions of
this 10% "Free Withdrawal Amount" are not carried forward to future Contract
Years.
We will deduct withdrawal charges, if applicable, from the amount paid. 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 in the
Contract. Thus, for tax purposes, earnings are considered to come out first,
which means you pay taxes on the earnings portion of your withdrawal.
We do not apply a withdrawal charge in the following situations:
o on the Payout Start Date (a withdrawal charge may apply if you elect
to receive income payments for a specified period of less than 120
months);
o withdrawals taken to satisfy IRS minimum distribution rules; or
o withdrawals that qualify for the waiver as described below.
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 may be subject to tax penalties or income tax and a Market Value
Adjustment. You should consult your own tax counsel or other tax advisers
regarding any withdrawals.
Confinement Waiver. We will waive the withdrawal charge on all withdrawals taken
prior to the Payout Start Date under your Contract if the following conditions
are satisfied:
1)you, or the Annuitant if the Contract is owned by a non-natural person,
are first confined to a long term care facility or a hospital for at
least 90 consecutive days. You or the Annuitant must enter the long term
care facility or hospital at least 30 days after the Issue Date;
2)we must receive the request for the withdrawal and written proof of the
stay no later than 90 days following the end of your or the Annuitant's
stay at the long term care facility or hospital; and
3)a physician must have prescribed the stay and the stay must be
medically necessary (as defined in the Contract).
You may not claim this benefit if you, or the Annuitant, or a member of your or
the Annuitant's immediate family (as defined in the Contract), is the physician
prescribing your or the Annuitant's stay in a long term care facility.
Please refer to your Contract for more detailed information about the terms and
conditions of these waivers.
The laws of your state may limit the availability of this waiver and may also
change certain terms and/or benefits available under the waiver. You should
consult your Contract for further details on these variations. Also, even if you
do not need to pay our withdrawal charge because of the waiver, you still may be
required to pay taxes or tax penalties on the amount withdrawn. You should
consult your tax adviser to determine the effect of a withdrawal on your taxes.
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.
We may discontinue this practice sometime in the future and deduct premium taxes
from the purchase payments. Premium taxes generally range from 0% to 4%,
depending on the state.
At the Payout Start Date, 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 SEPARATE ACCOUNT INCOME TAXES
We are not currently maintaining a provision for taxes. In the future, however,
we may establish 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 Fund deducts advisory fees and other expenses from its assets. You
indirectly bear the charges and expenses of the Funds whose shares are held by
the Variable Sub-Accounts. These fees and expenses are described in the
accompanying prospectus for the AIM Variable Insurance Funds, Inc.. For a
summary of current estimates of those charges and expenses, see pages 8-9 above.
We may receive compensation from A I M Advisors, Inc., for administrative
services we provide to the Funds.
<PAGE>
ACCESS TO YOUR MONEY
- --------------------------------------------------------------------------------
You can withdraw some or all of your Contract Value at any time prior to the
Payout Start Date. Withdrawals also are available under limited circumstances on
or after the Payout Start Date. See "Income Plans" on page 26.
The amount payable upon withdrawal is the Contract Value next computed after we
receive the request for a withdrawal at our headquarters, adjusted by any Market
Value Adjustment, less any withdrawal charges, contract maintenance charges,
income tax withholding, penalty tax, and any premium taxes. We will pay
withdrawals from the Variable Account within 7 days of receipt of the request,
subject to postponement in certain circumstances.
You can withdraw money from the Variable Account or the Fixed Account. To
complete a partial withdrawal from the Variable Account, we will cancel
Accumulation Units in an amount equal to the withdrawal and any applicable
withdrawal charge and premium taxes.
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 $50 at a time. You also may withdraw a
lesser amount if you are withdrawing your entire interest in a Variable
Sub-Account.
If you request a total withdrawal, you must return your Contract to us. We also
will deduct a contract maintenance charge of $35, unless we have waived the
contract maintenance charge on your Contract.
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 for up to
6 months or a shorter period if required by law. If we delay payment or transfer
for 30 days or more, we will pay interest as required by law. Any interest would
be payable from the date we receive the withdrawal request to the date we make
the payment or transfer.
SYSTEMATIC WITHDRAWAL PROGRAM
You may choose to receive systematic withdrawal payments on a monthly,
quarterly, semi-annual, or annual basis at any time prior to the Payout Start
Date. The minimum amount of each systematic withdrawal is $50. At our
discretion, systematic withdrawals may not be offered in conjunction with the
Dollar Cost Averaging or Automatic Fund Rebalancing Programs.
