THE AIM LIFETIME PLUS(SM) II VARIABLE ANNUITY
Glenbrook Life and Annuity Company Prospectus dated May 1, 2000
Post Office 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) II 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 20 investment alternatives ("investment
alternatives"). The investment alternatives include 3 fixed account options
("Fixed Account Options") and 17 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:
. AIM V.I. Aggressive Growth Fund . AIM V.I. Global Utilities Fund
. AIM V.I. Balanced Fund . AIM V.I. Government Securities Fund
. AIM V.I. Blue Chip 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. Dent Demographic Trends Fund
. AIM V.I. International Equity Fund
. AIM V.I. Diversified Income Fund . AIM V.I. Money Market Fund
. AIM V.I. Global Growth and Income Fund
. AIM V.I. Telecommunications and
Technology Fund*
. AIM V.I. Value Fund
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* Effective May 1, 2000, the Fund changed its name from AIM V.I.
Telecommunications Fund to AIM V.I. Telecommunications and Technology Fund to
reflect changes in its investment policies. We have made a corresponding
change in the name of the Sub-Account that invests in that Fund.
We (Glenbrook) have filed a Statement of Additional Information, dated May 1,
2000, with the Securities and Exchange Commission ("SEC"). It contains more
information about the Contract and is incorporated herein by reference, which
means 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.
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TABLE OF CONTENTS
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Page
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Important Terms................................................ 3
The Contract At A Glance....................................... 4
How the Contract Works......................................... 6
Expense Table.................................................. 7
Financial Information.......................................... 10
Overview
The Contract................................................... 11
Purchases...................................................... 13
Contract Value................................................. 14
Investment Alternatives........................................ 15
The Variable Sub-Accounts.................................... 15
The Fixed Account Options.................................... 16
Transfers.................................................... 20
Expenses....................................................... 23
Access To Your Money........................................... 27
Income Payments................................................ 29
Death Benefits................................................. 32
Contract
Features
More Information:
Glenbrook.................................................... 35
The Variable Account......................................... 35
The Funds.................................................... 36
The Contract................................................. 36
Qualified Plans.............................................. 37
Legal Matters................................................ 37
Year 2000.................................................... 37
Taxes.......................................................... 39
Annual Reports and Other Documents............................. 42
Performance Information........................................ 43
Experts........................................................ 44
Appendix A--Accumulation Unit Values........................... A-1
Appendix B--Market Value Adjustment Example.................... B-1
Statement of Additional Information Table of Contents.......... C-1
Other
Information
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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
Annuitant............................................................. 11
Automatic Additions Program........................................... 13
Automatic Fund Rebalancing Program.................................... 21
Beneficiary........................................................... 11
Cancellation Period................................................... 4
*Contract............................................................. 6,11
Contract Anniversary.................................................. 5
Contract Owner ("You")................................................ 6
Contract Value........................................................ 14
Contract Year......................................................... 4
Death Benefit Anniversary............................................. 32
Dollar Cost Averaging Program......................................... 21
Due Proof of Death.................................................... 32
Enhanced Death Benefit Rider.......................................... 32
Enhanced Death and Income Benefit Combination Rider................... 33
Fixed Account Options................................................. 16-18
Free Withdrawal Amount................................................ 24
Funds................................................................. 15
Glenbrook ("We")...................................................... 1,35
Guarantee Period...................................................... 16
Income Plan........................................................... 6,29
Investment Alternatives............................................... 1
Issue Date............................................................ 6
Market Value Adjustment............................................... 18
Payout Phase.......................................................... 6
Payout Start Date..................................................... 29
Qualified Contract.................................................... 4
Right to Cancel....................................................... 4,13
SEC................................................................... 1
Settlement Value...................................................... 32
Systematic Withdrawal Program......................................... 27
Treasury Rate......................................................... 18
Valuation Date........................................................ 13
Variable Account...................................................... 1,35
Variable Sub-Account.................................................. 1,15
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* If you purchase a group Contract, we will issue you a certificate that
represents your ownership and that summarizes the provisions of the Contract.
References to "Contract" in this prospectus include certificates, unless the
context requires otherwise. In certain states, the Contract is available only
as a group Contract.
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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.
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 $1,000.
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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 federal or
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:
. Total Variable Account annual fees equal to 1.10%
of average daily net assets (1.30% if you select
the Enhanced Death Benefit Rider and 1.50% if you
select the Enhanced Death and Income Benefit
Combination Rider)
. Annual contract maintenance charge of $35
(with certain exceptions)
. Withdrawal charges ranging from 0% to 7% of
payment withdrawn (with certain exceptions)
. Transfer fee of $10 after 12th transfer in
any Contract Year (fee currently waived)
. 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 The Contract offers 20 investment alternatives
Alternatives including:
. 3 Fixed Account Options (which credit
interest at rates we guarantee)
. 17 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 Options, or to find out how the Variable
Sub-Accounts have performed, please call us at
1-800-776-6978.
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Special Services For your convenience, we offer these
special services:
. Automatic Fund Rebalancing Program
. Automatic Additions Program
. Dollar Cost Averaging Program
. 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:
. life income with guaranteed payments
. a joint and survivor life income with
guaranteed payments
. 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 an Enhanced Death Benefit
Rider and an Enhanced Death and Income Benefit
Combination Rider.
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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.
No minimum applies to the amount you transfer.
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 anytime during the Accumulation Phase. Full or
partial withdrawals are available under limited
circumstances on or after the Payout Start Date.
In general, you must withdraw at least $50 at a
time ($1,000 for withdrawals made during the Payout
Phase). 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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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 20 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 Fixed
Account Options. If you invest in the Fixed Account Options, you will earn a
fixed rate of interest that we declare periodically. If you invest in any of the
Variable Sub-Accounts, your investment return will vary up or down depending on
the performance of the corresponding 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 29. 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>
<S> <C> <C> <C> <C>
Issue Payout Start
Date Accumulation Phase Date Payout Phase
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| | | ?
You save for retirement >
You buy You elect to receive You can receive Or you can
a Contract income payments or receive income payments receive income
a lump sum payment for a set period payments for life
</TABLE>
As the Contract owner, you exercise all of the rights and privileges provided by
the Contract. If you die, any surviving Contract owner, or if there is none, the
Beneficiary will exercise the rights and privileges provided by the Contract.
See "The Contract." In addition, if you die before the Payout Start Date, we
will pay a death benefit to any surviving Contract owner, or if there is none,
to your Beneficiary. See "Death Benefits."
Please call us at 1-800-776-6978 if you have any question about how the Contract
works.
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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 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.
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: 7% 7% 6% 6% 5% 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 15% of the Contract Value as of
the beginning of the Contract Year without incurring a withdrawal charge or
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, excluding transfers due to dollar cost averaging and automatic fund
rebalancing. We are currently waiving the transfer fee.
VARIABLE ACCOUNT ANNUAL EXPENSES
(as a percentage of average daily net asset value deducted from each Variable
Sub-Account)
Mortality and Expense Risk Charge................................. 1.00%*
Administrative Expense Charge..................................... 0.10%
Total Variable Account Annual Expenses............................ 1.10%
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*If you select the Enhanced Death Benefit Rider, the mortality and expense
risk charge will be equal to 1.20% of your Contract's average daily net
assets in the Variable Account. If you select the Enhanced Death and Income
Benefit Combination Rider, the mortality and expense risk charge will be
equal to 1.40% of the daily net assets of the Variable Account.
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FUND ANNUAL EXPENSES
(After Voluntary Reductions and Reimbursements)
(as a percentage of Fund average daily net assets)(1)
Management Other Total Annual
Fund Fees Expenses Fund Expenses
- ---- ---------- -------- -------------
AIM V.I. Aggressive Growth Fund(2)........... 0.80% 1.62% 2.42%
AIM V.I. Balanced Fund(2).................... 0.75% 0.56% 1.31%
AIM V.I. Blue Chip Fund(2)................... 0.75% 0.55% 1.30%
AIM V.I. Capital Appreciation Fund........... 0.62% 0.11% 0.73%
AIM V.I. Capital Development Fund(2)......... 0.75% 2.67% 3.42%
AIM V.I. Dent Demographic Trends Fund(2)..... 0.85% 0.55% 1.40%
AIM V.I. Diversified Income Fund............. 0.60% 0.23% 0.83%
AIM V.I. Global Growth and Income Fund(2).... 1.00% 0.37% 1.37%
AIM V.I. Global Utilities Fund............... 0.65% 0.49% 1.14%
AIM V.I. Government Securities Fund.......... 0.50% 0.40% 0.90%
AIM V.I. Growth Fund......................... 0.63% 0.10% 0.73%
AIM V.I. Growth and Income Fund.............. 0.61% 0.16% 0.77%
AIM V.I. High Yield Fund(2).................. 0.63% 0.79% 1.42%
AIM V.I. International Equity Fund........... 0.75% 0.22% 0.97%
AIM V.I. Money Market Fund................... 0.40% 0.20% 0.60%
AIM V.I. Telecommunications and Technology
Fund........................................ 1.00% 0.27% 1.27%
AIM V.I. Value Fund.......................... 0.61% 0.15% 0.76%
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(1) Figures shown in the table are for the year ended December 31, 1999.
