<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 22, 1996
FILE NO. 33-62203
811-7531
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM N-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
POST-EFFECTIVE AMENDMENT NO. 1 /X/
AND/OR
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1940
POST-EFFECTIVE AMENDMENT NO. 2 /X/
---------------------
GLENBROOK LIFE AND ANNUITY COMPANY
SEPARATE ACCOUNT A
(Exact Name of Registrant)
GLENBROOK LIFE AND ANNUITY COMPANY
3100 Sanders Road
Northbrook, Illinois 60062
(Name of Depositor)
MICHAEL J. VELOTTA
Vice President, Secretary and General Counsel
Glenbrook Life and Annuity Company
3100 Sanders Road
Northbrook, Illinois 60062
847/402-2400
(Name and Complete Address of Agent for Service)
Copies to:
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<S> <C>
STEPHEN E. ROTH, ESQUIRE JOHN R. HEDRICK, ESQUIRE
Sutherland, Asbill and Brennan Allstate Life Financial Services, Inc.
1275 Pennsylvania Avenue 3100 Sanders Road
Washington, D.C. 20004 Northbrook, IL 60062
</TABLE>
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STATEMENT PURSUANT TO RULE 24F-2
Pursuant to Rule 24f-2 under the Investment Company Act of 1940, the
Registrant hereby states that, pursuant to paragraph (b)(1), it filed its Rule
24f-2 Notice for the fiscal year ending December 31, 1995 on February 28, 1996.
------------------------
IT IS PROPOSED THAT THIS FILING WILL BECOME EFFECTIVE (CHECK APPROPRIATE
BOX)
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<C> <S>
immediately upon filing pursuant to paragraph (b) of Rule 485
X on May 1, 1996 pursuant to paragraph (b) of Rule 485
60 days after filing pursuant to paragraph (a)(i) of Rule 485
on (date) pursuant to paragraph (a)(i) of Rule 485
75 days after filing pursuant to paragraph (a)(ii) of Rule 485
</TABLE>
IF APPROPRIATE, CHECK THE FOLLOWING BOX:
<TABLE>
<C> <S>
This post-effective amendment designates a new effective date for a previously filed
post- effective amendment.
</TABLE>
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<PAGE>
CROSS REFERENCE SHEET
SHOWING LOCATION IN PART A (PROSPECTUS) AND PART B OF REGISTRATION
STATEMENT OF ADDITIONAL INFORMATION REQUIRED BY FORM N-4
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ITEM OF FORM N-4 PROSPECTUS CAPTION
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PART A: INFORMATION REQUIRED IN A PROSPECTUS
1. Cover Page.................................................... Cover Page
2. Definitions................................................... Glossary
3. Synopsis...................................................... Highlights; Summary of Variable Account Expenses
4. Condensed Financial........................................... --
(a) Chart.................................................... Condensed Financial Information
(b) MM Yield................................................. Not Applicable
(c) Location of Others....................................... Financial Statements
5. General....................................................... --
(a) Depositor................................................ Glenbrook Life and Annuity Company
(b) Registrant............................................... The Variable Account
(c) Portfolio Company........................................ The Fund; AIM Variable Insurance Funds, Inc.;
Investment Advisors for the Fund
(d) Fund Prospectus.......................................... AIM Variable Insurance Funds;
(e) Voting Rights............................................ Voting Rights
(f) Administrators........................................... Charges & Other Deductions Contract Maintenance
Charge
6. Deductions & Expenses......................................... Charges & Other Deductions
(a) General.................................................. Charges & Other Deductions
(b) Sales Load Percent....................................... Withdrawal Charge
(c) Special Purchase Plans................................... Not Applicable
(d) Commissions.............................................. Distribution of the Contracts
(e) Expenses -- Registrant................................... Charges & Other Deductions
(f) Fund Expenses............................................ Summary of Variable Account Expenses; Expenses of
the Funds
(g) Organizational Expenses.................................. Not Applicable
7. Contracts..................................................... --
(a) Persons with Rights...................................... Benefits under the Contract; Payout Start Date for
Income Payments; Voting Rights; Assignments;
Beneficiary
(b) (i) Allocation of Purchase Payments................... Allocation of Purchase Payments
(ii) Transfers......................................... Transfers among portfolios
(iii) Exchanges......................................... Not Applicable
(c) Changes.................................................. Modification
(d) Inquiries................................................ Customer Inquiries
8. Annuity Period................................................ Payout Start Date for Income Payments
(a) Material Factors......................................... Amount of Variable Annuity Income Payments
(b) Dates.................................................... Payout Start Date for Income Payments
(c) Frequency, duration & level.............................. Amount of Variable Annuity Income Payments
(d) AIR...................................................... Amount of Variable Annuity Income Payments
(e) Minimum.................................................. Amount of Variable Annuity Income Payments
(f) -- Change Options........................................ Transfers among Portfolios
-- Transfer.............................................. --
9. Death Benefit................................................. Death Benefit Payable; Death Benefit Amount; Death
Benefit Payment Provisions
10. Purchases & Contract Value.................................... --
(a) Purchases................................................ Purchase of the Contracts: Crediting of Initial
Purchase Payments
(b) Valuation................................................ Accumulation Units; Accumulation Unit Value
(c) Daily Calculation........................................ Accumulation Units; Accumulation Unit Value;
Allocation of Purchase Payments
(d) Underwriter.............................................. Distribution of the Contracts
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ITEM OF FORM N-4 PROSPECTUS CAPTION
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11. Redemptions................................................... --
(a) -- By Owners............................................. Withdrawals
(b) -- By Annuitant.......................................... Income Plans
(c) Texas ORP................................................ Not Applicable
(d) Lapse.................................................... Not Applicable
(e) Free Look................................................ Highlights
12. Taxes......................................................... Federal Tax Matters
13. Legal Proceedings............................................. Not Applicable
14. SAI Table of Contents......................................... SAI Table of Contents
PART B: INFORMATION REQUIRED IN A STATEMENT OF ADDITIONAL INFORMATION
15. Cover Page.................................................... Cover Page
16. Table of Contents............................................. Table of Contents
17. General Information & History................................. --
(a) Depositor's Name......................................... Glenbrook Life and Annuity Company
(b) Assets of Sub-account.................................... The Variable Account
(c) Control of Depositor..................................... Glenbrook Life and Annuity Company
18. Services...................................................... --
(a) Fees & Expenses of Registrant............................ Contract Maintenance Charge
(b) Management Contracts..................................... Contract Maintenance Charge; Distribution of the
Contracts
(c) Custodian................................................ SAI: Safekeeping of the Variable Account's Assets
Independent Public Accountant............................ Experts
(d) Assets of Registrant..................................... SAI: Safekeeping of the Variable Account Assets
(e) Affiliated Persons....................................... Not Applicable
(f) Principal Underwriter.................................... Distribution of the Contracts
19. Purchase of Securities Being Offered.......................... --
(a) Offering................................................. SAI: Purchase of Contracts
(b) Sales load............................................... Distribution of the Contracts
20. Underwriters.................................................. --
(a) Principal Underwriter.................................... Distribution of the Contracts
(b) Continuous offering...................................... SAI: Purchase of Contracts
(c) Commissions.............................................. Distribution of the Contracts
(d) Unaffiliated Underwriters................................ N/A
21. Calculation of Performance Data............................... SAI: Performance Data
22. Annuity Payments.............................................. Income Payments
23. Financial Statements.......................................... --
(a) Financial Statements of Registrant....................... SAI: Variable Account Financial Statements
(b) Financial Statements of Depositor........................ Glenbrook Life and Annuity Company Financial
Statements
PART C: OTHER INFORMATION
24a. Financial Statements.......................................... Financial Statements
24b. Exhibits...................................................... Exhibits
25. Directors and Officers........................................ Directors & Officers of Depositor
26. Persons Controlled By or Under Common Control with Depositor
or Registrant................................................. Persons Controlled by or Under Common Control with
Depositor or Registrant
27. Number of Contract Owners..................................... Number of Contract Owners
28. Indemnification............................................... Indemnification
29a. Relationship of Principal Underwriter to Other Investment
Companies..................................................... Relationship of Principal Underwriter to Other
Investment Companies
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ITEM OF FORM N-4 PROSPECTUS CAPTION
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29b. Principal Underwriters........................................ Principal Underwriters
29c. Compensation of Underwriter................................... Compensation of Allstate Life Financial Services,
Inc.
30. Location of Accounts and Records.............................. Location of Accounts and Records
31. Management Services........................................... Management Services
32. Undertakings.................................................. Undertakings
</TABLE>
<PAGE>
GLENBROOK LIFE AND ANNUITY COMPANY SEPARATE ACCOUNT A
OFFERED BY
GLENBROOK LIFE AND ANNUITY COMPANY
POST OFFICE BOX 94039
PALATINE, ILLINOIS 60094-4039
1-(800)776-6978
INDIVIDUAL AND GROUP FLEXIBLE PREMIUM DEFERRED VARIABLE
ANNUITY CONTRACTS
------------------------
PROSPECTUS
MAY 1, 1996.
This prospectus describes the AIM Lifetime Plus-SM- Variable Annuity, a
Flexible Premium Deferred Variable Annuity Contract ("Contract") designed to aid
you in long-term financial planning and which can be used for retirement
planning. The Contracts are issued by Glenbrook Life and Annuity Company
("Company"), a wholly owned subsidiary of Allstate Life Insurance Company.
Purchase payments for the Contracts will be allocated to a series of Variable
Sub-accounts of the Glenbrook Life and Annuity Company Separate Account A
("Variable Account") and/or to a Fixed Account option(s) funded through the
Company's general account.
The Contracts are issued as individual Contracts or as group Contracts. In
states where the Contracts are available only as group Contracts, a certificate
is issued that summarizes the provisions of the group Contract. For convenience,
this prospectus refers to both Contracts and certificates as "Contracts."
The Variable Sub-accounts invest in shares of AIM Variable Insurance Funds,
Inc. (the "Fund Series"). Nine Funds are currently available for investment
within the Variable Account: (1) AIM V.I. Capital Appreciation Fund; (2) AIM
V.I. Diversified Income Fund; (3) AIM V.I. Global Utilities Fund; (4) AIM V.I.
Government Securities Fund; (5) AIM V.I. Growth Fund; (6) AIM V.I. Growth and
Income Fund; (7) AIM V.I. International Equity Fund; (8) AIM V.I. Money Market
Fund; and (9) AIM V.I. Value Fund.
This prospectus presents information you should know before making a
decision to invest in the Contract and the available Investment Alternatives.
The Contract Value will vary daily as a function of the investment
performance of the Sub-accounts of our Variable Account and any interest
credited to the Fixed Account. The Company does not guarantee any minimum
Contract Value for amounts allocated to the Variable Account. Benefits provided
by this Contract, when based on the Fixed Account, are subject to a Market Value
Adjustment, the operation of which may result in upward or downward adjustments
in withdrawal benefits, death benefits, settlement values, transfers to other
Sub-accounts, or periodic income payments.
THE CONTRACTS MAY BE DISTRIBUTED THROUGH BROKER-DEALERS WHICH HAVE
RELATIONSHIPS WITH BANKS OR OTHER FINANCIAL INSTITUTIONS OR BY EMPLOYEES OF SUCH
BANKS; HOWEVER, THE CONTRACTS AND THE INVESTMENTS IN THE FUNDS ARE NOT DEPOSITS,
OR OBLIGATIONS OF, OR GUARANTEED OR ENDORSED BY ANY BANK, AND THE FUNDS' SHARES
ARE NOT FEDERALLY INSURED OR GUARANTEED BY THE U.S. GOVERNMENT, THE FEDERAL
DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER AGENCY.
INVESTMENT IN THE CONTRACTS INVOLVES INVESTMENT RISKS, INCLUDING THE POSSIBLE
LOSS OF PRINCIPAL.
The Company has prepared and filed a Statement of Additional Information
dated May 1, 1996 with the U.S. Securities and Exchange Commission. If you wish
to receive the Statement of Additional Information, you may obtain a free copy
by calling or writing the Company at the address above. For your convenience, an
order form for the Statement of Additional Information may be found on page B-2
of this prospectus. Before ordering, you may wish to review the Table of
Contents of the Statement of Additional Information on page B-1 of this
prospectus. The Statement of Additional Information has been incorporated by
reference into this prospectus.
THIS PROSPECTUS IS VALID ONLY WHEN ACCOMPANIED OR PRECEDED BY A CURRENT
PROSPECTUS FOR AIM VARIABLE INSURANCE FUNDS, INC.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION, NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
PLEASE READ THIS PROSPECTUS CAREFULLY AND RETAIN IT FOR FUTURE REFERENCE
The Contract is not available in all states.
At least once each Contract year, the Company will send the Owner an annual
statement that contains certain information pertinent to the individual Owner's
Contract. The annual statement details values and specific Contract data that
applies to each particular Contract. The annual statement does not contain
financial statements of the Company, although the Company's Financial Statements
are on page F-1 of this Prospectus. In addition, the Company is subject to the
informational requirements of the Securities Exchange Act of 1934 and in
accordance therewith files reports and other information with the Securities and
Exchange Commission. Reports and other information filed by the Company can be
inspected at the public reference facilities maintained by the Commission at 450
Fifth Street, N.W., Washington, D.C. 20549. Copies of such material can be
obtained from the Public Reference Section of the Commission, Washington, D.C.
20549 at prescribed rates.
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING IN ANY JURISDICTION IN WHICH
SUCH OFFERING MAY NOT LAWFULLY BE MADE. NO DEALER, SALESMAN, OR OTHER PERSON IS
AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY REPRESENTATIONS IN CONNECTION
WITH THIS OFFERING OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN
OR MADE, SUCH OTHER INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON.
<PAGE>
TABLE OF CONTENTS
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GLOSSARY.......................................... 3
HIGHLIGHTS........................................ 4
SUMMARY OF VARIABLE ACCOUNT EXPENSES.............. 5
CONDENSED FINANCIAL INFORMATION................... 7
YIELD AND TOTAL RETURN DISCLOSURE................. 7
FINANCIAL STATEMENTS.............................. 8
GLENBROOK LIFE AND ANNUITY COMPANY AND THE
VARIABLE ACCOUNT................................. 8
Glenbrook Life and Annuity Company.............. 8
The Variable Account............................ 8
THE FUND SERIES................................... 9
AIM Variable Insurance Funds, Inc............... 9
Investment Advisor for the Funds................ 10
FIXED ACCOUNT..................................... 10
Example of Interest Crediting During the
Guarantee Period............................... 10
Withdrawals or Transfers........................ 11
Market Value Adjustment......................... 11
PURCHASE OF THE CONTRACTS......................... 12
Purchase Payment Limits......................... 12
Free-Look Period................................ 12
Crediting of Initial Purchase Payment........... 12
Allocation of Purchase Payments................. 12
Accumulation Units.............................. 12
Accumulation Unit Value......................... 12
Transfers Among Investment Alternatives......... 12
Dollar Cost Averaging........................... 13
Automatic Fund Rebalancing...................... 13
BENEFITS UNDER THE CONTRACT....................... 13
Withdrawals..................................... 13
Income Payments................................. 14
Payout Start Date for Income Payments......... 14
Variable Account Income Payments.............. 14
Fixed Amount Income Payments.................. 14
Income Plans.................................. 14
DEATH BENEFITS.................................... 15
Distribution Upon Death Payment Provisions...... 15
Death Benefit Amount............................ 15
CHARGES AND OTHER DEDUCTIONS...................... 16
Deductions from Purchase Payments............... 16
Withdrawal Charge (Contingent Deferred Sales
Charge)........................................ 16
Contract Maintenance Charge..................... 17
Administrative Expense Charge................... 17
Mortality and Expense Risk Charge............... 17
Taxes........................................... 17
Transfer Charges................................ 17
Fund Expenses................................... 18
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GENERAL MATTERS................................... 18
Owner........................................... 18
Beneficiary..................................... 18
Assignments..................................... 18
Delay of Payments............................... 18
Modification.................................... 18
Customer Inquiries.............................. 18
FEDERAL TAX MATTERS............................... 19
Introduction.................................... 19
Taxation of Annuities in General................ 19
Tax Deferral.................................. 19
Non-natural Owners............................ 19
Diversification Requirements.................. 19
Ownership Treatment........................... 19
Delayed Maturity Dates........................ 19
Taxation of Partial and Full Withdrawals...... 19
Taxation of Annuity Payments.................. 20
Taxation of Annuity Death Benefits............ 20
Penalty Tax on Premature Distributions........ 20
Aggregation of Annuity Contracts.............. 20
Tax Qualified Contracts....................... 20
Restrictions Under Section 403(b) Plans....... 20
Income Tax Withholding........................ 20
DISTRIBUTION OF THE CONTRACTS..................... 21
VOTING RIGHTS..................................... 21
SELECTED FINANCIAL DATA........................... 21
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS.... 22
General......................................... 22
Results of Operations........................... 22
Financial Position.............................. 22
Liquidity and Capital Resources................. 23
COMPETITION....................................... 23
EMPLOYEES......................................... 23
PROPERTIES........................................ 23
STATE AND FEDERAL REGULATION...................... 23
EXECUTIVE OFFICERS AND DIRECTORS OF THE COMPANY... 24
EXECUTIVE COMPENSATION............................ 25
LEGAL PROCEEDINGS................................. 25
EXPERTS........................................... 25
LEGAL MATTERS..................................... 25
FINANCIAL STATEMENTS.............................. F-1
APPENDIX A - Market Value Adjustment.............. A-1
STATEMENT OF ADDITIONAL INFORMATION: TABLE OF
CONTENTS......................................... B-1
ORDER FORM........................................ B-2
</TABLE>
2
<PAGE>
GLOSSARY
ACCUMULATION UNIT: A measure of your ownership interest in a Sub-account of
the Variable Account prior to the Payout Start Date. Analogous, though not
identical, to a share owned in a mutual fund.
ACCUMULATION UNIT VALUE: The value of each Accumulation Unit which is
calculated each Valuation Date. Each Sub-account of the Variable Account has its
own distinct Accumulation Unit Value. Analogous, though not identical, to the
share price (net asset value) of a mutual fund.
ANNUITANT(S): The person or persons whose life determines the latest Payout
Start Date and the amount and duration of any income payments for Income Plan
options other than Guaranteed Payments for a Specified Period. Joint annuitants
are only permitted on or after the Payout Start Date.
BENEFICIARY(IES): The person(s) to whom any benefits are due when a death
benefit is payable and there is no surviving Owner.
COMPANY("WE," "US"): Glenbrook Life and Annuity Company.
CONTRACT: The Glenbrook Life and Annuity Company Flexible Premium Deferred
Variable Annuity Contract, known as the "AIM Lifetime Plus-SM- Variable
Annuity," that is described in this prospectus.
CONTRACT ANNIVERSARY: An anniversary of the date that the Contract was
issued.
CONTRACT VALUE: The value of all amounts accumulated under the Contract
prior to the Payout Start Date, equivalent to the Accumulation Units in each
Sub-account of the Variable Account multiplied by the respective Accumulation
Unit Value, plus the value in the Fixed Account.
CONTRACT YEAR: A period of 12 months starting with the issue date or any
Contract Anniversary.
DEATH BENEFIT ANNIVERSARY: Every seventh Contract Anniversary beginning on
the date that the Contract was issued. For example, the issue date, 7th and 14th
Contract Anniversaries are the first three Death Benefit Anniversaries.
FIXED ACCOUNT: All of the assets of the Company that are not in separate
accounts. Also known as the "Market Value Adjustment Account."
FIXED SUB-ACCOUNTS: These Sub-accounts are distinguished by Guarantee
Period(s) and the dates the period(s) begin. The Fixed Sub-accounts are
established when purchase payments are allocated to the Fixed Account; when
previous Sub-accounts expire and a new Guarantee Period is selected; and when
You transfer an amount to the Fixed Account.
GUARANTEE PERIOD: A period of years for which a specified effective annual
interest rate is guaranteed by the Company.
INCOME PLAN: One of several ways in which a series of payments are made
after the Payout Start Date. Income payments are based on the Contract Value
adjusted by any applicable Market Value Adjustment and applicable taxes on the
Payout Start Date. Income payment amounts may vary based on any Sub-account of
the Variable Account and/or may be fixed for the duration of the Income Plan.
INVESTMENT ALTERNATIVES: The Sub-accounts of the Variable Account and the
Fixed Account.
MARKET VALUE ADJUSTMENT: The Market Value Adjustment is the adjustment made
to the money distributed from a Sub-account of the Fixed Account, prior to the
end of the Guarantee Period, to reflect the impact of changes in interest rates
between the time the Sub-account of the Fixed Account was established and the
time of distribution.
NON-QUALIFIED CONTRACTS: Contracts other than Qualified Contracts.
OWNER(S)("YOU"): The person or persons designated as the Owner in the
Contract.
PAYOUT START DATE: The date on which income payments begin.
QUALIFIED CONTRACTS: Contracts issued under plans that qualify for special
federal income tax treatment under Sections 401(a), 403(a), 403(b) and 408 of
the Internal Revenue Code.
VALUATION DATE: Each day that the New York Stock Exchange is open for
business. The Valuation Date does not include such Federal and non-Federal
holidays as are observed by the New York Stock Exchange.
VALUATION PERIOD: The period between successive Valuation Dates, commencing
at the close of regular trading on the New York Stock Exchange (which is
normally 4:00pm Eastern Time) and ending as of the close of regular trading on
the New York Stock Exchange on the next succeeding Valuation Date.
VARIABLE ACCOUNT: Glenbrook Life and Annuity Company Separate Account A, a
separate investment account established by the Company to receive and invest
purchase payments paid under the Contracts.
VARIABLE SUB-ACCOUNT: A portion of the Variable Account invested in shares
of a corresponding Fund. The investment performance of each Variable Sub-account
is linked directly to the investment performance of its corresponding Fund.
3
<PAGE>
HIGHLIGHTS
THE CONTRACT
This Contract is designed for long-term financial planning and retirement
planning. Money can be allocated to any combination of Funds and/or the Fixed
Account. You have access to your funds either through withdrawals of Contract
Value or through periodic income payments. You bear the entire investment risk
for Contract Values and income payments based upon the Variable Account, because
values will vary depending on the investment performance of the Fund(s) you
select. See "Accumulation Unit Value," page 12 and "Income Plans," page 14. You
will also bear the investment risk of adverse changes in interest rates in the
event amounts are prematurely withdrawn or transferred from Sub-accounts of the
Fixed Account. See "Fixed Account," page 10.
FREE-LOOK
You may cancel the Contract any time within 20 days after receipt of the
Contract and receive a full refund of purchase payments allocated to the Fixed
Account. Purchase payments allocated to the Variable Account will be returned
after an adjustment to reflect investment gain or loss that occurred from the
date of allocation through the date of cancellation, unless a refund of purchase
payments is required by state or federal law. See "Free-Look Period," page 12.
HOW TO INVEST
Your first purchase payment must be at least $5,000 (for Qualified
Contracts, $2,000). Subsequent purchase payments must be at least $500. Purchase
payments may also be made pursuant to an Automatic Addition Program. See
"Purchase Payment Limits," page 10. At the time of your application, you will
allocate your purchase payment among the Investment Alternatives. The allocation
you specify on the application will be effective immediately. All allocations
must be in whole percents from 0% to 100% (total allocation equals 100%) or in
whole dollars (total allocation equals entire dollar amount of purchase
payment). Allocations may be changed by notifying the Company in writing. See
"Allocation of Purchase Payments," page 12.
INVESTMENT ALTERNATIVES
The Variable Account invests in shares of AIM Variable Insurance Funds, Inc.
(the "Fund Series"). The Fund Series has a total of nine Funds available under
the Contract. The Funds include: (1) AIM V.I. Capital Appreciation Fund; (2) AIM
V.I. Diversified Income Fund; (3) AIM V.I. Global Utilities Fund; (4) AIM V.I.
Government Securities Fund; (5) AIM V.I. Growth Fund; (6) AIM V.I. Growth and
Income Fund; (7) AIM V.I. International Equity Fund; (8) AIM V.I. Money Market
Fund; and (9) AIM V.I. Value Fund. The assets of each Fund are held separately
from the other Funds and each has distinct investment objectives and policies
which are described in the accompanying prospectus for the Fund Series. In
addition to the Variable Account, Owners can also allocate all or part of their
purchase payments to the Fixed Account. See "Fixed Account," on page 10.
TRANSFERS AMONG INVESTMENT ALTERNATIVES
Prior to the Payout Start Date, you may transfer amounts among the
Investment Alternatives. The Company reserves the right to assess a $10 charge
on each transfer in excess of twelve per Contract Year. The Company is presently
waiving this charge. Transfers to the Fixed Account must be at least $500.
Certain Fixed Account transfers may be restricted. See "Transfers Among
Investment Alternatives," page 11. You may want to enroll in a Dollar Cost
Averaging Program or an Automatic Fund Rebalancing Program. See "Dollar Cost
Averaging," page 12, and "Automatic Fund Rebalancing," page 13.
CHARGES AND DEDUCTIONS
The costs of the Contract include: a contract maintenance charge ($35
annually), a mortality and expense risk charge (deducted daily, equal on an
annual basis to 1.35% of the Contract's daily net assets of the Variable
Account), and an administrative expense charge (deducted daily, equal on an
annual basis to .10% of the Contract's daily net assets of the Variable
Account). The Company reserves the right to assess a transfer charge ($10 on
each transfer in excess of twelve per Contract Year). Additional deductions may
be made for certain taxes. See "Contract Maintenance Charge," page 17,
"Mortality and Expense Risk Charge," page 17, "Administrative Expense Charge,"
page 17, "Transfer Charges," page 17, and "Taxes," page 17.
WITHDRAWALS
You may withdraw all or part of the Contract Value before the earliest of
the Payout Start Date, the death of any Owner or, if the Owner is not a natural
person, the death of the Annuitant. Each Contract Year, no withdrawal charges or
Market Value Adjustments will be applied to amounts withdrawn up to 10% of the
amount of purchase payments. Amounts withdrawn in excess of the 10% may be
subject to a withdrawal charge of 0% to 6% depending on how long purchase
payments have been invested in the Contract. Amounts withdrawn from a
Sub-account of the Fixed Account, in excess of the 10%, except during the 30 day
period after the Guarantee Period expires, will be subject to a Market Value
Adjustment. See "Withdrawals," page 13, "Withdrawals or Transfers," page 11, and
"Taxation of Annuities in General," page 19.
4
<PAGE>
DEATH BENEFIT
The Company will pay a death benefit prior to the Payout Start Date on the
death of any Owner or, if the Owner is not a natural person, the death of the
Annuitant. See "Death Benefit Amount," page 14.
INCOME PAYMENTS
You will receive periodic income payments beginning on the Payout Start
Date. You may choose among several Income Plans to fit your needs. Income
payments may be received for a specified period or for life (either single or
joint life), with or without a guaranteed number of payments. You can select
income payments that are fixed, variable or a combination of fixed and variable.
See "Income Payments," page 13.
SUMMARY OF VARIABLE ACCOUNT EXPENSES
The following table illustrates all expenses and fees that you will incur.
The expenses and fees set forth in the table are based on charges under the
Contracts and on the expenses of the Variable Account and the underlying Fund
Series.
OWNER TRANSACTION EXPENSES (ALL SUB-ACCOUNTS)
<TABLE>
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Sales Load Imposed on Purchases (as a percentage of purchase payments).................... None
Contingent Deferred Sales Charge (as a percentage of purchase payments)................... *
</TABLE>
<TABLE>
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APPLICABLE
SALES CHARGE
NUMBER OF COMPLETE YEARS SINCE PURCHASE AS A
PAYMENT BEING WITHDRAWN WAS MADE PERCENTAGE
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<S> <C>
0 years........................................................... 6%
1 year............................................................ 6%
2 years........................................................... 5%
3 years........................................................... 5%
4 years........................................................... 4%
5 years........................................................... 4%
6 years........................................................... 3%
7 Years or more................................................... 0%
Transfer Fee.......................................................... **
Annual Contract Fee................................................... $35***
Variable Account Annual Expenses (as a percentage of the Contract's average net
assets in the Variable Account)
Mortality and Expense Risk Charge..................................... 1.35%
Administrative Expense Charge......................................... 0.10%
Total Variable Account Annual Expenses................................ 1.45%
</TABLE>
- ------------
* Each Contract Year up to 10% of the amount of purchase payments may be
withdrawn without a contingent deferred sales charge or a Market Value
Adjustment.
** No charges will be imposed on the first twelve transfers in any Contract
Year. The Company reserves the right to assess a $10 charge for each
transfer in excess of twelve in any Contract Year, excluding transfers due
to dollar cost averaging and automatic fund rebalancing.
*** The annual Contract Fee will be waived if total purchase payments as of a
Contract Anniversary, or upon a full withdrawal, are $50,000 or if all
monies are allocated to the Fixed Account.
5
<PAGE>
FUND EXPENSES
(AS A PERCENTAGE OF FUND ASSETS)
<TABLE>
<CAPTION>
TOTAL FUND
MANAGEMENT OTHER ANNUAL
FUND FEES EXPENSES EXPENSES
- ------------------------------------------------------------------------------- ---------- ---------- ----------
<S> <C> <C> <C>
AIM V.I. Capital Appreciation Fund............................................. 0.65% .10% .75%
AIM V.I. Growth and Income Fund................................................ 0.65% .52% 1.17%
AIM V.I. Global Utilities Fund (after expense reimbursements).................. 0.65% 1.03% 1.68%
AIM V.I. Diversified Income Fund............................................... 0.60% .28% .88%
AIM V.I. Government Securities Fund............................................ 0.50% .69% 1.19%
AIM V.I. Growth Fund........................................................... 0.65% .19% .84%
AIM V.I. International Equity Fund............................................. 0.75% .40% 1.15%
AIM V.I. Value Fund............................................................ 0.65% .10% .75%
AIM V.I. Money Market Fund..................................................... 0.40% .13% .53%
</TABLE>
EXAMPLE
You (the Owner) would pay the following cumulative expenses on a $1,000
investment, assuming a 5% annual return under the following circumstances:
If you terminate your Contract or annuitize for a specified period of less
than 120 months at the end of the applicable time period:
<TABLE>
<CAPTION>
FUND 1 YEAR 3 YEARS
- ------------------------------------------------------------------------------------------------------- ----------- -----------
<S> <C> <C>
AIM V.I. Capital Appreciation Fund..................................................................... $ 78 $ 118
AIM V.I. Growth and Income Fund........................................................................ $ 82 $ 131
AIM V.I. Global Utilities Fund......................................................................... $ 85 $ 140
AIM V.I. Diversified Income Fund....................................................................... $ 79 $ 122
AIM V.I. Government Securities Fund.................................................................... $ 82 $ 131
AIM V.I. Growth Fund................................................................................... $ 79 $ 121
AIM V.I. International Equity Fund..................................................................... $ 82 $ 130
AIM V.I. Value Fund.................................................................................... $ 78 $ 118
AIM V.I. Money Market Fund............................................................................. $ 76 $ 111
</TABLE>
If you do not terminate your Contract or if you annuitize for a specified
period of 120 months or more at the end of the applicable time period:
<TABLE>
<CAPTION>
FUND 1 YEAR 3 YEARS
- ------------------------------------------------------------------------------------------------------- ----------- -----------
<S> <C> <C>
AIM V.I. Capital Appreciation Fund..................................................................... $ 24 $ 73
AIM V.I. Growth and Income Fund........................................................................ $ 28 $ 86
AIM V.I. Global Utilities Fund......................................................................... $ 31 $ 95
AIM V.I. Diversified Income Fund....................................................................... $ 25 $ 77
AIM V.I. Government Securities Fund.................................................................... $ 28 $ 86
AIM V.I. Growth Fund................................................................................... $ 25 $ 76
AIM V.I. International Equity Fund..................................................................... $ 28 $ 85
AIM V.I. Value Fund.................................................................................... $ 24 $ 73
AIM V.I. Money Market Fund............................................................................. $ 21 $ 66
</TABLE>
THE ABOVE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR
FUTURE EXPENSE. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN. The
purpose of the example is to assist you in understanding the various costs and
expenses that you will bear directly or indirectly. Premium taxes, which vary
from 0 - 3.5% depending on the state where the Contract is sold, are not
reflected in the example.
6
<PAGE>
CONDENSED FINANCIAL INFORMATION
Accumulation Unit Values and Number
of Accumulation Units Outstanding for
Each Sub-Account since Inception
<TABLE>
<CAPTION>
1995
----------
<S> <C>
AIM V.I. MONEY MARKET SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period.......................................... 10.000000
Accumulation Unit Value, End of Period................................................ 10.023366
Number of Units Outstanding, End of Period............................................ 0
AIM V.I. GOVERNMENT SECURITIES SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period.......................................... 10.000000
Accumulation Unit Value, End of Period................................................ 10.082005
Number of Units Outstanding, End of Period............................................ 0
AIM V.I. DIVERSIFIED INCOME SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period.......................................... 10.000000
Accumulation Unit Value, End of Period................................................ 10.067806
Number of Units Outstanding, End of Period............................................ 0
AIM V.I. GLOBAL UTILITIES SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period.......................................... 10.000000
Accumulation Unit Value, End of Period................................................ 10.209475
Number of Units Outstanding, End of Period............................................ 0
AIM V.I. GROWTH AND INCOME SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period.......................................... 10.000000
Accumulation Unit Value, End of Period................................................ 9.617647
Number of Units Outstanding, End of Period............................................ 102
AIM V.I. VALUE SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period.......................................... 10.000000
Accumulation Unit Value, End of Period................................................ 9.865204
Number of Units Outstanding, End of Period............................................ 957
AIM V.I. INTERNATIONAL EQUITY SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period.......................................... 10.000000
Accumulation Unit Value, End of Period................................................ 10.182309
Number of Units Outstanding, End of Period............................................ 927
AIM V.I. GROWTH SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period.......................................... 10.000000
Accumulation Unit Value, End of Period................................................ 9.932039
Number of Units Outstanding, End of Period............................................ 103
AIM V.I. CAPITAL APPRECIATION SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period.......................................... 10.000000
Accumulation Unit Value, End of Period................................................ 9.911854
Number of Units Outstanding, End of Period............................................ 987
</TABLE>
All Sub-Accounts commenced operations on December 4, 1995. The Accumulation
Unit Values in this table reflect a Mortality and Expense Risk Charge of 1.35%
and an Administrative Expense Charge of 0.10%.