Depending on fluctuations in the net asset value of the Variable Sub-Accounts
and the value of the Fixed Account, 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 will make systematic withdrawal payments to you or your designated payee. 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 the amount in any
Guarantee Period to less than $500, we will treat the request as a withdrawal of
the entire amount invested in such Guarantee Period. In addition, if your
request for a partial withdrawal would reduce your Contract Value to less than
$1,000, 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, adjusted by any applicable Market Value Adjustment, less
withdrawal and other charges, including premium taxes.
<PAGE>
INCOME PAYMENTS
- --------------------------------------------------------------------------------
PAYOUT START DATE
You select the Payout Start Date in your application. The Payout Start Date is
the day that we apply your money 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.
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 payments for 10 years.
Three Income Plans are available under the Contract. Each is available to
provide:
o fixed income payments;
o variable income payments; or
o a combination of the two.
The three Income Plans are:
Income Plan 1 -- Life Income with 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 with Guaranteed Payments.
Under this plan, we make periodic income payments for at least as long as
either the Annuitant or the joint Annuitant is alive. If both the
Annuitant and the joint Annuitant die 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 3 -- Guaranteed Payments for a Specified Period (5 Years to 30
Years). Under this plan, we make periodic income payments for the period
you have chosen. These payments do not depend on the Annuitant's life.
Income payments for less than 120 months may be subject to a withdrawal
charge. We will deduct the mortality and expense risk charge from variable
income payments even though we may not bear any mortality risk.
The length of any guaranteed payment period under your selected Income Plan
generally will affect the dollar amounts of each income payment. As a general
rule, longer guarantee periods result in lower income payments, all other things
being equal. For example, if you choose an Income Plan with payments that depend
on the life of the Annuitant but with no minimum specified period for guaranteed
payments, the income payments generally will be greater than the income payments
made under the same Income Plan with a minimum specified period for guaranteed
payments.
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 alive before
we make each payment. Please note that under such Income Plans, if you elect to
take no minimum guaranteed payments, it is possible that the payee could receive
only 1 income payment if the Annuitant and any joint Annuitant both die before
the second income payment, or only 2 income payments if they die before the
third income payment, and so on.
Generally, you may not make withdrawals after the Payout Start Date. One
exception to this rule applies if you are receiving variable income payments
that do not depend on the life of the Annuitant (such as under Income Plan 3).
In that case you may terminate the Variable Account portion of the income
payments at any time and receive a lump sum equal to the present value of the
remaining variable payments due. A withdrawal charge may apply. We also assess
applicable premium taxes against all income payments.
We may make other Income Plans available. You may obtain information about them
by writing or calling us.
You must apply at least the Contract Value in the Fixed Account on the Payout
Start Date to fixed income payments. If you wish to apply any portion of your
Fixed Account option balance to provide variable income payments, you should
plan ahead and transfer that amount to the Variable Sub-Accounts prior to the
Payout Start Date. If you do not tell us how to allocate your Contract Value
among fixed and variable income payments, we will apply your Contract Value in
the Variable Account to variable income payments and your Contract Value in the
Fixed Account to fixed income payments.
We will apply your Contract Value, less adjusted by a Market Value Adjustment,
less applicable taxes to your Income Plan on the Payout Start Date. If the
amount available to apply under an Income Plan is less than $2,000 or not enough
to provide an initial payment of at least $20, and state law permits, we may:
o pay you the Contract Value, adjusted by any Market Value Adjustment
and less any applicable taxes, in a lump sum instead of the periodic
payments you have chosen, or
o reduce the frequency of your payments so that each payment will be at
least $20.
VARIABLE INCOME PAYMENTS
The amount of your variable income payments depends upon the investment results
of the Variable Sub-Accounts you select, the premium taxes you pay, the age and
sex of the Annuitant, and the Income Plan you choose. We guarantee that the
payments will not be affected by (a) actual mortality experience and (b) the
amount of our administration expenses.
We cannot predict the total amount of your variable income payments. Your
variable income payments may be more or less than your total purchase payments
because (a) variable income payments vary with the investment results of the
underlying Funds and (b) the Annuitant could live longer or shorter than we
expect based on the tables we use.
In calculating the amount of the periodic payments in the annuity tables in the
Contract, we assumed an annual investment rate of 3%. If the actual net
investment return of the Variable Sub-Accounts you choose is less than this
assumed investment rate, then the dollar amount of your variable income payments
will decrease. The dollar amount of your variable income payments will increase,
however, if the actual net investment return exceeds the assumed investment
rate. The dollar amount of the variable income payments stays level if the net
investment return equals the assumed investment rate. Please refer to the
Statement of Additional Information for more detailed information as to how we
determine variable income payments.