(2) 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:
Management Other Total Annual
Fund Fees Expenses Fund Expenses
---- ---------- -------- -------------
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%
The AIM V.I. Blue Chip, Dent Demographic Trends, Global Growth and Income, and
Telecommunications and Technology Fund commenced operations on December 29,
1999, December 29, 1999, October 15, 1999 and October 15, 1999, respectively.
For the latter funds, the management fee, other expenses and total annual fund
operating expenses are based on estimates for these Funds' current full fiscal
year.
EXAMPLE 1
The example below shows the dollar amount of expenses that you would bear
directly or indirectly if you:
. invested $1,000 in a Variable Sub-Account,
. earned a 5% annual return on your investment, and
.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.
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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...................... $101 $176 $243 $425
AIM V.I. Balanced............................... $ 90 $144 $191 $322
AIM V.I. Blue Chip.............................. $ 90 $144 $190 $321
AIM V.I. Capital Appreciation................... $ 85 $127 $162 $264
AIM V.I. Capital Development.................... $110 $204 $288 $508
AIM V.I. Dent Demographic....................... $ 91 $147 $195 $331
AIM V.I. Diversified Income..................... $ 86 $130 $167 $274
AIM V.I. Global Growth and Income............... $ 91 $146 $194 $328
AIM V.I. Global Utilities....................... $ 88 $139 $182 $306
AIM V.I. Government Securities.................. $ 86 $132 $171 $281
AIM V.I. Growth................................. $ 85 $127 $162 $264
AIM V.I. Growth and Income...................... $ 85 $129 $164 $268
AIM V.I. High Yield............................. $ 91 $147 $196 $333
AIM V.I. International Equity................... $ 87 $134 $174 $289
AIM V.I. Money Market........................... $ 83 $124 $156 $250
AIM V.I. Telecommunications and Technology...... $ 90 $143 $189 $318
AIM V.I. Value.................................. $ 85 $128 $164 $267
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 for a specified period), at the end of each period.
SUB-ACCOUNT 1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ----------- ------ ------- ------- --------
AIM V.I. Aggressive Growth...................... $41 $123 $208 $425
AIM V.I. Balanced............................... $29 $ 90 $153 $322
AIM V.I. Blue Chip.............................. $29 $ 90 $153 $321
AIM V.I. Capital Appreciation................... $23 $ 72 $124 $264
AIM V.I. Capital Development.................... $51 $153 $255 $508
AIM V.I. Dent Demographic....................... $30 $ 93 $158 $331
AIM V.I. Diversified Income..................... $24 $ 75 $129 $274
AIM V.I. Global Growth and Income............... $30 $ 92 $156 $328
AIM V.I. Global Utilities....................... $28 $ 85 $144 $306
AIM V.I. Government Securities.................. $25 $ 77 $132 $281
AIM V.I. Growth................................. $23 $ 72 $124 $264
AIM V.I. Growth and Income...................... $24 $ 73 $126 $268
AIM V.I. High Yield............................. $31 $ 93 $159 $333
AIM V.I. International Equity................... $26 $ 80 $136 $289
AIM V.I. Money Market........................... $22 $ 68 $117 $250
AIM V.I. Telecommunications and Technology...... $29 $ 89 $151 $318
AIM V.I. Value.................................. $24 $ 73 $125 $267
Please remember that you are looking at examples and not a representation of
past or future expenses. The examples assume that any Fund expense waivers or
reimbursement arrangements described in the footnotes on page 8 are in effect
for the time periods presumed above. Your actual expenses may be lower or
greater than those shown above. Similarly, your rate of return may be lower or
greater than 5%, which is not guaranteed. The above examples assume the election
of the Enhanced Death and Income Benefit Combination Rider with a mortality and
expense risk charge of 1.40%. If that option were not elected, the example
figures shown above would be slightly lower. To reflect the contract maintenance
charge in the examples, we estimated an equivalent percentage charge, based on
an assumed average Contract size of $57,476.
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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.
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THE CONTRACT
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CONTRACT OWNER
The AIM Lifetime PlusSM II 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):
. the investment alternatives during the Accumulation and Payout Phases,
. the amount and timing of your purchase payments and withdrawals,
. the programs you want to use to invest or withdraw money,
. the income payment plan you want to use to receive retirement income,
. the Annuitant (either yourself or someone else) on whose life the income
payments will be based,
. the Beneficiary or Beneficiaries who will receive the benefits that the
Contract provides when the last surviving Contract Owner or Annuitant dies,
and
. any other rights that the Contract provides.
If you die, any surviving Contract owner or, if none, the Beneficiary may
exercise the rights and privileges provided to them by the Contract.
The Contract cannot be jointly owned by both a non-natural person and a natural
person. At issue, the maximum age of Contract Owner, joint contract owner, or
annuitant if the owner is a non-natural person, cannot exceed age 90.
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 37.
ANNUITANT
The Annuitant is the individual whose age determines the latest Payout Start
Date and 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.
Prior to the Payout Start Date, you may designate a joint Annuitant, who is a
second person on whose life income payments depend. In our discretion, we may
permit you to designate a joint Annuitant prior to the Payout Start Date.
If the Annuitant dies prior to the Payout Start Date, the new Annuitant will be:
. the youngest Contract owner if living, otherwise
. 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.
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You may name one or more Beneficiaries when you apply for a Contract. You may
change or add Beneficiaries at any time by writing to us unless you have
designated an irrevocable Beneficiary. We will provide a change of Beneficiary
form to be signed and filed with us. Any change will be effective at the time
you sign the written notice, whether or not the Annuitant is living when we
receive the notice. Until we receive your written notice to change a
Beneficiary, we are entitled to rely on the most recent Beneficiary information
in our files. We will not be liable as to any payment or settlement made prior
to receiving the written notice. Accordingly, if you wish to change your
Beneficiary, you should deliver your written notice to us promptly.
If you did not name a Beneficiary or if the named Beneficiary is no longer
living and there are no other surviving Beneficiaries, the new Beneficiary will
be:
. your spouse or, if he or she is no longer alive,
. your surviving children equally, or if you have no surviving children,
. your estate.
If more than one Beneficiary survives you (or the Annuitant if the Contract
owner is not a natural person), we will divide the death benefit among your
Beneficiaries according to your most recent written instructions. If you have
not given us written instructions, we will pay the death benefit in equal
amounts to the surviving Beneficiaries.
MODIFICATION OF THE CONTRACT
Only a 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 have 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 the Assignor signs it and files it with us. We are not responsible for the
validity of any assignment. Federal law prohibits or restricts the assignment of
benefits under many types of retirement plans and the terms of such plans may
themselves contain restrictions on assignments. An assignment may also result in
taxes or tax penalties. You should consult with an attorney before trying to
assign your Contract.
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PURCHASES
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MINIMUM PURCHASE PAYMENTS
Your initial purchase payment must be at least $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.
MINIMUM AND MAXIMUM ALLOWABLE AGE
You can purchase a Contract if you are between the your state's age of majority
and 90. If the owner is a non-natural person, then the Annuitant must be between
the ages of 0 and 90.
AUTOMATIC ADDITIONS PROGRAM
You may make additional purchase payments of $100 or more per month by
automatically transferring money from your bank account. Please consult with
your sales representative for 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 reserve the right to limit the
availability of the investment alternatives.
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 use the term "business day" to refer to each day Monday through Friday that
the New York Stock Exchange is open for business. We also refer to these days as
"Valuation Dates." 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 your 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 that 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 adjusted, to the extent federal or 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.
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CONTRACT VALUE
- --------------------------------------------------------------------------------
On the Issue Date, your Contract Value is equal to your initial purchase
payment. Thereafter, 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 Options.