YIELD AND TOTAL RETURN DISCLOSURE
From time to time the Variable Account may advertise the yield and total
return investment performance of one or more Sub-accounts. Yield and
standardized total return advertisements include all charges and expenses
attributable to the Contracts. Including these fees has the effect of decreasing
the advertised performance of a Sub-account, so that a Sub-account's investment
performance will not be directly comparable to that of an ordinary mutual fund.
When a Sub-account advertises its standardized total return it will usually
be calculated for one year, five years, and ten years or since inception if the
Sub-account has not been in existence for such periods. Total return is measured
by comparing the value of an investment in the Sub-account at the end of the
relevant period to the value of the investment at the beginning of the period.
7
<PAGE>
In addition to the standardized total return, the Sub-account may advertise
a non-standardized total return. This figure will usually be calculated for one
year, five years, and ten years or other periods. Non-standardized total return
is measured in the same manner as the standardized total return described above,
except that the withdrawal charges under the Contract are not deducted.
Therefore, a non-standardized total return for a Sub-account can be higher than
a standardized total return for a Sub-account.
Certain Sub-accounts may advertise yield in addition to total return. Except
in the case of the AIM V.I. Money Market Sub-account, the yield will be computed
in the following manner: the net investment income per unit earned during a
recent one month period is divided by the unit value on the last day of the
period, and then annualized. This figure reflects the recurring charges at the
separate account level.
The AIM V.I. Money Market Sub-account may advertise, in addition to the
total return, either yield or the effective yield. The yield in this case refers
to the income generated by an investment in that Sub-account over a seven-day
period net of recurring charges at the separate account level. The income is
then annualized (i.e., the amount of income generated by the investment during
that week is assumed to be generated each week over a 52-week period and is
shown as a percentage of the investment). The effective yield is calculated
similarly but when annualized, the income earned by an investment in the AIM
V.I. Money Market Sub-account is assumed to be reinvested at the end of each
seven-day period. The effective yield will be slightly higher than the yield
because of the compounding effect of this assumed reinvestment during a 52-week
period.
The Variable Account may also disclose yield, standard total return, and
non-standard total return for periods prior to the date that the Variable
Account commenced operations. For periods prior to the date the Variable Account
commenced operations, performance information for the Sub-accounts will be
calculated based on the performance of the underlying Funds and the assumption
that the Sub-accounts were in existence for the same periods as those of the
underlying Funds, with a level of charges equal to those currently assessed
against the Sub-accounts.
Please refer to the Statement of Additional Information for a further
description of the method used to calculate a Sub-account's yield and total
return.
FINANCIAL STATEMENTS
The financial statements of Glenbrook Life and Annuity Company are on page
F-1 of the prospectus. The financial statements of Glenbrook Life and Annuity
Company Separate Account A may be found in the Statement of Additional
Information, which is incorporated by reference into this prospectus and which
is available upon request. (See order form on page B-2)
GLENBROOK LIFE AND ANNUITY COMPANY AND THE VARIABLE ACCOUNT
GLENBROOK LIFE AND ANNUITY COMPANY
The Company is the issuer of the Contract. The Company is a stock life
insurance company which was organized under the laws of the State of Illinois in
1992. The Company was originally organized under the laws of the State of
Indiana in 1965. From 1965 to 1983 the Company was known as "United Standard
Life Assurance Company" and from 1983 to 1992 the Company was known as "William
Penn Life Assurance Company of America." As of the date of this prospectus, the
Company is licensed to operate in the District of Columbia and all states except
New York. The Company intends to market the Contract in those jurisdictions in
which it is licensed to operate. The Company's home office is located at 3100
Sanders Road, Northbrook, Illinois 60062.
The Company is a wholly-owned subsidiary of Allstate Life Insurance Company
("Allstate Life"), 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 ("Allstate"), a stock property-liability insurance company
incorporated under the laws of Illinois. All of the outstanding capital stock of
Allstate is owned by The Allstate Corporation ("Corporation"). In June 1995,
Sears, Roebuck and Co. distributed in a tax-free dividend to its stockholders
its remaining 80.3% ownership in the Corporation.
The Company and Allstate Life entered into a reinsurance agreement,
effective June 5, 1992. Under the reinsurance agreement, Fixed Account purchase
payments are automatically transferred to Allstate Life and become invested with
the assets of Allstate Life, and Allstate Life accepts 100% of the liability
under such contracts. However, the obligations of Allstate Life under the
reinsurance agreement are to the Company; the Company remains the sole obligor
under the Contract to the Owners.
THE VARIABLE ACCOUNT
Established on September 6, 1995, the Glenbrook Life and Annuity Company
Separate Account A is a unit investment trust registered with the Securities and
Exchange Commission under the Investment Company Act of 1940. However, such
registration does not signify that the Commission supervises the management or
investment practices or policies of the Variable Account. The investment
performance of the Variable Account is entirely independent of both the
investment performance of the Company's general account and the performance of
any other separate account.
8
<PAGE>
The Variable Account has been divided into nine Sub-accounts, each of which
invests solely in its corresponding Fund of AIM Variable Insurance Funds, Inc.
Additional Variable Sub-accounts may be added at the discretion of the Company.
The assets of the Variable Account are held separately from the other assets
of the Company. They are not chargeable with liabilities incurred in the
Company's other business operations. Accordingly, the income, capital gains and
capital losses, realized or unrealized, incurred on the assets of the Variable
Account are credited to or charged against the assets of the Variable Account,
without regard to the income, capital gains or capital losses arising out of any
other business the Company may conduct. The Company's obligations arising under
the Contracts are general corporate obligations of the Company.
THE FUND SERIES
The Variable Account will invest in shares of the AIM Variable Insurance
Funds, Inc. (the "Fund Series"). The Fund Series is registered with the
Securities and Exchange Commission as an open-end, series, management investment
company. Registration of the Fund Series does not involve supervision of its
management, investment practices or policies by the Securities and Exchange
Commission. The Funds are designed to provide investment vehicles for variable
insurance contracts of various insurance companies, in addition to the Variable
Account.
Shares of the Funds are not deposits, or obligations of, or guaranteed or
endorsed by any bank and the shares are not federally insured by the Federal
Deposit Insurance Corporation, the Federal Reserve Board or any other agency.
AIM VARIABLE INSURANCE FUNDS, INC.
AIM Variable Insurance Funds, Inc. offers nine Funds for use with this
Contract: (1) AIM V.I Capital Appreciation Fund; (2) AIM V.I Diversified Income
Fund; (3) AIM V.I. Global Utilities Fund; (4) AIM V.I. Government Securities
Fund; (5) AIM V.I. Growth Fund; (6) AIM V.I. Growth and Income Fund; (7) AIM
V.I. International Equity Fund; (8) AIM V.I. Money Market Fund; and (9) AIM V.I.
Value Fund. Each Fund has different investment objectives and policies and
operates as a separate investment fund. The following is a brief description of
the investment objectives and programs of the Funds:
AIM V.I. CAPITAL APPRECIATION FUND ("CAPITAL APPRECIATION FUND") is a
diversified Fund which seeks to provide capital appreciation through investments
in common stocks, with emphasis on medium-sized and smaller emerging growth
companies.
AIM V.I. DIVERSIFIED INCOME FUND ("DIVERSIFIED INCOME FUND") is a
diversified Fund which seeks to achieve a high level of current income primarily
by investing in a diversified portfolio of foreign and U.S. government and
corporate debt securities, including lower rated high yield debt securities
(commonly known as "junk bonds"). The risks of investing in junk bonds are
described in the accompanying prospectus for the Fund Series, which should be
read carefully before investing.
AIM V.I. GLOBAL UTILITIES FUND ("GLOBAL UTILITIES FUND") is a
non-diversified Fund which seeks to achieve a high level of current income and,
as a secondary objective, to achieve capital appreciation, by investing
primarily in common and preferred stocks of public utility companies (either
domestic or foreign).
AIM V.I. GOVERNMENT SECURITIES FUND ("GOVERNMENT FUND") is a diversified
Fund which seeks to achieve a high level of current income consistent with
reasonable concern for safety of principal by investing in debt securities
issued, guaranteed or otherwise backed by the U.S. Government.
AIM V.I. GROWTH FUND ("GROWTH FUND") is a diversified Fund which seeks to
provide growth of capital through investments primarily in common stocks of
leading U.S. companies considered by AIM to have strong earnings momentum.
AIM V.I. GROWTH AND INCOME FUND ("GROWTH & INCOME FUND") is a diversified
Fund which seeks to provide growth of capital, with current income as a
secondary objective by investing primarily in dividend paying common stocks
which have prospects for both growth of capital and dividend income.
AIM V.I. INTERNATIONAL EQUITY FUND ("INTERNATIONAL FUND") is a diversified
Fund which seeks to provide long-term growth of capital by investing in
international equity securities, the issuers of which are considered by AIM to
have strong earnings momentum.
AIM V.I. MONEY MARKET FUND ("MONEY MARKET FUND") is a diversified Fund which
seeks to provide as high a level of current income as is consistent with the
preservation of capital and liquidity by investing in a diversified portfolio of
money market instruments.
AIM V.I. VALUE FUND ("VALUE FUND") is a diversified Fund which seeks to
achieve long-term growth of capital by investing primarily in equity securities
judged by AIM to be undervalued relative to the current or projected earnings of
the companies issuing the securities, or relative to current market values of
assets owned by the companies issuing the securities or relative to the equity
markets generally. Income is a secondary objective.
9
<PAGE>
INVESTMENT ADVISOR FOR THE FUNDS
AIM Advisors, Inc., ("AIM") serves as the investment advisor to each Fund.
AIM was organized in 1976 and, together with its affiliates, manages or advises
38 investment company portfolios (including the Funds). AIM is a wholly owned
subsidiary of AIM Management Group Inc., a holding company. AIM manages pursuant
to a master investment advisory agreement dated October 18, 1993, as amended
April 28, 1994. As of February 26, 1996, total assets advised or managed by AIM
and its affiliates were approximately $49 billion.
There is no assurance that the Funds will attain their respective stated
objectives. Additional information concerning the investment objectives and
policies of the Funds can be found in the current prospectus for the Fund Series
accompanying this prospectus.
You will find more complete information about the Funds, including the risks
associated with each Fund, in the accompanying prospectus. You should read the
prospectus for the Fund Series in conjunction with this prospectus.
THE FUND SERIES PROSPECTUS SHOULD BE READ CAREFULLY BEFORE ANY DECISION IS
MADE CONCERNING THE ALLOCATION OF PURCHASE PAYMENTS TO A PARTICULAR VARIABLE
SUB-ACCOUNT.
FIXED ACCOUNT
Purchase payments and transfers allocated to one or more of the Sub-accounts
of the Fixed Account become part of the general account of the Company. Each
Sub-account offers a separate interest rate Guarantee Period. Guarantee Periods
will be offered at the Company's discretion and may range from one to ten years.
Presently, the Company offers Guarantee Periods of one, three, five, seven and
ten years. The Owner must select the Sub-account(s) in which to allocate each
purchase payment and transfer. No less than $500 may be allocated to any one
Sub-account. The Company reserves the right to limit the number of additional
purchase payments. The Fixed Account Investment Alternative may not be available
in all states. Please consult with your sales representative for current
information.
Interest is credited daily to each Sub-account at a rate which compounds to
the effective annual interest rate declared for each Sub-account's Guarantee
Period that has been selected.
The following example illustrates how the Sub-account value for a
Sub-account of the Fixed Account would grow given an assumed purchase payment,
Guarantee Period, and effective annual interest rate:
EXAMPLE OF INTEREST CREDITING DURING THE GUARANTEE PERIOD:
<TABLE>
<S> <C>
Purchase Payment:..................................................................... $10,000.00
Guarantee Period:..................................................................... 5 years
Effective Annual Rate:................................................................ 4.75%
</TABLE>
END OF CONTRACT YEAR:
<TABLE>
<CAPTION>
YEAR 1 YEAR 2 YEAR 3 YEAR 4 YEAR 5
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Beginning Sub-Account Value $10,000.00
X (1 + Effective Annual Rate) 1.0475
----------
$10,475.00
Sub-Account Value at end of Contract $10,475.00
year 1 X (1 + Effective Annual Rate) 1.0475
----------
$10,972.56
Sub-Account Value at end of Contract $10,972.56
year 2 X (1 + Effective Annual Rate) 1.0475
----------
$11,493.76
Sub-Account Value at end of Contract $11,493.76
year 3 X (1 + Effective Annual Rate) 1.0475
----------
$12,039.71
Sub-Account Value at end of Contract $12,039.71
year 4 X (1 + Effective Annual Rate) 1.0475
----------
Sub-Account Value at end of Guarantee Period: $12,611.60
----------
----------
TOTAL INTEREST CREDITED IN GUARANTEE PERIOD: $2,611.60 ($12,611.60 -$10,000.00)
</TABLE>
NOTE: The above illustration assumes no withdrawals of any amount during the
entire five year period. A withdrawal charge and a Market Value
Adjustment may apply to any amount withdrawn in excess of 10% of the
amount of purchase payments. The hypothetical interest rate is for
illustrative purposes only and is not intended to predict future interest
rates to be declared under the Contract.
10
<PAGE>
The Company has no specific formula for determining the rate of interest
that it will declare initially or in the future. Such interest rates will be
reflective of investment returns available at the time of the determination. In
addition, the management of the Company may also consider various other factors
in determining interest rates, including regulatory and tax requirements, sales
commissions and administrative expenses borne by the Company, general economic
trends, and competitive factors. The Company guarantees that the interest rates
will never be less than the minimum guaranteed rate shown in the Contract. For
current interest rate information, please contact your sales representative or
the Company's Customer Support Unit at 1(800)776-6978.
THE MANAGEMENT OF THE COMPANY WILL MAKE THE FINAL DETERMINATION AS TO THE
INTEREST RATES TO BE DECLARED. THE COMPANY CAN NEITHER PREDICT NOR GUARANTEE
FUTURE INTEREST RATES TO BE DECLARED.
Prior to the end of a Guarantee Period, a notice will be mailed to the Owner
outlining the options available at the end of a Guarantee Period. During the 30
day period after a Guarantee Period expires the Owner may:
- take no action and the Company will automatically renew the Sub-account
value to a Guarantee Period of the same duration to be established on the
day the previous Guaranteed Period expired; or
- notify the Company to apply the Sub-account value to a new Guarantee
Period or periods to be established on the day the previous Guarantee
Period expired; or
- notify the Company to apply the Sub-account value to any Sub-account of
the Variable Account on the day we receive the notification; or
- receive a portion of the Sub-account value or the entire Sub-account value
through a partial or full withdrawal that is not subject to a Market Value
Adjustment. In this case, the amount withdrawn will be deemed to have been
withdrawn on the day the guarantee period expired.
The Automatic Laddering Program allows the Owner to choose, in advance, one
renewal Guarantee Period for all renewing Sub-accounts. The Owner can select the
Automatic Laddering Program at any time during the accumulation phase, including
on the issue date. The Automatic Laddering Program will continue until the Owner
gives written notice to the Company. The Company reserves the right to
discontinue this Program. For additional information on the Automatic Laddering
Program, please call the Company's Customer Support Unit at 1(800)776-6978.
WITHDRAWALS OR TRANSFERS
With the exception of transfers made automatically through dollar cost
averaging, all withdrawals and transfers, paid from a Sub-account of the Fixed
Account other than during the 30 day period after a Guarantee Period expires are
subject to a Market Value Adjustment.
The amount received by the Owner under a withdrawal request equals the
amount requested, adjusted by any Market Value Adjustment, less any applicable
withdrawal charge (based upon the amount requested prior to any Market Value
Adjustment), less premium taxes and withholding (if applicable).
MARKET VALUE ADJUSTMENT
The Market Value Adjustment reflects the relationship between (1) the
Treasury Rate for the time remaining in the Guarantee Period at the time of the
request for withdrawal or transfer, and (2) the Treasury Rate at the time the
Sub-account was established. As such, the Owner bears some investment risk under
the Contract. Treasury Rate means the U.S. Treasury Note Constant Maturity yield
for the preceding week as reported in Federal Reserve Bulletin Release H.15.
Generally, if the Treasury Rate for the Guarantee Period is higher than the
applicable current Treasury Rate, then the Market Value Adjustment will result
in a higher amount payable to the Owner or transferred. Similarly, if the
Treasury Rate at the time the Sub-account was established is lower than the
applicable Treasury Rate (interest rate for a period equal to the time remaining
in the Sub-account), then the Market Value Adjustment will result in a lower
amount payable to the Owner or transferred.
For example, assume the Owner purchases a Contract and selects an initial
Guarantee Period of five years and the five year Treasury Rate for that duration
is 4.75%. Assume that at the end of 3 years, the Owner makes a partial
withdrawal. If, at that later time, the current two year Treasury Rate is 4.00%,
then the Market Value Adjustment will be positive, which will result in an
increase in the amount payable to the Owner. Similarly, if the current two year
Treasury Rate is 7.00%, then the Market Value Adjustment will be negative, which
will result in a decrease in the amount payable to the Owner.
The formula for calculating the Market Value Adjustment is set forth in
Appendix A to this prospectus which also contains additional illustrations of
the application of the Market Value Adjustment.
11
<PAGE>
PURCHASE OF THE CONTRACTS
PURCHASE PAYMENT LIMITS
Your first purchase payment must be at least $5,000 unless the Contract is a
Qualified Contract, in which case the first purchase payment must be at least
$2,000. All subsequent purchase payments must be $500 or more and may be made at
any time prior to the Payout Start Date. Subsequent purchase payments may also
be made from your bank account through Automatic Additions. Under an Automatic
Additions Program, the minimum purchase payment for allocation to the Variable
Account is $100 and for allocation to the Fixed Account the minimum purchase
payment is $500. Please consult with your sales representative for detailed
information about Automatic Additions.
We reserve the right to limit the amount of purchase payments we will
accept.
FREE-LOOK PERIOD
You may cancel the Contract any time within 20 days after receipt of the
Contract and receive a full refund of purchase payments allocated to the Fixed
Account. Purchase payments allocated to the Variable Account will be returned
after an adjustment to reflect investment gain or loss that occurred from the
date of allocation through the date of cancellation unless a refund of purchase
payments is required by state or federal law.
CREDITING OF INITIAL PURCHASE PAYMENT
The initial purchase payment accompanied by a duly completed application
will be credited to the Contract within two business days of receipt by us at
our home office. If an application is not duly completed, we will credit the
purchase payments to the Contract within five business days or return it at that
time unless you specifically consent to us holding the purchase payment until
the application is complete. We reserve the right to reject any application.
Subsequent purchase payments will be credited to the Contract at the close of
the Valuation Period in which the purchase payment is received by the Company at
its home office.
ALLOCATION OF PURCHASE PAYMENTS
On the application, you instruct us how to allocate the purchase payment
among the Investment Alternatives. Purchase payments may be allocated to any
Investment Alternative in whole percents, from 0% to 100% (total allocation
equals 100%) or in whole dollars (total allocation equals entire dollar amount
of purchase payments). Unless you notify us in writing otherwise, subsequent
purchase payments are allocated according to the allocation for the previous
purchase payment. Any change in allocation instructions will be effective at the
time we receive the notice in good order.
ACCUMULATION UNITS
Each purchase payment allocated to the Variable Account will be credited to
the Contract as Accumulation Units. For example, if a $10,000 purchase payment
is credited to the Contract when the Accumulation Unit value equals $10, then
1,000 Accumulation Units would be credited to the Contract. The Variable
Account, in turn, purchases shares of the corresponding Fund.
ACCUMULATION UNIT VALUE
The Accumulation Units in each Sub-account of the Variable Account are
valued separately. The value of Accumulation Units will change each Valuation
Period according to the investment performance of the shares purchased by each
Variable Sub-account and the deduction of certain expenses and charges.
The value of an Accumulation Unit in a Variable Sub-account for any
Valuation Period equals the value of the Accumulation Unit as of the immediately
preceding Valuation Period, multiplied by the Net Investment Factor for that
Sub-account for the current Valuation Period. The Net Investment Factor for a
Valuation Period is a number representing the change, since the last Valuation
Date in the value of Sub-account assets per Accumulation Unit due to investment
income, realized or unrealized capital gain or loss, deductions for taxes, if
any, and deductions for the mortality and expense risk charge and administrative
expense charge.
TRANSFERS AMONG INVESTMENT ALTERNATIVES
Amounts may be transferred among Investment Alternatives, subject to the
following restrictions. The Company reserves the right to assess a $10 charge on
each transfer in excess of twelve per Contract Year. The Company is presently
waiving this charge. Transfers to or from more than one Investment Alternative
on the same day are treated as one transfer.
Transfers among Investment Alternatives before the Payout Start Date may be
made at any time. See "Withdrawals or Transfers," page 10 for the requirements
on transfers from the Fixed Account. After the Payout Start Date, transfers
among Sub-accounts of the Variable Account or from a variable amount income
payment to a fixed amount income payment may be made only once every six months
and may not be made during the first six months following the Payout Start Date.
After the Payout Start Date, transfers from a fixed amount income payment are
not allowed.
Telephone transfer requests will be accepted by the Company if received at
1(800)776-6978 by 3:00 p.m., Central Time. Telephone transfer requests received
at any other telephone number or after 3:00 p.m., Central Time will not be
accepted by the Company. Telephone transfer requests received before 3:00 p.m.,
Central Time are effected at the next computed value. The Company utilizes
procedures which
12
<PAGE>
the Company believes will provide reasonable assurance that telephone authorized
transfers are genuine. Such procedures include taping of telephone conversations
with persons purporting to authorize such transfers and requesting identifying
information from such persons. Accordingly, the Company disclaims any liability
for losses resulting from such transfers by reason of their allegedly not having
been properly authorized. However, if the Company does not take reasonable steps
to help ensure that such authorizations are valid, the Company may be liable for
such losses.
The minimum amount that may be transferred into a Sub-account of the Fixed
Account is $500. Any transfer from a Sub-account of the Fixed Account at a time
other than during the 30 day period after a Guarantee Period expires will be
subject to a Market Value Adjustment. If any transfer reduces the value of a
Sub-account of the Fixed Account to less than $500, the Company will treat the
request as a transfer of the entire Sub-account value.
The Company reserves the right to waive transfer restrictions.
DOLLAR COST AVERAGING
Transfers may be made automatically through Dollar Cost Averaging prior to
the Payout Start Date. Dollar Cost Averaging permits the Owner to transfer a
specified amount every month from the one year Guarantee Period Sub-account of
the Fixed Account or any of the Variable Sub-accounts, to any Sub-account of the
Variable Account. Dollar Cost Averaging cannot be used to transfer amounts to
the Fixed Account. Transfers made through Dollar Cost Averaging are not subject
to a Market Value Adjustment. In addition, such transfers are not assessed a $10
charge and are not included in the twelve free transfers per Contract Year.
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 the Dollar Cost Averaging program does not assure you of a
greater profit from your purchases under the program; nor will it prevent or
alleviate losses in a declining market.
AUTOMATIC FUND REBALANCING
Transfers may be made automatically through Automatic Fund Rebalancing prior
to the Payout Start Date. By electing Automatic Fund Rebalancing, all of the
money allocated to Sub-accounts of the Variable Account will be rebalanced to
the desired allocation on a quarterly basis, determined from the first date that
you decide to rebalance. Each quarter, money will be transferred among
Sub-accounts of the Variable Account to achieve the desired allocation.
The desired allocation will be the allocation initially selected, unless
subsequently changed. You may change the allocation at any time by giving us
written notice. The new allocation will be effective with the first rebalancing
that occurs after we receive the written request. We are not responsible for
rebalancing that occurs prior to receipt of the written request.
Transfers made through Automatic Fund Rebalancing are not assessed a $10
charge and are not included in the twelve free transfers per Contract Year.
Any money allocated to the Fixed Account will not be included in the
rebalancing.
BENEFITS UNDER THE CONTRACT
WITHDRAWALS
You may withdraw all or part of the Contract Value at any time prior to the
earlier of the death of the Owner (or the Annuitant if the Owner is not a
natural person) or the Payout Start Date. The amount available for withdrawal is
the Contract Value next computed after the Company receives the request for a
withdrawal at its home office, adjusted by any applicable Market Value
Adjustment, less any withdrawal charges, contract maintenance charges and any
premium taxes. Withdrawals from the Variable Account will be paid within seven
days of receipt of the request, subject to postponement in certain
circumstances. See "Delay of Payments," page 18.
Money can be withdrawn from the Variable Account or the Fixed Account. To
complete the partial withdrawal from the Variable Account, the Company will
redeem Accumulation Units in an amount equal to the withdrawal and any
applicable withdrawal charge and premium taxes. The Owner must name the
Investment Alternatives from which the withdrawal is to be made. If none is
named, then the withdrawal request is incomplete and cannot be honored.
The minimum partial withdrawal is $50. If any withdrawal reduces the value
of any Sub-account of the Fixed Account to less than $500, we will treat the
request as a withdrawal of the entire Sub-account value. If the Contract Value
after a partial withdrawal would be less than $1,000, then the Company will
treat the request as one for termination of the Contract and the entire Contract
Value, adjusted by any Market Value Adjustment, less any charges and premium
taxes, will be paid out.
Partial withdrawals may also be taken automatically through Systematic
Withdrawals on a monthly, quarterly, semi-annual or annual basis. Systematic
Withdrawals of $50 or more may be requested at any time prior to the Payout
Start Date. At the Company's discretion, Systematic Withdrawals may not be
offered in conjunction with Dollar Cost Averaging or Automatic Fund Rebalancing.
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Partial and full withdrawals may be subject to income tax and a 10% tax
penalty. This tax and penalty are explained in "Federal Tax Matters," on page
19.
After the Payout Start Date, withdrawals are only permitted when payments
from the Variable Account are being made for a specified number of payments only
(i.e. Income Plan 3). In that case, you may terminate the Variable Account
portion of the income payments at any time and receive a lump sum equal to the
commuted balance of the remaining variable payments due, less any applicable
withdrawal charge.
INCOME PAYMENTS
PAYOUT START DATE FOR INCOME PAYMENTS
The Payout Start Date is the day that income payments will start under the
Contract. You may change the Payout Start Date at any time by notifying the
Company in writing of the change at least 30 days before the scheduled Payout
Start Date. The Payout Start Date must be (a) at least one month after the issue
date; and (b) no later than the day the Annuitant reaches age 90, or the 10th
anniversary of the issue date, if later.
VARIABLE ACCOUNT INCOME PAYMENTS
The amount of Variable Account income payments depends upon the investment
experience of the Sub-accounts selected by the Owner and any premium taxes, the
age and sex of the Annuitant, and the Income Plan chosen. The Company guarantees
that the amount of the income payment will not be affected by (1) actual
mortality experience and (2) the amount of the Company's administration
expenses.
The Contracts offered by this prospectus contain income payment tables that
provide for different benefit payments to men and women of the same age (except
in states which require unisex annuity tables). Nevertheless, in accordance with
the U.S. Supreme Court's decision in ARIZONA GOVERNING COMMITTEE V. NORRIS, in
certain employment-related situations, annuity tables that do not vary on the
basis of sex will be used.
The total income payments received may be more or less than the total
purchase payments made because (a) Variable Account income payments vary with
the investment results of the underlying Funds, and (b) Annuitants may not live
as long as, or may live longer than, expected.
The Income Plan option selected will affect the dollar amount of each income
payment. For example, if an Income Plan for a Life Income is chosen, the income
payments will be greater than income payments under an Income Plan for a Life
Income with Guaranteed Payments.
If the actual net investment experience of the Variable Account is less than
the assumed investment rate, then the dollar amount of the income payments will
decrease. The dollar amount of the income payments will stay level if the net
investment experience equals the assumed investment rate and the dollar amount
of the income payments will increase if the net investment experience exceeds
the assumed investment rate. For purposes of the Variable Account income
payments, the assumed investment rate is 3 percent. For more detailed
information as to how Variable Account income payments are determined see the
Statement of Additional Information.
FIXED AMOUNT INCOME PAYMENTS
Income payment amounts derived from any monies allocated to Sub-accounts of
the Fixed Account during the accumulation phase are fixed for the duration of
the Income Plan. The fixed amount income payment amount is calculated by
applying the portion of the Contract Value in the Fixed Account on the Payout
Start Date, adjusted by any Market Value Adjustment and less any applicable
premium tax, to the greater of the appropriate value from the income payment
table selected or such other value as we are offering at that time.
INCOME PLANS
The Income Plans include:
INCOME PLAN 1 -- LIFE INCOME WITH GUARANTEED PAYMENTS
The Company will make payments for as long as the Annuitant lives. If the
Annuitant dies before the selected number of guaranteed payments have been made,
the Company will continue to pay the remainder of the guaranteed payments.
INCOME PLAN 2 -- JOINT AND SURVIVOR LIFE INCOME WITH GUARANTEED PAYMENTS
The Company will make payments for as long as either the Annuitant or Joint
Annuitant, named at the time of Income Plan selection, is living. If both the
Annuitant and the Joint Annuitant die before the selected number of guaranteed
payments have been made, the Company will continue to pay the remainder of the
guaranteed payments.
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INCOME PLAN 3 -- GUARANTEED NUMBER OF PAYMENTS
The Company will make payments for a specified number of months beginning on
the Payout Start Date. These payments do not depend on the Annuitant's life. The
number of months guaranteed may be from 60 to 360. The mortality and expense
risk charge will be deducted from Variable Account assets supporting these
payments even though the Company does not bear any mortality risk.
The Owner may change the Income Plan until 30 days before the Payout Start
Date. If an Income Plan is chosen which depends on the Annuitant or Joint
Annuitant's life, proof of age will be required before income payments begin.
Applicable premium taxes will be assessed.
In the event that an Income Plan is not selected, the Company will make
income payments in accordance with Income Plan 1 with Guaranteed Payments for
120 Months. At the Company's discretion, other Income Plans may be available
upon request. The Company currently uses sex-distinct annuity tables. However,
if legislation is passed by Congress or the states, the Company reserves the
right to use income payment tables which do not distinguish on the basis of sex.
Special rules and limitations may apply to certain qualified contracts.
If the Contract Value to be applied to an Income Plan is less than $2,000,
or if the monthly payments determined under the Income Plan are less than $20,
the Company may pay the Contract Value adjusted by any Market Value Adjustment
and less any applicable taxes, in a lump sum or change the payment frequency to
an interval which results in income payments of at least $20.
DEATH BENEFITS
DISTRIBUTION UPON DEATH PAYMENT PROVISIONS
A distribution upon death may be paid to the Owner determined immediately
after the death if, prior to the Payout Start Date:
- any Owner dies; or
- the Annuitant dies and the Owner is not a natural person.
If the Owner eligible to receive a distribution upon death is not a natural
person, then the Owner may elect to receive the distribution upon death in one
or more distributions. Otherwise, if the Owner is a natural person, the Owner
may elect to receive a distribution upon death in one or more distributions or
periodic payments through an Income Plan.
A death benefit will be paid: 1) if the Owner elects to receive the death
benefit in a single payment distributed within 180 days of the date of death;
and 2) if the death benefit is paid as of the day the value of the death benefit
is determined. Otherwise, the settlement value will be paid. The settlement
value is the same amount that would be paid in the event of withdrawal of the
Contract Value. The Company will calculate the settlement value at the end of
the Valuation Period coinciding with the requested distribution date for payment
or on the mandatory distribution date of 5 years after the date of death. In any
event, the entire distribution upon death must be distributed within five years
after the date of death unless an Income Plan is selected or a surviving spouse
continues the Contract in accordance with the following sections:
Payments from the Income Plan must begin within one year of the date of
death and must be payable throughout:
- the life of the Owner; or
- a period not to exceed the life expectancy of the Owner; or
- the life of the Owner with payments guaranteed for a period not to exceed
the life expectancy of the Owner.
If the surviving spouse of the deceased Owner is the new 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 Company will only
permit the Contract to be continued once. If the Contract is continued in the
accumulation phase, the surviving spouse may make a single withdrawal of any
amount within one year of the date of death without incurring a withdrawal
charge. However, any applicable Market Value Adjustment, determined as of the
date of the withdrawal, will apply.
DEATH BENEFIT AMOUNT
Prior to the Payout Start Date, the death benefit is equal to the greatest
of:
(a) the Contract Value on the date the Company determines the death
benefit; or
(b) the amount that would have been payable in the event of a full
withdrawal of the Contract Value on the date the Company determines the
death benefit; or
(c) the Contract Value on the Death Benefit Anniversary immediately
preceding the date the Company determines the death benefit adjusted by
any purchase payments, withdrawals and charges made between such Death
Benefit Anniversary and the date the Company determines the death
benefit. A Death Benefit Anniversary is every seventh Contract
Anniversary beginning with the issue date. For example, the issue date,
7th and 14th Contract Anniversaries are the first three Death Benefit
Anniversaries.
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In addition to the above options, upon purchase of the Contract, the Owner
can select one of the following enhanced death benefit options:
(A) the greatest of the anniversary values as of the date we determine the
death benefit. The anniversary value is equal to the Contract Value on
a Contract Anniversary, increased by purchase payments made since that
anniversary and reduced by the amount of any partial withdrawals since
that anniversary. Anniversary values will be calculated for each
Contract Anniversary prior to the earlier of: (i) the date we determine
the death benefit, or (ii) the deceased's attained age 75 or 5 years
after the date the Contract was established, if later; or
(B) total purchase payments minus the sum of all partial withdrawals. Each
purchase payment and each partial withdrawal will accumulate daily at
rate equivalent to 5% per year until the earlier of: (i) the date we
determine the death benefit, or (ii) the first day of the month
following the deceased's 75th birthday or 5 years after the issue date,
if later.