FIXED INCOME PAYMENTS
We guarantee income payment amounts derived from the Fixed Account for the
duration of the Income Plan. We calculate the fixed income payments by:
1) adjusting the portion of the Contract Value in the Fixed Account on
the Payout Start Date by any applicable Market Value Adjustment;
2) deducting any applicable premium tax; and
3) applying the resulting amount to the greater of (a) the appropriate
value from the income payment table in your Contract or (b) such other
value as we are offering at that time.
We may defer making fixed income payments for a period of up to 6 months or such
shorter time as 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.
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:
1) any Contract owner dies or,
2) the Annuitant dies, if the Contract is owned by a company or other
legal entity.
We will pay the death benefit to the new Contract owner as determined
immediately after the death. The new Contract owner would be a surviving
Contract owner or, if none, the Beneficiary.
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 Settlement Value (that is, the amount that would have been payable
on a full withdrawal of the Contract Value) on the date that we
determine the death benefit, or
3) the Contract Value at the Death Benefit Anniversary immediately
preceding the date that we determine the death benefit adjusted by any
purchase payments, withdrawals, and charges made since that
anniversary.
A "Death Benefit Anniversary" is every seventh Contract Anniversary beginning
with the Issue Date. For example, the Issue Date, 7th and 14th Contract
Anniversaries are the first three Death Benefit Anniversaries.
We will adjust the death benefit by any applicable Market Value Adjustment as of
the date we determine the death benefit. The death benefit will never be less
than the sum of all purchase payments less any amounts previously paid to the
Contract owner (including income tax withholding).
A claim for a distribution on death must include "Due Proof of Death." We will
accept the following documentation as Due Proof of Death:
o a certified copy of a death certificate;
o a certified copy of a decree of a court of competent jurisdiction as
to a finding of death; or
o any other proof acceptable to us.
ENHANCED DEATH BENEFIT OPTIONS
You can select an enhanced death benefit option when you purchase the Contract.
Enhanced Death Benefit A. If you select Enhanced Death Benefit A, the death
benefit will be the greater of the values stated in the Death Benefit Amount
provision above, or the value of Enhanced Death Benefit A. The Enhanced Death
Benefit A is:
The greatest of the Anniversary Values as of the date we determine the
death benefit. An "Anniversary Value" is equal to the Contract Value on a
Contract Anniversary, increased by purchase payments made since that
Anniversary and reduced by the amount of any partial withdrawals since
that anniversary. Anniversary Values will be calculated for each Contract
Anniversary prior to the earlier of:
(i) the date we determine the death benefit, or
(ii) the 75th birthday of the oldest Contract owner, or, the Annuitant
if the Contract owner is not a natural person, or 5 years after
the Issue Date, if later.
Enhanced Death Benefit B. If you select Enhanced Death Benefit B, the death
benefit will be the greater of the values stated in the Death Benefit Amount
provision above, or the value of Enhanced Death Benefit B. The Enhanced Death
Benefit B is:
Total purchase payments minus the sum of all partial withdrawals. Each
purchase payment and each partial withdrawal will accumulate daily at a
rate equivalent to 5% per year until the earlier of:
(i) the date we determine the death benefit, or
(ii) the first day of the month following the 75th birthday of the
oldest Contract owner, or, the Annuitant if the Contract owner is
not a natural person, or 5 years after the Issue Date, if later.
If neither option is selected by the Owner, the Contract will automatically
include Enhanced Death Benefit A. We will determine the value of the death
benefit at the end of the Valuation Date on which we receive a complete request
for payment of the death benefit which includes due proof of death. Neither
Enhanced Death Benefit A nor Enhanced Death Benefit B will ever be greater than
the maximum death benefit allowed by any non-forfeiture laws which govern the
Contract.
DEATH BENEFIT PAYMENTS
A death benefit will be paid if:
1) the Contract owner elects to receive the death benefit distributed in
a single payment within 180 days of the date of death, and
2) the death benefit is paid as of the day we determine the value of the
death benefit. Otherwise, we will pay the Settlement Value. 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 death. We are currently
waiving the 180 day limit, but we reserve the right to enforce the
limitation in the future.
In any event, the entire value of the Contract must be distributed within 5
years after the date of death unless an Income Plan is elected or a surviving
spouse continues the Contract in accordance with the provisions described below.
The Contract owner eligible to receive death benefits has the following options:
1) If the Contract owner is not a natural person, then the Contract owner
may receive the death benefit in one or more distributions.
2) If the Contract owner is a natural person, the Contract owner may
elect to receive the death benefit in one or more distributions or by
periodic payments through an Income Plan. Payments from the Income
Plan must begin within one year of the date of death and must be
payable throughout:
o the life of the Contract owner; or
o a period not to exceed the life expectancy of the
Contract owner; or
o the life of the Contract owner with payments guaranteed
for a period not to exceed the life expectancy of the
Contract owner.