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 or
transfer. For example, if we receive a $10,000 purchase payment allocated to a
Variable Sub-Account when the Accumulation Unit Value for the Sub-Account is
$10, we would credit 1,000 Accumulation Units of that Variable Sub-Account to
your Contract.
ACCUMULATION UNIT VALUE
As a general matter, the Accumulation Unit Value for each Variable Sub-Account
will rise or fall to reflect:
. changes in the share price of the Fund in which the Variable Sub-Account
invests, and
. the deduction of amounts reflecting the mortality and expense risk charge,
administrative expense charge, and any provision for taxes that have accrued
since we last calculated the Accumulation Unit Value.
We determine contract maintenance charges, withdrawal charges, and transfer fees
(currently waived) separately for each Contract. They do not affect the
Accumulation Unit Value. Instead, we obtain payment of those charges and fees by
redeeming Accumulation Units. For details on how we compute Accumulation Unit
Value, please refer to the Statement of Additional Information.
We determine a separate Accumulation Unit Value for each Variable Sub-Account on
each Valuation Date. We also determine a separate set of Accumulation Unit
Values reflecting the cost of the Enhanced Death Benefit Rider and the Enhanced
Death and Income Benefit Combination Rider described on pages 32 and 33 below.
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.
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INVESTMENT ALTERNATIVES: The Variable Sub-Accounts
- --------------------------------------------------------------------------------
You may allocate your purchase payments to up to 17 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 Fund prospectus before allocating amounts
to the Variable Sub-Accounts. A I M Advisors, Inc. serves as the investment
advisor to each Fund.
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. Blue Chip Fund Long-term growth of capital
with a secondary objective of
current income
- -------------------------------------------------------------------------------
AIM V.I. Capital Appreciation Fund Growth of capital
- -------------------------------------------------------------------------------
AIM V.I. Capital Development Fund Long-term growth of capital
- -------------------------------------------------------------------------------
AIM V.I. Dent Demographics Fund Long-term growth of capital
together with current income
- -------------------------------------------------------------------------------
AIM V.I. Diversified Income Fund High level of current income
- -------------------------------------------------------------------------------
AIM V.I. Global Growth and Income Fund Long-term growth of capital
- -------------------------------------------------------------------------------
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
- -------------------------------------------------------------------------------
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. Telecommunications and Technology Fund Long-term growth of capital
- -------------------------------------------------------------------------------
AIM V.I. Value Fund Long-term growth of capital
- ----------------
*A Fund's investment objective may be changed by the Fund's Board of
Directors without shareholder approval.
**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.
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INVESTMENT ALTERNATIVES: The Fixed Account Options
- --------------------------------------------------------------------------------
You may allocate all or a portion of your purchase payments to the Fixed
Account. You may choose from among 3 Fixed Account Options including two dollar
cost averaging options and the option to invest in one or more Guarantee
Periods. The Fixed Account Options 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 a Fixed Account Option does not
entitle you to share in the investment experience of the Fixed Account.
DOLLAR COST AVERAGING OPTIONS
You may establish a Dollar Cost Averaging Program, as described on page 21, by
allocating purchase payments to the Fixed Account either for 6 months (the "6
Month Dollar Cost Averaging Option") or for 12 months (the "12 Month Dollar Cost
Averaging Option"). Your purchase payments will earn interest for the period you
select at the current rates in effect at the time of allocation. Rates may
differ from those available for the Guarantee Periods described below.
You must transfer all of your money out of the 6 or 12 Month Dollar Cost
Averaging Options to other investment alternatives in equal monthly installments
beginning within 30 days of allocation. The number of monthly installments must
be no more than 6 for the 6 Month Dollar Cost Averaging Option, and no more than
12 for the 12 Month Dollar Cost Averaging Option. At the end of the applicable 6
or 12 month period, we will transfer any remaining amounts in the 6 or 12 Month
Dollar Cost Averaging Options to the other investment alternatives you
designated. Transfers out of the 6 or 12 Month Dollar Cost Averaging Options do
not count towards the 12 transfers you can make without paying a transfer fee.
If we do not receive allocation instructions from you, the payment and
associated interest will be transferred to Money Market Variable Sub-Account in
equal monthly installments.
You may not transfer funds from other investment alternatives to either the 6 or
12 Month Dollar Cost Averaging Options.
The 6 or 12 Month Dollar Cost Averaging Options may not be available in your
state.
GUARANTEE PERIODS
Each payment or transfer allocated to a Fixed Account earns interest at a
specified rate that we guarantee for a period of years. 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 a Guarantee Period for each purchase or transfer. If you do not
select a Guarantee Period, we will assign the same period(s) you selected for
your most recent purchase payment.
We reserve the right to limit the number of additional purchase payments that
you may allocate to this Option.
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.
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We have no specific formula for determining the rate of interest that we will
declare initially or in the future. We will set those interest rates based on
investment returns available at the time of the determination. In addition, we
may consider various other factors in determining interest rates including
regulatory and tax requirements, our sales commission and administrative
expenses, general economic trends, and competitive factors. We determine the
interest rates to be declared in our sole discretion. We can neither predict nor
guarantee what those rates will be in the future. For current interest rate
information, please contact your sales representative or Glenbrook at 1-800-
776-6978. The interest rate will never be less than the minimum guaranteed 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 effective annual interest rate that we declared at
the beginning of the applicable Guarantee Period. The following example
illustrates how a purchase payment allocated to this Option would grow, given an
assumed Guarantee Period and annual interest rate:
Purchase Payment..................................................... $10,000
Guarantee Period..................................................... 5 years
Annual Interest Rate................................................. 4.50%
END OF CONTRACT YEAR
YEAR 1 YEAR 2 YEAR 3 YEAR 4 YEAR 5
---------- ---------- ---------- ---------- ----------
Beginning Contract Value $10,000.00
X (1 + Annual Interest X 1.045
Rate) $10,450.00
Contract Value at end of $10,450.00
Contract Year X 1.045
X (1 + Annual Interest $10,920.25
Rate)
Contract Value at end of $10,920.25
Contract Year X 1.045
X (1 + Annual Interest $11,411.66
Rate)
Contract Value at end of $11,411.66
Contract Year X 1.045
X (1 + Annual Interest $11,925.19
Rate)
Contract Value at end of $11,925.19
Contract Year X 1.045
X (1 + Annual Interest $12,461.82
Rate)
Total Interest Credited During Guarantee Period = $2,461.82 ($12,461.82 -
$10,000)
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.
17
<PAGE>
RENEWALS
Prior to the end of each Guarantee Period, we will mail you a notice asking you
what to do with your money, including the accrued interest. 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. You may also be required to pay premium taxes and
withholding (if applicable). The amount withdrawn will be deemed to have been
withdrawn on the day the previous Guarantee Period ends. 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 a
Guarantee Period expires, are subject to a Market Value Adjustment. A Market
Value Adjustment also may apply upon payment of a death benefit (a Market Value
Adjustment made upon payment of a death benefit would be positive) and when you
apply amounts currently invested in this option 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:
. within the Free Withdrawal Amount as described on page 24,
. as part of the Dollar Cost Averaging Program,
. when exercising the confinement, unemployment, widow withdrawals or
terminal illness waivers, or
. to satisfy IRS minimum distribution rule 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 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 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.
18
<PAGE>
Generally, if the original Treasury Rate at the time you allocate money to a
Guarantee Period is higher than the applicable current Treasury Rate, then the
Market Value Adjustment will result in a higher amount payable to you,
transferred, or applied to an Income Plan. Conversely, if the Treasury Rate at
the time you allocate money to a Guarantee Period is lower than the applicable
current Treasury Rate, then the Market Value Adjustment will result in a lower
amount payable to you, transferred, or applied to an Income Plan.
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 5 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 5 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.
19
<PAGE>
INVESTMENT ALTERNATIVES: Transfers
- --------------------------------------------------------------------------------
TRANSFERS DURING THE ACCUMULATION PHASE
During the Accumulation Phase, you may transfer Contract Value among the
investment alternatives. Transfers are not permitted into the 6 or 12 Month
Dollar Cost Averaging Options. You may request transfers in writing on a form
that we provide or by telephone according to the procedure described below.
There is no minimum transfer amount. 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 Options for up to 6 months from the date
we receive your request. If we decide to postpone transfers from any Fixed
Account Option 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 a Guarantee Period expires, we will increase or decrease the amount
by a Market Value Adjustment.
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. 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.