If neither option is selected by the Owner, the Contract will automatically
include option (A).
The value of the death benefit will be determined at the end of the
Valuation Period during which the Company receives a complete request for
payment of the death benefit, which includes due proof of death.
The Company will not settle any death claim until it receives due proof of
death.
CHARGES AND OTHER DEDUCTIONS
DEDUCTIONS FROM PURCHASE PAYMENTS
No deductions are made from purchase payments. Therefore, the full amount of
every purchase payment is invested in the Investment Alternative(s).
WITHDRAWAL CHARGE (CONTINGENT DEFERRED SALES CHARGE)
You may withdraw the Contract Value at any time before the earliest of the
Payout Start Date, the death of any Owner or, if the Owner is not a natural
person, the death of the Annuitant.
There are no withdrawal charges on amounts withdrawn up to 10% of the amount
of purchase payments. Amounts withdrawn in excess of this may be subject to a
withdrawal charge. Amounts not subject to a withdrawal charge and not withdrawn
in a Contract Year are not carried over to later Contract Years. Withdrawal
charges, if applicable, will be deducted from the amount paid.
Free withdrawals and other partial withdrawals will be allocated on a first
in, first out basis to purchase payments. For purposes of calculating the amount
of the withdrawal charge, withdrawals are assumed to come from purchase payments
first, beginning with the oldest payment. Withdrawals made after all purchase
payments have been withdrawn, will not be subject to a withdrawal charge. For
partial withdrawals, the Contract Value will be adjusted to reflect the amount
of payment received by the Owner, any withdrawal charge, any applicable taxes
and any Market Value Adjustment.
Withdrawals in excess of the free withdrawal amount will be subject to a
withdrawal charge as set forth below:
<TABLE>
<CAPTION>
COMPLETE YEARS SINCE
PURCHASE PAYMENT BEING APPLICABLE WITHDRAWAL
WITHDRAWN WAS MADE CHARGE PERCENTAGE
- ------------------------------------------------------------------------------------------- ---------------------
<S> <C>
0 YEARS.................................................................................... 6%
1 YEAR..................................................................................... 6%
2 YEARS.................................................................................... 5%
3 YEARS.................................................................................... 5%
4 YEARS.................................................................................... 4%
5 YEARS.................................................................................... 4%
6 YEARS.................................................................................... 3%
7 YEARS OR MORE............................................................................ 0%
</TABLE>
Withdrawal charges will be used to pay sales commissions and other
promotional or distribution expenses associated with the marketing of the
Contracts. The Company does not anticipate that the withdrawal charges will
cover all distribution expenses in connection with the Contract.
In addition, federal and state income tax may be withheld from withdrawal
amounts. Certain terminations may also be subject to a federal tax penalty. See
"Federal Tax Matters," page 19.
The Company reserves the right to waive the withdrawal charge with respect
to Contracts issued to employees and registered representatives of any
broker-dealer that has entered into a sales agreement with Allstate Life
Financial Services, Inc. ("ALFS") to sell the Contracts and all wholesalers and
their employees that are under agreement with ALFS to wholesale the Contract. In
addition, the Company
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will waive any withdrawal charge prior to the Payout Start Date if at least 30
days after the Contract Date any Owner (or Annuitant if the Owner is not a
natural person) is first confined to a long term care facility or hospital for
at least 90 consecutive days, confinement is prescribed by a physician and is
medically necessary, and the request for a withdrawal and adequate written proof
of confinement are received by us no later than 90 days after discharge. The
withdrawal charge will also be waived on withdrawals taken to satisfy IRS
required minimum distribution rules for this Contract.
CONTRACT MAINTENANCE CHARGE
A contract maintenance charge is deducted annually from the Contract Value
to reimburse the Company for its actual costs in maintaining each Contract and
the Variable Account. The Company guarantees that the amount of this charge will
not exceed $35 per Contract Year over the life of the Contract. This charge will
be waived if the total purchase payments are $50,000 or more on a Contract
Anniversary or if all money is allocated to the Fixed Account on the Contract
Anniversary.
Maintenance costs include but are not limited to expenses incurred in
billing and collecting purchase payments; keeping records; processing death
claims, cash withdrawals, and policy changes; proxy statements; calculating
Accumulation Unit and Annuity Unit values; and issuing reports to Owners and
regulatory agencies. The Company does not expect to realize a profit from this
charge.
On each Contract Anniversary prior to the payout start date, the contract
maintenance charge will be deducted from Sub-accounts of the Variable Account in
the same proportion that the Owner's value in each bears to the total value in
all Sub-accounts of the Variable Account. After the Payout Start Date, a pro
rata share of the annual contract maintenance charge will be deducted from each
income payment. For example, 1/12 of the $35, or $2.92, will be deducted if
there are twelve income payments during the Contract Year. A full contract
maintenance charge will be deducted if the Contract is terminated on any date
other than a Contract Anniversary.
ADMINISTRATIVE EXPENSE CHARGE
The Company will deduct an administrative expense charge which is equal, on
an annual basis, to .10% of the daily net assets you have allocated to the
Sub-accounts of the Variable Account. This charge is designed to cover actual
administrative expenses which exceed the revenues from the contract maintenance
charge. The Company does not intend to profit from this charge. The Company
believes that the administrative expense charge and contract maintenance charge
have been set at a level that will recover no more than the actual costs
associated with administering the Contracts. There is no necessary relationship
between the amount of administrative charge imposed on a given Contract and the
amount of expenses that may be attributable to that Contract.
MORTALITY AND EXPENSE RISK CHARGE
The Company will deduct a mortality and expense risk charge which is equal,
on an annual basis, to 1.35% of the daily net assets you have allocated to the
Sub-accounts of the Variable Account. The Company estimates that .95% is
attributable to the assumption of mortality risks and .40% is attributable to
the assumption of expense risks. The Company guarantees that the amount of this
charge will not increase over the life of the Contract.
The mortality risk arises from the Company's guarantee to cover all death
benefits and to make income payments in accordance with the Income Plan selected
and the Income Payment Tables.
The expense risk arises from the possibility that the contract maintenance
and administrative expense charge, both of which are guaranteed not to increase,
will be insufficient to cover actual administrative expenses.
If the mortality and expense risk charge is insufficient to cover the
Company's mortality costs and excess expenses, the Company will bear the loss.
If the charge is more than sufficient, the Company will retain the balance as
profit. The Company currently expects a profit from this charge. Any such
profit, as well as any other profit realized by the Company and held in its
general account (which supports insurance and annuity obligations), would be
available for any proper corporate purpose, including, but not limited to,
payment of distribution expenses.
TAXES
The Company will deduct applicable state premium taxes or other similar
policyholder taxes relative to the Contract (collectively referred to as
"premium taxes") either at the Payout Start Date, or when a total withdrawal
occurs. Current premium tax rates range from 0 to 3.5%. The Company reserves the
right to deduct premium taxes from the purchase payments.
At the Payout Start Date, the charge for premium taxes will be deducted from
each Investment Alternative in the proportion that the Owner's value in the
Investment Alternative bears to the total Contract Value.
TRANSFER CHARGES
The Company reserves the right to assess a $10 charge on each transfer in
excess of twelve per Contract Year, excluding transfers through Dollar Cost
Averaging and Automatic Fund Rebalancing. The Company is presently waiving this
charge.
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FUND EXPENSES
A complete description of the expenses and deductions from the Funds is
found in the prospectus for the Fund Series. This prospectus is accompanied by
the prospectus for the Fund Series.
GENERAL MATTERS
OWNER
The Owner has the sole right to exercise all rights and privileges under the
Contract, except as otherwise provided in the Contract. The Contract cannot be
jointly owned by both a non-natural person and a natural person.
BENEFICIARY
Subject to the terms of any irrevocable Beneficiary designation, the Owner
may change the Beneficiary at any time by notifying the Company in writing. Any
change will be effective at the time it is signed by the Owner, whether or not
the Annuitant is living when the change is received by the Company. The Company
will not, however, be liable as to any payment or settlement made prior to
receiving the written notice.
Unless otherwise provided in the Beneficiary designation, if a Beneficiary
predeceases the Owner and there are no other surviving beneficiaries, the new
Beneficiary will be: the Owner's spouse if living; otherwise, the Owner's
children, equally, if living; otherwise, the Owner's estate. Multiple
Beneficiaries may be named. Unless otherwise provided in the Beneficiary
designation, if more than one Beneficiary survives the Owner, the surviving
Beneficiaries will share equally in any amounts due.
ASSIGNMENTS
The Company will not honor an assignment of an interest in a Contract as
collateral or security for a loan. Otherwise, the Owner may assign benefits
under the Contract prior to the Payout Start Date. No Beneficiary may assign
benefits under the Contract until they are due. No assignment will bind the
Company unless it is signed by the Owner and filed with the Company. The Company
is not responsible for the validity of an 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.
DELAY OF PAYMENTS
Payment of any amounts due from the Variable Account under the Contract will
occur within seven days, unless:
1. The New York Stock Exchange is closed for other than usual weekends or
holidays, or trading on the Exchange is otherwise restricted;
2. An emergency exists as defined by the Securities and Exchange
Commission; or
3. The Securities and Exchange Commission permits delay for the protection
of the Owners.
Payments or transfers from the Fixed Account may be delayed for up to 6
months.
MODIFICATION
The Company may not modify the Contract without the consent of the Owner
except to make the Contract meet the requirements of the Investment Company Act
of 1940, or to make the Contract comply with any changes in the Internal Revenue
Code or to make any changes required by the Code or by any other applicable law.
CUSTOMER INQUIRIES
The Owner or any persons interested in the Contract may make inquiries
regarding the Contract by calling or writing your representative or the Company
at:
GLENBROOK LIFE AND ANNUITY COMPANY
POST OFFICE BOX 94039
PALATINE, ILLINOIS 60094-4039
1-(800) 776-6978
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FEDERAL TAX MATTERS
INTRODUCTION
THE FOLLOWING DISCUSSION IS GENERAL AND IS NOT INTENDED AS TAX ADVICE. THE
COMPANY MAKES NO GUARANTEE REGARDING THE TAX TREATMENT OF ANY CONTRACT OR
TRANSACTION INVOLVING A CONTRACT. Federal, state, local and other tax
consequences of ownership or receipt of distributions under an annuity contract
depend on the individual circumstances of each person. If you are concerned
about any tax consequences with regard to your individual circumstances, you
should consult a competent tax adviser.
TAXATION OF ANNUITIES IN GENERAL
TAX DEFERRAL
Generally, an annuity contract owner is not taxed on increases in the
Contract Value until a distribution occurs. This rule applies only where (1) the
owner is a natural person, (2) the investments of the Variable Account are
"adequately diversified" in accordance with Treasury Department Regulations, and
(3) the issuing insurance company, instead of the annuity owner, is considered
the owner for federal income tax purposes of any separate account assets funding
the contract.
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 and the income on such contracts is taxed as
ordinary income received or accrued by the owner during the taxable year. There
are several exceptions to the general rule for contracts owned by non-natural
persons which are discussed in the Statement of Additional Information.
DIVERSIFICATION REQUIREMENTS
For a Contract to be treated as an annuity for federal income tax purposes,
the investments in the Variable Account must be "adequately diversified" in
accordance with the standards provided in the Treasury regulations. If the
investments in the Variable Account are not adequately diversified, then the
Contract will not be treated as an annuity contract for federal income tax
purposes and the Owner will be taxed on the excess of the Contract Value over
the investment in the Contract. Although the Company does not have control over
the Funds or their investments, the Company expects the Funds to meet the
diversification requirements.
OWNERSHIP TREATMENT
In connection with the issuance of the regulations on the adequate
diversification standards, the Department of the Treasury announced that the
regulations do not provide guidance concerning the extent to which contract
owners may direct their investments among Sub-accounts of a variable account.
The Internal Revenue Service has previously stated in published rulings that a
variable contract owner will be considered the owner of separate account assets
if the owner possesses incidents of ownership in those assets such as the
ability to exercise investment control over the assets. At the time the
diversification regulations were issued, Treasury announced that guidance would
be issued in the future regarding the extent that owners could direct their
investments among Sub-accounts without being treated as owners of the underlying
assets of the Variable Account. As of the date of this prospectus, no such
guidance has been issued.
The ownership rights under this contract are similar to, but different in
certain respects from, those described by the Service in rulings in which it was
determined that contract owners were not owners of separate account assets. For
example, the owner of this contract has the choice of more investment options to
which to allocate premiums and contract values, and may be able to transfer
among investment options more frequently than in such rulings. These differences
could result in the contract owner being treated as the owner of the assets of
the Variable Account. In those circumstances, income and gains from the Variable
Account assets would be includible in the Contract Owners' gross income. In
addition, the Company does not know what standards will be set forth in the
regulations or rulings which the Treasury Department has stated it expects to
issue. It is possible that Treasury's position, when announced, may adversely
affect the tax treatment of existing contracts. The Company, therefore, reserves
the right to modify the Contract as necessary to attempt to prevent the Owner
from being considered the federal tax owner of the assets of the Variable
Account. However, the Company makes no guarantee that such modification to the
contract will be successful.
DELAYED MATURITY DATES
If the contract's scheduled maturity date is at a time when the annuitant
has reached an advanced age, e.g., past age 85, it is possible that the contract
would not be treated as an annuity. In that event, the income and gains under
the contract could be currently includible in the owner's income.
TAXATION OF PARTIAL AND FULL WITHDRAWALS
In the case of a partial withdrawal under a non-qualified contract, amounts
received are taxable to the extent the contract value before the withdrawal
exceeds the investment in the contract. The investment in the contract is the
gross premium or other consideration paid for the contract reduced by any
amounts previously received from the contract to the extent such amounts were
properly excluded from the owner's gross income. In the case of a partial
withdrawal under a qualified contract, the portion of the payment that bears the
same ratio to the total payment that the investment in the contract (i.e.,
nondeductible IRA contributions, after tax contributions to qualified plans)
bears
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<PAGE>
to the contract value, can be excluded from income. In the case of a full
withdrawal under a non-qualified contract or a qualified contract, the amount
received will be taxable only to the extent it exceeds the investment in the
contract. If an individual transfers an annuity contract without full and
adequate consideration to a person other than the individual's spouse (or to a
former spouse incident to a divorce), the owner will be taxed on the difference
between the contract value and the investment in the contract at the time of
transfer. Other than in the case of certain qualified contracts, any amount
received as a loan under a contract, and any assignment or pledge (or agreement
to assign or pledge) of the contract value is treated as a withdrawal of such
amount or portion. The contract provides a death benefit that in certain
circumstances may exceed the greater of the payments and the contract value. As
described elsewhere in the prospectus, the Company imposes certain charges with
respect to the death benefit. It is possible that some portion of those charges
could be treated for federal tax purposes as a partial withdrawal from the
contract.
TAXATION OF ANNUITY PAYMENTS
Generally, the rule for income taxation of payments received from an annuity
contract provides for the return of the owner's investment in the contract in
equal tax-free amounts over the payment period. The balance of each payment
received is taxable. In the case of variable annuity payments, the amount
excluded from taxable income is determined by dividing the investment in the
contract by the total number of expected payments. In the case of fixed annuity
payments, the amount excluded from income is determined by multiplying the
payment by the ratio of the investment in the contract (adjusted for any refund
feature or period certain) to the total expected value of annuity payments for
the term of the contract. Once the total amount of the investment in the
contract is excluded using these ratios, the annuity payments will be fully
taxable. If annuity payments cease because of the death of the annuitant before
the total amount of the investment in the contract is recovered, the unrecovered
amount generally will be allowed as a deduction to the annuitant for his last
taxable year.
TAXATION OF ANNUITY DEATH BENEFITS
Amounts may be distributed from an annuity contract because of the death of
an owner or annuitant. Generally, such amounts are includible in income as
follows: (1) if distributed in a lump sum, the amounts are taxed in the same
manner as a full withdrawal or (2) if distributed under an annuity option, the
amounts are taxed in the same manner as an annuity payment.
PENALTY TAX ON PREMATURE DISTRIBUTIONS
There is a 10% penalty tax on the taxable amount of any premature
distribution from a non-qualified annuity contract. The penalty tax generally
applies to any distribution made prior to the owner attaining age 59 1/2.
However, there should be no penalty tax on distributions to owners (1) made on
or after the owner attains age 59 1/2; (2) made as a result of the owner's death
or disability; (3) made in substantially equal periodic payments over life or
life expectancy; (4) made under an immediate annuity; or (5) attributable to an
investment in the contract before August 14, 1982. Similar rules apply for
distributions under certain qualified contracts. A competent tax advisor should
be consulted to determine if any other exceptions to the penalty apply to your
specific circumstances.
AGGREGATION OF ANNUITY CONTRACTS
All non-qualified deferred annuity contracts issued by the Company (or its
affiliates) to the same owner during any calendar year will be aggregated and
treated as one annuity contract for purposes of determining the taxable amount
of a distribution.
TAX QUALIFIED CONTRACTS
Annuity contracts may be used as investments with certain tax qualified
plans such as: (1) Individual Retirement Annuities under Section 408(b) of the
Code; (2) Simplified Employee Pension Plans under Section 408(k) of the Code;
(3) Tax Sheltered Annuities under Section 403(b) of the Code; (4) Corporate and
Self Employed Pension and Profit Sharing Plans; and (5) State and Local
Government and Tax-Exempt Organization Deferred Compensation Plans. In the case
of certain tax qualified plans, the terms of the plans may govern the right to
benefits, regardless of the terms of the contract.
RESTRICTIONS UNDER SECTION 403(B) PLANS
Section 403(b) of the Code provides for tax-deferred retirement savings
plans for employees of certain non-profit and educational organizations. In
accordance with the requirements of Section 403(b), any annuity contract used
for a 403(b) plan must provide that distributions attributable to salary
reduction contributions made after 12/31/88, and all earnings on salary
reduction contributions, may be made only after the employee attains age 59 1/2,
separates from service, dies, becomes disabled or on account of hardship
(earnings on salary reduction contributions may not be distributed on the
account of hardship). These limitations do not apply to withdrawals where the
Company is directed to transfer some or all of the contract value to another
Section 403(b) plans.
INCOME TAX WITHHOLDING
The Company is required to withhold federal income tax at a rate of 20% on
all "eligible rollover distributions" unless an individual elects to make a
"direct rollover" of such amounts to another qualified plan or Individual
Retirement Account or Annuity (IRA). Eligible rollover distributions generally
include all distributions from qualified contracts, excluding IRAs, with the
exception of (1) required minimum distributions, or (2) a series of
substantially equal periodic payments made over a period of at least 10 years,
or the life (joint
20
<PAGE>
lives) of the participant (and beneficiary). For any distributions from
non-qualified annuity contracts, or distributions from qualified contracts which
are not considered eligible rollover distributions, the Company may be required
to withhold federal and state income taxes unless the recipient elects not to
have taxes withheld and properly notifies the Company of such election.
DISTRIBUTION OF THE CONTRACTS
Allstate Life Financial Services, Inc. ("ALFS"), 3100 Sanders Road,
Northbrook Illinois, a wholly owned subsidiary of Allstate Life Insurance
Company, acts as the principal underwriter of the Contracts. ALFS is registered
as a broker-dealer under the Securities Exchange Act of 1934 and became a member
of the National Association of Securities Dealers, Inc. on June 30, 1993.
Contracts are sold by registered representatives of broker-dealers or bank
employees who are licensed insurance agents appointed by the Company, either
individually or through an incorporated insurance agency. 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 Securities
Exchange Act of 1934, pursuant to legal and regulatory exceptions.
Commissions paid may vary, but in aggregate are not anticipated to exceed
6.75% of any purchase payment. In addition, under certain circumstances, certain
sellers of the Contracts may be paid persistency bonuses which will take into
account, among other things, the length of time purchase payments have been held
under a Contract, and Contract Values. A persistency bonus is not expected to
exceed 1.20%, on an annual basis, of the Contract Values considered in
connection with the bonus. These commissions are intended to cover distribution
expenses.
The underwriting agreement with ALFS provides for indemnification of ALFS by
the Company for liability to Owners arising out of services rendered or
Contracts issued.
VOTING RIGHTS
The Owner or anyone with a voting interest in the Sub-account of the
Variable Account may instruct the Company on how to vote at shareholder meetings
of the Fund Series. The Company will solicit and cast each vote according to the
procedures set up by the Fund Series and to the extent required by law. The
Company reserves the right to vote the eligible shares in its own right, if
subsequently permitted by the Investment Company Act of 1940, its regulations or
interpretations thereof.
Fund shares as to which no timely instructions are received will be voted in
proportion to the voting instructions which are received with respect to all
Contracts participating in that Sub-account. Voting instructions to abstain on
any item to be voted upon will be applied on a pro-rata basis to reduce the
votes eligible to be cast.
Before the Payout Start Date, the Owner holds the voting interest in the
Sub-account of the Variable Account (The number of votes for the Owner will be
determined by dividing the Contract Value attributable to a Sub-account by the
net asset value per share of the applicable eligible Fund.)
After the Payout Start Date, the person receiving income payments has the
voting interest. After the Payout Start Date, the votes decrease as income
payments are made and as the reserves for the Contract decrease. That person's
number of votes will be determined by dividing the reserve for such Contract
allocated to the applicable Sub-account by the net asset value per share of the
corresponding eligible Fund.
SELECTED FINANCIAL DATA
The following selected financial data for the Company should be read in
conjunction with the 1995 financial statements and notes thereto included in
this Prospectus beginning on page F-1 and the 1994 and 1993 financial statements
and notes thereto incorporated by reference in this prospectus.
GLENBROOK LIFE AND ANNUITY COMPANY
SELECTED FINANCIAL DATA
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR-END FINANCIAL DATA 1995 1994 1993 1992(2)
- ------------------------------------------------------------------------------- ---------- --------- --------- ---------
<S> <C> <C> <C> <C>
For The Years Ended December 31:
Income Before Taxes.......................................................... $ 4,455 $ 2,017 $ 836 $ 337
Net Income................................................................... 2,879 1,294 529 212
As of December 31:
Total Assets(1)............................................................ 1,409,705 750,245 169,361 12,183
</TABLE>
- ------------
(1) The Company adopted SFAS No. 115, "Accounting for Certain Investments in
Debt and Equity Securities" on December 31, 1993. See Note 3 to the
Financial Statements.
(2) For the period from April 1, 1992 (date of acquisition) to December 31,
1992.
21
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
GENERAL
The following highlights significant factors influencing results of
operations and financial position.
Glenbrook Life and Annuity Company ("the Company"), which is wholly owned by
Allstate Life Insurance Company ("Allstate Life"), currently issues flexible
premium fixed annuities, and beginning in 1995, flexible premium deferred
variable annuity contracts through its Separate Accounts. The Company markets
its products through banks and other financial institutions.
The Company reinsures all of its annuity deposits with Allstate Life, and
all life insurance in force with other reinsurers. Accordingly, the financial
results reflected in the Company's statements of operations relate only to the
investment of those assets of the Company that are not transferred to Allstate
Life or other reinsurers under the reinsurance treaties.
Separate Account assets and liabilities are legally segregated and carried
at fair value in the statements of financial position. The Separate Account
investment portfolios were initially funded with a $10 million seed money
contribution from the Company in 1995. Investment income and realized gains and
losses of the Separate Account investments, other than the portion related to
the Company's participation, accrue directly to the contractholders (net of
fees) and, therefore, are not included in the Company's statements of
operations.
RESULTS OF OPERATIONS
<TABLE>
<CAPTION>
1995 1994 1993
--------- --------- ---------
$ IN THOUSANDS
<S> <C> <C> <C>
Net investment income...................................................................... $ 3,996 $ 2,017 $ 753
--------- --------- ---------
Realized capital gains (losses), after tax................................................. $ 298 $ -- $ 54
--------- --------- ---------
Net income................................................................................. $ 2,879 $ 1,294 $ 529
--------- --------- ---------
Fixed income securities, at amortized cost................................................. $ 44,112 $ 51,527 $ 9,543
--------- --------- ---------
</TABLE>
Net investment income increased $2.0 million in 1995, and $1.3 million in
1994. In both years, the increases were attributable to an increased level of
investments, including the Company's participation in the Separate Accounts
during 1995, and a $40 million capital contribution received from Allstate Life
in the third quarter of 1994. Net income increases of $1.6 million and $0.8
million reflect the change in net investment income in both years.
Realized capital gains after tax of $0.3 million in 1995 were the result of
sales of investments to fund the Company's participation in the Separate
Accounts.
FINANCIAL POSITION
<TABLE>
<CAPTION>
1995 1994
---------- ---------
$ IN THOUSANDS
<S> <C> <C>
Fixed income securities, at fair value........................................................... $ 48,815 $ 49,807
---------- ---------
Unrealized net capital gains (losses) (1)........................................................ $ 5,164 $ (1,720)
---------- ---------
Separate Account assets, at fair value........................................................... $ 15,578 $ --
---------- ---------
Contractholder funds............................................................................. $1,340,925 $ 696,854
---------- ---------
Reinsurance recoverable from Allstate Life....................................................... $1,340,925 $ 696,854
---------- ---------
</TABLE>
- -----------------
(1) Unrealized net capital gains (losses) exclude the effect of deferred income
taxes.
Fixed income securities are classified as available for sale and carried in
the statements of financial position at fair value. Although the Company
generally intends to hold its fixed income securities for the long-term, such
classification affords the Company flexibility in managing the portfolio in
response to changes in market conditions.
At December 31, 1995 unrealized capital gains were $5.2 million compared to
unrealized capital losses of $1.7 million at December 31, 1994. The significant
change in the unrealized capital gain/loss position is primarily attributable to
declining interest rates.
At December 31, 1995 both contractholder funds and amounts recoverable from
Allstate Life under reinsurance treaties reflect an increase of $644 million.
These increases result from sales of the Company's single and flexible premium
deferred annuities partially offset by surrenders. Reinsurance recoverable from
Allstate Life relates to policy benefit obligations ceded to Allstate Life.
22
<PAGE>
The Company's participation in the Separate Accounts of $10.5 million at
December 31, 1995 is included in the Separate Accounts assets. Unrealized net
capital gains arising from the Company's participation in the Separate Accounts
was $0.3 million, net of tax, at December 31, 1995.
LIQUIDITY AND CAPITAL RESOURCES
Allstate Life made a $40 million capital contribution to the Company in the
third quarter of 1994.
Under the terms of intercompany reinsurance agreements, assets of the
Company that relate to insurance in force, excluding Separate Account assets,
are transferred to Allstate Life or other reinsurers, who maintain investment
portfolios which support the Company's products.
COMPETITION
The Company is engaged in a business that is highly competitive because of
the large number of stock and mutual life insurance companies and other entities
competing in the sale of insurance and annuities. There are approximately 2,000
stock, mutual and other types of insurers in business in the United States.
Several independent rating agencies regularly evaluate life insurer's
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 the Company. A.M. Best Company also assigns the Company the
rating of A+(r) because the Company automatically reinsures all business with
Allstate Life. Standard & Poor's Insurance Rating Services assigns AA+
(Excellent) to the Company's claims-paying ability and Moody's assigns an Aa3
(Excellent) financial stability rating to the Company. The Company shares the
same ratings of its parent, Allstate Life Insurance Company. These ratings do
not relate to the investment performance of the Variable Account.
EMPLOYEES
As of December 31, 1995, Glenbrook Life and Annuity Company had
approximately 43 employees at its Home Office in Northbrook, Illinois.
PROPERTIES
The Company occupies office space provided by its parent, Allstate Life, in
Northbrook, Illinois. Expenses associated with these offices are allocated on a
direct and indirect basis to the Company.
STATE AND FEDERAL REGULATION
The insurance business of the Company is subject to comprehensive and
detailed regulation and supervision throughout the United States. The laws of
the various jurisdictions establish supervisory agencies with broad
administrative powers with respect to licensing to transact business, overseeing
trade practices, licensing agents, approving policy forms, establishing reserve
requirements, fixing maximum interest rates on life insurance policy loans and
minimum rates for accumulation of surrender values, prescribing the form and
content of required financial statements and regulating the type and amounts of
investments permitted. Each insurance company is required to file detailed
annual reports with supervisory agencies in each of the jurisdictions in which
it does business and its operations and accounts are subject to examination by
such agencies at regular intervals.
Under insurance guaranty fund law, in most states, insurers doing business
therein can be assessed up to prescribed limits for contract owner losses
incurred as a result of company insolvencies. The amount of any future
assessments on the Company under these laws cannot be reasonably estimated. Most
of these laws do provide, however, that an assessment may be excused or deferred
if it would threaten an insurer's own financial strength.
In addition, several states, including Illinois, regulate affiliated groups
of insurers, such as the Company and its affiliates, under insurance holding
company legislation. Under such laws, intercompany transfers of assets and
dividend payments from insurance subsidiaries may be subject to prior notice or
approval, depending on the size of such transfers and payments in relation to
the financial positions of the companies.
Although the federal government generally does not directly regulate the
business of insurance, federal initiatives often have an impact on the business
in a variety of ways. Current and proposed federal measures which may
significantly affect the insurance business include employee benefit regulation,
controls on medical care costs, removal of barriers preventing banks from
engaging in the securities and insurance business, tax law changes affecting the
taxation of insurance companies, the tax treatment of insurance products and its
impact on the relative desirability of various personal investment vehicles, and
proposed legislation to prohibit the use of gender in determining insurance and
pension rates and benefits.
23
<PAGE>
EXECUTIVE OFFICERS AND DIRECTORS OF THE COMPANY
The directors and executive officers are listed below, together with
information as to their ages, dates of election and principal business
occupations during the last five years (if other than their present business
occupations).
LOUIS G. LOWER, II, 50, Chief Executive Officer (1995)* and Chairman of the
Board (1992)*
He is also President and Chairman of the Board of Directors of Allstate Life
Insurance Company, Northbrook Life Insurance Company, Glenbrook Life Insurance
Company, The Northbrook Corporation and Allstate Life Insurance Company of New
York; Chairman of the Board of Directors and Chief Executive Officer of Surety
Life Insurance Company and Lincoln Benefit Life Company; Chairman of the Board
of Directors of Allstate Settlement Corporation; Director and Senior Vice
President of Allstate Insurance Company; Vice President of the Allstate
Foundation; and Director of Allstate Life Financial Services, Inc., Allstate
Indemnity Company, Allstate Property and Casualty Insurance Company, Deerbrook
Insurance Company, Northbrook Indemnity Company, Northbrook National Insurance
Company, Northbrook Property and Casualty Insurance Company, Allstate
International, Inc. and Saison Life Insurance Company, Ltd. Prior to 1990, he
was Executive Vice President of Allstate Life Insurance Company. From 1992 to
1995, in addition to his position as Chairman of the Board, he was also
President of the Company.
MARLA G. FRIEDMAN, 42, President, Chief Operating Officer (1995)* and Director
(1992)*
She is also Vice President and Director of Allstate Life Insurance Company,
Northbrook Life Insurance Company, Glenbrook Life Insurance Company and The
Northbrook Corporation; and Director of Allstate Settlement Corporation and
Allstate Life Financial Services, Inc. Prior to 1995, she was Vice President and
Director of Glenbrook Life and Annuity Company and prior to 1992, she was Vice
President and Director of Allstate Life Insurance Company and Northbrook Life
Insurance Company. Prior to 1995, she was also Vice President of the Company.
MICHAEL J. VELOTTA, 50, Vice President, Secretary, General Counsel, and Director
(1993)*
He is also Vice President, Secretary, General Counsel and Director of
Allstate Life Insurance Company, Northbrook Life Insurance Company, Glenbrook
Life Insurance Company and Allstate Life Insurance Company of New York;
Secretary and Director of Allstate Settlement Corporation, Allstate Life
Financial Services, Inc. and The Northbrook Corporation; and Director of Surety
Life Insurance Company and Lincoln Benefit Life Company. Prior to 1993, he was
Vice President and Assistant General Counsel of Allstate Insurance Company.
PETER H. HECKMAN, 50, Vice President and Director (1992)*
He is also Vice President and Director of Allstate Life Insurance Company,
Northbrook Life Insurance Company, Glenbrook Life Insurance Company, Allstate
Settlement Corporation and Allstate Life Insurance Company of New York; Vice
President and Controller of The Northbrook Corporation; and Director of Surety
Life Insurance Company and Lincoln Benefit Life Company. Prior to 1992, he was
Vice President and Director of Allstate Life Insurance Company, Northbrook Life
Insurance Company, Glenbrook Life Insurance Company and Allstate Life Insurance
Company of New York.
G. CRAIG WHITEHEAD, 50, Senior Vice President and Director (1995)*
He is also Assistant Vice President and Director of Glenbrook Life Insurance
Company and Assistant Vice President of Allstate Life Insurance Company. Prior
to 1992, he was an Assistant Vice President of Glenbrook Life Insurance Company
and Allstate Life Insurance Company and prior to 1991, he was a director in the
strategic planning area of Allstate Insurance Company.
BARRY S. PAUL, 40, Assistant Vice President and Controller (1992)*
He is also Assistant Vice President and Controller of Allstate Life
Insurance Company, Northbrook Life Insurance Company, Allstate Life Insurance
Company of New York and Glenbrook Life Insurance Company. Prior to 1991, he was
Assistant Vice President of Allstate Life Insurance Company, Northbrook Life
Insurance Company and Allstate Life Insurance Company of New York.