3) If the surviving spouse of the deceased Contract owner is the new
Contract owner, then the spouse may elect one of the options listed
above or may continue the Contract in the Accumulation Phase as if the
death had not occurred. The Contract may only be continued once. 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. However, any
applicable Market Value Adjustment, determined as of the date of the
withdrawal, will apply.
Any death benefit payable in a lump sum must be paid within 5 years of
the date of death. If no election is made, funds will be distributed
at the end of the 5 year period.
<PAGE>
MORE INFORMATION
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GLENBROOK
Glenbrook is the issuer of the Contract. Glenbrook is a stock life insurance
company organized under the laws of the State of Arizona in 1998. Previously,
Glenbrook was organized under the laws of the State of Illinois in 1992.
Glenbrook was originally organized under the laws of the State of Indiana in
1965. From 1965 to 1983 Glenbrook was known as "United Standard Life Assurance
Company" and from 1983 to 1992 as "William Penn Life Assurance Company of
America."
Glenbrook is currently licensed to operate in the District of Columbia and all
states except New York. We intend to offer the Contract in those jurisdictions
in which we are licensed. Our headquarters is located at 3100 Sanders Road,
Northbrook, Illinois, 60062.
Glenbrook is a wholly owned subsidiary of Allstate Life Insurance Company
("Allstate Life"), a stock life insurance company incorporated under the laws of
the State of Illinois. Allstate Life is a wholly owned subsidiary of Allstate
Insurance Company, a stock property-liability insurance company incorporated
under the laws of Illinois. All of the outstanding capital stock of Allstate
Insurance Company is owned by The Allstate Corporation.
Glenbrook and Allstate Life entered into a reinsurance agreement effective June
5, 1992. Under the reinsurance agreement, Allstate Life reinsures substantially
all of Glenbrook's liabilities under its various insurance 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 Glenbrook; Glenbrook 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 Glenbrook. A.M. Best Company also assigns Glenbrook the rating
of A+(r) because Glenbrook 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 Glenbrook. Glenbrook 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
Glenbrook established the Glenbrook Life and Annuity Company Separate Account A
on September 6, 1995. 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 Glenbrook.
We own the assets of the Variable Account. The Variable Account is a segregated
asset account under Arizona 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
Glenbrook.
The Variable Account consists of 13 Variable Sub-Accounts, each of which invests
in a corresponding Fund. 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 Funds. 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 FUNDS
Dividends and Capital Gain Distributions. We automatically reinvest all
dividends and capital gains distributions from the Funds in shares of the
distributing Fund at their net asset value.
Voting Privileges. As a general matter, you do not have a direct right to vote
the shares of the Funds 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 Funds 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 Fund 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 reserve for such Contract allocated to the applicable Variable
Sub-account by the net asset value per share of the corresponding Fund. 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 on a pro-rata basis to reduce the votes eligible
to be cast.
We reserve the right to vote Fund 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 Funds. If the shares of any of the Funds 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 Fund and substitute shares of another eligible investment
fund. Any substitution of securities will comply with the requirements of the
1940 Act. 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 Funds 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 Fund. The boards of directors of these Funds monitor for possible
conflicts among separate accounts buying shares of the Funds. 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 Fund's board of directors may
require a separate account to withdraw its participation in a Fund. A Fund'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
Distribution. Allstate Life Financial Services, Inc. ("ALFS"), located at 3100
Sanders Road, Northbrook, Illinois 60062-7154, serves as distributor of the
Contracts. ALFS is a wholly owned subsidiary of Allstate Life. ALFS is a
registered broker dealer under the Securities and Exchange Act of 1934, as
amended ("Exchange Act"), and is a member of the National Association of
Securities Dealers, Inc.
We will pay commissions to broker-dealers who sell the Contracts. Commissions
paid may vary, but we estimate that the total commissions paid on all Contract
sales will not exceed 8% of any purchase payments (on a present value basis).
These commissions are intended to cover distribution expenses. Sometimes, we
also pay the broker-dealer a persistency bonus in addition to the standard
commissions. We do not expect that a persistency bonus will exceed 1.20%, on an
annual basis, of the Contract Values considered in connection with the bonus.
These commissions are intended to cover distribution expenses. In some states,
Contracts may be sold by representatives or employees of banks which may be
acting as broker-dealers without separate registration under the Exchange Act,
pursuant to legal and regulatory exceptions.
Glenbrook does not pay ALFS a commission for distribution of the Contracts. The
underwriting agreement with ALFS provides that we will reimburse ALFS for any
liability to Contract owners arising out of services rendered or Contracts
issued.