20
<PAGE>
EXCESSIVE TRADING LIMITS
For Contracts issued on or after May 1, 1999, we reserve the right to limit
transfers in any Contract Year, or to refuse any transfer request for a Contract
owner or certain Contract owners, if:
. we believe, in our sole discretion, that excessive trading by such Contract
owner or owners, or a specific transfer request or group of transfer
requests, may have a detrimental effect on the Accumulation Unit Values of
any Variable Sub-Account or the share prices of the corresponding Funds or
would be to the disadvantage of other Contract owners; or
. we are informed by one or more of the corresponding Funds that they intend
to restrict the purchase or redemption of Fund shares because of excessive
trading or because they believe that a specific transfer or groups of
transfers would have a detrimental effect on the prices of Fund shares.
We may apply the restrictions in any manner reasonably designed to prevent
transfers that we consider disadvantageous to other Contract owners.
DOLLAR COST AVERAGING PROGRAM
You may make transfers automatically through dollar cost averaging prior to the
Payout Start Date. There are three different ways to use the Dollar Cost
Averaging Program:
1) You may allocate purchase payments to the Fixed Account Options for the
specific purpose of dollar cost averaging.
2) You may dollar cost average out of any Variable Sub-account into any other
Variable Sub-account(s).
3) You may transfer interest credited from a Guarantee Period(s) to any
Variable Sub-account without application of a Market Value Adjustment.
We will not charge a transfer fee for transfers made under this Program, nor
will such transfers count against the 12 transfers you can make each Contract
Year without paying a transfer fee.
The theory of dollar cost averaging is that if purchases of equal dollar amounts
are made at fluctuating prices, the aggregate average cost per unit will be less
than the average of the unit prices on the same purchase dates. However,
participation in this Program does not assure you of a greater profit from your
purchases under the Program nor will it prevent or necessarily reduce losses in
a declining market.
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. Money you
allocate to the Fixed Account will not be included in the rebalancing.
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 written or
telephone request. We are not responsible for rebalancing that occurs prior to
receipt of proper notice 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
21
<PAGE>
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.
22
<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 to compensate us for the cost of administering the Contracts and
the Variable Account. Maintenance costs include expenses we incur in processing
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:
. total purchase payments equal $50,000 or more, or
. all money is allocated to the Fixed Account Options, as of the Contract
Anniversary.
After the Payout Start Date, we will waive this charge if, as of the Payout
Start Date:
. the Contract Value is $50,000 or more, or
. all income payments are fixed amount income payments.
If you surrender your Contract, we will deduct a 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 1.00%
of the average daily net assets you have invested in the Variable Sub-Accounts
(1.20% if you select the Enhanced Death Benefit Rider, and 1.40% if you select
the Enhanced Death and Income Benefit Combination Rider). 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 Glenbrook will bear the loss.
We charge additional amounts for the enhanced death benefit and Enhanced Death
and Income Benefit Combination riders to compensate us for the additional risk
that we accept by providing each rider. Neither the Enhanced Death Benefit Rider
nor the Enhanced Death and Income Benefit Combination Rider are available under
a Contract that is continued by a surviving spouse. After the death of the
Contract owner, if the surviving spouse elects to continue the Contract in the
Accumulation Phase, then the mortality and expense risk charge will be 1.00%
from the date we determine the value of the death benefit through the remainder
of the life of the continued Contract.
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
23
<PAGE>
amount of administrative charge imposed on a given Contract and the amount of
expenses that may be attributable 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 Program or Automatic Fund
Rebalancing Program.
WITHDRAWAL CHARGE
We may assess a withdrawal charge of up to 7% of the purchase payment(s) you
withdraw. The charge declines to 0% after 7 complete years from the date we
received the purchase payment being withdrawn. A schedule showing how the charge
declines appears on page 7, above. During each Contract Year, you can withdraw
up to 15% of the Contract Value as of the beginning of that Contract Year
without paying the charge. Unused portions of this 15% "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,
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:
. 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);
. the death of the Contract owner or Annuitant (unless the settlement value
is used);
. withdrawals taken to satisfy IRS minimum distribution rules for the
Contract; or
. withdrawals that qualify for one of the waivers 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 also 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 and any Market Value
Adjustment 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 (as defined in the
Contract) 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 your request for the withdrawal and due proof (as defined
in the Contract) 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.
24
<PAGE>
Terminal Illness Waiver. We will waive the withdrawal charge and any Market
Value Adjustment on all withdrawals taken prior to the Payout Start Date under
your Contract if:
1) you (or the Annuitant if the Contract owner is not a natural person) are
first diagnosed by a physician (we may require a second or a third opinion)
with a terminal illness (as defined in the Contract) at least 30 days after
the Issue Date; and
2) you claim this benefit and deliver adequate proof of diagnosis to us.
Unemployment Waiver. We will waive the withdrawal charge and any Market Value
Adjustment on one partial or a full withdrawal taken prior to the Payout Start
Date under your Contract, if you meet the following requirements:
1) you or the Annuitant become unemployed at least one year after the Issue
Date;
2) you or the Annuitant have been granted unemployment compensation (as
defined in the Contract) for at least 30 days as a result of that unemployment
and we receive due proof thereof (as defined in the Contract) prior to or at
the time of the withdrawal request; and
3) you or the Annuitant exercise this benefit within 180 days of your or the
Annuitant's initial receipt of unemployment compensation.
You may exercise this benefit once during the life of your Contract. This waiver
applies upon the unemployment of the Annuitant only if the Contract owner is not
a natural person.
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 these waivers and may also
change certain terms and/or benefits available under the waivers. You should
consult your Contract for further details on these variations. Also, even if you
are not required to pay our withdrawal charge because of these waivers, 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, if applicable, we deduct the charge for premium taxes
from each investment alternative in the proportion that the Contract owner's
value in the investment alternative bears to the total Contract Value.
DEDUCTION FOR 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.
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OTHER EXPENSES
Each Fund deducts advisory fees and other expenses from its assets. You
indirectly bear the charges and expenses of the Fund whose shares are held by
the Variable Sub-Accounts. These fees and expenses are described in the
accompanying prospectus for the Funds. 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.
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ACCESS TO YOUR MONEY
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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 29.
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 Options.
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, we may require you to 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 Options
for up to 6 months or shorter period if required by law. If we delay payment or
transfer for 30 days or more, we will pay interest as required by law. Any
interest would be payable from the date we receive the withdrawal request to the
date we make the payment or transfer.
SYSTEMATIC WITHDRAWAL PROGRAM
You may choose to receive systematic withdrawal payments on a monthly,
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 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.
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MINIMUM CONTRACT VALUE
If your request for a partial withdrawal would reduce the 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, and taxes.
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INCOME PAYMENTS
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PAYOUT START DATE
You select the Payout Start Date in your application. The Payout Start Date is
the day that we apply your Contract Value, adjusted by any Market Value
Adjustment and less any applicable taxes, 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. After the Payout Start Date, you may not make
withdrawals (except as described below) or change your choice of Income Plan.
Three Income Plans are available under the Contract. Each is available to
provide:
. fixed income payments;
. variable income payments; or
. a combination of the two.
The three Income Plans are:
.Income Plan 1--Life Income with Guaranteed Payments. Under this plan, we
make periodic income payments for at least as long as the Annuitant lives. If
the Annuitant dies before we have made all of the guaranteed income payments,
we will continue to pay the remainder of the guaranteed income payments as
required by the Contract.
.Income Plan 2--Joint and Survivor Life Income 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 the Variable Sub-Account
assets which support variable income payments even though we do 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.
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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 all or a portion of the Variable Account portion
of the income payments at any time and receive a lump sum equal to the present
value of the remaining variable payments associated with the amount withdrawn.
To determine the present value of any remaining variable income payments being
withdrawn, we use a discount rate equal to the assumed annual investment rate
that we use to compute such variable income payments. The minimum amount you may
withdraw under this feature is $1,000. A withdrawal charge may apply. We also
deduct applicable premium taxes from the Contract Value at the Payout Start
Date.
We may make other Income Plans available. You may obtain information about them
by writing or calling us. You may apply all or part of your Contract Value to an
Income Plan. If you elected the Enhanced Death and Income Benefit Combination
Rider, you may be able to apply an amount greater than your Contract Value. You
must apply at least the Contract Value in the Fixed Account Options on the
Payout Start Date to fixed income payments. If you wish to apply any portion of
your Fixed Account Option balance to provide variable income payments, you
should plan ahead and transfer that amount to the Variable Sub- Accounts prior
to the Payout Start Date. If you do not tell us how to allocate your Contract
Value among fixed and variable income payments, we will apply your Contract
Value in the Variable Account to variable income payments and your Contract
Value in the Fixed Account Options to fixed income payments.