JAMES P. ZILS, 44, Treasurer (1995)*
He is also Treasurer of Allstate Life Financial Services, Inc., Allstate
Settlement Corporation, Allstate Life Insurance Company, Allstate Life Insurance
Company of New York, Northbrook Life Insurance Company, Glenbrook Life Insurance
Company, The Northbrook Corporation. He is Treasurer and Vice President of AEI
Group, Inc., Allstate International Inc., Allstate Motor Club, Inc., Direct
Marketing Center, Inc., Enterprises Services Corporation, The Allstate
Foundation, Forestview Mortgage Insurance Company, Allstate Indemnity Company,
Allstate Property and Casualty, Deerbrook Insurance Company, First Assurance
Company, Northbrook Indemnity Company, Northbrook National Insurance Company,
Northbrook Property and Casualty Insurance Company. Prior to 1995 he was Vice
President of Allstate Life Insurance Company. Prior to 1993 he held various
management positons.
CASEY J. SYLLA, 52, Chief Investment Officer (1995)*
He is also Director of Allstate Insurance Company, Allstate Indemnity
Company, Allstate Property and Casualty Insurance Company, Deerbrook Insurance
Company, First Assurance Company, Northbrook Indemnity Company, Northbrook Life
Insurance Company, Northbrook National Insurance Company, Northbrook Property
and Casualty Insurance Company. He is also Chief Investment Officer of Allstate
Settlement Corporation, The Northbrook Corporation, Allstate Insurance Company,
Allstate Indemnity Company, Allstate Property and
24
<PAGE>
Casualty, Deerbrook Insurance Company, First Assurance Company, Northbrook
Indemnity Company, Northbrook National Insurance Company, Northbrook Property
and Casualty Insurance Company. He is also Director and Chief Investment Officer
of Allstate Life Insurance Company. Prior to 1995, he was Senior Vice President
and Executive Officer Investments for Northwestern Mutual Life Insurance
Company.
* Date elected/appointed to current office.
EXECUTIVE COMPENSATION
Executive officers of the Company also serve as officers of Allstate Life
and receive no compensation directly from the Company. Some of the officers also
serve as officers of other companies affiliated with the Company. Allocations
have been made as to each individual's time devoted to his or her duties as an
executive officer of the Company. However, no officer's compensation allocated
to the Company exceeded $100,000. The allocated cash compensation of all
officers of the Company as a group for services rendered in all capacities to
the Company during 1995 totalled $5,976.86. Directors of the Company receive no
compensation in addition to their compensation as employees of the Company.
SUMMARY COMPENSATION TABLE
(ALLSTATE LIFE INSURANCE CO.)
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG TERM
COMPENSATION
-----------
AWARDS
------------------------
(G)
------------------------------------- (E) (F) SECURITIES
OTHER ANNUAL RESTRICTED UNDERLYING
(A) (B) (C) (D) COMPENSATION STOCK OPTIONS/
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($) $ AWARD(S) SARS(#)
- ------------------------------------------- --- ----------- ----------- --------------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Louis G. Lower, II......................... 1995 $ 416,000 $ 266,175 $ 17,044 $ 199,890 N/A
Chief Executive Officer and 1994 $ 389,050 $ 43,973 $ 26,990 $ 170,660 N/A
Chairman of the Board of Directors 1993 $ 374,200 $ 294,683 $ 52,443 $ 318,625 N/A
<CAPTION>
PAYOUTS
----------------------------
(H) (I)
LTIP ALL OTHER
(A) PAYOUTS COMPENSATION
NAME AND PRINCIPAL POSITION ($) ($)
- ------------------------------------------- ----------- ---------------
<S> <C> <C>
Louis G. Lower, II......................... $ 411,122 $ 5,250
Chief Executive Officer and 0 $ 1,890(1)
Chairman of the Board of Directors $ 13,451 $ 6,296(1)
</TABLE>
- ------------
(1) Amount received by Mr. Lower which represents the value allocated to his
account from employer contributions under the Profit Sharing Fund and to
its predecessor, The Savings and Profit Sharing Fund of Sears employees.
Shares of the Company and Allstate Life are not directly owned by any
director or officer of the Company. The percentage of shares of The Allstate
Corporation beneficially owned by any director, and by all directors and
officers of the Company as a group, does not exceed one percent of the class
outstanding.
LEGAL PROCEEDINGS
From time to time the Company is involved in pending and threatened
litigation in the normal course of its business in which claims for monetary
damages are asserted. Management, after consultation with legal counsel, does
not anticipate the ultimate liability arising from such pending or threatened
litigation to have a material effect on the financial condition of the Company.
EXPERTS
The financial statements of the Variable Account incorporated by reference
in this prospectus, the financial statements and financial statement schedule of
the Company, and the financial statements from which the Selected Financial Data
included in this prospectus have been derived, have been audited by Deloitte &
Touche LLP, Two Prudential Plaza, 180 North Stetson Avenue, Chicago, IL
60601-6799, independent auditors, as stated in their reports appearing herein
and incorporated by reference in this prospectus, and are included in reliance
upon the reports of such firm given upon their authority as experts in
accounting and auditing.
LEGAL MATTERS
Sutherland, Asbill and Brennan of Washington, D.C. has provided advice on
certain legal matters relating to the federal securities laws applicable to the
issue and sale of the Contracts. All matters of Illinois law pertaining to the
Contracts, including the validity of the Contracts and the Company's right to
issue such Contracts under Illinois insurance law, have been passed upon by
Michael J. Velotta, General Counsel of the Company.
25
<PAGE>
[LETTERHEAD]
INDEPENDENT AUDITORS' REPORT
TO THE BOARD OF DIRECTORS AND SHAREHOLDER OF
GLENBROOK LIFE AND ANNUITY COMPANY:
We have audited the accompanying Statements of Financial Position of
Glenbrook Life and Annuity Company as of December 31, 1995 and 1994, and the
related Statements of Operations, Shareholder's Equity and Cash Flows for each
of the three years in the period ended December 31, 1995. Our audits also
included Schedule IV -- Reinsurance. These financial statements and financial
statement schedule are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements and
financial statement schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all material
respects, the financial position of Glenbrook Life and Annuity Company as of
December 31, 1995 and 1994, and the results of its operations and its cash flows
for each of the three years in the period ended December 31, 1995 in conformity
with generally accepted accounting principles. Also, in our opinion, Schedule IV
- -- Reinsurance, when considered in relation to the basic financial statements
taken as a whole, presents fairly, in all material respects, the information set
forth therein.
As discussed in Note 3 to the financial statements, in 1993 the Company
changed its method of accounting for investments in fixed income securities.
/s/ DELOITTE & TOUCHE LLP
Chicago, Illinois
March 1, 1996
F-1
<PAGE>
GLENBROOK LIFE AND ANNUITY COMPANY
STATEMENTS OF FINANCIAL POSITION
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------
1995 1994
---------- ---------
($ IN THOUSANDS)
<S> <C> <C>
Assets
Investments
Fixed income securities
Available for sale, at fair value (amortized cost $44,112 and $51,527)..................... $ 48,815 $ 49,807
Short-term................................................................................... 2,102 924
---------- ---------
Total investments........................................................................ 50,917 50,731
Reinsurance recoverable from Allstate Life Insurance Company................................... 1,340,925 696,854
Cash........................................................................................... 264
Deferred income taxes.......................................................................... 542
Other assets................................................................................... 2,021 2,118
Separate Accounts.............................................................................. 15,578
---------- ---------
Total assets............................................................................. $1,409,705 $ 750,245
---------- ---------
---------- ---------
Liabilities
Contractholder funds........................................................................... $1,340,925 $ 696,854
Income taxes payable........................................................................... 1,637 605
Deferred income taxes.......................................................................... 1,828
Net payable to Allstate Life Insurance Company................................................. 255 128
Separate Accounts.............................................................................. 5,048
---------- ---------
Total liabilities........................................................................ 1,349,693 697,587
---------- ---------
Shareholder's equity
Common stock ($500 par value, 4,200 shares authorized, issued, and outstanding)................ 2,100 2,100
Additional capital paid-in..................................................................... 49,641 49,641
Unrealized net capital gains (losses).......................................................... 3,357 (1,118)
Retained income................................................................................ 4,914 2,035
---------- ---------
Total shareholder's equity............................................................... 60,012 52,658
---------- ---------
Total liabilities and shareholder's equity............................................... $1,409,705 $ 750,245
---------- ---------
---------- ---------
</TABLE>
GLENBROOK LIFE AND ANNUITY COMPANY
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------
1995 1994 1993
--------- --------- ---------
($ IN THOUSANDS)
<S> <C> <C> <C>
Revenues
Net investment income..................................................................... $ 3,996 $ 2,017 $ 753
Realized capital gains (losses)........................................................... 459 83
--------- --------- ---
Income before income taxes.................................................................. 4,455 2,017 836
Income tax expense.......................................................................... 1,576 723 307
--------- --------- ---
Net income.................................................................................. $ 2,879 $ 1,294 $ 529
--------- --------- ---
--------- --------- ---
</TABLE>
See notes to financial statements.
F-2
<PAGE>
GLENBROOK LIFE AND ANNUITY COMPANY
STATEMENTS OF SHAREHOLDER'S EQUITY
<TABLE>
<CAPTION>
ADDITIONAL UNREALIZED NET
COMMON CAPITAL CAPITAL GAINS RETAINED
STOCK PAID-IN (LOSSES) INCOME TOTAL
----------- ----------- --------------- ----------- ---------
($ IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Balance, December 31, 1992................................... $ 2,100 $ 9,641 $ (10) $ 212 $ 11,943
Net income................................................. 529 529
Change in unrealized net capital gains and losses.......... 703 703
----- ----------- ------ ----- ---------
Balance, December 31, 1993................................... 2,100 9,641 693 741 13,175
Net income................................................. 1,294 1,294
Capital contribution....................................... 40,000 40,000
Change in unrealized net capital gains and losses.......... (1,811) (1,811)
----- ----------- ------ ----- ---------
Balance, December 31, 1994................................... 2,100 49,641 (1,118) 2,035 52,658
Net income................................................. 2,879 2,879
Change in unrealized net capital gains and losses.......... 4,475 4,475
----- ----------- ------ ----- ---------
Balance, December 31, 1995................................... $ 2,100 $ 49,641 $ 3,357 $ 4,914 $ 60,012
----- ----------- ------ ----- ---------
----- ----------- ------ ----- ---------
</TABLE>
GLENBROOK LIFE AND ANNUITY COMPANY
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------
1995 1994 1993
--------- --------- ---------
($ IN THOUSANDS)
<S> <C> <C> <C>
Cash flows from operating activities
Net income........................................................................... $ 2,879 $ 1,294 $ 529
Adjustments to reconcile net income to net cash from operating activities
Deferred income taxes.............................................................. (39)
Realized capital gains............................................................. (459) (83)
Changes in other operating assets and liabilities.................................. 1,217 (180) 656
--------- --------- ---------
Net cash from operating activities............................................... 3,598 1,114 1,102
--------- --------- ---------
Cash flows from investing activities
Fixed income securities available for sale
Proceeds from sales................................................................ 7,836 3,015
Investment collections............................................................. 1,568 649 969
Investment purchases............................................................... (1,491) (42,729) (3,737)
Participation in Separate Account.................................................... (10,069)
Change in short-term investments, net................................................ (1,178) 667 (1,102)
--------- --------- ---------
Net cash from investing activities............................................... (3,334) (41,413) (855)
--------- --------- ---------
Cash flows from financing activities
Capital contribution................................................................. 40,000
--------- --------- ---------
Net cash from financing activities............................................... -- 40,000 --
--------- --------- ---------
Net increase (decrease) in cash........................................................ 264 (299) 247
Cash at beginning of year.............................................................. -- 299 52
--------- --------- ---------
Cash at end of year.................................................................... $ 264 $ -- $ 299
--------- --------- ---------
--------- --------- ---------
</TABLE>
See notes to financial statements.
F-3
<PAGE>
GLENBROOK LIFE AND ANNUITY COMPANY
NOTES TO FINANCIAL STATEMENTS
($ IN THOUSANDS)
1. ORGANIZATION AND NATURE OF OPERATIONS
Glenbrook Life and Annuity Company (the "Company") is wholly owned by
Allstate Life Insurance Company ("Allstate Life"), which is wholly owned by
Allstate Insurance Company ("Allstate"), a wholly-owned subsidiary of The
Allstate Corporation (the "Corporation"). On June 30, 1995, Sears, Roebuck and
Co. ("Sears") distributed its 80.3% ownership in the Corporation to Sears common
shareholders through a tax-free dividend (the "Distribution").
The Company develops and markets flexible premium deferred variable annuity
contracts and single and flexible premium deferred annuities to individuals
through banks and financial institutions in the United States.
Annuity contracts issued by the Company are subject to discretionary
withdrawal or surrender by the contractholder, subject to applicable surrender
charges. These contracts are reinsured with Allstate Life (Note 4) which selects
assets to meet the anticipated cash flow requirements of the assumed
liabilities. Allstate Life utilizes various modeling techniques in managing the
relationship between assets and liabilities and employs strategies to maintain
investments which are sufficiently liquid to meet obligations to contractholders
in various interest rate scenarios.
The Company monitors economic and regulatory developments which have the
potential to impact its business. Currently there is proposed legislation which
would permit banks greater participation in securities businesses, which could
eventually present an increased level of competition for sales of the Company's
annuity contracts. Furthermore, the federal government may enact changes which
could possibly eliminate the tax-advantaged nature of annuities or eliminate
consumers' need for tax deferral, thereby reducing the incentive for customers
to purchase the Company's products. While it is not possible to predict the
outcome of such issues with certainty, management evaluates the likelihood of
various outcomes and develops strategies, as appropriate, to respond to such
challenges.
Certain reclassifications have been made to the prior year financial
statements to conform to the presentation for the current year.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
LIFE INSURANCE ACCOUNTING
The Company sells long-duration contracts that do not involve significant
risk of policyholder mortality or morbidity (principally single and flexible
premium annuities) which are considered investment contracts.
CONTRACTHOLDER FUNDS
Contractholder funds arise from the issuance of individual and group
annuities that include an investment component. Payments received are recorded
as interest-bearing liabilities. Contractholder funds are equal to deposits
received and interest accrued to the benefit of the contractholder less
withdrawals, mortality charges and administrative expenses. Credited interest
rates on contractholder funds ranged from 3.0% to 7.4% for those contracts with
fixed interest rates and from 4.25% to 7.9% for those with flexible rates during
1995.
SEPARATE ACCOUNTS
During 1995, the Company issued flexible premium deferred variable annuity
contracts, the assets and liabilities of which are legally segregated and
reflected in the accompanying statements of financial position as assets and
liabilities of the Separate Accounts (Glenbrook Life and Annuity Company
Variable Annuity Account and Glenbrook Life and Annuity Company Separate Account
A), unit investment trusts registered with the Securities and Exchange
Commission. Assets of the Separate Accounts are invested in funds of management
investment companies. For certain variable annuity contracts, the Company has
entered into an exclusive distribution arrangement with distributors.
The assets of the Separate Accounts are carried at fair value. Unrealized
gains and losses on the Company's participation in the Separate Account, net of
deferred income taxes, is shown as a component of shareholder's equity. The
Company's participation in the Separate Account, amounting to $10,530 at
December 31, 1995, is subject to certain withdrawal restrictions which are
dependent upon aggregate fund net asset values. In addition, limitations exist
with regard to the maximum amount which can be withdrawn by the Company within
any 30-day period.
Investment income and realized gains and losses of the Separate Accounts,
other than the portion related to the Company's participation, accrue directly
to the contractholders and, therefore, are not included in the accompanying
statements of operations. Revenues to the Company from the Separate Accounts
consist of contract maintenance fees, administrative fees and mortality and
expense risk charges, which are entirely ceded to Allstate Life.
F-4
<PAGE>
GLENBROOK LIFE AND ANNUITY COMPANY
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
($ IN THOUSANDS)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
REINSURANCE
Beginning June 5, 1992, the Company reinsures all new business to Allstate
Life (Note 4). Life insurance in force prior to that date is ceded to
non-affiliated reinsurers.
Contract charges and credited interest are ceded and reflected net of such
cessions in the statements of operations. Reinsurance recoverable and
contractholder funds are reported separately in the statements of financial
position.
INVESTMENTS
Fixed income securities include bonds and mortgage-backed securities. Fixed
income securities are carried at fair value. The difference between amortized
cost and fair value, net of deferred income taxes, is reflected as a separate
component of shareholder's equity. Provisions are made to write down the
carrying value of fixed income securities for declines in value that are other
than temporary. Such writedowns are included in realized capital gains and
losses.
Short-term investments are carried at cost which approximates fair value.
Investment income consists primarily of interest, which is recognized on an
accrual basis. Interest income on mortgage-backed securities is determined on
the effective yield method, based on the estimated principal repayments. Accrual
of income is suspended for fixed income securities that are in default or when
the receipt of interest payments is in doubt. Realized capital gains and losses
are determined on a specific identification basis.
INCOME TAXES
The income tax provision is calculated under the liability method. Deferred
tax assets and liabilities are recorded based on the difference between the
financial statement and tax bases of assets and liabilities and the enacted tax
rates. Deferred income taxes also arise from unrealized capital gains or losses
on fixed income securities carried at fair value.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
3. ACCOUNTING CHANGE
Effective December 31, 1993, the Company adopted Statement of Financial
Accounting Standards ("SFAS") No. 115, "Accounting for Certain Investments in
Debt and Equity Securities." SFAS No. 115 requires that investments classified
as available for sale be carried at fair value. Previously, fixed income
securities classified as available for sale were carried at the lower of
amortized cost or fair value, determined in the aggregate. Unrealized holding
gains and losses are reflected as a separate component of shareholder's equity,
net of deferred income taxes. The net effect of adoption of this statement
increased shareholder's equity at December 31, 1993 by $693, with no impact on
net income.
4. RELATED PARTY TRANSACTIONS
REINSURANCE
Contract charges ceded to Allstate Life under reinsurance agreements were
$1,523 and $409 in 1995 and 1994, respectively. Credited interest and expenses
ceded to Allstate Life amounted to $71,905 and $26,177 in 1995 and 1994,
respectively. Investment income earned on the assets which support
contractholder funds is not included in the Company's financial statements as
those assets were transferred to Allstate Life under the terms of reinsurance
treaties. Reinsurance ceded arrangements do not discharge the Company as the
primary insurer.
BUSINESS OPERATIONS
The Company utilizes services and business facilities owned or leased, and
operated by Allstate in conducting its business activities. The Company
reimburses Allstate for the operating expenses incurred by Allstate on behalf of
the Company. The cost to the Company is determined by various allocation methods
and is primarily related to the level of services provided. Operating expenses,
including compensation and retirement and other benefit programs, allocated to
the Company were $348, $271 and $59 in 1995, 1994 and 1993, respectively.
Investment-related expenses are retained by the Company. All other costs are
assumed by Allstate Life under reinsurance treaties.
F-5
<PAGE>
GLENBROOK LIFE AND ANNUITY COMPANY
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
($ IN THOUSANDS)
4. RELATED PARTY TRANSACTIONS (CONTINUED)
LAUGHLIN GROUP
Laughlin Group, Inc. ("Laughlin"), a wholly-owned subsidiary of Laughlin
Group Holdings Inc., a wholly-owned subsidiary of Allstate Life which was
acquired in September 1995, is a third-party marketer which distributes the
products of insurance carriers including the Company. Laughlin markets the
Company's flexible premium deferred variable annuity contracts and flexible
premium deferred annuities. Sales commissions paid to Laughlin subsequent to the
acquisition date of $3,439 were ceded to Allstate Life.
5. INCOME TAXES
Allstate Life and its life insurance subsidiaries, including the Company,
will file a consolidated federal income tax return. Tax liabilities and benefits
realized by the consolidated group are allocated as generated by the respective
subsidiaries, whether or not such benefits generated by the subsidiaries would
be available on a separate return basis. The Corporation and its domestic
subsidiaries including the Company (the "Allstate Group"), will be eligible to
file a consolidated tax return beginning in the year 2000.
Prior to the Distribution, the Allstate Group joined with Sears and its
domestic business units (the "Sears Group") in the filing of a consolidated
federal income tax return (the "Sears Tax Group") and were parties to a federal
income tax allocation agreement (the "Tax Sharing Agreement"). As a member of
the Sears Tax Group, the Corporation was jointly and severally liable for the
consolidated income tax liability of the Sears Tax Group. Under the Tax Sharing
Agreement, the Company, through the Corporation, paid to or received from the
Sears Group the amount, if any, by which the Sears Tax Group's federal income
tax liability was affected by virtue of inclusion of the Allstate Group in the
consolidated federal income tax return. Effectively, this resulted in the
Company's annual income tax provision being computed as if the Company filed a
separate return, except that items such as net operating losses, capital losses
or similar items which might not be immediately recognizable in a separate
return, were allocated according to the Tax Sharing Agreement and reflected in
the Company's provision to the extent that such items reduced the Sears Tax
Group's federal tax liability.
The Allstate Group and Sears Group have entered into an agreement which
governs their respective rights and obligations with respect to federal income
taxes for all periods prior to the Distribution ("Consolidated Tax Years"). The
agreement provides that all Consolidated Tax Years will continue to be governed
by the Tax Sharing Agreement with respect to the Company's federal income tax
liability and taxes payable to or recoverable from the Sears Group.
The components of the deferred income tax assets and liabilities at December
31, 1995 and 1994 are as follows:
<TABLE>
<CAPTION>
1995 1994
--------- ---------
<S> <C> <C>
Unrealized net capital losses on fixed income securities............................................... $ -- $ 602
Other.................................................................................................. 4
--------- ---
Total deferred assets................................................................................ -- 606
--------- ---
--------- ---
Unrealized net capital gains on fixed income securities................................................ $ (1,807)
Difference in tax bases of investments................................................................. (21)
Other.................................................................................................. (64)
--------- ---
Total deferred liabilities........................................................................... (1,828) (64)
--------- ---
Net deferred (liability) asset....................................................................... $ (1,828) $ 542
--------- ---
--------- ---
</TABLE>
The components of income tax expense are as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------
1995 1994 1993
--------- --------- ---------
<S> <C> <C> <C>
Current..................................................................................... $ 1,615 $ 652 $ 290
Deferred.................................................................................... (39) 71 17
--------- --- ---
Income tax expense........................................................................ $ 1,576 $ 723 $ 307
--------- --- ---
--------- --- ---
</TABLE>
The Company paid income taxes of $874, $57 and $290 in 1995, 1994 and 1993,
respectively, under the Tax Sharing Agreement. The Company had income taxes
payable to Allstate Life of $1,637 and $605 at December 31, 1995 and 1994,
respectively.
F-6
<PAGE>
GLENBROOK LIFE AND ANNUITY COMPANY
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
($ IN THOUSANDS)
6. INVESTMENTS
FAIR VALUES
The amortized cost, fair value and gross unrealized gains and losses for
fixed income securities are as follows:
<TABLE>
<CAPTION>
GROSS UNREALIZED
AMORTIZED --------------------
COST GAINS LOSSES FAIR VALUE
----------- --------- --------- -----------
<S> <C> <C> <C> <C>
AT DECEMBER 31, 1995
U.S. government and agencies................................................... $ 24,722 $ 3,470 -- $ 28,192
Corporate...................................................................... 1,304 120 1,424
Mortgage-backed securities..................................................... 18,086 1,113 19,199
----------- --------- --------- -----------
Totals....................................................................... $ 44,112 $ 4,703 -- $ 48,815
----------- --------- --------- -----------
----------- --------- --------- -----------
AT DECEMBER 31, 1994
U.S. government and agencies................................................... $ 31,005 $ 30 $ 1,126 $ 29,909
Mortgage-backed securities..................................................... 20,522 624 19,898
----------- --------- --------- -----------
Total........................................................................ $ 51,527 $ 30 $ 1,750 $ 49,807
----------- --------- --------- -----------
----------- --------- --------- -----------
</TABLE>
SCHEDULED MATURITIES
The scheduled maturities of fixed income securities available for sale at
December 31, 1995 are as follows:
<TABLE>
<CAPTION>
AMORTIZED FAIR
COST VALUE
----------- ---------
<S> <C> <C>
Due in one year or less............................................................................ $ 398 $ 403
Due after one year through five years..............................................................
Due after five years through ten years............................................................. 15,883 17,681
Due after ten years................................................................................ 9,745 11,532
----------- ---------
26,026 29,616
Mortgage-backed securities......................................................................... 18,086 19,199
----------- ---------
Total............................................................................................ $ 44,112 $ 48,815
----------- ---------
----------- ---------
</TABLE>
Actual maturities may differ from those scheduled as a result of prepayments
by the issuers.
UNREALIZED NET CAPITAL GAINS AND LOSSES
Unrealized net capital gains and losses on fixed income securities and the
Company's participation in the Separate Account included in shareholder's equity
at December 31, 1995 are as follows:
<TABLE>
<CAPTION>
UNREALIZED
AMORTIZED FAIR NET GAINS/
COST VALUE (LOSSES)
----------- --------- -----------
<S> <C> <C> <C>
Fixed income securities............................................................... $ 44,112 $ 48,815 $ 4,703
Participation in Separate Account..................................................... 10,069 10,530 461
Deferred income taxes................................................................. (1,807)
-----------
Total............................................................................... $ 3,357
-----------
-----------
</TABLE>
F-7
<PAGE>
GLENBROOK LIFE AND ANNUITY COMPANY
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
($ IN THOUSANDS)
6. INVESTMENTS (CONTINUED)
The change in unrealized net capital gains and losses for fixed income
securities and the Company's participation in the Separate Account is as
follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------
1995 1994 1993
--------- --------- ---------
<S> <C> <C> <C>
Fixed income securities..................................................................... $ 6,423 $ (2,786) $ 1,076
Participation in Separate Account in 1995................................................... 461
Deferred income taxes....................................................................... (2,409) 975 (373)
--------- --------- ---------
Change in unrealized net capital gains and losses........................................... $ 4,475 $ (1,811) $ 703
--------- --------- ---------
--------- --------- ---------
</TABLE>
COMPONENTS OF NET INVESTMENT INCOME
Investment income by investment type is as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------
1995 1994 1993
--------- --------- ---------
<S> <C> <C> <C>
Investment income:
Fixed income securities...................................................................... $ 3,850 $ 1,984 $ 729
Short-term................................................................................... 113 48 35
Participation in Separate Account in 1995.................................................... 69
--------- --------- ---
Investment income, before expense.............................................................. 4,032 2,032 764
Investment expense............................................................................. 36 15 11
--------- --------- ---
Net investment income.......................................................................... $ 3,996 $ 2,017 $ 753
--------- --------- ---
--------- --------- ---
</TABLE>
REALIZED CAPITAL GAINS AND LOSSES
Realized capital gains on investments are as follows:
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
----------------
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Fixed income securities............................................................................. $459 $-- $83
Income tax.......................................................................................... 161 29
---- ---- ----
Net realized gains.................................................................................. $298 $-- $54
---- ---- ----
---- ---- ----
</TABLE>
PROCEEDS FROM SALES OF FIXED INCOME SECURITIES
The proceeds from sales of investments in fixed income securities, excluding
calls, were $7,836 and $3,015, with related gross realized gains of $459 and $22
for 1995 and 1993, respectively. There were no such amounts realized in 1994.
SECURITIES ON DEPOSIT
At December 31, 1995, fixed income securities with a carrying value of
$10,085 were on deposit with regulatory authorities as required by law.
7. FINANCIAL INSTRUMENTS
In the normal course of business, the Company invests in various financial
assets and incurs various financial liabilities. The fair value of all financial
assets other than fixed income securities and all liabilities other than
contractholder funds approximates their carrying value as they are short-term in
nature.
Fair values for fixed income securities are based on quoted market prices.
The December 31, 1995 and 1994 fair values and carrying values of fixed income
securities are discussed in Note 6.
The fair value of contractholder funds on investment contracts is based on
the terms of the underlying contracts. Reserves on investment contracts with no
stated maturities (single premium and flexible premium deferred annuities) are
valued at the fund balance less surrender charge. The fair value of immediate
annuities with fixed terms are estimated using discounted cash flow calculations
based on
F-8
<PAGE>
GLENBROOK LIFE AND ANNUITY COMPANY
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
($ IN THOUSANDS)
7. FINANCIAL INSTRUMENTS (CONTINUED)
interest rates currently offered for contracts with similar terms and duration.
Contractholder funds on investment contracts had a carrying value of $1,340,925
at December 31, 1995 and a fair value of $1,282,248. The carrying value and fair
value at December 31, 1994 were $696,854 and $670,930, respectively.
8. STATUTORY FINANCIAL INFORMATION
The following tables reconcile net income and shareholder's equity as
reported herein in conformity with generally accepted accounting principles with
statutory net income and capital and surplus, determined in accordance with
statutory accounting practices prescribed or permitted by insurance regulatory
authorities:
<TABLE>
<CAPTION>
NET INCOME
YEAR ENDED
DECEMBER 31,
-------------------------------
1995 1994 1993
--------- --------- ---------
<S> <C> <C> <C>
Balance per generally accepted accounting principles....................................... $ 2,879 $ 1,294 $ 529
Income taxes............................................................................. (164) 29 8
Interest maintenance reserve............................................................. (53) 27
Non-admitted assets and statutory reserves............................................... (46) 15 (47)
--------- --------- ---
Balance per statutory accounting practices................................................. $ 2,669 $ 1,285 $ 517
--------- --------- ---
--------- --------- ---
</TABLE>
<TABLE>
<CAPTION>
SHAREHOLDER'S
EQUITY
DECEMBER 31,
----------------
1995 1994
------- -------
<S> <C> <C>
Balance per generally accepted accounting principles............................ $60,012 $52,658
Income taxes.................................................................. 698 (575)
Unrealized net capital gains (losses)......................................... (4,703) 1,719
Non-admitted assets and statutory reserves.................................... (1,702) (1,635)
------- -------
Balance per statutory accounting practices...................................... $54,305 $52,167
------- -------
------- -------
</TABLE>
PERMITTED STATUTORY ACCOUNTING PRACTICES
The Company prepares their statutory financial statements in accordance with
accounting principles and practices prescribed or permitted by the insurance
department of the State of Illinois. Prescribed statutory accounting practices
include a variety of publications of the National Association of Insurance
Commissioners, as well as state laws, regulations, and general administrative
rules. Permitted statutory accounting practices encompass all accounting
practices not so prescribed. The Company does not follow any permitted statutory
accounting practices that have a material effect on statutory surplus or
risk-based capital.
DIVIDENDS
The ability of the Company to pay dividends is dependent on business
conditions, income, cash requirements of the Company and other relevant factors.
The payment of shareholder dividends by insurance companies without the prior
approval of the state insurance regulator is limited to formula amounts based on
net income and capital and surplus, determined in accordance with statutory
accounting practices, as well as the timing and amount of dividends paid in the
preceding twelve months. The maximum amount of dividends that the Company can
distribute during 1996 without prior approval of both the Illinois and
California Departments of Insurance is $5,220.
F-9
<PAGE>
GLENBROOK LIFE AND ANNUITY COMPANY
SCHEDULE IV--REINSURANCE
($ IN THOUSANDS)
<TABLE>
<CAPTION>
GROSS
AMOUNT CEDED NET AMOUNT
----------- --------- -----------
<S> <C> <C> <C>
YEAR ENDED DECEMBER 31, 1995
Life insurance in force..................................................................... $ 1,250 $ 1,250 $ --
----- --------- -----
----- --------- -----
Premiums and contract charges:
Life and annuities........................................................................ $ 6,571 $ 6,571 $ --
----- --------- -----
----- --------- -----
<CAPTION>
GROSS
AMOUNT CEDED NET AMOUNT
----------- --------- -----------
<S> <C> <C> <C>
YEAR ENDED DECEMBER 31, 1994
Life insurance in force..................................................................... $ 1,250 $ 1,250 $ --
----- --------- -----
----- --------- -----
Premiums and contract charges:
Life and annuities........................................................................ $ 409 $ 409 $ --
----- --------- -----
----- --------- -----
<CAPTION>
GROSS
AMOUNT CEDED NET AMOUNT
----------- --------- -----------
<S> <C> <C> <C>
YEAR ENDED DECEMBER 31, 1993
Life insurance in force..................................................................... $ 1,250 $ 1,250 $ --
----- --------- -----
----- --------- -----
Premiums and contract charges:
Life...................................................................................... 6 6 --
Contract charges.......................................................................... 70 70 --
----- --------- -----
$ 76 $ 76 $ --
----- --------- -----
----- --------- -----
</TABLE>
F-10
<PAGE>
APPENDIX A
MARKET VALUE ADJUSTMENT
The Market Value Adjustment is based on the following:
<TABLE>
<S> <C> <C>
I = the Treasury Rate for a maturity equal to the Sub-account's Guarantee Period for the
week preceding the establishment of the Sub-account.
N = the number of whole and partial years from the date we receive the withdrawal, or
death benefit request, or from the Payout Start Date to the end of the Sub-account's
Guarantee Period.
J = the Treasury Rate for a maturity of length N for the week preceding the receipt of the
withdrawal request, death benefit request, or income payment request. If a Note with a
maturity of length N is not available, a weighted average will be used. If N is one
year or less, J will be the 1-year Treasury Rate.
</TABLE>
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
Any transfer, withdrawal in excess of the free withdrawal amount, or death
benefit paid from a Sub-account of the Fixed Account will be multiplied by the
Market Value Adjustment factor to determine the Market Value Adjustment.
ILLUSTRATION
EXAMPLE OF MARKET VALUE ADJUSTMENT
<TABLE>
<S> <C>
Purchase Payment: $10,000
Guarantee Period: 5 Years
Interest Rate: 4.75%
Full Withdrawal: End of Contract Year 3
</TABLE>
NOTE: THIS ILLUSTRATION ASSUMES THAT PREMIUM TAXES WERE NOT APPLICABLE.