Administration. We have primary responsibility for all administration of the
Contracts and the Variable Account.
We provide the following administrative services, among others:
o issuance of the Contracts;
o maintenance of Contract owner records;
o Contract owner services;
o calculation of unit values;
o maintenance of the Variable Account; and
o preparation of Contract owner reports.
We will send you Contract statements and transaction confirmations at least
annually. 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
reserve the right to 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.
LEGAL MATTERS
Freedman, Levy, Kroll & Simonds, Washington, D.C., has advised Glenbrook on
certain federal securities law matters. All matters of state law pertaining to
the Contracts, including the validity of the Contracts and Glenbrook's right to
issue such Contracts under state insurance law, have been passed upon by Michael
J. Velotta, General Counsel of Glenbrook.
YEAR 2000
Glenbrook is heavily dependent upon complex computer systems for all phases of
its operations, including customer service, and policy and contract
administration. Since many of Glenbrook's older computer software programs
recognize only the last two digits of the year in any date, some software may
fail to operate properly in or after the year 1999, if the software is not
reprogrammed or replaced ("Year 2000 Issue"). Glenbrook believes that many of
its counterparties and suppliers also have Year 2000 Issues which could affect
Glenbrook. In 1995, Allstate Insurance Company commenced a plan intended to
mitigate and/or prevent the adverse effects of Year 2000 Issues. These
strategies include normal development and enhancement of new and existing
systems, upgrades to operating systems already covered by maintenance agreements
and modifications to existing systems to make them Year 2000 compliant. The plan
also includes Glenbrook actively working with its major external counterparties
and suppliers to assess their compliance efforts and Glenbrook's exposure to
them. Glenbrook presently believes that it will resolve the Year 2000 Issue in a
timely manner, and the financial impact will not materially affect its results
of operations, liquidity or financial position. Year 2000 costs are and will be
expensed as incurred.
<PAGE>
TAXES
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The following discussion is general and is not intended as tax advice. Glenbrook
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) Glenbrook 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 Glenbrook does not have control over the Funds their investments,
we expect the Funds 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. Glenbrook does not know what standards will
be set forth in any regulations or rulings which the Treasury Department may
issue. It is possible that future standards announced by the Treasury Department
could adversely affect the tax treatment of your Contract. We reserve the right
to modify the Contract as necessary to attempt to prevent you from being
considered the federal tax owner of the assets of the Variable Account. However,
we make no guarantee that such modification to the Contract will be successful.
Taxation of Partial and Full Withdrawals. If you make a partial withdrawal under
a non-Qualified Contract, amounts received are taxable to the extent the
Contract Value, without regard to surrender charges, exceeds the investment in
the Contract. The investment in the Contract is the gross premium paid for the
Contract minus any amounts previously received from the Contract if such amounts
were properly excluded from your gross income. If you make a partial withdrawal
under a Qualified Contract, the portion of the payment that bears the same ratio
to the total payment that the investment in the Contract (i.e., nondeductible
IRA contributions, after tax contributions to qualified plans) bears to the
Contract Value, is excluded from your income. If you make a full withdrawal
under a non-Qualified Contract or a Qualified Contract, the amount received will
be taxable only to the extent it exceeds the investment in the Contract.
"Nonqualified distributions" from Roth IRAs are treated as made from
contributions first and are included in gross income only to the extent that
distributions exceed contributions. "Qualified distributions" from Roth IRAs are
not included in gross income. "Qualified distributions" are any distributions
made more than 5 taxable years after the taxable year of the first contribution
to any Roth IRA and which are:
o made on or after the date the individual attains age 59 1/2,
o made to a beneficiary after the Contract owner's death,
o attributable to the Contract owner being disabled, or
o for a first time home purchase (first time home purchases are subject
to a lifetime limit of $10,000).
If you transfer a non-Qualified Contract without full and adequate consideration
to a person other than your spouse (or to a former spouse incident to a
divorce), you will be taxed on the difference between the Contract Value and the
investment in the Contract at the time of transfer. Except for certain Qualified
Contracts, any amount you receive as a loan under a Contract, and any assignment
or pledge (or agreement to assign or pledge) of the Contract Value is treated as
a withdrawal of such amount or portion.
Taxation of Annuity Payments. Generally, the rule for income taxation of annuity
payments received from a non-Qualified Contract provides for the return of your
investment in the Contract in equal tax-free amounts over the payment period.
The balance of each payment received is taxable. For fixed annuity payments, the
amount excluded from income is determined by multiplying the payment by the
ratio of the investment in the Contract (adjusted for any refund feature or
period certain) to the total expected value of annuity payments for the term of
the Contract. If you elect variable annuity payments, the amount excluded from
taxable income is determined by dividing the investment in the Contract by the
total number of expected payments. The annuity payments will be fully taxable
after the total amount of the investment in the Contract is excluded using these
ratios. If you die, and annuity payments cease before the total amount of the
investment in the Contract is recovered, the unrecovered amount will be allowed
as a deduction for your last taxable year.