We will apply your Contract Value, adjusted by a Market Value Adjustment, less
applicable taxes to your Income Plan on the Payout Start Date. If the Contract
Value is less than $2,000 or not enough to provide an initial payment of at
least $20, and state law permits, we may:
. 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
. 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. We reserve the right to make other assumed
investments rates available under this contract.
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FIXED INCOME PAYMENTS
We guarantee income payment amounts derived from any Fixed Account Option for
the duration of the Income Plan. We calculate the fixed income payments by:
1) adjusting the portion of the Contract Value in any Fixed Account Option 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 times 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.
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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(ies). In the case of the death of
the Annuitant, we will pay the death benefit to the current Contract Owner.
A claim for a distribution on death must include "Due Proof of Death." We will
accept the following documentation as Due Proof of Death:
. a certified copy of a death certificate; or
. a certified copy of a decree of a court of competent jurisdiction as to a
finding of death; or
. any other proof acceptable to us.
DEATH BENEFIT AMOUNT
Prior to the Payout Start Date, the death benefit is equal to the greatest of:
1) the Contract Value as of the date we determine the death benefit, or
2) the Settlement Value (that is, the amount payable on a full withdrawal of
Contract Value) on the date we determine the death benefit, or
3) the sum of all purchase payments reduced by a withdrawal adjustment, as
defined below, or
4) the Contract Value on each Death Benefit Anniversary prior to the date we
determine the death benefit, increased by purchase payments made since that
Death Benefit Anniversary and reduced by a withdrawal adjustment as defined
below.
A Death Benefit Anniversary is every seventh Contract Anniversary during the
Accumulation Phase. For example, the 7th, 14th, and 21st Contract Anniversaries
are the first three Death Benefit Anniversaries.
The "withdrawal adjustment" is equal to (a) divided by (b), with the result
multiplied by (c), where:
(a) is the withdrawal amount;
(b) is the Contract Value immediately prior to the withdrawal; and
(c) is the value of the applicable death benefit alternative immediately
prior to the withdrawal.
A Market Value Adjustment made upon payment of a death benefit would be
positive.
We will determine the value of the death benefit as of the end of the Valuation
Date on which we receive a complete request for payment of the death benefit. If
we receive a request after 3:00 p.m. Central Time on a Valuation Date, we will
process the request as of the end of he following Valuation Date.
ENHANCED DEATH BENEFIT RIDER
For Contract owners up to an including age 80, the Enhanced Death Benefit Rider
is an optional benefit that you may elect. If you elect the rider, the death
benefit will be the greater of the death benefit alternatives (1) through (4)
listed above, or (5) the enhanced death benefit.
If the Contract owner is a living individual, the enhanced death benefit applies
only for the death of the Contract owner. If the Contract owner is not a living
individual, the enhanced death benefit applies only for the death of the
Annuitant. The enhanced death benefit is equal to the greater of Enhanced Death
Benefit A or Enhanced Death Benefit B. Enhanced Death Benefit B may not be
available in all states.
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The enhanced death benefit will never be greater than the maximum death benefit
allowed by any nonforfeiture laws which govern the Contract. The Enhanced Death
Benefit Rider benefit is not available under a contract that is continued by a
surviving spouse. After the death of the Contract owner, if the surviving spouse
elects to continue the Contract in the Accumulation Phase, then the mortality
and expense risk charge will be 1.00% from the date we determine the value of
the death benefit through the remainder of the life of the continued Contract,
and any death benefit paid under a continued Contract will not include the
enhanced death benefit.
Enhanced Death Benefit A. The Enhanced Death Benefit A on the Issue Date is
equal to the initial purchase payment. On each Contract Anniversary, we will
recalculate your Enhanced Death Benefit A to equal the greater of your Contract
Value on that date, or the most recently calculated Enhanced Death Benefit A. We
also will recalculate your Enhanced Death Benefit A whenever you make an
additional purchase payment or a partial withdrawal. Additional purchase
payments will increase the Enhanced Death Benefit A dollar-for-dollar.
Withdrawals will reduce the Enhanced Death Benefit A by an amount equal to a
withdrawal adjustment computed in the manner described above under "Death
Benefit Amount." In the absence of any withdrawals or purchase payments, the
Enhanced Death Benefit A will be the greatest of all Contract Anniversary
Contract Values on or before the date we calculate the death benefit.
We will calculate Anniversary Values for each Contract Anniversary prior to the
oldest Contract owner's or, if the Contract owner is not a natural person, the
oldest Annuitant's, 85th birthday. After age 85, we will recalculate the
Enhanced Death Benefit A only for purchase payments and withdrawals. The
Enhanced Death Benefit A will never be greater than the maximum death benefit
allowed by any non-forfeiture laws which govern the Contract.
Enhanced Death Benefit B. The Enhanced Death Benefit B is equal to total
purchase payments made reduced by a withdrawal adjustment computed in the manner
described above under "Death Benefit Amount." Each purchase payment and each
withdrawal adjustment will accumulate daily at a rate equivalent to 5% per year
until the earlier of the date
. we determine the death benefit, or
. the first day of the month following the oldest Contract owner's or, if the
Contract owner is not a natural person, the Annuitant's, 85th birthday.
The Enhanced Death Benefit B will never be greater than the maximum death
benefit allowed by any non-forfeiture laws which govern the Contract.
ENHANCED DEATH AND INCOME BENEFIT COMBINATION RIDER
Instead of the Enhanced Death Benefit Rider, for Contract Owners up to and
including age 80, you may choose the Enhanced Death and Income Benefit
Combination Rider.
The enhanced death benefit portion of the Enhanced Death and Income Benefit
Combination Rider is the same as that described above under "Enhanced Death
Benefit Rider."
The enhanced income benefit defines a minimum amount applied to the Payout
Phase. This minimum amount is equal to what the value of the enhanced death
benefit would be on the Payout Start Date.
The enhanced income benefit will apply if the Contract owner elects a Payout
Start Date that:
. is on or after the tenth Contract Anniversary, and
. is prior to the Annuitant's age 90.
On the Payout Start Date, you may apply the greater of the Contract Value or the
enhanced income benefit to the Payout Phase of the Contract. No Market Value
Adjustment will be applied to the enhanced income benefit amount. The enhanced
income benefit will only apply if the Income Plan selected provides payments
guaranteed for either single or joint life with a period certain of at least:
. 10 years, if the youngest Annuitant's age is 80 or less on the date the
amount is applied; or
. 5 years, if the youngest Annuitant's age is greater than 80 on the date the
amount is applied.
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If, however, you apply the Contract Value and not the enhanced income benefit to
the Income Plan, then you may select any Income Plan we offer at that time. The
Enhanced Death and Income Benefit Combination Rider benefit is not available
under a Contract that is continued by a surviving spouse. After the death of the
Contract owner, if the surviving spouse elects to continue the Contract in the
Accumulation Phase, then the mortality and expense risk charge will be 1.00%
from the date we determine the value of the death benefit through the remainder
of the life of the continued Contract. Any death benefit paid under a continued
Contract will not include the enhanced death benefit. Any calculation of amount
to be applied to an Income Plan upon annuitization under a continued Contract
will not include the enhanced income benefit.
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, the Settlement Value will be paid. 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, whichever is earlier. We are currently waiving the 180 day limit, but we
reserve the right to enforce the limitation in the future.
In any event, the entire value of the Contract must be distributed within 5
years after the date of death unless an Income Plan is elected or a surviving
spouse continues the Contract in accordance with the provisions described below.
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
elect to 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 under an Income Plan or in one or more
distributions. Payments from the Income Plan must begin within one year of the
date of death and must be payable throughout:
. the life of the Contract owner; or
. a period not to exceed the life expectancy of the Contract owner; or
. 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 or a Market Value Adjustment. On the day the
Contract is continued, the Contract Value will be the death benefit on the
Valuation Date after we receive due proof of death. The death benefit of the
continued Contract will be the greater of:
(a) the sum of all purchase payments reduced by a withdrawal
adjustment, as defined in the death benefit provision, or
(b) the Contract Value on the date we determine the death benefit.
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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 the State 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 17 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 may also add other variable sub-accounts that may be available under
other variable annuity contracts. 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.