EXAMPLE 1: (ASSUMES DECLINING INTEREST RATES)
Step 1: Calculate Account Value at End of Contract Year 3:
= 10,000.00 X (1.0475)3 = $11,493.76
Step 2: Calculate the Free Withdrawal Amount:
= 10% X (10,000.00) = $1,000.00
Step 3: Calculate the Withdrawal Charge:
= .05 X (10,000.00 - 1,000.00) = $450.00
Step 4: Calculate the Market Value Adjustment:
I = 4.75%
J = 4.25%
N = 730 DAYS = 2
----------
365 days
A-1
<PAGE>
Market Value Adjustment Factor: .9 X (I-J) X N
= .9 X (.0475 - .0425) X 2 = .009
Market Value Adjustment = Factor X Amount Subject to Market Value Adjustment:
= .009 X (11,493.76 - 1,000) = $94.44
Step 5: Calculate The Amount Received by Customers as a Result of a Full
Withdrawal at the end of Contract Year 3:
= 11,493.76 - 450.00 + 94.44 = $11,138.20
EXAMPLE 2: (ASSUMES RISING INTEREST RATES)
Step 1: Calculate Account Value at End of Contract Year 3:
= 10,000.00 X (1.0475)3 = $11,493.76
Step 2: Calculate the Free Withdrawal Amount
= 10% X (10,000.00) = $1,000.00
Step 3: Calculate the Withdrawal Charge:
= .05 X (10,000.00 - 1,000.00) = $450.00
Step 4: Calculate the Market Value Adjustment:
I = 4.75%
J = 5.25%
N = 730 DAYS = 2
----------
365 days
Market Value Adjustment Factor: .9 X (I-J) X N
= .9 X (.0475 - .0525) X (2) = -.009
Market Value Adjustment = Factor X Amount Subject to Market Value Adjustment:
= -.009 X ($11,493.76 - 1,000) = -94.44
Step 5: Calculate The Net Withdrawl Value at End of Contract Year 3:
= 11,493.76 - 450.00 - 94.44 = $10,949.32
A-2
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION: TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
ADDITIONS, DELETIONS OR SUBSTITUTIONS OF INVESTMENTS.............................................................
REINVESTMENT.....................................................................................................
THE CONTRACT.....................................................................................................
Purchase of Contracts..........................................................................................
Performance Data...............................................................................................
Tax-free Exchanges (1035 Exchanges, Rollovers and Transfers)...................................................
Premium Taxes..................................................................................................
Tax Reserves...................................................................................................
INCOME PAYMENTS..................................................................................................
Calculation of Variable Annuity Unit Values....................................................................
GENERAL MATTERS..................................................................................................
Incontestability...............................................................................................
Settlements....................................................................................................
Safekeeping of the Variable Account's Assets...................................................................
FEDERAL TAX MATTERS..............................................................................................
Introduction...................................................................................................
Taxation of Glenbrook Life and Annuity Company.................................................................
Exceptions to the Non-Natural Owner Rule.......................................................................
IRS Required Distribution at Death Rules.......................................................................
Qualified Plans................................................................................................
Types of Qualified Plans.......................................................................................
VARIABLE ACCOUNT FINANCIAL STATEMENTS............................................................................
</TABLE>
B-1
<PAGE>
ORDER FORM
Please send me a copy of the most recent Statement of Additional Information
for the Glenbrook Life and Annuity Company Separate Account A.
<TABLE>
<S> <C>
- -------------- -------------------------------------------
(Date) (Name)
-------------------------------------------
(Street Address)
-------------------------------------------
(City) (State) (Zip Code)
</TABLE>
Send to:
Glenbrook Life and Annuity Company
Post Office Box 94039
Palatine, Illinois 60094-4039
Attention: VA Customer Service Unit
B-2
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
GLENBROOK LIFE AND ANNUITY COMPANY SEPARATE ACCOUNT A
OFFERED BY
GLENBROOK LIFE AND ANNUITY COMPANY
POST OFFICE BOX 94039
PALATINE, IL 60094-4039
1-800/776-6978
INDIVIDUAL AND GROUP FLEXIBLE PREMIUM DEFERRED
VARIABLE ANNUITY CONTRACTS
This Statement of Additional Information supplements the information in the
prospectus for the Individual and Group Flexible Premium Deferred Variable
Annuity Contract offered by Glenbrook Life and Annuity Company ("Company"), a
wholly owned subsidiary of Allstate Life Insurance Company. The Contract is
primarily designed to aid individuals in long-term financial planning and it can
be used for retirement planning regardless of whether the plan qualifies for
special federal income tax treatment. The prospectus may be obtained from
Glenbrook Life and Annuity Company by writing or calling the address or
telephone number listed above.
THIS STATEMENT OF ADDITIONAL INFORMATION IS NOT A PROSPECTUS AND
SHOULD BE READ ONLY IN CONJUNCTION WITH THE PROSPECTUS FOR THE
CONTRACT
The prospectus, dated May 1, 1996, has been filed with the United
States Securities and Exchange Commission
DATED MAY 1, 1996.
<PAGE>
TABLE OF CONTENTS
PAGE
----
Additions, Deletions or Substitutions of Investments . . . . . . . . . . . . .
Reinvestment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
The Contract . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Purchase of Contracts . . . . . . . . . . . . . . . . . . . . . . . . . .
Performance Data. . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Tax-free Exchanges (1035 Exchanges, Rollovers and Transfers). . . . . . .
Premium Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Tax Reserves. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income Payments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Calculation of Variable Annuity Unit Values . . . . . . . . . . . . . . .
General Matters. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Incontestability. . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Settlements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Safekeeping of the Variable Account's Assets. . . . . . . . . . . . . . .
Federal Tax Matters. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Introduction. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Taxation of Glenbrook Life and Annuity Company. . . . . . . . . . . . . .
Exceptions to the Non-Natural Owner Rule. . . . . . . . . . . . . . . . .
IRS Required Distribution at Death Rules. . . . . . . . . . . . . . . . .
Qualified Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Types of Qualified Plans. . . . . . . . . . . . . . . . . . . . . . . . .
Variable Account Financial Statements. . . . . . . . . . . . . . . . . . . . .
2
<PAGE>
ADDITIONS, DELETIONS OR SUBSTITUTIONS OF INVESTMENTS
The Company retains the right, subject to any applicable law, to make
additions to, deletions from or substitutions for the Fund shares held by any
Sub-account of the Variable Account. The Company reserves the right to
eliminate the shares of any of the Funds and to substitute shares of another
Fund of the Fund Series, or of another open-end, registered investment company,
if the shares of the Fund are no longer available for investment, or if, in the
Company's judgment, investment in any Fund would become inappropriate in view of
the purposes of the Variable Account. Substitutions of shares attributable to
an Owner's interest in a Sub-account will not be made until the Owner has been
notified of the change, and until the Securities and Exchange Commission has
approved the change, to the extent such notification and approval is required by
the Investment Company Act of 1940. Nothing contained in this Statement of
Additional Information shall prevent the Variable Account from purchasing other
securities for other series or classes of contracts, or from effecting a
conversion between series or classes of contracts on the basis of requests made
by Owners.
The Company may also establish additional Sub-accounts or series of
Sub-accounts of the Variable Account. Each additional Sub-account would
purchase shares in a new Fund of the Fund Series or in another mutual fund. New
Sub-accounts may be established when, in the sole discretion of the Company,
marketing needs or investment conditions warrant. Any new Sub-accounts offered
in conjunction with the Contract will be made available to existing Owners on a
basis to be determined by the Company. The Company may also eliminate one or
more Sub-accounts if, in its sole discretion, marketing, tax or investment
conditions so warrant.
In the event of any such substitution or change, the Company may, by
appropriate endorsement, make such changes in the Contract as may be necessary
or appropriate to reflect such substitution or change. If deemed to be in the
best interests of persons having voting rights under the policies, the Variable
Account may be operated as a management company under the Investment Company Act
of 1940 or it may be deregistered under such Act in the event such registration
is no longer required.
REINVESTMENT
All dividends and capital gains distributions from the Funds are
automatically reinvested in shares of the distributing Fund at their net asset
value.
3
<PAGE>
THE CONTRACT
PURCHASE OF CONTRACTS
The Contracts are offered to the public through brokers as well as banks
licensed under the federal securities laws and state insurance laws. The
Contracts are distributed through the principal underwriter for the Variable
Account, Allstate Life Financial Services, Inc., an affiliate of Glenbrook Life
and Annuity Company. The offering of the Contracts is continuous and the
Company does not anticipate discontinuing the offering of the Contracts.
However, the Company reserves the right to discontinue the offering of the
Contracts.
PERFORMANCE DATA
From time to time the Variable Account may publish advertisements
containing performance data relating to its Sub-accounts. The performance data
for the Sub-accounts (other than for the AIM V.I. Money Market Sub-account) will
always be accompanied by total return quotations. Performance figures used by
the Variable Account are based on actual historical performance of its
Sub-accounts for specified periods, and the figures are not intended to indicate
future performance. The Variable Account may also disclose yield, standard
total return, and non-standard total return for periods prior to the date that
the Variable Account commenced operations. For periods prior to the date the
Variable Account commenced operations, performance information for the
Sub-accounts will be calculated based on the performance of the underlying Funds
and the assumption that the Sub-accounts were in existence for the same periods
as those of the underlying Funds, with a level of charges equal to those
currently assessed against the Sub-accounts.
A Sub-account's "average annual total return" represents an
annualization of the Sub-account's total return over a particular period and is
computed by finding the annual percentage rate which, when compounded annually,
will accumulate a hypothetical $1,000 Purchase Payment to the redeemable value
at the end of the one, five or ten year period, or for a period from the date of
commencement of the Sub-account's operations, if shorter than any of the
foregoing. The average annual total return is obtained by dividing the ending
redeemable value, after deductions for any Withdrawal Charges or Contract
Maintenance Charges imposed on the Contracts by the Variable Account, by the
initial hypothetical $1,000 Purchase Payment, taking the "n"th root of the
quotient (where "n" is the number of years in the period) and subtracting 1 from
the result.
The Withdrawal Charges assessed upon redemption are computed as
follows: the free withdrawal amount is not assessed a withdrawal charge.
Withdrawal charges are charged on the amount of redemption equal to the
purchase payment, reduced by the amount of the free withdrawal amount,
4
<PAGE>
if any. The remaining amount of the redemption, if any, is not assessed a
Withdrawal Charge. The Withdrawal Charge Schedule specifies rates based on the
number of complete years since each Purchase Payment was made. The Contract
Maintenance Charge ($35 per contract) used in the total return calculation is
normally prorated using the following method: The total amount of annual
Contract fees collected during the year is divided by the total average net
assets of all the Sub-accounts. The resulting percentage is then multiplied by
the ending Contract Value.
In addition, the Variable Account may advertise the total return over
different periods of time by means of aggregate, average, year-by-year or other
types of total return figures. Such calculations would not reflect deductions
for Withdrawal Charges which may be imposed on the Contracts by the Variable
Account which, if reflected, would reduce the performance quoted. The formula
for computing such total return quotations involves a per unit change
calculation. This calculation is based on the Accumulation Unit value at the
end of the defined period divided by the Accumulation Unit value at the
beginning of such period, minus 1. The periods included in such advertisements
are "year-to-date" (prior calendar year end to the day of the advertisement);
"year to most recent quarter" (prior calendar year end to the end of the most
recent quarter); "the prior calendar year"; "'n' most recent Calendar Years";
and "Inception (commencement of the Sub-account's operation) to date" (day of
the advertisement).
The standard total returns for the Sub-accounts for the period of each
Sub-account's operations during 1995 are presented below. Note that these
total returns have not been annualized.
<TABLE>
TOTAL RETURN FOR THE PERIOD
FROM INCEPTION OF THE
SUB-ACCOUNT (12/4/95)
SUB-ACCOUNT TO 12/31/95
- ----------- ---------------------------
<S> <C>
AIM V.I. Capital Appreciation Fund ......... -7.14%
AIM V.I. Diversified Income Fund............ -4.84%
AIM V.I. Global Utilities Fund.............. -3.42%
AIM V.I. Government Securities Fund......... -4.70%
AIM V.I. Growth Fund........................ -6.90%
AIM V.I. Growth and Income Fund............. -6.48%
AIM V.I. International Equity Fund.......... -4.49%
AIM V.I. Value Fund......................... -7.55%
AIM V.I. Money Market Fund.................. N/A
</TABLE>
From time to time, sales literature or advertisements may also quote
average annual total returns for periods prior to the date the Variable
Account commenced operations. Such performance information for the
Subaccounts will be calculated based on the performance of the Portfolios and
the assumption that the Sub-accounts were in existence for the same periods
as those indicated for the Portfolios, with the level of Contract charges
currently in effect.
Such average annual return information for the Subaccounts (including
deduction of the Surrender Charge) is as follows:
<TABLE>
SUBACCOUNT AND DATE FOR THE FOR THE FOR THE PERIOD FROM
OF INCEPTION OF 1-YEAR PERIOD 5-YEAR PERIOD INCEPTION OF THE
CORRESPONDING PORTFOLIO ENDED 12/31/95 ENDED 12/31/95 PORTFOLIO TO 12/31/95
----------------------- -------------- ---------------- ---------------------
<S> <C> <C> <C>
AIM V.I. Capital Appreciation Fund*....... 28.22% N/A 17.98%
AIM V.I. Diversified Income Fund*......... 11.80% N/A 3.81%
AIM V.I. Global Utilities Fund**.......... 19.40% N/A 8.48%
AIM V.I. Government Securities Fund*...... 8.39% N/A 2.22%
AIM V.I. Growth Fund*..................... 27.32% N/A 12.00%
AIM V.I. Growth and Income Fund**......... 26.42% N/A 14.40%
AIM V.I. International Equity Fund*....... 10.04% N/A 9.47%
AIM V.I. Value Fund*...................... 28.78% N/A 17.03%
AIM V.I. Money Market Fund*............... N/A N/A N/A
</TABLE>
* Portfolio inception date of May 5, 1993
** Portfolio inception date of May 2, 1994
OTHER TOTAL RETURNS
From time to time, sales literature or advertisements may also quote
average annual total returns that do not reflect the Surrender Charge. These
are calculated in exactly the same way as the average annual total returns
described above, except that the ending redeemable value of the hypothetical
account for the period is replaced with an ending value for the period that
does not take into account any charges on amounts surrendered. Sales
literature or advertisements may also quote such average annual total returns
for periods prior to the date the Variable Account commenced operations,
calculated based on the performance of the Portfolios and the assumption that
the Sub-accounts were in existence for the same periods as those indicated
for the Portfolios, with the level of Contract charges currently in effect
except for the Surrender Charge.
Such average annual total return information for the Sub-accounts (not
including deduction of the Surrender Charge) is as follows:
<TABLE>
SUBACCOUNT AND DATE FOR THE FOR THE FOR THE PERIOD FROM
OF INCEPTION OF 1-YEAR PERIOD 5-YEAR PERIOD INCEPTION OF THE
CORRESPONDING PORTFOLIO ENDED 12/31/95 ENDED 12/31/95 PORTFOLIO TO 12/31/95
----------------------- -------------- ---------------- ---------------------
<S> <C> <C> <C>
AIM V.I. Capital Appreciation Fund*....... 33.74% N/A 19.37%
AIM V.I. Diversified Income Fund*......... 17.31% N/A 5.52%
AIM V.I. Global Utilities Fund**.......... 24.92% N/A 11.67%
AIM V.I. Government Securities Fund*...... 13.90% N/A 3.96%
AIM V.I. Growth Fund*..................... 32.83% N/A 13.51%
AIM V.I. Growth and Income Fund**......... 31.94% N/A 17.48%
AIM V.I. International Equity Fund*....... 15.55% N/A 11.03%
AIM V.I. Value Fund*...................... 34.29% N/A 11.03%
AIM V.I. Money Market Fund*............... N/A N/A N/A
</TABLE>
* Portfolio inception date of May 5, 1993
** Portfolio inception date of May 2, 1994
The Variable Account may also advertise the performance of the
Sub-accounts relative to certain performance rankings and indexes compiled by
independent organizations, such as: (a) Lipper Analytical Services, Inc.; (b)
the Standard & Poor's 500 Composite Stock Price Index ("S & P 500"); (c) A.M.
Best Company; (d) Bank Rate Monitor; and (e) Morningstar.
TAX-FREE EXCHANGES (1035 EXCHANGES, ROLLOVERS AND TRANSFERS)
The Company accepts Purchase Payments which are the proceeds of a
Contract in a transaction qualifying for a tax-free exchange under Section 1035
of the Internal Revenue Code. Except as required by federal law in calculating
the basis of the Contract, the Company does not differentiate between Section
1035 Purchase Payments and non-Section 1035 Purchase Payments.
The Company also accepts "rollovers" and transfers from Contracts
qualifying as tax-sheltered annuities ("TSAs"), individual retirement annuities
or accounts ("IRAs"), or any other Qualified Contract which is eligible to
"rollover" into an IRA. The Company differentiates among Non-Qualified
Contracts, TSAs, IRAs and other Qualified Contracts to the extent necessary to
comply with federal tax laws. For example, the Company restricts the
assignment, transfer or pledge of TSAs and IRAs so the Contracts will continue
to qualify for special tax treatment. An Owner contemplating any such exchange,
rollover or transfer of a Contract should contact a competent tax adviser with
respect to the potential effects of such a transaction.
5
<PAGE>
PREMIUM TAXES
Applicable premium tax rates depend on the Owner's state of residency
and the insurance laws and status of the Company in those states where premium
taxes are incurred. Premium tax rates may be changed by legislation,
administrative interpretations or judicial acts.
TAX RESERVES
The Company does not establish capital gains tax reserves for the
Sub-account nor deduct charges for tax reserves because the Company believes
that capital gains attributable to the Variable Account will not be taxable.
However, the Company reserves the right to deduct charges to establish tax
reserves for potential taxes on realized or unrealized capital gains.
INCOME PAYMENTS
CALCULATION OF VARIABLE ANNUITY UNIT VALUES
The amount of the first Income Payment is calculated by applying the
Contract Value allocated to each Variable Sub-account less any applicable
premium tax charge deducted at this time, to the income payment tables in the
Contract. The first Variable Annuity Income Payment is divided by the
Sub-account's then current annuity unit value to determine the number of annuity
units upon which later Income Payments will be based. Variable Annuity Income
Payments after the first will be equal to the sum of the number of annuity units
determined in this manner for each Sub-account times the then current annuity
unit value for each respective Sub-account.
Annuity units in each variable Sub-account are valued separately and
annuity unit values will depend upon the investment experience of the particular
Portfolios in which the Sub-account invests. The value of the annuity unit for
each variable Sub-account at the end of any Valuation Period is calculated by:
(a) multiplying the annuity unit Value at the end of the immediately preceding
Valuation Period by the Sub-accounts's Net Investment Factor during the period;
and then (b) dividing the product by the sum of 1.0 plus the assumed investment
rate for the period. The assumed investment rate adjusts for the interest rate
assumed in the Income Payment tables used to determine the dollar amount of the
first Variable Annuity Income Payment, and is at an effective annual rate which
is disclosed in the Contract.
The amount of the first Income Payment paid under an income plan is
determined using the interest rate and mortality table disclosed in the
Contract. Due to judicial or legislative developments regarding the use of
tables which do not differentiate on the basis of sex, different annuity tables
may be used.
6
<PAGE>
GENERAL MATTERS
INCONTESTABILITY
The Contract will not be contested after it is issued.
SETTLEMENTS
Due proof of the Owner(s) death (or Annuitant's death if there is a
non-natural Owner) must be received prior to settlement of a death claim.
SAFEKEEPING OF THE VARIABLE ACCOUNT'S ASSETS
The Company holds title to the assets of the Variable Account. The
assets are kept physically segregated and held separate and apart from the
Company's general corporate assets. Records are maintained of all purchases and
redemptions of the Fund shares held by each of the variable Sub-accounts.
The Fund does not issue certificates and, therefore, the Company holds
the Account's assets in open account in lieu of stock certificates. See the
Fund's prospectus for a more complete description of the custodian of the Fund.
FEDERAL TAX MATTERS
INTRODUCTION
THE FOLLOWING DISCUSSION IS GENERAL AND IS NOT INTENDED AS TAX ADVICE.
THE COMPANY MAKES NO GUARANTEE REGARDING THE TAX TREATMENT OF ANY CONTRACT OR
TRANSACTION INVOLVING A CONTRACT. Federal, state, local and other tax
consequences of ownership or receipt of distributions under an annuity contract
depend on the individual circumstances of each person. If you are concerned
about any tax consequences with regard to your individual circumstances, you
should consult a competent tax adviser.
TAXATION OF GLENBROOK LIFE AND ANNUITY COMPANY
7
<PAGE>
The Company is taxed as a life insurance company under Part I of
Subchapter L of the Internal Revenue Code. Since the Variable Account is not an
entity separate from the Company, and its operations form a part of the Company,
it will not be taxed separately as a "Regulated Investment Company" under
Subchapter M of the Code. Investment income and realized capital gains are
automatically applied to increase reserves under the contract. Under existing
federal income tax law, the Company believes that the Variable Account
investment income and realized net capital gains will not be taxed to the extent
that such income and gains are applied to increase the reserves under the
contract.
Accordingly, the Company does not anticipate that it will incur any
federal income tax liability attributable to the Variable Account, and therefore
the Company does not intend to make provisions for any such taxes. However, if
changes in the federal tax laws or interpretations thereof result in the Company
being taxed on income or gains attributable to the Variable Account, then the
Company may impose a charge against the Variable Account (with respect to some
or all contracts) in order to set aside provisions to pay such taxes.
EXCEPTIONS TO THE NON-NATURAL OWNER RULE
There are several exceptions to the general rule that contracts held
by a non-natural owner are not treated as annuity contracts for federal income
tax purposes. Contracts will generally be treated as held by a natural person
if the nominal owner is a trust or other entity which holds the contract as
agent for a natural person. However, this special exception will not apply in
the case of an employer who is the nominal owner of an annuity contract under a
non-qualified deferred compensation arrangement for its employees. Other
exceptions to the non-natural owner rule are: (1) contracts acquired by an
estate of a decedent by reason of the death of the decedent; (2) certain
qualified contracts; (3) contracts purchased by employers upon the termination
of certain qualified plans; (4) certain contracts used in connection with
structured settlement agreements, and (5) contracts purchased with a single
premium when the annuity starting date is no later than a year from purchase of
the annuity and substantially equal periodic payments are made, not less
frequently than annually, during the annuity period.
IRS REQUIRED DISTRIBUTION AT DEATH RULES
In order to be considered an annuity contract for federal income tax
purposes, an annuity contract must provide: (1) if any owner dies on or after
the annuity start date but before the entire interest in the contract has been
distributed, the remaining portion of such interest must be distributed at least
as rapidly as under the method of distribution being used as of the date of the
owner's death; (2) if any owner dies prior to the annuity start date, the entire
interest in the contract will be distributed within five years after the date of
the owner's death. These requirements are satisfied if any portion of the
owner's interest which is payable to (or for the benefit of) a designated
beneficiary is distributed over the life of such beneficiary (or over a period
8
<PAGE>
not extending beyond the life expectancy of the beneficiary) and the
distributions begin within one year of the owner's death. If the owner's
designated beneficiary is the surviving spouse of the owner, the contract may be
continued with the surviving spouse as the new owner. If the owner of the
contract is a non-natural person, then the annuitant will be treated as the
owner for purposes of applying the distribution at death rules. In addition, a
change in the annuitant on a contract owned by a non-natural person will be
treated as the death of the owner.
QUALIFIED PLANS
This annuity contract may be used with several types of qualified
plans. The tax rules applicable to participants in such qualified plans vary
according to the type of plan and the terms and conditions of the plan itself.
Adverse tax consequences may result from excess contributions, premature
distributions, distributions that do not conform to specified commencement and
minimum distribution rules, excess distributions and in other circumstances.
Owners and participants under the plan and annuitants and beneficiaries under
the contract may be subject to the terms and conditions of the plan regardless
of the terms of the contract.
TYPES OF QUALIFIED PLANS
INDIVIDUAL RETIREMENT ANNUITIES
Section 408 of the Code permits eligible individuals to contribute to
an individual retirement program known as an Individual Retirement Annuity.
Individual Retirement Annuities are subject to limitations on the amount that
can be contributed and on the time when distributions may commence. Certain
distributions from other types of qualified plans may be "rolled over" on a
tax-deferred basis into an Individual Retirement Annuity. IRAs generally may
not provide life insurance, but they may provide a death benefit that equals the
greater of the premiums paid and the contract's cash value. The contract
provides a death benefit that in certain circumstances may exceed the greater of
the payments and the contract value. It is possible that the Death Benefit
could be viewed as violating the prohibition on investment in life insurance
contracts with the result that the Contract would not be viewed as satisfying
the requirements of an IRA.
9
<PAGE>
SIMPLIFIED EMPLOYEE PENSION PLANS
Section 408(k) of the Code allows employers to establish simplified
employee pension plans for their employees using the employees' individual
retirement annuities if certain criteria are met. Under these plans the
employer may, within specified limits, make deductible contributions on behalf
of the employees to their individual retirement annuities. Employers intending
to use the contract in connection with such plans should seek competent advice.
In particular, employers should consider that IRAs generally may not provide
life insurance, but they may provide a death benefit that equals the greater of
the premiums paid and the contract's cash value. The contract provides a death
benefit that in certain circumstances may exceed the greater of the payments and
the contract value. It is possible that the death benefit could be viewed as
violating the prohibition on investment in life insurance contracts with the
result that the contract would not be viewed as satisfying the requirements
of the IRS.
TAX SHELTERED ANNUITIES
Section 403(b) of the Code permits public school employees and
employees of certain types of tax-exempt organizations (specified in Section
501(c)(3) of the Code) to have their employers purchase annuity contracts for
them, and subject to certain limitations, to exclude the purchase payments from
the employees' gross income. An annuity contract used for a Section 403(b) plan
must provide that distributions attributable to salary reduction contributions
made after 12/31/88, and all earnings on salary reduction contributions, may be
made only after the employee attains age 59 1/2, separates from service, dies,
becomes disabled or on the account of hardship (earnings on salary reduction
contributions may not be distributed for hardship). These limitations do not
apply to withdrawals where the Company is directed to transfer some or all of
the contract value to another Section 403(b) plan. Purchasers of the contracts
for such purposes should seek competent advice as to eligibility, limitations on
permissible amounts of purchase payments and other tax consequences associated
with the contracts. In particular, purchasers should consider that the contract
provides a death benefit that in certain circumstances may exceed the greater of
the payments and the contract value. It is possible that such death benefit
could be characterized as an incidental death benefit. If the death benefit
were so characterized, this could result in currently taxable income to
purchasers. In addition, there are limitations on the amount of incidental
death benefits that may be provided under a tax-sheltered annuity. Even if the
death benefit under the contract were characterized as an incidental death
benefit, it is unlikely to violate those limits unless the purchaser also
purchases a life insurance contract as part of his or her tax-sheltered annuity
plan.
CORPORATE AND SELF-EMPLOYED PENSION AND PROFIT SHARING PLANS
Sections 401(a) and 403(a) of the Code permit corporate employers to
establish various types of tax favored retirement plans for employees. The
Self-Employed Individuals Retirement Act of 1962, as amended, (commonly referred
to as "H.R. 10" or "Keogh") permits self-employed individuals to establish tax
favored retirement plans for themselves and their
10
<PAGE>
employees. Such retirement plans may permit the purchase of annuity contracts
in order to provide benefits under the plans. The contract provides a death
benefit that in certain circumstances may exceed the greater of the payments and
the contract value. It is possible that such death benefit could be
characterized as an incidental death benefit. There are limitations on the
amount of incidental benefits that may be provided under pension and profit
sharing plans. In addition, the provision of such benefits may result in
currently taxable income to participants. Employers intending to use the
contract in connection with such plans should seek competent advice.
STATE AND LOCAL GOVERNMENT AND TAX-EXEMPT ORGANIZATION
DEFERRED COMPENSATION PLANS
Section 457 of the Code permits employees of state and local
governments and tax-exempt organizations to defer a portion of their
compensation without paying current taxes. The employees must be participants
in an eligible deferred compensation plan. Under these plans, contributions
made for the benefit of the employees will not be includible in the employees'
gross income until distribution from the plan. However, under a Section 457
plan all the compensation deferred under the plan must remain solely the
property of the employer, subject only to the claims of the employer's general
creditors, until such time as made available to the employee or a beneficiary.
11
<PAGE>
VARIABLE ACCOUNT FINANCIAL STATEMENTS
GLENBROOK LIFE AND ANNUITY COMPANY SEPARATE ACCOUNT A
Financial Statements for the Period from December 4, 1995 (date operations
commenced) to December 31, 1995, and Independent Auditors' Report
F-1
<PAGE>
INDEPENDENT AUDITORS' REPORT
TO THE BOARD OF DIRECTORS AND SHAREHOLDER OF
GLENBROOK LIFE AND ANNUITY COMPANY
We have audited the accompanying Statement of Net Assets of Glenbrook Life and
Annuity Company Separate Account A (the "Account") as of December 31, 1995, and
the related Statements of Operations and Changes in Net Assets for the period
from December 4, 1995 (date operations commenced), to December 31, 1995, of the
Capital Appreciation, Diversified Income, Global Utilities, Government
Securities, Growth, Growth & Income, International Equity, Money Market, and
Value Funds that comprise the Account. These financial statements are the
responsibility of the Account's management. Our responsibility is to express
an opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. Our
procedures included confirmation of securities owned at December 31, 1995. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, such financial statements present fairly, in all material
respects, the financial position of the Account as of December 31, 1995, and
the results of its operations and the changes in net assets of each of the
funds comprising the Account, for the period from December 4, 1995 (date
operations commenced), to December 31, 1995, in conformity with generally
accepted accounting principles.
March 1, 1996
F-2
<PAGE>
GLENBROOK LIFE AND ANNUITY COMPANY SEPARATE ACCOUNT A
STATEMENT OF NET ASSETS
DECEMBER 31, 1995
<TABLE>
<CAPTION>
<S> <C>
ASSETS
Investments in the AIM Variable Insurance Funds, Inc.:
Capital Appreciation Fund
591 shares (cost $ 9,495) $ 9,784
Diversified Income Fund
no shares issued
Global Utilities Fund
no shares issued
Government Securities Fund
no shares issued
Growth Fund
71 shares (cost $ 999) 1,023
Growth & Income Fund
77 shares (cost $ 958) 981
International Equity Fund
691 shares (cost $ 9,232) 9,440
Money Market Fund
no shares issued
Value Fund
586 shares (cost $ 9,242) 9,442
-------
Total assets 30,670
LIABILITIES
Payable to Glenbrook Life and Annuity Company -
Accrued contract maintenance charges 3
-------
Net assets $30,667
-------
-------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
F-3
<PAGE>
<TABLE>
<CAPTION>
GLENBROOK LIFE AND ANNUITY COMPANY SEPARATE ACCOUNT A
STATEMENT OF OPERATIONS
FOR THE PERIOD FROM DECEMBER 4, 1995 (DATE OPERATIONS COMMENCED) TO DECEMBER 31, 1995
AIM VARIABLE INSURANCE FUNDS, INC.
------------------------------------------------------------------------------
CAPITAL DIVERSIFIED GLOBAL GOVERNMENT
APPRECIATION INCOME UTILITIES SECURITIES GROWTH
FUND FUND FUND FUND FUND
------------- ------------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends $ - $ - $ - $ - $ -
Less charges from Glenbrook
Life and Annuity Company:
Mortality and expense risk (3)
Administrative expense (1)
----------- ------------- ------------ ------------ -----------
Net investment income (loss) (4) - - - -
----------- ------------- ------------ ------------ -----------
REALIZED AND UNREALIZED GAINS
ON INVESTMENTS:
Realized gains from
sales of investments:
Proceeds from sales 6 1
Cost of investments sold (5) (1)
----------- ------------- ------------ ------------ -----------
Net realized gains 1 - - - -
----------- ------------- ------------ ------------ -----------
Change in unrealized
gains and losses 289 - - - 24
----------- ------------- ------------ ------------ -----------
Net gains on investments 290 - - - 24
----------- ------------- ------------ ------------ -----------
CHANGE IN NET ASSETS
RESULTING FROM OPERATIONS $ 286 $ - $ - $ - $ 24
----------- ------------- ------------ ------------ -----------
----------- ------------- ------------ ------------ -----------
<CAPTION>
AIM VARIABLE INSURANCE FUNDS, INC.
---------------------------------------------------------------
GROWTH & INTERNATIONAL MONEY
INCOME EQUITY MARKET VALUE
FUND FUND FUND FUND TOTAL
------------ ------------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends $ - $ - $ - $ - $ -
Less charges from Glenbrook
Life and Annuity Company:
Mortality and expense risk (1) (3) (3) (10)
Administrative expense (1)
----------- ------------- ------------ ------------ -----------
Net investment income (loss) (1) (3) - (3) (11)
----------- ------------- ------------ ------------ -----------
REALIZED AND UNREALIZED GAINS
ON INVESTMENTS:
Realized gains from
sales of investments:
Proceeds from sales 43 18 8 76
Cost of investments sold (42) (18) (8) (74)
----------- ------------- ------------ ------------ -----------
Net realized gains 1 - - - 2
----------- ------------- ------------ ------------ -----------
Change in unrealized
gains and losses 23 208 - 200 744
----------- ------------- ------------ ------------ -----------
Net gains on investments 24 208 - 200 746
----------- ------------- ------------ ------------ -----------
CHANGE IN NET ASSETS
RESULTING FROM OPERATIONS $ 23 $ 205 $ - $ 197 $ 735
----------- ------------- ------------ ------------ -----------
----------- ------------- ------------ ------------ -----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
F-4
<PAGE>
<TABLE>
<CAPTION>
GLENBROOK LIFE AND ANNUITY COMPANY SEPARATE ACCOUNT A
STATEMENT OF CHANGES IN NET ASSETS
FOR THE PERIOD FROM DECEMBER 4, 1995 (DATE OPERATIONS COMMENCED) TO DECEMBER 31, 1995
AIM VARIABLE INSURANCE FUNDS, INC.