Taxation of Annuity Death Benefits. Death of a Contract owner, or death of the
Annuitant if the Contract is owned by a non-natural person, will cause a
distribution of death benefits from a Contract. Generally, such amounts are
included in income as follows:
1) if distributed in a lump sum, the amounts are taxed in the same manner
as a full withdrawal, or
2) if distributed under an annuity option, the amounts are taxed in the
same manner as an annuity payment. Please see the Statement of
Additional Information for more detail on distribution at death
requirements.
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 Glenbrook (or its affiliates) to the same Contract owner during any
calendar year will be aggregated and treated as one annuity contract for
purposes of determining the taxable amount of a distribution.
Tax Qualified Contracts
Contracts may be used as investments with certain qualified plans such as:
o Individual Retirement Annuities or Accounts (IRAs) under Section 408
of the Code;
o Roth IRAs under Section 408A of the Code;
o Simplified Employee Pension Plans under Section 408(k) of the Code;
o Savings Incentive Match Plans for Employees (SIMPLE) Plans under
Section 408(p) of the Code;
o Tax Sheltered Annuities under Section 403(b) of the Code;
o Corporate and Self Employed Pension and Profit Sharing Plans; and
o State and Local Government and Tax-Exempt Organization Deferred
Compensation Plans.
In the case of certain qualified plans, the terms of the plans may govern the
right to benefits, regardless of the terms of the Contract.
Restrictions Under Section 403(b) Plans. Section 403(b) of the Code provides
tax-deferred retirement savings plans for employees of certain non-profit and
educational organizations. Under Section 403(b), any Contract used for a 403(b)
plan must provide that distributions attributable to salary reduction
contributions made after December 31, 1998, and all earnings on salary reduction
contributions, may be made only:
1) on or after the date of employee
o attains age 59 1/2,
o separates from service,
o dies,
o becomes disabled, or
2) on account of hardship (earnings on salary reduction contributions may
not be distributed on account of hardship).
These limitations do not apply to withdrawals where Glenbrook is directed to
transfer some or all of the Contract Value to another 403(b) plan.
INCOME TAX WITHHOLDING
Glenbrook 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).
Glenbrook may be required to withhold federal and state income taxes on any
distributions from non-Qualified Contracts or Qualified Contracts that are not
eligible rollover distributions, unless you notify us of your election to not
have taxes withheld.
<PAGE>
ANNUAL REPORTS AND OTHER DOCUMENTS
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Glenbrook's annual report on Form 10-K for the year ended December 31, 1998 is
incorporated herein by reference, which means that it is legally a part of this
prospectus.
After the date of this prospectus and before we terminate the offering of the
securities under this prospectus, all documents or reports we file with the SEC
under the Exchange Act are also incorporated herein by reference, which means
that they also legally become a part of this prospectus.
Statements in this prospectus, or in documents that we file later with the SEC
and that legally become a part of this prospectus, may change or supersede
statements in other documents that are legally part of this prospectus.
Accordingly, only the statement that is changed or replaced will legally be a
part of this prospectus.
We file our Exchange Act documents and reports, including our annual and
quarterly reports on Form 10-K and Form 10-Q electronically on the SEC's "EDGAR"
system using the identifying number CIK No. 0000947878. The SEC maintains a Web
site that contains reports, proxy and information statements and other
information regarding registrants that file electronically with the SEC. The
address of the site is http://www.sec.gov. You also can view these materials at
the SEC's Public Reference Room at 450 Fifth Street, N.W., Washington, D.C.
20549. For more information on the operations of SEC's Public Reference Room,
call 1-800-SEC-0330.
If you have received a copy of this prospectus, and would like a free copy of
any document incorporated herein by reference (other than exhibits not
specifically incorporated by reference into the text of such documents), please
write or call us at P.O. Box 94039, Palatine, Illinois 60094-4039 (telephone:
1-800-776-6978).
<PAGE>
PERFORMANCE INFORMATION
- ------------------------------------------------------------------------------
We may advertise the performance of the Variable Sub-Accounts, including yield
and total return information. Yield refers to the income generated by an
investment in a Variable Sub-Account over a specified period. Total return
represents the change, over a specified period of time, in the value of an
investment in a Variable Sub-Account after reinvesting all income distributions
All performance advertisements will include, as applicable, standardized yield
and total return figures that reflect the deduction of insurance charges, the
contract maintenance charge, and withdrawal charge. Performance advertisements
also may include total return figures that reflect the deduction of insurance
charges, but not the contract maintenance or withdrawal charges. The deduction
of such charges would reduce the performance shown. In addition, performance
advertisements may include aggregate, average, year-by-year, or other types of
total return figures.