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THE FUNDS
Dividends and Capital Gain Distributions. We automatically reinvest all
dividends and capital gains distributions from the Funds in shares of the
distributing Funds 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 Sub-Account
by the net asset value per share of the corresponding eligible 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 upon 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. 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 board of directors of the Funds monitors 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, the Funds' 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. ALFS, Inc. (effective May 1, 2000, Allstate Life Financial
Services, Inc. was renamed ALFS, Inc.), located at 3100 Sanders Road,
Northbrook, Illinois 60062-7154, serves as principal underwriter of the
Contracts. ALFS, Inc. ("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 all 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. A persistency bonus is not
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expected to exceed 1.20%, on an annual basis, of the Contract Values considered
in connection with the bonus. Sale of the Contracts may also count toward
incentive program awards for the registered representative. 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:
. issuance of the Contracts;
. maintenance of Contract owner records;
. Contract owner services;
. calculation of unit values;
. maintenance of the Variable Account; and
. preparation of Contract owner reports.
We will send you Contract statements 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
have failed to operate properly in or after the year 1999, if the software was
not reprogrammed or replaced ("Year 2000 Issue"). Glenbrook believes that many
of its counterparties and suppliers also had potential Year 2000 Issues which
could affect Glenbrook. In 1995, Allstate Insurance Company commenced a four
phase plan intended to mitigate and/or prevent the adverse effects of Year 2000
Issues. These strategies included normal development
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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 included Glenbrook actively
working with its major external counterparties and suppliers to assess their
compliance efforts and Glenbrook's exposure to them. Because of the accuracy of
this plan, and its timely completion, Glenbrook has experienced no material
impacts on its results of operations, liquidity or financial position due to the
Year 2000 issue. Year 2000 costs are expensed or incurred.
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TAXES
- --------------------------------------------------------------------------------
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 or 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.
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Taxation of Partial and Full Withdrawals. If you make a partial withdrawal under
a non-Qualified Contract, amounts received are taxable to the extent the
Contract Value, without regard to surrender charges, exceeds the investment in
the Contract. The investment in the Contract is the gross premium paid for the
Contract minus any amounts previously received from the Contract if such amounts
were properly excluded from your gross income. If you make a partial withdrawal
under a Qualified Contract, the portion of the payment that bears the same ratio
to the total payment that the investment in the Contract (i.e., nondeductible
IRA contributions, after tax contributions to qualified plans) bears to the
Contract Value, is excluded from your income. If you make a full withdrawal
under a non-Qualified Contract or a Qualified Contract, the amount received will
be taxable only to the extent it exceeds the investment in the Contract.
"Nonqualified distributions" from Roth IRAs are treated as made from
contributions first and are included in gross income only to the extent that
distributions exceed contributions. "Qualified distributions" from Roth IRAs are
not included in gross income. "Qualified distributions" are any distributions
made more than 5 taxable years after the taxable year of the first contribution
to any Roth IRA and which are:
. made on or after the date the individual attains age 59 1/2,
. made to a beneficiary after the Contract owner's death,
. attributable to the Contract owner being disabled, or
. for a first time home purchase (first time home purchases are subject to a
lifetime limit of $10,000).
If you transfer a non-Qualified Contract without full and adequate consideration
to a person other than your spouse (or to a former spouse incident to a
divorce), you will be taxed on the difference between the Contract Value and the
investment in the Contract at the time of transfer. Except for certain Qualified
Contracts, any amount you receive as a loan under a Contract, and any assignment
or pledge (or agreement to assign or pledge) of the Contract Value is treated as
a withdrawal of such amount or portion.
Taxation of Annuity Payments. Generally, the rule for income taxation of annuity
payments received from a non-Qualified Contract provides for the return of your
investment in the Contract in equal tax-free amounts over the payment period.
The balance of each payment received is taxable. For fixed annuity payments, the
amount excluded from income is determined by multiplying the payment by the
ratio of the investment in the Contract (adjusted for any refund feature or
period certain) to the total expected value of annuity payments for the term of
the Contract. If you elect variable annuity payments, the amount excluded from
taxable income is determined by dividing the investment in the Contract by the
total number of expected payments. The annuity payments will be fully taxable
after the total amount of the investment in the Contract is excluded using these
ratios. If you die, and annuity payments cease before the total amount of the
investment in the Contract is recovered, the unrecovered amount will be allowed
as a deduction for your last taxable year.
Taxation of Annuity Death Benefits. Death of a Contract owner, or death of the
Annuitant if the Contract is owned by a non-natural person, will cause a
distribution of death benefits from a Contract. Generally, such amounts are
included in income as follows:
1) if distributed in a lump sum, the amounts are taxed in the same manner
as a full withdrawal, or
2) if distributed under an annuity option, the amounts are taxed in the same
manner as an annuity payment. Please see the Statement of Additional
Information for more detail on distribution at death requirements.
Penalty Tax on Premature Distributions. A 10% penalty tax applies to the taxable
amount of any premature distribution from a non-Qualified Contract. The penalty
tax generally applies to any distribution made prior to the date you attain age
59 1/2. However, no penalty tax is incurred on distributions:
1) made on or after the date the Contract owner attains age 59 1/2;
2) made as a result of the Contract owner's death or disability;
3) made in substantially equal periodic payments over the Contract owner's
life or life expectancy,
4) made under an immediate annuity, or
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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:
. Individual Retirement Annuities or Accounts (IRAs) under Section 408 of
the Code;
. Roth IRAs under Section 408A of the Code;
. Simplified Employee Pension Plans under Section 408(k) of the Code;
. Savings Incentive Match Plans for Employees (SIMPLE) Plans under Section
408(p) of the Code;
. Tax Sheltered Annuities under Section 403(b) of the Code;
. Corporate and Self Employed Pension and Profit Sharing Plans; and
. State and Local Government and Tax-Exempt Organization Deferred
Compensation Plans.
The income on qualified plan and IRA investments is tax deferred and variable
annuities held by such plans do not receive any additional tax deferral. You
should review the annuity features, including all benefits and expenses, prior
to purchasing a variable annuity in a qualified plan or IRA. Glenbrook reserves
the right to limit the availability of the Contract for use with any of the
Qualified Plans listed above. In the case of certain qualified plans, the terms
of the plans may govern the right to benefits, regardless of the terms of the
Contract.
Restrictions Under Section 403(b) Plans. Section 403(b) of the Code provides
tax-deferred retirement savings plans for employees of certain non-profit and
educational organizations. Under Section 403(b), any Contract used for a 403(b)
plan must provide that distributions attributable to salary reduction
contributions made after December 31, 1988, and all earnings on salary reduction
contributions, may be made only:
1) on or after the date the employee
. attains age 59 1/2,
. separates from service, dies,
. becomes disabled, or
2) on account of hardship (earnings on salary reduction contributions may not
be distributed on account of hardship).
These limitations do not apply to withdrawals where Glenbrook is directed to
transfer some or all of 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, 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.
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ANNUAL REPORTS AND OTHER DOCUMENTS
- --------------------------------------------------------------------------------
Glenbrook's annual report on Form 10-K for the year ended December 31, 1999 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 or P.O. Box 94039, Palatine, Illinois 60094-4039 (telephone:
1-800-776-6978).
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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.
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EXPERTS
- --------------------------------------------------------------------------------
The financial statements and related financial statement schedule of Glenbrook
as of December 31, 1999 and 1998 and for each of the three years in the period
ended December 31, 1999, which are incorporated herein by reference, have been
audited by Deloitte & Touche LLP, independent auditors, as stated in their
report, which are incorporated herein by reference, and are included in reliance
upon the report of such firm given upon their authority as experts in accounting
and auditing.
The financial statements of the Variable Account as of December 31, 1999, and
for each of the periods in the two years then ended that appear in the Statement
of Additional Information have been audited by Deloitte & Touche LLP,
independent auditors, as stated in their report appearing in the Statement of
Additional Information, and are included in reliance upon the report of such
firm given upon their authority as experts in accounting and auditing.