CAPITAL DIVERSIFIED GLOBAL GOVERNMENT GROWTH &
APPRECIATION INCOME UTILITIES SECURITIES GROWTH INCOME
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
------------ ----------- --------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
FROM OPERATIONS:
Net investment loss $ (4) $ - $ - $ - $ - $ (1)
Net realized gains 1 1
Net change in unrealized
gains and losses 289 24 23
------------ ----------- --------- ---------- --------- ---------
286 - - - 24 23
------------ ----------- --------- ---------- --------- ---------
FROM CAPITAL TRANSACTIONS:
Deposits 9,500 1,000 1,000
Benefit payments
Payments on termination
Contract maintenance charges (1)
Transfers among the portfolios
and with the Fixed Account, net (2) (1) (42)
------------ ----------- --------- ---------- --------- ---------
9,497 - - - 999 958
------------ ----------- --------- ---------- --------- ---------
Increase in net assets 9,783 - - - 1,023 981
Net assets, beginning of period
------------ ----------- --------- ---------- --------- ---------
Net assets, end of period $ 9,783 $ - $ - $ - $ 1,023 $ 981
------------ ----------- --------- ---------- --------- ---------
------------ ----------- --------- ---------- --------- ---------
NET ASSET VALUE PER UNIT,
END OF PERIOD $ 9.91 $ - $ - $ - $ 9.93 $ 9.62
------------ ----------- --------- ---------- --------- ---------
------------ ----------- --------- ---------- --------- ---------
UNITS OUTSTANDING, END OF PERIOD 987 - - - 103 102
------------ ----------- --------- ---------- --------- ---------
------------ ----------- --------- ---------- --------- ---------
<CAPTION>
AIM VARIABLE INSURANCE FUNDS, INC.
INTERNATIONAL MONEY
EQUITY MARKET VALUE
PORTFOLIO PORTFOLIO PORTFOLIO TOTAL
------------- --------- --------- -------
<S> <C> <C> <C> <C>
FROM OPERATIONS:
Net investment loss $ (3) $ - $ (3) $ (11)
Net realized gains 2
Net change in unrealized
gains and losses 208 200 744
------------- --------- --------- -------
205 - 197 735
------------- --------- --------- -------
FROM CAPITAL TRANSACTIONS:
Deposits 9,250 9,250 30,000
Benefit payments -
Payments on termination -
Contract maintenance charges (1) (1) (3)
Transfers among the portfolios -
and with the Fixed Account, net (15) (5) (65)
------------- --------- --------- -------
9,234 - 9,244 29,932
------------- --------- --------- -------
Increase in net assets 9,439 - 9,441 30,667
Net assets, beginning of period -
------------- --------- --------- -------
Net assets, end of period $ 9,439 $ - $ 9,441 $30,667
------------- --------- --------- -------
------------- --------- --------- -------
NET ASSET VALUE PER UNIT,
END OF PERIOD $ 10.18 $ - $ 9.87
------------- --------- ---------
------------- --------- ---------
UNITS OUTSTANDING, END OF PERIOD 927 - 957
------------- --------- ---------
------------- --------- ---------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
F-5
<PAGE>
GLENBROOK LIFE AND ANNUITY COMPANY SEPARATE ACCOUNT A
NOTES TO FINANCIAL STATEMENTS
FOR THE PERIOD FROM DECEMBER 4, 1995 (DATE OPERATIONS COMMENCED)
TO DECEMBER 31, 1995
1. ORGANIZATION
Glenbrook Life and Annuity Company Separate Account A (the "Account"), a
unit investment trust registered with the Securities and Exchange Commission
under the Investment Company Act of 1940, is a Separate Account of Glenbrook
Life and Annuity Company ("Glenbrook Life"), which is wholly owned by Allstate
Life Insurance Company ("Allstate Life"), a wholly-owned subsidiary of Allstate
Insurance Company ("Allstate"), which is wholly owned by The Allstate
Corporation (the "Corporation"). The Account was established on September 6,
1995, by resolution of the Board of Directors of Glenbrook Life and began
accepting contractholder deposits on December 4, 1995.
Glenbrook Life writes certain annuity contracts, the proceeds of which are
invested at the discretion of the contractholder. Contractholders primarily
invest in units of the portfolios comprising the Account, for which they bear
investment risk. The Account, in turn, invests solely in shares of the
portfolios of the AIM Variable Insurance Funds ("Fund"). The contractholder may
also invest in the general account of Glenbrook Life ("Fixed Account").
Glenbrook Life provides administrative and insurance services to the Account for
a fee.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Valuation of investments
Investments consist of shares in the portfolios of the Fund, and are stated
at fair value based on quoted market prices.
Recognition of investment income
Investment income consists of dividends declared by the portfolios of the
Fund, and is recognized on the date of record.
Realized gains and losses
Realized gains and losses on the sale of shares by the Account are computed
on a weighted average cost ("cost") basis.
F-6
<PAGE>
GLENBROOK LIFE AND ANNUITY COMPANY SEPARATE ACCOUNT A
NOTES TO FINANCIAL STATEMENTS
FOR THE PERIOD FROM DECEMBER 4, 1995 (DATE OPERATIONS COMMENCED)
TO DECEMBER 31, 1995
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Contractholder account activity
Account activity is reflected in individual contractholder accounts on a
daily basis.
For each year or portion of a year a contract is in effect, Glenbrook
Life deducts a fixed annual contract maintenance charge of $35 as
reimbursement for expenses related to the maintenance of each contract and
the Account. The amount of this charge is guaranteed not to increase over
the life of the contract. This charge is waived if the total purchase payments
are $50,000 or more on a contract anniversary, or if all money is allocated to
the Fixed Account on the contract anniversary.
Federal income taxes
Net investment income and realized gains and losses on investments of the
Account are taxable to the contractholders, generally upon distribution.
Accordingly, no provision for income taxes has been recorded.
3. MORTALITY AND EXPENSE CHARGES
Glenbrook Life assumes mortality and expense risks related to the
operations of the Account and deducts charges daily at a rate, on an annual
basis, equal to 1.35% of the daily net assets of the Account. Glenbrook Life
guarantees that the amount of this charge will not increase over the life of the
contract.
4. ADMINISTRATIVE EXPENSE CHARGE
Glenbrook Life deducts administrative expense charges daily at a rate, on
an annual basis, equal to .10% of the daily net assets of the Account. This
charge is designed to cover additional administrative expenses.
F-7
<PAGE>
<TABLE>
<CAPTION>
GLENBROOK LIFE AND ANNUITY COMPANY SEPARATE ACCOUNT A
NOTES TO FINANCIAL STATEMENTS
FOR THE PERIOD FROM DECEMBER 4, 1995 (DATE OPERATIONS COMMENCED) TO DECEMBER 31, 1995
5. UNITS ISSUED AND REDEEMED
Units issued and redeemed by the Account during 1995 were as follows:
AIM VARIABLE INSURANCE FUNDS, INC.
---------------------------------------------------------------------------------------
CAPITAL DIVERSIFIED GLOBAL GOVERNMENT GROWTH & INTERNATIONAL MONEY
APPRECIATION INCOME UTILITIES SECURITIES GROWTH INCOME EQUITY MARKET VALUE
FUND FUND FUND FUND FUND FUND FUND FUND FUND
------------ ----------- --------- ---------- ------ -------- ------------- ------ ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
UNITS OUTSTANDING AT DECEMBER 4, 1995
(DATE OPERATIONS COMMENCED) - - - - - - - - -
Unit activity from December 4, 1995 (date
operations commenced) to December 31, 1995
Issued 996 104 103 936 966
Redeemed (9) (1) (1) (9) (9)
------------ ----------- --------- --------- ------ -------- ------------- ------ -----
UNITS OUTSTANDING, DECEMBER 31, 1995 987 - - - 103 102 927 - 957
------------ ----------- --------- --------- ------ -------- ------------- ------ -----
------------ ----------- --------- --------- ------ -------- ------------- ------ -----
</TABLE>
UNITS REDEEMED INCLUDES UNITS DEDUCTED FOR ACCRUED CONTRACT MAINTENANCE CHARGES.
F-8
<PAGE>
PART C
OTHER INFORMATION
24a. FINANCIAL STATEMENTS
Glenbrook Life and Annuity Company Financial Statements and
Financial Statement Schedules are contained in Part A of this Registration
Statement.
Glenbrook Life and Annuity Company Separate Account A Financial
Statements are contained in Part B of this Registration Statement.
24b. EXHIBITS
The following exhibits:
The following exhibits correspond to those required by paragraph (b) of
item 24 as to exhibits in Form N-4:
(1) Resolution of the Board of Directors of Glenbrook Life and
Annuity Company authorizing establishment of the Glenbrook Life and
Annuity Company Separate Account A
(2) Not Applicable
(3) Form of Underwriting Agreement*
(4) Form of Glenbrook Life and Annuity Company Flexible Premium
Deferred Variable Annuity Contract*
(5) Form of Glenbrook Life and Annuity Company Flexible Premium
Deferred Variable Annuity Contract Application*
(6) (a) Articles of Incorporation of Glenbrook Life and Annuity
Company.**
(b) By-laws of Glenbrook Life and Annuity Company*
(7) Reinsurance Agreement between Glenbrook Life and Annuity Company
and Allstate Life Insurance Company*
(8) Participation Agreement
(9) Opinion and Consent of Michael J. Velotta, Vice President, Secretary
and General Counsel of Glenbrook Life and Annuity Company***
(10) (a) Consent of Independent Certified Public Accountants
(b) Consent of Attorneys
(11) Not applicable
(12) Not applicable
(13) Computation of Performance Quotations
(99) Powers of Attorney*,****
_____________
* Previously filed in Registrant's Form N-4 Registration Statement,
No. 33-62203 dated November 22, 1995 and incorporated by reference.
** Previously filed in Registrant's Form N-4 Registration Statement, No.
33-60882 dated April 9, 1993 and incorporated by reference.
*** Previously filed in Registrant's initial Form N-4 Registration Statement
filed August 28, 1995.
**** Filed herewith powers of attornery for James P. Zils and Casey J. Sylla.
<PAGE>
25. DIRECTORS AND OFFICERS OF THE DEPOSITOR
Name and Principal Positions and Offices With Depositor
Business Address
- ---------------- ------------
Louis G. Lower, II Chairman of the Board and Chief Executive Officer
Michael J. Velotta Vice President, Secretary, General Counsel and Director
Marla G. Friedman President, Chief Operating Officer and Director
Peter H. Heckman Vice President and Director
G. Craig Whitehead Assistant Vice President and Director
James P. Zils Treasurer
Casey J. Sylla Chief Investment Officer
Sarah R. Donahue Assistant Vice President
Emma M. Kalaidjian Assistant Secretary
Margarita E. Kellen Assistant Vice President
Paul N. Kierig Assistant Secretary
Mary J. McGinn Assistant Secretary
Barry S. Paul Assistant Vice President and Controller
Robert N. Roeters Assistant Vice President
Theodore A. Schnell Assistant Treasurer
C. Nelson Strom Assistant Vice President and Corporate Actuary
Kevin R. Slawin Assistant Treasurer
Brenda D. Sneed Assistant Secretary and Assistant General Counsel
The principal business address of the foregoing officers and directors is 3100
Sanders Road, Northbrook, Illinois 60062.
26. Persons Controlled by or Under Common Control with Depositor or Registrant
See 10-K Commission File #1-11840, The Allstate Corporation.
27. NUMBER OF CONTRACT OWNERS
As of December 31, 1995 there were 2 non-qualified contracts in force.
28. INDEMNIFICATION
The by-laws of both Glenbrook Life and Annuity Company (Depositor) and
Allstate Life Financial Services, Inc. (Principal Underwriter), provide for the
indemnification of its Directors, Officers and Controlling Persons, against
expenses, judgments, fines and amounts paid in settlement as incurred by such
person, if such person acted properly. No indemnification shall be made in
respect of any claim, issue or matter as to which such person shall have been
adjudged to be liable for negligence or misconduct in the performance of a duty
to the Company, unless a court determines such person is entitled to such
indemnity.
Insofar as indemnification for liability arising under the Securities Act
of 1933 may be permitted to Directors, Officers and Controlling Persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant of expenses incurred
or paid by a Director, Officer or Controlling Person of the registrant in the
successful defense of any action, suit, or proceeding) is asserted such
Director, Officer or Controlling Person in connection with the securities
being registered, the registrant will, unless in the opinion of its counsel
the matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Act and will be governed by the
final adjudication of such issue.
<PAGE>
29a. RELATIONSHIP OF PRINCIPAL UNDERWRITER TO OTHER INVESTMENT COMPANIES
- Glenbrook Life and Annuity Company Variable Annuity Account
- Glenbrook Life Multi-Manager Variable Account
- Allstate Life of New York Separate Account A
29b. PRINCIPAL UNDERWRITER
Name and Principal Business Allstate Life Financial
Address Of Each Such Person Services, Inc.
___________________________________________________________________________
Louis G. Lower, II Director
Marla G, Friedman Director
Michael J. Velotta Director and Secretary
Robert J. Kelly President and Chief Executive Officer
Diane Bellas Vice President and Controller
Andrea J. Schur Vice President
John R. Hedrick General Counsel and Assistant Secretary
James P. Zils Treasurer
Lisa A. Burnell Assistant Vice President and
Compliance Officer
Robert N. Roeters Assistant Vice President
Emma M. Kalaidjian Assistant Secretary
Paul N. Kierig Assistant Secretary
Kevin R. Slawin Assistant Treasurer
The principal address of Allstate Life Financial Services, Inc. is 3100
Sanders Road, Northbrook, Illinois 60062.
29c. COMPENSATION OF ALLSTATE LIFE FINANCIAL SERVICES, INC.
<TABLE>
<CAPTION>
(1) (2) (3) (4) (5)
Net Underwriting
Name of Principal Discounts and Compensation on Brokerage
Underwriter Commissions Redemption Commissions Compensation
- ----------------- ----------------- ------------------ ------------ ------------
<S> <C> <C> <C> <C>
Allstate Life None None None None
Financial Services Inc.
</TABLE>
30. LOCATION OF ACCOUNTS AND RECORDS
The Depositor, Glenbrook Life and Annuity Company, is located at 3100
Sanders Road, Northbrook, Illinois 60062.
The Principal Underwriter, Allstate Life Financial Services, Inc., is
located at 3100 Sanders Road, Northbrook, Illinois 60062.
Each company maintains physical possession of each account, book, or
other document required to be maintained by Section 31(a) of the 1940 Act and
the Rules under it.
31. MANAGEMENT SERVICES
None
<PAGE>
32. UNDERTAKINGS
The Registrant promises to file a post-effective amendment to this
Registration Statement as frequently as is necessary to ensure that the audited
financial statements in the Registration Statement are never more than 16 months
old for so long as payments under the variable annuity contracts may be
accepted. Registrant furthermore agrees to include either as part of any
application to purchase a contract offered by the prospectus, a space that an
applicant can check to request a Statement of Additional Information or a post
card or similar written communication affixed to or included in the Prospectus
that the applicant can remove to send for a Statement of Additional Information.
Finally, the Registrant agrees to deliver any Statement of Additional
Information and any Financial Statements required to be made available under
this Form N-4 promptly upon written or oral request.
33. REPRESENTATIONS PURSUANT TO SECTION 403(B) OF THE INTERNAL REVENUE CODE
The Company represents that it is relying upon a November 28, 1988
Securities and Exchange Commission no-action letter issued to the American
Council of Life Insurance ("ACLI") and that the provisions of paragraphs 1-4 of
the no-action letter have been complied with.
<PAGE>
SIGNATURES
As required by the Securities Act of 1933 and the Investment Company Act
of 1940, the Registrant, Glenbrook Life and Annuity Company Separate
Account A, certifies that it meets the requirements of Securities Act Rule
485 for effectiveness of this Registration Statement and has caused this
Registration Statement to be signed on its behalf, by the undersigned,
thereunto duly authorized, and its seal to be hereunto affixed and attested,
in the Township of Northfield, and State of Illinois on the 22nd day of
April, 1996.
GLENBROOK LIFE AND ANNUITY COMPANY SEPARATE ACCOUNT A
(REGISTRANT)
BY: GLENBROOK LIFE AND ANNUITY COMPANY
(DEPOSITOR)
(SEAL)
Attest: /s/ BRENDA D. SNEED By: /s/ MICHAEL J. VELOTTA
-------------------- -------------------------
Brenda D. Sneed Michael J. Velotta
Assistant Secretary Vice President, Secretary and
General Counsel
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, this Registration Statement has been duly signed
below by the following Directors and Officers of Glenbrook Life and Annuity
Company on the 22nd day of April, 1996.
*/ LOUIS G. LOWER, II Chairman of the Board of Directors and
- ---------------------- Chief Executive Officer
Louis G. Lower, II (Principal Executive Officer)
/s/ MICHAEL J. VELOTTA Vice President, Secretary, General
- ---------------------- Counsel and Director
Michael J. Velotta
*/MARLA G. FRIEDMAN President, Chief Operating Officer
- ---------------------- and Director
Marla G. Friedman
*/PETER H. HECKMAN Vice President and Director
- ----------------------
Peter H. Heckman
*/G. CRAIG WHITEHEAD Senior Vice President and Director
- ----------------------
G. Craig Whitehead
**/JAMES P. ZILS Treasurer
- ----------------------
James P. Zils
**/CASEY J. SYLLA Chief Investment Officer
- ----------------------
Casey J. Sylla
*/ BARRY S. PAUL Assistant Vice President and Controller
- ---------------------- (Principal Accounting Officer)
Barry S. Paul
*/ By Michael J. Velotta, pursuant to Power of Attorney, previously filed.
**/ By Michael J. Velotta, pursuant to Power of Attorney, filed herewith.
<PAGE>
RESOLUTION OF THE BOARD OF DIRECTORS
SEPARATE ACCOUNT A
Upon motion duly made, seconded and unanimously carried, the following
resolutions were adopted:
RESOLVED, That the Corporation, pursuant to the provisions of Section
245.21 of the Illinois Insurance Code, hereby establishes a separate account
designated Glenbrook Life and Annuity Company Separate Account A, (hereafter
"Separate Account A") for the following use and purposes, and subject to such
conditions as hereinafter set forth.
FURTHER RESOLVED, That Separate Account A shall be established for the
purpose of providing for the issuance by the Corporation of such variable
annuity or such other contracts ("Contracts") as the Chief Executive Officer
may designate for such purpose and shall constitute a separate account into
which are allocated amounts paid to or held by the Corporation under such
Contracts.
<PAGE>
FURTHER RESOLVED, That the income, gains and losses, whether or not
realized, from assets allocated to Separate Account A shall, in accordance
with Contracts, be credited to or charged against such account without regard
to other income, gains, or losses of the Corporation.
FURTHER RESOLVED, That the fundamental investment policy of Separate
Account A shall be to invest or reinvest the assets of Separate Account A in
securities issued by investment companies registered under the Investment
Company Act of 1940, as amended, as the Investment Committee may designate
pursuant to the provisions of the Contracts.
FURTHER RESOLVED, That nine investment divisions be, and hereby are,
established within Separate Account A to which net payments under the
Contracts will be allocated in accordance with instructions received from
contractholders, and that the Chief Executive Officer be, and hereby is,
authorized to increase or decrease the number of investment divisions in
Separate Account A as deemed necessary or appropriate.
FURTHER RESOLVED, That each such investment division shall invest only
in the shares of a single mutual fund or a single mutual fund portfolio of an
investment company organized as a series fund pursuant to the Investment
Company Act of 1940.
FURTHER RESOLVED, That the Chief Executive Officer, President and
Treasurer be, and they hereby are, authorized to deposit such amount in
Separate Account A or in each investment division thereof as may be necessary
or appropriate to facilitate the commencement of the operations of Separate
Account A.
FURTHER RESOLVED, That the Chief Executive Officer of the Corporation
be, and hereby is, authorized to change the designation of Separate Account A
to such other designation as the Chief Executive Officer may deem necessary
or appropriate.
FURTHER RESOLVED, That the appropriate officers of the Corporation, with
such assistance from the Corporation's auditors, legal counsel and
independent consultants or others as they may require, be, and they hereby
are, authorized and directed to take all action necessary to: (a) register
Separate Account A as a unit investment trust under the Investment Company
Act of 1940, as amended; (b) register the Contracts in such amounts, which
may be an indefinite amount, as the officers of the Corporation shall from
time to time deem appropriate under the Securities Act of 1933; and take all
other actions which are necessary in connection with the offering of said
Contracts for sale and the operation of Separate Account A in order to comply
with Investment Company Act of 1940, the Securities Exchange Act of 1934, the
Securities Act of 1933, and other applicable federal laws, including the
filing of any amendments to registration statements, any undertakings, and
any applications for exemptions from the Investment Company Act of 1940 or
<PAGE>
other applicable federal laws as the officers of the Corporation shall deem
necessary or appropriate.
FURTHER RESOLVED, That the Chief Executive Officer and the General
Counsel, and either of them with full power to act without the other, hereby
are severally authorized and empowered to prepare, execute and cause to be
filed with the Securities and Exchange Commission on behalf of Separate
Account A and by the Corporation as sponsor and depositor, a Form of
Notification of Registration on Form N-8A, a Registration Statement
registering Separate Account A as an investment company under the Investment
Company Act of 1940, and a Registration Statement under the Securities Act of
1933.
FURTHER RESOLVED, That the appropriate officers of the Corporation be,
and they hereby are, authorized on behalf of Separate Account A and on behalf
of the Corporation to take any and all action that they may deem necessary or
advisable in order to sell the Contracts, including any registrations,
filings and qualifications of the Corporation, its officers, agents and
employees, and the Contracts under the insurance and securities laws of any
of the states of the United States of America or other jurisdictions, and in
connection therewith, to prepare, execute, deliver and file all such
applications, reports, covenants, resolutions, applications for exemptions,
consents to service of process and other papers and instruments as may be
required under such laws, and to take any and all further action which said
officers or counsel of the Corporation may deem necessary or desirable
(including entering into whatever agreements and contracts may be necessary)
in order to maintain such registrations or qualifications for as long as said
officers or counsel deem them to be in the best interests of Separate Account
A and the Corporation.
FURTHER RESOLVED, That the General Counsel for the Corporation be, and
hereby is, authorized in the names and on behalf of Separate Account A and
the Corporation to execute and file irrevocable written consents to service
of process on the part of Separate Account A and of the Corporation to be
used in such states wherein such consents to service of process may be
requisite under the insurance or securities laws therein in connection with
said registration or qualification of Contracts and to appoint the
appropriate state official, or such other person as may be allowed by said
insurance or securities laws, agent of Separate Account A and of the
Corporation for the purpose of receiving and accepting process.
FURTHER RESOLVED, That the Chief Executive Officer of the Corporation
be, and hereby is, authorized to establish criteria by which the Corporation
shall institute procedures to provide for a pass-through of voting rights to
the owners of such Contracts as required by the applicable laws with respect
to securities owned by Separate Account A.
<PAGE>
FURTHER RESOLVED, That the Chief Executive Officer of the Corporation is
hereby authorized to execute such agreement or agreements on such terms and
subject to such modifications as deemed necessary or appropriate (i) with a
qualified entity that will be appointed principal underwriter and distributor
for the Contracts and (ii) with one or more qualified banks or other
qualified entities to provide administrative and/or custodial services in
connection with the establishment and maintenance of Separate Account A and
the design, issuance, and administration of the Contracts.
FURTHER RESOLVED, That since it is expected that Separate Account A will
invest in the securities issued by one or more investment companies, the
appropriate officers of the Corporation are hereby authorized to execute
whatever agreement or agreements as may be necessary or appropriate to enable
such investments to be made.
FURTHER RESOLVED, That the appropriate officers of the Corporation, and
each of them, are hereby authorized to execute and deliver all such documents
and papers and to do or cause to be done all such acts and things as they may
deem necessary or desirable to carry out the foregoing resolutions and the
intent and purposes thereof.
There being no further business, upon motion duly made, seconded and
unanimously carried, the meeting was adjourned.
/s/ MICHAEL J. VELOTTA
-------------------------------------
Michael J. Velotta, Secretary
/s/ LOUIS G. LOWER, II
- ---------------------------------
Louis G. Lower, II, Chairman
<PAGE>
PARTICIPATION AGREEMENT
BY AND AMONG
AIM VARIABLE INSURANCE FUNDS, INC.,
A I M DISTRIBUTORS, INC.,
GLENBROOK LIFE AND ANNUITY COMPANY,
ON BEHALF OF ITSELF AND
ITS SEPARATE ACCOUNTS
AND
ALLSTATE LIFE FINANCIAL SERVICES, INC.
<PAGE>
TABLE OF CONTENTS
DESCRIPTION PAGE
Section 1. Available Funds. . . . . . . . . . . . . . . . . . . . . . . . . 2
1.1 AVAILABILITY.. . . . . . . . . . . . . . . . . . . . . . . . . 2
1.2 ADDITION, DELETION OR MODIFICATION OF FUNDS. . . . . . . . . . 3
1.3 NO SALES TO THE GENERAL PUBLIC . . . . . . . . . . . . . . . . 3
Section 2. Processing Transactions. . . . . . . . . . . . . . . . . . . . . 3
2.1 TIMELY PRICING AND ORDERS. . . . . . . . . . . . . . . . . . . 3
2.2 TIMELY PAYMENTS. . . . . . . . . . . . . . . . . . . . . . . . 4
2.3 APPLICABLE PRICE . . . . . . . . . . . . . . . . . . . . . . . 4
2.4 DIVIDENDS AND DISTRIBUTIONS. . . . . . . . . . . . . . . . . . 4
2.5 BOOK ENTRY . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Section 3. Costs and Expenses . . . . . . . . . . . . . . . . . . . . . . . 5
3.1 GENERAL. . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
3.2 PARTIES TO COOPERATE . . . . . . . . . . . . . . . . . . . . . 5
Section 4. Legal Compliance . . . . . . . . . . . . . . . . . . . . . . . . 5
4.1 TAX LAWS . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
4.2 INSURANCE AND CERTAIN OTHER LAWS . . . . . . . . . . . . . . . 8
4.3 SECURITIES LAWS. . . . . . . . . . . . . . . . . . . . . . . . 8
4.4 NOTICE OF CERTAIN PROCEEDINGS AND OTHER CIRCUMSTANCES. . . . . 9
4.5 GLENBROOK OR THE UNDERWRITER TO PROVIDE DOCUMENTS;
INFORMATION ABOUT AVIF . . . . . . . . . . . . . . . . . . . .10
4.6 AVIF OR AIM TO PROVIDE DOCUMENTS; INFORMATION ABOUT
GLENBROOK AND THE UNDERWRITER. . . . . . . . . . . . . . . . .11
Section 5. Mixed and Shared Funding . . . . . . . . . . . . . . . . . . . .12
5.1 GENERAL. . . . . . . . . . . . . . . . . . . . . . . . . . . .12
5.2 DISINTERESTED DIRECTORS. . . . . . . . . . . . . . . . . . . .12
5.3 MONITORING FOR MATERIAL IRRECONCILABLE CONFLICTS . . . . . . .13
5.4 CONFLICT REMEDIES. . . . . . . . . . . . . . . . . . . . . . .14
5.5 NOTICE TO GLENBROOK. . . . . . . . . . . . . . . . . . . . . .15
5.6 INFORMATION REQUESTED BY BOARD OF DIRECTORS. . . . . . . . . .15
5.7 COMPLIANCE WITH SEC RULES. . . . . . . . . . . . . . . . . . .15
5.8 REQUIREMENTS FOR OTHER INSURANCE COMPANIES . . . . . . . . . .16
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Section 6. Termination. . . . . . . . . . . . . . . . . . . . . . . . . . .16
6.1 EVENTS OF TERMINATION. . . . . . . . . . . . . . . . . . . . .16
6.2 NOTICE REQUIREMENT FOR TERMINATION . . . . . . . . . . . . . .17
6.3 FUNDS TO REMAIN AVAILABLE. . . . . . . . . . . . . . . . . . .18
6.4 SURVIVAL OF WARRANTIES AND INDEMNIFICATIONS. . . . . . . . . .18
6.5 CONTINUANCE OF AGREEMENT FOR CERTAIN PURPOSES. . . . . . . . .18
Section 7. Parties To Cooperate Respecting Termination. . . . . . . . . . .18
Section 8. Assignment . . . . . . . . . . . . . . . . . . . . . . . . . . .19
Section 9. Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . . .19
Section 10. Voting Procedures . . . . . . . . . . . . . . . . . . . . . . .20
Section 11. Foreign Tax Credits . . . . . . . . . . . . . . . . . . . . . .20
Section 12. Indemnification . . . . . . . . . . . . . . . . . . . . . . . .21
12.1 OF AVIF AND AIM BY GLENBROOK AND THE UNDERWRITER . . . . . . .21
12.2 OF GLENBROOK AND THE UNDERWRITER BY AVIF AND AIM . . . . . . .23
12.3 EFFECT OF NOTICE . . . . . . . . . . . . . . . . . . . . . . .25
12.4 SUCCESSORS . . . . . . . . . . . . . . . . . . . . . . . . . .26
Section 13. Applicable Law. . . . . . . . . . . . . . . . . . . . . . . . .26
Section 14. Execution in Counterparts . . . . . . . . . . . . . . . . . . .26
Section 15. Severability. . . . . . . . . . . . . . . . . . . . . . . . . .26
Section 16. Rights Cumulative . . . . . . . . . . . . . . . . . . . . . . .26
Section 17. Headings. . . . . . . . . . . . . . . . . . . . . . . . . . . .26
SCHEDULE A . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .28
SCHEDULE B . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .29
SCHEDULE C . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .30
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PARTICIPATION AGREEMENT
THIS AGREEMENT, made and entered into as of the ____ day of _________,
1995 ("Agreement"), by and among AIM Variable Insurance Funds, Inc., a Maryland
corporation ("AVIF"); A I M Distributors, Inc., a Delaware corporation ("AIM");
Glenbrook Life and Annuity Company, an Illinois life insurance company
("Glenbrook"), on behalf of itself and each of its segregated asset accounts
listed in Schedule A hereto, as the parties hereto may amend from time to time
(each, an "Account," and collectively, the "Accounts"); and Allstate Life
Financial Services, Inc., a Delaware corporation and the principal underwriter
of the Contracts and Policies referred to below ("Underwriter") (collectively,
the "Parties").
WITNESSETH THAT:
WHEREAS, AVIF is registered with the Securities and Exchange Commission
("SEC") as an open-end management investment company under the Investment
Company Act of 1940, as amended (the "1940 Act"); and
WHEREAS, AVIF currently consists of nine separate series, shares
("Shares") of each of which are registered under the Securities Act of 1933, as
amended (the "1933 Act") and are currently sold to one or more separate accounts
of life insurance companies to fund benefits under variable annuity contracts;
and
WHEREAS, AVIF will make Shares of each Series listed on Schedule A hereto
as the Parties hereto may amend from time to time (each a "Fund"; reference
herein to "AVIF" includes reference to each Fund, to the extent the context
requires) available for purchase by the Accounts; and
WHEREAS, AIM is a broker-dealer registered with the SEC under the
Securities Exchange Act of 1934 ("1934 Act") and a member in good standing of
the National Association of Securities Dealers, Inc. ("NASD"); and
WHEREAS, AIM currently serves as the distributor for the Shares; and
WHEREAS, Glenbrook will be the issuer of certain variable annuity
contracts ("Contracts") and/or variable life insurance policies ("Policies") as
set forth on Schedule A hereto, as the Parties hereto may amend from time to
time, which Contracts and Policies (hereinafter collectively, the "Policies"),
if required by applicable law, will be registered under the 1933 Act; and
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WHEREAS, the Accounts may be divided into two or more subaccounts
("Subaccounts"; reference herein to an "Account" includes reference to each
Subaccount thereof to the extent the context requires); and
WHEREAS, Glenbrook will serve as the depositor of the Accounts, each of
which is registered as a unit investment trust investment company under the 1940
Act (or exempt therefrom), and the security interests deemed to be issued by the
Accounts under the Policies will be registered as securities under the 1933 Act
(or exempt therefrom); and
WHEREAS, to the extent permitted by applicable insurance laws and
regulations, Glenbrook intends to purchase Shares in one or more of the Funds on
behalf of the Accounts to fund the Policies PROVIDED, that AVIF implements Mixed
and Shared Funding, described below, pursuant to an exemptive order from the SEC
or otherwise; and
WHEREAS, the Underwriter is a broker-dealer registered with the SEC under
the 1934 Act and a member in good standing of the NASD; and
WHEREAS, the Underwriter intends to enter into Selling Group Agreements
with entities that may legally sell the Policies (the "Selling Group Members");
and
NOW, THEREFORE, in consideration of the mutual benefits and promises
contained herein, the Parties hereto agree as follows:
SECTION 1. AVAILABLE FUNDS
1.1 AVAILABILITY.
AVIF will make Shares of each Fund available to Glenbrook for purchase
and redemption at net asset value and with no sales charges, subject to the
terms and conditions of this Agreement. The Board of Directors of AVIF may
refuse to sell Shares of any Fund to any person, or suspend or terminate the
offering of Shares of any Fund if such action is required by law or by
regulatory authorities having jurisdiction or if, in the sole discretion of the
Directors acting in good faith and in light of their fiduciary duties under
federal and any applicable state laws, such action is deemed in the best
interests of the shareholders of such Fund.
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1.2 ADDITION, DELETION OR MODIFICATION OF FUNDS.
The Parties hereto may agree, from time to time, to add other Funds to
provide additional funding media for the Policies, or to delete, combine, or
modify existing Funds, by amending Schedule A hereto. Upon such amendment to
Schedule A, any applicable reference to a Fund, AVIF, or its Shares herein shall
include a reference to any such additional Fund. Schedule A, as amended from
time to time, is incorporated herein by reference and is a part hereof.