Performance information for periods prior to the inception date of the Variable
Sub-Accounts will be based on the historical performance of the corresponding
Funds for the periods beginning with the inception dates of the Funds 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.
EXPERTS
- --------------------------------------------------------------------------------
The financial statements and the related financial statement schedule
incorporated in this prospectus by reference from Glenbrook's Annual Report on
Form 10-K for the year ended December 31, 1998 have been audited by Deloitte &
Touche LLP, independent auditors, as stated in their report, which is
incorporated herein by reference, and have been so incorporated in reliance upon
the report of such firm given upon their authority as experts in accounting and
auditing.
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<CAPTION>
APPENDIX A
Accumulation Unit Value and Number of Accumulation Units
Outstanding for Each Variable Sub-Account Since Inception
<S> <C> <C> <C> <C>
For the Years Beginning January 1* and Ending December 31 1995 1996 1997 1998
---- ---- ---- ----
December 31
AIM V.I. AGGRESSIVE GROWTH SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period - - - $ 10.000
Accumulation Unit Value, End of Period - - - $ 9.810
Number of Units Outstanding, End of Period - - - 163,537
AIM V.I. BALANCED SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period - - - $ 10.000
Accumulation Unit Value, End of Period - - - $ 11.193
Number of Units Outstanding, End of Period - - - 244,603
AIM V.I. CAPITAL DEVELOPMENT SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period - - - $ 10.000
Accumulation Unit Value, End of Period - - - $ 9.160
Number of Units Outstanding, End of Period - - - 126,384
AIM V.I. HIGH YIELD SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period - - - $ 10.000
Accumulation Unit Value, End of Period - - - $ 9.141
Number of Units Outstanding, End of Period - - - 170,679
AIM V.I. CAPITAL APPRECIATION SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period $10.000 $ 9.827 $ 11.387 $ 12.739
Accumulation Unit Value, End of Period $ 9.827 $ 11.387 12.739 14.979
Number of Units Outstanding, End of Period 996 4,471,775 7,850,032 8,770,421
AIM V.I. DIVERSIFIED INCOME SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period $10.000 $ 10.068 $ 10.934 $ 11.788
Accumulation Unit Value, End of Period $10.068 $ 10.934 $ 11.788 $ 12.035
Number of Units Outstanding, End of Period 0 747,505 1,950,608 2,301,209
AIM V.I. GLOBAL UTILITIES SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period $10.000 $ 10,209 $ 11.276 $ 13.518
Accumulation Unit Value, End of Period 10,209 $ 11.276 $ 13.518 $ 15.534
Number of Units Outstanding, End of Period 0 163,534 426,581 630,811
AIM V.I. GOVERNMENT SECURITIES SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period $10.000 $ 10.082 $ 10.164 $ 10.835
Accumulation Unit Value, End of Period $10.082 $ 10.164 $ 10.835 $ 11.484
Number of Units Outstanding, End of Period 0 263,768 550,452 912,586
AIM V.I. GROWTH SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period $10.000 $ 9.852 $ 11.466 $ 14.338
Accumulation Unit Value, End of Period 9.852 11.466 14.388 $ 18.954
Number of Units Outstanding, End of Period 104 2,070,239 4,031,175 5,170,994
AIM V.I. GROWTH AND INCOME SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period $10.000 $ 9.897 $ 11.699 $ 14.496
Accumulation Unit Value, End of Period $ 9.897 $ 11.699 $ 14.496 $ 18.243
Number of Units Outstanding, End of Period 103 2,425,462 5,374,119 6,935,245
AIM V.I. INTERNATIONAL EQUITY SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period $10.000 $ 10.103 $ 11.953 $ 12.598
Accumulation Unit Value, End of Period $10.103 $ 11.953 $ 12.598 14.340
Number of Units Outstanding, End of Period 936 1,969,297 3,667,815 3,847,934
AIM V.I. MONEY MARKET SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period $10.000 $ 10.023 $ 10.369 10.745
Accumulation Unit Value, End of Period $10.023 $ 10.369 $ 10.745 $ 11.125
Number of Units Outstanding, End of Period 0 894,947 1,291,169 1,389,344
AIM V.I. VALUE SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period $10.000 $ 9.783 $ 11.090 $ 13.520
Accumulation Unit Value, End of Period $ 9.783 $ 11.090 $ 13.520 $ 17.644
Number of Units Outstanding, End of Period 966 3,528,353 7,294,719 9,222,186
</TABLE>
* All Variable Sub-Accounts commenced operations on December 4, 1995, with the
exception of the AIM V.I. Aggressive Growth, Balanced, Capital Development, and
High Yield Sub-Accounts, which commenced operations on May 1, 1998.