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APPENDIX A Accumulation Unit Value and Number of Accumulation Units Outstanding
for Each Variable Sub-Account Since Inception
Basic Policy
For the years beginning January 1 and ending December 31 1998 1999
- -------------------------------------------------------- ------- -------
AIM V.I. AGGRESSIVE GROWTH SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period................. $10.000 $10.561
Accumulation Unit Value, End of Period....................... $10.561 $15.111
Number of Units Outstanding, End of Period................... 50,119 334,924
AIM V.I. BALANCED SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period................. $10.000 $11.298
Accumulation Unit Value, End of Period....................... $11.298 $13.331
Number of Units Outstanding, End of Period................... 67,315 626,980
AIM V.I. BLUE CHIP SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period................. -- --
Accumulation Unit Value, End of Period....................... -- --
Number of Units Outstanding, End of Period................... -- --
AIM V.I. CAPITAL APPRECIATION SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period................. $10.000 $11.037
Accumulation Unit Value, End of Period....................... $11.037 $15.787
Number of Units Outstanding, End of Period................... 97,387 829,707
AIM V.I. CAPITAL DEVELOPMENT SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period................. $10.000 $ 9.914
Accumulation Unit Value, End of Period....................... $ 9.914 $12.658
Number of Units Outstanding, End of Period................... 12,713 125,972
AIM V.I. DENT DEMOGRAPHIC TRENDS SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period................. -- --
Accumulation Unit Value, End of Period....................... -- --
Number of Units Outstanding, End of Period................... -- --
AIM V.I. DIVERSIFIED INCOME SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period................. $10.000 $ 9.873
Accumulation Unit Value, End of Period....................... $ 9.873 $ 9.577
Number of Units Outstanding, End of Period................... 31,735 248,525
AIM V.I. GLOBAL GROWTH AND INCOME SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period................. -- --
Accumulation Unit Value, End of Period....................... -- --
Number of Units Outstanding, End of Period................... -- --
AIM V.I. GLOBAL UTILITIES SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period................. $10.000 $10.803
Accumulation Unit Value, End of Period....................... $10.803 $14.271
Number of Units Outstanding, End of Period................... 28,175 112,484
AIM V.I. GOVERNMENT SECURITIES SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period................. $10.000 $10.706
Accumulation Unit Value, End of Period....................... $10.706 $10.162
Number of Units Outstanding, End of Period................... 52,212 402,500
A-1
<PAGE>
For the years beginning January 1 and ending December 31 1998 1999
- -------------------------------------------------------- ------- ---------
AIM V.I. GROWTH SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period............... $10.000 $ 11.824
Accumulation Unit Value, End of Period..................... $11.824 $ 15.815
Number of Units Outstanding, End of Period................. 77,514 1,176,171
AIM V.I. GROWTH AND INCOME SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period............... $10.000 $ 11.684
Accumulation Unit Value, End of Period..................... $11.684 $ 15.514
Number of Units Outstanding, End of Period................. 112,627 1,472,961
AIM V.I. HIGH YIELD SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period............... $10.000 $ 9.099
Accumulation Unit Value, End of Period..................... $ 9.099 $ 9.946
Number of Units Outstanding, End of Period................. 61,267 374,834
AIM V.I. INTERNATIONAL EQUITY SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period............... $10.000 $ 9.674
Accumulation Unit Value, End of Period..................... $ 9.674 14.835
Number of Units Outstanding, End of Period................. 34,979 294,021
AIM V.I. MONEY MARKET SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period............... $10.000 $ 10.221
Accumulation Unit Value, End of Period..................... $10.221 $ 10.582
Number of Units Outstanding, End of Period................. 104,779 284,221
AIM V.I. TELECOMMUNICATIONS AND TECHNOLOGY SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period............... -- --
Accumulation Unit Value, End of Period..................... -- --
Number of Units Outstanding, End of Period................. -- --
AIM V.I. VALUE SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period............... $10.000 $ 11.747
Accumulation Unit Value, End of Period..................... $11.747 $ 15.091
Number of Units Outstanding, End of Period................. 139,946 1,901,840
- ----------------
* The Contracts were first offered for sale on June 2, 1998. The Accumulation
Unit Values in this table reflect a mortality and expense risk charge of
1.00% and an administrative expense charge of 0.10%. All of the Variable
Sub-Accounts commenced operations on or before June 2, 1998, except the Blue
Chip, Dent Demographics, Global Growth and Income and Telecommunications and
Technology Variable Sub-Accounts ("the New Sub-Accounts"). No Accumulation
Unit Data is shown for the New Sub-Accounts which commenced operations on
January 3, 2000.
A-2
<PAGE>
Accumulation Unit Values and Number of Accumulation Units
Outstanding for Each Variable Sub-Account Since Inception
Basic Policy plus Enhanced Death Benefit Rider
For the years beginning January 1 and ending December 31 1998 1999
- -------------------------------------------------------- ------- ---------
AIM V.I. AGGRESSIVE GROWTH SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period............... $10.000 $ 10.549
Accumulation Unit Value, End of Period..................... $10.549 $ 15.063
Number of Units Outstanding, End of Period................. 57,688 314,748
AIM V.I. BALANCED SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period............... $10.000 $ 11.285
Accumulation Unit Value, End of Period..................... $11.285 $ 13.289
Number of Units Outstanding, End of Period................. 221,488 1,149,345
AIM V.I. BLUE CHIP SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period............... -- --
Accumulation Unit Value, End of Period..................... -- --
Number of Units Outstanding, End of Period................. -- --
AIM V.I. CAPITAL APPRECIATION SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period............... $10.000 $ 11.025
Accumulation Unit Value, End of Period..................... $11.025 $ 15.737
Number of Units Outstanding, End of Period................. 223,554 1,105,150
AIM V.I. CAPITAL DEVELOPMENT SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period............... $10.000 $ 9.902
Accumulation Unit Value, End of Period..................... $ 9.902 $ 12.619
Number of Units Outstanding, End of Period................. 55,046 195,123
AIM V.I. DENT DEMOGRAPHIC TRENDS SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period............... -- --
Accumulation Unit Value, End of Period..................... -- --
Number of Units Outstanding, End of Period................. -- --
AIM V.I. DIVERSIFIED INCOME SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period............... $10.000 $ 9.861
Accumulation Unit Value, End of Period..................... $ 9.861 $ 9.547
Number of Units Outstanding, End of Period................. 40,007 277,036
AIM V.I. GLOBAL GROWTH AND INCOME SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period............... -- --
Accumulation Unit Value, End of Period..................... -- --
Number of Units Outstanding, End of Period................. -- --
AIM V.I. GLOBAL UTILITIES SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period............... $10.000 $ 10.791
Accumulation Unit Value, End of Period..................... $10.791 $ 14.226
Number of Units Outstanding, End of Period................. 21,377 146,531
AIM V.I. GOVERNMENT SECURITIES SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period............... $10.000 $ 10.693
Accumulation Unit Value, End of Period..................... $10.693 $ 10.130
Number of Units Outstanding, End of Period................. 15,866 330,314
A-3
<PAGE>
For the years beginning January 1 and ending December 31 1998 1999
- -------------------------------------------------------- ------- ---------
AIM V.I. GROWTH SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period............... $10.000 $ 11.810
Accumulation Unit Value, End of Period..................... $11.810 $ 15.765
Number of Units Outstanding, End of Period................. 182,188 1,590,694
AIM V.I. GROWTH AND INCOME SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period............... $10.000 $ 11.671
Accumulation Unit Value, End of Period..................... $11.671 $ 15.465
Number of Units Outstanding, End of Period................. 276,962 2,087,079
AIM V.I. HIGH YIELD SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period............... $10.000 $ 9.088
Accumulation Unit Value, End of Period..................... $ 9.088 $ 9.914
Number of Units Outstanding, End of Period................. 103,485 361,905
AIM V.I. INTERNATIONAL EQUITY SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period............... $10.000 $ 9.663
Accumulation Unit Value, End of Period..................... $ 9.663 $ 14.788
Number of Units Outstanding, End of Period................. 63,514 374,374
AIM V.I. MONEY MARKET SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period............... $10.000 $ 10.209
Accumulation Unit Value, End of Period..................... $10.209 $ 10.549
Number of Units Outstanding, End of Period................. 111,395 250,507
AIM V.I. TELECOMMUNICATIONS AND TECHNOLOGY SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period............... -- --
Accumulation Unit Value, End of Period..................... -- --
Number of Units Outstanding, End of Period................. -- --
AIM V.I. VALUE SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period............... $10.000 $ 11.733
Accumulation Unit Value, End of Period..................... $11.733 $ 15.044
Number of Units Outstanding, End of Period................. 350,953 2,912,880
- ----------------
* The Contracts, including the Enhanced Death Benefit Rider, were first offered
for sale on June 2, 1998. The Accumulation Unit Values in this table reflect
a mortality and expense risk charge of 1.20% and an administrative expense
charge of 0.10%. All of the Variable Sub-Accounts commenced operations on or
before June 2, 1998, except the Blue Chip, Dent Demographics, Global Growth
and Income and Telecommunications and Technology Variable Sub-Accounts ("the
New Sub-Accounts"). No Accumulation Unit Data is shown for the New
Sub-Accounts which commenced operations on January 3, 2000.