1.3 NO SALES TO THE GENERAL PUBLIC.
AVIF represents and warrants that no Shares of any Fund have been or will
be sold to the general public.
SECTION 2. PROCESSING TRANSACTIONS
2.1 TIMELY PRICING AND ORDERS.
(a) AVIF or its designated agent will use its best efforts to provide
Glenbrook with the net asset value per Share for each Fund by 6:00 p.m. Central
time on each Business Day. As used herein, "Business Day" shall mean any day on
which (i) the New York Stock Exchange is open for regular trading and (ii) AVIF
calculates the Fund's net asset value.
(b) Glenbrook will use the data provided by AVIF each Business Day
pursuant to paragraph (a) immediately above to calculate Account unit values and
to process transactions that receive that same Business Day's Account unit
values. Glenbrook will perform such Account processing the same Business Day,
and will place corresponding orders to purchase or redeem Shares with AVIF by 9
a.m. Central time the following Business Day; PROVIDED, however, that AVIF shall
provide additional time to Glenbrook in the event that AVIF is unable to meet
the 6:00 p.m. time stated in paragraph (a) immediately above. Such additional
time shall be equal to the additional time that AVIF takes to make the net asset
values available to Glenbrook.
(c) Each order to purchase or redeem Shares will separately describe the
amount of Shares of each Fund to be purchased, redeemed or exchanged and will
not be netted; PROVIDED, however, with respect to payment of the purchase price
by Glenbrook and of redemption proceeds by AVIF, Glenbrook and AVIF shall net
purchase and redemption orders with respect to each Fund and shall transmit one
net payment per Fund in accordance with Section 2.2, below. Each order to
purchase or redeem Shares shall also specify whether the order results from
purchase payments, surrenders,
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<PAGE>
partial withdrawals, routine withdrawals of charges, or requests for other
transactions under Policies (collectively, "Policy transactions").
(d) If AVIF provides materially incorrect Share net asset value
information, Glenbrook shall be entitled to an adjustment to the number of
Shares purchased or redeemed to reflect the correct net asset value per Share.
Any material error in the calculation or reporting of net asset value per Share,
dividend or capital gain information shall be reported promptly upon discovery
to Glenbrook. Materiality and reprocessing cost reimbursement shall be
determined in accordance with standards established by the parties as provided
in Schedule B, attached hereto and incorporated herein.
2.2 TIMELY PAYMENTS.
Glenbrook will wire payment for net purchases to a custodial account
designated by AVIF by 1:00 p.m. Central Time on the same day as the order for
Shares is placed, to the extent practicable. AVIF will wire payment for net
redemptions to an account designated by Glenbrook by 1:00 p.m. Central Time on
the same day as the Order is placed, to the extent practicable, but in any event
within five calendar days after the date the order is placed in order to enable
Glenbrook to pay redemption proceeds within the time specified in Section 22(e)
of the 1940 Act or such shorter period of time as may be required by law.
2.3 APPLICABLE PRICE.
(a) Share purchase and redemption orders that result from Policy
transactions and that Glenbrook receives prior to the close of regular trading
on the New York Stock Exchange on a Business Day will be executed at the net
asset values of the appropriate Funds next computed after receipt by AVIF or its
designated agent of the orders. For purposes of this Section 2.3(a), Glenbrook
shall be the designated agent of AVIF for receipt of orders relating to Policy
transactions on each Business Day and receipt by such designated agent shall
constitute receipt by AVIF; PROVIDED, that AVIF receives notice of such orders
by 9 a.m. Central time on the next following Business Day or such later time
computed in accordance with Section 2.1(b) hereof.
(b) All other Share purchases and redemptions by Glenbrook will be
effected at the net asset values of the appropriate Funds next computed after
receipt by AVIF or its designated agent of the order therefor, and such orders
will be irrevocable.
2.4 DIVIDENDS AND DISTRIBUTIONS.
AVIF will furnish notice promptly to Glenbrook of any income dividends or
capital gain distributions payable on the Shares of any Fund. Glenbrook hereby
elects to reinvest all dividends
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and capital gains distributions in additional Shares of the corresponding Fund
at the ex-dividend date net asset values until Glenbrook otherwise notifies AVIF
in writing, it being agreed by the Parties that the ex-dividend date and the
payment date with respect to any dividend or distribution will be the same
Business Day. Glenbrook reserves the right to revoke this election and to
receive all such income dividends and capital gain distributions in cash.
2.5 BOOK ENTRY.
Issuance and transfer of AVIF Shares will be by book entry only. Stock
certificates will not be issued to Glenbrook. Shares ordered from AVIF will be
recorded in an appropriate title for Glenbrook, on behalf of its Account.
SECTION 3. COSTS AND EXPENSES
3.1 GENERAL.
Except as otherwise specifically provided in Schedule C, attached hereto
and made a part hereof, each Party will bear all expenses incident to its
performance under this Agreement.
3.2 PARTIES TO COOPERATE.
Each Party agrees to cooperate with the others, as applicable, in
arranging to print, mail and/or deliver, in a timely manner, combined or
coordinated prospectuses or other materials of AVIF and the Accounts.
SECTION 4. LEGAL COMPLIANCE
4.1 TAX LAWS.
(a) AVIF represents and warrants that each Fund is currently
qualified and will continue to qualify as a regulated investment company ("RIC")
under Subchapter M of the Internal Revenue Code of 1986, as amended (the
"Code"). AVIF will notify Glenbrook immediately upon having a reasonable basis
for believing that a Fund has ceased to so qualify or that it might not so
qualify in the future.
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<PAGE>
(b) AVIF represents that it will comply and maintain each Fund's
compliance with the diversification requirements set forth in Section 817(h) of
the Code and Section 1.817-5(b) of the regulations under the Code. AVIF will
notify Glenbrook immediately upon having a reasonable basis for believing that a
Fund has ceased to so comply or that a Fund might not so comply in the future.
(c) Glenbrook agrees that if the Internal Revenue Service ("IRS")
asserts in writing in connection with any governmental audit or review of
Glenbrook or, to Glenbrook's knowledge, of any Policy owner, annuitant or
participant under the Policies (collectively, "Participants"), that any Fund has
failed to comply with the diversification requirements of section 817(h) of the
Code or Glenbrook otherwise becomes aware of any facts that could give rise to
any claim against AVIF or its affiliates as a result of such a failure or
alleged failure to so comply with section 817(h) (hereinafter respectively
referred to in this paragraph (c) as "failure" or "alleged failure"):
(i) Glenbrook shall promptly notify AVIF of such assertion or potential
claim;
(ii) Glenbrook shall consult with AVIF as to how to minimize any
liability that may arise as a result of such failure or alleged failure;
(iii) Glenbrook shall use its best efforts to minimize any liability of
AVIF or its affiliates resulting from such failure, including, without
limitation, demonstrating, pursuant to Treasury Regulations Section
1.817-5(a)(2), to the Commissioner of the IRS that such failure was
inadvertent, PROVIDED that Glenbrook shall not be required to make any
such demonstration of inadvertence unless AVIF represents or provides an
opinion of counsel, which representation or opinion shall be reasonably
satisfactory to Glenbrook, to the effect that a reasonable basis exists
for making such a demonstration;
(iv) Glenbrook shall permit AVIF, its affiliates and their legal and
accounting advisors to attend, advise and otherwise assist Glenbrook
(which assistance Glenbrook shall consider and/or accept in good faith)
with respect to any conferences, settlement discussions or other
administrative or judicial proceeding or contests (including judicial
appeals thereof) with the IRS, any Participant or any other claimant
regarding any claims that could give rise to liability to AVIF or its
affiliates as a result of such a failure or alleged failure, PROVIDED
that Glenbrook shall control, in good faith, the conduct of such
conferences, discussions, proceedings, or contests or appeals thereof;
(v) any written materials to be submitted by Glenbrook to the IRS, any
Participant or any other claimant in connection with any of the foregoing
proceedings or contests (including, without limitation, any such
materials to be submitted to the IRS pursuant to Treasury Regulations
Section 1.817-5(a)(2)), (a) shall be provided by Glenbrook to AVIF
(together with any supporting information or analysis) at least ten (10)
business days, or such shorter period to which the Parties hereto may
from time to time agree, prior to the day on which such proposed
materials are to be submitted and (b) shall not be submitted by Glenbrook
to
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<PAGE>
any such person without the express written consent of AVIF which shall not be
unreasonably withheld;
(vi) Glenbrook shall provide AVIF or its affiliates and their accounting
and legal advisors with such cooperation as AVIF shall reasonably request
(including, without limitation, by providing AVIF and its accounting and
legal advisors with copies of any relevant books and records (or portions
thereof) of Glenbrook that may be reasonably requested by or on behalf of
AVIF and that Glenbrook is permitted to provide in accordance with
applicable law) in order to facilitate review by AVIF or its advisors of
any written submissions provided to it pursuant to the preceding clause
or its assessment of the validity or amount of any claim against its
arising from such a failure or alleged failure;
(vii) Glenbrook shall not with respect to any claim of the IRS or any
Participant that would give rise to a claim against AVIF or its
affiliates (a) compromise or settle any claim, (b) accept any adjustment
on audit, or (c) forego any allowable administrative or judicial appeals,
without the express written consent of AVIF or its affiliates, which
shall not be unreasonably withheld, PROVIDED that Glenbrook shall not be
required, after exhausting all administrative remedies, to appeal any
adverse IRS or judicial decision unless AVIF or its affiliates shall have
provided an opinion of counsel approved by Glenbrook, which approval
shall not be unreasonably withheld, to the effect that a reasonable basis
exists for taking such appeal (or, in the case of an appeal to the United
States Supreme Court, that Glenbrook should be more likely than not to
prevail on such appeal), and PROVIDED FURTHER that each Party shall bear
one-half of the expenses of any judicial appeal; and
(viii) AVIF and its affiliates shall have no liability as a result of
such failure or alleged failure if Glenbrook fails to comply with any of
the foregoing clauses (i) through (vii), and such failure could be shown
to have materially contributed to the liability.
Should AVIF or any of its affiliates refuse to give its written consent
to any compromise or settlement of any claim or liability hereunder, Glenbrook
may, in its discretion, authorize AVIF or its affiliates to act in the name of
Glenbrook in, and to control the conduct of, such conferences, discussions,
proceedings, contests or appeals and all administrative or judicial appeals
thereof, and in that event AVIF or its affiliates shall bear the fees and
expenses associated with the conduct of the proceedings that it is so authorized
to control; PROVIDED that in no event shall Glenbrook have liability resulting
from AVIF's refusal to accept the proposed settlement or compromise with respect
to any failure caused by AVIF. As used in this Agreement, the term "affiliates"
shall have the same meaning as "affiliated person" as defined in Section 2(a)(3)
of the 1940 Act.
(d) Glenbrook represents and warrants that the Policies currently are
and at all times will be treated as annuity, endowment, or life insurance
contracts under applicable provisions of the Code. Glenbrook will notify AVIF
immediately upon having a reasonable basis for believing that any of the
Policies have ceased to be so treated or that they might not be so treated in
the future,
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<PAGE>
provided that such notice shall be kept confidential during the period of
Glenbrook's investigation of any such circumstances to the extent permitted by
applicable law.
(e) Glenbrook represents and warrants that each Account is and at all
times will be a "segregated asset account" and that interests in each Account
are offered exclusively through the purchase of or transfer into a "variable
contract," within the meaning of such terms under Section 817 of the Code and
the regulations thereunder. Glenbrook will notify AVIF immediately upon having
a reasonable basis for believing that such requirements have ceased to be met or
that they might not be met in the future.
4.2 INSURANCE AND CERTAIN OTHER LAWS.
(a) AVIF and AIM will use their best efforts to comply with any
applicable state insurance laws or regulations, to the extent specifically
requested in writing by Glenbrook.
(b) Glenbrook represents and warrants that (i) it is an insurance
company duly organized, validly existing and in good standing under the laws of
the State of Illinois and has full corporate power, authority and legal right to
execute, deliver and perform its duties and comply with its obligations under
this Agreement, (ii) it has legally and validly established and maintains each
Account as a segregated asset account under Section 245.21 of the Illinois
Insurance Code and the regulations thereunder, and (iii) the Policies comply in
all material respects with all other applicable federal and state laws and
regulations.
(c) AVIF represents and warrants that it is a corporation duly
organized, validly existing, and in good standing under the laws of the State of
Maryland and has full power, authority, and legal right to execute, deliver, and
perform its duties and comply with its obligations under this Agreement.
(d) AIM represents and warrants that it is a Delaware corporation
duly organized, validly existing, and in good standing under the laws of the
State of Delaware and has full power, authority, and legal right to execute,
deliver, and perform its duties and comply with its obligations under this
Agreement.
(e) The Underwriter represents and warrants that it is a Delaware
corporation duly organized, validly existing, and in good standing under the
laws of the State of Delaware and has full power, authority, and legal right to
execute, deliver, and perform its duties and comply with its obligations under
this Agreement.
4.3 SECURITIES LAWS.
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<PAGE>
(a) Glenbrook and the Underwriter represent and warrant that (i)
interests in each Account pursuant to the Policies will be registered under the
1933 Act to the extent required by the 1933 Act, (ii) the Policies will be duly
authorized for issuance and sold in compliance with all applicable federal and
state laws, including, without limitation, the 1933 Act, the 1934 Act, the 1940
Act and Illinois law, (iii) each Account is and will remain registered under the
1940 Act, to the extent required by the 1940 Act, (iv) each Account does and
will comply in all material respects with the requirements of the 1940 Act and
the rules thereunder, to the extent required, (v) each Account's 1933 Act
registration statement relating to the Policies, together with any amendments
thereto, will at all times comply in all material respects with the requirements
of the 1933 Act and the rules thereunder, (vi) Glenbrook will amend the
registration statement for its Policies under the 1933 Act and for its Accounts
under the 1940 Act from time to time as required in order to effect the
continuous offering of its Policies or as may otherwise be required by
applicable law, and (vii) each Account Prospectus will at all times comply in
all material respects with the requirements of the 1933 Act and the rules
thereunder.
(b) AVIF and AIM represent and warrant that (i) Shares sold pursuant
to this Agreement will be registered under the 1933 Act to the extent required
by the 1933 Act and duly authorized for issuance and sold in compliance with
Maryland law, (ii) AVIF is and will remain registered under the 1940 Act to the
extent required by the 1940 Act, (iii) AVIF will amend the registration
statement for its Shares under the 1933 Act and itself under the 1940 Act from
time to time as required in order to effect the continuous offering of its
Shares, (iv) AVIF does and will comply in all material respects with the
requirements of the 1940 Act and the rules thereunder, (v) AVIF's 1933 Act
registration statement, together with any amendments thereto, will at all times
comply in all material respects with the requirements of the 1933 Act and rules
thereunder, and (vi) AVIF Prospectus will at all times comply in all material
respects with the requirements of the 1933 Act and the rules thereunder.
(c) AVIF will register and qualify its Shares for sale in accordance
with the laws of any state or other jurisdiction if and to the extent reasonably
deemed advisable by AVIF.
4.4 NOTICE OF CERTAIN PROCEEDINGS AND OTHER CIRCUMSTANCES.
(a) AVIF and/or AIM will immediately notify Glenbrook of (i) the
issuance by any court or regulatory body of any stop order, cease and desist
order, or other similar order with respect to AVIF's registration statement
under the 1933 Act or AVIF Prospectus, (ii) any request by the SEC for any
amendment to such registration statement or AVIF Prospectus, (iii) the
initiation of any proceedings for that purpose or for any other purpose relating
to the registration or offering of AVIF's Shares, or (iv) any other action or
circumstances that may prevent the lawful offer or sale of Shares of any Fund in
any state or jurisdiction, including, without limitation, any circumstances in
which (a) such Shares are not registered and, in all material respects, issued
and sold in accordance with applicable state and federal law or (b) such law
precludes the use of such Shares
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<PAGE>
as an underlying investment medium of the Policies issued or to be issued by
Glenbrook. AVIF will make every reasonable effort to prevent the issuance, with
respect to any Fund, of any such stop order, cease and desist order or similar
order and, if any such order is issued, to obtain the lifting thereof at the
earliest possible time.
(b) Glenbrook and/or the Underwriter will immediately notify AVIF of
(i) the issuance by any court or regulatory body of any stop order, cease and
desist order, or other similar order with respect to each Account's registration
statement under the 1933 Act relating to the Policies or each Account
Prospectus, (ii) any request by the SEC for any amendment to such registration
statement or Account Prospectus, (iii) the initiation of any proceedings for
that purpose or for any other purpose relating to the registration or offering
of each Account's interests pursuant to the Policies, or (iv) any other action
or circumstances that may prevent the lawful offer or sale of said interests in
any state or jurisdiction, including, without limitation, any circumstances in
which said interests are not registered and, in all material respects, issued
and sold in accordance with applicable state and federal law. Glenbrook will
make every reasonable effort to prevent the issuance of any such stop order,
cease and desist order or similar order and, if any such order is issued, to
obtain the lifting thereof at the earliest possible time.
4.5 GLENBROOK OR THE UNDERWRITER TO PROVIDE DOCUMENTS; INFORMATION
ABOUT AVIF.
(a) Glenbrook or the Underwriter will provide to AVIF or its
designated agent at least one complete copy of all SEC registration statements,
Account Prospectuses, reports, any preliminary and final voting instruction
solicitation material, applications for exemptions, requests for no-action
letters, and all amendments to any of the above, that relate to each Account or
the Policies, contemporaneously with the filing of such document with the SEC or
other regulatory authorities.
(b) The Underwriter will provide to AVIF or its designated agent at
least one complete copy of each piece of sales literature or other promotional
material not prepared by AVIF or its affiliates, in which AVIF or any of its
affiliates is named, at least ten [10] Business Days prior to its use or such
shorter period as the Parties hereto may, from time to time, agree upon. No
such material shall be used if AVIF or its designated agent objects to such use
within ten [10] Business Days after receipt of such material or such shorter
period as the Parties hereto may, from time to time, agree upon. AVIF hereby
designates its investment adviser as the entity to receive such sales
literature, until such time as AVIF appoints another designated agent by giving
notice to Glenbrook in the manner required by Section 9 hereof.
(c) Neither Glenbrook, the Underwriter, nor any of their respective
affiliates will give any information or make any representations or statements
on behalf of or concerning AVIF or its affiliates in connection with the sale of
the Policies other than (i) the information or representations
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contained in the registration statement, including the AVIF Prospectus contained
therein, relating to Shares, as such registration statement and AVIF Prospectus
may be amended from time to time; or (ii) in reports or proxy materials for
AVIF; or (iii) in sales literature or other promotional material approved by
AVIF, except with the express written permission of AVIF.
(d) Glenbrook and the Underwriter shall adopt and implement procedures
reasonably designed to ensure that information concerning AVIF and its
affiliates that is intended for use only by brokers or agents selling the
Policies (I.E., information that is not intended for distribution to
Participants or offerees) ("broker only materials") is so used, and neither AVIF
nor any of its affiliates shall be liable for any losses, damages or expense
relating to the improper use of such broker only materials.
4.6 AVIF OR AIM TO PROVIDE DOCUMENTS; INFORMATION ABOUT GLENBROOK AND
THE UNDERWRITER.
(a) AVIF will provide to Glenbrook at least one complete copy of all
SEC registration statements, AVIF Prospectuses, reports, any preliminary and
final proxy material, applications for exemptions, requests for no-action
letters, and all amendments to any of the above, that relate to AVIF or the
Shares of a Fund, contemporaneously with the filing of such document with the
SEC or other regulatory authorities.
(b) AVIF will provide to Glenbrook or the Underwriter camera ready or
computer diskette copies of all AVIF Prospectuses, proxy materials, periodic
reports to shareholders and other materials required by law to be sent to
Participants who have allocated any Policy value to a Fund. AVIF will provide
such copies to Glenbrook or the Underwriter in a timely manner so as to enable
Glenbrook or the Underwriter, as the case may be, to print and distribute such
materials within the time required by law to be furnished to Participants.
(c) AIM will provide to Glenbrook or its designated agent at least
one complete copy of each piece of sales literature or other promotional
material in which Glenbrook, the Underwriter or any of their respective
affiliates is named, or that refers to the Policies, at least 10 Business Days
prior to its use or such shorter period as the Parties hereto may, from time to
time, agree upon. No such material shall be used if Glenbrook or its designated
agent objects to such use within 10 Business Days after receipt of such material
or such shorter period as the Parties hereto may, from time to time, agree upon.
Glenbrook shall receive all such sales literature until such time as it appoints
a designated agent by giving notice to AVIF in the manner required by Section 9
hereof.
(d) Neither AVIF nor any of its affiliates will give any information
or make any representations or statements on behalf of or concerning Glenbrook,
the Underwriter, each Account, or the Policies other than (i) the information or
representations contained in the registration statement, including each Account
Prospectus contained therein, relating to the Policies, as such
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registration statement and Account Prospectus may be amended from time to time;
or (ii) in reports or voting instruction materials for each Account; or (iii) in
sales literature or other promotional material approved by Glenbrook or its
affiliates, except with the express written permission of Glenbrook.
(e) AIM shall adopt and implement procedures reasonably designed to
ensure that information concerning Glenbrook, the Underwriter, and their
respective affiliates that is intended for use only by brokers or agents selling
the Policies (I.E., information that is not intended for distribution to
Participants or offerees) ("broker only materials") is so used, and neither
Glenbrook, the Underwriter, nor any of their respective affiliates shall be
liable for any losses, damages or expense relating to the improper use of such
broker only materials.
SECTION 5. MIXED AND SHARED FUNDING
5.1 GENERAL.
AVIF has applied for an order from the SEC exempting it from certain
provisions of the 1940 Act and rules thereunder so that AVIF may be available
for investment by certain other entities, including, without limitation,
separate accounts funding variable life insurance contracts, separate accounts
of insurance companies unaffiliated with Glenbrook, and trustees of qualified
pension and retirement plans (collectively, "Mixed and Shared Funding"). The
Parties recognize that the SEC has imposed terms and conditions for such orders
that are substantially identical to many of the provisions of this Section 5.
Sections 5.2 through 5.8 below shall apply, if and only if AVIF implements Mixed
and Shared Funding, pursuant to such an exemptive order or otherwise. AVIF
hereby notifies Glenbrook that, in the event that AVIF implements Mixed and
Shared Funding, it may be appropriate to include in the prospectus pursuant to
which a Policy is offered disclosure regarding the potential risks of Mixed and
Shared Funding.
5.2 DISINTERESTED DIRECTORS.
AVIF agrees that its Board of Directors shall at all times consist of
directors a majority of whom (the "Disinterested Directors") are not interested
persons of AVIF within the meaning of Section 2(a)(19) of the 1940 Act and the
Rules thereunder and as modified by any applicable orders of the SEC, except
that if this condition is not met by reason of the death, disqualification, or
bona fide resignation of any director, then the operation of this condition
shall be suspended (a) for a period of 45 days if the vacancy or vacancies may
be filled by the Board; (b) for a period of 60 days if a vote of shareholders is
required to fill the vacancy or vacancies; or (c) for such longer period as the
SEC may prescribe by order upon application.
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5.3 MONITORING FOR MATERIAL IRRECONCILABLE CONFLICTS.
AVIF agrees that its Board of Directors will monitor for the existence of
any material irreconcilable conflict between the interests of the participants
in all separate accounts of life insurance companies utilizing AVIF
("Participating Insurance Companies"), including each Account and participants
on all qualified retirement and pension plans investing in AVIF ("Participating
Plans"). Glenbrook agrees to inform the Board of Directors of AVIF of the
existence of or any potential for any such material irreconcilable conflict of
which it is aware. The concept of a "material irreconcilable conflict" is not
defined by the 1940 Act or the rules thereunder, but the Parties recognize that
such a conflict may arise for a variety of reasons, including, without
limitation:
(a) an action by any state insurance or other regulatory authority;
(b) a change in applicable federal or state insurance, tax or securities
laws or regulations, or a public ruling, private letter ruling, no-action or
interpretative letter, or any similar action by insurance, tax or securities
regulatory authorities;
(c) an administrative or judicial decision in any relevant proceeding;
(d) the manner in which the investments of any Fund are being managed;
(e) a difference in voting instructions given by variable annuity
contract and variable life insurance contract Participants or by Participants of
different Participating Insurance Companies;
(f) a decision by a Participating Insurance Company to disregard the
voting instructions of Participants; or
(g) a decision by a Participating Plan to disregard the voting
instructions of Plan participants.
Consistent with the SEC's requirements in connection with exemptive
orders of the type referred to in Section 5.1 hereof, Glenbrook will assist the
Board of Directors in carrying out its responsibilities by providing the Board
of Directors with all information reasonably necessary for the Board of
Directors to consider any issue raised, including information as to a decision
by Glenbrook to disregard voting instructions of Participants.
5.4 CONFLICT REMEDIES.
(a) It is agreed that if it is determined by a majority of the
members of the Board of Directors or a majority of the Disinterested Directors
that a material irreconcilable conflict exists, Glenbrook will, if it is a
Participating Insurance Company for which a material irreconcilable
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conflict is relevant, at its own expense and to the extent reasonably
practicable (as determined by a majority of the Disinterested Directors), take
whatever steps are necessary to remedy or eliminate the material irreconcilable
conflict, which steps may include, but are not limited to:
(i) withdrawing the assets allocable to some or all of the Accounts
from AVIF or any Fund and reinvesting such assets in a different
investment medium, including another Fund of AVIF, or submitting
the question whether such segregation should be implemented to a
vote of all affected Participants and, as appropriate,
segregating the assets of any particular group (E.G., annuity
Participants, life insurance Participants) that votes in favor of
such segregation, or offering to the affected Participants the
option of making such a change; and
(ii) establishing a new registered investment company of the type
defined as a "management company" in Section 4(3) of the 1940 Act
or a new separate account that is operated as a management
company.
(b) If the material irreconcilable conflict arises because of
Glenbrook's decision to disregard Participant voting instructions and that
decision represents a minority position or would preclude a majority vote,
Glenbrook may be required, at AVIF's election, to withdraw each Account's
investment in AVIF or any Fund. No charge or penalty will be imposed as a
result of such withdrawal. Any such withdrawal must take place within six
months after AVIF gives notice to Glenbrook that this provision is being
implemented, and until such withdrawal AVIF shall continue to accept and
implement orders by Glenbrook for the purchase and redemption of Shares of AVIF.
(c) If a material irreconcilable conflict arises because a particular
state insurance regulator's decision applicable to Glenbrook conflicts with the
majority of other state regulators, then Glenbrook will withdraw each Account's
investment in AVIF within six months after AVIF's Board of Directors informs
Glenbrook that it has determined that such decision has created a material
irreconcilable conflict (after consideration of the interests of all
Participants), and until such withdrawal AVIF shall continue to accept and
implement orders by Glenbrook for the purchase and redemption of Shares of AVIF.
(d) Glenbrook agrees that any remedial action taken by it in
resolving any material irreconcilable conflict will be carried out at its
expense and with a view only to the interests of Participants.
(e) For purposes hereof, a majority of the Disinterested Directors
will determine whether or not any proposed action adequately remedies any
material irreconcilable conflict. In no event, however, will AVIF or any of its
affiliates be required to establish a new funding medium for any Policies.
Glenbrook will not be required by the terms hereof to establish a new funding
medium for any Policies if an offer to do so has been declined by vote of a
majority of Participants materially adversely affected by the material
irreconcilable conflict.
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5.5 NOTICE TO GLENBROOK.
AVIF will promptly make known in writing to Glenbrook the Board of
Directors' determination of the existence of a material irreconcilable conflict,
a description of the facts that give rise to such conflict and the implications
of such conflict.
5.6 INFORMATION REQUESTED BY BOARD OF DIRECTORS.
Glenbrook and AVIF (or its investment adviser) will at least annually
submit to the Board of Directors of AVIF such reports, materials or data as the
Board of Directors may reasonably request so that the Board of Directors may
fully carry out the obligations imposed upon it by the provisions hereof or any
exemptive application filed with the SEC to permit Mixed and Shared Funding, and
said reports, materials and data will be submitted at any reasonable time deemed
appropriate by the Board of Directors. All reports received by the Board of
Directors of potential or existing conflicts, and all Board of Directors actions
with regard to determining the existence of a conflict, notifying Participating
Insurance Companies of a conflict, and determining whether any proposed action
adequately remedies a conflict, will be properly recorded in the minutes of the
Board of Directors or other appropriate records, and such minutes or other
records will be made available to the SEC upon request.
5.7 COMPLIANCE WITH SEC RULES.
If, at any time during which AVIF is serving as an investment medium for
variable life insurance Policies, 1940 Act Rules 6e-3(T) or, if applicable, 6e-2
are amended or Rule 6e-3 is adopted to provide exemptive relief with respect to
Mixed and Shared Funding, AVIF agrees that it will comply with the terms and
conditions thereof and that the terms of this Section 5 shall be deemed modified
if and only to the extent required in order also to comply with the terms and
conditions of such exemptive relief that is afforded by any of said rules that
are applicable.
5.8 REQUIREMENTS FOR OTHER INSURANCE COMPANIES.
AVIF will require that each Participating Insurance Company enter into an
agreement with AVIF that contains in substance the same provisions as are set
forth in Sections 4.1(b), 4.1(d), 4.3(a), 4.4(b), 4.5(a), 5, and 10 of this
Agreement.
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SECTION 6. TERMINATION
6.1 EVENTS OF TERMINATION.
Subject to Section 6.4 below, this Agreement will terminate as to a Fund:
(a) at the option of AVIF or Glenbrook upon the approval by (i) a
majority of the Disinterested Directors or (ii) a majority vote of the Shares of
the affected Fund that are held in the corresponding Subaccount of an Account
(pursuant to the procedures set forth in Section 10 of this Agreement for voting
Shares in accordance with Participant instructions); or
(b) at the option of AVIF or AIM upon institution of formal
proceedings against Glenbrook or its affiliates by the NASD, the SEC, any state
insurance regulator or any other regulatory body regarding Glenbrook's
obligations under this Agreement or related to the sale of the Policies, the
operation of each Account, or the purchase of Shares, if, in each case, AVIF or
AIM reasonably determines that such proceedings, or the facts on which such
proceedings would be based, have a material likelihood of imposing material
adverse consequences on the Fund with respect to which the Agreement is to be
terminated; or
(c) at the option of Glenbrook upon institution of formal proceedings
against AVIF, its principal underwriter, or its investment adviser by the NASD,
the SEC, or any state insurance regulator or any other regulatory body regarding
AVIF's obligations under this Agreement or related to the operation or
management of AVIF or the purchase of AVIF Shares, if, in each case, Glenbrook
reasonably determines that such proceedings, or the facts on which such
proceedings would be based, have a material likelihood of imposing material
adverse consequences on Glenbrook, or the Subaccount corresponding to the Fund
with respect to which the Agreement is to be terminated; or
(d) at the option of any Party in the event that (i) the Fund's
Shares are not registered and, in all material respects, issued and sold in
accordance with any applicable federal or state law or (ii) such law precludes
the use of such Shares as an underlying investment medium of the Policies issued
or to be issued by Glenbrook; or
(e) upon termination of the corresponding Subaccount's investment in
the Fund pursuant to Section 5 hereof; or
(f) at the option of Glenbrook if the Fund ceases to qualify as a RIC
under Subchapter M of the Code or under successor or similar provisions, or if
Glenbrook reasonably believes that the Fund may fail to so qualify;
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(g) at the option of Glenbrook if the Fund fails to comply with
Section 817(h) of the Code or with successor or similar provisions (other than
by reason of the failure of the Policies issued by Glenbrook to qualify as
annuity or life insurance contracts under the Code, or the failure of any
Account or Policy to meet the definition of "segregated asset account" or
"variable contract"; respectively, within the meaning of the Code), or if
Glenbrook reasonably believes that the Fund may fail to so comply; or
(h) at the option of AVIF or AIM if the Policies issued by Glenbrook
cease to qualify as annuity contracts or life insurance contracts under the Code
(other than by reason of the Fund's noncompliance with Section 817(h) or
Subchapter M of the Code) or if interests in an Account under the Policies are
not registered, where required, and, in all material respects, are not issued or
sold in accordance with any applicable federal or state law; or
(i) upon another Party's material breach of any provision of this
Agreement.
6.2 NOTICE REQUIREMENT FOR TERMINATION.
No termination of this Agreement will be effective unless and until the
Party terminating this Agreement gives prior written notice to the other Party
to this Agreement of its intent to terminate, and such notice shall set forth
the basis for such termination. Furthermore:
(a) in the event that any termination is based upon the provisions of
Section 6.1(a) or 6.1(e) hereof, such prior written notice shall be given at
least six (6) months in advance of the effective date of termination unless a
shorter time is agreed to by the Parties hereto;
(b) in the event that any termination is based upon the provisions of
Section 6.1(b) or Section 6.1(c) hereof, such prior written notice shall be
given at least ninety (90) days in advance of the effective date of termination
unless a shorter time is agreed to by the Parties hereto; and
(c) in the event that any termination is based upon the provisions of
Section 6.1(d), Section 6.1(f), Section 6.1(g), Section 6.1(h) or Section 6.1(i)
hereof, such prior written notice shall be given as soon as possible within
twenty-four (24) hours after the terminating Party learns of the event causing
termination to be required.
6.3 FUNDS TO REMAIN AVAILABLE.
Except (a) as necessary to implement Participant-initiated transactions,
(b) as required by state insurance laws or regulations, (c) as required pursuant
to Section 5 of this Agreement, or (d)
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with respect to any Fund as to which this Agreement has terminated pursuant to
Section 6.1 hereof, Glenbrook shall not (i) redeem AVIF Shares attributable to
the Policies (as opposed to AVIF Shares attributable to Glenbrook's assets held
in each Account), or (ii) prevent Participants from allocating payments to or
transferring amounts from a Fund that was otherwise available under the
Policies, until six (6) months after Glenbrook shall have notified AVIF of its
intention to do so and until 36 full calendar months shall have expired from the
date on which an Account first invested in any Fund.