<PAGE>
[back cover]
APPENDIX B
MARKET VALUE ADJUSTMENT
The Market Value Adjustment is based on the following:
I = the Treasury Rate for a maturity equal to the applicable Guarantee
Period for the week preceding the establishment of the Guarantee Period.
N = the number of whole and partial years from the date we receive the
withdrawal, transfer, or death benefit request, or from the Payout Start
Date, to the end of the Guarantee Period; and
J = the Treasury Rate for a maturity of length N for the week preceding
the receipt of the withdrawal, transfer, death benefit, or income payment
request. If a note for a maturity of length N is not available, a weighted
average will be used. If N is one year or less, J will be the 1-year
Treasury rate.
"Treasury Rate" means the U.S. Treasury Note Constant Maturity Yield as
reported in Federal Reserve Bulletin Release H.15.
The Market Value Adjustment factor is determined from the following formula:
.9 X (I - J) X N
To determine the Market Value Adjustment, we will multiply the Market Value
Adjustment factor by the amount transferred, withdrawn (in excess of the Free
Withdrawal Amount), paid as a death benefit, or applied to an Income Plan, from
a Guarantee Period at any time other than during the 30 day period after such
Guarantee Period expires.
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EXAMPLES OF MARKET VALUE ADJUSTMENT
Purchase Payment: $10,000 allocated to a Guarantee Period
Guarantee Period: 5 years
Treasury Rate (at the
time the Guarantee
Period was established): 4.50%
Full Surrender: End of Contract Year 3
NOTE: These examples assume that premium taxes are not applicable.
EXAMPLE 1: (Assumes declining interest rates)
<S> <C> <C>
Step 1. Calculate Contract Value at End of Contract Year 3: $10,000.00 X (1.0450)3 = $11,411.66
Step 2. Calculate the Free Withdrawal Amount: .10 X $10,000.00 = $1,000.00
Step 3. Calculate the Withdrawal Charge: .05 X ($10,000.00 - $1,000.00) = $450.00
Step 4. Calculate the Market Value Adjustment: I = 4.5%
J = 4.2%
730 Days
--------
N = 365 days = 2
Market Value Adjustment Factor: .9 X(I-J) X N
= .9 X (.045 - .042) X (2) = .0054
Market Value Adjustment = Market Value Adjustment
Factor X Amount Subject to Market Value Adjustment:
= .0054 X ($11,411.66-$1,000) = $56.22
Step 5. Calculate the amount received by Contract owner as
result of full withdrawal at the end of Contract Year 3: $11,411.66-$450.00+$ 56.22 = $11,017.88
</TABLE>
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<TABLE>
<CAPTION>
EXAMPLE 2: (Assumes rising interest rates)
<S> <C> <C>
Step 1. Calculate Contract Value at End of Year 3: $10,000.00 X (1.045)3 = $11,411.66 Contract Year 3:
Step 2. Calculate the Free Withdrawal Amount: .10 X ($10,000.00) = $1,000.00
Step 3. Calculate the Withdrawal Charge: .05 X ($10,000.00 - $1,000.00) = $450.00
Step 4. Calculate the Market Value Adjustment I = 4.5%
J = 4.8%
730 days
--------
N = 365 days = 2
Market Value Adjustment Factor: .9 X (I-J) X N
= .9 X (.045 - .048) X (2) = -.0054
Market Value Adjustment = Market Value Adjustment
Factor X Amount Subject to Market Value Adjustment
= -.0054 X ($11,411.66 - $1,000.00) = - $56.22
Step 5. Calculate the amount received by Contract owner as a $11,411.66 - $450.00 - 56.22 =
result of full withdrawal at the end of Contract Year 3: $11,411.66 - $450.00 - 56.22 = $10,905.44
</TABLE>
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
TABLE OF CONTENTS
Description
Additions, Deletions or Substitutions of Investments.....................
The Contract.............................................................
Purchases.......................................................
Tax-free Exchanges (1035 Exchanges, Rollovers and Transfers)....
Performance Information..................................................
Calculation of Accumulation Unit Values..................................
Calculation of Variable Income Payments..................................
General Matters..........................................................
Incontestability................................................
Settlements.....................................................
Safekeeping of the Variable Account's Assets....................
Premium Taxes...................................................
Tax Reserves....................................................
Federal Tax Matters......................................................
Qualified Plans..........................................................
Experts..................................................................
Financial Statements.....................................................
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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.
C-1