A-4
<PAGE>
Accumulation Unit Values and Number of Accumulation Units
Outstanding for Each Variable Sub-Account Since Inception
Basic Policy plus Enhanced Death and Income Benefit Combination Rider
For the years beginning January 1 and ending December 31 1998 1999
- -------------------------------------------------------- ------- -------
AIM V.I. AGGRESSIVE GROWTH SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period................. $10.000 $10.536
Accumulation Unit Value, End of Period....................... $10.536 $15.016
Number of Units Outstanding, End of Period................... 63,177 256,328
AIM V.I. BALANCED SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period................. $10.000 $11.272
Accumulation Unit Value, End of Period....................... $11.272 $13.247
Number of Units Outstanding, End of Period................... 164,576 696,094
AIM V.I. BLUE CHIP SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period................. -- --
Accumulation Unit Value, End of Period....................... -- --
Number of Units Outstanding, End of Period................... -- --
AIM V.I. CAPITAL APPRECIATION SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period................. $10.000 $11.012
Accumulation Unit Value, End of Period....................... $11.012 $15.687
Number of Units Outstanding, End of Period................... 203,098 691,747
AIM V.I. CAPITAL DEVELOPMENT SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period................. $10.000 $ 9.891
Accumulation Unit Value, End of Period....................... $ 9.891 $12.579
Number of Units Outstanding, End of Period................... 42,275 94,929
AIM V.I. DENT DEMOGRAPHIC TRENDS SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period................. -- --
Accumulation Unit Value, End of Period....................... -- --
Number of Units Outstanding, End of Period................... -- --
AIM V.I. DIVERSIFIED INCOME SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period................. $10.000 $ 9.850
Accumulation Unit Value, End of Period....................... $ 9.850 $ 9.516
Number of Units Outstanding, End of Period................... 25,503 156,436
AIM V.I. GLOBAL GROWTH AND INCOME SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period................. -- --
Accumulation Unit Value, End of Period....................... -- --
Number of Units Outstanding, End of Period................... -- --
AIM V.I. GLOBAL UTILITIES SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period................. $10.000 $10.778
Accumulation Unit Value, End of Period....................... $10.778 $14.181
Number of Units Outstanding, End of Period................... 16,742 81,745
AIM V.I. GOVERNMENT SECURITIES SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period................. $10.000 $10.681
Accumulation Unit Value, End of Period....................... $10.681 $10.098
Number of Units Outstanding, End of Period................... 28,964 192,103
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For the years beginning January 1 and ending December 31 1998 1999
- -------------------------------------------------------- ------- ---------
AIM V.I. GROWTH SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period............... $10.000 $ 11.797
Accumulation Unit Value, End of Period..................... $11.797 $ 15.715
Number of Units Outstanding, End of Period................. 233,659 1,047,361
AIM V.I. GROWTH AND INCOME SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period............... $10.000 $ 11.657
Accumulation Unit Value, End of Period..................... $11.657 $ 15.416
Number of Units Outstanding, End of Period................. 384,306 1,263,124
AIM V.I. HIGH YIELD SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period............... $10.000 $ 9.077
Accumulation Unit Value, End of Period..................... $ 9.077 $ 9.883
Number of Units Outstanding, End of Period................. 55,345 246,594
AIM V.I. INTERNATIONAL EQUITY SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period............... $10.000 $ 9.651
Accumulation Unit Value, End of Period..................... $ 9.651 $ 14.741
Number of Units Outstanding, End of Period................. 63,643 266,112
AIM V.I. MONEY MARKET SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period............... $10.000 $ 10.197
Accumulation Unit Value, End of Period..................... $10.197 $ 10.516
Number of Units Outstanding, End of Period................. 61,481 209,100
AIM V.I. TELECOMMUNICATIONS AND TECHNOLOGY SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period............... -- --
Accumulation Unit Value, End of Period..................... -- --
Number of Units Outstanding, End of Period................. -- --
AIM V.I. VALUE SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period............... $10.000 $ 11.719
Accumulation Unit Value, End of Period..................... $11.719 $ 14.996
Number of Units Outstanding, End of Period................. 397,504 1,742,887
- ----------------
* The Contracts, including the Enhanced Death and Income Benefit Combination
Rider, were first offered for sale on June 2, 1998. The Accumulation Unit
Values in this table reflect a mortality and expense risk charge of 1.40% and
an administrative expense charge of 0.10%. All of the Variable Sub- Accounts
commenced operations on or before June 2, 1998, except the Blue Chip, Dent
Demographics, Global Growth and Income and Telecommunications and Technology
Variable Sub-Accounts ("the New Sub-Accounts"). No Accumulation Unit Data is
shown for the New Sub-Accounts which commenced operations on January 3, 2000.
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APPENDIX B
MARKET VALUE ADJUSTMENT
The Market Value Adjustment is based on the following:
I = the Treasury Rate, for a maturity equal to the 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.
J = the Treasury Rate, for a maturity equal to the Guarantee Period, for the
week preceding the receipt of the withdrawal, transfer, death benefit, or
income payment request.
"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.
EXAMPLES OF MARKET VALUE ADJUSTMENT
Purchase Payment: $10,000 allocated to a Guarantee Period
Guarantee Period: 5 years
Guaranteed Interest Rate: 4.50%
5 Year 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.
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EXAMPLE 1: (Assumes declining interest rates)
Step 1. Calculate Contract
Value at End of Contract
Year 3: $10,000.00 X (1.045)/3/ = $11,411.66
Step 2. Calculate the Free
Withdrawal Amount: .15% X $10,000 X (1.045)/2/ = $1,638.04
Step 3. Calculate the
Withdrawal Charge: = .06 X ($10,000.00 - $1,638.04) = $501.72
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 - $1,638.04) = $52.78
Step 5. Calculate the amount
received by Contract
owner as a result of
full withdrawal at the
end of Contract Year 3: $11,411.66 - $501.72 + $52.78 = $10,962.72
EXAMPLE 2: (Assumes rising interest rates)
Step 1. Calculate Contract
Value at End of Contract
Year 3: $10,000.00 X (1.045)/3/ = $11,411.66
Step 2. Calculate the Free
Withdrawal Amount: .15 X $10,000.00 X (1.045)/2/ = $1,638.04
Step 3. Calculate the
Withdrawal Charge: .06 X ($10,000.00 - $1,638.04) = $501.72
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 - $1,638.04) = -$52.78
Step 5. Calculate the amount
received by Contract
owner as a result of
full withdrawal at the
end of Contract Year 3: $11,411.66 - $501.72 - $52.78 = $10,857.16
B-2
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STATEMENT OF ADDITIONAL INFORMATION
TABLE OF CONTENTS
Description Page
----------- ----
Additions, Deletions or Substitutions of Investments...................... 1
The Contract.............................................................. 2
Purchases of Contracts.................................................. 2
Tax-free Exchanges (1035 Exchanges, Rollovers and Transfers)............ 2
Performance Information................................................... 3
Standardized Total Returns.............................................. 3
Non-standardized Total Returns.......................................... 4
Adjusted Historical Total Returns....................................... 6
Calculation of Accumulation Unit Values................................... 8
Net Investment Factor................................................... 8
Calculation of Variable Income Payments................................... 8
Calculation of Annuity Unit Values...................................... 9
General Matters........................................................... 9
Incontestability........................................................ 9
Settlements............................................................. 9
Safekeeping of the Variable Account's Assets............................ 9
Premium Taxes........................................................... 9
Tax Reserves............................................................ 10
Federal Tax Matters....................................................... 10
Taxation of Glenbrook Life and Annuity Company.......................... 10
Exceptions to the Non-Natural Owner Rule................................ 10
IRS Required Distribution at Death Rules................................ 10
Qualified Plans........................................................... 11
Individual Retirement Annuities......................................... 11
Roth Individual Retirement Annuities.................................... 11
Simplified Employee Pension Plans....................................... 12
Savings Incentive Match Plans for Employees (Simple Plans).............. 12
Tax Sheltered Annuities................................................. 12
Corporate and Self-Employed Pension and Profit Sharing Plans............ 12
State and Local Government and Tax-Exempt Organization Deferred
Compensation Plans..................................................... 12
Experts................................................................... 13
Financial Statements...................................................... 13
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