6.4 SURVIVAL OF WARRANTIES AND INDEMNIFICATIONS.
All warranties and indemnifications will survive the termination of this
Agreement.
6.5 CONTINUANCE OF AGREEMENT FOR CERTAIN PURPOSES.
If any Party terminates this Agreement with respect to any Fund pursuant
to Sections 6.1(b), 6.1(c), 6.1(d), 6.1(f), 6.1(g), 6.1(h) or 6.1(i) hereof,
this Agreement shall nevertheless continue in effect as to any Shares of that
Fund that are outstanding as of the date of such termination (the "Initial
Termination Date"). This continuation shall extend to the earlier of the date
as of which an Account owns no Shares of the affected Fund or a date (the "Final
Termination Date") six (6) months following the Initial Termination Date, except
that Glenbrook may, by written notice shorten said six (6) month period in the
case of a termination pursuant to Sections 6.1(d), 6.1(f), 6.1(g), 6.1(h) or
6.1(i).
SECTION 7. PARTIES TO COOPERATE RESPECTING TERMINATION
The Parties hereto agree to cooperate and give reasonable assistance to
one another in taking all necessary and appropriate steps for the purpose of
ensuring that an Account owns no Shares of a Fund after the Final Termination
Date with respect thereto, or, in the case of a termination pursuant to Section
6.1(a), the termination date specified in the notice of termination. Such steps
may include combining the affected Account with another Account, substituting
other mutual fund shares for those of the affected Fund, or otherwise
terminating participation by the Policies in such Fund.
SECTION 8. ASSIGNMENT
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This Agreement may not be assigned by any Party, except with the written
consent of each other Party.
SECTION 9. NOTICES
Notices and communications required or permitted by Section 2 hereof will
be given by means mutually acceptable to the Parties concerned. Each other
notice or communication required or permitted by this Agreement will be given to
the following persons at the following addresses and facsimile numbers, or such
other persons, addresses or facsimile numbers as the Party receiving such
notices or communications may subsequently direct in writing:
Glenbrook Life and Annuity Company
3100 Sanders Road, Suite J5D
Northbrook, Illinois 60062
Facsimile: (708) 402-3781
Attn: Michael Velotta, Esq.
Allstate Life Financial Services, Inc.
3100 Sanders Road, Suite J5B
Northbrook, Illinois 60062
Facsimile: (708) 402-3781
Attn: John Hedrick, Esq.
AIM Variable Insurance Funds, Inc.
11 Greenway Plaza, Suite 1919
Houston, Texas 77046
Facsimile: (713) 993-9185
Attn: Nancy L. Martin, Esq.
A I M Distributors, Inc.
11 Greenway Plaza, Suite 1919
Houston, Texas 77046
Facsimile: (713) 993-9185
Attn.: Nancy L. Martin, Esq.
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SECTION 10. VOTING PROCEDURES
Subject to the cost allocation procedures established pursuant to Section
3.1 hereof, Glenbrook will distribute all proxy material furnished by AVIF to
Participants to whom pass-through voting privileges are required to be extended
and will solicit voting instructions from Participants. Glenbrook will vote
Shares in accordance with timely instructions received from Participants.
Glenbrook will vote Shares that are (a) not attributable to Participants to whom
pass-through voting privileges are extended, or (b) attributable to
Participants, but for which no timely instructions have been received, in the
same proportion as Shares for which said instructions have been received from
Participants. Neither Glenbrook nor any of its affiliates will in any way
recommend action in connection with or oppose or interfere with the solicitation
of proxies for the Shares held for such Participants, except with respect to
matters as to which Glenbrook has the right, under Rule 6e-2 or 6e-3(T) under
the 1940 Act, to vote the Shares without regard to voting instructions from
Participants. Glenbrook reserves the right to vote shares held in any Account
in its own right, to the extent permitted by law. Glenbrook shall be
responsible for assuring that each of its Accounts holding Shares calculates
voting privileges in a manner consistent with that of other Participating
Insurance Companies or in the manner required by any Mixed and Shared Funding
exemptive order that AVIF may obtain in the future. AVIF will notify Glenbrook
(i) of any changes of interpretations or amendments to any Mixed and Shared
Funding exemptive order it obtains in the future and (ii) of any proposal to be
submitted to Participants for their approval (prior to any Board of Directors
meeting of AVIF at which such proposals are presented).
SECTION 11. FOREIGN TAX CREDITS
AVIF agrees to consult in advance with Glenbrook concerning any decision
to elect or not to elect pursuant to Section 853 of the Code to pass through the
benefit of any foreign tax credits to its shareholders.
SECTION 12. INDEMNIFICATION
12.1 OF AVIF AND AIM BY GLENBROOK AND THE UNDERWRITER.
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(a) Except to the extent provided in Sections 12.1(b) and 12.1(c),
below, Glenbrook and the Underwriter each agrees to indemnify and hold harmless
AVIF, its affiliates (including AIM) except Participants, and each of their
respective directors and officers, and each person, if any, who controls AVIF or
its affiliates (including AIM) within the meaning of Section 15 of the 1933 Act
(collectively, the "Indemnified Parties" for purposes of this Section 12.1)
against any and all losses, claims, damages, liabilities (including amounts paid
in settlement with the written consent of Glenbrook) or actions in respect
thereof (including, to the extent reasonable, legal and other expenses), to
which the Indemnified Parties may become subject under any statute, regulation,
at common law or otherwise, insofar as such losses, claims, damages, liabilities
or actions are related to the sale or acquisition of AVIF's Shares and:
(i) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in any Account's
1933 Act registration statement, any Account Prospectus, the
Policies, or sales literature or advertising for the Policies (or
any amendment or supplement to any of the foregoing), or arise
out of or are based upon the omission or the alleged omission to
state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading;
PROVIDED, that this agreement to indemnify shall not apply as to
any Indemnified Party if such statement or omission or such
alleged statement or omission was made in reliance upon and in
conformity with information furnished to Glenbrook or the
Underwriter by or on behalf of AVIF for use in any Account's 1933
Act registration statement, any Account Prospectus, the Policies,
or sales literature or advertising or otherwise for use in
connection with the sale of Policies or Shares (or any amendment
or supplement to any of the foregoing); or
(ii) arise out of or as a result of any other statements or
representations (other than statements or representations
contained in AVIF's 1933 Act registration statement, AVIF
Prospectus, sales literature or advertising of AVIF, or any
amendment or supplement to any of the foregoing, not supplied for
use therein by or on behalf of Glenbrook or the Underwriter and
on which such persons have reasonably relied) or the negligent,
illegal or fraudulent conduct of Glenbrook, the Underwriter or
their respective affiliates or persons under their control
(including, without limitation, their employees and "Associated
Persons," as that term is defined in paragraph (m) of Article I
of the NASD's By-Laws), in connection with the sale or
distribution of the Policies or Shares; or
(iii) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in AVIF's 1933
Act registration statement, AVIF Prospectus, sales literature or
advertising of AVIF, or any amendment or supplement to any of the
foregoing, or the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make
the statements therein not misleading if such a statement or
omission was made in reliance upon and in
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conformity with information furnished to AVIF or AIM by or on
behalf of Glenbrook, the Underwriter or their respective
affiliates for use in AVIF's 1933 Act registration statement,
AVIF Prospectus, sales literature or advertising of AVIF, or any
amendment or supplement to any of the foregoing; or
(iv) arise as a result of any failure by Glenbrook or the Underwriter
to perform the obligations, provide the services and furnish the
materials required of them under the terms of this Agreement, or
any material breach of any representation and/or warranty made by
Glenbrook or the Underwriter in this Agreement or arise out of or
result from any other material breach of this Agreement by
Glenbrook or the Underwriter; or
(v) arise as a result of failure by the Policies issued by Glenbrook
to qualify as life insurance, endowment, or annuity contracts
under the Code, otherwise than by reason of any Fund's failure to
comply with Subchapter M or Section 817(h) of the Code.
(b) Neither Glenbrook nor the Underwriter shall be liable under this
Section 12.1 with respect to any losses, claims, damages, liabilities or actions
to which an Indemnified Party would otherwise be subject by reason of willful
misfeasance, bad faith, or gross negligence in the performance by that
Indemnified Party of its duties or by reason of that Indemnified Party's
reckless disregard of obligations or duties (i) under this Agreement or (ii) to
AVIF.
(c) Neither Glenbrook nor the Underwriter shall be liable under this
Section 12.1 with respect to any action against an Indemnified Party unless AVIF
or AIM shall have notified Glenbrook or the Underwriter in writing within a
reasonable time after the summons or other first legal process giving
information of the nature of the action shall have been served upon such
Indemnified Party (or after such Indemnified Party shall have received notice of
such service on any designated agent), but failure to notify Glenbrook or the
Underwriter of any such action shall not relieve Glenbrook or the Underwriter
from any liability which it may have to the Indemnified Party against whom such
action is brought otherwise than on account of this Section 12.1. Except as
otherwise provided herein, in case any such action is brought against an
Indemnified Party, Glenbrook or the Underwriter shall be entitled to
participate, at its own expense, in the defense of such action and Glenbrook or
the Underwriter also shall be entitled to assume the defense thereof, with
counsel approved by the Indemnified Party named in the action, which approval
shall not be unreasonably withheld. After notice from Glenbrook or the
Underwriter to such Indemnified Party of its election to assume the defense
thereof, the Indemnified Party will cooperate fully with Glenbrook and shall
bear the fees and expenses of any additional counsel retained by it, and
Glenbrook will not be liable to such Indemnified Party under this Agreement for
any legal or other expenses subsequently incurred by such Indemnified Party
independently in connection with the defense thereof, other than reasonable
costs of investigation.
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12.2 OF GLENBROOK AND THE UNDERWRITER BY AVIF AND AIM.
(a) Except to the extent provided in Sections 12.2(d), 12.2(e) and
12.2(f), below, to the extent permitted by law, AVIF and/or AIM each agrees
to indemnify and hold harmless Glenbrook, the Underwriter, their respective
affiliates, and each of their respective directors and officers, and each
person, if any, who controls Glenbrook, the Underwriter, or their respective
affiliates within the meaning of Section 15 of the 1933 Act (collectively, the
"Indemnified Parties" for purposes of this Section 12.2) against any and all
losses, claims, damages, liabilities (including amounts paid in settlement with
the written consent of AVIF and/or AIM) or actions in respect thereof
(including, to the extent reasonable, legal and other expenses), to which the
Indemnified Parties may become subject under any statute, regulation, at common
law, or otherwise, insofar as such losses, claims, damages, liabilities or
actions are related to the sale or acquisition of AVIF's Shares and:
(i) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in AVIF's 1933
Act registration statement, AVIF Prospectus or sales literature
or advertising of AVIF (or any amendment or supplement to any of
the foregoing), or arise out of or are based upon the omission or
the alleged omission to state therein a material fact required to
be stated therein or necessary to make the statements therein not
misleading; PROVIDED, that this agreement to indemnify shall not
apply as to any Indemnified Party if such statement or omission
or such alleged statement or omission was made in reliance upon
and in conformity with information furnished to AVIF or its
affiliates by or on behalf of Glenbrook or its affiliates for use
in AVIF's 1933 Act registration statement, AVIF Prospectus, or in
sales literature or advertising (or any amendment or supplement
to any of the foregoing); or
(ii) arise out of or as a result of any other statements or
representations (other than statements or representations
contained in any Account's 1933 Act registration statement, any
Account Prospectus, sales literature or advertising for the
Policies, or any amendment or supplement to any of the foregoing,
not supplied for use therein by or on behalf of AVIF or its
affiliates and on which such persons have reasonably relied) or
the negligent, illegal or fraudulent conduct of AVIF, its
affiliates or persons under their control (including, without
limitation, their employees and "Associated Persons"), in
connection with the sale or distribution of AVIF Shares; or
(iii) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in any Account's
1933 Act registration statement, any Account Prospectus, sales
literature or advertising covering the Policies, or any amendment
or supplement to any of the foregoing, or the omission or alleged
omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not
misleading, if such statement or omission was made in reliance
upon and in conformity with information furnished to Glenbrook,
the
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Underwriter, or their respective affiliates by AVIF or AIM for
use in any Account's 1933 Act registration statement, any Account
Prospectus, sales literature or advertising covering the
Policies, or any amendment or supplement to any of the foregoing;
or
(iv) arise as a result of any failure by AVIF or AIM to perform their
respective obligations, provide the services (including, but not
limited to, the provision of correct net asset value) and furnish
the materials required of them under the terms of this
Agreement, or any material breach of any representation and/or
warranty made by AVIF or AIM in this Agreement or arise out of or
result from any other material breach of this Agreement by AVIF
or AIM.
(b) Except to the extent provided in Sections 12.2(c), 12.2(d) and
12.2(e) hereof, AVIF agrees to indemnify and hold harmless the Indemnified
Parties from and against any and all losses, claims, damages, liabilities
(including amounts paid in settlement thereof with, the written consent of
AVIF) or actions in respect thereof (including, to the extent reasonable, legal
and other expenses) to which the Indemnified Parties may become subject directly
or indirectly under any statute, at common law or otherwise, insofar as such
losses, claims, damages, liabilities or actions directly or indirectly result
from or arise out of the failure of any Fund to operate as a regulated
investment company in compliance with (i) Subchapter M of the Code and
regulations thereunder or (ii) Section 817(h) of the Code and regulations
thereunder, including, without limitation, any income taxes and related
penalties, rescission charges, liability under state law to Participants
asserting liability against Glenbrook or the Underwriter pursuant to the
Policies, the costs of any ruling and closing agreement or other settlement with
the IRS, and the cost of any substitution by Glenbrook of Shares of another
investment company or portfolio for those of any adversely affected Fund as a
funding medium for each Account that Glenbrook reasonably deems necessary or
appropriate as a result of the noncompliance.
(c) AVIF shall not be liable under this Section 12.2 with respect to
any losses, claims, damages, liabilities or actions to which an Indemnified
Party would otherwise be subject by reason of willful misfeasance, bad faith, or
gross negligence in the performance by that Indemnified Party of its duties or
by reason of such Indemnified Party's reckless disregard of its obligations and
duties (i) under this Agreement or (ii) to Glenbrook, each Account, the
Underwriter or Participants.
(d) AVIF shall not be liable under this Section 12.2 with respect to
any action against an Indemnified Party unless the Indemnified Party shall have
notified AVIF in writing within a reasonable time after the summons or other
first legal process giving information of the nature of the action shall have
been served upon such Indemnified Party (or after such Indemnified Party shall
have received notice of such service on any designated agent), but failure to
notify AVIF of any such action shall not relieve AVIF from any liability which
it may have to the Indemnified Party against whom such action is brought
otherwise than on account of this Section 12.2. Except as otherwise provided
herein, in case any such action is brought against an Indemnified Party, AVIF
will be
24
<PAGE>
entitled to participate, at its own expense, in the defense of such action and
also shall be entitled to assume the defense thereof, with counsel approved by
the Indemnified Party named in the action, which approval shall not be
unreasonably withheld. After notice from AVIF to such Indemnified Party of
AVIF's election to assume the defense thereof, the Indemnified Party will
cooperate fully with AVIF and shall bear the fees and expenses of any additional
counsel retained by it, and AVIF will not be liable to such Indemnified Party
under this Agreement for any legal or other expenses subsequently incurred by
such Indemnified Party independently in connection with the defense thereof,
other than reasonable costs of investigation.
(e) In no event shall AVIF be liable under the indemnification
provisions contained in this Agreement to any individual or entity, including
without limitation, Glenbrook, the Underwriter, or any other Participating
Insurance Company or any Participant, with respect to any losses, claims,
damages, liabilities or expenses that arise out of or result from (i) a breach
of any representation, warranty, and/or covenant made by Glenbrook or the
Underwriter hereunder or by any Participating Insurance Company under an
agreement containing substantially similar representations, warranties and
covenants; (ii) the failure by Glenbrook or any Participating Insurance Company
to maintain its segregated asset account (which invests in any Fund) as a
legally and validly established segregated asset account under applicable state
law and as a duly registered unit investment trust under the provisions of the
1940 Act (unless exempt therefrom); or (iii) the failure by Glenbrook or any
Participating Insurance Company to maintain its variable annuity and/or variable
life insurance contracts (with respect to which any Fund serves as an underlying
funding vehicle) as life insurance, endowment or annuity contracts under
applicable provisions of the Code; provided, however, that the limitation of
liability contained in this paragraph (e) shall not apply if the breach or
failures described in subparagraphs (i), (ii) and (iii), above, by Glenbrook or
any Participating Insurance Company resulted from the failure of AVIF to comply
with the requirements of Subchapter M or Section 817(h) of the Code.
12.3 EFFECT OF NOTICE.
Any notice given by the indemnifying Party to an Indemnified Party
referred to in Section 12.1(c) or 12.2(d) above of participation in or control
of any action by the Indemnifying Party will in no event be deemed to be an
admission by the Indemnifying Party of liability, culpability or responsibility,
and the Indemnifying Party will remain free to contest liability with respect to
the claim among the Parties or otherwise.
12.4 SUCCESSORS.
A successor by law of any Party shall be entitled to the benefits of the
indemnification contained in this Section 12.
25
<PAGE>
SECTION 13. APPLICABLE LAW
This Agreement will be construed and the provisions hereof interpreted
under and in accordance with Maryland law, without regard for that state's
principles of conflict of laws.
SECTION 14. EXECUTION IN COUNTERPARTS
This Agreement may be executed simultaneously in two or more
counterparts, each of which taken together will constitute one and the same
instrument.
SECTION 15. SEVERABILITY
If any provision of this Agreement is held or made invalid by a court
decision, statute, rule or otherwise, the remainder of this Agreement will not
be affected thereby.
SECTION 16. RIGHTS CUMULATIVE
The rights, remedies and obligations contained in this Agreement are
cumulative and are in addition to any and all rights, remedies and obligations,
at law or in equity, that the Parties are entitled to under federal and state
laws.
SECTION 17. HEADINGS
The Table of Contents and headings used in this Agreement are for
purposes of reference only and shall not limit or define the meaning of the
provisions of this Agreement.
IN WITNESS WHEREOF, the Parties have caused this Agreement to be executed
in their names and on their behalf by and through their duly authorized officers
signing below.
AIM VARIABLE INSURANCE FUNDS, INC.
26
<PAGE>
By_____________________________________
Title___________________________________
A I M DISTRIBUTORS, INC.
By_____________________________________
Title___________________________________
GLENBROOK LIFE AND ANNUITY COMPANY, on behalf of itself and
its Separate Accounts as provided in Schedule A
By_____________________________________
Title___________________________________
ALLSTATE LIFE FINANCIAL SERVICES, INC.
By_____________________________________
Title___________________________________
27
<PAGE>
SCHEDULE A
FUNDS AVAILABLE UNDER THE POLICIES
AIM Variable Insurance Funds, Inc.
AIM V.I. Capital Appreciation Fund
AIM V.I. Diversified Income Fund
AIM V.I. Global Utilities Fund
AIM V.I. Government Securities Fund
AIM V.I. Growth Fund
AIM V.I. Growth and Income Fund
AIM V.I. International Equity Fund
AIM V.I. Money Market Fund
AIM V.I. Value Fund
SEPARATE ACCOUNTS UTILIZING THE FUNDS
Glenbrook Life and Annuity Company Separate Account A
POLICIES FUNDED BY THE SEPARATE ACCOUNTS
Individual and Group Flexible Premium Deferred Variable Annuity Contracts
28
<PAGE>
SCHEDULE B
AIM'S PRICING ERROR POLICIES
DETERMINATION OF MATERIALITY
In the event that AIM discovers an error in the calculation of the Fund's net
asset value, the following policies will apply:
If the amount of the error is less than $.01 per share, it is considered
immaterial and no adjustments are made.
If the amount of the error is $.01 per share or more, then the following
thresholds are applied:
a. If the amount of the difference in the erroneous net asset value and
the correct net asset value is less than .5% of the correct net asset
value, AIM will reimburse the affected Fund to the extent of any loss
resulting from the error. No other adjustments shall be made.
b. If the amount of the difference in the erroneous net asset value and
the correct net asset value is .5% of the correct net asset value or
greater, then AIM will determine the impact of the error to the affected
Fund and shall reimburse such Fund (and/or Glenbrook, as appropriate) to
the extent of any loss resulting from the error. To the extent that an
overstatement of net asset value per share is detected quickly and
Glenbrook has not mailed redemption checks to Participants, Glenbrook and
AIM agree to examine the extent of the error to determine the feasibility
of reprocessing such redemption transaction (for purposes of reimbursing
the Fund to the extent of any such overpayment).
REPROCESSING COST REIMBURSEMENT
To the extent a reprocessing of Participant transactions is required pursuant to
paragraph (b), above, AIM shall reimburse Glenbrook for Glenbrook's reprocessing
costs in the amount of $3.00 per contract affected by $10 or more.
The Pricing Policies described herein may be modified by AVIF as approved by its
Board of Directors. AIM agrees to use its best efforts to notify Glenbrook at
least five days prior to any such meeting of the Board of Directors of AVIF to
consider such proposed changes.
29
<PAGE>
SCHEDULE C
EXPENSE ALLOCATIONS
<TABLE>
<CAPTION>
DESCRIPTION GLENBROOK AIM/AVIF
- ----------------------------------------------------------------------------------------------------
<S> <C> <C>
REGISTRATION
- ------------
Prepare and file Account registration Fund registration statements
registration statements(1) statements
Payment of fees Account fees Fund fees
- ----------------------------------------------------------------------------------------------------
PROSPECTUSES
- ------------
Typesetting Account Prospectuses Fund Prospectuses
Printing(2) Account Prospectuses Fund Prospectuses
- ----------------------------------------------------------------------------------------------------
SAIS
- ----
Typesetting Account SAIs Fund SAIs
Printing Account SAIs Fund SAIs
- ----------------------------------------------------------------------------------------------------
SUPPLEMENTS (TO
- ----------------
PROSPECTUSES OR SAIS)
- ---------------------
Typesetting and Account Supplements (UNLESS Fund Supplements (UNLESS
Printing changes relate only to the changes relate only to the
Fund) Account)
Fund Supplements (for Account Supplements (for
changes that relate only to changes that relate only to
Account) Fund)
</TABLE>
- ------------------------
(1)Includes all filings and costs necessary to keep registrations current
and effective; including, without limitation, filing Forms N-SAR and Rule 24f-2
Notices as required by law.
(2)To the extent that documents prepared by Glenbrook and AIM are printed
together, the printing cost shall be allocated in proportion to the number of
pages attributable to each document.
30
<PAGE>
<TABLE>
<CAPTION>
DESCRIPTION GLENBROOK AIM/AVIF
- ----------------------------------------------------------------------------------------------------
<S> <C> <C>
FINANCIAL REPORTS
Typesetting Account Reports Fund Reports
Printing(2) Account Reports Fund Reports
- ----------------------------------------------------------------------------------------------------
MAILING AND DISTRIBUTION(3)
To Contract owners Account and Fund Supplements (for which
Prospectuses, SAIs, AIM/AVIF is responsible to
Supplements (for which typeset and print)
Glenbrook is responsible to
typeset and print) and Reports
To Offerees Supplements (for which Account and Fund
Glenbrook is responsible Prospectuses, SAIs,
to typeset and print) Supplements (for which
AIM/AVIF is responsible to
typeset and print) and Reports
- ----------------------------------------------------------------------------------------------------
PROXIES(4)
Typesetting, printing Account and Fund Proxies Account and Fund Proxies
and mailing of proxy where the matters submitted where the matters submitted
solicitation materials and are solely Account related are solely Fund related
voting instruction
solicitation materials and
tabulation of proxies to
Participants
- ----------------------------------------------------------------------------------------------------
</TABLE>
- ------------------------
(3)To the extent required by law.
(4)When proxy materials are required for both Account and Fund matters,
the costs shall be split proportionately based upon those materials related
solely to the Account and those materials related solely to the Fund. The cost
with respect to joint materials shall be allocated evenly between Glenbrook and
AIM.
31
<PAGE>
<TABLE>
<CAPTION>
DESCRIPTION GLENBROOK AIM/AVIF
- ----------------------------------------------------------------------------------------------------
<S> <C> <C>
OTHER (SALES RELATED)
Contract owner communication Account related items Fund related items
Distribution Policies
Administration Account (Policies)
- --------------------------------------------------------------------------------
</TABLE>
32
<PAGE>
EXHIBIT (10)(a)
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Post-Effective Amendment No. 1 to Registration
Statement No. 33-62203 on Form N-4, of our report dated March 1, 1996
accompanying the financial statements and financial statement schedule of
Glenbrook Life and Annuity Company, appearing in the Prospectus, and our report
dated March 1, 1996 accompanying the financial statements of Glenbrook Life and
Annuity Company Separate Account A contained in the Statement of Additional
Information (which is incorporated by reference in the Prospectus of Glenbrook
Life and Annuity Company Separate Account A of Glenbrook Life and Annuity
Company) which is part of such Registration Statement, and to the reference to
us under the heading "Experts" in such Prospectus.
/s/ DELOITTE & TOUCHE LLP
Chicago, Illinois
April 22, 1996
<PAGE>
EXHIBIT 10(b)
(SUTHERLAND, ASBILL & BRENNAN LETTERHEAD)
April 18, 1996
Glenbrook Life and Annuity Company
3100 Sanders Road
Northbrook, Illinois 60062
Gentlemen:
We hereby consent to the use of our name under the caption "Legal
Matters" in the Prospectus contained in Post-Effective Amendment No. 1 to the
registration statement on Form N-4 (File No. 33-62203) for Glenbrook Life and
Annuity Company Separate Account A filed with the Securities and Exchange
Commission. In giving this consent, we do not concede that we are within the
category of persons whose consent is required under Section 7 of the
Securities Act of 1933.
Very truly yours,
SUTHERLAND, ASBILL & BRENNAN
By /s/ STEPHEN E. ROTH
-------------------------
Stephen E. Roth
<PAGE>
AIM V.I. CAPITAL APPRECIATION FUND
12/6/95-12/31/95 NO. YEARS 0.066
<TABLE>
TRANSACTION DATE $ VALUE UNIT VALUE NO. UNITS END VALUE
<S> <C> <C> <C> <C> <C>
INIT DEPOSIT 06-Dec-95 1000.00 10.000000 100.00000
FEE 29-Dec-95 1.166666667 9.826825 0.11872
RESULTING VALUE 29-Dec-95 9.826825 99.88128 981.5158
0.066
FORMULA: 1000*(1+T)= 981.5158 - .06* (981.52-1000*0.1)
= 928.6249
T = -67.57%
R = -7.14%
</TABLE>
AIM V.I. DIVERSIFIED INCOME FUND
12/6/95-12/31/95 NO. YEARS 0.066
<TABLE>
TRANSACTION DATE $ VALUE UNIT VALUE NO. UNITS END VALUE
<S> <C> <C> <C> <C> <C>
INIT DEPOSIT 06-Dec-95 1000.00 10.000000 100.00000
FEE 29-Dec-95 1.166666667 10.067806 0.11588
RESULTING VALUE 29-Dec-95 10.067806 99.88412 1005.6139
0.066
FORMULA: 1000*(1+T)= 1005.6139 - (0.9*1000*.06)
= 951.6139
T = -52.96%
R = -4.84%
</TABLE>
AIM V.I. GOVERNMENT SECURITIES FUND
12/6/95-12/31/95 NO. YEARS 0.066
<TABLE>
TRANSACTION DATE $ VALUE UNIT VALUE NO. UNITS END VALUE
<S> <C> <C> <C> <C> <C>
INIT DEPOSIT 06-Dec-95 1000.00 10.000000 100.00000
FEE 29-Dec-95 1.166666667 10.082005 0.11572
RESULTING VALUE 29-Dec-95 10.082005 99.88428 1007.0338
0.066
FORMULA: 1000*(1+T)= 1007.0338 - (0.9*1000*.06)
= 953.0338
T = -51.89%
R = -4.70%
</TABLE>
<PAGE>
AIM V.I. GROWTH FUND
12/6/95-12/31/95 NO. YEARS 0.066
<TABLE>
TRANSACTION DATE $ VALUE UNIT VALUE NO. UNITS END VALUE
<S> <C> <C> <C> <C> <C>
INIT DEPOSIT 06-Dec-95 1000.00 10.000000 100.00000
FEE 29-Dec-95 1.166666667 9.852494 0.11841
RESULTING VALUE 29-Dec-95 9.852494 99.88159 984.0827
0.066
FORMULA: 1000*(1+T)= 984.0827 - .06* (984.08-1000*0.1)
= 931.0378
T = -66.27%
R = -6.90%
</TABLE>
AIM V.I. GROWTH AND INCOME FUND
12/6/95-12/31/95 NO. YEARS 0.066
<TABLE>
TRANSACTION DATE $ VALUE UNIT VALUE NO. UNITS END VALUE
<S> <C> <C> <C> <C> <C>
INIT DEPOSIT 06-Dec-95 1000.00 10.000000 100.00000
FEE 29-Dec-95 1.166666667 9.896616 0.11789
RESULTING VALUE 29-Dec-95 9.896616 99.88211 988.4949
0.066
FORMULA: 1000*(1+T)= 988.4949 - .06* (988.49-1000*0.1)
= 935.1852
T = -63.91%
R = -6.48%
</TABLE>
AIM V.I. INTERNATIONAL EQUITY FUND
12/6/95-12/31/95 NO. YEARS 0.066
<TABLE>
TRANSACTION DATE $ VALUE UNIT VALUE NO. UNITS END VALUE
<S> <C> <C> <C> <C> <C>
INIT DEPOSIT 06-Dec-95 1000.00 10.000000 100.00000
FEE 29-Dec-95 1.166666667 10.102677 0.11548
RESULTING VALUE 29-Dec-95 10.102677 99.88452 1009.1010
0.066
FORMULA: 1000*(1+T)= 1009.1010 - (0.9*1000*.06)
= 955.1010
T = -50.27%
R = -4.49%
</TABLE>
AIM V.I. MONEY MARKET FUND
12/6/95-12/31/95 NO. YEARS 0.066
<TABLE>
TRANSACTION DATE $ VALUE UNIT VALUE NO. UNITS END VALUE
<S> <C> <C> <C> <C> <C>
INIT DEPOSIT 06-Dec-95 1000.00 10.000000 100.00000
FEE 29-Dec-95 1.166666667 10.023366 0.11639
RESULTING VALUE 29-Dec-95 10.023366 99.88361 1001.1699
0.066
FORMULA: 1000*(1+T)= 1001.1699 - (0.9*1000*.06)
= 947.1699
T = -56.20%
R = -5.28%
</TABLE>
<PAGE>
AIM V.I. UTILITIES FUND
12/6/95-12/31/95 NO. YEARS 0.066
<TABLE>
TRANSACTION DATE $ VALUE UNIT VALUE NO. UNITS END VALUE
<S> <C> <C> <C> <C> <C>
INIT DEPOSIT 06-Dec-95 1000.00 10.000000 100.00000
FEE 29-Dec-95 1.166666667 10.209475 0.11427
RESULTING VALUE 29-Dec-95 10.209475 99.88573 1019.7808
0.066
FORMULA: 1000*(1+T)= 1019.7808 - (0.9*1000*.06)
= 965.7808
T = -41.11%
R = -3.42%
</TABLE>
AIM V.I. VALUE FUND
12/6/95-12/31/95 NO. YEARS 0.066
<TABLE>
TRANSACTION DATE $ VALUE UNIT VALUE NO. UNITS END VALUE
<S> <C> <C> <C> <C> <C>
INIT DEPOSIT 06-Dec-95 1000.00 10.000000 100.00000
FEE 29-Dec-95 1.166666667 9.783324 0.11925
RESULTING VALUE 29-Dec-95 9.783324 99.88075 977.1657
0.066
FORMULA: 1000*(1+T)= 977.1657 - .06* (977.17-1000*0.1)
= 924.5358
T = -69.68%
R = -7.55%
</TABLE>
<PAGE>
EXHIBIT 99
POWER OF ATTORNEY
WITH RESPECT TO THE GLENBROOK LIFE AND ANNUITY COMPANY
SEPARATE ACCOUNT A CONTRACT
Know all men by these presents that James P. Zils, whose signature
appears below, constitutes and appoints Louis G. Lower, II, and Michael J.
Velotta, and each of them, his attorneys-in-fact, with power of substitution,
and him in any and all capacities, to sign any Form N-4 registration
statements and amendments thereto for the Glenbrook Life and Annuity Company
Separate Account A Contract and to file the same, with exhibits thereto and
other documents in connection therewith, with the Securities and Exchange
Commission, hereby ratifying and confirming all that each of said
attorneys-in-fact, or his substitute or substitutes, may do or cause to be
done by virtue hereof.
March 5, 1996
----------------------
Date
/s/ James P. Zils
----------------------
James P. Zils
Treasurer
<PAGE>
POWER OF ATTORNEY
WITH RESPECT TO THE GLENBROOK LIFE AND ANNUITY COMPANY
SEPARATE ACCOUNT A CONTRACT
Know all men by these presents that Casey J. Sylla, whose signature
appears below, constitutes and appoints Louis G. Lower, II, and Michael J.
Velotta, and each of them, his attorneys-in-fact, with power of substitution,
and him in any and all capacities, to sign any Form N-4 registration
statements and amendments thereto for the Glenbrook Life and Annuity Company
Separate Account A Contract and to file the same, with exhibits thereto and
other documents in connection therewith, with the Securities and Exchange
Commission, hereby ratifying and confirming all that each of said
attorneys-in-fact, or his substitute or substitutes, may do or cause to be
done by virtue hereof.
March 5, 1996
----------------------
Date
/s/ Casey J. Sylla
----------------------
Casey J. Sylla
Chief Investment Officer and Director
